As filed with the Securities and Exchange Commission on June 30, 2006
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Fiscal Year Ended: December 31, 2005
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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OR
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Date of event requiring this shell company report
For the transition period from to
Commission file number: 1-10108
FIAT S.p.A.
(Exact name of registrant as specified in its charter)
FIAT S.p.A.
(Translation of registrants name into English)
Italy
(Jurisdiction of incorporation or organization)
Via Nizza 250, Turin, Italy
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Title of each class
Ordinary American Depositary Shares
Ordinary shares with a par value of €5 each*
Preference American Depositary Shares
Preference shares with a par value of €5 each*
Savings American Depositary Shares
Savings shares with a par value of €5 each*
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Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuers classes of capital or
common stock as of the close of the period covered by the annual report.
1,092,246,316 ordinary shares, 103,292,310
preference shares and 79,912,800 savings shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes þ No o
If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
1934.
Yes
o
No þ
Note
checking the box above will not relieve any registrant required to file reports pursuant to
Section 13 or 15 (d) of the Securities Exchange Act of 1934 from their obligations under those
sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
þ
Accelerated filer
o Non-accelerated filer o
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o Item 18 þ
If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
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(*) |
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Not for trading, but only in connection with the registration of the American Depositary Shares. |
TABLE OF CONTENTS
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TABLE OF CONTENTS, continued
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ii
TABLE OF CONTENTS, continued
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iii
TABLE OF CONTENTS, continued
iv
ACCOUNTING PRINCIPLES AND REPORTING CURRENCY
We publish our Consolidated Financial Statements in euro (€), the official common
currency of certain Member States of the European Union (the EU), including Italy. In this
annual report, references to dollars, US$ or $ are to United States dollars. Amounts stated
in dollars, unless otherwise indicated, have been translated from euro at an assumed rate solely
for convenience and should not be construed as representations that the euro amounts actually
represent such dollar amounts or could be converted into dollars at the rate indicated. Unless
otherwise indicated, such dollar amounts have been translated from euro at the noon buying rate in
The City of New York for cable transfers in foreign currencies as announced by the Federal Reserve
Bank of New York for customs purposes (the Noon Buying Rate) on December 31, 2005 (the last
business day of 2005) of $1.1842 per €1.00. Such rate may differ from the actual rates we used
in preparing our Consolidated Financial Statements included in Item 18 and dollar amounts used in
this annual report may differ from the actual dollar amounts that were translated into euro in the
preparation of our financial statements. For information regarding recent rates of exchange
between euro and dollars, see Item 3. Key InformationSelected Financial DataExchange Rates.
The Consolidated Financial Statements in this annual report are based on financial information
prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) and adopted by the EU. The designation IFRS
also includes all valid International Accounting Standards (IAS), as well as all interpretations
of the International Financial Reporting Interpretations Committee, formerly the Standing
Interpretations Committee.
The adopted principles are described in the Notes to the consolidated financial statements
included in Item 18. These principles differ in certain respects from accounting principles
generally accepted in the United States (US GAAP). See Note 38 to the Consolidated Financial
Statements included in Item 18 for a discussion of the differences between IFRS and US GAAP.
The Fiat Group adopted IFRS on January 1, 2005 on the coming into effect of EU Regulation No.
1606 of July 19, 2002. In this context, the accounting policies applied in these financial
statements are consistent with those adopted in preparing the IFRS opening consolidated balance
sheet at January 1, 2004, as well the consolidated financial statements at December 31, 2004, as
restated in accordance with IFRS and presented in Note 39 to the Consolidated Financial Statements
included in Item 18, to which reference should be made. Reconciliations between profit or loss and
equity under previous GAAP (i.e., the requirements of Italian Legislative Decree No. 127 of April
9, 1991, as interpreted and supplemented by the Italian accounting principles issued by the
Consiglio Nazionale dei Dottori Commercialisti e dei Ragioneri, and, to the extent such requirements
or principles are silent on particular issues and not at variance, by those standards laid down by
the IASB; such requirements, as so interpreted and supplemented, Italian GAAP) to profit or loss
and equity under IFRS for the periods shown as comparatives, as required by IFRS 1 First-time
Adoption of IFRS, together with related explanatory notes, are included in such Note 39 to the
Consolidated Financial Statements included in Item 18.
Certain of the financial measures we use to evaluate our financial and operating performance
are considered to be non-GAAP measures, including our net
debt as calculated for purposes,
among other things, of financial targets agreed with our lenders, as well as measures calculated on
a comparable consolidation basis or constant exchange
rate basis. Where we discuss these measures, we also discuss
the most directly comparable IFRS financial measures with equal prominence and present a
reconciliation of the relevant non-GAAP measure to the most directly comparable IFRS financial
measure. See Item 5. Operating and Financial Review and Prospects for additional information on
these measures and the required reconciliation of each of them to the most comparable IFRS measure.
1
We are a corporation organized under the laws of the Republic of Italy. As used in this
annual report, unless the context otherwise requires, the terms Fiat, Fiat S.p.A. and the
Company refer to Fiat S.p.A., and the terms we, us, our, the Group and the Fiat Group
refer to the Company and its consolidated subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Except for the historical statements and discussions contained herein, statements contained in
this annual report constitute forward-looking statements within the meaning of Section 27A of the
US Securities Act of 1933, as amended (the Securities Act), and Section 21E of the US Securities
Exchange Act of 1934, as amended (the Exchange Act). When used in this annual report, the words
anticipate, assume, believe, could, estimate, expect, plan, project, intend,
may, risk and variations of such words and other similar words and expressions that are
predictions or otherwise indicate future events or trends are intended to identify forward-looking
statements.
Information filed with or furnished by us to the US Securities and Exchange Commission (SEC)
may include forward-looking statements. In addition, other written or oral statements that
constitute forward-looking statements have been made and may in the future be made by us or on our
behalf, including statements concerning our future operating and financial performance, our share
of new and existing markets, general industry and economic trends and our performance relative
thereto, our expectations as to requirements for capital expenditures and regulatory matters, the
achievement of our targets and the expected benefits of restructurings, reorganizations and
disposal programs and other similar corporate transactions. Our businesses include our automotive,
automotive-related and other sectors, and our outlook is predominantly based on our interpretation
of what we consider to be the key economic factors affecting these businesses. Forward-looking
statements with regard to our businesses rely on a number of assumptions concerning future events
and are subject to a number of uncertainties and other factors (many of which are outside our
control) that could cause actual results to differ materially from such statements, including:
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the many interrelated factors that affect consumer confidence and worldwide
demand for automotive and automotive-related products; |
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factors affecting the agricultural machinery business, including commodity
prices, weather patterns and governmental policies; |
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general economic conditions in each of our markets, as well as changes in the
level of interest rates and exchange rates; |
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legal and regulatory developments, particularly those relating to
automotive-related issues, agriculture, the environment, international trade and
commerce and infrastructure development; |
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actions of competitors in the various industries and markets in which we operate;
and |
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production difficulties, which may arise from capacity and supply constraints,
excess inventory levels, labor stoppages or slowdowns, political or civil unrest,
military or terrorist action and other risks and uncertainties. |
These forward-looking statements are subject to risks, uncertainties and assumptions about us
that could cause our actual results to differ materially from those projected. Additional factors
that could cause actual results, performance or achievements to differ materially from those
projected include, but are not limited to, those discussed under Item 3. Key InformationRisk
Factors.
We disclaim any obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
2
MARKET AND OTHER DATA
The market share, ranking and other data discussed below was derived from or based upon a
variety of official, non-official and internal sources believed to be reliable, including the
following agencies in the indicated countries: Italy Ministero dei Trasporti; BrazilAssociaçao
Nacional dos Fabricantes de Veiculos Automotores; FranceChambre Syndicale; GermanyKraftfahr
Bundesamt; SpainDireccion General de Trafico; the United KingdomSociety of Motor Manufacturers
and Traders. Market share, ranking and other data contained in this annual report may also be based
on our good faith belief, our own knowledge and experience and such other sources as may be
available. Our internal company surveys and management estimates have not been verified by an
independent expert, and we cannot guarantee that a third party using different methods to assemble,
analyze or compute market data would obtain or generate the same result. Market share data may
change and cannot always be verified with complete certainty due to limits on the availability and
reliability of raw data, the voluntary nature of the data gathering process and other limitations
and uncertainties inherent in any statistical survey of market shares or size. In addition,
consumption patterns and consumer preferences are subject to change. The market share data
presented in this annual report represents the best estimates available from the sources indicated
as of the date hereof, but as a result of the factors set forth above, you should be aware that
market share, ranking and other similar data, and estimates and beliefs based on that data, may not
be reliable.
In addition, please note that we calculate our automobile market share as being equal to the
percentage of the total number of vehicles registered in the relevant market during the relevant
period that is attributable to our vehicles. Our automobile unit sales represent sales of vehicles
to our distribution network, importers and other large direct customers in a given market during
the relevant period, including vehicles sold under buy-back commitments. Therefore, unit sales in
a given market during any period do not necessarily correspond to the number of our vehicles
registered in that market during the same period.
Certain financial and market information for CNH Global N.V. (CNH) is provided by geographic
area. CNH defines its geographic areas as (1) North America, encompassing the United States and
Canada; (2) Western Europe, encompassing Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland and the United Kingdom; (3) Latin America, encompassing Mexico, Central and South
America and the Caribbean Islands; and (4) rest of the world, which encompasses all areas not
included in North America, Western Europe and Latin America.
Market share information for CNH presented as worldwide includes all countries in which CNH
operates except India. Estimates of market share information for CNH are generally based on
registrations of equipment in most of Europe and the rest of the world on retail data collected by
a central information bureau from equipment manufacturers in North America and Brazil, as well as
on shipment data collected by an independent service bureau. Not all agricultural and construction
equipment is registered, and registration data may thus underestimate actual retail demand. In many
countries, there may also be a period of time between the delivery, sale and registration of a
vehicle; as a result, delivery or registration data for a particular period may not correspond
directly to retail sales in such a period.
Throughout this report, unless otherwise specified, market share and vehicle registration data
for 2005 represent the best estimates available from the sources indicated as of the date hereof.
We calculate our market share as being equal to the percentage of the total number of vehicles
registered in the relevant market during the relevant period that is attributable to our vehicles.
In certain cases, market share and vehicle registration data for 2004 have been revised from that
presented in our
Annual Report on Form 20-F for the year ended December 31, 2004 to reflect changes in such
sources appearing after the date thereof.
3
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
The Fiat Group
We are one of the largest industrial groups in Italy. We also have extensive operations in
the rest of Europe, the US and in other parts of the world.
We are engaged principally in the manufacture and sale of automobiles, commercial vehicles and
agricultural and construction equipment. We also manufacture, for use by our automotive sectors
and for sale to third parties, other automotive-related products and systems, principally
powertrains (engines and transmissions), components, metallurgical products and production systems.
In addition, we are currently involved in other sectors, including publishing and communications
and certain service operations. A detailed description of our business can be found in Item 4.
Information on the Company.
Our significant subsidiaries as of December 31, 2005, were:
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Fiat Auto S.p.A. (Fiat Auto), an Italian corporation wholly owned through our
Dutch subsidiary Fiat Auto Holdings B.V.; |
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Maserati S.p.A. (Maserati), an Italian corporation formerly owned by Ferrari.
Maserati became a wholly owned member of the Group in April 2005, and its results
are now reported as a separate sector; |
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Ferrari S.p.A. (Ferrari), an Italian corporation which produces luxury sports
cars, of which we own approximately 56% of the voting shares; |
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Fiat Powertrain Technologies S.p.A. (FPT) a wholly owned Italian corporation
established in the first half of 2005, which carries out our powertrain operations; |
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CNH, a Dutch corporation that is the lead company of our agricultural and
construction equipment sector, of which we hold approximately 90% of the voting
shares, following the conversion in March 2006 of 8,000,000 Series A Preferred
Shares into CNH common shares. See Item 4. Information on the Company
Introduction Recent Developments Financial Initiatives; |
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Iveco S.p.A. (Iveco), a wholly owned Italian corporation that is the lead
company of our trucks and commercial vehicles sector; |
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Magneti Marelli Holding S.p.A. (Magneti Marelli), a wholly owned Italian
corporation that is the lead company of our automotive components sector; |
4
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Teksid S.p.A. (Teksid), an Italian corporation that is the lead company of our
metallurgical products sector, of which we hold 84.8% of the voting shares; |
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Comau S.p.A. (Comau), a wholly owned Italian corporation that is the lead
company of our production systems sector; |
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Business Solutions S.p.A. (Business Solutions), a wholly owned Italian
corporation that is the lead company of our services sector; and |
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Itedi-Italiana Edizioni S.p.A. (Itedi), a wholly owned Italian corporation that
is the lead company of our publishing and communications sector. |
Beginning in 2006, the FPT sector also includes the powertrain businesses of Iveco, Centro
Ricerche Fiat (CRF, the Fiat Research Center) and Elasis (Fiats advanced research center
headquartered in Pomigliano dArco near Naples). See Item 4. Information on the
CompanyIntroductionRecent Developments.
Since January 1, 2005, we have aggregated our activities into five business areas for certain
external communication purposes: Automobiles (including the sectors led by Fiat Auto, FPT, Maserati
and Ferrari); Agricultural and Construction Equipment (the CNH sector); Trucks and Commercial
Vehicles (the Iveco sector); Components and Production Systems (which includes the sectors led by
Magneti Marelli, Teksid and Comau); and Other Businesses (the sectors led by Business Solutions and
Itedi, as well as the results of our holding companies and other companies).
Selected Financial Data
The following selected consolidated financial data at December 31, 2005 and 2004, and for each
of the years in the two-year period ended December 31, 2005, have been derived from the audited
Consolidated Financial Statements included in Item 18. This data should be read in conjunction
with Item 5. Operating and Financial Review and Prospects and are qualified in their entirety by
reference to the audited Consolidated Financial Statements and the Notes thereto included in Item
18.
The Consolidated Financial Statements and the Notes thereto for fiscal years ending at
December 31, 2005 and 2004 have been prepared in accordance with the requirements of IFRS. IFRS
differ in certain respects from US GAAP. For an explanation and quantification of such
differences, see Note 38 to the Consolidated Financial Statements included in Item 18. In the
tables below, we also present selected statement of operation and balance sheet data calculated in
accordance with US GAAP for each of the years in the period 2001-2005, as explained in more detail
in the US GAAP reconciliation footnote to our consolidated financial statements for the relevant
years included in our prior annual reports on Form 20-F.
The following selected consolidated financial data for 2005 and 2004 also reflect certain
changes in our structure during the years presented. See Principles of consolidation and
significant accounting policies in the Notes to the Consolidated Financial Statements included in
Item 18. In particular, this data reflects the following transactions that resulted in changes in
the scope of consolidation:
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At the end of 2005, the Fiat Group acquired Enels share of Leasys S.p.A.
(Leasys), which rents and manages corporate car fleets, thereby obtaining 100%
control of the
former joint venture. For additional details, see Item 4. Information on the
Company Sectors Fiat Auto. |
5
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|
On June 1, 2005, Iveco sold to Barclays Mercantile Business Finance Ltd a 51%
stake in Iveco Finance Holdings Limited, a company comprising certain financial
services companies of Iveco operating in France, Germany, Italy, Switzerland and the
United Kingdom. As of that date, Iveco Finance Holdings Limited was no longer
consolidated on a line-by-line basis, but rather accounted for using the equity
method. For additional details, see Item 4. Information on the Company Sectors -
Trucks and Commercial Vehicles. |
|
|
|
|
As of May 2005, the operations that had previously been transferred to the
Fiat-GM Powertrain joint venture were consolidated in FPT. Upon termination of the
2000 master agreement that had governed our former industrial alliance (the Master
Agreement) with General Motors Corp. (GM), Fiat re-acquired the full control of
all such operations with the sole exception of those in Poland (which continue to be
jointly managed by both parties). |
|
|
|
|
In the first quarter of 2005, we sold 65% of our stake in the temporary
employment agency WorkNet to Generale Industrielle. For additional details, see Item
4. Information on the Company Sectors Services. |
|
|
|
|
In the first quarter of 2005, Magneti Marelli increased its equity investment in
the Turkish automotive component manufacturer Mako Elektrik Sanayi Ve Ticaret A.S.
(Mako) to 95%, thus acquiring control from the Turkish group Koç. As a result, the
company, previously accounted for using the equity method, is now consolidated on a
line-by-line basis. For additional details, see Item 4. Information on the Company
Sectors Components. |
|
|
|
|
In September 2004, Magneti Marelli sold its Midas automotive repair and
maintenance service business (Midas) in Europe and Latin America to the Norauto
Group. |
|
|
|
|
As a result of our gradual acquisition of control of Magneti Marelli Sistemi
Elettronici S.p.A. (Electronic Systems) culminating in our acquisition of full
ownership, we have been consolidating Electronic Systems on a line-by-line basis
since the beginning of 2004. |
|
|
|
|
We deconsolidated Fiat Engineering, S.p.A. (Fiat Engineering), as a result of
its sale in February 2004 to Maire Investimenti S.p.A. (now Maire Engineering
S.p.A.), a privately held Italian company. |
6
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
2005 |
|
2005 |
|
2004 |
|
|
(in million of |
|
|
|
|
dollars except per |
|
(in million of euro |
|
|
share data) |
|
except per share data) |
Amount in conformity with IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
55,117 |
|
|
|
46,544 |
|
|
|
45,637 |
|
Trading profit |
|
|
1,184 |
|
|
|
1,000 |
|
|
|
50 |
|
Gains (losses) on the disposal of investments |
|
|
1,072 |
|
|
|
905 |
|
|
|
150 |
|
Restructuring costs |
|
|
594 |
|
|
|
502 |
|
|
|
542 |
|
Other unusual income (expenses) |
|
|
961 |
|
|
|
812 |
|
|
|
(243 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating result |
|
|
2,623 |
|
|
|
2,215 |
|
|
|
(585 |
) |
Financial income (expenses) |
|
|
(998 |
) |
|
|
(843 |
) |
|
|
(1,179 |
) |
Unusual financial income (1) |
|
|
1,016 |
|
|
|
858 |
|
|
|
|
|
Result from investments (2) |
|
|
40 |
|
|
|
34 |
|
|
|
135 |
|
Result before taxes |
|
|
2,681 |
|
|
|
2,264 |
|
|
|
(1,629 |
) |
Income taxes |
|
|
999 |
|
|
|
844 |
|
|
|
(50 |
) |
Result from continuing operations |
|
|
1,682 |
|
|
|
1,420 |
|
|
|
(1,579 |
) |
Result from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net result before minority interest |
|
|
1,682 |
|
|
|
1,420 |
|
|
|
(1,579 |
) |
Minority interest |
|
|
106 |
|
|
|
89 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group interest in net result |
|
|
1,576 |
|
|
|
1,331 |
|
|
|
(1,634 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary and preference share (3) |
|
|
1.480 |
|
|
|
1.250 |
|
|
|
(1.699 |
) |
Earnings per savings share (3) |
|
|
1.480 |
|
|
|
1.250 |
|
|
|
(1.699 |
) |
Diluted earnings per ordinary and preference share (3) |
|
|
1.480 |
|
|
|
1.250 |
|
|
|
(1.699 |
) |
Diluted earnings per savings share (3) |
|
|
1.480 |
|
|
|
1.250 |
|
|
|
(1.699 |
) |
|
|
|
(1) |
|
The unusual financial income recorded in 2005 represents the excess of the aggregate
subscription price paid by the lending banks for the Fiat shares received upon conversion
of our €3 billion mandatory convertible facility at maturity in September 2005 and the
aggregate stock market value of those shares on the subscription date of approximately
€2,141 million. We had no unusual financial income in 2004. |
|
(2) |
|
This item includes investment income, as well as writedowns of and upward adjustments to
equity investments accounted for using the equity method. |
|
(3) |
|
In accordance with IAS 33, the dilutive effects of the mandatory convertible facility have not
been included in the determination of earnings per share for 2004, as there was a net loss
for the period. |
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
2005 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
|
(in million of |
|
|
|
|
dollars except |
|
|
|
|
per share |
|
|
|
|
data) |
|
(in million of euro except per share data) |
Amounts in accordance with US GAAP : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
148 |
|
|
|
125 |
|
|
|
(2,100 |
) |
|
|
(2,934 |
) |
|
|
(3,906 |
) |
|
|
(762 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing
operations before accounting changes |
|
|
176 |
|
|
|
149 |
|
|
|
(2,088 |
) |
|
|
(3,542 |
) |
|
|
(3,286 |
) |
|
|
(1,050 |
) |
Income (loss) per ordinary and
preference share and ordinary and
preference ADR (basic and diluted) |
|
|
0.14 |
|
|
|
0.12 |
|
|
|
(2.15 |
) |
|
|
(3.89 |
) |
|
|
(6.65 |
) |
|
|
(1.36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per savings share and
savings ADR (basic and diluted) |
|
|
0.14 |
|
|
|
0.12 |
|
|
|
(2.15 |
) |
|
|
(3.89 |
) |
|
|
(6.65 |
) |
|
|
(1.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations per ordinary and preference
share and ordinary and preference ADR
(basic and diluted) |
|
|
0.17 |
|
|
|
0.14 |
|
|
|
(2.14 |
) |
|
|
(4.70 |
) |
|
|
(5.59 |
) |
|
|
(1.87 |
) |
Income (loss) from continuing
operations per savings share and
savings ADR (basic and diluted) |
|
|
0.17 |
|
|
|
0.14 |
|
|
|
(2.14 |
) |
|
|
(4.70 |
) |
|
|
(5.59 |
) |
|
|
(1.72 |
) |
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
2005 |
|
|
|
2004 |
|
|
|
(in millions of dollars |
|
(in millions of euro except per share data) (shares |
|
|
|
except per share data) |
|
outstanding in thousands) |
|
Amounts in conformity with IFRS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
73,958 |
|
|
|
|
|
|
|
62,454 |
|
|
|
|
|
|
62,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
11,147 |
|
|
|
|
|
|
|
9,413 |
|
|
|
|
|
|
4,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock |
|
|
7,552 |
|
|
|
|
|
|
|
6,377 |
|
|
|
|
|
|
4,918 |
|
|
Dividends declared per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary and preference |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding (par value of €5 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary |
|
|
1,092,246 |
|
|
|
|
|
|
|
1,092,246 |
|
|
|
|
|
|
800,418 |
|
|
Preference |
|
|
103,292 |
|
|
|
|
|
|
|
103,292 |
|
|
|
|
|
|
103,292 |
|
|
Savings |
|
|
79,913 |
|
|
|
|
|
|
|
79,913 |
|
|
|
|
|
|
79,913 |
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
2005 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
|
(in million |
|
|
|
|
of dollars |
|
|
|
|
except per |
|
|
|
|
share data) |
|
(in million of euro) |
Amounts in accordance with US GAAP : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
7,951 |
|
|
|
6,714 |
|
|
|
2,718 |
|
|
|
4,935 |
|
|
|
6,066 |
|
|
|
10,667 |
|
Exchange Rates
Fluctuations in the exchange rate between the euro and the dollar will affect the dollar
equivalent of euro prices of shares listed on the Italian Stock Exchange and, as a result, are
likely to affect the market price of our American Depositary Receipts (ADRs) in the United
States. Exchange rate fluctuations will also affect the dollar amounts received by holders of
ADRs on the conversion into dollars by the depositary for the ADRs of any cash dividends
declared and paid in euro on the shares represented by the ADRs.
The following table sets forth the Noon Buying Rate for euro expressed in dollars per euro
rounded to the nearest one hundredth of a US cent for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At Period |
|
|
|
|
|
|
|
|
End |
|
Average(1) |
|
High |
|
Low |
Year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001 |
|
|
0.8901 |
|
|
|
0.8909 |
|
|
|
|
|
|
|
|
|
2002 |
|
|
1.0485 |
|
|
|
0.9495 |
|
|
|
|
|
|
|
|
|
2003 |
|
|
1.2597 |
|
|
|
1.1411 |
|
|
|
|
|
|
|
|
|
2004 |
|
|
1.3538 |
|
|
|
1.2478 |
|
|
|
|
|
|
|
|
|
2005 |
|
|
1.1842 |
|
|
|
1.2400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2005 |
|
|
|
|
|
|
|
|
|
|
1.2041 |
|
|
|
1.1699 |
|
January 2006 |
|
|
|
|
|
|
|
|
|
|
1.2287 |
|
|
|
1.1980 |
|
February 2006 |
|
|
|
|
|
|
|
|
|
|
1.2100 |
|
|
|
1.1860 |
|
March 2006 |
|
|
|
|
|
|
|
|
|
|
1.2197 |
|
|
|
1.1886 |
|
April 2006 |
|
|
|
|
|
|
|
|
|
|
1.2624 |
|
|
|
1.2091 |
|
May 2006 |
|
|
|
|
|
|
|
|
|
|
1.2888 |
|
|
|
1.2606 |
|
|
|
|
(1) |
|
Average of the Noon Buying Rate for euro for the last business day of each month in
the period. |
The Noon Buying Rate for euro on June 26, 2006, was $1.2554= €1.0000 or $1.00 =
€0.7966.
9
Risk Factors
Risks Related to the Fiat Group
We have recorded significant losses in recent periods. Our future profitability and financial
condition depend on the successful implementation of our current strategic objectives.
From 2002-2004, our operating performance was negatively affected by a persistently
unfavorable business environment in the automotive market and the poor performance of Fiat Auto.
We recorded net losses under Italian GAAP of €1,586 million, €1,900 million and €3,948
million in 2004, 2003 and 2002, respectively. Our net loss in 2004 as recalculated in accordance
with IFRS was €1,634 million. In response to these challenging conditions, we have adopted a
series of organizational and industrial initiatives intended to refocus our efforts on our core
automotive businesses and bring us back to profitability. These initiatives aim to achieve
significant improvements in our results over the period through 2007 by restoring Fiat Auto to
profitability and reorganizing our businesses to develop our innovation capabilities and
expertise, while reinforcing our capital structure and maintaining a comfortable liquidity
position. They also provide for significant cost savings to be generated through cost structure
rationalization and improved manufacturing efficiency, further synergies among our industrial
joint ventures and inter-sector cooperation, and the adoption of a more dynamic and efficient
management structure. See Item 4. Information on the CompanyIntroduction Strategies and
Programs. The initial positive impact of these initiatives is reflected in our operating and
financial results for 2005 and for the first quarter of 2006. See Item 4. Information on the
CompanyIntroduction Recent Developments and Item 5. Operating and Financial Review and
ProspectsResults of Operations2005 Compared with 2004.
Our ability to further strengthen our capital structure, reduce our indebtedness and
improve profitability, while at the same time continuing to invest in new products, research and
development and our distribution network, will depend on the success of these organizational and
industrial initiatives, as well as on general economic and business conditions and the
performance of our companies. Any failure to implement a significant portion of these
initiatives successfully, or to realize the anticipated benefits, could have a material adverse
effect on our financial condition, results of operations and business prospects.
In addition, realization of our development plans for Fiat Auto over the period through
2008 is predicated upon specified financial and operating factors, including the Groups overall
ability to generate the necessary profitability, to access financing and state grants under
available regulations for research, development and innovation, and to realize specific
programs, as well as upon the cooperation of unionized labor. In order to be competitive, we
must also implement operational solutions that will allow for improvements in cost efficiency,
flexibility with regard to plant use and productivity. See Item 4. Information on the
CompanyIntroduction Recent Developments for additional information.
Our businesses are affected by cyclical economic conditions.
Our businesses depend upon general activity levels in our key industries, which
historically have been highly cyclical. In addition, we generate a substantial portion of our
revenues in Western Europe, and more particularly in Italy. Both demand for cars and our market
shares have been volatile in recent periods, though in the first quarter of 2006, demand for
automobiles grew by 3.3% in Western Europe as a whole, and by 9.0% in Italy, with Fiat Auto
increasing its market share in both regions. See Item 4. Information on the
CompanySectorsFiat AutoMarkets and Competition for more information on trends in the
automobile market. Any event adversely affecting activity in the
10
automotive industry, such as an economic downturn in a key market, an increase in energy
prices, fluctuations in the prices of other commodities or raw materials, adverse shifts in
sector specific factors such as weather, interest rates, government policies (including
environmental regulation), infrastructure spending or major epidemics (such as avian flu) could
negatively affect our profitability and business prospects.
We operate in highly competitive industries.
Approximately 93% of our net revenues are generated in the highly competitive worldwide
automotive industry, which includes automobiles, commercial vehicles, agricultural and
construction equipment and automotive-related products. We face strong competition in Europe and
Latin America from other international automobile and commercial vehicle manufacturers, and in
Europe, North America and Latin America from global, regional and local agricultural and
construction equipment manufacturers and suppliers of automotive-related products. We compete in
these markets in terms of product quality and features, innovation and development time,
pricing, reliability, safety, fuel economy, customer service and financing terms. We also face
strong competition in our other businesses.
We face intense price competition in the automobile and other sectors.
Competition, particularly with regard to price, has increased in several of our operating
sectors in recent years, and has had a negative impact on sales and margins in these sectors. In
addition, overall manufacturing capacity in the global automotive industry exceeds current
demand. This overcapacity, combined with already intense competition in the automotive industry
and persistent weakness in the global economy, may intensify pricing pressures. Our ability to
maintain or improve the quality of our products, increase market share and improve profitability
in the face of strong competitive pricing pressures will be fundamental to our future success.
Our future performance depends on our ability to innovate and on market acceptance of new or
existing products.
Our ability to improve our position within our product and market segments through research
to improve current products, as well as the development of innovative new products and services
will have a significant impact on our future performance. Failure to develop and offer products
that compare favorably to those of our competitors, particularly in more profitable segments, in
terms of price, quality, styling, reliability, safety, functionality or otherwise, may result in
lower market share, lower sales volumes and margins, and may have a substantial adverse effect
on our operational and financial results. For example, Fiat Autos development plans call for
the launch over the 20052008 period of 20 new models, including the Fiat Grande Punto and the
Alfa 159, which were introduced commercially at the end of the third quarter of 2005, as well as
23 restylings of existing models of the Fiat, Lancia, Alfa Romeo and Fiat Commercial Vehicle
brands. See Item 4. Sectors Fiat Auto Product Development. The lack of market acceptance
of these and other new automotive models, potential delays in bringing new vehicles to market or
the inability to achieve efficiency targets without suffering quality losses would adversely
affect our overall profitability.
Downgrades of our credit ratings would raise our cost of capital and could limit our access to
financing and negatively affect our business.
We are currently rated below investment grade, with a rating of Ba3 with a stable outlook
from Moodys Investors Service (Moodys), BB- with a stable outlook from Standard & Poors
Ratings Service, a division of the McGraw Hill Companies, Inc. (Standard & Poors), and BB-
with a stable
11
outlook from Fitch Ratings. Our ability to access capital markets, and the cost of
borrowing in those markets, is highly dependent on our credit ratings. The rating agencies may
review their ratings for possible further downgrades, and any new downgrades would increase our
cost of capital, potentially limit our access to sources of financing, and could negatively
affect our businesses, especially our vehicle lease and sales financing businesses, which are
typically financed with a high proportion of debt. Moreover, the management and development of
the core automotive and automotive-related businesses in which we operate, may require large
capital investments. Consequently, we may find it necessary to secure additional financing or to
refinance our outstanding debt. We cannot give any assurances as to whether we will be able to
secure such funds or refinance existing indebtedness, or whether any additional measures may be
required to raise funds, nor whether we will be able to effect any or all of any such
transactions at all, or on favorable terms.
We may not achieve the expected benefits of mergers, acquisitions, joint ventures or other
similar corporate transactions.
We have engaged in the past and may engage in the future in significant corporate
transactions, such as mergers, acquisitions, joint ventures and restructurings, the success of
which is difficult to predict. We have also sold a number of businesses and equity investments
as part of the refocusing of our operations on our core automotive businesses. There can be no
assurance that we will be able to enter into such transactions without encountering
administrative, technical, political, financial or other difficulties. Each of our automotive
sectors participates in joint ventures, and Fiat Auto is currently exploring or has recently
signed additional cooperation or other agreements with various auto makers, including Tata
Motors of India, Severstal of Russia and Ford Motor Co. of the United States. See Item 4 -
Introduction Recent Developments.
Joint ventures involve special risks associated with the possibility that the joint venture
partners may:
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have economic or business interests or goals that are inconsistent with ours; |
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take action contrary to our instructions or requests or contrary to our policies
or objectives with respect to operations; |
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be unable or unwilling to fulfill their obligations under the joint venture agreement; or |
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experience financial or other difficulties. |
We are subject to risks relating to international sales and exposure to changing local
conditions.
A significant portion of our current operations is conducted and located outside of Italy,
and we expect that revenues from sales outside of Italy, and more generally outside of the EU,
will continue to account for a material portion of our total revenues for the foreseeable
future. We are subject to risks inherent in operating on a global basis, including risks related
to:
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exposure to local economic and political conditions; |
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export and import restrictions; |
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currency exchange rate fluctuations; |
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multiple tax regimes, including regulations relating to transfer pricing and
withholding and other taxes on remittances and other payments by subsidiaries; |
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foreign investment restrictions or requirements, foreign exchange controls and
restrictions on repatriation of funds; and |
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local content laws. |
The degree of risk and the potential magnitude of effects of unfavorable developments in
any one of these areas vary from country to country, and, depending on the circumstances, could
have a material adverse effect on our business prospects, results of operations and financial
condition.
Developments in emerging market countries may adversely affect our business.
We operate in a number of emerging market countries, both directly, in markets such as
Brazil and Argentina, and through joint ventures or other cooperation agreements, including in
Turkey, India, China and Russia. Our Brazilian operations accounted for approximately 8.3% of
our net revenues in 2005. As a result, economic and political developments in Brazil and other
emerging market countries, including economic crises and political instability, have had, and
may in the future have, a material adverse impact on our operating and financial results.
We are subject to extensive environmental and other governmental regulation.
Our products and operations are subject to increasingly stringent environmental laws and
regulations in many of the countries in which we operate. Such regulations govern, among other
things, vehicle emissions, fuel economy, vehicle safety and the type and level of pollutants
generated by industrial production facilities. We expend significant resources to comply with
such regulations, and expect to continue to incur substantial compliance and remediation costs
in the future.
In addition, government initiatives that affect consumer demand for our products, such as
changes in tax policy or the grant or repeal of subsidies to provide incentives for the purchase
of vehicles, can substantially influence the timing and level of our revenues. Such government
actions are unpredictable and beyond our control, and any adverse changes in government policy
could have a significantly negative impact on our business prospects, financial condition and
results of operations.
Labor matters could impair our flexibility to reposition our businesses.
Most of our employees worldwide are represented by labor unions. In Europe, our employees
are protected by various laws giving them, through local and central works councils,
consultation rights with respect to specific matters regarding their employers businesses and
operations, including the downsizing or closure of facilities and employment terminations. These
laws and the collective bargaining agreements to which we are subject could impair our
flexibility as we continue our efforts to reorganize and restructure our businesses.
The processes of reorganizing and restructuring that are under way could increase conflict
with our labor unions. Our policy, which we implement in accordance with local rules and labor
practices, is to seek to minimize labor unrest by maintaining constructive relations with
representatives of our workers and with their unions, in an effort to reach a consensus on
measures to manage the social consequences of these processes. For example, our initiatives to
reduce business governance costs are expected to result in a further streamlining of our
(predominantly white collar) administrative, technical and sales personnel. We seek to use
measures such as the so-called mobilità lunga, a
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program that provides a supplemental unemployment allowance to bridge the period prior to
retirement, to manage the impact of these initiatives, as we and our unions believe such
programs help reduce their social consequences. However, use of these programs is subject to the
Italian governments passage of specific legislation permitting us to do so.
In the past, union dissatisfaction with our restructuring initiatives has resulted in labor
unrest, including occasional wildcat and other strikes of varying severity and duration. See
Item 6. Directors, Senior Management and EmployeesEmployees and Labor Relations for
additional information. Any future work stoppages or labor unrest, whether involving our own
employees or those of other companies on which we depend for goods and services, could have a
material adverse effect on our business, results of operations and financial condition.
We are subject to risks associated with exchange rate fluctuations, interest rate changes and
other market risks.
We are subject to currency exchange rate risk in the ordinary course of our business to the
extent that our costs are denominated in currencies other than those in which we earn revenues.
Exchange rate fluctuations also affect our operating results because we recognize revenues in
currencies other than euro but publish our financial statements in euro. Similarly, changes in
interest rates affect our results by increasing or decreasing borrowing costs and financial
income. Our financial services businesses also involve risks relating to changes in interest and
inflation rates, consumer and dealer insolvency rates and the overall strength of the economies
in which these businesses operate.
We seek to manage these risks through the use of financial hedging instruments. However,
despite these hedging transactions, exchange rate or interest rate fluctuations may continue to
adversely affect our financial condition or results of operations. See Notes 22 and 34 to the
Consolidated Financial Statements included in Item 18 and Item 11. Quantitative and Qualitative
Disclosures about Market Risk.
Our success depends on the ability of our management team to operate and manage effectively.
Most of our current senior managers have been appointed relatively recently. Our Chairman,
Luca Cordero di Montezemolo, and our Chief Executive Officer (CEO), Sergio Marchionne, were
appointed in June 2004. In February 2005, Mr. Marchionne assumed the additional position of CEO
of Fiat Auto, Paolo Monferino, who was CEO of CNH, became CEO of Iveco, and Harold Boyanovsky
became interim CEO of CNH, prior to being confirmed in that position later in the year. In 2005,
following the creation of FPT, we also reorganized management at certain of our other sectors.
See Item 6. Directors, Senior Management and Employees- Senior Management.
Our success depends in large part on the ability of our executive officers and other
members of senior management continuing to operate and manage effectively, both independently
and as a group. The loss of the services of any executive officer, senior manager or other key
employee without adequate replacement or the inability to attract and retain new qualified
personnel could have a material adverse effect upon our business, operating results and
financial condition.
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ITEM 4. INFORMATION ON THE COMPANY
Introduction
We are one of the largest industrial groups in Italy. We also have extensive operations in
the rest of Europe, the US and in other parts of the world. In 1999, we celebrated our
centenary, having been founded in Turin in 1899 as a manufacturer of automobiles.
We are a società per azioni, or corporation limited by shares, organized under the laws of
the Republic of Italy. Under our current Statuto, or by-laws, Fiat S.p.A. has a duration
expiring on December 31, 2100. Our registered office and principal place of business is located
at Via Nizza 250, Turin, Italy (telephone number +39-011-006-1111).
We are engaged principally in the manufacture and sale of automobiles, commercial vehicles
and agricultural and construction equipment. We also manufacture, for use by our automotive
sectors and for sale to third parties, other automotive-related products and systems,
principally powertrains, components, metallurgical products and production systems. In
addition, we are currently involved in other sectors, including publishing and communications
and service operations.
Strategies and Programs
Since 2002, we have re-focused the Group on our core automotive operations, and in
particular, around our three main industrial business areas: Automobiles, Agricultural and
Construction Equipment, and Trucks and Commercial Vehicles. We are also active in related components
manufacturing and are combining our powertrain operations to better exploit our expertise in
this field, serving both Group companies and outside customers. As part of this re-focusing
process, we have divested a number of non-core assets. We have also adopted industrial and
organizational initiatives in order to return to profitability, to generate positive cash flow,
and to reduce our indebtedness.
Our main strategic objectives currently include:
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Restoring Fiat Auto to profitability and to positive cash flow generation; |
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Building on our global presence and expertise in other core sectors (such as
agricultural and construction equipment and commercial vehicles) through product
innovation and continued efficiency improvements; |
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Developing and integrating our significant innovation capabilities and expertise,
notably in the field of automotive powertrains; |
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Adopting a more dynamic and efficient management structure; and |
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Reinforcing our capital structure and maintaining a healthy liquidity position. |
The major ongoing initiatives we are currently implementing in light of these objectives
are:
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Restoring Fiat Auto to Profitability and to Positive Cash Flow Generation. We aim to
capitalize on initiatives already implemented and develop new projects to restore Fiat Auto to
profitability. In 2005, Fiat Autos performance improved, as the sector narrowed its trading
loss to
€281 million from €822 million in 2004. In February 2005, our CEO Sergio Marchionne
assumed the role of CEO of Fiat Auto to help accelerate our turnaround.
Key initiatives being implemented include:
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The creation of a coherent and sustainable brand image through a clearer
positioning of our portfolio of brands and products, each specifically targeting
identified groups of consumers. |
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The rationalization and strengthening of Fiat Autos product portfolio by
launching carefully targeted and complementary products, with a strong focus on
technological innovation and product quality. Since 2003, Fiat Auto has commercially
launched 11 new models (including the award-winning new Panda in 2003, the Lancia
Musa, Alfa GT, Crosswagon Q4 in 2004, the Fiat Croma, Grande Punto, the Alfa 159,
and Brera in 2005), which have significantly contributed to its improved financial
performance. Fiat Autos product pipeline for the period 2006-2008 includes several
new models and restylings, including a new C segment mid-size model, which it
expects will further strengthen and expand its product range. |
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The revitalization of Fiat Autos distribution network by rationalizing the
number of dealers, closing existing gaps in the geographic dealership coverage,
enhancing corporate identity and improving economics for dealers. We expect that its
strengthened distribution network will facilitate the introduction of new models and
strengthen the image of our brands. |
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A continuous focus on efficiency and cost reduction. Fiat Autos initiatives
include the reduction of its workforce, an alignment of production capacity with
prevailing demand through the temporary shutdown of certain manufacturing plants, as
well as the optimization of dealers inventories. Fiat Auto intends to continue to
pursue additional cost savings through improved sourcing of direct materials,
including through the standardization of components and sourcing from low-cost
countries, platform rationalization, increased capacity and manpower utilization,
and a focus on improved quality. |
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The pursuit of targeted, strategic industrial alliances with other auto
manufacturers, such as those recently entered into with Tata Motors Ltd. (Tata
Motors), Severstal and Ford Motor Co. (see Recent DevelopmentsIndustrial
Alliances below), which the sector sees as fundamental to achieving the economies
of scale required to operate competitively. |
The above initiatives helped Fiat Auto to record a positive trading profit in the first
quarter 2006. See First Quarter Results below.
Building on Our Global Presence and Expertise in Other Core Sectors. Initiatives being
implemented include:
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Agricultural and Construction Equipment. CNH intends to expand its business
through the improvement of its product offerings. CNH has significantly renewed its
product range and has restructured its manufacturing facilities to achieve greater
flexibility and cost |
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efficiency. CNHs strategy is focused on strengthening customer
and dealer support, making ongoing product improvements, continuing efforts to
reduce costs, reducing capital employed in its business and continuing to develop
its financial services business.
In the fourth quarter of 2005, CNH reorganized its operations into four distinct
global brand structures which will have fully independent profit and loss
accountabilityCase IH and New Holland in agricultural equipment and Case and New
Holland in construction equipmentin order to invigorate the brands and more
effectively satisfy the differentiated needs of brand dealers and customers. CNH
also intends to remain focused on achieving greater purchasing and manufacturing
efficiencies while counting on pricing to offset rising raw material costs. CNH
believes that these initiatives will lead to increased customer satisfaction and
loyalty, thereby promoting future financial stability and improved returns. |
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Trucks and commercial vehicles. Iveco enjoys leading market positions in the
Italian truck market and in the European medium commercial vehicle segment. Iveco
has a strong engine platform with a full range of environmentally compliant models
and has recently enhanced its vehicle portfolio. In addition, Iveco is improving its
product range, including restyling of the Daily, early introduction of Euro 4- and
Euro 5-compliant engines, and the launch of new special-purpose vehicles. See
Sectors Trucks and Commercial Vehicles below. Iveco intends to build further
on these strengths to achieve revenue growth and improved profitability, including
realizing manufacturing efficiencies in order to offset higher labor and utilities
costs. Iveco intends to reinforce its presence in global markets, increase its heavy
segment market share, improve the perceived quality and pricing of its products and
enhance its distribution network. Other areas of strategic importance for Iveco
include expanding its aftermarket services and developing its financial services
activities, such as through its new joint venture with Barclays. |
Developing and Integrating Our Significant Innovation Capabilities and Expertise. We are
striving to develop and integrate our significant innovation capabilities and expertise.
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In May 2005, we created FPT, a new sector that is now responsible for managing
our innovation capabilities and expertise with respect to engines and transmissions
by coordinating management of the resources, employees and activities of our
automobile powertrain activities, the powertrain activities of Iveco, and the
powertrain research activities of the CRF and Elasis. We expect that our advanced
engine technologies will allow us to strengthen our market positioning, product
portfolio, and brands. We anticipate that the technological excellence of FPT may
also enable us to benefit from engine sales and/or the licensing of its technology
to third parties. We expect FPT to make a positive contribution to the Group and to
become a leading player in this segment. |
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We are striving to integrate the technological excellence of our operations
throughout the Group. For example, on April 1, 2005, we transferred ownership of
Maserati from Ferrari to Fiat Partecipazioni S.p.A. to allow Fiat Autos Alfa Romeo
and Maserati units to cooperate closely, both technically and commercially,
especially in significant international markets. We expect both brands to benefit
from this cooperation, while allowing Maserati to continue to take advantage of
Ferraris valuable technological expertise. |
Adopting a More Dynamic and Efficient Management Structure. We recently restructured our
corporate functions and operating units to maximize intra-Group synergies and allocate capital
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efficiently. We have downsized our corporate structure and strengthened our management by hiring
highly qualified and internationally experienced managers and promoting our internal group
managers.
In November 2004, we created a new governance body, the Group Executive Council (the
GEC), to review our organizational and operating model and increase its competitiveness. The
GEC comprises the CEO of Fiat, certain department heads and the CEOs of our operating sectors.
The GEC is responsible for sharing best practices throughout the Group and assessing the
opportunities and risks of the Group.
Reinforcing Our Capital Structure. We seek to maintain a healthy liquidity position and a
balanced ratio of net debt to Group stockholders equity.
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In recent years, we have successfully executed a number of transactions that have
improved our capitalization and liquidity profile, including two capital increases,
which generated a total of €2.8 billion, and a series of major asset disposals in
2003 and 2004, including the divestitures of our former aviation and insurance
sectors (led by FiatAvio S.p.A. and Toro Assicurazioni S.p.A., respectively), which
generated more than €7 billion in proceeds. |
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We further reduced our net debt to €18,523 million at December 31, 2005, from
€25,423 million at year-end 2004. Item 5. Operating and Financial Review and
ProspectsLiquidity and Capital Resources for a reconciliation of net debt, a
non-GAAP measure, to debt as reported in our IFRS balance sheet. Our total debt was
€25,761 million at December 31, 2005, compared to €32,191 million at year-end
2004. |
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As part of our agreement with General Motors to terminate the 2000 master
agreement that had governed our former industrial alliance (the Master Agreement)
and our related joint ventures, GM paid us €1.56 billion in the first half of
2005. |
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As anticipated, the lending banks converted the €3 billion mandatory
convertible facility (the Mandatory Convertible Facility) into equity (in the form of Fiat
ordinary shares) at its maturity in September 2005, and we reduced our debt further
in the same month by nearly €1.8 billion, in connection with transactions related
to the sale of our stake in Italenergia Bis to Electricité de France (EDF). |
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We continue to consider opportunities for the creation of joint ventures related
to certain of our operations, including our financial services businesses. On June
1, 2005, Iveco sold to Barclays, for consideration of €119 million, 51% of a
newly created subsidiary, Iveco Finance Holdings, to which Iveco had contributed the
bulk of its financing activities. The joint venture, in which Iveco retains a 49%
interest, provides commercial vehicle financing and leasing services to Iveco
customers in France, Germany, Italy, Switzerland and the United Kingdom. See
SectorsTrucks and Commercial Vehicles below for more information on this joint
venture. As part of this transaction, the deconsolidated entities that are now part
of Iveco Finance Holdings repaid Fiat more than €2 billion in intercompany
indebtedness. |
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We also pursue and execute a wide range of financing and refinancing transactions
in the international banking and financial markets, with the aim of maintaining a
healthy liquidity level for the Group and the financial flexibility required to
implement our industrial strategy. |
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See Item 5. Operating and Financial Review and ProspectsLiquidity and Capital Resources
for additional information on the effect of these transactions.
Operating and Financial Results for 2005
Our net revenues1 totaled €46,544 million in 2005, an increase of 2.0% from
the €45,637 million recorded in 2004. Revenues rose at all
of our industrial business areas other
than Fiat Auto, where revenues declined by 0.8% as a recovery in the fourth quarter did not
fully offset the trend of the first nine months, during which sales slowed ahead of new product
launches.
We posted a trading profit of €1,000 million in 2005, a sharp increase from the €50
million trading profit we recorded in 2004. The €950 million increase reflected a €541
million reduction in trading losses for Fiat Auto, combined with the positive performance of
other industrial sectors; trading profit rose by €231 million at CNH and €44 million at
Iveco.
We recorded operating income of €2,215 million in 2005, compared with an operating loss
of €585 million in 2004. The positive operating results reflected not only the €950
million increase in trading profit, but also the €1,134 million gain (net of related costs)
arising from GMs payments to us in connection with the termination of the Master Agreement and
a €878 million gain as a result of the sale of our stake in Italenergia Bis. See Item 5.
Operating and Financial Review and ProspectsLiquidity and Capital Resources for more
information about these transactions. These positive factors were partially offset by €502
million in restructuring costs and €469 million for other unusual expenses.
Income before taxes was €2,264 million in 2005, compared with a loss before taxes of
€1,629 million in 2004. This item includes unusual financial income of €858 million in
2005 that we recorded in connection with the capital increase resulting from the conversion of
the Mandatory Convertible Facility. See Item 7. Major Stockholders and Related Party
TransactionsDescription of Capital Stock. The positive result also reflects the decline in net
financial expenses to €843 million in 2005 from €1,179 million in 2004, a result that
included €250 million in non-recurring financial expenses, attributable to both the unwinding
of an equity swap on GM shares (see Item 5. Operating and Financial Review and ProspectsOff
Balance Sheet Arrangements) and write-downs of financial receivables recorded in 2004.
We recorded net income before minority interests of €1,420 million in 2005, compared
with a net loss of €1,579 million in 2004. The significant improvement in our bottom line
reflected the stronger financial results summarized above and was achieved notwithstanding an
increase in income taxes from a tax benefit of €50 million in 2004 to a charge of €844
million in 2005, of which €277 million was attributable to a reversal of deferred tax assets
related to the gain recorded in connection with the termination of the Master Agreement with GM
and €119 million related to income taxes for prior years.
Research and development expenses2 were equal to €1,558 million in 2005, as
compared to €1,791 million in 2004. Investments in tangible and intangible assets (net of
vehicles sold under buy-back commitments) increased by 4.7%, totaling €3,052 million in 2005,
as compared to €2,915 million in 2004, including investments in long-term leasing services.
See Item 5. Operating and Financial Review and ProspectsLiquidity and Capital Resources.
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discount and similar concessions. |
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Includes capitalized research and development
costs and costs charged directly to operations for the fiscal year. |
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Seasonality
We operate in a number of different business sectors, each of which, particularly the
agricultural and construction equipment sector, is subject to certain seasonal fluctuations.
However, management believes that, as a whole, seasonal fluctuations are not material to us or
the results of our operations.
Recent Developments
The significant transactions we undertook in the first half of 2006 included the following:
Industrial Alliances
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Fiat Auto and Severstal Auto industrial agreement. In January, Fiat Auto and
Severstal Auto signed an industrial agreement for the assembly in Russia of Fiat
Palio and Fiat Albea models based on CKD kits manufactured in Turkey by Tofas, our
joint venture with the Koç Group. Assembly of these models at Severstal Autos
Naberejniye Chelni plant near Kazan in the Volga region is scheduled to start in
2007. On February 8, Fiat Auto and Severstal Auto extended the agreement to cover
Fiat Doblò models (the kits for which are also produced in Turkey). |
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Fiat Auto and Tata Motors industrial agreement. In January, the Fiat Group and
Tata Motors Ltd. signed a cooperation agreement providing for dealer network sharing
for the sale of Fiat branded cars in Tata outlets throughout India. As a result of
this agreement, in March 2006, the Tata dealership network began to sell a targeted
selection of Fiat cars, as well as the complete Tata product range (together with
spare parts and sales and service assistance for both brands). The dealerships
involved in this program now display the new Fiat logo alongside the Tata logo. |
Financial Initiatives
In the first half of 2006, we completed a series of capital markets transactions that have
allowed us to refinance some of our existing debt at more favorable interest rates, including:
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Fiats €1 Billion Eurobond. In February, Fiat marked its successful return to
the international capital markets by closing the offering of €1 billion of 6.625%
Senior Notes with an issue price of 100% and a maturity date on February 15, 2013
(the 2013 Notes). The 2013 Notes, which were issued by Fiat Finance and Trade Ltd.
société anonyme (Fiat Finance and Trade), a wholly owned subsidiary of Fiat
S.p.A., and guaranteed by Fiat S.p.A., were offered to institutional investors
outside the United States and have been admitted to listing on the Irish Stock
Exchange. The 2013 Notes were rated Ba3 by Moodys Investors Service, BB- by
Standard & Poors Ratings Services, and BB- by Fitch Ratings, in line with the
agencies ratings of the Fiat Groups long-term debt. In January 2006, Fitch Ratings
and Moodys changed their outlook on Fiat S.p.A. from negative to stable, as
Standard & Poors Rating Services had already done in August 2005. |
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CNHs US $500 million Senior Notes. In March, CNH closed a private placement to
institutional investors of US $500 million in 7.125% Senior Notes due 2014 issued by
its wholly owned subsidiary, Case New Holland Inc., and guaranteed by CNH. |
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Fiat stake in CNH rises to 90%. In March 2006, Fiat increased its stake in CNH
from approximately 84% to approximately 90% as a result of the automatic conversion
of the CNH Series A Preference Shares it had held into CNH common shares. The
conversion (which was triggered by the average of the NYSE closing prices for CNHs
common shares having exceeded US$24.00 over the preceding 30 trading days) resulted
in Fiat receiving 100 million newly issued CNH common shares. |
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Fiats €1 Billion Global Medium Term Notes. In May, Fiat closed the offering
of €1 billion of 6.625% Senior Notes due November 2011, with an issue price of
99.565% (the 2011 GMTNs). The 2011 GMTNs were issued by Fiat Finance and Trade,
and guaranteed by Fiat S.p.A. under the Fiat Groups €15 billion Global Medium
Term Note Programme, which was recently renewed and allows for the offering to
institutional investors of Fiat S.p.A. guaranteed debt securities by three of the
Groups finance subsidiaries. The 2011 GMTNs were offered to institutional
investors outside the United States and have been admitted to listing on the Irish
Stock Exchange. |
New Contracts and Industrial Initiatives
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Major investments in FPTs plants. In February 2006, the Italian Ministry of
Productive Activities, Fiat Powertrain Italia S.r.l (FPI), Fabbrica Motori
Automobilistici S.p.A. (FMA a wholly owned subsidiary of FPI), and Elasis signed
a project agreement providing for an investment plan to support Fiats manufacturing
plants in Pratola Serra, near Avellino, and in Termoli, near Campobasso, as well as
improving research activities carried out at the Pomigliano dArco plant near
Naples. The Fiat Group has committed €647 million to this project, which is
expected to be supplemented by a contribution by the Italian public authorities. |
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Contract for renewal of the Groups Termini Imerese manufacturing facility. In
February 2006, the Italian Ministry of Productive Activities, Fiat Auto and Elasis
signed an agreement to renew the Groups manufacturing facility at Termini Imerese
in Sicily under the conditions of the Program Agreement signed with the Italian
government in December 2002. The Termini Imerese project, which has involved Fiat
Auto, the Ministry of Productive Activities and Sicilys regional administration
since April 2004, comprises two major initiatives. The first initiative provides
for Fiat to make industrial investments in the Termini Imerese plant amounting to
approximately €31 million to prepare the Sicilian facility to produce the Lancia
Ypsilon and the models subsequent facelifts. These investments are part of Fiats
2005-2008 Development Plan. The second phase of the plan focuses on the research
and development field, where Elasis is expected to invest approximately €13
million on improving the plants manufacturing processes. Public funding for the
project is expected to amount to about €10 million, of which €1.6 million will
be provided by the Sicilian regional administration. |
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Piedmont region and Fiat Group program for hydrogen fueled transport. On
February 13, 2006, the Piedmont Region and the Fiat Group announced, by means of a
joint press release, a wide-ranging cooperative program for hydrogen fueled
transport, as envisaged in the protocol of intent signed at the end of December
2005. |
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Fiat and the Piedmont Region will cooperate on local and European-level programs over
the short, medium and long term. They will promote the Piedmont Region as a key
research and development center in this innovative area. Fiat will support these
initiatives by lending some of its internationally recognized experts, including
available resources at the CRF and at the Fiat Auto innovation facilities. |
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Fiat engines for Beijing buses. On April 12, 2006, FPT signed an agreement with
Beijing Public Transport Company for the supply of 1,000 natural gas-powered
engines.
This transaction is part of a cooperation program among the Italian Ministry for the
Environment and Territory, the China State Agency for the Environmental Protection
and the Municipality of Beijing. This contract is the largest ever made by Fiat Group
in this field. These engines, to be manufactured at the FPT facility in Turin, will
equip locally manufactured busses. |
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New industrial agreement for the production of a PSA Peugeot Citroën gearbox in
Fiat Autos plant in Argentina. On May 11, 2006, Fiat and PSA Group signed a new
industrial agreement. Starting in 2007, the Fiat Auto plant in Cordoba, Argentina,
will assemble PSA Group gearboxes to be mounted on Peugeot and Citroën cars sold in
South America. Annual production over the course of the 10-year agreement is
expected to reach 140,000 units. |
Disposal of subsidiaries
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Sale of Atlanet S.p.A. The most significant condition precedent to the closing
of sale of Atlanet S.p.A (which provides telecommunication services in Italy to the
Fiat Group) to the BT Group for consideration of approximately €80 million was
satisfied in the first quarter of 2006 upon our receipt of approval from the Italian Antitrust Authority.
The sale of our telecommunication businesses in Poland and Brazil is currently being
finalized. |
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Sale of Société Bretonne de Fonderie et de Mécanique S.A. In May 2006, the
transfer of approximately 60% of Société Bretonne de Fonderie et de Mécanique S.A.
(SBFM), a French company that was part of Teksids Cast Iron Unit, was completed.
Under the terms and conditions of the transaction, Teksid and the transferee have
respective put and call options on Teksids remaining stake through the end of 2008. |
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Agreement between Fiat Group and BSI SA for the sale of Banca Unione di Credito.
The Fiat Group, through IHF Internazionale Holding Fiat, and BSI SA, a Generali
Group company, reached an agreement in June 2006 whereby BSI will purchase 100% of
the capital stock of Banca Unione di Credito, a Swiss bank owned by IHF, from IHF.
The value of the transaction, subject to the results of due diligence, is
approximately 400 million Swiss francs, or about €260 million. Closing of the
transaction is subject to the approval by regulatory and antitrust authorities. This
transaction is consistent with Fiat Groups strategy of focusing on its core
automotive business through the sale of non-strategic assets. |
|
|
|
|
Sale of 10% stake in IPI. In June 2006, Fiat Partecipazioni sold its 10%
residual stake in IPI S.p.A., a central operator in the Italian and European real
estate industry, to Risanamento S.p.A. for a consideration of approximately €25.7
million, thus recording a gain of approximately €9 million on a consolidated
basis. The transaction was envisaged in the agreements signed with Risanamento in
March 2003 and is consistent with the Groups strategy of focusing on the core
automotive business. |
|
|
|
|
Sale of Sestrieres S.p.A. On June 29, 2006, Fiat through Fiat Partecipazioni
S.p.A. and Business Solutions S.p.A. completed the divestiture of its entire
stake in Sestrieres S.p.A., which manages the lift facilities in the via Lattea ski
area, for consideration of approximately €30 million. |
22
First Quarter Results
Our consolidated net revenues totaled €12,556 million in the first quarter of 2006,
compared to €10,755 million in the previous year-period. The 16.7% increase was supported by the
sharp rise in the Automobiles business area, as the success of new models led to an increase in
sales volume. Increases at CNH, Iveco and the Components and Production Systems business area
contributed to the improvement. Effective January 1, 2006, the Components and Production Systems
business area includes the results of the FPT sector, which itself now includes not only the
passenger and commercial vehicles powertrain operations it had in 2005, but also the industrial
powertrain activities included in the Iveco sector until December 31, 2005. To facilitate a
comparison, the 2005 data presented herein has been reclassified on the same basis. In April 2005,
we transferred ownership of Maserati from Ferrari to Fiat Partecipazioni S.p.A. (a wholly owned
member of the Group) and established a new sector comprising the companies dedicated to the
production and sale of Maserati cars. To facilitate a comparison, data for 2005 has been
reclassified to conform to the current structure, with Maserati and Ferrari as separate sectors.
We posted a trading profit of €323 million in the first quarter of 2006, or almost seven
times the €47 million trading profit posted in the first three months of 2005. The most
significant improvement was recorded in the Automobiles business area, and more specifically at
Fiat Auto, as trading profit grew to €57 million, compared to a trading loss of €129
million in the first quarter of 2005. All the principal sectors also contributed to the
improvement.
Our operating income was €323 million in the first quarter of 2006, as compared to
operating income of €729 million in the previous year-period. The first quarter of 2005
included other unusual income, amounting to €715 million, which reflected the gain (net of
related costs) arising from the €1 billion payment received by GM in February 2005, as well
as restructuring costs and other minor unusual expenses amounting to €33 million. If these
items are excluded, the increase from the first quarter of 2005 was due to the improved trading
profit.
We
recorded group interest in net income of €138 million in the first
quarter of 2006, compared to €295 million in the first
quarter of 2005.
Among the most significant trends in our revenues and trading profit3 during the
first quarter of 2006 were:
|
|
|
The Automobiles business area recorded aggregate revenues of €6,139 million
and trading profit of €49 million in the first quarter of 2006, compared to
aggregate revenues of €4,981 million and trading losses of €166 million in the
first quarter of 2005. In particular: |
|
|
|
In the first quarter of 2006, Fiat Auto recorded revenues of
€5,718 million, an increase of 23.7% over the €4,623 million posted in
the first three months of 2005. |
|
|
|
|
The quarter was characterized by the success of the new models that took concrete
shape in a significant increase in volumes. Revenues also benefited from the
positive impact of exchange rates. |
|
|
|
|
Also, in the first quarter of 2006 the Western European market for automobiles
posted an increase of 3.3% with respect to the first quarter of 2005. Among
leading European countries, increases were recorded in Italy (approximately +9%),
Germany |
|
|
|
3 |
|
References to revenues and trading profit for
the individual business areas and operating sectors in this section are based
on such measures prior to intersegment eliminations. |
23
|
|
|
(approximately +6%) and Spain (approximately +3%); sales were stable in France,
but decreased in Great Britain (-4.6%). |
|
|
|
|
Outside Western Europe, the Polish market for automobiles continued to perform
poorly, declining by 14.7%, while the strong economic expansion of the Brazilian
market drove an increase in sales, which rose by 14.0%. |
|
|
|
|
The Western European market for light commercial vehicles increased by 7.4% with
respect to the first three months of 2005, with growth being recorded in all
principal countries. |
|
|
|
|
In the first quarter of 2006, Fiat Auto delivered a total of approximately
485,000 units, an increase of 15.8% over the first quarter of 2005. A total of
333,000 units were delivered in Western Europe, 16.8% more than in the
corresponding period of 2005. The strong performance of new models enabled the
sector to outperform the favorable trend of the European market, posting notable
results in almost all the principal European markets. Deliveries increased by
20.7% in Italy, 26.9% in Germany, 8.1% in France and 7.8% in Great Britain; the
5.2% decline recorded in Spain represented the only exception. Fiat Autos share
of the automobile market in Italy grew to 30.7%, an increase of 2.4 percentage
points over the corresponding quarter of 2005. A positive trend was recorded in
Western Europe as a whole, where the sectors market share increased by 1
percentage point to 8.0%. In Brazil, market expansion (+14%) positively influenced
shipments which posted an overall increase of 12.5%; the sectors share of the
automobile market increased by 0.3 percentage points to 23.8%. In Poland, Fiat
Autos market share held steady at approximately 11%. |
|
|
|
|
With regard to light commercial vehicles alone, a total of approximately 73,000
units were delivered, an increase of 6.6% over the corresponding period of 2005.
In Western Europe, shipments were up 6.9% to approximately 49,000 units. The
sectors share of the market for light commercial vehicles increased by 2.7
percentage points to 44.0%, while in Western Europe it held steady at 10.0%. |
|
|
|
|
Fiat Auto had a trading profit of €57 million in the first quarter of 2006,
reflecting a major improvement from the trading loss of €129 million reported
in the first quarter of 2005. The change was mainly attributable to higher sales
volume, improved product mix thanks to the new models, improved absorption of
fixed production costs, and containment of governance costs (partially offset by
higher advertising costs related to new model launches). |
|
|
|
|
Maserati had revenues of €121 million in the first quarter
of 2006, for a decline of 6.2% over the €129 million posted in the
corresponding period of 2005, which had benefited from the sales of the special
MC 12 series, which is no longer being sold in 2006. The strong performance of
the Quattroporte was not sufficient to offset the impact of this change and
lower sales of the Coupé and Spyder, which are awaiting the introduction of new
models in 2007. |
|
|
|
|
In the first quarter of 2006, Maserati delivered 1,332 cars to the network, a
decrease of 4.3% compared with the 1,392 cars delivered in 2005. |
|
|
|
|
Also, in the first quarter of 2006, Maserati had a trading loss of €19
million. The |
24
|
|
|
improvement with respect to the trading loss of €29 million of the first
quarter of 2005 was mainly due to cost efficiency gains that offset the
contraction in volume. |
|
|
|
|
Ferrari recorded revenues of €317 million in the first
quarter of 2006, or 27.3% more than the €249 million posted in the
corresponding period of 2005, mainly due to sales of the coupe, spider and
challenge versions of the F430. |
|
|
|
|
A total of 1,365 units were delivered to end customers, a gain of 15.0% over the
first quarter of 2005. This increase confirms the publics appreciation of the
current product line. |
|
|
|
|
Shipments to the sales network reached 1,266 units, 19.7% more than in the first
quarter of 2005. |
|
|
|
|
Ferrari closed the first quarter of 2006 with a trading profit of €11 million,
an improvement with respect to the trading loss of €8 million recorded in the
corresponding period of 2005. This positive performance was mainly attributable to
an increase in volume and efficiency gains, which amply offset higher research
and development costs. |
|
|
|
CNH revenues in the first quarter of 2006 amounted to €2,652 million, an
increase of 13.7% over the €2,333 million posted in the first quarter of 2005, in
part connected to the positive translation impact of the dollar/euro exchange rate.
On a constant exchange rate basis the increase would have been approximately 6%.
This increase reflected the combined effect of significantly higher sales of
construction equipment across all regions and higher prices in both the agricultural
and construction equipment segments. |
|
|
|
|
In the first quarter of 2006, CNHs sales of agricultural equipment to its dealer
network declined slightly with respect to the first three months of 2005. Tractor
sales decreased slightly (-1%), as the declines reported in Western Europe, Latin
America and North America, combined with de-stocking efforts, were partly offset by
the positive performances of rest of the world countries. Sales of combine harvesters
to the network (-12%) were negatively impacted by the sharp declines reported in
Latin America and in Western Europe, which were only partially offset by gains in
North America and rest of the world countries. |
|
|
|
|
Also, in the first quarter of 2006, CNHs sales volume of construction equipment to
the network increased by 9% over the first quarter of 2005. Sales of light equipment
to the network increased in Latin America and rest of the world countries. Sales of
heavy equipment increased across all regions. |
|
|
|
|
CNH closed the first quarter of 2006 with a trading profit of €137 million, up
10.5% from €124 million in the first quarter of 2005, which included a one-time
reduction in health care costs of €24 million. The increase in volumes and
improved mix in the construction equipment segment, better prices, and production
cost efficiency gains amply compensated for higher costs connected with product
quality improvements and brand enhancement measures. |
|
|
|
|
Iveco closed the first quarter of 2006 with revenues of €2,071 million, posting a
gain of 5.0% with respect to the €1,972 million in the corresponding period of 2005
that was made possible by higher sales volumes (+1.6%), the favorable effect of
market/product mix and |
25
|
|
|
better pricing. |
|
|
|
|
In the first quarter of 2006, Iveco had a trading profit of €70 million, a gain of
€22 million or 45.8% over the first quarter of 2005. This positive performance was
mainly attributable to an increase in volumes, the favorable market/product mix, and
improved prices and efficiencies realized on materials and production costs. As
previously mentioned, the Iveco sector figures for both periods are reported excluding
the powertrain activities, which were included in the FPT sector effective January 1,
2006. |
|
|
|
|
In the first quarter of 2006, the Components and Production Systems business area,
which includes, as previously mentioned, the FPT activities, had €3,204 million in
revenues and €82 million in trading profit. In the same period of 2005 it had
€2,132 million in revenues and €46 million in trading profit. The significant
changes were primarily attributable to the inclusion of FPT. |
|
|
|
FPTs revenues in first quarter of 2006 were €1.6 billion,
thanks to the contribution of revenues from the former Iveco Industrial and
Marine Business Unit, (€693 million in first quarter of 2006, compared with
€653 million in the same period of 2005) and the Passenger and Commercial
Vehicles Business Unit (€885 million in first quarter of 2006), which was
still part of the Fiat-GM Powertrain joint venture in first quarter of 2005 and
therefore was not included in the scope of consolidation. |
|
|
|
|
FPTs trading profit for the first quarter of 2006 was €34 million, compared
with €17 million recorded by the industrial and marine activities in the first
quarter of 2005. The change reflects not only the consolidation of the passenger
and commercial vehicles activities, which reported a trading profit of €9
million, but also the improved result of the industrial and marine activities
compared with the first quarter of 2005. The 2006 trading profit also benefited
from the positive volume effect and significant efficiencies in purchasing and
manufacturing. |
|
|
|
|
With revenues of €1,196 million in the first quarter of
2006, Magneti Marelli posted an increase of 23.8% over the first quarter of
2005, when revenues totaled €966 million. The increase was due in part to
the good sales performance of Fiat models, with gains excluding exchange
rate effects being recorded across all the business units, and was amplified by
exchange rates effects. |
|
|
|
|
Magneti Marelli had a trading profit of €42 million in the first quarter of
2006, an increase of 27.3% compared to €33 million in the same period of 2005.
The €9 million increase was mainly attributable to the positive impact of
increased sales volumes and the streamlining of the cost structure, which offset
competitive price pressures. |
|
|
|
|
Teksid recorded revenues of €260 million in the first
quarter of 2006, an increase of 9.7% over the first three months of last year.
The transfer of approximately 60% of SBFM, which was part of the cast iron
business unit, was completed in May 2006. Thus, the subsidiarys assets and
liabilities were reclassified as assets and liabilities held for sale.
Excluding the impact of this reclassification, the increase in revenues for the
period was approximately 22%, mainly due to higher volumes at the Cast Iron
Business Unit and the positive impact of exchange rates effects. |
|
|
|
|
In the first quarter of 2006, Teksid posted a trading profit of €12 million,
against a trading profit of €5 million in the first three months of 2005. |
26
|
|
|
In the first quarter of 2006, Comau recorded revenues of €306
million, down 3.2% over the corresponding period of 2005 when revenues were
€316 million. Excluding the sale of a minor activity (painting systems) in
2005 and the positive impact of foreign currency translation differences,
revenues would have been substantially in line with those of the first quarter
of 2005. |
|
|
|
|
During the first quarter of 2006, a period usually impacted by an unfavorable
seasonality, Comau reported a trading loss of €6 million, somewhat less than
the €9 million trading loss reported in the same period of 2005. The change
stemmed from improvements both in contract work and service operations. |
|
|
|
Our other businesses reported aggregate revenues of €372 million in the first
quarter of 2006, down 3.6% from €386 million in the prior-year period, reflecting
lower revenues at Business Solutions that were only partially offset by an increase
in Holdings and other companies. Our other businesses reported a trading loss of
€15 million in the first quarter of 2006, compared to a trading loss of €5
million in the first quarter of 2005. |
Outlook
The Western European automobile market is expected to remain stable in 2006, while demand
in Brazil should show moderate growth. In this context, the Groups automobile sector plans to
take advantage of the full-year contribution of its new models to boost volume and improve its
mix in European markets. Meanwhile, the profit contribution from Brazil is expected to remain
roughly unchanged from the 2005 level.
Aggressive cost cutting will continue in all non-essential areas of the company. Efforts
will also be made to ensure that purchasing efficiencies offset the impact of expected price
hikes in raw materials.
At CNH, the demand for construction equipment should remain strong, while agricultural
equipment volumes in 2006 are expected to remain stable. The North American market is expected
to outperform Europe, with soft demand forecast in Latin America. CNH should benefit from its
recent brand reorganization, while relying on pricing to offset rising raw material costs. CNH
will also remain focused on achieving greater purchasing and manufacturing efficiencies.
Iveco expects a slight increase in market shares in the framework of a stable Western
European market, especially for its heavy-range vehicles and buses. Growth is also expected in
the rest of the world, particularly for buses. Additionally, Iveco will focus on manufacturing
efficiencies to offset higher labor and utilities costs. Iveco is improving its product range,
including restyling of the Daily, early introduction of Euro 4- and Euro 5-compliant engines,
and the launch of new special-purpose vehicles.
Overall, the Group expects that all its businesses will achieve sales volumes in line with
the forecast of essentially flat market demand. Cost-reduction measures are on track. As a
result, the Group has confirmed its principle targets for 2006: positive operating cash flow,
trading profit between €1.6 and €1.8 billion and net income of approximately €700
million.
Broken down by sector or business area, our full-year 2006 trading profit targets (trading
profit or trading profit as a percentage of revenues) are as follows:
|
|
|
Fiat Auto trading profit of approximately €200 million; |
27
|
|
|
CNH, 7.0% to 7.5% of revenues; |
|
|
|
|
Iveco (without the powertrain activities transferred to FPT), 5.5% to 6.0% of revenues; |
|
|
|
|
FPT, 3.0% to 3.5% of revenues; and |
|
|
|
|
Components and Production Systems (Marelli, Teksid and Comau), 3.5% to 4.0% of
revenues. |
The Fiat Group will continue to implement its strategy of targeted alliances, in order to
reduce capital commitments, share investments and risks. Efforts will be made to complement
Fiats advanced technological resources with better quality, commercial distribution and
customer service capabilities.
28
Historical Overview
We were founded in Turin in 1899 and incorporated in 1906 as a manufacturer of automobiles,
but quickly expanded into the production of buses and motor coaches, commercial vehicles and
aviation and marine engines. By 1920, our product lines included metallurgical products,
railway cars, automotive and industrial components and tractors. We expanded into civil
engineering in 1929. In the 1950s, we began to manufacture construction equipment, developed
the first Italian jet-powered aviation engine and introduced the first mass-produced Italian
automobile. In the 1960s, we acquired several other major automobile manufacturers in Italy.
The early 1970s witnessed the expansion of our commercial vehicles, construction equipment and
production systems operations. Throughout this period, our operations developed an increasingly
international character, as we marketed our products outside Italy and formed manufacturing
subsidiaries, participated in joint ventures and engaged in other forms of industrial
cooperation in several countries.
In the late 1970s, we began reorganization with a specific focus on our operations in
Italy, selected countries in Europe and Brazil. The 1980s and the beginning of the 1990s were
characterized by expansion through acquisitions, joint ventures and marketing agreements.
Beginning in 1990, the economies of the industrialized world were faced with a serious economic
downturn, leading to a sharp drop in demand in key markets and heightened competitive pressures.
We responded to the crisis by initiating a program to renew and modernize our facilities and
products with the objective of increasing our competitiveness and further lowering our
break-even point. These efforts, along with a significant improvement in economic conditions in
many of our principal markets, resulted in our recording net profits in each of the years from
1994 through 2000, following the historic losses we recorded in 1993. However, in the early
years of the new millennium, increased competition and the deterioration of the economic
environment in many of our markets were reflected in our disappointing financial results. In
2004, we recorded a net loss for the fourth year in a row, although our losses were narrowed as
we continued to work to improve the efficiency and competitiveness of our operations. The year
2005 represented a significant turning point for the Fiat Group, as we reported trading profit
of €1.0 billion and net income of €1.4 billion, as described in detail in Item 5.
Operating and Financial Review and Prospects Results of Operations 2005 Compared with
2004. In the fourth quarter of 2005, Fiat Auto posted a positive trading profit, after 17
consecutive quarters of losses; a trend that was confirmed in the first quarter of 2006 for both
Fiat Auto and the Group as a whole.
At December 31, 2005, we operated in 57 countries through 650 subsidiaries and affiliates;
155 of these subsidiaries and affiliates were located in Italy. As of such date, we had a total
of 173,695 employees, including approximately 77,100 in Italy. The tables which follow set
forth for the years indicated: (i) net revenues presented by the geographic market in which the
sales were made and (ii) revenues, trading profit (loss) and the number of employees for each of
our sectors and our other companies. The Consolidated Financial Statements included in Item 18
for the years ended December 31, 2005 and 2004 (from which the financial data in this table have
been extracted) have been prepared in accordance with the requirements of IFRS and also reflect
the changes in the scope of consolidation discussed above in Item 3. Key InformationSelected
Financial Data.
29
Net Revenues By Destination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
Net revenues |
|
of net revenues |
|
|
(in millions of euro) |
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
Italy |
|
|
13,078 |
|
|
|
28.1 |
% |
Europe (excluding Italy) |
|
|
18,518 |
|
|
|
39.8 |
|
|
|
|
|
|
|
|
|
|
Total Europe |
|
|
31,596 |
|
|
|
67.9 |
|
North America |
|
|
6,048 |
|
|
|
13.0 |
|
Mercosur Region (1) |
|
|
4,364 |
|
|
|
9.4 |
|
Rest of the World |
|
|
4,536 |
|
|
|
9.7 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
46,544 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
Italy |
|
|
14,903 |
|
|
|
32.6 |
% |
Europe (excluding Italy) |
|
|
17,646 |
|
|
|
38.7 |
|
|
|
|
|
|
|
|
|
|
Total Europe |
|
|
32,549 |
|
|
|
71.3 |
|
North America |
|
|
6,020 |
|
|
|
13.2 |
|
Mercosur Region (1) |
|
|
3,195 |
|
|
|
7.0 |
|
Rest of the World |
|
|
3,873 |
|
|
|
8.5 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
45,637 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Comprising Argentina, Brazil, Paraguay and Uruguay. |
30
Revenues, Trading Profit and Number of employees by Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Percentage of |
|
Trading profit |
|
employees at |
|
|
Revenues |
|
revenues(1) |
|
(loss) (2) |
|
year end |
|
|
(in millions |
|
|
|
|
|
(in millions |
|
|
|
|
|
|
of euro) |
|
|
|
|
|
of euro) |
|
|
|
|
2005: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiat Auto |
|
|
19,533 |
|
|
|
38.0 |
% |
|
|
(281 |
) |
|
|
46,099 |
|
Maserati |
|
|
533 |
|
|
|
1.0 |
|
|
|
(85 |
) |
|
|
606 |
|
Ferrari |
|
|
1,289 |
|
|
|
2.5 |
|
|
|
157 |
|
|
|
2,809 |
|
Fiat Powertrain Technologies (3) |
|
|
1,966 |
|
|
|
3.8 |
|
|
|
26 |
|
|
|
10,111 |
|
Agricultural & Construction Equipment (CNH)(4) |
|
|
10,212 |
|
|
|
19.9 |
|
|
|
698 |
|
|
|
25,420 |
|
Trucks and commercial vehicles (Iveco) |
|
|
9,489 |
|
|
|
18.5 |
|
|
|
415 |
|
|
|
32,373 |
|
Components (Magneti Marelli) |
|
|
4,033 |
|
|
|
7.9 |
|
|
|
162 |
|
|
|
24,213 |
|
Metallurgical Products (Teskid) |
|
|
1,036 |
|
|
|
2.0 |
|
|
|
45 |
|
|
|
8,952 |
|
Production Systems (Comau) |
|
|
1,573 |
|
|
|
3.1 |
|
|
|
42 |
|
|
|
12,725 |
|
Services (Business Solutions) |
|
|
752 |
|
|
|
1.5 |
|
|
|
35 |
|
|
|
5,436 |
|
Publishing and Communications (Itedi) |
|
|
397 |
|
|
|
0.8 |
|
|
|
16 |
|
|
|
846 |
|
Other Companies (5) |
|
|
469 |
|
|
|
1.0 |
|
|
|
(173 |
) |
|
|
4,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total before Eliminations and Consolidating
Adjustments |
|
|
51,282 |
|
|
|
100.0 |
|
|
|
1,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations and Consolidating Adjustments |
|
|
(4,738 |
) |
|
|
|
|
|
|
(57 |
) |
|
|
|
|
Total |
|
|
46,544 |
|
|
|
|
|
|
|
1,000 |
|
|
|
173,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiat Auto |
|
€ |
19,695 |
|
|
|
40.4 |
% |
|
|
(822 |
) |
|
|
45,122 |
|
Maserati |
|
|
409 |
|
|
|
0.8 |
|
|
|
(168 |
) |
|
|
652 |
|
Ferrari |
|
|
1,175 |
|
|
|
2.4 |
|
|
|
138 |
|
|
|
2,670 |
|
Fiat Powertrain Technologies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural & Construction Equipment (CNH)(4) |
|
|
9,983 |
|
|
|
20.5 |
|
|
|
467 |
|
|
|
25,746 |
|
Trucks and commercial vehicles (Iveco) |
|
|
9,047 |
|
|
|
18.6 |
|
|
|
371 |
|
|
|
31,037 |
|
Components (Magneti Marelli) |
|
|
3,795 |
|
|
|
7.8 |
|
|
|
165 |
|
|
|
21,868 |
|
Metallurgical Products (Teskid) |
|
|
910 |
|
|
|
1.9 |
|
|
|
(39 |
) |
|
|
8,571 |
|
Production Systems (Comau) |
|
|
1,711 |
|
|
|
3.5 |
|
|
|
40 |
|
|
|
13,328 |
|
Services (Business Solutions) |
|
|
976 |
|
|
|
2.0 |
|
|
|
41 |
|
|
|
6,519 |
|
Publishing and Communications (Itedi) |
|
|
407 |
|
|
|
0.8 |
|
|
|
11 |
|
|
|
849 |
|
Other Companies (5) |
|
|
620 |
|
|
|
1.3 |
|
|
|
(58 |
) |
|
|
4,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total before Eliminations and Consolidating
Adjustments |
|
|
48,728 |
|
|
|
100.0 |
|
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminations and Consolidating Adjustments |
|
|
(3,091 |
) |
|
|
|
|
|
|
(96 |
) |
|
|
|
|
Total |
|
|
45,637 |
|
|
|
|
|
|
|
50 |
|
|
|
161,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
|
Note 33 to the Consolidated Financial Statements included in
Item 18 sets forth the amounts of revenues attributable to
intersegment transactions for each of our sectors, but not
for our Other Companies. The aggregate of these amounts
for all sectors is shown under Eliminations and
Consolidating Adjustments in the above table. |
|
(1) |
|
Represents the revenues of each sector, prior to eliminations and consolidating
adjustments, as a percentage of total consolidated net revenues prior to eliminations and
consolidating adjustments. |
|
(2) |
|
Trading profit (loss) reflected in eliminations and consolidating adjustments arises from
the consolidation process. |
|
(3) |
|
Began as of May 1, 2005, therefore 2005 data is based on eight months of 2005. |
|
(4) |
|
The revenues of CNH (as reported by us under IFRS) in dollars, CNHs reporting currency,
were $12,706 million in 2005 and $12,419 million in 2004. Similarly, trading profit at CNH
(as reported by us under IFRS) in dollars totaled $869 million in 2005 and $581 million in
2004. |
|
(5) |
|
Other Companies include holding and miscellaneous companies (i.e. Banca Unione di
Credito BUC). See Recent Developments Disposal of subsidiaries above. |
31
Sectors
Our companies in 2005 were organized into 11 operating sectors, two more than the previous
year, following the transfer of the ownership of Maserati from Ferrari to Fiat Partecipazioni
S.p.A. (as a consequence, Maseratis results which had previously been included in the
Ferrari-Maserati sector, are now presented as separate sectors) and the creation of the new sector
FPT. Each of the Groups sectors functions with a high degree of operating autonomy, although key
decisions in areas such as senior management appointments, human resources and capital allocation
matters and other strategic development issues are closely coordinated with Group management.
Fiat Auto
Our automobile operations are conducted primarily through Fiat Auto and its subsidiaries. The
Fiat Auto sector operates internationally with three major brands Fiat, Lancia and Alfa Romeo
and manufactures and markets automobiles, light commercial vehicles and related products primarily
in Italy and in the rest of Europe, and in South America and Turkey.
In 2005, Fiat Auto continued to pursue a strategy focused on upgrading, improving and
completing its model line-up. Demand for automobiles in Western Europe as a whole decreased by
0.2% in 2005 as compared with 2004, and the pressure on prices has continued. This market
environment, together with the relative strength of the euro, which favors the competitiveness of
non-European original equipment manufacturers (OEMs), has created a situation in which European
OEMs are unable to pass higher input costs on to consumers. Furthermore, in recent years, the auto
industry has experienced a general reduction in sales prices. Together, all of these factors have
had a generally negative effect on the profitability of the European auto industry.
Despite this challenging environment, Fiat Auto was able to sharply reduce its trading loss in
2005, from €822 million in 2004 to €281 million in 2005. The improved result was mainly
attributable to a better product mix due to the introduction of new models, a reduction in product
costs reflecting the realization of purchasing efficiencies, a strong focus on more profitable
sales channels and a sharp reduction in business governance costs.
The 2005 results reflected Fiat Autos ongoing implementation of its reorganization, which is
focused on reinforcing the sectors value added activities for customers and businesses and
simplifying its internal processes so as to speed up its responsiveness to changes in the market,
while at the same time continuing to realize greater efficiencies. This reengineering process is
primarily based on a cultural change focused on enhancing the entrepreneurship and involvement of
Fiat Autos employees, which is supported by an important Leadership Development Program.
At December 31, 2005, the sector had 46,099 employees, including 29,136 in Italy. The
aggregate increase of approximately 1,000 employees over the course of the year reflected the
addition of approximately 3,900 employees as a result of:
|
|
|
the acquisition of purchasing activities in Italy and Latin America, after the
termination of the GM/Fiat Worldwide Purchasing joint venture, and of ICT
development activities, due to the termination of the Global Value joint venture
between Fiat and IBM; |
|
|
|
|
the insourcing of stamping activities in Italy and the acquisition of full
control of Leasys in Italy and directly owned dealerships in Europe; and |
32
|
|
|
an increase in the number of blue collar workers at the Melfi Plant in Italy, in
relation to the startup of Grande Punto production, and at Fiat Automoveis South
America (Fiasa), in line with growing manufacturing volumes at that location. |
The impact of these increases was partially offset by the departure of approximately 2,900
employees, largely as a result of the sectors restructuring initiatives. At the end of 2005,
about 900 of the sectors employees in Italy were receiving Cassa Integrazione benefits. See Item
6. Directors, Senior Management and Employees Employees and Labor Relations for more details.
Product Development
In 2005, Fiat Auto continued to pursue a strategy focused on upgrading, improving and
completing its model line. As part of its effort to round out its model line, Fiat launched the
Croma, a new entry in the intermediate segment. This car, which is notable for its high levels of
performance and comfort, was introduced to the market in May 2005, and generated over 27,000 orders
from the dealer network by the end of the year. The Grande Punto subcompact was launched in
September and generated an excellent response among customers at dealer showrooms during the Open
Doors promotion; the model was gradually rolled-out to the rest of Western Europe, and the sector
recorded more than 35,000 registrations and orders for 88,000 cars by the end of the year, with
customers outside Italy accounting for approximately 45% of the total.
The launch of the Fiat Panda Cross and Fiat Sedici during the second half of the 2005 helped
the Fiat brand in gaining a strong position in the four-wheel drive segment of the market, where it
had already established a presence with the Panda 4x4. Both the Panda Cross and the Fiat Sedici
were unveiled in November. The Panda Cross is a new version of the four-wheel-drive Panda. The Fiat
Sedici, which is being built in partnership with Suzuki, at a plant owned by Suzuki in Hungary, is
Fiats first ever entry into the four-wheel drive segment of the market, and is expected to benefit
from having been chosen as the official car of the 2006 Turin Winter Olympic Games. During the
Bologna Motor Show at the beginning of December, Fiat presented the Panda Monster, a new version of
the Panda four-wheel drive vehicle, co-branded with the Ducati motorcycle company, and the Fiat
Oltre, a show car based on a powerful Iveco multi-use vehicle.
Alfa Romeo also continued to renovate its product line. The Alfa 159, introduced to the market
in October 2005, belongs to the great Alfa Romeo tradition of automobiles with distinctive styling.
By the end of December, the model had generated more than 14,000 orders from dealers. In October,
Alfa Romeo unveiled the Brera coupé, an upscale sport car whose styling elicited accolades from
both the industry press and the public in general.
In anticipation of the celebration of its 100th birthday in November 2006, Lancia presented
important upgrades of some of its most successful models, including new versions of the Ypsilon (in
particular one created in connection with Momo Design of Italy), Musa (Platino+) and Phedra (Unique
Edition).
The launch of numerous new models has allowed the sector to significantly rejuvenate its
fleet. At the end of 2005, the Fiat and Alfa Romeo line-ups were comprised of models that were less
than two years old on average, and thus highly competitive. The competitiveness of the product line
is bolstered by the significant success achieved in terms of safety and customer satisfaction.
Three of the major new models introduced in 2005 the Fiat Croma, Alfa 159 and Grande Punto were
each awarded five stars, placing them at the top of the Euro NCAP safety ranking. The Grande Punto
was also honored with several prizes in Europe, including the Golden Steering Wheel in Germany and
the Auto Europa prize awarded by the Italian Association of Automotive Journalists (UIGA).
33
The Fiat Light Commercial Vehicles brand also had a very positive year with the launch, in
October, of the new Doblò, which was awarded the 2006 Van of the Year prize by an international
jury of automotive industry journalists from 19 European countries, and was able to maintain its
leading market share in Italy.
The sectors research and development activities focused on completing the ongoing development
of the Grande Punto, Croma, Alfa 159 and Doblò, continuing the development of the Nuovo Ducato,
Nuovo Scudo and a new car in the subcompact segment for South America and other international
markets and starting the development of the nuova Bravo, which will replace the Stilo, and Fiat
500. Another area of activity involved basic research in engines and components for future
applications.
In February 2006, Alfa Romeo launched the Alfa 159 Sportwagon, a successor to the 156
Sportwagon. In mid-May 2006, Fiat Light Commercial Vehicles presented the Nuovo Ducato, a new
medium commercial vehicle replacing the previous Ducato. In mid June 2006, Alfa Romeo launched the
Alfa Spider, the model that, following its world preview at the Geneva Motor Show, was named
Cabrio of the Year 2006 by the Cabriolet Committee, a jury of 23 specialist journalists from 12
countries.
In 2005, Fiat Auto intensified its activity in those markets outside the EU where it already
had an established presence, such as Brazil, Argentina and Turkey, while at the same time launching
programs to expand in emerging markets through alliances with strong local partners.
In Brazil, Fiat Auto benefited from healthy demand in the local market, increasing sales by
12.9% with respect to 2004, and regaining leadership of the market. The success of the flex
(bi-fuel alcohol and gasoline) versions of the Palio and Mille models, which were introduced during
the first half of the year, was largely responsible for this increase.
In Argentina, where consumer demand continued to improve after the deep crisis of 2002, the
automobile market expanded at a rate of 35.6%, as compared with 2004; Fiat Auto also increased its
market share to 12.4%, an increase of 0.6 percentage points as compared with 2004. Due to the
positive impact of new products and the contribution of a revamped sales network, deliveries of
automobiles and light commercial vehicles to the dealer network increased by 43.1%, to 44,100
units.
In Turkey, demand for automobiles and light commercial vehicles increased to about 720,000
units, up +2.9% as compared with 2004; this increase mainly reflected the positive performance of
the Turkish economy. In such environment, Tofas, the local joint venture in which Fiat Auto has a
37.9% interest, achieved a market share of 11.2% compared to its market share of 11.1% in 2004, and
it also increased deliveries by 8.1% as compared to 2004. Tofass improved performance over 2005,
both in the domestic and export markets, was largely made possible by the production of the new
Doblò, and the launch of the new Palio and Albea.
Fiat Auto also has a joint venture in China with the Yuejin Motor Company, established in
2002, which sold approximately 33,000 vehicles in 2005. In India, Fiat Auto continued to
rationalize its existing operations as part of its cost reduction efforts, while at the same time
exploring new opportunities for strategic growth, including the industrial alliance with the Tata
Group described below.
Industrial alliances
After termination of the Master Agreement with General Motors, Fiat Auto regained its
strategic independence and was thus able to execute targeted industrial agreements with major
carmakers outside of Italy. These agreements will increase the competitiveness of Fiat Autos
products and expand its presence in emerging markets.
34
In November 2005, Fiat Auto and Ford announced a definitive agreement to cooperate on the
joint development and production of a future A segment, or city subcompact, car. The strategic
collaboration aims to bring to market in the 2007-2008 period, a separate new vehicle for each Fiat
and Ford featuring highly differentiated designs: for Fiat, a new 500, and for Ford, a
replacement for its current Ka. The parties expect the collaboration, with projected annual volume
of approximately 120,000 units of each vehicle, to result in reduced development and material costs
for each company (as compared to the cost of individually developing a vehicle).
In 2005, Fiat Auto also entered into cooperation agreements with the PSA Group and Tofas to
design and produce a new light commercial vehicle in Turkey, with Zastava to assemble the Fiat
Punto under license at a Zastava plant in Serbia, and with Suzuki. With reference to the latter, in
March 2006, Fiat Auto and Suzuki Motor Corporation signed a license agreement for the production by
Suzuki of the Fiat 2 liter JTD Multijet diesel engines, which are to be compliant with Euro 5
emission requirements.
Since 1978, Fiat Auto has also had alliances with PSA Group for the production of light
commercial vehicles, carried out through Sevel S.p.A., and for the production of multi purpose
vehicles and utility vans, carried out through Sevel Nord S.A. The above mentioned Nuovo Ducato is
manufactured at the Sevel plant in Atessa (Italy).
In January 2006, Fiat Auto and Severstal Auto signed an industrial agreement for the assembly
in Russia of Fiat Palio and Fiat Albea models based on CKD kits manufactured in Turkey by Tofas,
our joint venture with the Koç Group. Assembly of these models at Severstal Autos Naberejniye
Chelni plant near Kazan in the Volga region is scheduled to start in 2007. In February, Fiat Auto
and Severstal Auto extended the agreement to cover Fiat Doblò models (the kits for which are also
produced in Turkey). The two companies previously entered into a supply agreement providing for
the importation and distribution in Russia of the full range of Fiat branded cars and light
commercial vehicles by Severstal.
Also in January 2006, the Fiat Group and Tata Motors Ltd. (Tata Motors) announced the
signing of an agreement for the sale of Fiat branded cars in the Tata Motors network throughout
India. As a result of this agreement, in March 2006, Tata Motors began selling a targeted
selection of Fiat cars as well as the complete Tata product range (together with spare parts and
sales and service assistance for both brands). The dealerships involved in this program now display
the new Fiat logo alongside the Tata logo. We expect to enter into additional agreements as further
analysis of the feasibility and nature of our cooperation with Tata Motors continues.
Markets and Competition
In 2005, the Western European automobile market (measured in terms of new registrations)
remained essentially steady at 14.4 million units (0.2% less units than in 2004), with some
clear differences depending on markets. In Italy, new registrations totaled 2,234,200, 1.3% less
than in 2004. The United Kingdom experienced an even greater decline (5.0% less than 2004) with
demand at 2,443.500 units, while France and Germany registered an increasing demand (+2.6% and
+1.6% respectively) to reach 2,058,100 and 3,250,100 units respectively. Spain remained pretty
stable with a 0.9% increase to 1,527,300.
Elsewhere in Europe, registrations in the Polish market decreased by 26.5% to 234,200
vehicles, reflecting the continuing negative impact on new car sales of imports by individuals of
second-hand cars as a result of the abolition, following Polands entry into the EU, of a tax on
imported used cars that was held to be contrary to EU law. In Turkey, new registrations decreased
by 2.8% to 438,500 units, reversing the positive trend recorded in the previous year.
35
In the Mercosur countries, new registrations in Brazil increased by 9.1% in 2005 to 1,414,800
units, while in the Argentine market, new registrations increased by 35.6% to 290,700 units.
In Asia, the car market in China continued to expand, recording an increase in new
registrations of 27.5% from 2004, to almost 3.2 million vehicles, while in India the market
increased by 6.4%, to 1,036,800 units. In China, Fiat Auto sold approximately 33,000 vehicles in
2005 through our joint venture with the Yeujin Group. In India, Fiat Auto sold 1,700 vehicles, a
0.2% decrease as compared to 2004.
Overall, demand for light commercial vehicles increased in Western Europe, totaling 1,925,200
units, or 2.8% more than in 2004. New registrations in Italy decreased by 1.8% to 206,300 units,
reversing the positive trend recorded in 2004. The market showed healthy increases in Spain
(+13.4%), and moderate increases in France (+3.4%) and Germany (+3.1%). In Poland, demand decreased
to 34,300 units, or 4.5% fewer than 2004.
Fiat Auto delivered a total of 1,697,300 vehicles to its dealer network, importers and other
large direct customers in 2005 (1,804,600 units if sales by unconsolidated affiliates are added),
as compared with 1,766,000 vehicles in 2004 (1,856,700 including unconsolidated affiliates). The
decrease of 3.9%, or 68,700 vehicles, in the sectors global unit sales (excluding unconsolidated
affiliates) reflected the relatively small impact on the 2005 results of the new models that were
launched in the last part of the year, the phase-out of the old models they replaced, and decreased
unit sales in Italy and several of the sectors major markets, particularly Germany, the United
Kingdom and rest of Europe, reflecting both aggressive competition and the sectors policy aimed at
reducing sales through less profitable distribution channels and concentrating on the quality of
margins, rather than the quantity of vehicles sold.
In Western Europe as a whole, the sectors share of the automobile market declined to 6.5%,
falling by 0.7 percentage points as compared with 2004. Fiat Autos unit sales in Western Europe
(excluding Italy) totaled 412,000 units, a decline of 15.7%, as its share of the automobile market
decreased from 3.4% in 2004 to 2.6% in 2005. The sectors unit sales in Italy decreased by 2.4% to
688,000, while its market share in Italy remained stable at 28.0%.
In 2005, sales of light commercial vehicles followed a positive trend, with total shipments
rising to 285,200 units, or 5.1% more than in 2004. In Western Europe, the sectors share of the
light commercial vehicle market declined by 0.2 percentage points to 10.4%, and sales decreased to
181,800 units, or 0.7% less than in 2004. With the exception of Italy and Germany, where shipments
were down 2.7% and 0.4%, respectively, sales improved throughout Western Europe, as Fiat Auto
recorded increases of 11.6% in Spain, 3.9% in France, and 1.4% in the United Kingdom.
The following table sets forth for the years indicated: unit sales of the sectors automobiles
and light commercial vehicles in its principal markets, the percentage of the sectors unit sales
represented by each market and the sectors automobile market shares (excluding light commercial
vehicles).
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
Auto |
|
|
|
|
|
|
|
|
|
|
Auto |
|
|
|
|
|
|
|
Percentage |
|
|
market |
|
|
|
|
|
|
Percentage |
|
|
market |
|
|
|
All units |
|
|
of units |
|
|
share |
|
|
All units |
|
|
of units |
|
|
share |
|
|
|
sold |
|
|
sold |
|
|
(%) |
|
|
sold |
|
|
sold |
|
|
(%) |
|
|
|
|
|
|
|
|
|
|
|
(Units in thousands) |
|
|
|
|
|
|
|
|
|
Italy |
|
|
688 |
|
|
|
40.5 |
|
|
|
28.0 |
|
|
|
704 |
|
|
|
39.9 |
|
|
|
28.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe (excluding Italy) |
|
|
412 |
|
|
|
24.3 |
|
|
|
2.6 |
|
|
|
489 |
|
|
|
27.7 |
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total W. Europe |
|
|
1,100 |
|
|
|
64.8 |
|
|
|
6.5 |
|
|
|
1,193 |
|
|
|
67.6 |
|
|
|
7.2 |
|
Brazil |
|
|
404 |
|
|
|
23.8 |
|
|
|
24.4 |
|
|
|
358 |
|
|
|
20.2 |
|
|
|
23.5 |
|
Poland |
|
|
34 |
|
|
|
2.0 |
|
|
|
10.7 |
|
|
|
61 |
|
|
|
3.5 |
|
|
|
17.1 |
|
Rest of the World |
|
|
159 |
|
|
|
9.4 |
|
|
|
|
|
|
|
154 |
|
|
|
8.7 |
|
|
|
|
|
TOTAL |
|
|
1,697 |
|
|
|
100.0 |
|
|
|
|
|
|
|
1,766 |
|
|
|
100.0 |
|
|
|
|
|
In Western Europe, Fiat Auto delivered a total of approximately 1,100,000 vehicles in 2005, a
7.8% decrease from 2004. The overall decrease in sales reflected a reduction in unit sales across
Western Europe as unit sales declined by 2.4% in Italy, by 38.5% to 53,300 vehicles in the United
Kingdom, by 15.8% to 90,800 units in Germany, by 3.0% to 70,300 units in Spain and by 20.3%, to
118,500 units in the rest of Europe. Only in France Fiat Auto posted an 8.3% increase.
The sector had mixed results in Poland and Brazil, its two most important markets outside
Western Europe. In Poland, Fiat Auto delivered a total of 33,800 vehicles in 2005, a decrease of
44.3% as compared with 2004, reflecting the overall decline in new registrations in the Polish
market of 26.5%, amid the significant inflow of used cars during the year. The sectors automobile
market share in Poland declined by 6.4 percentage points to 10.7%. In Brazil, where new
registrations increased by 9.1% in 2005, the sector delivered a total of 404,300 vehicles, a 12.9%
increase from the 358,100 units sold during 2004, primarily as a result of a recovery of demand in
the local market and the introduction of new models in the country. Fiat Autos share of the
Brazilian automobile market rose by 0.9 percentage points in 2005, to 24.4%. In Argentina, Fiat
Auto increased its automobile market share to 12.4% in 2005, up 0.6 percentage points from 2004,
with the sector selling a total of approximately 44,100 vehicles, 43.1% more than the approximately
30,800 sold in 2004.
The Western European market for automobiles, in which approximately 65% of the sectors unit
sales were made during 2005, is generally divided into a number of different major model segments
or classes. The sector is generally represented in each of these segments, with individual models
from each of its three major automobile brands designed to meet a broad range of consumer tastes.
|
|
|
The Fiat brand includes models ranging from city subcompacts such as the new Panda
with its 4x4 versions, to the subcompact Punto and Grande Punto, the
intermediate/compact Stilo (including its station wagon version), the new comfort wagon
Croma in the intermediate segment, and the Doblò, Ulysse and Multipla multipurpose
vehicles. The sector also produces the subcompact Siena and Palio in Brazil, and the
subcompact Albea and Palio in Turkey. In 2005, Fiat Auto started production and sales of
the Idea multipurpose vehicle in Brazil, a model that is already sold in Europe. In
2005, Fiat Auto also entered the four-wheel drive segment with a new model, the Sedici. |
|
|
|
|
In light commercial vehicles, which this sector defines as commercial vehicles with
gross vehicle weights, or GVW, of 3.5 tons or less, models sold under the Fiat brand
include the Ducato (of which a new generation was introduced in May 2006), the Doblò
Cargo |
37
|
|
|
(awarded Van of the Year 2006), the Scudo and the Strada pickup. Our Ducato
utility vans are
produced in Italy through the Sevel S.p.A. joint venture. The Ducato line is also
manufactured at a facility in Sete Lagoas, Brazil, which Fiat Auto operates as a joint
venture with Iveco. |
|
|
|
|
In addition, the Fiat brand includes bifuel (gasoline and compressed natural gas)
versions of the Multipla, the Punto van, the Doblò and the Ducato. |
|
|
|
|
The Lancia brand, traditionally associated with elegance and comfort, includes the
subcompact Ypsilon, the compact multipurpose vehicle Musa, and the Thesis and Phedra, in
the full-sized and multipurpose vehicle ranges, respectively. |
|
|
|
|
The Alfa Romeo brand, with its strong tradition of high performance, includes the
Alfa 159, Alfa 159 Sportwagon, Alfa Crosswagon and the GT sport coupé in the
intermediate segment, the Alfa 147 in the intermediate/compact segment, as well as the
full-size Alfa 166 and the Alfa Brera, which was presented in the second half of 2005. |
The following table sets forth the number of vehicles Fiat Auto sold in each of the recognized
segments in each of the years indicated, as well as the percentage of the sectors overall unit
sales represented by each segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
Percentage |
|
|
Units Sold |
|
of Units Sold |
|
Units Sold |
|
of Units Sold |
|
|
|
|
|
|
(Units in thousands) |
|
|
|
|
City subcompacts |
|
|
269 |
|
|
|
15.9 |
|
|
|
291 |
|
|
|
16.5 |
|
Subcompacts |
|
|
648 |
|
|
|
38.2 |
|
|
|
674 |
|
|
|
38.2 |
|
Intermediate/compact |
|
|
247 |
|
|
|
14.5 |
|
|
|
288 |
|
|
|
16.3 |
|
Intermediate |
|
|
83 |
|
|
|
4.9 |
|
|
|
80 |
|
|
|
4.5 |
|
Full-sized |
|
|
4 |
|
|
|
0.2 |
|
|
|
9 |
|
|
|
0.5 |
|
Sports cars |
|
|
1 |
|
|
|
0.1 |
|
|
|
3 |
|
|
|
0.2 |
|
Multipurpose vehicles |
|
|
160 |
|
|
|
9.4 |
|
|
|
150 |
|
|
|
8.5 |
|
Light commercial vehicles |
|
|
285 |
|
|
|
16.8 |
|
|
|
271 |
|
|
|
15.3 |
|
TOTAL |
|
|
1,697 |
|
|
|
100.0 |
|
|
|
1,766 |
|
|
|
100.0 |
|
While Fiat Autos unit sales of city subcompact vehicles decreased overall (mainly due to
the lower sales of the Fiat Seicento), sales of the new Fiat Panda remained largely stable. Sales
of subcompact vehicles decreased primarily due to lower sales of older models and Lancia Ypsilon
that were only partially offset by the first sales of the Grande Punto, which was introduced in the
last months of 2005. The sectors unit sales of intermediate/compact vehicles decreased, reflecting
a decline in sales of the Fiat Stilo and the Alfa 147. The increase in Fiat Autos unit sales of
intermediate vehicles was due to the launch of the new comfort wagon Fiat Croma, which more than
offset lower sales of the Alfa GT and Lancia Lybra (production of which was stopped last year), as
well as the Alfa 156, which was replaced at the end of the year by the new 159. The sectors unit
sales of multipurpose vehicles increased slightly, reflecting a full year of sales of the new
Lancia Musa alongside the Fiat Idea, as well as an increase in sales of the Fiat Multipla, the
impact of which was partially offset by decreases in sales of the Fiat Ulysse and the Lancia
Phedra. The sectors unit sales of light commercial vehicles increased due to higher sales of the
Fiat Strada, Fiat Ducato, Fiat Fiorino and the new Fiat Doblò Cargo and Panda Van.
The following table sets forth for the years indicated the market shares of the Fiat Group and
its major competitors in each of the automobile markets indicated.
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED |
|
TOT. WESTERN |
|
|
ITALY |
|
GERMANY |
|
FRANCE |
|
KINGDOM |
|
EUROPE |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
FIAT GROUP |
|
|
28.0 |
|
|
|
28.0 |
|
|
|
1.8 |
|
|
|
2.5 |
|
|
|
3.1 |
|
|
|
3.2 |
|
|
|
1.7 |
|
|
|
3.1 |
|
|
|
6.5 |
|
|
|
7.2 |
|
VW GROUP |
|
|
11.2 |
|
|
|
10.6 |
|
|
|
30.4 |
|
|
|
30.0 |
|
|
|
11.0 |
|
|
|
10.2 |
|
|
|
13.7 |
|
|
|
12.8 |
|
|
|
18.7 |
|
|
|
17.8 |
|
GM/OPEL |
|
|
7.7 |
|
|
|
7.6 |
|
|
|
10.8 |
|
|
|
10.5 |
|
|
|
5.3 |
|
|
|
5.6 |
|
|
|
14.1 |
|
|
|
13.4 |
|
|
|
9.6 |
|
|
|
9.6 |
|
PSA GROUP |
|
|
10.1 |
|
|
|
11.2 |
|
|
|
5.8 |
|
|
|
5.6 |
|
|
|
30.7 |
|
|
|
30.8 |
|
|
|
9.9 |
|
|
|
10.6 |
|
|
|
13.7 |
|
|
|
14.0 |
|
FORD |
|
|
8.9 |
|
|
|
9.6 |
|
|
|
8.8 |
|
|
|
9.1 |
|
|
|
6.0 |
|
|
|
6.1 |
|
|
|
18.9 |
|
|
|
18.9 |
|
|
|
11.0 |
|
|
|
11.3 |
|
RENAULT |
|
|
6.4 |
|
|
|
7.0 |
|
|
|
5.1 |
|
|
|
5.0 |
|
|
|
25.6 |
|
|
|
27.1 |
|
|
|
7.1 |
|
|
|
7.4 |
|
|
|
9.8 |
|
|
|
10.2 |
|
MB-CHRYSLER |
|
|
5.9 |
|
|
|
5.2 |
|
|
|
12.0 |
|
|
|
13.1 |
|
|
|
3.7 |
|
|
|
3.5 |
|
|
|
4.4 |
|
|
|
4.3 |
|
|
|
6.2 |
|
|
|
6.2 |
|
BMW GROUP |
|
|
4.1 |
|
|
|
3.5 |
|
|
|
9.0 |
|
|
|
8.7 |
|
|
|
2.6 |
|
|
|
2.4 |
|
|
|
6.4 |
|
|
|
5.7 |
|
|
|
5.3 |
|
|
|
4.8 |
|
JAPANESE |
|
|
12.0 |
|
|
|
12.0 |
|
|
|
11.9 |
|
|
|
11.8 |
|
|
|
8.8 |
|
|
|
8.3 |
|
|
|
17.8 |
|
|
|
16.8 |
|
|
|
13.7 |
|
|
|
13.3 |
|
OTHERS |
|
|
5.7 |
|
|
|
5.3 |
|
|
|
4.4 |
|
|
|
3.7 |
|
|
|
3.2 |
|
|
|
2.8 |
|
|
|
6.0 |
|
|
|
7.0 |
|
|
|
5.5 |
|
|
|
5.6 |
|
|
TOTAL |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
Distribution
Fiat Auto distributes automobiles in its principal markets through dealer networks in each
market, which are based on the coverage of specific geographic areas. At December 31, 2005, its
European network consisted of approximately 1,950 dealers, of which 425 were located in Italy. Fiat
Auto also maintains significant dealer networks in Brazil and in Poland.
Fiat Auto entered into new contracts with its dealer network in the EU on October 1, 2003, in
compliance with the new European block exemption regulation. These contracts eliminated the
exclusivity clauses that were included in the previous dealer agreements, permitting dealers to
sell a variety of auto brands in the same showroom, provided they are separated into brand-specific
areas. The new contracts also eliminated, as of September 2005, the so-called location clause,
which gave Fiat Auto the right to determine where its dealers were located geographically, and now
permit auto dealers instead to sell vehicles to consumers throughout the EU. The contracts also no
longer oblige dealers to provide after-sales servicing in addition to their auto sales activities.
Fiat Autos distribution strategy is based on enhancing its direct link with customers so as
to increase customer satisfaction and brand loyalty, lowering distribution costs and adapting the
European dealer network to take advantage of the increasing process of integration within the EU.
In particular, Fiat Auto is focusing on improving the geographical coverage of its network in the
major European markets.
With the goal of lowering its distribution costs, Fiat Auto continues to monitor its dealer
network, using a selection process aimed at identifying productive dealers that are capable of
producing higher revenues from services, parts and used cars, and supporting those dealers through
a variety of marketing initiatives and programs.
Production
Fiat Auto currently owns and operates ten plants, including six in Italy, and one in each of
Poland, Brazil, Argentina and India.
The sectors capital expenditures in fixed assets (property, plant, equipment and leased
assets) totaled €1,229 million in 2005, as compared with €1,203 million in 2004, of which
approximately 55% were dedicated to completing the retooling of production lines for models already
on the market, continuing the installation of new and modified manufacturing systems for the models
launched in 2005, and retooling production lines for new models. In addition, approximately 24% of
capital expenditures were for autos purchased for the sectors long-term leasing programs,
approximately 21% were for
39
regular maintenance at its manufacturing plants and the remainder were for other expenditures,
including the maintenance and repair of other property and equipment, as well as compliance with
environmental regulations. Research and development outlays for the sector amounted to €665
million in 2005, down from €952 million in 2004.
Financial Services
In 2005, the sector companies that provide financing to the sales network handled loans
totaling approximately €9,810 million, as compared to €11,090 million in 2004.
The reduction in financing reflected the decrease in sales volumes in most European countries,
as well as a change in the scope of consolidation following the sale of retail financing activities
in the United Kingdom in the fourth quarter of 2004. In Brazil, lending activity mirrored the
positive sales performance in the local market.
In 2005, the total loan volume handled by the Sectors activities that provide financing to
suppliers declined to €3,670 million from €6,342 million in 2004. This decrease reflected a
selective approach to the portfolio of loans held by these operations, and a decision to focus
efforts on Fiat Autos strategic suppliers.
Fiat Auto strengthened its position in the rental and corporate fleet business in
Italy by acquiring Enels share of Leasys, which rents and manages corporate car fleets, at the end
of 2005. Savarent continued to perform the function of a captive company that operates through the
Fiat Auto dealer network, serving mainly individuals and small and medium-size businesses. Efforts
to strengthen their sales and customer support networks enabled these two companies to end 2005
with a portfolio of more than 39,000 contracts, an increase of approximately 14% as compared with
2004. Their rental fleet also increased, rising to 144,500 vehicles at the end of 2005, an increase
of approximately 3% with respect to the previous year.
* * *
We control the luxury sports car manufacturers Ferrari and Maserati. The highly specialized
nature of these companies products, design processes, manufacturing techniques and distribution
channels necessitates management that is itself specialized and different from that of our core
automotive business, which is the manufacture and sale of automobiles to mass market consumers.
For these reasons, the management of Fiat S.p.A. has directly overseen our luxury sports car
operations; accordingly, Ferrari and Maseratis results have been excluded from those of the Fiat
Auto sector and reported separately.
Maserati
Until April 2005, Ferrari had primary operational responsibility for Maserati, of which
Ferrari owned 100% of the shares. In April 2005, we transferred ownership of Maserati from Ferrari
to Fiat Partecipazioni S.p.A. (a wholly owned member of the Group) and established a new sector
comprising the companies dedicated to the production and sale of Maserati cars, with the goal of
also permitting closer cooperation between Maserati and Fiat Autos Alfa Romeo unit. The Maserati
sector contributed 1.0% of our total 2005 net revenues, prior to eliminations and consolidating
adjustments.
Maserati revenues totaled €533 million in 2005, an increase of 30.3% from €409 million
recorded by the same operations in 2004 (when they were part of the Ferrari-Maserati sector),
reflecting higher sales of most models, particularly the successful Quattroporte.
The following table shows Maseratis shipments to dealers in its principal markets for each of
the years indicated:
40
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
Italy |
|
|
567 |
|
|
|
628 |
|
Europe excl. Italy |
|
|
1,783 |
|
|
|
1,992 |
|
|
|
|
|
|
|
|
|
|
Total Europe |
|
|
2,350 |
|
|
|
2,620 |
|
United States |
|
|
2,311 |
|
|
|
1,124 |
|
Rest of the World |
|
|
907 |
|
|
|
1,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
5,568 |
|
|
|
4,765 |
|
|
|
|
|
|
|
|
|
|
Maseratis shipments to its dealers increased by 16.9% in 2005, mainly reflecting the
strong increase in sales of the Quattroporte (which almost doubled), as well as the contribution of
GranSport in the coupè segment. The 2005 sales results also included shipments of the limited
edition special series MC12, a road version of the MC12 Competizione race car that won the 2005 FIA
GT championship.
Sales to the Maserati network totaled 5,568 in 2005, as compared with 4,765 in 2004, an
increase of 16.9%, primarily reflecting an increase in sales in the United States, where shipments
more than doubled to 2,311 units. The success in North America reflected strong sales of the
Quattroporte, which was introduced in this market in the summer of 2004.
In 2005, Maserati accounted for 5,639 units sold to final customers, 22.8% more than the 4,590
vehicles sold in 2004.
The market segment in which the Maserati Coupé and Spyder compete reached 70,137 units
worldwide in 2005, with the main competitors being the BMW Series 6, the Jaguar XK, the Mercedes SL
and CL and the Porsche 911 Carrera. In the luxury sedan segment, which reached 64,951 units
worldwide, the Quattroportes main competitors include the Audi A8 4.2 6.0, the BMW 750-760, the
Jaguar XJR and the Mercedes S 500.
As of December 31, 2005, the sector employed 606 workers, including 580 in Italy.
The sector currently operates one production facility, which is located in Italy in a building
leased from Ferrari.
Ferrari
As noted above, until April 2005, Ferrari had primary operational responsibility for Maserati,
also a luxury sport car manufacturer, of which Ferrari owned 100%. In April 2005, Ferrari
transferred ownership of Maserati to Fiat. The Ferrari sector contributed 2.5% of our total 2005
net revenues, prior to eliminations and consolidating adjustments.
In 2005, Ferrari finished third in the Formula 1 Constructors Championship and its leading
driver, Michael Schumacher, also finished third in the Drivers Championship. During the year,
Ferrari entered into a number of agreements designed to ensure the long-term stability of its
racing operations. Ferrari renewed its participation in the Concorde Agreement the triangular
agreement between the racing teams, the FIA (Federation Internationale de lAutomobile) and FOM
(Formula One Management), which regulates the Formula 1 World Championship until the end of 2012.
It also renewed its sponsorship agreements with two key partners Philip Morris and Shell until
the end of 2011 and of 2010, respectively.
The sectors revenues totaled €1,289 million in 2005, or 9.7 % more than the €1,175
million recorded by Ferrari in 2004. The increase reflected higher revenues from Formula 1 and
sponsoring
41
activities and higher sales volumes. These factors more than offset the negative effects of
changes in the sale mix caused by the termination of deliveries of the limited edition Enzo model
and the negative trend of the US dollar exchange rate.
The following table shows Ferraris shipments to dealers in its principal markets for each of
the years indicated:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
Italy |
|
|
662 |
|
|
|
529 |
|
Europe excl. Italy |
|
|
2,246 |
|
|
|
2,028 |
|
|
|
|
|
|
|
|
|
|
Total Europe |
|
|
2,908 |
|
|
|
2,557 |
|
United States |
|
|
1,580 |
|
|
|
1,450 |
|
Rest of the World |
|
|
911 |
|
|
|
859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
5,399 |
|
|
|
4,866 |
|
|
|
|
|
|
|
|
|
|
The 11.0% increase in unit shipments in 2005 reflects the strong performance of the 612
Scaglietti and 575 Superamerica limited edition, which more than offset lower sales of the 575M
Maranello, which reached the end of its life cycle. The 8-cylinder range saw the introduction of
the Spider version of the F430 in spring and the presentation of the Challenge version, which is
not authorized for road use, but will be a contender in the 2006 Ferrari Challenge Championship.
Ferrari believes that its introduction of the FXX Supercar has further enhanced and specialized
the brand by offering a special program for test drivers based on a laboratory car with unique
features, which will be used to develop innovative content in the near future. Ferraris main
markets are Western Europe, the United States and Japan, which is included in Rest of the World
in the table above.
Vehicle shipments for the Ferrari brand totaled 5,399 units in 2005, up 11.0% from 4,866 in
2004, reflecting an increase in all of the sectors principal markets. Shipments to the United
States, which remained the brands largest single market, increased by 9% to 1,580 units, as
compared to 1,450 in 2004. In Europe, shipments increased by 13.7% to 2,908 units, as compared to
2,557 in 2004, reflecting increases of 103 units in Western Europe (excluding Italy) and of 115
units in the other European countries. The United Kingdom became the largest single market in
Europe outside of Italy and the third worldwide, with 626 units sold, as compared to 533 in 2004.
Sales to the Italian dealer network totaled 662 units, as compared to 529 in 2004.
In 2005, Ferrari accounted for the sale of a total of 5,409 units to end customers, an 8.7%
increase from the 4,975 vehicles sold in 2004.
In recent years, the number of competing models in Ferraris primary market segment in the
largest eight markets (United States, Germany, the United Kingdom, Japan, Italy, Switzerland,
France, Australia) has increased to about 23,000 units, from 7,600 in 1999, primarily as a result
of new entries in the category, such as the Lamborghini Gallardo and the Bentley Continental GT, as
well as the Ford GT (particularly in the United States), and the development of the product ranges
by other competitors, such as Aston Martin Vanquish S, DB9 and DB9 Volante, Porsche Turbo S
version, Turbo Cabrio and GT2, and Mercedes with new SL55AMG, SL65AMG and SL600 models.
As of December 31, 2005, the sector employed 2,809 workers, including 2,582 in Italy.
The sector currently owns and operates two production facilities, both of which are located in
Italy. Another plant was leased to Maserati following its transfer to Fiat in 2005.
42
Fiat Powertrain Technologies
As of May 2005, the automotive engine and transmission operations that had previously been
transferred to the Fiat-GM Powertrain joint venture were consolidated in FPT. Upon termination of
the Master Agreement, Fiat re-acquired the full control of all such operations with the sole
exception of those in Poland (which continue to be jointly managed by both parties). As noted
above, beginning in 2006, the FPT sector also includes the powertrain businesses of Iveco, CRF and
Elasis.
Approximately 77% of the sectors revenues, which amounted to €1,966 million for the period
from its creation in May to the end of 2005, were generated by transactions with other members of
the Fiat Group, with non-Group customers accounting for approximately 23% of the total.
During 2005, FPT operated through its Product Line Passenger and Commercial Vehicles
(FPT-P&CV), which design and build innovative powertrain systems for Fiat, Lancia and Alfa Romeo,
delivering products that are consistent with Fiat Autos strategy of renewing, relaunching and
repositioning its product line. In 2006, FPT also began operating through its Industrial and Marine
Product line, which includes the powertrain activities that were previously part of the Iveco
sector.
In the area of gasoline engines, FPT-P&CV used the opportunity provided by the launch of the
Grande Punto to introduce an evolution of the Fire 1.4 liter eight-valve engine that uses a phasing
transformer to deliver increased fuel efficiency and better performance. For the upscale segments
of the market, FPT-P&CV developed two new gasoline engines: the four-cylinder L850, which is
available in two versions (a 160-HP 1.9-liter version and a 185-HP 2.2-liter version) and the
260-HP six-cylinder HFV6 3.2. Both engines, which are available in the new Alfa 159, use a JTS
direct injection system with continuous intake and exhaust phasing transformers.
In the field of diesel engines, FPT-P&CVs 1.3-liter Piccolo Diesel engine won Engine of the
Year 2005 honors (1.0 to 1.4 liter category) at the 2005 International Engine of the Year Awards
selected by a distinguished panel of automotive industry journalists, and beating major European
and Japanese competitors. The output of this engine has been increased to 90 HP and the engine has
been made compliant with the Euro 4 pollution standards by adding a diesel particulate filter. At
the higher end of the market, the sector offers the 200 HP Euro 4, a 5 cylinder, 2.4-liter engine
that powers the Alfa 159 and the Fiat Croma, delivering a high level of performance in terms of
power, that places it at the top of its class.
In the future, FPT-P&CV intends to build on the technological leadership it has gained in
common-rail engines (next generation Multijet powerplants); continue with the relaunching of the
Fire family of gasoline engines by extending their range of application with the introduction of
turbocharged versions; redouble its technological efforts to improve fuel efficiency, improve
quality and ensure compliance with increasingly stringent antipollution laws; and continue to work
on the development of bi-fuel and natural gas engines.
Programs that are already being implemented pursuant to such strategy include: development of
a 1.6 liter diesel engine that targets a new segment of the market, extension of Port De-Activation
technology to the Fire series of engines, use of turbocharging technology in gasoline engines,
launch of a new M40 transmission and more widespread use of the Selespeed automatic transmission.
In April and May 2006, important industrial agreements were signed to supply 1,000 natural-gas
supplied engines to Beijing Public Transport Company, and to assemble PSA Group gearboxes in the
Fiat Auto plant in Cordoba, Argentina. For a more detailed description of these two agreements,
see Recent Developments New Contracts and Industrial Initiatives above.
43
The sector operates worldwide through seven production plants, of which four are located in
Italy, and one in each of Poland, Brazil and Turkey. At December 31, 2005, the sector employed
10,111 workers, including 7,424 in Italy.
Agricultural and Construction Equipment
Our agricultural and construction equipment sector is led by CNH. As of December 31, 2005,
our wholly owned subsidiary Fiat Netherlands Holding N.V. (Fiat Netherlands) owned approximately
83% of CNHs outstanding common shares and all of CNHs 8 million Series A Preference Shares
(Series A Preferred Stock). Pursuant to their terms, the 8 million outstanding shares of Series A
Preferred Stock automatically converted into 100 million newly issued CNH common shares on March
23, 2006. Upon completion of the conversion, Fiat Netherlandss ownership of CNH increased to
approximately 90%.
CNH is a global, full-line company in both the agricultural and construction equipment
industries, with strong and usually leading positions in most significant geographic and product
categories in both agricultural and construction equipment. CNHs global scope and scale includes
integrated engineering, manufacturing, marketing and distribution of equipment on five continents.
CNH organizes its operations into three business segments: agricultural equipment, construction
equipment and financial services. CNH believes that it is, based on units sold, one of the largest
manufacturers of agricultural equipment and one of the largest manufacturers of construction
equipment in the world. CNH also believes that it has one of the industrys largest equipment
finance operations.
Since the fourth quarter of 2005, CNH sells its products globally through four distinct global
brand structures which will have full independent profit and loss accountabilityCase IH and New
Holland in agricultural equipment and Case and New Holland in construction equipmentin order to
invigorate the brands and satisfy more effectively the differentiated needs of brand dealers and
customers. As of December 31, 2005, CNH was manufacturing its products in 39 facilities throughout
the world and distributing its products in approximately 160 countries, through an extensive
network of over 11,000 dealers and distributors.
At December 31, 2005, the sector employed 25,420 workers, including 4,223 in Italy.
In agricultural equipment, CNH believes that it is, based on units sold, one of the leading
global manufacturers of agricultural tractors and combines, and it has leading positions in hay and
forage equipment and specialty harvesting equipment. In construction equipment, CNH has a leading
position in backhoe loaders and a strong position in skid steer loaders in North America and
crawler excavators in Western Europe. In addition, CNH provides a complete range of replacement
parts and services to support its equipment. For the year ended December 31, 2005, in US dollar
terms, sales of agricultural equipment represented approximately 62% of the sectors net revenues,
sales of construction equipment represented approximately 31% of net revenues and financial
services represented approximately 7% of net revenues.
CNH believes that it is the most geographically diversified manufacturer and distributor of
agricultural equipment in the industry. For the year ended December 31, 2005, approximately 45% of
net sales of agricultural equipment reported in US dollars were generated from sales in North
America, approximately 32% in Western Europe, approximately 6% in Latin America and approximately
17% in the Rest of World. In 2005, approximately 54% of net sales of construction equipment
reported in US dollars were generated in North America, approximately 28% in Western Europe,
approximately 8% in Latin America and approximately 10% in the Rest of World. CNHs broad
manufacturing base includes facilities in Europe, Latin America, North America, China, India and
Uzbekistan.
44
CNH offers a range of financial services products, including retail financing for the purchase
or lease of new and used CNH equipment. To facilitate the sale of products, CNH offers wholesale
financing to its dealers. Wholesale financing consists primarily of floor plan financing and allows
dealers to maintain a representative inventory of products.
Agricultural Equipment
CNHs primary product lines of agricultural equipment, which are sold primarily under the Case
IH and New Holland brands, include tractors, combine harvesters, hay and forage equipment, seeding
and planting equipment, tillage equipment, sprayers, and grape, cotton, coffee and sugar cane
harvesters. In addition, a large number of construction equipment products, such as telehandlers,
skid steer loaders and backhoe loaders, are sold to agricultural equipment customers. CNH also
sells tractors under the Steyr brand in Western Europe.
In order to capitalize on customer loyalty to dealers and CNHs relative distribution
strengths and historical brand identities, the sector continues to use the Case IH and New Holland
(and Steyr for tractors in Western Europe only) brands, and to produce equipment in the historical
colors of each brand. CNH believes that these brands enjoy high levels of brand identification and
loyalty among both customers and dealers. Although new generation tractors have a higher percentage
of common mechanical components, each brand and product remains significantly differentiated by
color, interior and exterior styling, internal operator features and model designation. In
addition, flagship products such as row crop tractors and large combine harvesters have
significantly greater differentiation. Distinctive features that are specific to a particular brand
such as the Supersteer® axle for New Holland, the Case IH tracked four-wheel drive
tractor, Quadtrac®, and front axle mounted hitch for Steyr have been retained as part of
each brands identity.
Construction Equipment
The current brand and product portfolio represents the history of the many companies that have
been merged into the global Case or New Holland Construction brand families. Case provides a full
line of products on a global scale utilizing the Sumitomo technology for its key crawler excavator
product. The New Holland Construction brand family, in conjunction with its global alliance with
Kobelco Japan, also provides a full product line on a global scale. In February 2005, the
historical New Holland brand family reorganized all of its networks outside North America, in order
to better focus on the New Holland Construction brand name.
New generation products share common components to achieve economies of scale in research and
development and manufacturing. CNH differentiates its products based on the relative product value
and volume in areas such as technology, design concept, productivity, operator controllability,
product serviceability, color and styling, to preserve the unique identity of each brand.
Product Development
CNH continuously reviews opportunities for expanding its product lines and the geographic
range of its activities. CNH is focusing on improving product quality, with a goal of achieving
best-in-class product quality and reliability. In addition, CNH is emphasizing enhanced
differentiation between the Case and New Holland brands to increase their market attractiveness.
This also includes its continuing engine development efforts by combining the introduction of new
engines to meet new emissions requirements with additional innovations expected to refresh the
sectors product line. Improved product quality and reliability, coupled with initiatives to
improve dealer and customer support, is expected to allow CNH to more fully capitalize on its
market leadership positions throughout the world.
45
To increase its global presence and gain access to technology, CNH participates in a number of
international manufacturing joint ventures and strategic partnerships. CNH has integrated its
manufacturing facilities and joint ventures into a global manufacturing network designed to source
products from the most economically advantageous locations and to reduce its exposure to any
particular market.
Business Strategy
Building upon competitive strengths and the business platform established during its merger
integration period, CNH believes it has the base for improving its performance, narrowing the gap
between CNH and its best competitors and creating value.
CNHs strategic objectives are to:
|
|
emphasize and focus on its customers and further improve its distribution and service capabilities and product quality
and reliability, all designed to increase customer satisfaction and market penetration; |
|
|
|
achieve higher margins than either Case or New Holland earned prior to the merger and deliver profitability throughout
the industry cycles; |
|
|
|
generate cash to reduce debt and strengthen its balance sheet; and |
|
|
|
continue to position CNH to take advantage of future opportunities for expansion. |
CNH believes that successfully achieving its goals of meeting the needs of its dealers and
customers, improving the quality and reliability of its products and reducing the costs of those
products and of its overall operations, will result in increased unit sales, a stronger market
position and higher margins. CNH expects that higher margins will allow it to generate better
overall profitability, on average, throughout industry cycles. CNHs goal is to use improved cash
flow, generated by improved profitability, to reduce debt and strengthen its balance sheet. CNH
believes a stronger balance sheet, and a customer driven focus to the business, will position it to
take advantage of future opportunities for product and market expansion as they arise. This could
include short to medium-term opportunities, in areas such as Latin America and Eastern Europe, and
longer-term opportunities, in areas such as China and India.
Markets and Competition
In 2005, overall worldwide market demand, on a unit basis, for major agricultural equipment
product lines was approximately 4% higher than in 2004. Worldwide demand for tractors increased by
about 5%, on the strength of an approximate 26% increase in demand in Rest of World markets.
Industry demand in North America was flat compared with 2004, while demand in Western Europe is
estimated to have declined by approximately 6% and tractor industry demand in Latin America is
estimated to have declined by 19%. Worldwide demand for combines was estimated to be down
approximately 16% over the level in 2004, driven by an approximate 58% decline in combine industry
volumes in Latin America. Market demand in North America was flat compared with 2004 while demand
in Western Europe increased by about 6% and in Rest of World markets by about 10%. On a unit basis,
CNHs worldwide retail sales of major agricultural equipment declined. The sectors overall tractor
market share declined by about 2.5 percentage points from 2004, and its combine market share
declined by approximately 1 percentage point. At year-end, total company and dealer inventories
were about one-half of a month higher than at year-end 2004, on a forward month supply basis.
46
Worldwide market demand for major construction equipment product lines in which CNH competes,
increased by about 8% on a unit basis in 2005 compared with 2004. Market demand increased in all
markets and for all of CNHs major product categories. World market demand for backhoe loaders, on
a unit basis, increased by about 15%, while demand for skid steer loaders increased by about 4%. In
total, worldwide market demand for light construction equipment, on a unit basis, increased
approximately 13%. Worldwide demand for the sectors heavy construction equipment product lines
increased by approximately 8%. On a unit basis, CNHs construction equipment market share declined
by approximately 1 percentage point. Worldwide wholesale unit volumes of the sectors major
construction equipment products increased by approximately 4%. At year-end, total company and
dealer inventories were about one-half of a month higher than at year-end 2004, on a forward months
supply basis.
In 2005, CNHs net revenues of agricultural equipment, in US dollar terms, were approximately
2% lower than in 2004. Excluding the results of variations in foreign exchange rates, agricultural
equipment net sales would have been down by approximately 6%. Net sales were reduced by lower
sales of equipment and unfavorable mix, which were offset in part by the impact of currency,
improved price realization and the impact of new products.
CNHs net revenues of construction equipment increased by approximately 12% in 2005, compared
with 2004. Approximately 1.0 percentage point of this increase resulted from the variations in
foreign exchange rates. Worldwide, in addition to the currency impact, net sales increased from
improved net price realization, higher volumes and improved product mix, including the contribution
of new products.
The agricultural equipment industry is highly competitive. CNH competes with large global
full-line suppliers, including Deere & Company and AGCO Corporation; manufacturers focused on
particular industry segments, including Kubota Corporation and various implement manufacturers;
regional manufacturers in mature markets, including the CLAAS Group, the ARGO Group and the SAME
Deutz-Fahr Group, that are expanding worldwide to build a global presence; and local, low-cost
manufacturers in individual markets, particularly in emerging markets such as Eastern Europe, India
and China.
The construction equipment industry also is highly competitive. CNH competes with global
full-line suppliers, with a presence in every market and a broad range of products that cover most
customer needs, including Caterpillar, Komatsu Construction Equipment, TEREX Corporation and Volvo
Construction Equipment Corporation; regional full-line manufacturers, including Deere & Company,
J.C. Bamford Excavators Ltd. and Liebherr-International AG; and product specialists, operating on
either a global or a regional basis, including Ingersoll-Rand Company Limited (Bobcat), Hitachi,
Sumitomo Construction, Manitou B.F., S.A., Merlo S.p.A., Gehl Company, and JLG Industries Inc.
CNH believes that multiple factors influence a buyers choice of equipment. These factors
include the strength and quality of a companys dealers, brand loyalty, product performance,
availability of a full product range, the quality and pricing of products, technological
innovations, product availability, financing terms, parts and warranty programs, resale value,
customer service and satisfaction and timely delivery. CNH continually seeks to improve in each of
these areas, but focuses primarily on providing high-quality and high-value products, and
supporting those products through its dealer networks. In both the agricultural and construction
equipment industries, buyers tend to favor brands based on experience with the product and the
dealer. Customers perceptions of value in terms of product productivity, reliability, resale value
and dealer support are formed over many years.
The financial services industry is highly competitive. CNH competes primarily with banks,
finance companies and other financial institutions. Typically, this competition is based upon
customer service, financial terms and interest rates charged.
47
Distribution
As of December 31, 2005, CNH sold and distributed its products through approximately 11,000
dealers and distributors in approximately 160 countries worldwide. Dealers typically sell either
agricultural equipment or construction equipment, although some dealers sell both types of
equipment. Construction equipment dealers tend to be fewer in number, larger in size, better
capitalized and located in more urban areas. Agricultural dealers tend to be greater in number, but
smaller in size and located in rural areas.
Large construction equipment dealers often complete their product offering with products from
more than one manufacturer, because of historical relationships that have persisted through the
consolidation of the industry.
In connection with its program of promoting unified brand names and identity, CNH generally
seeks to have dealers sell a full line of its agricultural or construction equipment products (such
as tractors, crop production and crop harvesting). Generally, the sector achieves greater market
penetration where each of its dealers sells the full line of products from only one CNH brand.
Although appointing dealers that sell more than one of its brands is not part of its business
model, some joint dealers exist, either for historical reasons or in limited markets where it is
not feasible to have separate dealers for each CNH brand. In some limited cases, dealerships are
operated under common ownership with separate facilities for each of its brands.
In the United States, Canada, Mexico, most of Western Europe, Brazil and Australia, the
distribution of CNH products is generally accomplished directly through the dealer network. In
other parts of the world, the sectors products are sold initially to distributors who then resell
them to dealers, in an effort to take advantage of such distributors expertise and to minimize
marketing costs. Generally, each distributor has responsibility for an entire country.
Management believes that a strong dealer network with wide geographic coverage is critical to
the success of any manufacturer of agricultural and construction equipment. CNH continually works
to enhance its dealer network through the expansion of product lines and customer services,
including enhanced financial services, and an increased focus on dealer support. To assist dealers
in building rewarding relationships with their customers, CNH has introduced focused customer
satisfaction programs and seeks to incorporate customer input into the product development and
service delivery processes.
As the equipment rental business becomes a more significant factor in the markets for both
agricultural and construction equipment, CNH is continuing to support its dealer network by
facilitating sales of equipment to the local, regional and national rental companies through its
dealers, as well as by encouraging dealers to develop their own rental activities. CNH launched
several programs to support dealer service and rental operations including training, improved
dealer standards, financing, and advertising. Also, as the rental market is a capital-intensive
activity and sensitive to variations in construction demand, CNH believes that any such activities
should be expanded gradually, with special attention to managing the resale of rental units into
the secondary market by its dealers, who can utilize this opportunity to improve their customer
base and generate additional parts business.
As noted above, in early 2005, CNH rationalized its non-Case construction equipment brand
family in Europe and Latin America into one brand, New Holland Construction. In connection with
this brand rationalization, CNH terminated certain dealer relationships in Europe, where
overlapping geographic presence would have made ongoing business impractical for maintaining
multiple dealerships. CNH expects that, long-term, this consolidation will generate additional
incremental revenue, allow the
48
sector to provide better support to its dealers, strengthen the dealer network, and result in
the availability of a greater range of products. CNH cannot make any assurance, however, that such
actions will ultimately improve the competitive position or financial results of its construction
equipment operations in Europe.
In Japan, CNH owns 50% of New Holland HFT Japan Inc. (HFT), which distributes its products
in that country. HFT imports and sells a full range of New Hollands agricultural equipment through
approximately 50 retail sales and service centers located throughout Japan. In order to complete
its product offering, HFT also sells certain equipment manufactured by other producers. HFT is a
leading importer of agricultural tractors in the highly competitive Japanese market and has a
leading share of the Japanese markets for combine harvesters and self-propelled forage harvesters.
Production
CNH manufactures equipment and components in 39 manufacturing facilities, including those
operated through joint ventures and alliances. Its broad manufacturing base currently includes
facilities in North America, Europe, Latin America, China, India and Uzbekistan. Similar
manufacturing techniques are employed in the production of agricultural and construction equipment,
resulting in certain economies and efficiencies.
CNHs capital expenditures in fixed assets (property, plant, equipment and leased assets) for
the year amounted to €214 million, as compared with a total of €210 million in 2004, and were
principally related to its initiatives to introduce new products, enhance manufacturing efficiency,
further integrate its operations, expand environmental and safety programs and support long term
leasing business.
Financial Services
CNH Financial Services is the captive financing arm of CNH, providing financial services to
dealers and customers in North America, Australia and Brazil. Through its joint venture with BPLG,
a wholly-owned subsidiary of BNP Paribas, financial services provides customer financing in Western
Europe and has begun the process of managing dealer receivables in certain countries in Western
Europe. The principal products offered on a worldwide basis are retail loans to final customers and
wholesale financing to the sectors dealers. As of December 31, 2005, financial services managed a
portfolio of receivables of approximately $13.8 billion, both directly and indirectly through its
joint venture with BNP Paribas Lease Group in Western Europe. North America accounts for 65% of
the managed portfolio, Western Europe 19% (which includes the receivables of the joint venture with
BPLG), Brazil 11% and Australia 5%. Financial services provides retail loans, leases and insurance
products to end-user customers as the local market requires and provides a variety of wholesale and
insurance products to the dealer network.
Financial services mission is to improve the effectiveness of its finance activities in
supporting the growth of the sectors equipment sales and to contribute to building dealer and
end-user loyalty. Managements strategy for meeting these objectives is to grow the core financing
business through higher financing penetration of CNHs equipment sales, expansion of services
offerings, new product development and marketing promotions and events. In addition, Financial
Services is focused on improving credit quality and service levels and increasing operational
effectiveness. Financial Services also continues to grow its financing business in Western Europe
as it leverages its joint venture arrangement with BPLG to broaden its financing activities to
cover CNH-branded products in all the countries we service. Financial Services also seeks to expand
the sectors financing of used equipment through its dealers and related services, including
expanded insurance offerings. In Western Europe and
49
Brazil, CNH is extending its North American business model for centralizing the management of
wholesale receivables within Financial Services.
Trucks and Commercial Vehicles
Our trucks and commercial vehicles operations are conducted through Iveco and its subsidiaries
and include the manufacture and sale, primarily to customers in Western Europe, of (i) trucks and
commercial vehicles (under the Iveco brand); (ii) buses (under the Irisbus brand); and (iii)
firefighting vehicles and other specialty vehicles (under the Iveco, Magirus and Astra brands). At
December 31, 2005, the sector employed 32,373 workers, including 14,923 in Italy.
Iveco has in recent years renovated and rationalized its manufacturing facilities, giving each
of its plants a specific mission in the production of its product line. During 2005, heavy
vehicles were manufactured in Germany, Spain and Argentina; medium vehicles in Italy and Argentina;
light vehicles in Italy, Spain and Brazil; and specialized vehicles in Italy, Germany and France.
Buses are manufactured by the sectors Irisbus division in France, Italy, Spain, Hungary and the
Czech Republic.
In 2005, the sectors manufacturing activity also included the production of diesel engines
(in Italy, France and in Brazil), other mechanical components, such as gearboxes and axles (in
Italy, Spain and Ukraine), and the production of body components such as cabs, frames and pressed
parts (in Italy). In May 2005, Fiat created FPT, a new sector that is now responsible for managing
our innovation capabilities and expertise with respect to engines and transmissions by coordinating
management of the resources, employees and activities of our automobile powertrain activities, the
powertrain activities of Iveco, and the powertrain research activities of the CRF and Elasis.
Starting January 1, 2006, Ivecos powertrain activities are managed by FPT and their results are
reported as a part of that sector.
In China, the sectors Naveco joint venture (50% Iveco and 50% NAC Group) is active in both
the light vehicle and light bus segments, while the Haveco joint venture (owned in equal shares by
Iveco, the NAC Group and the Hangzhou Group) is active in gearbox production. In 2005 Iveco also
had a 50-50 joint venture with Changzhou Bus Company (CBC) for the production and sale of buses.
At the end of January 2006, Iveco transferred its 50% investment in the joint venture CBC to the
other shareholder Changzhou.
New organization structure
With effect from the beginning of 2006, Iveco has re-shaped its organization in order to
structurally improve its competitive position. The new team directed by Ivecos CEO, Paolo
Monferino, is implementing a plan based on quick and lean management processes, the realization of
internal synergies, an enhanced global approach, and focusing resources on customers. In line with
the objectives of the Fiat Group, the main philosophy behind the new organization is centered on
the attribution of greater responsibility to individuals, team work and rapid response.
Product Development
In 2005, Iveco continued to renovate its vehicle line. The family of light vehicles was
expanded by the addition of a new 136-HP version of the 2.3-liter Iveco Unijet engine, and the
automated Agile gearbox, which is available with a 136-HP or a 166-HP 3.0-liter engine. In May 2006
Iveco launched the New Daily (Euro 4) presented with the slogan Professional DNA. It is a new
vehicle designed starting from a deep understanding of product and brand features in order to
involve the sales network, both technically and emotionally so as to meet consumers needs. In
2005, at the RAI Expo in Amsterdam, Iveco presented a version of the Eurocargo, which meets the
Euro 5 emissions requirements that have not
50
yet come into force, meeting these standards years in advance of the regulatory deadline and
before all of its principal competitors. The ES, a new version of the Stralis, was introduced in
the heavy road vehicle segment. The main innovations offered in this version are two safety
devices: the ESP electronic stability control system that can take action to correct a vehicles
path and the Lane Departure Warning System (a device that signals when a vehicle is crossing into
another lane). Iveco also introduced the Stralis Euro 4/Euro 5, a heavy vehicle that is already in
compliance with EU emissions requirements scheduled to come into effect in 2009. Irisbus also
broadened its product line, focusing on low-emission vehicles, with special emphasis on urban
transportation vehicles fueled with natural gas. The new Irisbus Arway was unveiled in Turin in
2005. This bus, which was created for long-distance service, is equipped with a Cursor 8 engine
that complies with Euro 4 emissions standards. In the area of luxury touring buses, Irisbus
presented the New Domino, a bus that accommodates up to 55 passengers in the utmost comfort and is
equipped with a 430-HP Cursor engine that is already Euro 4 compliant.
Markets and Competition
In 2005, demand in Western Europe for commercial vehicles with a curb weight of 2.8 tons or
more, as measured by new registrations, increased to approximately 1,109,700, or 5.2% more than in
2004. The main increases were recorded in France (+10.8%) and Spain (+9.6%), followed by more
modest increases in the United Kingdom (+3.7%) and Germany (+2.9%). In Italy, demand decreased by
1.7%. Although Iveco conducts operations throughout the world, Western Europe is its principal
market, accounting for 78.2% of its 2005 unit sales.
Iveco sells its vehicles in three market segments: light vehicles (for this sector, this is
defined to mean vehicles with a GVW of 2.8 to 6.0 tons), medium vehicles (6.1 to 15.9 tons) and
heavy-vehicles (16 tons and higher).
New registrations in the light vehicle segment in Western Europe increased 4.3%, to
approximately 779,800 units in 2005, as compared to approximately 747,300 in 2004, with most major
European markets posting gains that were offset in part by a decline in new registrations in Italy
(-2.1%); the most significant increases were recorded in Spain (+9.4%) and France (+8.2%). Market
demand for medium vehicles increased 2.9% to approximately 79,100 units, with gains recorded in
almost all European markets, most notably in Germany (+8.7%) and Spain (+9.3%), although new
registrations declined in Italy (-6.6%). Demand also increased in the heavy vehicle segment, with
new registrations up 8.6% in 2005 to approximately 250,800 units, principally as a result of gains
in France (+21.6%), Spain (+10.0%), the United Kingdom (+5.0%), Germany (+4.1%) and Italy (+1.1%).
Ivecos principal competitors are other European manufacturers of the full range of trucks and
commercial vehicles, such as Mercedes Benz and Renault Vehicules Industriels, and manufacturers of
specialized vehicles for certain segments, such as M.A.N. and Volvo (medium and heavy vehicle
segments), Scania (heavy vehicle segment) and Ford Europe, Volkswagen and Fiat Auto (light vehicle
segment).
51
The following table sets forth for the years indicated unit sales in thousands of Iveco
vehicles (including light commercial vehicles, buses and other vehicles) in the sectors principal
markets, the percentage of the sectors unit sales represented by each market and Ivecos market
share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
Units |
|
of units |
|
% |
|
Units |
|
of units |
|
% |
|
|
sold |
|
sold |
|
Market share |
|
sold |
|
sold |
|
Market share |
Italy |
|
|
39.0 |
|
|
|
22.6 |
|
|
|
29.4 |
|
|
|
40.6 |
|
|
|
25.0 |
|
|
|
29.8 |
|
Western Europe
(excluding Italy) |
|
|
95.9 |
|
|
|
55.6 |
|
|
|
8.6 |
|
|
|
91.2 |
|
|
|
56.2 |
|
|
|
8.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe |
|
|
134.9 |
|
|
|
78.2 |
|
|
|
10.9 |
|
|
|
131.8 |
|
|
|
81.2 |
|
|
|
11.1 |
|
Rest of the World |
|
|
37.6 |
|
|
|
21.8 |
|
|
|
|
|
|
|
30.5 |
|
|
|
18.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
172.5 |
|
|
|
100.0 |
|
|
|
|
|
|
|
162.3 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the sectors unit sales in thousands by product segment
light, medium and heavy trucks and commercial vehicles, buses and other vehicles for each of the
years indicated.
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
Light commercial vehicles |
|
|
95.7 |
|
|
|
91.0 |
|
Medium commercial vehicles |
|
|
21.3 |
|
|
|
21.1 |
|
Heavy commercial vehicles |
|
|
42.8 |
|
|
|
37.6 |
|
Buses |
|
|
8.5 |
|
|
|
8.6 |
|
Other vehicles (1) |
|
|
4.2 |
|
|
|
4.0 |
|
Total |
|
|
172.5 |
|
|
|
162.3 |
|
|
|
|
(1) |
|
Astra, defense and firefighting vehicles. |
In 2005, Iveco delivered approximately 172,500 vehicles worldwide, or 6.3% more than in
2004. Ivecos sales including those by associated licensees (approximately 64,800 units (57,500 in
2004)), amounted to approximately 237,300 units (219,800 units in 2004). In Western Europe, Iveco
delivered approximately 134,900 vehicles, or 2.3% more than in 2004. Iveco reported significant
increases in unit sales in France (+7.5%), the United Kingdom (+6.5%), Germany (+1.9%), and Spain
(+7.1%), while its sales decreased in Italy (-3.8%), reflecting the general decline in market
demand.
Ivecos share of the overall Western European market for vehicles with a GVW of 2.8 tons or
more declined to 10.9% in 2005, or by 0.2 percentage points from the level recorded in 2004, with
market share in the light vehicle segment stable at 9.3%, that in the medium vehicle segment down
by 1.7 percentage points to 26.3% and that in the heavy vehicle segment down by 0.2 percentage
points to 11.1%. However, Iveco nonetheless maintained its second place ranking in the Western
European medium vehicle segment, behind Mercedes (in the five major individual markets, Iveco is
the leader in this segment in Italy, France, the United Kingdom and Spain, and ranks second in
Germany behind Mercedes).
Ivecos sales to Eastern European countries rose to 13,300 units, a 3.0% increase compared to
2004. In non-European markets, Iveco sold approximately 24,300 vehicles, a 38.0% increase from
17,600 vehicles in 2004, primarily as a result of strong sales in Latin America. In China, the
sectors Naveco joint venture produced and sold approximately 18,000 light vehicles, up 20.1% from
2004. In India, Ivecos Ashok Leyland affiliate, in which the sector holds a 15.3% interest, built
and sold a total of approximately 59,600 vehicles, an increase of 14.1% from 2004, mainly as a
result of growth in demand in the domestic market. In Turkey, Otoyol, a joint venture with the Koç
Group in which Iveco holds a
52
27% interest, sold approximately 5,200 units, essentially unchanged compared to 2004. In
South and Central America, Ivecos sales and manufacturing activities increased significantly,
particularly in the heavy vehicle segment. Iveco sold 11,900 vehicles in the region (mainly in the
Mercosur countries) in 2005, an increase of 22.8% from 2004.
The Irisbus Group delivered a total of 8,526 vehicles in 2005, roughly in line with the
previous year (8,553 vehicles). Irisbuss share of the Western European market (20.4% in 2005)
declined by 1.0 percentage point compared with 2004. The sectors market share for buses
contracted in Italy (-3.3 percentage points) and France (-3.0 percentage points), though Iveco
still controls a significant portion of the market (about 45% to 50%) in each of these countries,
decreased by a smaller percentage in Spain (-1.7 percentage points) and held relatively steady in
the United Kingdom (-0.4 percentage points) and Germany (+0.6 percentage points). In Western
Europe, the bus market as a whole expanded to 34,800 units, or 6.6% more than in 2004. This
improvement reflected a positive trend in France (+11.9%), the United Kingdom (+23.3%) and Spain
(+15.9%), and steady demand in Germany and Italy.
Iveco manufactured about 435,300 engines in 2005, about the same as in 2004; approximately 41%
of this production was used directly by the sector, while approximately 48% of the total was sold
to CNH and to Sevel, a joint venture between Fiat Auto and the PSA Group. Beginning in January
2006, Ivecos entire powertrain operations are part of the FPT sector.
Distribution
Iveco has adopted a global strategy of distributing its products through networks of
independent, professional dealers, as well as through Iveco-owned dealers and branches, seeking to
provide high-quality service with a widespread geographic presence. At December 31, 2005, Iveco had
505 dealers in its network covering all parts of the world, including 226 in Western Europe, 68 in
Eastern Europe, 101 in Africa and the Middle East, 69 in Central and South America and 41 in the
Asia Pacific region, with a total of 1,210 sales points and 2,828 service points. The Iveco
worldwide network also includes: 112 bus dealers, 33 special vehicles (Astra) dealers and 191 Iveco
Motors dealers.
During 2005, Ivecos management took different approaches to network organization in different
regions: in Western Europe and other mature markets, such as those in Central and Eastern Europe,
it further consolidated its dealer network as part of its efforts to improve the quality of
customer service, increase profitability and reduce the overall cost of distribution. The sector is
focusing on the achievement of qualitative standards set by its dealership agreements; these
standards are designed to ensure a consistent level of high-quality service, as measured through a
self-assessment procedure and confirmed by specific audits. Following the introduction in 2003 of
new dealership contracts to comply with the EUs block exemption rules, an increasing number of
countries outside of the EU (particularly those in Central Europe, as well as Turkey) have adopted
this regulation as a standard for regulating automotive distribution. Iveco is therefore
introducing new agreements based on the principles of non-exclusivity and qualitative standards in
these markets, in a process that started in 2004 and Iveco expects to complete this process by the
end of 2006. The reorganization of Ivecos distribution network in South and Central America,
particularly in Brazil and Argentina, on the other hand, is aimed at capitalizing on current
favorable market conditions and improving dealer standards is still in progress.
Production
At December 31, 2005, the Iveco sector had 39 manufacturing facilities, including 14 in Italy,
seven in France, four in Spain, four in Germany, two in Brazil and Hungary and one in each of
Austria, the Czech Republic, Argentina, Australia, Ethiopia and Venezuela. Together, these
factories produced a total of approximately 170,500 vehicles (163,000 vehicles in 2004).
53
Ivecos international expansion in recent years has focused on joint ventures (such as those
active in China, Turkey and India) and licensing agreements in markets where management believes
opportunities for growth exist. Vehicles are currently produced for Iveco by companies outside the
Group in Asia, the Middle East and Africa, in each case pursuant to licensing arrangements with
Iveco.
In 2005, Iveco also continued to consolidate its portfolio of maintenance and repair
contracts, with a total number of approximately 41,000 contracts in force at December 31, 2005,
compared to 41,800 at the end of 2004.
Capital expenditures in fixed assets (property, plant, equipment and leased assets, excluding
vehicles sold with buy-back commitments) for the year amounted to €198 million, of which €173
million related to industrial investments, as compared with a total of €140 million in 2004,
with the increase being largely attributable to the completion of certain major investment
programs, including that for the New Daily, Euro 4 5 medium heavy vehicles, and new bus ranges.
Investments in vehicles used for fleet leasing activities accounted for the remaining €25
million of the 2005 total (having totaled €12 million in 2004), with the increase being largely
attributable to an increase in leasing activities in Spain, France and Hungary.
Financial Services
On June 1, 2005, Iveco sold to Barclays 51% of Iveco Finance Holdings Limited, a new company
in which Iveco contributed its financing and leasing services in France, Germany, Italy,
Switzerland and the United Kingdom. The purpose of Iveco Finance Holdings is to provide Ivecos
customers and dealers with competitive truck and commercial vehicle financing by combining
Barclays strength and competitiveness in the financing business with Ivecos expertise in the
research, development, design, manufacture and marketing of trucks and commercial vehicles.
Barclays Asset and Sales Finance already has a strong presence in many of Ivecos principal markets
and management expects Iveco Finance Holdings to provide opportunities for further expansion of
existing operations, as well as the development of new markets. As of June 1, 2005, Iveco Finance
Holdings Limited was no longer consolidated on a line-by-line basis, but is accounted for using the
equity method.
Overall, the sector provided financing for approximately 23.4% of the vehicles sold by Iveco
in 2005, a decrease from 25.2% in 2004. This reduction was primarily due to intense competition for
business from banks, particularly in the German and Italian markets. In its leasing operations,
Ivecos fleet of rental vehicles numbered approximately 3,120 at the end of 2005, compared to
approximately 3,770 at the end of 2004.
Components
Our operations in the components sector are led by our wholly owned subsidiary Magneti Marelli
Holding S.p.A.
Magneti Marelli supplies components to nearly all of the worlds major car manufacturers,
including the PSA Group, Renault, Volkswagen, DaimlerChrysler, BMW, Ford and Opel (GMs European
subsidiary), as well as to other companies of the Fiat Group (Fiat Auto, Iveco, FPT and Ferrari).
Magneti Marelli is among the largest European producers of lighting systems. The components sector
contributed 7.9% of our 2005 net revenues, prior to eliminations and consolidating adjustments.
In 2005, Magneti Marelli operated principally through five business units: lighting, engine
control, automotive suspensions, electronic systems and exhaust systems.
54
Magneti Marelli focuses on developing complete modules and systems in its main product lines,
which include lighting systems using innovative technologies, engine and gearbox controls,
electronic systems and exhaust and suspension systems. In a business environment that is
increasingly global and competitive, the main trend characterizing the components industry
continues to be the demand for increasingly sophisticated products at lower costs. At the same
time, carmakers are pursuing solutions that simplify manufacturing processes and are requiring
components manufacturers to supply systems and modules that are designed in cooperation with their
own design staff. In response to these trends, Magneti Marelli has developed a strategy based on
innovation, focusing on businesses that supply complete systems with high technology content.
In 2005, global production of cars and light commercial vehicles increased by approximately
3.5%, reaching roughly 63 million units, although performance varied across countries and
geographic regions, and increases were concentrated mainly in South America, Eastern Europe and
Asia. The Western European market has remained relatively steady since 2004, with a total
production of 16.1 million units, and production was stable in the majority of the regions
individual countries.
In 2005, a significant portion of the sectors budget was devoted to investments in research
and development and capital expenditures, which amounted to €425 million, or 10.5% of Magneti
Marellis revenues (compared to €382 million, or 10.1% of revenues, in 2004). This amount
included €228 million of investments in tangible fixed assets and €197 million in research
and development projects, which were focused on product innovation.
The sector operates worldwide through 53 production plants, of which 17 are located in Italy,
eight in Brazil, five in France, four in Mexico, three in each of Poland, Spain and China, two in
each of the United States and Germany, and one in each of Russia, Argentina, the Czech Republic,
Malaysia, Turkey and South Africa. As of December 31, 2005, the sector employed 24,213 workers,
including 7,096 in Italy.
In 2005, Magneti Marelli reported revenues of €4,033 million, an increase of 6.3% from the
€3,795 million reported in 2004. The increase reflected the consolidation of Mako from January
1, 2005 (which contributed €119 million in revenues during the year), as well as improved sales
results at all business units despite relatively stable volumes, largely reflecting new products
with a higher technology content, such as the diesel injection systems in the engine control
business unit; the first time application in Europe of headlamps equipped with infrared sensors for
night vision enhancement and the successful introduction of LED tail lamp technology introduced by
the lighting business unit, as well as the positive performance of Telematics Psa in the electronic
systems business unit. In addition, the sectors automotive suspension business unit reported
higher sales for components sold for production of the Fiat Panda Poland, which offset declining
sales in Italy, where the market picked up again late in the year thanks to the Groups
newly-introduced models, particularly the Grande Punto.
In 2005, approximately 41% of the sectors revenues came from sales to other Fiat Group
companies, as compared with approximately 32% in 2004.
Effective May 1, 2006 Magneti Marelli transferred to Fiat Auto the final assembling suspension
activity realized in the Cassino, Pomigliano, Melfi plants, and, effective June 1, 2006, in the
Mirafiori plant.
Metallurgical Products
Our metallurgical products sector is led by Teksid S.p.A., of which we own 84.8%. The
remaining 15.2% stake is owned by Renault S.A.
55
Teksid, which comprises a cast iron business unit and a magnesium business unit, contributed
2.0% of our total 2005 net revenues, prior to eliminations and consolidating adjustments. The
economic environment in 2005 has slightly improved over 2004.
In 2005, Teksids cast iron business unit, which produces cast iron auto parts, saw a rise of
20.4% in its revenues due to a 4.6% increase of volumes, as well as a favorable trend in exchange
rates (particularly those between the euro and the Brazilian real and Polish zloty). The growth in
market demand has been particularly significant in North America and in Brazil, while the
Crescentino plant has continued its process of focusing on light engine blocks. Teksid do Brasil
completed the initial transition phase for the cast iron producing assets it acquired from GMs
former foundry at Sao José dos Campos, producing about 45,000 tons.
Teksids magnesium business activities are carried out through Meridian Technologies Inc., a
51%-owned joint venture with Hydro Aluminium AS. The predominant market for the magnesium
business unit, which produces magnesium auto parts and operates under the Meridian brand, is in
North America, which in both 2005 and 2004 accounted for approximately 80% of its revenues. The
unit also maintained its focus on serving customers outside the Fiat Group, with the Group
accounting for approximately 6% of total revenues in 2005 (approximately 5% in 2004). The units
revenues declined by 1.0% in 2005 due to a 6.8% decrease in volumes.
In 2005, Teksid reported overall revenues of €1,036 million, an increase of 13.8% from
€910 million in 2004, as the improved results at the cast iron unit more than offset the decline
at the magnesium business unit. In 2005, approximately 20% of Teksids revenues were derived from
sales within the Group.
The sectors principal competitors are divisions of other automobile manufacturers, as well as
other manufacturers of metallurgical products operating in different markets. Competition is based
primarily on price and the reliability of the products, which in turn is dependent upon the
technology used to produce them.
At December 31, 2005, the metallurgical products sector had 12 manufacturing facilities,
consisting of two in each of Italy and France, and one in each of the United States, Brazil, the
United Kingdom, Poland, Mexico, Canada, Portugal and China. At year-end, Teksid employed 8,952
workers, including 1,092 in Italy.
In May 2006, Teksids transfer of a 60% interest of SBFM, which was part of the Cast Iron Unit,
was completed. For more information about this transaction see Recent DevelopmentsDisposal of
subsidiaries above.
Renault, Teksids minority stockholder, has the right to sell its stake to Fiat under certain
circumstances, such as:
|
|
|
if Teksid fails to comply with the terms of the joint venture agreement or one
party is subjected to a receivership or any other insolvency procedure; |
|
|
|
|
if Renaults interest in Teksid falls below 15%; |
|
|
|
|
if Teksid decides to make a strategic investment outside the foundry sector; or |
|
|
|
|
if another auto manufacturer acquires control of Fiat. |
56
Fiat also has similar rights to purchase Renaults stake under these same conditions should
they occur and Renault decide not to exercise its put right.
In addition, Teksid and Norsk Hydro have certain rights with respect to their Meridian
Technologies joint venture in the event the board of directors cannot agree unanimously with
respect to certain specified strategic decisions. In such event:
|
|
|
Norsk Hydro has the right to require Teksid to purchase its 49% holding in Meridian
Technologies; and |
|
|
|
|
if Norsk Hydro declines to exercise this option, Teksid may require Norsk Hydro to
sell its 49% holding to Teksid. |
The possibility that such a deadlock between Teksid and Norsk Hydro will arise is considered
to be quite remote.
See Note 32 (iii) to the Consolidated Financial Statements included in Item 18 for a
discussion of these agreements.
Production Systems
Our wholly owned subsidiary, Comau S.p.A., is the lead company of the production systems
sector. Comaus core business is the engineering and manufacturing of industrial automation
systems and related products, mainly for the automotive industry. Its principal products include
metalworking systems, mechanical assembly systems, body welding and assembly systems, sheet metal
dies and injection molds, handling systems, robotics, product and process engineering, software
engineering and systems, and specialized maintenance services. The sectors principal customers
are international automotive manufacturers, including the automotive sectors of the Fiat Group.
In 2005, the production systems sector contributed 3.1% of our net revenues, prior to
eliminations and consolidating adjustments.
In 2005, Comaus activities continued to be adversely affected by a climate of uncertainty and
by the financial difficulties experienced by most automotive manufacturers, all of which has tended
to curb capital investments. In Europe, the situation remained uncertain, and new investments by
automotive manufacturers focused on rationalization of existing plants with a view to increasing
re-utilization, flexibility and capacity utilization. In the United States, local automotive
manufacturers face strong competition from Japanese and Korean car producers, which have increased
their volumes and market shares; the excess of productive capacity has been reflected in decreases
in sales prices. In South America, increased economic and political stability in the sectors main
markets drove a slow recovery in investments by automotive manufacturers. By contrast, a number of
countries in Asia and Eastern Europe have shown a sharp rise in investments, often through joint
ventures between western car manufacturers and local partners.
In 2005, the sector received €1,448 million in orders, a reduction of about 9% from 2004 on
a comparable consolidation basis (the actual decline being equal to 19.7%). The sector acquired
€1,210 million in new orders for contract work, a decrease of 17.3% from 2004 (or approximately
14% on a comparable consolidation basis). Overall in 2005, the sector acquired approximately 48% of
its orders for contract work in Europe, 35% in the NAFTA region, and 17% from the Mercosur region
(comprising Argentina, Brazil, Paraguay and Uruguay) and new markets (including 7% in China).
Approximately 17%
57
of Comaus orders for contract work during 2005 were from other Fiat Group companies (20% in
2004), with the significant majority coming from other automotive manufacturers.
On a comparable consolidation basis orders for services activities increased by roughly 30%,
(reaching €238 million) of which approximately 26% came from other Fiat companies. The
unadjusted order figure shows a reduction of 30.2% that was reflected in the fact that the revenues
of Comaus service operations were about €223 million, a decline of 34.1% compared to €338
million in 2004. This reduction was largely due to the sale of the service activities in Europe
related to Ivecos, Magneti Marellis and CNHs businesses, which was effective as of January 1,
2005. About 30% of the service revenues were from companies within
the Group (52% in 2004) and
approximately 70% from non-Group customers.
Comau recorded revenues of €1,573 million in 2005, a decline of 8.1% from the €1,711
million recorded in 2004, largely reflecting the impact of the sale of its services activities
noted above. On a comparable consolidation basis, net revenues increased by about 6% compared to
2004, largely due to the positive results of the sectors service and body welding and assembly
activities. In 2005, approximately 16% of the sectors overall revenues came from sales to other
Fiat Group companies, down from 25% in 2004, with sales to third parties and joint ventures
representing approximately 84% of the sectors revenues.
Competition in this sector mainly consists of large diversified international groups operating
in the field of production systems for the mechanical and automotive industry. The competitive
environment, which reflects a structural excess of production capacity in the traditional
industrialized countries, benefits producers that can offer a wide range of production systems on
an international basis and are capable of engineering flexible and innovative manufacturing
solutions.
At December 31, 2005, Comaus activities were conducted through 29 manufacturing facilities,
consisting of 12 in the United States, 3 in Italy, 2 in France, in the United Kingdom and in South
Africa, and 1 in Germany, Spain, Romania, Poland, Argentina, Mexico, India and China.
At December 31, 2005, the sector employed 12,725 workers, including 2,695 in Italy.
Services
The sector, led by Business Solutions, provides integrated corporate services and business
process outsourcing. In 2005, Business Solutions continued to pursue its strategy of offering
enhanced management and coordination activities for Fiat Group companies.
Business Solutions reported revenues of €752 million in 2005, a decrease of 23.0% from the
€976 million recorded in 2004, mainly reflecting changes in the scope of consolidation,
primarily the disposal of WorkNet. In 2005, sales to other Group companies accounted for
approximately 56% of the sectors total revenues, compared to approximately 41% in 2004. Business
Solutions contributed 1.5% of our total 2005 net revenues, prior to eliminations and consolidating
adjustments.
Business Solutions operates in the four main areas of activity described below.
Human Resources. Human Resources provides payroll management and other human resources
services. In 2005, revenues were €72 million, of which approximately 73% were from customers
within Fiat Group, compared to revenues of €261 million in 2004, when third-party customers
accounted for approximately 77% of revenues. The significant change was due to the sale in February
2005 of
58
WorkNet, a temporary employment services company, and the sale in September of HRS, a company
aimed at providing payroll services to third parties.
Facility Management. The units activities in 2005 were refocused mainly on facility
management operations and maintenance activities carried out through Ingest Facility S.p.A..
Revenues in 2005 totaled €242 million, as compared to €264 million in 2004. Customers from
outside the Fiat Group accounted for 45% of revenues in 2005, compared to approximately 55% in
2004.
Administrative Services. This unit, through Fiat Gesco, provides management and back office
services, mainly within the Fiat Group. The unit also includes SADI (customs services) and Risk
Management S.p.A. (risk management of insurable risks). In 2005, revenues totaled €269 million
(of which approximately 84% were generated by Fiat Group companies), compared to €288 million of
revenues in 2004 (approximately 77% generated by Fiat Group companies).
I.C.T. Information and Communication Technology. This unit operated through subsidiaries
including Global Value, a joint venture with IBM providing technology infrastructure management and
software application development services. In June 2005, Business Solutions sold the 50% stake in
Global Value it held to IBM and at the same time, it acquired from IBM some specific activities in
Italy and Europe. In line with the sectors restructuring strategy, an agreement with British
Telecom for the sale of Atlanet, which provides the Fiat Group with communications services and
telecommunication system in Italy, was for the most part finalized in the first quarter of 2006
(see Recent Developments above). Atlanet recorded €147 million in revenues in 2005. The unit
also operated e-Spin, a competence center operating particularly in the areas of online
applications and business process management. The I.C.T unit as a whole recorded revenues of
€194 million in 2005, of which approximately 42% were attributable to Fiat Group companies, as
compared to €178 million in 2004, of which approximately 51% were attributable to non-Group
companies.
The services sector also includes Sestrieres S.p.A., which manages the lift facilities in the
Via Lattea ski area and which generated revenues of €19 million in 2005. On June 29, 2006 the
divesture of our stake in Sestrieres S.p.A. was completed.
At December 31, 2005, Business Solutions employed 5,436 workers, of which 2,892 in Italy.
Publishing and Communications
This sectors operations consist principally of the publication and distribution of the
Turin-based daily newspaper La Stampa, as well as the sale of advertising space in print,
television and Internet media through Publikompass S.p.A. (Publikompass).
Editrice La Stampa S.p.A. (Editrice La Stampa) reported an average daily circulation of
312,000 copies of La Stampa, a 8.0% decrease from 339,000 copies in 2004, reflecting lower
newsstand sales and the fact that several joint marketing arrangements with other papers were
discontinued during the year. Editrice La Stampa sharpened its strategic focus on
brand-stretching measures, designed to increase newsstand sales of supplemental products by
leveraging La Stampas nationally recognized brand name. Efforts to boost our newspaper readership
base through distribution to students also continued.
During 2005, the sector continued the process of investing in new printing presses, started in
December 2004, which will allow it to produce a newspaper with up to 96 pages in full color and in
a new, more compact size.
59
As of October 3, 2005, Editrice La Stampa signed a Memorandum of Understanding with M-Dis
S.p.A., a company operating in newspaper distribution industry in Italy, in order to create To-Dis
S.r.l., following the spin-off of La Stampas distribution and circulation activity. Effective May
2006 To-Dis S.r.l. is owned by Editrice La Stampa (45%) and M-Dis S.p.A. (55%). To-Dis distributes
all of Editrice La Stampas products as well as other products, already distributed by M-Dis.
Revenues from the sales of newspapers and other publishing products totaled approximately
€70 million in 2005, a decrease of €8 million as compared to 2004, due to a contraction of
newsstand sales and brand-stretching measures oriented more to profit than volumes.
The advertising market in Italy increased by approximately 2.8% in 2005. Newspaper advertising
increased by 2.0% (or by 1.4%, if free newspapers are excluded) and periodicals advertising
increased by 3.7%, due to new magazines. Publikompass revenues of €328 million decreased by 0.6%
over 2004, reflecting the loss of Sky Italia as a client, the impact of which was only partially
offset by new clients.
In this context, the publishing and communications sector posted a 2.5% decrease in revenues
in 2005 to €397 million, compared to the €407 million reported in 2004, or 0.8% of our total
2005 net revenues, prior to eliminations and consolidating adjustments.
At December 31, 2005, the sector had two plants in Italy, and employed 846 workers.
Other Companies
In addition to our operating sectors, we also have holding companies, service companies and
other operations under our direct control. In 2005, these other companies contributed 1.0% of our
net revenues, prior to eliminations and consolidating adjustments. At December 31, 2005, these
companies employed 4,105 workers, including 3,581 in Italy.
The most significant of our other companies included in these results are the CRF and Elasis,
which occupy an important place in our strategies and development plans (see Research and
Innovation below).
Supply of Raw Materials and Components
Our increased focus on quality improvement, cost reduction, product innovation and
production flexibility has required a change in our historical relationship with our
suppliers. To this end, we have relied upon suppliers with a focus on quality and the ability
to provide cost reductions. We view our relationships with our suppliers as partnerships, and
in recent years we have established closer ties with a significantly reduced number of
suppliers, selecting those that enjoy a leading position in the relevant market. To these
suppliers, we offer long-term, stable relationships and high volume supply contracts,
cooperation in the development of new products and joint research on cost reduction methods.
Our purchasing coordination activities are designed to optimize Group purchasing, develop
and coordinate our global sourcing initiatives, develop new purchasing policies and methods
and monitor purchasing activity at each of our sectors. These activities are organized into
five main areas: direct materials (including commodities), indirect materials and services,
low-cost sourcing, supplier quality and transport and logistics.
60
Management believes that adequate supplies and alternate sources of the Groups principal
raw materials are available and does not believe that the prices of these raw materials are
especially volatile.
Operating Environment
As one of the largest industrial groups in Italy, the Fiat Group is affected by social,
economic and political developments in Italy. At the same time, by virtue of our significant
operations outside of Italy, we are subject to the risks normally associated with cross-border
transactions, principally those relating to exchange rate fluctuations and delayed payments
from customers in certain countries. Finally, because our operations are based in Europe,
both the intensifying integration of the European market and the ongoing process of
enlargement, which saw ten countries join the EU in 2004, will create new opportunities and
challenges for our management.
We continued to operate in a difficult international environment in 2005, characterized
by weak economic growth and intensified competition, exacerbated by stagnation in automotive
markets and the appreciation of the euro. In Europe in particular, a prolonged period of low
GDP growth has led to the progressive contraction of the car market. This, together with the
strength of the European currency, has put further pressure on prices, and has created a
situation in which European OEMs are unable to pass higher input costs on to the market.
Despite these challenges, as discussed in more detail in Item 4. Information on the
CompanySectors Fiat Auto below, we were able to improve our operating performance,
reflecting the positive impact of our new models on profit margins and the implementation of
cost savings measures.
The Republic of Italy
The Republic of Italy is composed of 20 regions covering an area of approximately 301,000
square kilometers on a peninsula in the middle of Southern Europe, with a population of
approximately 57.5 million. The most important industrial and commercial activity is situated
in the north-central part of Italy.
Government
The Republic of Italy was proclaimed in 1946 and a President was elected in the same
year. The present Constitution, which took effect in 1948, provides for the powers of a
democratic state to be divided among the Parliament, the Executive and the Judiciary. The
head of state is the President, who is elected by Parliament and holds office for a period of
seven years. The President has the power to designate the President of the Council of
Ministers, who is then confirmed (and may be removed only) by Parliament. The President of
the Council of Ministers heads the executive branch. Parliament consists of the Senate and
the Chamber of Deputies. Parliamentary elections must be held every five years, although they
have often been held more frequently.
The Italian government is currently led by a center-left coalition led by Romano Prodi
(formerly head of the European Commission), which won a very slim majority in the Senate and a
larger majority in the Chamber of Deputies in the April 2006 election. Notwithstanding the
privatization of a considerable number of state industries and lower rates of inflation, Italy
still lags behind most of its European partners, with a lower rate of economic growth than
many of the other major European economies. The new government has announced a commitment to
reduce Italys budget deficit so as to conform with guidelines set in the EU stability and
growth pact.
61
Foreign Relations
In 1998, Italy qualified as a founding member of the third stage of the European Monetary
Union on January 1, 1999, having met the convergence criteria set forth in the Maastricht
Treaty with respect to the public sector deficit, inflation, interest rates and exchange rate
stability. Italy is a founding member of the EU and the third stage of European Monetary
Union, a member of NATO and a member of many other regional and international organizations,
including the United Nations and many of its affiliated agencies. Italy is also a member of
the OECD, the International Monetary Fund, the International Bank for Reconstruction and
Development, the European Investment Bank, the European Bank for Reconstruction and
Development, the Asian Development Bank and the Inter-American Development Bank and a charter
member of the World Trade Organization.
Economy
Overall, GDP in Italy was 0.1% in 2005 (compared to a growth of 1.0% in 2004 and 0.4% in
each of 2003 and 2002), marking the fourth consecutive year of slow growth. At current
prices, GDP reached approximately €1.42 trillion in 2005.
The following table sets forth certain statistical information on the Italian economy for
each of the years indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
2001 |
GDP at current prices (in billions of euros) |
|
€ |
1,417.24 |
|
|
€ |
1,351.33 |
|
|
€ |
1,300.93 |
|
|
€ |
1,260.60 |
|
|
€ |
1,218.53 |
|
Real GDP growth |
|
|
0.1 |
% |
|
|
1.0 |
% |
|
|
0.4 |
% |
|
|
0.4 |
% |
|
|
1.7 |
% |
Current account deficit (in billions of euros) |
|
€ |
5.79 |
|
|
€ |
11.00 |
|
|
€ |
16.88 |
|
|
€ |
10.01 |
|
|
€ |
0.74 |
|
Total employment (in thousands) |
|
|
22,685 |
|
|
|
22,404 |
|
|
|
22,241 |
|
|
|
21,913 |
|
|
|
21,605 |
|
Harmonized consumer price index (% change)* |
|
|
1.9 |
% |
|
|
2.2 |
% |
|
|
2.8 |
% |
|
|
2.6 |
% |
|
|
2.7 |
% |
Public administration deficit as a percentage of GDP |
|
|
4.1 |
% |
|
|
3.0 |
% |
|
|
2.9 |
% |
|
|
2.6 |
% |
|
|
3.0 |
% |
|
|
|
* |
|
Beginning in 2002, the harmonized consumer price index measure has been calculated in
accordance with a Eurostat methodology which lessens sensitivity to transient changes in
prices. |
|
|
Sources: Istat, National Accounts, Banca dItalia, Economic Bulletin and Statistical
Bulletin, including revisions of data reported earlier. |
Fiat in Italy
The size and international status of the Fiat Group have significant economic
implications for the Italian economy. Our net revenues on a worldwide basis in 2005 were
equivalent to approximately 3.3% of Italys GDP and our Italian employees represented
approximately 1.5% of the Italian industrial work force.
European Union
The Treaty of Athens, signed on April 16, 2003, marked the culmination of the successful
accession negotiations with ten countries that subsequently joined the EU on May 1, 2004.
However, in a referendum held on May 29, 2005, approximately 55% of the French voting public
rejected the approval of a constitution for the EU. Three days later, in a referendum in the
Netherlands, the constitution was rejected by an even greater margin. These two rejections
have created significant doubts regarding the viability of the proposed constitution and
questions about future political and economic integration among member states, as scheduled
referenda in a number of other Member States have been postponed.
62
From an economic standpoint, 2005 was not a particularly impressive year for the EU.
While GDP of the enlarged EU as a whole grew by a respectable 1.6%, the overall result masks
very heterogeneous performances within the various member states. Growth was mostly
concentrated in economies where private consumption benefited from a strong performance of the
housing market (including Spain, the U.K. and Ireland) and in new member states, which
benefited from their accession to the EU (although the relatively small sizes of their
economies failed to raise the average EU growth rate in a significant way). Two of the
biggest economies, Germany and Italy, showed only extremely modest growth, and growth in the
EU as a whole was lower than in 2005, reflecting both a slowdown in external demand and high
oil prices. The growth in GDP did not manage to significantly decrease the unemployment rate
within the EU, which continues to hover around 9.0%. However, the high unemployment rate did
help keep in check the inflationary pressures caused by high commodity prices.
United States
In 2005, the US economy continued to expand at a strong pace, with GDP growing by 3.5%
(down from 4.4% in 2004), primarily due to increased domestic demand despite high oil prices
and interest rate increases. Wealth gains due to the booming housing market, fueled by the
still relatively low level of interest rates, helped increase private consumption. These low
interest rates, along with record profit growth also led to strong growth in business
investment. By contrast, net exports continued to act as a drag on growth, as imports
continued to expand at a faster pace than exports, despite the weaker dollar. As a result,
the current account deficit widened sharply, reaching a new record high.
Emerging Markets
Brazil is the most significant of the many emerging markets in which we operate.
Real GDP growth in Brazil slowed to 2.3% in 2005 from 4.6% in 2004. The slowdown
reflected corruption allegations against several government officials as well as efforts by
the Central Bank to reach the inflation goal of 5.1% per year, which resulted in higher
interest rates. However, following the economic downturn in November, the government started
to reduce the basic interest rate in order to stimulate economic
growth. As of December 31, 2005, the basic interest rate established by the Central Bank was 18.0% per year. Also in
2005, the Brazilian real appreciated 11.8% against the US dollar, notwithstanding this
appreciation, Brazil had a commercial surplus of US$47.7 billion, its highest ever.
Environmental and Other Regulatory Matters
Our manufacturing facilities are spread over numerous countries, and are therefore subject to
the relevant laws and regulations designed to protect the environment, particularly with respect to
plant solid and liquid waste and air emissions. In addition, the vehicles we manufacture must
comply with extensive EU, national and local laws and regulations, including those which regulate
vehicle safety, emissions and noise. Management believes that further reductions in the
environmental impact of our manufacturing processes and products are of strategic importance if we
are to increase our competitiveness and meet the statutory and social requirements that exist in
the countries in which we have expanded.
For many years, Fiat has recognized the sustainable development as a strategic priority in
designing new products and new processes, as well as measures and decisions that may have direct or
indirect effects on the environment. These principles are outlined in the Environmental Reports
that the
63
Group has published yearly since 1993, a tradition carried through in the annual
Sustainability Reports issued since 2004.
Environmental Policies
The Fiat Group Code of Conduct sets out environmental policy guidelines that reflect those
published in official documents since 1992. In this context, the Group companies and their
production sites are responsible for the environmental impact of their products and manufacturing
processes, making every effort to prevent harmful consequences.
Our environmental policy is to be pursued and consolidated through the following fundamental
guidelines:
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Prevent pollution, with a preference for using environmentally friendly materials; |
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Conserve resources, using a Design for the Environment approach for all products and processes. |
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Minimize environmental impact, paying attention to each phase of the product and process life cycle; and |
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Reduce waste generation, sorting used materials so that they can be recovered, reused and recycled. |
A team-based approach ensures that environmental needs are built into every management
decision.
Environmental management goals are detailed in specific plans prepared by each Group sector,
and kept up to date at all times. These environmental plans seek to achieve a balance between
environmental and economic goals, and involve constructive cooperation between the Group and the
relevant public authorities, with the hope that future benefits will bring broader advantages for
the general public.
In its manufacturing processes, the Group pursues ISO 14001 certification as a means of
ensuring uniformity in organizational practices, procedures and methods for measuring parameters,
by following the requirements mandated in internationally recognized standards.
Envirnomental Management System
Fiats Environmental Management System (EMS) includes all the people, rules and actions
designed to lessen the impact that corporate activities can have on the environment and contribute
cost-effectively to achieving the goals set by management at each manufacturing site.
The organization of regular internal and external audits is an integral part of the EMS
applied at the Groups manufacturing sites.
These audits are aimed at verifying that working methods and practices comply with Group
policies and with the mandatory and voluntary rules set forth in the Environmental Management
Manual adopted by each site.
The audit activities are carried out according to precise rules and are set with the following
time schedule:
64
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Annual audits. To ensure an impartial assessment, annual audits are carried out both
by the sites internal auditors, who have received special training in this area, as
well as in ISO 9000 system requirements, and by Group auditors from outside the site. |
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Annual and triennial audits. External auditors from the relevant certification
bodies carry out annual and triennial audits, which certify that the requirements
indicated in the site manual are implemented in full. |
Together, these audits jointly ensure that EMS strengths and shortcomings can be promptly
identified by comparing the results from at each site with the rules and targets established for
it. As a result, immediate corrective actions may be taken to remedy any weaknesses in the system,
in order to prevent environmental problems from occurring, and also to reformulate improvement
targets to boost participation and achieve a higher level of cost effectiveness.
Training
Supporting and developing the EMS requires that everyone working at the site involved, whether
they are employees or outside contractors, be appropriately informed and trained in order to:
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promote a general culture of prevention, ensuring that required procedures are put
into actual practice; and |
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guarantee that programs, improvement measures, objectives and targets are widely
understood, and thus can be achieved. |
To achieve all these targets, personnel at different stages participate in meetings tailored
to their specific role in the plant organization:
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management and upper-level supervisors formulate strategies, examine areas for
action, and determine priorities. |
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base teams stimulate their leaders in order to ensure that conduct is consistent with
working procedures and the associated activities. |
Together, these measures promote facility-wide understanding of all guidelines and the results
that have been achieved. In 2005, 44,799 people participated in environmental training programs
for a total of 156,351 hours.
Management believes that we are in substantial compliance with regulatory requirements
affecting our facilities and our products in the relevant markets and is continuously engaged
in monitoring such requirements and adjusting affected operations. Our management believes
that environmental regulatory requirements have not had a material adverse effect on our
operations.
Research and Innovation
In a competitive environment characterized by continuous and rapid change, research
activities are a vital component of our strategy and expansion programs. Our commitment in
this area is clearly demonstrated by the financial resources and the number of researchers and
technicians involved.
In 2005, a central Research and Innovation function was set up with the aim of:
65
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overseeing multisectorial research and innovation, ensuring a uniform approach and
cost containment; |
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optimizing and facilitating the transfer of results achieved within the Group and
guaranteeing synergies between the Sectors in projects of common interest; |
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promoting opportunities for public funding in the Group; |
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protecting and enhancing intellectual property; and |
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promoting the Groups high-tech image. |
The Research and Innovation function groups together the human and engineering resources
already available at the CRF, Elasis and the corresponding development centers within a number of
our sectors (Fiat Auto, CNH, Iveco, Magneti Marelli and Comau).
Consistent with this approach, a multi-sector innovation team has been set up, which is
composed of upper echelon engineering and marketing personnel from each sector.
In 2005, the Groups two research and development companies, the CRF and Elasis, intensified
their interactions with the operating sectors so as to improve policy coordination. Rationalization
skills and reaching an excellent level are targets to be reached by the improvement in policies
coordination.
In 2005, research and development expenses4 totaled approximately €1.6 billion,
or approximately 3.5% of the net revenues of our industrial operations, a decrease from
approximately €1.8 billion in 2004. The plan for the three-year period from 2006-2008 calls for
research and development expenses for a total of approximately €5.9 billion. Overall, research
and development activities involved approximately 13,200 people at 120 centers in Italy and abroad.
Centro Ricerche Fiat
In 2005, the CRF concentrated its work in several fields and applications including:
environment-friendly engines, innovative vehicle structures, electronic chassis control systems,
onboard electronic systems, integrated transportation safety, environmental protection and advanced
manufacturing methods. The Centers headquarters in Orbassano, on the outskirts of Torino, has
branches in Trento, Bari, Foggia and Catania, as well as an interest in the C.R.P. Centro
Ricerche Plast-optica Plastics and Optics Research Center in Amaro (Udine), a joint venture
between the CRF and Automotive Lighting and Agemont, whose work in the fields of optics and
plastics is instrumental in developing better lighting systems.
With a staff of approximately 890 employees, the CRF made significant progress during the
year, with research and development output totaling 460 projects. Eighty new patent applications
were filed, bringing the total number of patents held by the Center to over 1,400. A further 1,000
patents are currently pending. In addition, the CRF was awarded 115 projects in the EUs Sixth
Framework Programme, confirming its leading position in European research field.
Of the many awards testifying to the high quality of the Centers work, some of the most
important included:
|
|
|
4 |
|
Including capitalized Research and Development
costs and costs charged directly to operations during the fiscal year. |
66
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Special Prize for Innovative Concepts for the Vehicle of the Future which the jury
awarded to the Centers trail-blazing Sportiva Latina prototype at the 33rd
Barcelona International Motor Show; |
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Oscar Masi 2005 award for new production technologies based on research by the CRF,
which was given to Comau for the new AgiLaser laser welding system; |
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International Engine of the Year award for 2005 assigned to the 1.3-litre Multijet
engine, currently in production at FPT plants and developed from CRF innovations and
patents; and |
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EuroCarBody Award for 2005 Recognition went to the outstanding work performed by
the Fiat Auto and CRF project team in developing, planning and producing the chassis for
the Grande Punto. |
|
The
major accomplishments of the CRF in 2005 are reviewed below: |
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Panda Natural Power. Fueled with compressed natural gas, this version of the Fiat
Panda promises to be the new benchmark in sustainable urban mobility. |
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Fiat Panda Hydrogen. The Orbassano laboratories are continuing to develop fuel cell
propulsion systems. The new Panda Hydrogen follows the Seicento Elettra H2 Fuel Cell and
the Seicento Hydrogen. With the fuel cell engine neatly stowed away beneath the floor
pan, the Panda Hydrogen retains all of the distinctive features of the New Pandas
occupant compartment, comfortably accommodating the driver and three passengers. At
full power, the vehicle reaches a top speed of over 130 kph and can accelerate from 0 to
50 kph in 7 seconds, with grade driveaway capability of 23%. The hydrogen tank, with its
total volume of 68 litres, gives the Panda Hydrogen a cruising range of over 200
kilometers in stop-and-go city traffic. Refueling, moreover, takes less than five
minutes: much the same as a natural gas-powered car. |
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Infonebbia Fog Warning System Experimental Torino-Caselle Airport link. During the
Olympic Winter Games in 2006, the Infonebbia Fog Warning System test site on the
Torino-Caselle motorway was put into service. The site is integrated with the Torino
2006 Traffic Operative Center mobility and emergency management system. |
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Motor vehicle safety. Safety, both of vehicle occupants and vulnerable road users
such as pedestrians, benefits from the product improvements achieved through the use of
numerical/experimental design and testing techniques that focus on crashworthy vehicle
structures as well as airbags, seat belts, occupant compartment interiors and pedestrian
protection systems. |
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Lightweight materials for commercial vehicles. The CRF assisted Iveco in developing
new ways to increase the competitiveness of the Daily line. The goal for 2005 reducing
vehicle weight without penalizing costs and investments was reached through the use of
high strength steels and flexible manufacturing technologies such as hydroforming and
profiling. |
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High performance thin seat structure. The CRF developed a new front seat structure
for subcompact cars featuring a low-bulk seatback and cushion. With this structure,
seatback and cushion padding are approximately 50% thinner than conventional seats,
while continuing to provide excellent performance in terms of postural comfort and
active and passive safety. |
67
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Spark ignition Multiair engine. The work of the CRF on optimizing the performance of
the original UNIAIR electronic valve control technology in terms of feasibility and
costs has made it possible to extend this systems applications to include medium-small
engines, thus cutting their CO2 emissions. The preproduction version of the Fire
MULTIAIR engine has been successfully tested, demonstrating its low consumption and high
performance. In addition, the UNIAIR system turned out to be fully compatible with
turbocharging technologies. |
Elasis
Elasis is a highly specialized research center whose work addresses technological innovation,
complete vehicle development, mobility, the environmental impact from vehicles, and traffic safety.
It has a staff of over 800 employees at its two sites in Pomigliano and Lecce, both located in
Southern Italy. Its sophisticated computer-aided design tools and advanced physical and virtual
testing equipment are based on an ability to develop and manage information systems that put Elasis
in the front ranks of the worlds research and development centers.
In 2005, Elasis continued to pursue its strategic goals of forging new links in the
research/innovation systems value chain and of promoting local development by (i) working together
with universities, private institutions and consortia in basic research and training; (ii)
continuing to focus on issues related to mobility and its environmental impact; and (iii)
cooperating with employers associations and chambers of commerce in Southern Italy to help the
areas small and medium enterprises make the most of their skills.
Significant achievements were made in the following areas:
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Biomechanics. The Elasis Biomechanics Center developed simulation methods for the
crash tests called for by international regulatory requirements and rating systems. As a
consequence, the range of experimental tests that can be simulated has been expanded,
and simulations represent the more accurately complex physical phenomena that can take
place during impact. The testing and statistical analysis methods were applied during
the development of all new Fiat Auto models, and contributed significantly to the
achievement of 5-star Euro NCAP ratings for Fiat Croma, Grande Punto, and Alfa 159; |
|
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225 Minicargo development project. As a part of the joint venture between Fiat Auto
and PSA Group, Elasis is working together with Tofas to develop the body shell, trim,
and closure panels for this new vehicle. Particular attention is devoted to optimizing
weight and standardizing components by applying innovative robust design methods and an
integrated system of product archetypes based on Knowledge Based Engineering (KBE)
technology; |
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|
New product planning. During 2005, Elasis worked with Fiat Auto to set out the
requirements for the C-segment models envisaged by the product plan, and with Ferrari in
developing the architecture of the new 8-cylinder front-engine roadster, which will be
the forerunner of the Ferraris future 12-cylinder offerings; |
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|
Fast Dynamics Prototype. The Fast Dynamics Prototype known by its Italian acronym
PDR was developed in order to boost the actuation speed of vehicle dynamics systems.
This prototype will serve as the foundation for further work on developing technologies
capable of coping with the most extreme conditions; and |
68
|
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|
FIRE engine evolution. In 2005, Elasis continued its development and product
engineering work on 8 and 16-valve spark ignition engines in the FIRE series with
displacements ranging from 1.1 to 1.4 liters. In particular, the first engine in the
new FIRE family was developed and put into production: a 1.4-liter unit with variable
valve timing which will be installed on the Grande Punto, Idea, Doblò, Palio and Siena,
all of which meet Euro 4 emission requirements. |
In the area of education and prevention, Elasis and Italys Federal Police (Polizia di Stato)
jointly developed the ICARO project, which aims at promoting a culture of traffic safety through a
presentation that will tour a number of Italian cities.
The following table summarizes our research and development expenses* during 2005 and 2004 by
sector:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in million of euros) |
Fiat Auto |
|
|
665 |
|
|
|
952 |
|
Maserati |
|
|
57 |
|
|
|
72 |
|
Ferrari |
|
|
86 |
|
|
|
75 |
|
Fiat Powertrain Technologies |
|
|
2 |
|
|
|
|
|
Agricultural & Construction Equipment (CNH) |
|
|
234 |
|
|
|
221 |
|
Trucks and commercial vehicles (Iveco) |
|
|
277 |
|
|
|
243 |
|
Components (Magneti Marelli) |
|
|
197 |
|
|
|
193 |
|
Metallurgical Products (Teskid) |
|
|
5 |
|
|
|
4 |
|
Production Systems (Comau) |
|
|
20 |
|
|
|
17 |
|
Services (Business Solutions) |
|
|
|
|
|
|
|
|
Publishing and Communications (Itedi) |
|
|
|
|
|
|
|
|
Other Companies |
|
|
15 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
1,558 |
|
|
|
1,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Including capitalized Research and Development costs and costs charged directly to operations during the
fiscal year |
Description of Property
At December 31, 2005, we owned 189 manufacturing facilities, of which 56 were located in
Italy. Our remaining facilities are located principally in the United States, France, Brazil,
the United Kingdom, Spain, Poland and Germany. For further information with respect to the
types and locations of our manufacturing facilities, see Sectors above. We also own other
significant properties, mainly in Italy, including spare parts centers, research laboratories,
test tracks, warehouses and office buildings.
A number of our manufacturing facilities (land and industrial buildings) are subject to
mortgages and other security interests granted to secure indebtedness to certain financial
institutions. This indebtedness equaled approximately €195 million at December 31, 2005,
as compared to €139 million at the end of 2004.
Management believes that our manufacturing facilities and other significant properties
are in good condition and that they are adequate to meet our needs.
69
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
Our worldwide net revenues increased by 2.0%, from €45,637 million in 2004 to
€46,544 million in 2005. All of our industrial business areas posted improved revenues,
except for a slight decrease at Fiat Auto, where revenues decreased by 0.8% as a recovery in
car sales volumes in the fourth quarter was insufficient to offset the trend of the first nine
months of 2005, when sales slowed down ahead of the launch of new models. Group trading profit
for 2005 was €1,000 million, as compared to €50 million in 2004, with the sharply
improved result reflecting a €541 million reduction in trading losses at Fiat Auto and the
positive trading results of all our other industrial sectors. In 2005, we recorded operating
income of €2,215 million, as compared to an operating loss of €585 million in 2004. The
turnaround reflects the improvement in trading profit and, more significantly, the gains
realized on the settlement with General Motors (€1.1 billion), and the sale of our stake in
Italenergia Bis to EDF (€878 million). Income before taxes was €2,264 million, as
compared a loss of €1,629 million in 2004. We recorded a positive Group interest in net
result of €1,331 million for 2005, as compared to a negative €1,634 million in 2004.
The dramatic improvement in our net result was primarily attributable to the increase in
operating income, as well as the €858 million in unusual financial income we recorded in
connection with the banks conversion into equity of the
Mandatory Convertible Facility and a
decrease in our net financial expenses. We analyze each of these items in more detail below.
We believe that 2005 marked a turning point for the Fiat Group, as we completed our
transformation into an industrial group focused on automotive activities after achieving successful
resolutions of a number of key strategic and financial issues. We concluded the dispute with GM
through our receipt of a €1,560 million settlement. Then, the Italenergia Bis transaction
resulted in a €1.8 billion reduction in our net industrial debt. Finally, conversion of the
Mandatory Convertible Facility resulted in a further reduction of €3 billion in the Groups debt and
a significant improvement in our capital structure. See Liquidity and Capital Resources below
for more information on each of these transactions.
Changes in the Scope of Consolidation
Transactions that resulted in a change in the scope of consolidation during 2005 include those
described below. None of these transactions had a significant impact on the comparability of our
consolidated IFRS results for 2005 and 2004. Accordingly, their effects are described below as
appropriate in the context of the discussions of our individual business areas and sectors. See
also the Notes to the Consolidated Financial Statements included in Item 18.
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In December 2004, Business Solutions agreed to sell 65% of the temporary employment
agency WorkNet to Generale Industrielle. The transaction closed in the first quarter of
2005. |
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In the first quarter of 2005, Magneti Marelli increased its stake in Mako from 43% to
94%, thereby acquiring control of this Turkish automotive supply company from Koc
Holding. Mako, previously accounted for using the equity method, has been fully
consolidated on a line-by-line basis. |
70
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|
In May 2005, following termination of the Master Agreement with General Motors, we
reacquired the powertrain operations that Fiat Auto had previously transferred to the
Fiat-GM Powertrain joint venture (other than certain Polish operations that continue to
be jointly managed with General Motors). These operations are now managed by our new FPT
sector, which as a consequence has generated results starting from May 1, 2005, when we
acquired these assets. |
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|
On June 1, 2005, Iveco sold to Barclays 51% of a newly created subsidiary, Iveco
Finance Holdings Ltd., to which Iveco had contributed the bulk of its financial
services. The joint venture, in which Iveco retains a 49% interest, provides commercial
vehicle financing and leasing services activities to Iveco customers in France, Germany,
Italy, Switzerland and the United Kingdom. See Item 4. Information on the
CompanySectors Trucks and Commercial Vehicles for additional information on this
transaction. |
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|
In addition, in April 2005, ownership of Maserati was transferred from Ferrari to
Fiat Partecipazioni S.p.A., a subsidiary of Fiat S.p.A. The new entity, comprising the
group of companies producing and selling Maserati cars, became operational on April 1,
2005. As a consequence, we now present the results of Maserati, which had previously
been included in the Ferrari sector, on a standalone basis as a separate sector within
our Automobiles business area. In order to present the data for 2004 and 2005 in the
analysis below on a comparable basis, we have reclassified the results of the Maserati
business for periods prior to April 1, 2005 to separate them from those of the former
Ferrari-Maserati sector. |
Critical Accounting Policies
The Consolidated Financial Statements included in Item 18 have been prepared in
accordance with IFRS; a summary of the significant differences between IFRS and US GAAP and
their effect on consolidated net income and stockholders equity is provided in Note 38 to the
Consolidated Financial Statements included in Item 18. You should also refer to the section
entitled US GAAP Reconciliation in the analysis below. The preparation of these financial
statements requires the use of estimates, judgments, and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the periods presented. Fiat believes that its most
critical accounting policies, which are those that require managements most difficult,
subjective and complex judgments, are as follows:
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects our estimate of losses inherent in our
wholesale and retail credit portfolio. We have reserved for the expected credit losses based
on past experience with similar receivables, current and historical past due amounts, dealer
termination rates, write-offs and collections, the careful monitoring of portfolio credit
quality and current and projected economic and market conditions. Management believes that
these reserves are adequate. Different assumptions or changes in economic circumstances could,
however, result in changes to the allowance for doubtful accounts.
Recoverability of Non-Current Assets (Including Goodwill)
Non-current assets include property, plant and equipment, investment property, intangible
assets (including goodwill), investments and other financial assets. As discussed in
Significant accounting policies in the Notes to the Consolidated Financial Statements
included in Item 18, we
71
review the carrying value of our non-current assets held and used and that of assets to
be disposed of when events and circumstances warrant such a review. We perform this review
using estimates of future cash flows from the use or disposal of the asset. If the carrying
amount of a non-current asset is considered impaired, we record an impairment charge for the
amount by which the carrying amount of the asset exceeds its estimated recoverable amount from
use or disposal determined by reference to our most recent corporate plans. Management
believes that the estimates of these recoverable amounts are reasonable; however, estimates of
future cash flows may differ from actual cash flows due to many factors, and changes in such
estimates would impact the amount of the impairment charges recorded.
Residual Values of Vehicles and Equipment Leased Out under Operating Lease Arrangements
or Sold with a Buy-Back Commitment
We report vehicles and equipment rented or leased to customers under operating leases as
tangible assets. In addition, sales of new vehicles made with a buy-back commitment that
requires us to repurchase the vehicle in certain circumstances on specified terms are not
recognized as sales at the time of delivery but are accounted for as operating leases if it is
probable that the vehicle will be bought back. We recognize income from such operating leases
over the term of the lease. The depreciation expense for vehicles subject to operating leases
is recognized on a straight-line basis over the term of the lease in amounts necessary to
reduce the cost of the vehicle to its estimated residual value at the end of the lease term.
The estimated residual value of the leased vehicles and equipment is calculated at the lease
inception date on the basis of published industry information and historical experience.
The total value of assets rented or leased to customers under operating leases, excluding
vehicles sold with a buy-back commitment and net of accumulated depreciation, was €1,254
million at December 31, 2005 (€740 million at December 31, 2004), and the net carrying
amount of vehicles sold with a buy-back commitment was €1,924 million at December 31, 2005
(€1,877 million at December 31, 2004). Realization of the residual values is dependent on
our future ability to market the vehicles and equipment under the then-prevailing market
conditions. We continually evaluate whether events and circumstances have occurred which
impact the estimated residual values of vehicles and equipment on operating leases. Management
believes that its current estimates in such regard are reasonable, although changes in the
underlying residual values or other external factors impacting our future ability to market
these assets under then-prevailing market conditions may impact the realization of
currently-estimated residual values.
Sales Allowances
We record the estimated impact of sales allowances provided in the form of dealer and/or
customer incentives as a reduction of revenues at the time we have created a constructive
obligation to provide certain forms of incentives to dealers or the time of sale to the
dealer, whichever is later. A number of different types of incentives may be available at any
particular time. The determination of the amounts we record in respect of sales allowances
requires management to make estimates based on a number of different factors. Management
believes that the amounts recorded are adequate, although the amounts actually paid in respect
of sales allowances could differ from the original estimates, with a resultant impact on our
results.
Product Warranties
We make provisions for estimated expenses related to product warranties at the time
products are sold. We establish these estimates based on historical information on the nature,
72
frequency and average cost of warranty claims. We seek to improve vehicle quality and
minimize warranty claims, but we have also extended contractual warranty periods for certain
classes of vehicles. Management believes that the warranty reserve is adequate; however,
actual claims could differ from the original estimates and therefore necessitate an adjustment
to the warranty reserve.
Pension and Other Post-Retirement Benefits
Our companies sponsor pension and other post-retirement benefits in various countries. In
the US, the United Kingdom, Germany and Italy, we have major defined benefit plans. We
consider several statistical and judgmental factors to attempt to anticipate future events for
the calculation of the expense and liability related to these plans. These factors include
assumptions about the discount rate, expected return on plan assets, rate of future
compensation increases and health care cost trend rates, each determined by us within certain
guidelines. In addition, our actuarial consultants also use subjective factors such as
withdrawal and mortality rates in making relevant estimates. Management believes that the
estimates it is currently using are reasonable; however, the actuarial assumptions used may
differ materially from actual results due to changing market and economic conditions, higher
or lower withdrawal rates, longer or shorter life spans of participants and changes in the
actual costs of health care. Any such differences may have a significant impact on the amount
of pension and other post-retirement benefit expenses we record.
Realization of Deferred Tax Assets arising from Tax Loss Carryforwards
As of December 31, 2005, we had gross deferred tax assets arising from tax loss
carry-forwards of €5,011 million and valuation allowances against these assets of €4,046
million. The corresponding totals as of year-end 2004 were €4,591 million and €3,383
million, respectively. We have recorded these valuation allowances to reduce our deferred tax
assets to the amount that we believe it is probable will be recovered. While we have
considered future taxable income and used ongoing prudent tax planning strategies in assessing
the need for valuation allowances, in the event we were to determine that we would be able to
realize our deferred tax assets in the future in excess of the net recorded amount, an
adjustment to the deferred tax asset would increase income in the period such determination
was made. Likewise, should we determine that we would not be able to realize all or part of
our net deferred tax assets in the future, an adjustment to the deferred tax asset would be
charged to income in the period such determination was made.
Contingent Liabilities
We are the subject of pending legal and administrative proceedings covering a range of
matters in a number of different jurisdictions, including some matters pertaining to tax
issues. Due to the uncertainty inherent in such matters, it is difficult to predict their
final outcome. The cases and claims against us often raise difficult and complex factual and
legal issues, which are subject to many uncertainties and complexities, including but not
limited to the facts and circumstances of each particular case and claim, the relevant
jurisdiction and the differences in applicable law. In the normal course of business, we
consult with legal counsel and certain other experts on such matters. We accrue a liability
when it is determined that an adverse outcome is probable and the amount of the loss can be
reasonably estimated. In the event an adverse outcome is possible (but not remote) or an
estimate is not determinable, no liability is accrued, but we are required to provide certain
disclosures in our financial statements.
73
Transition to International Financial Reporting Standards
Following the coming into force of European Regulation No. 1606 dated July 19, 2002, we
and other EU companies whose securities are traded on regulated markets in the EU were
required to adopt IFRS (known as international accounting standards, or IAS, until May 2002)
in the preparation of our 2005 consolidated financial statements. Standards introduced prior
to the renaming of IAS as IFRS are still referred to as IAS; we refer to the combined body of
IAS and IFRS standards as IFRS.
We published our first IFRS consolidated results in our report for the quarter ended
March 31, 2005, which included prior-year comparison data recalculated in accordance with
IFRS. This quarterly report also included a recalculation under IFRS of our results,
including consolidated balance sheets as of January 1 and December 31, 2004, and a
consolidated income statement for the year ended December 31, 2004. We prepared these results
for comparative purposes in accordance with IFRS 1 First-time Adoption of IFRS, based on the
IFRS applicable from January 1, 2005, as published as of December 31, 2004, as retrospectively
applied. See Note 39 to the Consolidated Financial Statements included in Item 18 which
includes the restated IFRS financial data referenced above, as well as a reconciliation to
IFRS of our Italian GAAP financial information as at January 1, 2004, and December 31, 2004.
As recalculated in accordance with IFRS, our stockholders equity (including minority
interest) at December 31, 2004, was €4,928 million, compared to the €5,757 million we
reported at that date under Italian GAAP; our total assets at December 31, 2004, as
recalculated in accordance with IFRS, were €62,522 million, as compared to the €47,598
million we reported at that date under Italian GAAP. Our net loss for the year ended December
31, 2004 as restated under IFRS was €1,579 million, compared to the net loss of €1,548
million we reported for the same period under Italian GAAP.
Results of Operations*
The following discussion is based on financial information prepared in conformity with
the accounting principles discussed in Form and content of the consolidated financial
statements and Principles of consolidation and significant accounting policies in the Notes
to the Consolidated Financial Statements included in Item 18, which have been prepared in
accordance with IFRS. These principles differ in certain respects from US GAAP. The effects
of such differences on consolidated net income and stockholders equity, as well as other
disclosures required by US GAAP, are included in Note 38 to the Consolidated Financial
Statements included in Item 18. See also Item 3. Key InformationSelected Financial Data
and Changes in the Scope of Consolidation above.
|
|
|
* |
|
Unless otherwise indicated, all references
to net revenues and trading profit (loss) for the individual sectors in this
section are based on these measures prior to eliminations for intra-Group
transactions. Aggregate net revenues for the Automobiles business area are
after intra-area eliminations; there are no significant intra-area eliminations
for any other business area or line item. |
74
2005 Compared with 2004
The following table summarizes the principal line items from our consolidated IFRS income
statement for the years presented:
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December, |
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Net revenues |
|
|
46,544 |
|
|
|
45,637 |
|
Trading profit |
|
|
1,000 |
|
|
|
50 |
|
Gains (losses) on the disposal of investments |
|
|
905 |
|
|
|
150 |
|
Restructuring costs |
|
|
502 |
|
|
|
542 |
|
Other unusual income (expenses) |
|
|
812 |
|
|
|
(243 |
) |
Operating result |
|
|
2,215 |
|
|
|
(585 |
) |
Financial income (expenses) |
|
|
(843 |
) |
|
|
(1,179 |
) |
Unusual financial income |
|
|
858 |
|
|
|
|
|
Result from investments (1) |
|
|
34 |
|
|
|
135 |
|
Result before taxes |
|
|
2,264 |
|
|
|
(1,629 |
) |
Income taxes |
|
|
844 |
|
|
|
(50 |
) |
Net result before minority interest |
|
|
1,420 |
|
|
|
(1,579 |
) |
Minority interest |
|
|
89 |
|
|
|
55 |
|
Group interest in net result |
|
|
1,331 |
|
|
|
(1,634 |
) |
|
|
|
(1) |
|
This item includes investment income, as well as writedowns of and upward adjustments to
equity investments in non-group entities accounted for using the equity method. |
Net Revenues
Our worldwide net revenues totaled €46,544 million in 2005, a 2.0% increase, as
compared to the €45,637 million recorded in 2004. Increases in revenues for nearly all of
our industrial sectors were only partially offset by declines at Fiat Auto, Comau and our
other businesses (Business Solutions, Itedi, and our holding and other companies).
For the Automobiles business area, aggregate net revenues after intra-area eliminations
increased by 2.5% to €21,729 million in 2005, from €21,207 million in 2004. Higher
revenues at Maserati and Ferrari, together with the revenues generated by FPT following its
formation on May 1, 2005, more than offset a 0.8% decline in revenues at Fiat Auto. The slight
decrease in revenues at Fiat Auto primarily reflected a 3.9% decrease in unit sales that was
mainly concentrated in the first nine months of the year, as discussed in more detail in the
discussion of Fiat Auto below. Eliminations for intra-area transactions were €1,592 million
and €72 million in 2005 and 2004 respectively; with the significant increase reflecting the
creation of FPT in May 2005, which provides the powertrains for nearly all of the vehicles
produced by Fiat Auto.
CNH recorded net revenues of €10,212 million in 2005, an increase of 2.3%, compared
with €9,983 million in 2004, as the impact of higher sales of construction equipment in the
Americas and the rest of the world, as well as higher prices, were partially offset by
decrease in sales of agricultural equipment in the sectors main markets. Net revenues at
Iveco increased 4.9% to €9,489 million from €9,047 million in the prior year, primarily
reflecting higher unit sales.
75
In the Components and Production Systems business area, aggregate net revenues increased
by 3.5%, from €6,416 million in 2004 to €6,642 million in 2005, reflecting higher
revenues at Magneti Marelli and Teksid that were only partially offset by lower revenues at
Comau. Aggregate net revenues in our other business area declined 19.2% to €1,618 million
in 2005 from €2,003 million in 2004, due to a decline in revenue at Business Solutions,
Itedi and our other businesses.
Trading Profit
In 2005, we recorded a trading profit of €1,000 million, a very significant increase
from the €50 million recorded in 2004. The increase reflected a €669 million
reduction in the trading loss of the Automobiles business area (of which €541 million
related to Fiat Auto), as well as higher trading profits at CNH, Iveco and the Components and
Production Systems business area, which were offset only in part by a higher trading loss at
our other businesses.
The net revenues and trading profit (loss) recorded by each of our sectors prior to
eliminations are summarized in the table Operating Results by Sector in Item 4 and analyzed
in the more detailed sector-by-sector discussion appearing below.
Net Gain on the disposal of investments
Net gain on the disposal of investments was €905 million in 2005, more than six times
higher than the €150 million net gain on such sales recorded in 2004. The principal items
contributing to this were the €878 million gain on the sale of our interest in Italenergia
Bis, as well as a €23 million gain on the sale of Palazzo Grassi S.p.A., which owned the
historic Palazzo Grassi in Venice. In 2004, the €150 million net gain on such sales
included a gain of €81 million on the sale of Fiat Engineering, a gain of €32 million on
the sale of Edison shares and warrants, and a gain of €31 million on the sale of the Midas
automotive repair and maintenance service business.
Restructuring Costs
Our restructuring costs in 2005 amounted to €502 million, a reduction of 7.4% from
2004, and primarily comprised:
|
|
€162 million in restructuring costs at Fiat Auto related to the
rightsizing of the sectors central business governance
structures and those of certain companies outside Italy, as well
as the restructuring of the former Fiat-GM Powertrain activities
following the unwinding of those joint ventures in May; |
|
|
|
€103 million at Iveco, mainly for reorganization activities,
particularly with regard to staff structures;
|
|
|
|
€87 million at CNH, primarily attributable to the
ongoing reorganization of activities and the restructuring process
underway at certain production plants; |
|
|
|
restructuring costs of €46 million, €33 million and €22
million at Comau, Magneti Marelli and Business Solutions,
respectively; |
In 2004, our restructuring costs totaled €542 million, and were primarily concentrated
at Fiat Auto (€355 million), CNH (€68 million), Magneti Marelli (€48 million) and
Iveco (€24 million).
76
Other Unusual Income (Expenses)
We recorded €812 million of unusual income in 2005, as compared to unusual expenses of
€243 million in 2004, with the positive result reflecting the €1,134 million gain (net
of related costs) arising from GMs payments to us in connection with the termination of the
Master Agreement, as well as a €117 million gain realized on our final sale of certain real
estate assets that had been securitized in 1998. These gains were partially offset by other
unusual expenses, primarily comprising €187 million in expenses relating to the process of
reorganization and streamlining of relationships with the Groups suppliers (which was
launched in 2004) and with Fiat Auto dealers, €141 million in expenses at Fiat Auto
associated with product platform rationalization and the reallocation of production
activities, and €71 million in indemnity claims paid in connection with the unwinding of
our Global Value joint venture with IBM, as well as €30 million in charges related to
businesses we had disposed of in prior years.
Operating Result
In 2005, we recorded operating income of €2,215 million, as compared with an operating
loss of €585 million in 2004. The very significant improvement in our operating results
reflected the notable positive change in other unusual income (expenses) described below, as well as the
€950 million increase in trading profit, a €755 million increase in net gains on the disposal investments, and a reduction of approximately €40 million in our restructuring
costs described above.
Financial Income (Expenses)
Our net financial expenses totaled €843 million in 2005, a 28.5% decrease from the
€1,179 million recorded in 2004. The 2004 result included approximately €150 million in
net financial expenses recorded on the unwinding of an equity swap on General Motors shares
(see Off Balance Sheet Arrangements below for additional information on this transaction)
and approximately €100 million in write downs of financial receivables. The overall
reduction in our net financial expenses net of these two items reflected the lower net debt of
the Groups industrial companies and greater efficiency in our funding operations, despite a
general increase in market interest rates, particularly on dollar-denominated borrowings. Net
financial expenses also include interest costs on pension and other post-employment benefits
to employees, which amounted to €146 million in 2005, compared to €127 million in 2004.
Unusual Financial Income
We also separately recorded unusual financial income of €858 million in 2005 in
connection with the capital increase resulting from the conversion of the Mandatory
Convertible Facility, reflecting the excess of the aggregate €3 billion subscription price for
the shares acquired by the lending banks and the actual stock market price of those shares on
the subscription date. We had no unusual financial income or expenses in 2004.
Income Taxes
The net income tax effect on our statement of operations for 2005 was a charge of €844
million (compared with a tax benefit of €50 million in 2004), including €425 million in
deferred taxes, €277 million of which was attributable to a reversal of deferred tax assets
related to the gain recorded in connection with the termination of the Master Agreement with
GM. The remaining deferred tax charges, as well as €184 million in current tax charges
recorded during 2005, principally related to income at the Groups subsidiaries outside of
Italy. In addition, €119 million was
77
attributable to income taxes for prior years (compared to none in 2004). IRAP, the
regional tax on production activities in Italy, totaled €116 million in 2005, compared to
€122 million in 2004.
Net Result
As a result of the factors described above, we recorded a positive net result before
minority interest of €1,420 million in 2005, compared to a negative €1,579 million in
2004. Group interest in net result was positive for €1,331 million in 2005, compared to negative
€1,634 million in 2004.
Earnings per Share
Earnings per share (ordinary, preference and savings) was equal to net income per share
of €1.250 in 2005, as compared with a net loss per share of €1.699 in 2004. Our
earnings per share for 2005 reflected the issuance of 291,828,718 new ordinary shares to the
lending banks in September 2005 in connection with the conversion of the Mandatory Convertible
Facility. In accordance with IAS 33, the dilutive effects of the Mandatory Convertible Facility
have not been included in the determination of earnings per share in 2004, as there was a net
loss for the period.
Automobiles Business Area
As noted above, aggregate net revenues after intra-area eliminations for the Automobiles
business area increased by 2.5% to €21,729 million in 2005, from €21,207 million in
2004. Higher revenues at Maserati (+30.3%) and Ferrari (+9.7%), together with the €1,966
million in revenues generated by FPT following its creation on May 1, 2005, more than offset a
0.8% decline in revenues at Fiat Auto. Eliminations for intra-area transactions were €1,592
million and €72 million in 2005 and 2004 respectively; with the significant increase
reflecting the creation of FPT, which provides the powertrains for nearly all of the vehicles
produced by Fiat. The Automobiles business area reduced its trading loss by 78.5% or €669
million, from €852 million in 2004 to €183 million in 2005. Fiat Auto and Maserati each
reduced their trading losses sharply, while Ferrari increased its trading profit and FPT
reported positive trading profit in its first eight months of operations.
The results of each of the business areas sectors are analyzed in more detail below.
Fiat Auto. Fiat Autos total revenues in 2005 were €19,533 million, a slight decrease of
0.8% from €19,695 million in 2004. The decrease was due to
lower sales volumes, particularly in
the first nine months of the year, the impact of which was only partially offset by an improved
product mix and positive exchange rate effects. The sectors performance varied over the course of
2005, as sales in the first half of the year were impacted by reduced sales of existing models in
anticipation of the expected launch of new models, intense competitive pressure, and Fiat Autos
focus on more profitable sales channels. The commercial launch of the Fiat Croma in May, and the
Fiat Grande Punto and Alfa 159 in September and October,
respectively, reversed the trend, as unit
sales rose in the fourth quarter of the year. These launches, followed by the presentation of the
Alfa Brera, Fiat Panda Cross, and Lancia Ypsilon Momo Design models in the fourth quarter, allowed
Fiat Auto to reverse the sales decline.
Fiat Autos global deliveries to the dealer network, importers and other large direct
customers during 2005 totaled approximately 1,697,300 vehicles, a decrease of 3.9% from
1,766,000 units in 2004. In Western Europe, Fiat Auto delivered 1,100,000 vehicles in 2005, a
decrease of 7.8% from 2004, with the rate of decline leveling off in the fourth quarter due to
the positive contribution of new models. New registrations in the Western European automobile
market as a whole remained essentially unchanged, decreasing by only 0.2% from 2004 industry
totals. In Italy, the sectors deliveries declined by 2.4% to 687,700 units, as new
registrations in the Italian market as
78
a whole declined by 1.3%. Fiat Autos deliveries in the sectors other principal
European markets declined by 15.8% in Germany, 38.5% in the United Kingdom and 3.0% in Spain,
with an increase posted only in France (+8.3%). Trends in new registrations in these markets
were mixed, with a decline of approximately 5% in the United Kingdom and slight gains in
France (+2.6%), Germany (+1.6%) and Spain (+0.9%). Fiat Autos share of the Italian
automobile market held steady at 28.0%, while its market share in Western Europe as a whole
declined to 6.5% from 7.2% in 2004.
In Poland, Fiat Auto sold a total of 33,800 vehicles in 2005, or 44.3% fewer than in
2004, with the decrease being mostly attributable to weak demand as new registrations in the
Polish market fell by 26.5%. Fiat Autos automobile market share in Poland declined by 6.4
percentage points to 10.7%. In Brazil, where new automobile registrations increased by 9.1%
in 2005, the sector sold a total of approximately 404,300 vehicles, a 12.9% increase from
2004, primarily as a result of a recovery of demand in the local market and the introduction
of the flex (alcohol and gasoline bi-fuel) versions of Palio and Mille models in the country.
Thanks to these gains, Fiat Autos share of the Brazilian automobile market increased by 0.9
percentage points to 24.4%. In Argentina, where the economy continued to recover from the
deep crisis of 2002, the automobile market expanded by 35.6%. Fiat Auto increased its market
share in Argentina to 12.4% in 2005, up 0.6 percentage points from 2004.
Fiat Auto delivered 285,200 light commercial vehicles in 2005, an increase of 5.1% from 2004,
and maintained its market share in Western Europe largely unchanged at 10.4% (down 0.2 percentage
points from 2004).
In 2005, Fiat Autos financial services subsidiaries provided €9,810 million in financing
to the distribution network, 11.5% less than in 2004. The reduction in business volume reflected
the decrease in unit sales in a number of European countries, a policy designed to reduce and
selectively control dealer inventories and the sale of the sectors retail financing activities in
the United Kingdom in the fourth quarter of 2004. In Brazil, on the contrary, Fiat Autos lending
activity mirrored the positive sales performance in the local market. The sectors financial
activities provided €3,670 million in financing to suppliers, or 42.1% less than in 2004. The
sectors financing and mobility services activities had revenues of €619 million in 2005, with
the decrease of 16.7% from €743 million in 2004 reflecting the reduction in financing to
suppliers as well as the divestiture in the United Kingdom.
Fiat Auto strengthened its position in the rental and corporate fleet business in
Italy by acquiring Enels share of Leasys, which rents and manages corporate car fleets, at the end
of 2005. Savarent continued to function as a captive company that operates through the Fiat Auto
dealer network, serving mainly individuals and small and medium-size businesses. The sectors
rental fleet rose to 144,500 vehicles at the end of 2005, or about 3% more than the previous year.
Fiat Auto narrowed its trading loss by 65.8%, recording a trading loss of €281 million in
2005, as compared to €822 million in 2004. The sharp decline in the sectors trading loss was
primarily attributable to a more profitable sales mix and very sharp reductions in governance
costs, as well as a reduction in production costs reflecting purchasing efficiencies and a strong
focus on more profitable sales channels, which together more than offset the impact of the declines
in revenues and unit sales. Fiat Autos 2005 trading loss was equal to -1.4% of its net revenues,
exceeding both the target of approximately -1.5% set by management and the approximately -4%
recorded in 2004.
Maserati. Maserati recorded revenues of €533 million in 2005, an increase of 30.3% from
€409 million recorded by the same operations in 2004 (when they were part of the
Ferarri-Maserati sector). The increase reflected strong sales of the Quattroporte and the special
MC 12 , a road version of the MC 12 Competizione race car that won the 2005 FIA GT championship.
Maseratis sales to dealer network
79
were 5,568 units in 2005, an increase of 16.9% from the prior year. The sector recorded a
trading loss of €85 million in 2005, compared to a loss of €168 million in 2004. The 2004
result had included €46 million in fixed asset write-downs, while the sectors higher sales
volumes and improved product mix in 2005 contributed to the reduction in its trading loss.
Ferrari. Ferrari recorded revenues of €1,289 million in 2005, a 9.7% increase from
€1,175 million recorded by the same operations in 2004 (when they were part of the
Ferarri-Maserati sector). The increase was largely attributable to the positive performance of the
F430 and 612 Scaglietti, while revenues were also boosted by sales of the limited edition
Superamerica and FXX. The sector recorded €157 million in trading profit, an increase of 13.8%
from €138 million in 2004. The improvement reflected higher sales volumes and efficiency gains,
which were partially offset by the negative impact of exchange rates.
Fiat Powertrain Technologies. Formed in May 2005 following the termination of the Master
Agreement with GM, the new sector recorded revenues of €1,966 million during the last eight
months of the year, most of which were attributable to sales to Fiat Auto, as sales to third
parties accounted for approximately 23% of its total revenues. FPT recorded a trading profit of
€26 million between May and December 2005.
CNH (Agricultural and Construction Equipment Business Area)
CNH recorded IFRS net revenues of €10,212 million, an increase of 2.3% from the
€9,983 million recorded in 2004. The improvement reflected higher revenues at the sectors
financial services operations and the positive impact of exchange rates, as well as higher
sales of construction equipment and improved prices, all of which more than offset the impact
of declines in the sectors sales of agricultural equipment.
The following table sets forth CNHs net revenues from sales of agricultural and
construction equipment, as reported by CNH, for the periods indicated in both US dollars and
euros.
|
|
|
|
|
|
|
|
|
Net Revenues from Sales of Equipment |
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Agricultural Equipment |
|
|
6,304 |
|
|
|
6,431 |
|
Construction Equipment |
|
|
3,186 |
|
|
|
2,850 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
9,490 |
|
|
|
9,281 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
|
|
|
|
|
|
|
|
Agricultural Equipment |
|
|
7,843 |
|
|
|
8,000 |
|
Construction Equipment |
|
|
3,963 |
|
|
|
3,545 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
11,806 |
|
|
|
11,545 |
|
CNHs net revenues from sales of equipment increased by 2.3% to €9,490 million,
from €9,281 million in 2004. In US dollar terms, net revenues from sales of equipment
increased by $261 million, or approximately 2.3%, primarily due to variations in exchange
rates for currencies other than the euro. When calculated so as to exclude the impact of
exchange rates, net sales of construction equipment increased by roughly 11% while those of
agricultural equipment decreased by about 6%.
Overall world market demand for major agricultural equipment product lines (as measured by new
registrations) was approximately 4% higher in 2005 than in 2004, reflecting a worldwide increase in
80
demand for tractors (+5%) and a decline for combines (-16%). Market demand for tractors was down
in Latin America (-19%) and Western Europe (- 6%), while increasing significantly in the rest of
the worlds markets (+26%) and remaining flat in North America. The market for combines declined
sharply in Latin America (-58%), increased in Western Europe (+6%) and in the rest of the world
markets (+10%) and remained flat in North America. CNHs overall tractor market share declined by
approximately 2.5 percentage points from 2004, while the sectors overall market share for combines
declined by approximately 1 percentage point, but held steady in North America. World market demand
for the construction equipment product lines in which CNH competes increased by about 8% in 2005,
rising in all principal markets and for all major product categories. Market demand for loader
backhoes rose by about 15% worldwide due a significant increase in Latin America (+47%) and growth
in the North American market (+8%). Market demand for skid steer loaders was up approximately 4%
worldwide as a result of positive trends in Latin America (+34%) and Western Europe (+9%). Retail
unit demand for heavy equipment increased by about 8% worldwide, as demand rose in Latin America
(+18%), North America (+15%) and Western Europe (+4%). CNHs overall construction equipment market
share (calculated on a unit basis) declined by approximately one percentage point.
Expressed in US dollars, CNHs net sales of agricultural equipment decreased to $7,843
million, approximately 2% lower than in 2004. This decline reflected a reduction in wholesale
unit sales and an unfavorable mix, which were only partially offset by the increase due to
improved price and new products. Net sales declined slightly in Western Europe as a
consequence of lower sales volumes, but declined sharply in Latin America, where the
reductions of unit sales reflected the market declines and a worse products mix. On the other
hand, net sales grew in North America, notwithstanding lower unit sales; net sales in the rest
of the world benefited from higher sales of tractors and combines.
Net sales of construction equipment increased by approximately 12% to $3,963 million in
2005, primarily due to improved net price realization, higher wholesale unit sales and
improved product mix linked to new products. Gains in net sales were recorded in North
America, where CNHs total unit sales grew due to higher market demand, and in Latin America,
where net sales increased by about 58%, reflecting strong growth in volumes and the positive
impact of exchange rates. Net sales declined in Western Europe as a result of lower wholesale
unit sales reflecting the negative impact of CNHs network consolidation in the first half of
2005. In early 2005, the sector consolidated its New Holland Construction brand family into
one distribution network structure in Western Europe and Latin America, thereby completing the
last phase of CNHs worldwide dual brand and dual distribution network structure. Net sales of
construction equipment began to increase in the second half of 2005.
The following table sets forth certain data on CNHs net revenues from sales of equipment
by geographic region for the periods indicated in both US dollars and euros.
81
|
|
|
|
|
|
|
|
|
Net Revenues from Sales of Equipment |
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
North America |
|
|
4,580 |
|
|
|
4,213 |
|
Western Europe |
|
|
2,929 |
|
|
|
3,082 |
|
Latin America |
|
|
617 |
|
|
|
734 |
|
Rest of the World |
|
|
1,364 |
|
|
|
1,252 |
|
TOTAL |
|
|
9,490 |
|
|
|
9,281 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars) |
|
North America |
|
|
5,698 |
|
|
|
5,241 |
|
Western Europe |
|
|
3,643 |
|
|
|
3,834 |
|
Latin America |
|
|
768 |
|
|
|
913 |
|
Rest of the World |
|
|
1,697 |
|
|
|
1,557 |
|
TOTAL |
|
|
11,806 |
|
|
|
11,545 |
|
Expressed in US dollars, CNHs net revenues from sales of equipment in North America
increased by 8.7% from $5,241 million in 2004 to $5,698 million in 2005, reflecting higher
sales of construction equipment and higher revenues from agricultural equipment sales. Net
sales of equipment in Western Europe decreased by 5.0% from $3,834 million in 2004 to $3,643
million in 2005, reflecting the effect of declines in unit sales of both agricultural
equipment and construction equipment. Net sales of equipment in Latin America decreased by
15.9%, from $913 million in 2004 to $768 million in 2005, as a result of the decline in
agricultural equipment sales volumes, which was partially offset by strong sales of
construction equipment and the favorable impact of variations in exchange rates. In the rest
of the world, sales of equipment were up 9.0%, to $1,697 million in 2005 from $1,557 million
in 2004, mainly as a result of higher unit sales of combines, tractors and construction
equipment.
When stated in euros, our reporting currency, CNHs net revenues from sales of equipment
showed essentially the same trends as noted above with respect to US dollars, as there were no
material variations in the average exchange rate between the dollars and the euro in 2005.
CNH recorded a trading profit of 698 million in 2005 (6.8% of net sales, exceeding the target
of 6 6.5% set by management), compared to 467 million (4.7% of net sales) in 2004. The 49.5%
increase was primarily attributable to improved pricing, higher sales volumes of construction
equipment, the realization of manufacturing efficiencies, and greater profitability in financial
services. These positive variations more than offset higher raw material prices, lower volumes in
the agricultural equipment segment and increased research and development costs. The sector also
benefited from a structural reduction in its employee healthcare costs in North America, which also
resulted in a positive
83 million
reversal to previously accrued reserves. See Note 26 to the
Consolidated Financial Statements included in Item 18 for further information.
Iveco (Trucks and Commercial Vehicles Business Area)
Ivecos revenues for 2005 totaled 9,489 million, an increase of 4.9% from the 9,047
million recorded in 2004, reflecting increased unit sales across its principal product lines,
particularly for heavy and light vehicles.
Moreover, the volumes reflect vehicles shipped, while, under the new IFRS, only rental
revenues can be reported for vehicles sold with a buy-back commitment, with the total rent being
equal to the
82
difference between the sale price and the buy-back price, which is then allocated over
the term of the contract. Consequently, sales volumes might not correlate immediately with revenue
volumes.
During 2005, Iveco delivered approximately 172,500 vehicles worldwide (15,400 of which were
sold with buy-back commitments), or 6.3% more than in 2004. Ivecos sales including those by
associated companies, which amounted to approximately 64,800 units (up from 57,500 in 2004),
totaled approximately 237,300 units, an increase from 219,800 units in 2004.
In Western Europe, Iveco delivered approximately 134,900 vehicles, or 2.3% more than the
131,800 vehicles delivered in 2004, as new registrations in the Western European market for
commercial vehicles (measured in terms of new registrations with a GVW of 2.8 tons or more)
increased by 5.2% to approximately 1,109,700 units. Significant increases in demand were
registered in France (+10.8%) and Spain (+9.6%), as well as the United Kingdom (+3.7%) and
Germany (+2.9%), the exception was Italy where demand contracted by 1.7%. In this context,
Iveco reported significant increases in deliveries in France (+7.5%), Spain (+7.1%), the
United Kingdom (+6.5%) and Germany (+1.9%), the impact of which was offset in part by a
decrease in Italy (-3.8%) reflecting the weak market. The sectors share of the overall
Western European market for vehicles with a GVW of 2.8 tons or more was 10.9%, virtually
unchanged from the prior year (-0.2 percentage points).
In Eastern Europe, Iveco delivered approximately 13,300 units, or 3.0% more than the
12,900 units delivered in 2004. Outside Europe, Ivecos
deliveries increased by 38.0%, from
approximately 17,600 vehicles to 24,300 in 2005, with particular gains in Latin America (where
Iveco shipped 11,900 vehicles, 22.8% more than in 2004).
Irisbus, the sectors bus unit, sold 8,526 buses during the period, in line with the
prior year (8,553 units). Unit sales at Naveco, the sectors joint venture in China with the
NAC Group, increased by roughly 20% to approximately 18,000 vehicles. Sales by Ivecos
unconsolidated licensee in Turkey were about the same as in 2004 (5,200 units), while those of
its associated company in India increased by 14.0 % to approximately 59,600 vehicles.
Iveco produced approximately 435,300 diesel engines, about the same as in 2004 (435,000
units). Forty-one percent of these engines were used by the sector itself, while 48% were sold to
CNH and Sevel, a joint venture between Fiat Auto and the PSA Group that produces light commercial
vehicles. Ivecos powertrain operations generated revenues of 2,554 million in 2005 (of which
approximately 58% came from intra-sector sales), for a year-over-year gain of 6.3%, and a trading
profit of 83 million, up from 76 million in 2004. Starting January 1, 2006, Ivecos powertrain
activities are managed by FPT and their results are reported as a part of that sector.
Ivecos financing and rental activities recorded revenues of 457 million in 2005, a decrease
of 22.7% from the 591 million recorded in 2004. On June 1, 2005, Iveco sold to Barclays a 51%
stake in Iveco Finance Holdings Limited, a company comprising certain financial services companies
of Iveco operating in France, Germany, Italy, Switzerland and the United Kingdom. As of that date,
Iveco Finance Holdings Limited was no longer consolidated on a line-by-line basis, but rather
accounted for using the equity method. The decrease in revenues was mainly due to this disposal.
At the end of 2005, Ivecos fleet of rental vehicles numbered approximately 3,116, approximately
17% fewer than the 3,770 available at the end of 2004.
Iveco recorded trading profit of 415 million in 2005, an increase of 11.9% from the 371
million posted in 2004, with the improved result reflecting higher volumes and improved
pricing, which together more than offset the impact of higher raw materials prices and a less
favorable
83
market mix. The sectors trading profit was equal to 4.4% of its revenues, exceeding
both the target of more than 4% set by management and the 4.1% recorded in 2004.
Components and Production Systems Business Area
The Components and Production Systems business area recorded aggregate net revenues of
6,642 million in 2005, or 3.5% more than the 6,416 million posted in 2004, reflecting the
positive performance of Magneti Marelli (+6.3%) and Teksid (+13.8%), which were partly offset
by a reduction in net revenues at Comau (-8.1%). The trading profit of this area was 249
million in 2005, an increase of 50.0% from 166 million in 2004. The overall increase of 83
million was primarily attributable to Teksid, whose performance in 2004 had been negatively
affected by major write-downs of fixed assets. The business areas 2005 trading profit was
equal to 3.7% of its net revenues, exceeding both the target of approximately 3% set by
management and the 2.6% recorded in 2004. The results of each of the business areas sectors
are analyzed in more detail below.
Components. Magneti Marellis revenues amounted to 4,033 million in 2005, or 6.3% more
than the 3,795 million recorded in 2004. The increase was primarily attributable to the
consolidation of Mako from January 1, 2005. Excluding changes in the scope of consolidation
and exchange rate effects, revenues increased by roughly 2%. The strong performance of Magneti
Marelli operations in Brazil and Poland and the positive trend of its onboard electronics
activities offset lower sales volumes in Italy, which started recovering in the fourth
quarter. Magneti Marelli recorded trading profit of 162 million, compared to 165 million in
2004 with the 1.8% decline being attributable to higher prices of raw materials, particularly
steel and plastic, the impact of which was not completely offset by efficiency gains.
Metallurgical Products. Teksid reported revenues of 1,036 million, or 13.8% more than
the 910 million recorded in 2004, reflecting improved sales volumes at the cast iron business
unit (+4.6%, due to increased sales in North America and Brazil), the positive impact of
exchange rates and the sectors ability to recover higher raw materials costs through higher
sales prices. These positive factors were partially offset by lower
volumes in the magnesium
business unit (-6.8%). Teksid recorded trading profit of 45 million in 2005, compared to a
trading loss of 39 million in 2004, when the sectors trading results reflected 68 million
in writedowns of fixed assets.
Production Systems. Comau recorded revenues of 1,573 million in 2005, a decline of 8.1% from
the 1,711 million recorded during 2004, largely reflecting the impact of the transfer of Comaus
European service activities to Iveco, Magneti Marelli and CNH. When calculated on a comparable
scope of consolidation, Comaus revenues rose by approximately 6%, reflecting a strong performance
in the car bodywork and service areas. The production systems sector posted trading profit of
42 million, up 5.0% from 40 million in 2004, as the negative effect of the reduced scope of the
sectors operations was offset by efficiency gains at the sectors North American activities.
Other Businesses Business Area
Our other businesses recorded aggregate net revenues of 1,618 million in 2005, down
19.2% from 2,003 million posted in 2004. The combined trading loss reported by the other
businesses amounted to 179 million, as the areas loss was 77 million greater than in 2004.
Results for each of the business areas sectors are analyzed in more detail below.
Services. Business Solutions had revenues of 752 million for 2005, a decrease of 23.0%
from 976 million in 2004. The decrease primarily reflected the sectors sale of the
temporary employment agency WorkNet. On a comparable scope of consolidation basis, the
decrease in
84
revenues was approximately 5%, mainly reflecting lower activity in the
administration area, following a redefinition of the services the sector provides to other
Group companies. Trading profit amounted to 35 million, as compared with 41 million in
2004, with the 14.6% decline primarily reflecting the contraction in the sectors activities
and changes in the scope of consolidation.
Publishing and Communications. Itedis revenues amounted to 397 million in 2005, a
decrease of 2.5% from the 407 million reported in 2004. The decrease reflected lower
advertising revenues recorded by Publikompass following termination of a major concession
agreement, lower newspaper sales revenues (as average daily circulation decreased to 312,000
in 2005 from 339,000 in 2004), as well as a more selective and profitability-oriented approach
to brand-stretching initiatives which use La Stampas nationally recognized brand name. The
publishing and communications sector reported trading profit of 16 million, as compared with
trading profit of 11 million in 2004, with the 45.5% increase attributable to the realization
of industrial, distribution and marketing efficiencies.
Holding companies, Other companies and Eliminations. Holding companies, Other companies
and Eliminations recorded a trading loss of 230 million in 2005, an increase of 49.4% from
154 million in 2004. The increased loss was mainly due to a reduction in revenues related to
the High Speed Railway (TAV) project, for which Fiat S.p.A. serves as general contractor and
the changing mix of services provided to the Groups other sectors.
Effect of Inflation
Management believes that the impact of inflation was not material to our net revenues,
operating result or consolidated net result in the years ended December 31, 2005 and 2004.
US GAAP Reconciliation
Our consolidated net income determined in accordance with US GAAP was 125 million in 2005
and a net loss of 2,100 million in 2004, as compared with net income of 1,420 million and a
net loss of 1,579 million, respectively, for the same periods under IFRS. For a more detailed
discussion of the principal differences between IFRS and US GAAP as they relate to our
consolidated net income and losses, see Note 38 to the Consolidated Financial Statements
included in Item 18.
Our US GAAP net income for the year ended December 31, 2005 was 1,295 million lower than
the net income we reported under IFRS due to the net effects of:
|
|
|
the reversal of the unusual financial income of 858 million recorded under IFRS
upon the conversion of the Mandatory Convertible Facility. Under US GAAP, this
amount was recorded as additional paid-in capital; |
|
|
|
|
the amortization, under the corridor method, of cumulative actuarial losses
fully recognized at January 1, 2004 under IFRS, and the deferral for US GAAP
purposes of the income realized under IFRS as a consequence of plan amendments to
certain benefit plans completed in 2005 resulting in an overall negative effect of
260 million; |
|
|
|
|
expensing of development costs under US GAAP, net of the effect of amortization
and impairment losses, whereas such costs are capitalized under IFRS, amounting to
a negative effect of 82 million; |
85
|
|
|
the deferral of the gains realized on certain sale and leaseback transactions
recorded under IFRS, amounting to a negative effect of 127 million; |
|
|
|
|
higher impairment losses on property, plant and equipment net of related
depreciation expense, due to different carrying value of property, plant and
equipment, differences in impairment calculation methodology, and the reversal of
previously recorded impairment losses recorded under IFRS but prohibited under US
GAAP amounting to a negative effect of 57 million; |
|
|
|
|
the reversal of accrued restructuring provisions due to later recognition of
restructuring costs under US GAAP, amounting to 111 million; |
|
|
|
|
the deduction of minority interest amounting to 22 million; |
|
|
|
|
other differences which relate primarily to differences in accounting for the
effects of foreign currency translation for subsidiaries operating in highly
inflationary economies, differences arising on equity investments, differences in accounting for borrowing costs, and the effect of
discounting provisions under IFRS but not under US GAAP. |
The net loss for the year ended December 31, 2004 was 521 million higher under US GAAP
than the loss reported under IFRS due to the net effects of:
|
|
|
the expensing of development costs under US GAAP, net of the effect of
amortization and impairment losses, whereas such costs were capitalized under IFRS,
amounting to a negative effect of 395 million; |
|
|
|
|
the amortization, under the corridor method, of actuarial losses fully
recognized at January 1, 2004 under IFRS, amounting to a negative effect of 138
million; |
|
|
|
|
lower impairment losses on property, plant and equipment net of related
depreciation expense due to different carrying value of property, plant and
equipment, and differences in impairment calculation methodology under US GAAP,
amounting to a positive effect of 72 million; |
|
|
|
|
the accrual of restructuring costs due to later recognition under US GAAP
amounting to
62 million; |
|
|
|
|
the deduction of minority interest amounting to 42 million; |
|
|
|
|
other differences that relate primarily to differences in accounting for the
effects of foreign currency translation for subsidiaries operating in highly
inflationary economies, differences arising on equity investments, differences in accounting for borrowing costs, and the effect of
discounting provisions that exist under IFRS but not under US GAAP. |
Stockholders equity determined in accordance with US GAAP was 6,714 million and 2,718
million at December 31, 2005 and 2004, respectively, as compared with 9,413 million and 4,928
million, respectively, under IFRS. For a more detailed discussion of the principal differences
between IFRS and US GAAP as they relate to our consolidated stockholders equity, see Note 38
to the Consolidated Financial Statements included in Item 18.
86
The reduction in stockholders equity under US GAAP as compared with IFRS at December 31,
2005 amounts to 2,699 million (2,210 million at December 31, 2004) and was the result of:
|
|
|
lower US GAAP intangible fixed assets of 2,604 million as of December 31, 2005
(2,489 million as of December 31, 2004) due to differences in accounting for
development costs which are capitalized and amortized under IFRS but expensed under
US GAAP; |
|
|
|
|
higher US GAAP goodwill of 464 million as of December 31, 2005 (487 million
as of December 31, 2004) related to differences in accounting for goodwill
recognition, amortization and impairment; |
|
|
|
|
higher US GAAP property, plant and equipment of 179 million as of December 31,
2005 (236 million as of December 31, 2004) relating primarily to lower impairment
charges recorded under US GAAP; |
|
|
|
|
lower US GAAP liabilities for employee benefits of 154 million as of December
31, 2005 (363 million as of December 31, 2004) due to the positive effect of the
amortization, under the corridor method, of actuarial losses fully recognized at
January 1, 2004 under IFRS, net of the effect of the recognition of a minimum
pension liability, as an increase to US GAAP stockholders equity; |
|
|
|
|
lower US GAAP restructuring liabilities of 168 million as of December 31, 2005
(34 million as of December 31, 2004), due to later recognition of restructuring
costs; |
|
|
|
|
lower US GAAP equity of 164 million as of December 31, 2005 (35 million as of
December 31, 2004), relating to the deferral of gains realized under IFRS in
certain sale and leaseback transactions; |
|
|
|
|
higher US GAAP equity of 51 million as of December 31, 2005 (76 million as of
December 31, 2004), due to differences in accounting for Qualifying Special Purpose
Entities under US GAAP and IFRS; |
|
|
|
|
lower US GAAP deferred tax assets of 194 million as of December 31, 2005 (295
million as of December 31, 2004), due primarily to differences in the criteria for
determination of valuation allowances and to the tax effect of the taxable US GAAP
differences; |
|
|
|
|
lower US GAAP equity of 721 million as of December 31, 2005 (652 million as of
December 31, 2004), due to the deduction of minority interest; |
|
|
|
|
other less significant differences resulting in an aggregate reduction of US
GAAP stockholders equity of 32 million as of December 31, 2005. The net total of
such other
less significant differences had resulted in an increase of US GAAP stockholders
equity of 65 million as of December 31, 2004. |
Liquidity and Capital Resources
Our principal sources of liquidity in 2005 were cash provided by operations, which totaled
3,716 million, including the 1,134 million net gain on payments received from GM in
connection
87
with the termination of the Master Agreement, as well as the repayment to Fiat of
approximately 2 billion in intercompany indebtedness by entities deconsolidated in connection with
the creation of Iveco Finance Holdings (which repayment was recorded as cash provided by investing
activities). We used these sources of liquidity primarily to fund our capital expenditures, which
amounted to 3,052 million in 2005, as well as to repay indebtedness, primarily the repayment at
maturity of approximately 1,900 million in bonds that had been outstanding at the beginning of the
year. See Cash Flow Analysis below for additional information.
At December 31, 2005, our total debt stood at 25,761 million, or 20.0% less than the 32,191
million recorded under IFRS at the end of 2004. Of the total at year-end 2005, 10,210 million
(10,174 million at December 31, 2004) related to asset-backed financing operations that must be
recorded on our IFRS balance sheet. Of our remaining 15,551 million of debt at December 31, 2005
(22,017 million at year-end 2004), bonds accounted for 7,634 million (9,326 million at the end
of 2004), bank loans accounted for 5,562 million (10,450 million at the end of 2004), debt
arising from the banking activities of our subsidiary Banca Unione di Credito (which had not been
consolidated under Italian GAAP) accounted for 1,255 million (1,326 million at the end of 2004)
and other indebtedness accounted for the remaining 1,100 million (915 million at the end of
2004). In addition, at December 31, 2005, the Group had 1.0 billion in unused committed lines of
credit available in various currencies. See Note 28 to the Consolidated Financial Statements
included in Item 18 for additional information on our indebtedness, including a table summarizing the
maturity profile and interest rates payable on our outstanding bonds.
At December 31, 2005, our net debt (which we calculate as debt plus financial liabilities, net
of cash, cash equivalents, current securities and other financial assets, all as recorded in our
IFRS balance sheet) stood at 18,523 million, a decrease of 6,900 million, or 27.1%, compared
with the 25,423 million recorded at the end of 2004. This decline was primarily attributable to
the conversion into equity by the lending banks of the
3 billion
Mandatory Convertible Facility at its
maturity in September 2005, as well as our repayment in September 2005 of the 1.147 billion loan
from a pool of banks led by Citibank upon conclusion of the sale of our 24.6% stake in Italenergia
Bis to EDF. The decline also reflected the cancellation of a payable of approximately 600 million
to a group of banks that had purchased 14% of Italenergia Bis from us in 2002, as well as to the
creation of the Iveco Finance Holdings joint venture described above. The approximately 600
million payable to the banks had arisen from a right the banks had to sell their 14% stake in
Italenergia Bis back to us in the event that we did not sell our 24.6% stake in that company to
EDF. This right expired in September 2005 after we and the banks sold our stakes in Italenergia Bis
to EDF (as described in more detail in Note 28 to the Consolidated
Financial Statements included in
Item 18). These positive factors were offset in part by indebtedness assumed in connection with the
dissolution of Fiat-GM Powertrain joint venture and the negative impact of currency translation
effects associated primarily with borrowings in US dollars and Brazilian reals, both of which
currencies strengthened against the euro during the course of 2005.
The following table details our net debt at 31 December, 2005 and 2004, and provides a
reconciliation of this unaudited non-GAAP measure to debt, the most directly comparable IFRS
measure included in our consolidated balance sheet. Net debt is managements primary measure for
analyzing the
Groups debt and managing its liquidity, as this measure demonstrates how much indebtedness
would remain if all of our available liquid resources were applied to the repayment of debt.
88
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Debt |
|
|
(25,761 |
) |
|
|
(32,191 |
) |
Asset-backed financing |
|
|
(10,210 |
) |
|
|
(10,174 |
) |
Other debt |
|
|
(15,551 |
) |
|
|
(22,017 |
) |
Other financial liabilities (1) |
|
|
(189 |
) |
|
|
(203 |
) |
Other financial assets (1) |
|
|
454 |
|
|
|
851 |
|
Current Securities (2) |
|
|
556 |
|
|
|
353 |
|
Cash and cash equivalents |
|
|
6,417 |
|
|
|
5,767 |
|
|
|
|
|
|
|
|
Net Debt |
|
|
(18,523 |
) |
|
|
(25,423 |
) |
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other financial liabilities and other financial assets include, respectively, the negative
and positive fair values of derivative financial instruments. |
|
(2) |
|
Current securities include short-term or marketable securities held as temporary investments
of available funds which do not satisfy the requirements for being classified as cash
equivalents under IFRS. See Note 21 to the Consolidated Financial Statements included in Item
18. |
Cash Flow Analysis
At December 31, 2005, we had cash and cash equivalents of 6,417 million, an increase of 650
million, or 11.3%, from the 5,767 million recorded at the end of 2004. Of the amount at year-end
2005, approximately 700 million of this amount (approximately 600 million at year-end 2004) was
reserved for the repayment of securitization-related debt, primarily that included in the line item
Asset-backed financing in the table above and our IFRS balance sheet. Our holdings of current
securities, which include short-term or marketable securities held as temporary investments of
available funds that do not satisfy the requirements for being classified as cash equivalents,
increased by 203 million, or 57.5%, from 353 million at the end of 2004, to 556 million at
December 31, 2005. Overall, what management considers our greatest liquid assets (i.e., cash, cash
equivalents and current securities) totaled 6,973 million at the end of 2005, an increase of 853
million or 13.9% from the end of 2004.
Net Cash from Operating Activities
Cash provided by operating activities in 2005 totaled 3,716 million (compared to 2,011
million in 2004), reflecting the 1,420 million net result before minority interest we recorded during 2005, as well as:
|
|
The positive impact of 2,590 million in non-cash charges for depreciation and amortization; |
|
|
|
The negative impact of 1,561 million in gains on disposals and other non-monetary items, including the 878 million
gain recorded on the sale of our interest in Italenergia Bis and the 858 million in unusual financial income arising
from the conversion of the Mandatory Convertible Facility, each as described above; |
|
|
|
The positive impact of changes in provisions of 797 million, deferred income taxes of 394 million and a 114 million
reduction of working capital (the sum of trade receivables, net inventories, trade payables and other payables,
receivables, accruals and deferrals); and |
89
|
|
The negative impact of items related to vehicles sold under buyback commitments which accounted for 85 million in cash
in 2005.* |
Net Cash from Investing Activities
In 2005, investing activities absorbed 535 million in cash (compared to 144 million in cash
provided by investing activities in 2004). During the year we received:
|
|
2 billion in cash in repayment of intercompany debt from entities deconsolidated in
connection with the creation of the Iveco Finance Holdings joint venture and 500 million
received in connection with the dissolution of the Fiat-GM Powertrain joint venture, both of
which were included in the 2,494 million in other changes in our cash flow statements
(compared to 284 million in other changes in 2004); and |
|
|
|
500 million from the sale of non-current assets (compared to 594 million in 2004). Of
this total, 427 million arose from our sale of tangible and intangible assets (including 115
million from the sale of used vehicles by our operating leases activities) and 73 million
from the sale of equity investments. |
These positive flows were more than absorbed by:
|
|
the 251 million increase in receivables from financing
activities, which reflected an increase in financing provided by
CNH and Fiat Auto to their respective dealer networks (reflecting
the increase in sales), partially offset by the collection of
financial receivables and a decrease in loans extended to Fiat
Auto suppliers; |
|
|
|
investments in tangible and intangible assets that used 3,052
million in cash (compared to 2,915 million in 2004) as well as a
159 million increase in current securities (compared to a
decrease of 460 million in 2004). Investments in tangible and
intangible assets include investments in vehicles for our
long-term leasing operations, but are net of investments relating
to vehicles sold under buyback commitments, which are reflected in
cash flows relating to operating activities. |
The following table summarizes our investments in tangible and intangible assets for each of
the years indicated:
|
|
|
* |
|
In connection with our transition to
IFRS, we now record some cash flows items associated with sales of vehicles
under buy-back commitments as a separate line item, change in items due
to buyback commitments, in the section of the cash flow statement
relating to cash flows provided by (used in) operating activities. This line
item is the sum of: |
|
|
|
|
|
|
|
changes in working capital associated with sales of vehicles under
buy-back commitments by the automobiles sector (changes in
inventories relating to such sales and other related liabilities,
which include the amounts paid in advance by such customers
corresponding to the buyback price upon expiration of the relative
contracts, plus total rental fees not yet recognized as revenues),
and |
|
|
|
|
cash flows related to sales of vehicles subject to buyback by Iveco
(investments, depreciation, gains/losses on and/or proceeds from disposals upon
the expiration of contracts relating to assets arising from such sales, which
are recorded in Property, plant and equipment). See
Significant Accounting Policies in the Notes to the Consolidated
Financial Statements included in Item 18 for additional information on the
accounting treatment of vehicles sold subject to buybacks. |
90
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in million of euros) |
Fiat Auto |
|
|
1,582 |
|
|
|
1,792 |
|
Maserati |
|
|
20 |
|
|
|
51 |
|
Ferrari |
|
|
142 |
|
|
|
143 |
|
Fiat Powertrain Technologies |
|
|
173 |
|
|
|
|
|
Agricultural & Construction Equipment (CNH) |
|
|
255 |
|
|
|
243 |
|
Trucks and Commercial Vehicles (Iveco) |
|
|
444 |
|
|
|
330 |
|
Components (Magneti Marelli) |
|
|
313 |
|
|
|
280 |
|
Metallurgical Products (Teskid) |
|
|
45 |
|
|
|
44 |
|
Production Systems (Comau) |
|
|
38 |
|
|
|
23 |
|
Services (Business Solutions) |
|
|
19 |
|
|
|
25 |
|
Publishing and Communications (Itedi) |
|
|
20 |
|
|
|
2 |
|
Other Companies and Eliminations |
|
|
1 |
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
3,052 |
|
|
|
2,915 |
|
|
|
|
|
|
|
|
|
|
We incurred these capital expenditures to acquire property, plant and equipment
necessary to introduce and manufacture new products, enhance our manufacturing efficiency and
implement further environmental and safety programs, as well as for automobiles, commercial
vehicles, and agricultural and construction equipment used in our long-term leasing programs.
Net Cash from Financing Activities
Cash flow used in financing activities totaled 2,868 million in 2005 (compared to 3,078
million in 2004), primarily reflecting the repayment of debt during the period, including
approximately 1,900 million in bonds repaid at maturity and the repayment of other loans. The
conversion into equity of the 3 billion Mandatory Convertible Facility and the nearly 1.8 billion
reduction in debt associated with the Italenergia Bis transaction (comprising the 1.147 billion
repayment of the Italenergia Bis-related loan, as well as the cancellation of the 600 million
payable to certain banks, each as described under - Liquidity and Capital Resources above); see
also Note 28 to the Consolidated Financial Statements included in Item 18) are not reflected in
this measure as they were non-cash transactions.
Capital Resources
The cash flows, funding requirements and liquidity of Group companies are managed on a
standard and centralized basis, under the control of our central treasury. This centralized
system is aimed at optimizing the efficiency and effectiveness of our management of capital
resources. It also guarantees the efficiency and security of treasury management processes.
Fiat Group companies participate in a Group-wide cash management system, which we operate
in a number of jurisdictions. Under this system, the cash balances of all Group companies are
aggregated at the end of each business day to central pooling accounts. The central treasury
offers the Group high levels of professional financial and systems expertise, as well as
providing related services and consulting to our business sectors.
At December 31, 2005, we had an aggregate amount of 7,634 million in bonds outstanding.
Net of the fair value adjustments and amortized costs valuation (413 million), the principal
amount of bonds issued amounted to 7,221 million. For information on the terms and conditions
of the bonds, including applicable financial covenants, see Note 28 to the Consolidated
Financial Statements included in Item 18.
91
Global Medium Term Note (GMTN) Programme. We have a global medium-term note programme
allowing for the placement of debt securities with institutional investors which was renewed
in April 2006 and has a total authorized amount of 15 billion. At December 31, 2005, 5,526
million was outstanding under the programme, which allows borrowings by Fiat Finance and Trade
(5,426 million outstanding at year-end 2005), Fiat Finance
Canada Ltd. (100 million) and Fiat Finance North America Inc. (none), each subject to the
guarantee of Fiat S.p.A.
In the first half of 2006, we completed a series of capital markets transactions that
have allowed us to refinance some of our existing debt at more favorable interest rates, for
more information please see Item 4. Information on the CompanyIntroductionRecent
DevelopmentsFinancial Initiatives.
We also have a 1 billion commercial paper (Billets de Trésorerie) program set up in
accordance with applicable French legislation. At December 31, 2005, 314 million in
securities issued by Fiat Finance and Trade and guaranteed by Fiat S.p.A. were outstanding under this program.
1.0 billion revolving credit facility. On July 22, 2005, Fiat entered into a 1 billion
three-year, multi-currency revolving credit facility with a syndicate of Italian and international
banks. The potential borrowers under the facility, which is currently undrawn, are Fiat Finance
S.p.A., Fiat Finance North America Inc, Fiat Finance Canada Ltd, Fiat Finance and Trade and CNH. The facility, which
expires in July 2008, includes:
|
|
financial and other customary covenants (including a negative pledge and restrictions on our ability to make major
disposals or to make certain acquisitions, as well as on the incurrence of indebtedness by certain subsidiaries); |
|
|
|
customary events of default, including cross-default provisions (some of which are subject to minimum thresholds);
failure to pay amounts due or to comply with certain provisions under the loan agreement; and the occurrence of certain
bankruptcy-related events; and |
|
|
|
mandatory prepayment obligations upon a change in control of the relevant borrower. |
Fiat S.p.A. will guarantee borrowings under the facility with cross-guarantees from each of
Fiat Finance S.p.A., Fiat Finance North America Inc, Fiat Finance Canada Ltd and Fiat Finance and Trade for drawings
by any other borrower, including CNH.
For more information on our outstanding indebtedness, see Note 28 to the Consolidated
Financial Statements included in Item 18.
We also sell certain of our finance, trade and tax receivables to third parties in order
to improve liquidity, to take advantage of market opportunities and, in certain circumstances,
to reduce credit and concentration risk in accordance with our risk management objectives.
See Concentrations of Credit Risk below. The sale of financial receivables is executed
primarily through securitization transactions and involves mainly accounts receivable from
final (retail) customers and from the network of dealers to our financial services companies.
At December 31, 2005, our current receivables included receivables sold and financed
through both securitization and factoring transactions of 9,604 million (9,596 million at
December 31, 2004), which do not meet IAS 39 derecognition requirements and therefore must be
recorded on our balance sheet. These receivables are recognized as such in the Group financial
statements even though they have been legally sold; a corresponding financial liability is
recorded in the consolidated
92
balance sheet as Asset-backed financing, as described above (see Note 28 to the
Consolidated Financial Statements included in Item 18).
At year end 2005, the Group had discounted receivables and bills without recourse having
due dates after December 31, 2005 (and meeting IAS 39 requirements for de-recognition)
amounting to 2,463 million (1,623 million at December 31, 2004, with due dates after that
date), which refer to trade receivables and other receivables for 2,007 million (1,325
million at December 31, 2004) and receivables from financing for 456 million (298 million at
December 31, 2004). The increase during the period is mainly connected with the sales of
receivables to companies of the Iveco Finance Holdings Limited group, which from June 1, 2005
are no longer consolidated on a line-by-line basis.
Future Liquidity
We have adopted formal policies and decision-making processes aimed at optimizing our
overall financial situation and the allocation of financial funds, cash management processes
and financial risk management. Our liquidity needs could increase in the event of an extended
economic slowdown or recession that would reduce cash flow from operations and would impair
the ability of our dealers and retail customers to meet their payment obligations. Increased
supplies of used cars, trucks and equipment may affect resale prices and result in decreased
cash flows. Any reduction of our credit ratings would increase the cost of funding and
potentially limit our access to these and other sources of financing.
Management believes that funds available under our current liquidity facilities
(including approximately 1.0 billion in unused committed lines of credit available in various
currencies), those realized under existing and planned asset-backed securitization programs
and those expected from the ordinary course refinancing of existing credit facilities and the
proceeds of notes offered during the first half 2006, together with cash provided by operating
activities, will allow the Group to satisfy its debt service requirements for the coming year.
Off-Balance Sheet Arrangements
We use certain off-balance sheet arrangements with unconsolidated third parties in the
ordinary course of business, including financial guarantees, indemnification agreements and
other arrangements under which we have or may have continuing obligations. Our arrangements
in each of these categories are described in more detail below. For additional information,
see Note 32 to the Consolidated Financial Statements included in Item 18.
Financial guarantees
Our financial guarantees require us to make contingent payments upon the occurrence of
certain events or changes in an underlying instrument that is related to an asset, a liability
or the equity of the guaranteed party. These guarantees include arrangements that are direct
obligations, giving the party receiving the guarantee a direct claim against us, as well as
indirect obligations, under which we have agreed to provide the funds necessary for another
party to satisfy an obligation.
At
December 31, 2005, the Group had granted guarantees on the debt or commitments of third
parties or associated entities totaling 1,198 million (2,360 million at December 31, 2004).
An amount of
598 million
of the total decrease of
1,162 million
was due to lower guarantees granted
on behalf of Sava S.p.A. for the bonds it has issued.
93
Indemnities
In connection with significant asset divestitures carried out in 2005 and in prior years,
the Group provided indemnities to purchasers whereby the maximum amount of potential liability
under these contracts generally capped at a percentage of the purchase price. These
liabilities primarily relate to potential liabilities arising from contingent liabilities in
existence at the time of the sale, as well as breach of representations and warranties
provided in the contracts and, in certain instances, environmental or tax matters, generally
for a limited period of time. At December 31, 2005, potential obligations with respect to
these indemnities are approximately 750 million, unchanged from the level at December 31,
2004. The Group have provided certain other indemnifications that do not limit potential
payments; it is not possible to estimate a maximum amount of potential future payments that
could result from claims made under these indemnities. We have provided certain other
indemnifications that do not limit potential payments; we are unable to estimate a maximum
amount of potential future payments that could result from claims made under these
indemnities. See Note 32 to the Consolidated Financial Statements included in Item 18.
Derivative Instruments
We do not hold or issue derivative financial instruments for speculative purposes.
However, certain of the derivatives we hold are not eligible for hedge accounting under IFRS.
In particular, in December 2002, we entered into a total return equity swap with Merrill
Lynch with respect to GM shares in order to hedge risk associated with our $2.2 billion bond
issue exchangeable into GM shares. During the first four months of 2004, we exercised our
right to terminate this equity swap. In a related transaction, we repurchased on the market
$540 million in principal amount of the exchangeable bonds, which we then cancelled. To hedge
our exposure under the approximately $1.7 billion in exchangeable bonds still outstanding
following these transactions, we purchased call options on GM shares. In June 2004, investors
holding $1,672 million in principal amount of the outstanding exchangeable bonds exercised
their right to require us to redeem their bonds for cash at face value in July 2004. See Note
22 to the Consolidated Financial Statements included in Item 18 for additional information on
the characteristics and accounting treatment of the call option on General Motor common stock
and other derivative instruments that do not qualify for hedge accounting, including those
relating to stock option plans.
Contractual Obligations
The following table sets forth our contractual obligations and commercial commitments
with definitive payment terms that will require significant cash outlays in the future, as of
December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
After 5 |
|
|
Total |
|
1 year |
|
1-3 years |
|
3-5 years |
|
years |
Contractual Obligations |
|
(in millions of euros) |
Long-Term Debt Obligations * |
|
|
11,537 |
|
|
|
3,910 |
|
|
|
2,847 |
|
|
|
2,055 |
|
|
|
2,725 |
|
Capital (Finance) Lease Obligations |
|
|
145 |
|
|
|
75 |
|
|
|
37 |
|
|
|
17 |
|
|
|
16 |
|
Operating Lease Obligations |
|
|
403 |
|
|
|
71 |
|
|
|
103 |
|
|
|
68 |
|
|
|
161 |
|
Purchase Obligations |
|
|
2,068 |
|
|
|
1,505 |
|
|
|
441 |
|
|
|
79 |
|
|
|
43 |
|
Other Long-Term Obligations under IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
14,153 |
|
|
|
5,561 |
|
|
|
3,428 |
|
|
|
2,219 |
|
|
|
2,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
Amounts presented exclude the related interest expense that will be paid when due. |
94
Long-Term Debt Obligations
For information on our long-term debt obligations, see ¾Capital Resources above
and Note 28 to the Consolidated Financial Statements included in Item 18.
Capital (Finance) Lease Obligations
Our capital leases consist mainly of industrial buildings and plant, machinery and
equipments used in our business. The amounts reported above include the minimum future lease
payments and payment commitment due under such leases. For information on our capital leases,
see Notes 14 and 28 to the Consolidated Financial Statements included in Item 18.
Operating Leases
Our operating leases consist mainly of leases for commercial and industrial properties
used in carrying out our businesses. The amounts reported above under Operating Lease
Obligations include the minimal rental and payment commitments due under such leases.
Purchase Obligations
Our purchase obligations at December 31, 2005, included the following:
|
|
the repurchase price guaranteed to certain customers on sales with a buy back commitments which are included in the
line item other payables in our consolidated balance sheets in an aggregate amount of 1,650 million; |
|
|
|
commitments to purchase tangible fixed assets, largely in connection with planned capital expenditures of various Group
companies, in an aggregate amount of approximately 418 million. |
Research and Development
For a discussion of our research and development policies and related expenditures, see
Research and Innovation in Item 4.
Trend Information
For a discussion of the most significant recent trends affecting our businesses, see
Introduction Recent Developments and Introduction Outlook in Item 4.
Concentrations of Credit Risk
In connection with our various operating and investment subsidiaries, we maintain
investments in trade and finance receivables and marketable securities. With respect to these
investments, management believes that our financial policies and the distribution of our
investments tend to mitigate significantly our exposure to credit risk. Among the factors
reducing such risk is the widely distributed nature of our trade and finance receivables among
the many of our automotive, commercial vehicle and agricultural and construction equipment
customers located in Italy, the rest of Europe, North and South America and the rest of the
world. Management believes that concentration of credit risk is also minimized with respect
to our investments in marketable securities, given that such investments consist primarily of
widely traded or other liquid securities issued by highly rated institutions located in our
various markets.
95
Although Europe and North America are our principal markets, we also sell products in other
regions where political, economic and financial risk can render the collection of receivables
difficult. We take a number of steps on a regular basis to reduce this risk, including maintaining
political risk insurance, liquidating a portion of our receivables on a non-recourse basis at a
discount through the banking system, arranging buyers credits in favor of the importers, which
allows for regular payments, as well as utilizing other techniques, including countertrade
agreements, that are aimed at protecting us from financial losses in our trade relations with
countries that have suspended payments abroad.
96
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors
Following the annual general meeting of stockholders held on May 3, 2006, the directors of
Fiat are as follows:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Luca Cordero di Montezemolo(3)
|
|
|
59 |
|
|
Chairman of the Board |
Andrea Agnelli
|
|
|
31 |
|
|
Director |
Roland Berger (3)
|
|
|
68 |
|
|
Director |
Tiberto Brandolini dAdda
|
|
|
58 |
|
|
Director |
John Philip Elkann(1)(3)
|
|
|
30 |
|
|
Vice Chairman of the Board |
Luca Garavoglia(1)
|
|
|
37 |
|
|
Director |
Gian Maria Gros-Pietro(1)
|
|
|
64 |
|
|
Director |
Hermann-Josef Lamberti(2)
|
|
|
50 |
|
|
Director |
Sergio Marchionne(3)
|
|
|
54 |
|
|
Director, CEO |
Virgilio Marrone
|
|
|
60 |
|
|
Director |
Vittorio Mincato(2)
|
|
|
70 |
|
|
Director |
Pasquale Pistorio(3)
|
|
|
70 |
|
|
Director |
Carlo SantAlbano
|
|
|
42 |
|
|
Director |
Ratan Tata
|
|
|
68 |
|
|
Director |
Mario Zibetti(2)
|
|
|
67 |
|
|
Director |
|
|
|
(1) |
|
Member of the Nominating and Compensation Committee |
|
(2) |
|
Member of the Internal Control Committee |
|
(3) |
|
Member of the Strategic Committee |
The terms of office for all our directors will expire at our stockholders meeting to
approve Fiats annual financial statements for the year ending December 31, 2008, which we expect
to take place in the second quarter of 2009.
On May 10, 2005, our Board of Directors voluntarily adopted new requirements for directors
independence, and at our stockholders meeting held on June 23, 2005, a resolution was passed
increasing the number of members of our board to 15 to allow for the majority of our board members
to qualify as independent under the new criteria. See Item 10. Additional
InformationBy-lawsSignificant Differences with Corporate Governance Practices under NYSE Rules
for a summary of our new criteria for director independence and how they differ from those
applicable to US companies. At the June 23, 2005 stockholders meeting and in connection with the
expansion of the Board to 15 directors, Gian Maria Gros-Pietro, Vittorio Mincato and Mario Zibetti
were elected as independent directors. On that same day, Virgilio Marrone was also elected to the
Board.
At the May 3, 2006 stockholders meeting called to approve Fiats annual financial statements
for the year ending December 31, 2005, the term of office of all our directors at that time expired
and the directors named above were elected. Three new members, Roland Berger, Carlo SantAlbano and
Ratan Tata, replaced three departing directors, Angelo Benessia, Flavio Cotti and Daniel John
Winteler. All of the other directors were re-elected.
The Board of Directors has given Mr. Cordero di Montezemolo, as Chairman, and Mr. Marchionne,
as CEO, broad operating powers and has authorized them to perform all acts that are
consistent with the Companys purpose. Notwithstanding the ample powers granted to them, the
97
Chairman and the CEO must submit all transactions that may have a material impact on our
profitability, balance sheet or financial position to the Board of Directors for approval, and must
adequately inform the directors and statutory auditors about any transactions that are of an
atypical or unusual nature or that involve related parties.
Biographies of each of the current members of our Board of Directors follow:
|
|
|
Name |
|
Position (dates) |
Luca Cordero di Montezemolo
|
|
Chairman of the Board (May 30, 2004 present)
Director (February 28, 2003 present)
Chairman and CEO of Ferrari S.p.A. (1991 present) |
|
|
|
|
|
Born in Bologna (Italy) on August 31, 1947. Mr.
Cordero di Montezemolo joined Ferrari in 1973, as a
Team Manager. From 1977 to 1981 he was Senior Vice
President of External Relations for Fiat. He was
CEO of Itedi S.p.A. from 1981 to 1983 and CEO of
Cinzano S.p.A. from 1984 to 1985. From 1986 to
1990 he chaired the organizing committee for the
football World Cup in 1990, which was held in
Italy. He has been Chairman and CEO of Ferrari
S.p.A. since 1991. Mr. Cordero di Montezemolo is
also a director of La Stampa,
Pinault-Printemps-Redoute S.A., Tods, Indesit
Company, and Chairman of Bologna Fiere. In May
2004, he also became President of Confindustria
(the Federation of Italian Industries). |
|
|
|
Andrea Agnelli
|
|
Director (May 30, 2004 present) |
|
|
|
|
|
Born in Turin (Italy) on December 6, 1975. Mr.
Agnelli has held various positions at several
companies, both in Italy and abroad, including at
Iveco, Piaggio S.p.A., Auchan S.A., Juventus F.C.
S.p.A., Ferrari S.p.A. and Philip Morris
International Inc. |
|
|
|
Roland Berger
|
|
Director (May 3, 2006 present) |
|
|
|
|
|
Born in Berlin (Germany) on November 22, 1937. Mr.
Berger is Chairman of the Supervisory Board of
Roland Berger Strategy Consultants, Munich, one of
the worlds leading strategy consulting firms with
32 offices in 23 countries. He studied in Hamburg
and Munich and holds a degree in business
administration from the University of Munich. |
|
|
|
|
|
He has served on the faculty and board of several
German Institutes of higher education as well as
the member of various advisory boards and advisory
groups. |
|
|
|
|
|
Mr. Berger was appointed by Chancellor Gerhard
Schröder to the Expert Commission on the
Development of Hostile Takeover Rules and to the
Expert Group on the Reform of German Bundesbank
Structures. He was appointed by former Federal
President Prof. Dr. Roman Herzog to the
Presidents Advisory Council for Innovation. He
was Chairman of the Commission for Income Reform
of the State Government Officials of Bavaria and
North Rhine-Westphalia and member of the
Commission for Issues Relating to the Future of
Bavaria and Saxony. Roland Berger was appointed to
the Council of Economic Experts for a Leaner
Federal |
98
|
|
|
Name |
|
Position (dates) |
|
|
Government as well as the Commission for
the Development of the Pension Insurance System.
He was appointed to the Baden-Wuerttemberg Forum
for Innovation by State Premier Erwin Teufel and
to the Commission for the Long Term Health of
Germanys Social Security System (Rürup
Commission) by the Schröder government. |
|
|
|
Tiberto Brandolini dAdda
|
|
Director (May 30, 2004 present) |
|
|
|
|
|
Born in Lausanne (Switzerland) on March 8, 1948.
Mr. Brandolini dAdda graduated with a degree in
commercial law from the University of Parma in
1971. From 1972 to 1974 he worked in Fiat S.p.As
international activities department, and for Lazard
Frères in London. In 1975, he was appointed
Assistant to the Director General for Enterprise
Policy at the European Economic Commission in
Brussels. He joined Ifint Company in 1976, as
General Manager of Ifint France, and became General
Manager of Ifint Europe in 1985. In 1993, he
became Managing Director of the Exor Group
(formerly Ifint) and in addition to that position
he was appointed Vice Chairman in 2003. He is
currently Chairman and CEO of Sequana Capital
(formerly Worms & Cie), as well as General Partner
of Giovanni Agnelli & C., and Vice Chairman and a
Member of the Executive Committee of IFIL S.p.A. |
|
|
|
John Philip Elkann
|
|
Vice Chairman (May 30, 2004 present)
Director (1997 present) |
|
|
|
|
|
Born in New York, New York (USA) on April 1, 1976.
Mr. Elkann graduated with a degree in industrial
engineering from Turin Polytechnic in 2000. He has
been a member of the Board of Directors of Fiat
since 1997. He is Chairman of Itedi S.p.A. S.p.A.,
IFIL S.p.A. and Giovanni Agnelli & C. S.a.p.a.z.
He is also a member of the Boards of Exor Group SA,
IFI S.p.A. and RCS Media Group. |
|
|
|
Luca Garavoglia
|
|
Director (May 13, 2003 present) |
|
|
|
|
|
Born in Milan (Italy) on February 27, 1969. Mr.
Garavoglia graduated with a degree in economics
from the Università Commerciale Luigi Bocconi in
Milan in 1994. He has been Chairman of Davide
Campari-Milano S.p.A., the parent company of the
Campari Group, since September 1994. |
|
|
|
Gian Maria Gros-Pietro
|
|
Director (June 23, 2005 present) |
|
|
|
|
|
Born in Turin (Italy) on February 4, 1942. Mr.
Gros-Pietro has a degree in economics from the
University of Turin. His professional career began
in 1964 as a lecturer at the University of Turin,
subsequently becoming head of its Department of
Production Management, and has also been a senior
lecturer in business economics there since 1972.
In addition, from 1992 to 1997 he chaired the
Industrial Privatization Strategy Commission for
the Italian Ministry of Industry and was member of
the Permanent Committee for Global Consulting and
Guarantee on Privatizations. He was Chairman and
CEO of IRI S.p.A. from 1997 to 1999, and Chairman
of Eni S.p.A. from 1999 to 2002. Currently, Mr. |
99
|
|
|
Name |
|
Position (dates) |
|
|
Gros-Pietro is, among other things, President of
Federtrasporto (the Italian association of
transportation companies), and a member of the
Directive Committee and General Council of
Assonime, the Italian listed companies association,
the board of the Union of Industrialists of Rome,
and Confindustrias General Council. He is also a
member of the Board of Edison S.p.A. and of SEAT
Pagine Gialle S.p.A, the Executive Committee and
the General Council of the Aspen Institute Italia,
the International Business Council of the World
Economic Forum and the Supervisory Board of Sofipa
Equity Fund, as well as Chairman of Autostrade
S.p.A., Vice President of I.G.I. (Istituto Grandi
Infrastrutture Great Infrastructures Institute)
and Senior Advisor for Italy of Société Générale
Corporate & Investment Banking. |
|
|
|
Hermann-Josef Lamberti
|
|
Director (2002 present) |
|
|
|
|
|
Born in Boppard (Germany) on February 5, 1956. Mr.
Lamberti studied business administration in Cologne
and Dublin and received a masters degree in
Business Administration in 1981. From 1985 to 1998
he held various management positions at IBM in
Germany, France and the United States. He joined
Deutsche Bank A.G. in 1998, as an executive vice
president and then became Chief Operating Officer;
he has been a member of the Board of Managing
Directors since 1999. He is currently also
Chairman of the Supervisory Board of Deutsche Bank
Privat und Geschaftskunden AG, a member of the
Supervisory Board of Carl Zeiss AG, and Deutsche
Börse AG, and a non-executive director of Euroclear
plc and Euroclear Bank SA. |
|
|
|
Sergio Marchionne
|
|
CEO, Fiat S.p.A. (June 1, 2004 present)
CEO, Fiat Auto Holding B.V. and Fiat Auto S.p.A. (February 2005 present)
Director (2003 present) |
|
|
|
|
|
Born in Chieti (Italy) on June 17, 1952. Mr.
Marchionne received a masters degree in Business
Administration from the University of Windsor,
Canada in 1980 and graduated with a law degree from
the Osgoode Hall Law School of York University of
Toronto in 1983. He is a licensed barrister and
solicitor and a chartered accountant. From 1997 to
2000, Mr. Marchionne was the Managing Director and
CEO of Alusuisse Lonza Group Ltd., Zurich
(Algroup), until its merger with Alcan. He
remained Managing Director and Chief Executive of
Lonza Group Ltd., Basel, the chemical entity carved
out of Algroup in 1999. He has been Chairman of
Lonzas Board of Directors since 2002. He is also
currently a director of Serono Ltd., Geneva, member
of the Supervisory Board of Hochtief and Chairman
of Société Générale de Surveillance Holding SA,
Geneva, of which he has also been Managing Director
and CEO since January 2002. On June 1, 2004, he was
appointed CEO of Fiat S.p.A., and in February 2005,
he also assumed the role of CEO of Fiat Auto Holding B.V. and Fiat
Auto S.p.A. In
March 2005, he was appointed Chairman of Banca
Unione di Credito and in April 2006, he was
appointed Chairman of CNH. He is a member of the
General Council of both Confindustria and of
Assonime (the |
100
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Name |
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Position (dates) |
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|
Association of listed Italian
companies) and is a permanent member of the
Fondazione Giovanni Agnelli. Since January 2006, he
has been Chairman of ACEA (European Automobile
Manufacturers Association). |
|
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Virgilio Marrone
|
|
Director (June 23, 2005 present) |
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|
Born in Savona (Italy) on August 2, 1946. Mr.
Marrone has a degree in management and business
administration from Università Commerciale Luigi
Bocconi in Milan. From 1973 to 1985, he was
assistant to the CEO of IFI S.p.A. and from 1985 to
1993, he was General Secretary of IFI S.p.A. From
1993 to 2002, Mr. Marrone was Joint General Manager
of IFI S.p.A. From 2002 to the present, he has been
General Manager of IFI S.p.A. and from May 2006 to
the present he has been CEO of the same company.
Mr. Marrone is currently a member of the boards of
SanPaolo IMI S.p.A. and the Exor Group. |
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Vittorio Mincato
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Director (June 23, 2005 present) |
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|
Born in Torrebelvicino (Italy) on May 14, 1936.
Mr. Mincato worked at Eni S.p.A. for nearly 50
years, joining the company in 1957, and serving in
a variety of positions before becoming CEO in 1998.
In 2005, he became Chairman of Poste Italiane
S.p.A., the Italian postal service. In addition,
from 2002 to 2004, he was a member of CNEL (the
Italian National Committee for Economy and Labor).
In 2005, he was also appointed Chairman of
Assonime, and is also currently a member of the
Executive Board of Confindustria, Vice President of
the Union of Industrialists of Rome and a member of
the Board of Directors of Parmalat S.p.A., the
Teatro alla Scala Foundation, the Accademia
Nazionale di Santa Cecilia, and the Accademia
Olimpica. |
|
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Pasquale Pistorio
|
|
Director (December 2004 present) |
|
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|
Born in Agira (Italy) on January 6, 1936. Mr.
Pistorio graduated with a degree in electrical
engineering from the Polytechnic of Turin. In 1967,
he joined Motorola Corporation, where he held
various management positions. He became President
and CEO of the SGS Group, an Italian
microelectronics company, in July 1980. Following
the merger of SGS Group with Thomson
Semiconducteurs in 1987, Mr. Pistorio became
President and CEO of the new company, SGS-THOMSON
Microelectronics (renamed STMicroelectronics in
1998). Upon his retirement from that position in
2005, he was appointed Honorary Chairman. Mr.
Pistorio is a member of numerous organizations,
including the Internal Advisory Council of the
Government of Singapore, the ICT Task Force of the
United Nations and the International Business
Council of the World Economic Forum. He is also
Chairman of ENIAC, the technological platform for
nanoelectronics of the EU, and Vice President of
Confindustria for innovation and research. He is
member of the Boards of Telecom Italia S.p.A. and
of Chartered Semiconductor Manufacturing. |
101
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Name |
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Position (dates) |
Carlo SantAlbano
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Director (May 3, 2006 present) |
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|
Born in Turin (Italy) on May 31, 1964. Mr.
SantAlbano received a Bachelor of Arts degree in
International Relations from Brown University and
completed his studies with a MBA from the Harvard
Business School. He began his career in finance as
a fixed income trader in New York at Drexel Burnham
Lambert. Later he entered the field of investment
banking at Bear Stearns & Co. and then worked in
the mergers and acquisitions group of Credit Suisse
First Boston in New York. After moving to London
in 2001, he was first Head of M&A for the
pharmaceuticals sector in Europe and then, in 2004,
became Chief Operating Officer for all M&A
operations in Europe. He speaks five languages: Italian, English, French, Portuguese and Spanish.
In February 2006 he was appointed Managing Director
and General Manager of IFIL S.p.A. He is also
member of the Boards of Sequana Capital, Juventus
F.C. and Alpitour. |
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Ratan Tata
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Director (May 3, 2006 present) |
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|
Born in Mumbai (India) on December 28, 1937. Mr.
Tata received a Bachelor of Science degree in
Architecture from Cornell University in 1962. Mr.
Tata joined the Tata Group in December 1962. He was
assigned to various companies before being
appointed Director-in-Charge of the National Radio
& Electronics Company Limited (NELCO) in 1971. He
was named Chairman of Tata Industries Limited in
1981, where he was responsible for transforming the
company into a Group strategy think-tank, and a
promoter of new ventures in high technology
businesses. In 1991, he was appointed Chairman of
Tata Sons Limited, the holding company of the Tata
Group, Indias leading industrial group. He serves
as the Chairman of the major Tata companies
including Tata Steel, Tata Motors, Tata Power, Tata
Consultancy Services, Tata Tea, Tata Chemicals,
Indian Hotels and Tata Teleservices Limited and he
is also the Chairman of two of the largest private
sector promoted philanthropic trusts in India. He
is associated with a number of important business
and philanthropic organizations in India and
abroad, including through his Chairmanship of the
Government of Indias Investment Commission, and
membership of: the Central Board of the Reserve
Bank of India (RBI), the International Advisory
Boards of Mitsubishi Corporation, the American
International Group, and J.P. Morgan Chase, the
International Investment Council set up by the
President of the Republic of South Africa, the
International Business Advisory Council set up by
the U.K. Government and the Asia Pacific Advisory
Committee to the Board of Directors of the New York
Stock Exchange. He also serves on the Board of
Trustees of the Ford Foundation and the Program
Board of the Bill & Melinda Gates Foundations
India AIDS Initiative, and chairs the Advisory
Board of RANDs Center for Asia Pacific Policy. |
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Mario Zibetti
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Director (June 23, 2005 present) |
102
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Name |
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Position (dates) |
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|
Born in Turin (Italy) on October 3, 1939. Mr.
Zibetti graduated with a degree in economics and
business administration from the University of
Turin. Until 2000, Mr. Zibetti was a senior
partner at Arthur Andersen S.p.A., where he had
worked for more than 40 years. He is currently a
member of the Board of Directors of Ersel
Finanziaria S.p.A., Comital Cofresco S.p.A. and
Fabio Perini S.p.A. |
The Board has identified the following eight directors (a majority of the Board) as
independent in accordance with the requirements for independence adopted by the Board of Directors
on May 10, 2005: Roland Berger, Luca Garavoglia, Gian Maria Gros-Pietro, Hermann-Josef Lamberti,
Vittorio Mincato, Pasquale Pistorio, Ratan Tata and Mario Zibetti. For a detailed description of
the criteria for director independence we have adopted see Item 10. Additional
InformationBy-lawsSignificant Differences with Corporate Governance Practices under NYSE Rules.
The Board of Directors has established three internal committees: the Comitato Controllo
Interno, or the Internal Control Committee, which currently includes three independent directors
(Mr. Zibetti, who chairs the Committee, and Messrs. Lamberti and Mincato); the Comitato per le
Nomine e Compensi, or the Nominating and Compensation Committee, which includes three directors,
one of whom has executive authority and two who are independent (Mr. Elkann, who chairs the
Committee, and Messrs. Garavoglia and Gros-Pietro); and the Comitato Strategico, or the Strategic
Committee, which includes five directors (Mr. Montezemolo, who chairs the Committee, and Messrs.
Berger, Elkann, Marchionne and Pistorio).
The Internal Control Committee is primarily in charge of verifying that our administrative
accounting system, organizational structure and internal controls systems are adequate. The
committee receives periodic reports on these matters from the Groups operating companies, and
reports to the full Board of Directors at least every six months.
The Nominating and Compensation Committee develops proposals for approval by the full Board of
Directors, mainly with regard to general compensation plans for senior employees and appointments
to senior positions within the Group. The Committee is also in charge of selecting and proposing
new candidates to the Board of Directors or indicating the necessary qualifications, for both
events of cooptation by the Board and appointment by the stockholders meeting. The independent
members of the Committee also meet separately to develop proposal to the Board with regard to the
compensation of executive directors (including their participation in stock option plans). For a
detailed description of the tasks and duties of our Nominating and Compensation Committee, see Item
10. Additional InformationBy-lawsSignificant Differences with Corporate Governance Practices
under NYSE Rules.
The Strategic Committee, which was established following the stockholders meeting of June 23,
2005, is in charge of assisting the board of directors in designing strategic plans for Fiat and
the Group as a whole.
Our Board of Directors has not established an audit committee pursuant to Rule 10A-3 under the
Exchange Act and NYSE listing standards, as our Board of Statutory Auditors meets the requirements
to qualify for the relevant exemption under Rule 10A-3, which became applicable to us starting on
July 31,
2005. See Item 10. Other Information¾By-laws¾Significant Differences with
Corporate Governance Practices under NYSE Rules.
103
Senior Management
In July 2004, Fiats CEO, Sergio Marchionne, announced the creation of the GEC, which now
serves as the decision-making forum for Fiats fundamental strategic choices, including capital
allocation, the review of business operations and evaluating the opportunities and potential
threats facing the Company. The GEC, which comprises the Companys CEO, the CEOs of the Groups
principal sectors, and representatives from Group-wide functions, is also designed to serve as a
forum for maximizing Group-wide synergies, sharing best practices and promoting the Groups
leadership values.
The membership of the GEC, other than those who also serve as directors, is currently as
follows:
|
|
|
Name (Age) |
|
Position (since) |
Ernesto Auci (60)
|
|
Senior Vice President Institutional Relations,
Fiat S.p.A. (2004) |
|
|
|
|
|
Mr. Auci began his training as journalist at Il
Globo in 1969. He continued his career as a
journalist until 1984, when he was nominated
Director of the External Relations Department at
Confindustria. In 1992, he joined Fiat S.p.A.
External Relations and Communications as Head of
Information and Press. In 1997, he was appointed
Editor of Italian financial daily Il Sole 24 Ore.
He returned to Fiat Group in 2002 as CEO of Itedi
S.p.A. and La Stampa and in 2004 he was appointed
Head of Institutional Relations of Fiat S.p.A. |
|
|
|
Domenico Bordone (60)
|
|
CEO, Fiat Powertrain Technologies (2005)
Group Purchasing Coordinator (2004) |
|
|
|
|
|
Mr. Bordone joined Fiat in 1963 in the Foundries
Department. During his nearly 20 years stay with
the Foundries and Forges Group, he held various
positions, including Assistant to the Head of the
Group. In 1983, he took up the responsibility of
the Cast Iron Foundries Division. In 1986, he
joined the Components Sector and shortly
thereafter, in 1987 he became responsible for
Planning and Industrial Rationalization. In 1988,
he became General Manager of the Boards and
Sensors Group, and in 1990, Head of the Automotive
Components Sector Industrial Coordination. In
1992, he was appointed CEO of Magneti Marelli. In
2004, in addition, he assumed the role of Fiat
Group Purchasing Coordination and in 2005 he left
Magneti Marelli to become CEO of Fiat Powertrain
Technologies. |
|
|
|
Harold Boyanovsky (61)
|
|
CEO, CNH Global N.V. (2005) |
|
|
|
|
|
Mr. Boyanovsky held several sales and marketing
positions in the agricultural equipment industry
before joining Case in 1985 as Managing Director.
He subsequently was appointed to increasingly
senior managerial positions, including Senior Vice
President and General Manager of the Case
construction business in North America, Senior
Vice President and |
104
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|
|
Name (Age) |
|
Position (since) |
|
|
General Manager for the North
American region, and President worldwide of
agricultural equipment products. In September
2002, he was appointed President of CNHs
Construction Equipment Business. He became CEO of
CNH in March 2005. |
|
|
|
Ferruccio Luppi (56)
|
|
Senior Vice President of Business Development and
Strategies, Fiat S.p.A. (2005) |
|
|
|
|
|
Mr. Luppi joined IFIL S.p.A. in 1984 as Head of
Equity Investments Control. In 1988, he became
Head of the IFILs Development and Control
Department, and in 1997 he became Head of the
Industrial Investments Control Department at the
Worms Group. In 1998, he was appointed Managing
Director of the Worms Group. He became the CFO of
Fiat S.p.A in 2002 and was appointed CEO of
Business Solutions in 2004. In addition to his
role as CEO of Business Solutions, in 2005 he was
appointed Senior Vice President of Business
Development and Strategies of Fiat S.p.A. |
|
|
|
Mario Mairano (55)
|
|
Senior Vice President Human Resources, Fiat S.p.A.
(2005) |
|
|
|
|
|
Mr. Mairano joined Fiat in 1974 as Assistant to
Head of Personnel at Industrial Vehicles Central
Functions. From 1975 to 1983, he held several
positions at Iveco, and in 1984 became Head of
Iveco Labor Relations. In 1987, Mr. Mairano
joined Fiat Auto Human Resources as Head of Labor
Relations and Litigation and in 1991 he took up
the responsibility of Development, Training and
Communication. In 1993, he became Head of
Personnel at Ferrari S.p.A. and in 1997 was
appointed Head of Personnel of Ferrari and
Maserati. In 2000, he joined Banca di Roma Group
as Head of Personnel and in 2002 became Head of
Human Resources of Capitalia Group. In 2004, he
returned to Fiat Group as Senior Vice President of
Human Resources at Fiat Auto and, in addition, he
became interim Senior Vice President of Human
Resources at Fiat S.p.A. Since 2005 he is Senior
Vice President of Fiat S.p.A. |
|
|
|
Paolo Monferino (59)
|
|
President and CEO Iveco S.p.A. (2005) |
|
|
|
|
|
Mr. Monferino joined Fiat in 1973 as a design
engineer. In 1977, he became Head of Purchasing
and Procurement at Teksid, where he remained until
1980. From 1981 to 1983 he was Head of Worldwide
Purchasing and Procurement at FiatAllis and from
1983 to 1987 he served as Managing Director of
FiatAllis Latin America. Mr. Monferino became
Chief Operating Officer of FiatAgri in 1987 and
served in that position until 1991. From 1991 to
1996, he was Executive Vice President of
Strategies and Business Development for New
Holland, and from |
105
|
|
|
Name (Age) |
|
Position (since) |
|
|
1996 to 2000, was Executive Vice
President of Automotive Components and Industrial
Diversified Sectors at Fiat. He became President
and CEO of CNH Global N.V. in 2000, and was
appointed CEO of Iveco in March 2005. |
|
|
|
Daniele Pecchini (55)
|
|
President and CEO Comau S.p.A (2003) |
|
|
|
|
|
Mr. Pecchini joined the Fiat Group in 1978 as an
Research and Development Specialist in the Teksid
Steel Division. In 1981 he moved to Fiat Allis as
Director of Organization. In 1983 he joined
Magneti Marelli, Components Sector, as Marelli
Autronica General Manager. From 1987 to 1993 he
served as Head of the Autronics Division, and he
subsequently became Head of the Engine Systems
Division in 1993. In 1996 he was appointed Vice
President of Magneti Marelli Technical and
Commercial Activities, and in 1998 he assumed the
position of Vice President of Magneti Marellis
Powertrain Business Unit. He became CEO of Comau
S.p.A in 2003. |
|
|
|
Eugenio Razelli (55)
|
|
CEO, Magneti Marelli (2005) |
|
|
|
|
|
Mr. Razelli joined Fiat Auto in 1977 as Materials
Manager at the Mirafiori plant. In 1980, he
became Vice President of Manufacturing for the
dishwasher division of Industrie Zanussi, a
position that he held until 1982. Mr. Razelli was
CEO of Gilardini Industriale from 1983 to 1984 and
became General Manager of Stars and Politecna -
Fiat Comind in 1985. From 1986 to 1993, he held
various management positions with Magneti Marelli.
Mr. Razelli became Vice President of
Manufacturing at Pirelli Cavi in 1993 and
President and CEO of Pirelli Cable North America
in 1994. In 1996, he became Senior Executive Vice
President at Pirelli Cavi, where he served until
2000. Mr. Razelli was President and CEO of Fiamm
S.p.A. from 2001 to 2003. He became Senior Vice
President of Business Development and Strategies
at Fiat S.p.A. in 2003. In 2005, he became CEO of
Magneti Marelli. |
|
|
|
Riccardo Tarantini (57)
|
|
President and CEO, Teksid S.p.A (2003) |
|
|
|
|
|
Mr. Tarantini joined Delchi S.p.A, Westinghouse
Electric in 1975 where he held several positions,
including Controller. In 1979 he moved to the Fiat
Group as Controller in Teksid and in 1980 he
became Head of Administration in the Aluminium
Foundry Division. In 1985, he joined Toro
Assicurazioni S.p.A and took charge of the
Corporate Control Project. In 1987 he returned to
Teksid as President and CEO of the Teksid
Aluminium Foundry. In 1991 he was appointed Head
of the Aluminium Foundry Division. In 1998 he
became Sector Deputy Managing Director and Head of
New Initiatives and International |
106
|
|
|
Name (Age) |
|
Position (since) |
|
|
Development. In
2001 he was appointed Head of the Iron Business
Unit and in 2003 he became President and CEO of
Teksid SpA. |
In addition, our senior management includes the following individuals:
|
|
|
Name (Age) |
|
Position (since) |
Augusto Ambroso (61)
|
|
Head of Corporate Security and Chairman of Sirio
S.c.p.a. (Sirio) and Consorzio Orione (Orione)
(2001) |
|
|
|
|
|
Mr. Ambroso started his career in the Carabinieri
Corps in 1966, leaving the corps with the rank of
Colonel. He joined the Fiat Group in 1991 and
held several positions within the security field.
In 1992, he became Chairman of Sirio. In 1993, he
was named Head of Security for the EXPO 2000 and
Lingotto. |
|
|
|
Alessandro Baldi (53)
|
|
Group Controller, Fiat S.p.A. (2004) |
|
|
|
|
|
Mr. Baldi started as an auditor at Earnst & Young
in 1981 and later was promoted to senior manager.
In 1989, he moved to Algroup, where he was
Director of Internal Audit and then became Group
Controller. In 1999, when Algroup spun off its
chemical activities, Mr. Baldi became Group
Controller of the new company, Lonza Group. In
2002, he moved to the SGS Group as Group
Controller. He joined Fiat in 2004 as assistant to
the Group Controller, and was named Group
Controller in 2005. |
|
|
|
Gilberto Ceresa (41)
|
|
Fiat Auto Steering Committee and GEC secretary
(2005) |
|
|
|
|
|
Mr. Ceresa joined Fiat Auto S.p.A. in 1989 as a
Team leader in the IT department of Fiat Auto
S.p.A.; he then became Head of IT processes at the
Termoli Plant, from 1993 to 1996, and Head of the
global client management project (DSI, DAL and
ERP) from 1997 to 2000. From 2000 to 2002, he was
the Head of the Product Data project at the
GM-Fiat joint ventures. He was also Head of
Next, the reengineering program, from 2003 to
2004. Later, he became Head of the SAP Platform
project, CEO assistant and Sector Program Officer
from 2004-2005. |
|
|
|
Mauro Di Gennaro (44)
|
|
Chief Audit Executive and Compliance Officer, Fiat
S.p.A. (2004) |
|
|
|
|
|
Mr. Di Gennaro joined Price Waterhouse in 1987 as
Assistant Auditor and was subsequently promoted to
Senior Manager. In 1994, he became Head of
Internal Audit at Stet S.p.A. In 1997, he joined
Telecom Italia, where he held several positions,
including Head of International Operations and
Head of International Internal Auditing. In 2002,
he was appointed Head of Internal Audit at the RAS
Group. On January 1, |
107
|
|
|
Name (Age) |
|
Position (since) |
|
|
2004, he joined Fiat S.p.A.
as Chief Audit Executive and Compliance Officer. |
|
|
|
Nevio Di Giusto (53)
|
|
CEO, Elasis (2004) |
|
|
CEO, Centro Ricerche Fiat (2006) |
|
|
|
|
|
Mr. Di Giusto joined the Fiat Group in 1978 and
held several positions in Fiat Auto in the
Technical Department as responsible for Vehicle
Engineering, Design and Development (1978-1991)
and in 1992 he became Head of the Style and Design
department. In 1997 he was responsible for a new
department called Platform Development. In 2001 he
was appointed Responsible for the Product
Engineering Department and in 2002 responsible of
Product Development in the BU Fiat, Lancia &
Commercial Vehicles. In 2004 he was appointed CEO
of Elasis and in 2006 CEO of CRF and Elasis. |
|
|
|
Maurizio Francescatti (43)
|
|
Group Treasurer, Fiat S.p.A. (2004) |
|
|
CEO, Fiat Finance S.p.A.(2004) |
|
|
|
|
|
Mr. Francescatti started his career working for
GFT in the foreign Finance office in 1989. In
1997, he joined Fiat Geva (part of the Fiat
Group), where he was in charge of Bank Relations.
Later in 2001, he became in charge of Finance
co-ordination and in 2003 he became Treasurer. In
2004 he was appointed CEO of Fiat Finance and
Group Treasurer. |
|
|
|
Giorgio Frasca (64)
|
|
International Relations Manager, Fiat S.p.A. (2005) |
|
|
|
|
|
Mr. Frasca began his career in 1964, at the Banca
Nazionale del Lavoro and held positions in
different Financial groups. He joined IFI
International as Manager of the Paris Office in
1975. In 1978, he took charge of International
Development Direction at Fiat S.p.A and the Fiat
US Representative Inc. office Manager. In 1980, he
was appointed Vice President and General Manager
of Fiat France S.A. (in 1987 this also included
Belgium, Netherlands and Luxembourg). In 1989, he
worked on an International Activities and European
activities Fiat Group project (being President and
General Manager of Fiat France). In 1995, he
became a member of the Committee of the
Paris-Dauphine University (a public French
university). In 2005, he was appointed Fiat S.p.A.
International Relations Manager (keeping his
position at Fiat France). |
|
|
|
Carl Heinz Kalbfell (56)
|
|
CEO, Maserati (2005) |
|
|
|
|
|
Mr. Kalbfell started his career by taking charge
of the Communication department at Eriba Hymer
(caravan and camper sector) in 1975. Then in 1977,
he held several Marketing positions at BMW Group,
as CEO of BMW Motorsport in 1987, as Marketing
Manager of BMW Group in 1993, in 1997 as Head of
Brand |
108
|
|
|
Name (Age) |
|
Position (since) |
|
|
and Product Strategy for BMW Group and as
the Senior Vice President Group Marketing in 2001.
In 2004, he was appointed CEO of Rolls Royce. He
joined the Fiat Group in 2005, working for Fiat
Auto as Vice President Brand and Commercial Alfa
Romeo. In September 2005, he became CEO of
Maserati. |
|
|
|
Simone Migliarino (58)
|
|
Senior Vice President Communications, Fiat S.p.A.
(2004) |
|
|
|
|
|
Mr. Migliarino joined Fiat S.p.A.s Press Office
and External Relations department in 1973.
Subsequent positions at Fiat S.p.A. included
Responsible for Relations with Provincial Press in
Italy (1980-1984), Head of Media Support and
Coordination (1984-1990), Head of Automobile Press
Coordination (1990-1994) at Information and Media,
Head of Product and Corporate Edition Press Office
(1995-2001) and Head of Communications and Media
Relations (2001-2004). In December 2004, he was
appointed Head of Communications of Fiat S.p.A.
and in April 2005 he was appointed Head of
Communications of Fiat Auto S.p.A. |
|
|
|
Antonio Perricone (59)
|
|
Chief Executive Officer, Itedi S.p.A. and La
Stampa (2004) |
|
|
|
|
|
Mr. Perricone started his career working for
Arthur Andersen as an auditor in 1972. He then
held several positions in BNL, Rusconi and
Howert&Howert. In 1981, he became Managing
Director of Publikompass and in 1983 Head of
Operations at International, a company of the IFI
Group. In 1987, he was named CEO of High Touch
Enterprises and in 1990, CEO of Manzoni S.p.A. In
1995, he joined Sipra where he became CEO in 1998.
In 2002, he became CEO of Maserati and in 2004 he
joined Ferrari as Head of Brand and Partners
Development. In December 2004, he was nominated
as CEO of Itedi S.p.A. and La Stampa. |
|
|
|
Paolo Rebaudengo (58)
|
|
Industrial Relations Manager, Fiat S.p.A. (2005) |
|
|
|
|
|
Mr. Rebaudengos career began in 1970 working for
INPS (a public company) and he held positions in
the Human Resources department of Weber Group. He
joined the Fiat Group working in the Industrial
Relations department in 1981 for Fiat S.p.A. and
in New Holland in 1992. In 1993, he joined Fiat
S.p.A.s Industrial Relations department. In 1996
he became Industrial Relations Manager (in 1996,
in the External Relations and Communication
department and in 1999, in the Human Resources
department). Since 2005, the Industrial Relations
Manager reports directly to Fiat Group CEO. |
109
|
|
|
Name (Age) |
|
Position (since) |
Roberto Russo (46)
|
|
Senior Counsel, Fiat S.p.A. (2004) |
|
|
|
|
|
Mr. Russo began his legal career as an attorney at
the law firm Studio Legale L. Longhetto in Turin
in 1984. In 1986, he joined Fiat S.p.A. Legal
Affairs as an in-house Counsel. In 2001, he was
nominated Mergers and Acquisitions Lead Counsel,
and in 2004 he was appointed Senior Counsel of
Fiat S.p.A. |
Our senior managers do not have a formal term of office.
In addition, Mr. Marchionne assumed the role of CEO of Fiat Auto in February 2005, replacing
Herbert Demel, who had left the Company. The CEO chose to take direct responsibility for the
automobile sector so as to concentrate our efforts toward the recovery and relaunch of Fiat Auto.
Other significant management changes in 2005 include the appointment of Paolo Monferino, former CEO
of CNH, as CEO of Iveco, replacing José Maria Alapont, who left the Company. Harold Boyanovsky is
currently serving as CEO of CNH as replacement for Mr. Monferino.
On March 24, 2005, Fiat announced that Domenico Bordone was appointed CEO of the new FPT
sector. On April 28, 2005 Eugenio Razelli was appointed the new CEO of Magneti Marelli, and was
replaced as head of Business Development for Fiat by Ferruccio Luppi, who is also CEO of Business
Solutions.
In July 2005, Luigi Gubitosi resigned from the position of CFO. Until a successor is
announced, Alessandro Baldi, the Group Controller, is in charge of Group Planning and Control and
Maurizio Francescatti, the Group Treasurer, is handling all Corporate Finance responsibilities.
Both Mr. Baldi and Mr. Francescatti are considered to be our principal financial officers.
In August 2005, Nevio Di Giusto was appointed CEO of CRF replacing Gian Carlo Michellone who
retired.
During 2006, Roberto Pisa resigned from his position as Senior Vice President of Corporate
Initiatives.
Board of Statutory Auditors
Under Italian law, in addition to appointing the Board of Directors, Fiats ordinary
stockholders also appoint a Board of Statutory Auditors (Collegio Sindacale). The statutory
auditors are appointed for a term of three years, may be re-appointed for successive terms and may
be removed only for cause and with the approval of a competent court. Each member of the Board of
Statutory Auditors must provide certain evidence that he is in good standing and meets certain
professional standards. The Board of Statutory Auditors is required to verify that the Company (i)
complies with applicable law and its by-laws, (ii) respects the principles of correct
administration, (iii) maintains adequate organizational structure, internal controls and
administrative and accounting systems, and (iv) adequately instructs its subsidiaries to transmit
information relevant to its disclosure obligations. In addition, the Board of Statutory Auditors
is required to assess the technical adequacy and independence of our external auditors.
The following table sets forth the names of the three members of the current Board of
Statutory Auditors and their respective positions. The current Board of Statutory Auditors was
appointed for a
110
three-year term at the annual meeting of stockholders on May 3, 2006, to serve for
the period from 2006 up until the date of the stockholders meeting approving the statutory
accounts for fiscal year 2008.
|
|
|
Name |
|
Title |
Carlo Pasteris
|
|
Chairman |
Giuseppe Camosci
|
|
Statutory Auditor |
Cesare Ferrero
|
|
Statutory Auditor |
Our Board of Statutory Auditors meets the requirements to qualify for the audit committee
exemption under Rule 10A-3, which became applicable to us starting on July 31, 2005. See Item 10.
Other Information¾By-laws¾Significant Differences with Corporate Governance Practices
under NYSE Rules.
Compensation of Directors, Statutory Auditors and Senior Management
In accordance with applicable Italian regulations (Article 78 of Regulation No. 11971 of the
Commissione Nazionale per le Società e la Borsa (the National Commission for Companies and the
Stock Exchange, or CONSOB), issued on May 14, 1999 (Regulation No. 11971)), we disclosed in our
published financial statements the following information regarding compensation paid in 2005 to the
current and former directors, statutory auditors and senior management indicated below, who are
listed with the title and as holding the position each held during the year ended December 31,
2005. See Item 6. Directors, Senior Management and Employees for more information.
Fees paid to Directors, Statutory Auditors and General Managers (in thousands of euros) (Article 78 of Consob Regulation No. 11971/99)
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Bonuses and |
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Term |
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Compensation |
|
Non-cash |
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other |
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Other |
First name and last name |
|
Office held in 2005 |
|
of office |
|
Expiration (*) |
|
for office held |
|
benefits (**) |
|
incentives |
|
fees |
IN OFFICE at December 31, 2005: |
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|
|
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|
|
|
Luca Cordero |
|
Chairman |
|
1/1-12/31 |
|
2006 |
|
|
551.2 |
|
|
|
4.3 |
|
|
|
|
|
|
|
6,484.0 |
|
di Montezemolo |
|
|
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|
|
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|
(1 |
) |
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(2 |
) |
|
John Elkann |
|
Vice Chairman |
|
1/1-12/31 |
|
2006 |
|
|
550.0 |
|
|
|
17.1 |
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|
|
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(3 |
) |
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|
|
|
Sergio Marchionne |
|
CEO |
|
1/1-12/31 |
|
2006 |
|
|
2,000.0 |
|
|
|
|
|
|
|
4,648.0 |
|
|
|
351.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
(5 |
) |
Andrea Agnelli |
|
Director |
|
1/1-12/31 |
|
2006 |
|
|
77.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Angelo Benessia |
|
Director |
|
1/1-12/31 |
|
2006 |
|
|
98.0 |
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|
|
|
|
Tiberto Brandolini
dAdda |
|
Director |
|
1/1-12/31 |
|
2006 |
|
|
77.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Flavio Cotti |
|
Director |
|
1/1-12/31 |
|
2006 |
|
|
80.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Luca Garavoglia |
|
Director |
|
1/1-12/31 |
|
2006 |
|
|
92.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gian Maria Gros-Pietro |
|
Director |
|
06/23-12/31 |
|
2006 |
|
|
41.3 |
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|
|
|
|
|
|
|
|
|
|
|
|
Hermann-Josef Lamberti |
|
Director |
|
1/1-12/31 |
|
2006 |
|
|
71.0 |
|
|
|
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|
|
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|
|
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|
|
Virgilio Marrone |
|
Director |
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06/23-12/31 |
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2006 |
|
|
41.3 |
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(6 |
) |
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|
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Vittorio Mincato |
|
Director |
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06/23-12/31 |
|
2006 |
|
|
47.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pasquale Pistorio |
|
Director |
|
1/1-12/31 |
|
2006 |
|
|
92.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel John Winteler |
|
Director |
|
1/1-12/31 |
|
2006 |
|
|
92.0 |
|
|
|
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|
|
|
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|
|
|
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|
|
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|
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(7 |
) |
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|
|
Mario Zibetti |
|
Director |
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06/23-12/31 |
|
2006 |
|
|
53.3 |
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|
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3.3 |
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(8 |
) |
Cesare Ferrero |
|
Chairman of the Board |
|
1/1-12/31 |
|
2006 |
|
|
63.0 |
|
|
|
|
|
|
|
|
|
|
|
30.0 |
|
|
|
of Statutory Auditors |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
Giuseppe Camosci |
|
Statutory Auditor |
|
1/1-12/31 |
|
2006 |
|
|
42.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Giorgio Ferrino |
|
Statutory Auditor |
|
1/1-12/31 |
|
2006 |
|
|
42.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
Year in which the Stockholders Meeting is convened for approval of the Annual Report,
coinciding with expiration of the term of office. |
|
(**) |
|
Includes the use of means of transport for personal purposes.
|
|
(1) |
|
The gross annual compensation for the office of Chairman amounts to 500,000. |
|
(2) |
|
Compensation for the office held in the Ferrari subsidiary inclusive of the variable portion
of his compensation. Starting from the fourth year of office, the Chairman and CEO of Ferrari
will accrue the right to receive the following severance package: a sum payable over |
111
|
|
|
|
|
twenty
years, the amount of which, after ten years, may not be greater than five times the fixed
portion of his annual compensation, which in 2005 amounted to 2,742 thousand. The relevant
accrual posted by Ferrari in 2005 amounted to 1.37 million. In addition, the Chairman and CEO
of Ferrari was granted options for the purchase of 184,000 Ferrari shares at the price of
175 per share, exercisable until December 31, 2010. The exercise of 80,000 of said shares is
subject to the placement of Ferrari shares on the stock market. |
|
(3) |
|
The gross annual compensation for the office of Vice Chairman amounts to 500,000. |
|
(4) |
|
Variable compensation whose payment is subject to the achievement of predetermined targets
related to the annual budget and which may not be greater than 2.5 times the gross annual
fixed compensation. |
|
(5) |
|
The amount includes compensation for the office held in the subsidiaries IHF (342.3
thousand) and Buc (9.6 thousand) but does not include compensation for the office held in
Fiat Auto (500 thousand), which he does not receive but is channeled to Fiat S.p.A. In 2005,
the Company posted an accrual of 800.6 thousand for the CEOs severance package. |
|
(6) |
|
Compensation channeled to IFI S.p.A.
|
|
(7) |
|
Compensation channeled to IFIL S.p.A. |
|
(8) |
|
Compensation for the office of Statutory Auditor, held until June 8, 2005, in the subsidiary
Atlanet. |
|
(9) |
|
Compensation for the office of Chairman of the Board of Statutory Auditors in Fiat Auto. |
Stock Options granted to Directors and General Managers (Article 78 of Consob Regulation No. 11971/99)
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Options |
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|
Options held |
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|
Options exercised |
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expired in |
|
|
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|
|
Options held |
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|
|
Grantee |
|
at the beginning of the year |
|
Options granted during the year |
|
|
|
|
|
during the year |
|
the year |
|
at the end of the year |
|
|
Office held |
|
Number |
|
Average |
|
Exercise |
|
Number |
|
Average |
|
Exercise |
|
Number |
|
Average |
|
Average |
|
Number |
|
Number |
|
Average |
|
Exercise |
First and |
|
at the date of the |
|
of |
|
exercise |
|
period |
|
of |
|
exercise |
|
period |
|
of |
|
exercise |
|
market price at |
|
of |
|
of |
|
exercise |
|
period |
last name |
|
grant |
|
options |
|
price |
|
(mm/yy) |
|
options |
|
price |
|
(mm/yy) |
|
options |
|
price |
|
exercise date |
|
options |
|
options |
|
price |
|
(mm/yy) |
Paolo Fresco |
|
Chairman |
|
|
2,250,000 |
|
|
|
20.614 |
|
|
|
07/01-01/10 |
|
|
|
|
|
|
|
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|
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|
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|
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|
2,250,000 |
|
|
|
20.614 |
|
|
|
07/01-01/10 |
|
|
|
|
|
|
|
|
Sergio |
|
Chief Executive |
|
|
|
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|
|
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|
Marchionne |
|
Officer |
|
|
10,670,000 |
|
|
|
6.583 |
|
|
|
06/08-01/11 |
* |
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|
10,670,000 |
|
|
|
6.583 |
|
|
|
06/08-01/11 |
|
|
|
|
* |
|
The options are exercisable for one-third of the shares only upon satisfaction of the
profitability targets, whose amount and reference period are defined in advance. |
On March 27, 2003, the Board adopted a resolution to grant to Mr. Morchio 11,822,195
options to purchase Fiat ordinary shares at a price of 6.344 per share; on July 31, 2003, in
connection with the capital increase approved in June 2003, the Board of Directors revoked this
resolution and resolved instead to grant to Mr. Morchio 13,338,076 options to purchase Fiat
ordinary shares at the price of 5.623 per share. Following Mr. Morchios resignation, 10,670,461
of these options expired. The remaining options expired on May 30, 2005.
In addition, the Board of Directors has granted Mr. Sergio Marchionne, as part of his
compensation as CEO, options for the purchase of 10,670,000 Fiat ordinary shares at the price of
6.583 per share. In each of the first three years following the date of the grant, Mr. Marchionne
will acquire the right to purchase a maximum of 2,370,000 shares per year, all of which will be
exercisable only from June 1, 2008, for a period expiring on January 1, 2011. The remaining
one-third of the options to be granted, for the purchase of 3,560,000 shares, will vest on June 1,
2008, subject to the satisfaction of certain predetermined profitability targets prior to that
date. These options would also be exercisable from June 1, 2008, through January 1, 2011.
Each member of the Board of Directors in 2005 received compensation comprising the following
in respect of their service for that year:
|
|
|
50,000 to be paid pro-rata within the end of the fiscal year; and |
|
|
|
|
an additional sum based on a fee of 3,000 for every board or committee meeting
attended by the director, with the exception of directors with executive authority. |
With respect to our current senior managers as listed in this Item 6 who are not directors,
the aggregate expense we accrued during 2005 for their compensation during the year was
approximately 20 million. Certain of these individuals held different positions within or outside
of the Group during 2005. This aggregate expense is inclusive of the following:
112
|
|
|
the provision charged by the Group in respect of mandatory severance payments,
amounting to 955,833 in 2005; these severance payments are a statutory obligation
under Italian law, with the amount of each years accrual based on the employees
remuneration for the year in question and the length of his or her service; |
|
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|
the amount contributed by the Fiat Group, equal to 442,059 in 2005, to an
independent pension fund that has been created for our senior and mid-level
officers, the assets of which are invested in insurance policies; |
|
|
|
|
the amount contributed by the Fiat Group to a special defined contribution plan
for the benefit of some executive officers, approved by the Board of Directors on
June 2, 1995; in 2005, such contribution amounted to 83,017; and |
|
|
|
|
the amount contributed by the Fiat Group to a special plan for senior executives
(Individual Top Hat Scheme), approved by the Board of Directors on December 7,
2000, that provides a lump sum to be paid in installments if an executive leaves
the Group before the age of 65; in 2005, such contribution amounted to 1,935,221. |
As of December 31, 2005, the senior managers listed in this Item 6 owned an immaterial number
of shares of Fiat S.p.A. (comprising only ordinary shares, in an aggregate amount representing
significantly less than 1% of the ordinary shares outstanding). As of December 31, 2005, these
individuals have also been granted an aggregate of 989,700 options in respect of an equivalent
number of
Fiats ordinary shares. See the table on the previous page and Item 10. Additional
InformationOptions to Purchase Securities From Registrant or Subsidiaries.
In accordance with applicable Italian regulations (Article 79 of Regulation No. 11971), Fiat
disclosed in its published financial statements the following information regarding shares held as
of December 31, 2005 by our directors and statutory auditors.
Interest held by Directors and Statutory Auditors (Article 79 of Consob Resolution No. 11971/99)
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|
Number of Shares |
|
|
Class of |
|
Held at |
|
Acquired |
|
Sold in |
|
Held at |
Name |
|
Shares |
|
12/31/04 |
|
during 2005 |
|
2005 |
|
12/31/05 |
Luca Cordero di Montezemolo |
|
Ordinary |
|
|
19,172 |
|
|
|
|
|
|
|
|
|
|
|
19,172 |
|
Sergio Marchionne |
|
Ordinary |
|
|
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|
|
220,000 |
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220,000 |
|
Cesare Ferrero |
|
Ordinary |
|
|
1 |
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|
1 |
|
On May 3, 2006, Mr. Montezemolo acquired 88,000 ordinary shares and on May 22, 2006, he
purchased an additional 20,000 ordinary shares. Also on May 22, 2006, Mr. Marchionne acquired
20,000 ordinary shares.
Employees and Labor Relations
As of December 31, 2005, we had 173,695 employees, as compared to 161,066 in 2004. During
2005, we hired approximately 15,800 new employees, of which approximately 2,700 in Italy, including
those hired on a temporary basis. Over the same period, approximately 17,100 people left the Group,
of which approximately 5,200 in Italy. Acquisitions and divestitures completed during the year
resulted in a net increase of approximately 13,900 employees. We adopt flexible employment
solution, when possible, in order to make our output resources respondent to market changes.
113
|
|
|
|
|
Number of Fiat Group Employees at 12/31/04 |
|
|
161,066 |
|
Additions |
|
|
15,820 |
|
Reductions |
|
|
(17,132 |
) |
Changes in the scope of consolidation |
|
|
13,941 |
|
|
|
|
|
Number of Fiat Group Employees at 12/31/05 |
|
|
173,695 |
|
For more information on the number of employees in each of the Groups sectors, see the
table Operating Results by Sector in Item 4. Information on the CompanyHistorical Overview.
Our total personnel expenses in 2005, including wages and salaries, employee benefits and
special reserves for severance indemnities, totaled 6,158 million, representing 13.2% of net sales
and revenues.
As of December 31, 2005, the number of employees based in Italy was 77,070, or 44.4% of the
total number of our employees worldwide, and they represent approximately 1.5% of the Italian
industrial workforce.
Labor agreements
At the end of 2005, approximately 40% of our employees in Italy were members of labor unions.
None of our facilities in Italy is operated on a closed-shop basis. The Italian industrial
relations system establishes that labor agreements are negotiated at two separate and distinct
levels a national collective bargaining agreement every four years between the national
employers association belonging to a specific industry and national unions; the agreement is aimed
at providing a basic framework on working
conditions, including pay and hour provisions. The separate agreement negotiated at a company
level between management and the union representatives of employees addresses issues having
specific importance for the firm and may act to supplement the general and basic provisions set
forth by the national collective bargaining agreement.
Most of our employees (including both white-collar and blue-collar workers) in Italy are
covered by the national collective bargaining agreement for metalworkers, which was renewed in May
2003. The agreement is applicable for 4 years, as far as work rules provisions are concerned
whereas clauses on economic terms of such agreement expired on December 31, 2004. The new agreement
was reached on January 19, 2006, following year-long negotiations, and provides for a 6% increase
in the minimum contractual wage over an extended 30-month period (six months longer than the normal
24-month contractual period for wages provisions), from 1 January, 2005 through 30 June, 2007.
During the negotiation period compensation have been paid under the term of the previous agreement.
With regard to negotiations at the company level, even though the Group-wide agreement
formally expired on September 30, 1999, we and our unions agreed that an annual bonus calculated on
the basis of the old contract should be paid to covered employees with respect to 2005. The average
bonus totaled 1,414 per employee before withholding, an amount similar to the bonus paid for 2004.
In May 2006 the trade unions officially presented requests for renewal of the Fiat Group collective
bargaining agreement asking for an 1,300 increase in the annual bonus by 2008. We declared our
willingness to review the bonus introducing a new calculation system that will link any bonus
dynamic to the achievement of our stated targets for the Groups trading performance. Negotiations started on May 22, 2006 and an agreement was reached at the end of June 2006. The
agreement provided for a 500 increase in the 2006 annual bonus in consideration of the sharp
improvement in the Groups performance in 2005. A further 200 increase in the annual bonus may be
awarded for 2007 if the Groups trading profit targets for 2006
are met and an additional 400 in
the bonus for 2008 may be awarded if the Group and its sectors trading profit targets for 2007 are
achieved and if quality index improvements are realized. The total increase in the annual bonus
through 2008 could thus reach 1,100
114
Industrial reorganization and recover competitiveness
The discussions carried out in 2005 with the trade unions and representatives of employees at
company level focused on finding solutions to handle the social impact of the programs implemented
by the various Group companies to restructure and streamline their organizations and recover
competitiveness. The meetings mainly concerned measures needed to bring the Groups manufacturing
operations in line with market needs, to improve their efficiency and operational flexibility, and
to manage the impact on staffing levels of reorganization programs implemented to reduce business
governance costs.
At European level, the Group has formed a representative body complying with Council Directive
94/45/EC on the establishment of a European Works Council (EWC) or a procedure in Community scale
undertakings and Community-scale groups of undertakings for the purposes of informing and
consulting employees. The agreement on the establishment of the EWC, signed in 1996 (and renewed
for the first time in 2001), was further renewed on June 29, 2005 through an agreement signed by
the European Metalworkers Federation (EMF which represents the trade union organizations of the
European countries where the Group is present) and the Italian trade organizations. The new
agreement, that will be effective until the end of 2009, changed the distribution of seats by
country so that employees of those countries that joined the EU as a result of its enlargement are
also represented on the EWC. The 30 seats have therefore been re-distributed on the basis of the
Groups current employment distribution in Europe.
In Italy, discussions with the trade unions, both at the national and local level, were
carried out constructively. A number of meetings were held to explain and discuss the different
stages of the Groups restructuring process. A key meeting with trade unions, national government
and local authorities was held on August 3. At that meeting, Sergio Marchionne, Fiats CEO,
explained the Groups situation, focusing in particular on Fiat Autos operating performance and
development plan as it applies to product range planning, to production allocations and to Fiat
Autos capital investment program, as well as the conditions for implementation of the program. The
situation for the other group sectors was discussed in detail during meetings held in autumn. On
those occasions, the executives in charge of the different businesses explained the relevant
strategies and action plans to the trade unions, highlighting the programs that they planned to
implement to achieve the profitability and competitiveness targets assigned to them. The actions
that would be required at the operational level were then reviewed with local union representatives
at the manufacturing facilities affected by these programs, with the goal of finding consensus
solutions to manage the programs impact on employees and identify the most appropriate measures
for each case.
At Fiat Auto, capacity underutilization at some plants that was attributable to lower sales
volumes, was handled by using the Cassa Integrazione Guadagni Ordinaria (Temporary Layoff Benefits
Fund). This tool was also used in the administrative, technical and sales departments and affected
mainly office staff and middle managers whose workload had decreased due to the reduction in sales
volumes and ongoing organizational changes. At the end of 2005, there were approximately 900
employees in Fiat Autos administrative, technical and sales departments and Fiat Purchasing Italia
who were receiving Cassa Integrazione benefits (which was significantly less than the 1,800
envisioned when the application process got under way in April). This figure will be further
reduced to little more than 500 people by June 2006.
As a result, during the first months of 2006, the Company and the trade unions agreed to
request an extension of Cassa Integrazione benefits, while seeking consensus solutions on how to
handle any remaining redundancies. Specifically, both parties believe that the mobilità lunga
(long-term mobility benefit to bridge the period prior to retirement) system could be the most
appropriate tool.
115
The Cassa Integrazione Straordinaria (temporary layoff benefits fund) was used in connection
with the manufacturing rationalization and reorganization plan launched by FPI at the end of 2004,
affecting the Mirafiori (Turin) and Arese (Milan) powertrain production facilities.
On the other hand, in areas in which a favorable demand trend produced an increase in
manufacturing activity, the Group took action to increase plant utilization. These actions, which
were taken with the agreement of employee representatives and/or trade unions, included an increase
in the number of shifts (e.g., agreements to reintroduce a six-day working week in production
organization at the Sata plant in Melfi, specifically to ramp up production of the Grande Punto,
and at Fiat Powertrains factories in Termoli and Pratola Serra) and the use of overtime work
(e.g., CNHs plant in Jesi).
Solutions designed to improve the use of the Groups manufacturing capacity are also being
planned in Poland, where Fiat Auto and FPT plan to resume Saturday overtime work and where Teksid
will introduce an 18-shift rotation. Iveco has reached agreements aimed at improving working
flexibility at its Ulm plant in Germany, as has CNH in Belgium.
With the exception of the strikes called in Italy for the renewal of the National Collective
Labor Agreement for Metalworkers (mentioned above), instances of labor unrest were relatively
minor.
Compensation
In Italy, average labor costs, including mandatory benefit payments and pension-plan
contributions, grew roughly in line with the inflation rate. In the other countries where we
operate, we focused on keeping compensation levels in line with cost-of-living. Increases in
excess of the rate of inflation were granted by Group companies with favorable operating results or
in special situations.
Training and Scholarships
In 2005, Fiat Group companies throughout the world invested a total of 90 million, or 2.1% of
total payroll costs, in professional development and training programs designed to support their
operations. Approximately 89,000 employees participated in these programs in 2005.
Isvor Fiat, which acts as the corporate university of the Fiat Group and also sells its
services to non-Group clients, in 2005 provided training, consulting and professional support
programs representing a total of 15,475 classroom days. An additional 26,189 employees received a
total of 137,748 hours of distance- and open-learning support.
The Fiat Grants and Scholarships Program, which was created in 1996 and is reserved for the
children of Group employees both in Italy and abroad, continued to enjoy considerable success.
Since 2001, grants and scholarships have been awarded directly by individual Group sectors and
companies, in order to give local managers a greater degree of involvement in programs affecting
their employees.
In 2005, we awarded 581 grants, including 185 to students in Italy and 396 to students in
other countries (Brazil, France, Poland, Spain and the United States), in an aggregate amount of
1,032,600.
116
ITEM 7. MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS
Description of Capital Stock
Fiats capital stock consists of ordinary shares, preference shares and savings shares with a
par value of 5.00 each. As of June 15, 2006, the number of such shares outstanding was as
follows: 1,092,246,316 ordinary shares, 103,292,310 preference shares and 79,912,800 savings
shares.
For a description of the capital increases effected in 2002 and 2003 see Item 7- Major
Stockholders and Related Party Transactions in the Companys Annual Report on Form 20-F for the
fiscal year ended December 31, 2004.
On September 15, 2005, in accordance with a delegation of authority granted by the September
12, 2003 extraordinary stockholders meeting pursuant to Article 2443 of the Italian Civil Code,
Fiats Board of Directors passed a resolution approving a capital increase in connection with the
maturity of the 3 billion mandatory convertible facility. The facility was repaid in full to the
lending banks in accordance with its terms at maturity on September 20, 2005 through the issuance
by Fiat and subscription by the lending banks of 291,828,718 new ordinary shares. The new ordinary
shares have the same characteristics as those already outstanding (including a par value of 5 and
a full entitlement to any dividends) and were subscribed for by the banks at an issue price of
10.28 per share (the resultant share premium therefore equaling 5.28 per share). The issue price
was determined in accordance with a formula set forth in the mandatory convertible facility, as
explained in more detail in Note 25 to the Consolidated Financial
Statements included in Item 18. In accordance with
Italian law concerning stockholders preemptive rights, optional rights to purchase such new shares
were offered to all existing stockholders in the ratio of 149 new shares for every 500 Fiat shares
(of any class) owned.
For additional information on our share capital, see Item 10. Additional
InformationBy-laws.
Major Stockholders
Fiat is directly controlled by IFIL S.p.A. (IFIL) , its largest single stockholder,
which in turn is controlled by IFI S.p.A. (IFI) . As of June 15, 2006, IFIL owned
30.06% of Fiats ordinary shares outstanding at that date.
117
The following tables present information on each of those stockholders who owned more than 2%
of Fiats ordinary shares and preference shares as of the dates indicated, based on information
available to us as of such dates. N/A signifies that to our knowledge, as of the relevant date,
the stockholder in question no longer owned 2% or more of our ordinary or preference shares, as
applicable. Because the savings shares are in bearer form and are entered in the stockholders
register only at the request of the stockholder, our records do not indicate the extent to which
savings shares are directly held by any single stockholder, and no stockholder has notified us that
it owns more than 2% of our savings shares.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 15, 2006 |
|
As of June 23, 2005 |
|
As of May 31, 2004 |
|
|
No. of |
|
|
|
|
|
No. of |
|
|
|
|
|
No. of |
|
|
|
|
Ordinary |
|
% of |
|
Ordinary |
|
% of |
|
Ordinary |
|
% of |
|
|
Shares |
|
class |
|
Shares |
|
class |
|
Shares |
|
class |
IFIL |
|
|
328,333,447 |
|
|
|
30.06 |
|
|
|
240,583,447 |
|
|
|
30.06 |
|
|
|
240,583,447 |
|
|
|
30.06 |
|
Gruppo Banca Intesa |
|
|
66,391,197 |
|
|
|
6.08 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Gruppo Unicredito italiano |
|
|
60,838,315 |
|
|
|
5.57 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Gruppo Capitalia |
|
|
41,474,296 |
|
|
|
3.80 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Fidelity International Ltd. |
|
|
26,390,094 |
|
|
|
2.42 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
FMR Corp. |
|
|
26,126,700 |
|
|
|
2.39 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Assicurazioni Generali S.p.A.
(and affiliates) |
|
|
26,001,817 |
|
|
|
2.38 |
|
|
|
26,001,817 |
|
|
|
2.76 |
|
|
|
26,001,817 |
|
|
|
2.76 |
|
ING Group |
|
|
N/A |
|
|
|
N/A |
|
|
|
28,500,000(* |
) |
|
|
3.56 |
|
|
|
N/A |
|
|
|
N/A |
|
Cater Allen International |
|
|
N/A |
|
|
|
N/A |
|
|
|
27,000,000 (** |
) |
|
|
3.37 |
|
|
|
N/A |
|
|
|
N/A |
|
Libyan Arab Foreign Investment Co. |
|
|
N/A |
|
|
|
N/A |
|
|
|
21,670,105 |
|
|
|
2.70 |
|
|
|
21,670,105 |
|
|
|
2.70 |
|
Merrill Lynch & Co. Inc. |
|
|
N/A |
|
|
|
N/A |
|
|
|
19,037,641 |
|
|
|
2.38 |
|
|
|
N/A |
|
|
|
N/A |
|
Mediobanca Banca di Credito
Finanziario S.p.A. |
|
|
N/A |
|
|
|
N/A |
|
|
|
18,075,000 |
|
|
|
2.24 |
|
|
|
19,112,590 |
|
|
|
2.39 |
|
SanPaolo (and affiliates) |
|
|
N/A |
|
|
|
N/A |
|
|
|
16,535,954 |
|
|
|
2.07 |
|
|
|
16,535,954 |
|
|
|
2.07 |
|
|
|
|
* |
|
ING held 15,000,000 of these shares as a lender. |
|
** |
|
Cater Allen International held 27,000,000 of these shares as a lender. |
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 15, |
|
|
2006 |
|
2005 |
|
2004 |
|
|
No. of |
|
% |
|
No. of |
|
% |
|
No. of |
|
% |
|
|
Preference |
|
of |
|
Preference |
|
of |
|
Preference |
|
of |
|
|
Shares |
|
class |
|
Shares |
|
class |
|
Shares |
|
class |
IFIL |
|
|
31,082,500 |
|
|
|
30.09 |
|
|
|
31,082,500 |
|
|
|
30.09 |
|
|
|
31,082,500 |
|
|
|
30.09 |
|
None of the shares held by the above stockholders provides any special voting rights.
In June 1999, IFI, IFIL, Assicurazioni Generali S.p.A. and Deutsche Bank AG agreed to consult
with each other (and with the Board of Directors of Fiat S.p.A.) prior to any sale of their
respective shares in Fiat and to meet from time to discuss possible strategies to be undertaken by
the Group. This arrangement does not expressly create any legal obligations among the parties and
is not binding under Italian law. In September 2000, Imi Investimenti (then called Nuova Holding
SanPaolo-IMI), an affiliate of SanPaolo, joined this arrangement.
As noted above, Fiat is indirectly controlled by IFI, which in turn is controlled by Giovanni
Agnelli & C. S.A.p.A. (GA), an Italian limited partnership, which, as of May 31, 2006, owned 100%
of the voting power and 53% of the equity of IFI. John Philip Elkann, the Vice Chairman of the
Board of Fiat S.p.A., is the Vice Chairman of and a partner in GA and, together with other members
of the Agnelli family, owns substantially all of the ownership interest in GA. Tiberto Brandolini
dAdda, a director of Fiat since May 30, 2004, is a director of and a partner in GA, and is also a
member of the Agnelli family.
118
Trading by the Group in Fiat Shares
Under Italian law, Italian companies are not permitted to purchase their own shares unless
authorized to do so by their stockholders, and then only in accordance with certain legal
requirements. The annual general meeting of Fiat stockholders held on May 13, 2003, renewed an
existing authorization to purchase up to an aggregate amount of 61,642,560 of Fiats shares of all
three classes for a period of 18 months, adding the requirement that the purchased shares, when
added to the shares already held by Fiat and its subsidiaries, may not exceed a maximum of 10% of
the total capital stock issued. This resolution expired in November 2004, and as of June 15, 2006,
Fiat S.p.A. held 4,314,458 ordinary shares in treasury.
Subsidiaries of Italian companies may, subject to stringent restrictions under Italian law,
purchase outstanding shares of their parent companies.
Related Party Transactions
Many of the Groups operating companies provide services to other member of the Group.
Transactions among Group companies, whether they are made to support vertical manufacturing
integration or to provide services, are carried out at terms that, considering the quality of the
goods or services involved, are competitive with those available in the marketplace.
The main transactions that took place during 2005 between Fiat and its
subsidiaries and associated companies are summarized below: |
|
|
|
|
Subscription to capital increases of subsidiaries as described in the Notes to
the financial statements of Fiat S.p.A.; |
|
|
|
|
Licensing of the right to use the Fiat trademark, for a consideration based on a
percentage of sales, to Fiat Auto; |
|
|
|
|
Contributions provided to Group companies for initiatives to enhance the Groups
image; |
|
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|
Services provided by Fiat S.p.A. managers to Fiat Auto, Iveco S.p.A., Teksid,
Magneti Marelli, Comau, Business Solutions, Itedi and other minor Group companies; |
|
|
|
|
Grant of suretyships and guarantees in connection with the issuance of bonds
(Fiat Finance and Trade), loans provided by banks (Fiat Finance S.p.A.
formerly Fiat Ge.Va. S.p.A., FMA Fabbrica Motori Automobilistici S.r.l., Banco
CNH Capital S.A., CNH America LLC, Fiat Automoveis S.A. and other minor companies),
the issuance of billets de tresorerie (Fiat Finance and Trade), credit lines
(CNH, CNH Capital America LLC, CNH Capital Canada Ltd., NH Credit Company LLC and
other minor companies) and payment obligations under building rental contracts
(Fiat Auto and its subsidiaries). In addition, a $1 billion direct credit line is
in place between Fiat S.p.A. and CNH; |
|
|
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|
Rental of buildings to Ingest Facility S.p.A.; |
|
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|
Current accounts and short-term financings management (Fiat Finance S.p.A.),
purchase of administrative, fiscal, corporate affairs and consulting services (Fiat
Gesco S.p.A.), payroll and other general services (Fiat Servizi per lIndustria
S.c.p.A.); |
119
|
|
|
Purchase of inspection and internal auditing services from Fiat-Revisione
Interna S.c.r.l.; |
|
|
|
|
Purchase of information technology services provided by PDL Service S.r.l. and
eSPIN S.p.A.; |
|
|
|
|
Purchase of external relations services provided by Fiat Information and
Communication Services società consortile per azioni; |
|
|
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|
Office space and real property maintenance services provided by Ingest Facility
S.p.A.; |
|
|
|
|
Security services and other services provided by Consorzio Orione and Sirio S.c.p.A.; |
|
|
|
|
Purchase of automobiles from Fiat Auto. |
Fiat S.p.A., as consolidating company, and almost all its Italian subsidiaries decided to
comply with the national tax consolidation program according to articles 177/129 of T.U.I.R.
(Consolidated Law on Income Tax).
Relationships with related parties, whose definition was extended in accordance with IAS 24,
include not only normal business relationships with listed groups or other major groups in which
the directors of the Company or its parent companies hold a significant position, but also
purchases of Group products at normal market prices or, in the case of individuals, the prices that
are usually charged to employees. Transactions with related parties to be mentioned include
professional services rendered by Mr. Franzo Grande Stevens (consultancies and activities performed
in his capacity as secretary of the Board of Directors) to Fiat S.p.A. for a total of 940
thousand.
Based on the information received from the various Group companies, there were no atypical or
unusual transactions during the year. Extraordinary transactions among Group companies or with
related parties that occurred during the year are as follows:
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|
|
Within Ferrari S.p.A.; an entity comprising the group of companies that manufacture
and sell Maserati cars was transferred to a company that simultaneously assumed the
name Maserati and was sold to Fiat Partecipazioni S.p.A.; |
|
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|
Within the framework of the reorganization of central activities in France, aimed at
transferring the role of national company to the main operating company, Fiat France
S.A. was merged into Fiat Auto France S.A. which took its name. Before the merger, Fiat
France S.A. had been sold by Fiat Partecipazioni S.p.A. to Fiat Finance Netherlands
B.V.; concurrently, Fiat France S.A. sold its 100% interest in La Stampa Europe SAS to
Itedi. |
ITEM 8. FINANCIAL INFORMATION
Consolidated Financial Statements
See Item 18. Financial Statements.
120
Other Financial Information
Export Sales
Export sales from Italy, which totaled 9.312 million in 2005, as compared with 9.240
million in 2004, represented 20% of the Groups net revenues (20.2% in 2004).
Legal Proceedings
We are parties to litigation, arbitration and other legal proceedings incidental to the
ordinary course of our business, including in relation to our divestitures and asset disposals.
While we have established reserves for various liabilities and risks, including certain risks
arising from contractual, commercial and regulatory disputes and proceedings, we cannot assure you
that the ultimate outcome of any current or future proceedings or claims against us will not result
in the imposition of material damages or other costs on us in excess of these reserves. Neither we
nor any of our subsidiaries are a party to any legal proceeding that is pending or, as far as our
senior management is aware, that threatened or contemplated against us or any such subsidiary that,
if determined adversely to us or any such subsidiary, would have a materially adverse effect,
either individually or in the aggregate, on the business, financial condition or results of
operations of the Fiat Group.
In February 2006, Fiat received a subpoena from the SEC Division of Enforcement regarding a
formal investigation entitled In the Matter of Certain Participants in the Oil-for-Food Program.
Under this subpoena, we are required to provide the SEC with identified documents relating to
certain members of the Group, including certain CNH subsidiaries and Iveco, regarding matters
relating to the United Nations Oil-for-Food Program. A very substantial number of companies,
including a handful of members of the Group, were mentioned in the October 2005 Report of the
Independent Inquiry Committee into the United Nations Oil-for-Food Programme, which report alleged
that these companies engaged in transactions under the program that involved inappropriate payments
to the former government of Iraq and officials of that government. The Group has already provided
a significant quantity of documents to the SEC in response to the subpoena, and continues to
collect additional documents. Given the on-going nature of the inquiry, which is still in its
initial stages, management is currently unable to predict what impact, if any, the SEC
investigation may have on the Group.
Dividend Policy
Upon the recommendation of our Board of Directors, dividends are declared at the annual
general meeting of our stockholders following the close of each fiscal year and paid in the middle
of the same fiscal year during which they are declared with respect to shares outstanding on the
date such dividends are declared. The following table sets forth the annual dividends payable per
ordinary, preference and savings share in respect of each of the years indicated. The table also
sets forth such dividend information, translated into dollars per ordinary, preference and savings
ADS on the basis of the Noon Buying Rate for euros on the date that the respective dividends were
payable.
121
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Dividends Payable in Respect of the |
|
Ordinary |
|
Preference |
|
Savings |
Fiscal Year ended December 31, |
|
Share |
|
ADS |
|
Share |
|
ADS |
|
Share |
|
ADS |
|
|
(euros) |
|
($) |
|
(euros) |
|
($) |
|
(euros) |
|
($) |
2001 |
|
|
0.31 |
|
|
|
0.27 |
|
|
|
0.31 |
|
|
|
0.27 |
|
|
|
0.47 |
|
|
|
0.41 |
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
2004 |
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|
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2005 |
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In recognition of the net loss we incurred in the past, notwithstanding our recording net
income for the fiscal year ended December 31, 2005, we were unable to declare or pay any dividends
in respect of any category of shares for the forth year in a row. Additionally, the Board of
Directors proposed to allocate the net income of 223,019,671 recorded in the unconsolidated
statutory accounts of Fiat to partially cover the losses carried forward, which consequently amount
to 726,080,851. Fiats stockholders approved this recommendation at the annual general meeting on
May 3, 2006.
Under our by-laws, when the dividend paid to savings stockholders in any year amounts to less
than 0.31 per
share, the difference between the amount paid and
0.31 shall
be added to the preferred dividend to which they are entitled in the
following two years. The right to receive the amount of
such difference when a dividend less than 0.31 is paid with respect to any year expires after two
years, regardless of whether any dividend was paid with respect to the two subsequent fiscal years.
Our failure to pay the minimum dividend of
0.31 per
savings share with respect to each of fiscal years
2004 and 2005 requires that we add the amount of each missed dividend to the preferred dividend
payable, if any, with respect to fiscal year 2006.
Whether future dividends will be paid will depend upon our earnings, financial condition and
other factors, including the amount of dividends paid to Fiat by its subsidiaries. In addition,
before dividends may be paid out of Fiats unconsolidated net income in any year, an amount equal
to 5% of such net income must be allocated to its legal reserve until such reserve is at least
equal to one-fifth of the par value of its issued share capital. At December 31, 2005, Fiats
legal reserve was 447 million, while the par value of its issued share capital was 6,377 million.
We are not subject to any Italian governmental restrictions on dividend payments to foreign
stockholders.
Significant Changes
See Item 4. Information on the CompanyIntroductionRecent Developments for a description of
material developments that have occurred since December 31, 2005.
ITEM 9. THE OFFER AND LISTING
Trading Markets and Share Prices
The principal trading market for Fiats ordinary, preference and savings shares is the Italian
Stock Exchange, where Fiat has been listed since 1906. These shares are also listed on the
Frankfurt Stock Exchange (since 1963), the Paris Stock Exchange (since 1963) and are quoted in
London on SEAQ. Ordinary, preference and savings American Depositary Shares (each representing one
current ordinary, preference or savings share, respectively) are listed on the New York Stock
Exchange. JPMorgan Chase Bank is Fiats depositary for purposes of issuing the ADRs evidencing the
ordinary, preference or savings ADSs.
122
The following table sets forth, for the periods indicated, the reported high and low sales
prices of the ordinary and preference ADRs on the New York Stock Exchange. As there has been
essentially no trading activity in the savings ADRs during the periods indicated, prices for those
ADRs are not included in this table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary ADRs |
|
Preference ADRs |
|
|
High |
|
Low |
|
High |
|
Low |
|
|
|
|
|
|
(in dollars) |
|
|
|
|
2000 |
|
|
36.06 |
|
|
|
21.19 |
|
|
|
21.87 |
|
|
|
13.00 |
|
2001 |
|
|
25.55 |
|
|
|
14.30 |
|
|
|
17.12 |
|
|
|
10.50 |
|
2002 |
|
|
16.83 |
|
|
|
7.90 |
|
|
|
11.50 |
|
|
|
4.95 |
|
2003 |
|
|
10.02 |
|
|
|
6.06 |
|
|
|
6.55 |
|
|
|
3.80 |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
8.07 |
|
|
|
6.68 |
|
|
|
5.25 |
|
|
|
4.00 |
|
Second Quarter |
|
|
8.45 |
|
|
|
6.24 |
|
|
|
5.00 |
|
|
|
5.00 |
|
Third Quarter |
|
|
8.28 |
|
|
|
7.02 |
|
|
|
4.60 |
|
|
|
4.60 |
|
Fourth Quarter |
|
|
8.06 |
|
|
|
6.85 |
|
|
|
4.97 |
|
|
|
4.35 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
8.28 |
|
|
|
7.18 |
|
|
|
5.90 |
|
|
|
5.00 |
|
Second Quarter |
|
|
7.56 |
|
|
|
5.90 |
|
|
|
6.10 |
|
|
|
5.00 |
|
Third Quarter |
|
|
9.63 |
|
|
|
7.02 |
|
|
|
8.45 |
|
|
|
6.10 |
|
Fourth Quarter |
|
|
9.08 |
|
|
|
8.02 |
|
|
|
7.50 |
|
|
|
5.90 |
|
December |
|
|
9.08 |
|
|
|
8.20 |
|
|
|
6.90 |
|
|
|
5.90 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January |
|
|
10.22 |
|
|
|
9.04 |
|
|
|
7.90 |
|
|
|
7.90 |
|
February |
|
|
10.95 |
|
|
|
9.73 |
|
|
|
8.85 |
|
|
|
8.75 |
|
March |
|
|
12.63 |
|
|
|
10.68 |
|
|
No trading |
|
No trading |
April |
|
|
14.32 |
|
|
|
12.51 |
|
|
|
10.00 |
|
|
|
10.00 |
|
May |
|
|
14.92 |
|
|
|
12.14 |
|
|
No trading |
|
No trading |
As of May 31, 2006, 1,092,246,316 ordinary shares, 103,292,310 preference shares and
79,912,800 savings shares were outstanding. As of the same date, there were 2,826,918 outstanding
ordinary ADRs held by 540 record holders, 7,213 preference ADRs held by eight record holders and
1,365 savings ADRs held by four record holders.
The following table sets forth, for the periods indicated, the reported high and low sales
prices for the ordinary shares, preference shares and savings shares on the Italian Stock Exchange.
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares |
|
Preference Shares |
|
Savings Shares |
|
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
|
(in euros) |
2000 |
|
|
35.41 |
|
|
|
25.88 |
|
|
|
21.57 |
|
|
|
12.53 |
|
|
|
17.18 |
|
|
|
13.00 |
|
2001 |
|
|
27.55 |
|
|
|
15.99 |
|
|
|
18.34 |
|
|
|
10.50 |
|
|
|
16.38 |
|
|
|
9.54 |
|
2002 |
|
|
17.34 |
|
|
|
7.70 |
|
|
|
12.18 |
|
|
|
4.27 |
|
|
|
11.38 |
|
|
|
4.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
9.440 |
|
|
|
5.599 |
|
|
|
5.609 |
|
|
|
3.253 |
|
|
|
5.514 |
|
|
|
3.320 |
|
Second Quarter |
|
|
7.306 |
|
|
|
5.562 |
|
|
|
4.507 |
|
|
|
3.259 |
|
|
|
4.532 |
|
|
|
3.284 |
|
Third Quarter |
|
|
7.211 |
|
|
|
5.248 |
|
|
|
5.642 |
|
|
|
3.289 |
|
|
|
4.438 |
|
|
|
3.369 |
|
Fourth Quarter |
|
|
7.062 |
|
|
|
6.063 |
|
|
|
4.187 |
|
|
|
3.642 |
|
|
|
4.347 |
|
|
|
3.902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
6.412 |
|
|
|
5.458 |
|
|
|
3.852 |
|
|
|
3.412 |
|
|
|
4.079 |
|
|
|
3.701 |
|
Second Quarter |
|
|
6.945 |
|
|
|
5.254 |
|
|
|
4.470 |
|
|
|
3.301 |
|
|
|
4.705 |
|
|
|
3.573 |
|
Third Quarter |
|
|
6.851 |
|
|
|
5.763 |
|
|
|
4.394 |
|
|
|
3.837 |
|
|
|
4.668 |
|
|
|
3.965 |
|
Fourth Quarter |
|
|
5.997 |
|
|
|
5.433 |
|
|
|
3.980 |
|
|
|
3.657 |
|
|
|
4.243 |
|
|
|
3.893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
6.259 |
|
|
|
5.585 |
|
|
|
4.692 |
|
|
|
4.021 |
|
|
|
5.15 |
|
|
|
4.384 |
|
Second Quarter |
|
|
6.206 |
|
|
|
4.607 |
|
|
|
5.325 |
|
|
|
3.523 |
|
|
|
5.569 |
|
|
|
3.887 |
|
Third Quarter |
|
|
7.77 |
|
|
|
5.796 |
|
|
|
7.137 |
|
|
|
5.212 |
|
|
|
7.354 |
|
|
|
5.549 |
|
Fourth Quarter |
|
|
7.674 |
|
|
|
6.626 |
|
|
|
6.859 |
|
|
|
5.59 |
|
|
|
7.058 |
|
|
|
6.011 |
|
December 2005 |
|
|
7.674 |
|
|
|
6.998 |
|
|
|
6.14 |
|
|
|
5.775 |
|
|
|
6.8 |
|
|
|
6.416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January |
|
|
8.428 |
|
|
|
7.447 |
|
|
|
6.853 |
|
|
|
5.984 |
|
|
|
7.432 |
|
|
|
6.644 |
|
February |
|
|
9.165 |
|
|
|
8.111 |
|
|
|
7.376 |
|
|
|
6.585 |
|
|
|
8.150 |
|
|
|
7.179 |
|
March |
|
|
10.278 |
|
|
|
8.917 |
|
|
|
8.312 |
|
|
|
7.220 |
|
|
|
8.958 |
|
|
|
7.871 |
|
April |
|
|
11.42 |
|
|
|
10.178 |
|
|
|
9.164 |
|
|
|
8.251 |
|
|
|
10.132 |
|
|
|
9.015 |
|
May |
|
|
11.691 |
|
|
|
9.461 |
|
|
|
9.371 |
|
|
|
7.739 |
|
|
|
10.349 |
|
|
|
8.479 |
|
In
addition to the shares represented by the ADRs, at June 30, 2002, the last date upon
which we paid a dividend, 12,715,241 ordinary shares and 1,530,235 preference shares were held on
record in the United States. These ordinary shares and preference shares were held on record by
269 and 139 holders, respectively, and, together with the shares represented by the ADRs,
represented in the aggregate 5.32% and 1.66% of the number of ordinary shares and preference shares
then outstanding. Because the savings shares are in bearer form, our records do not indicate the
extent to which savings shares are directly held in the United States. Since certain of the
ordinary shares, preference shares and ADSs were held by brokers or other nominees, the number of
direct record holders in the United States may not be fully indicative of the number of direct
beneficial owners in the United States or of where the direct beneficial owners of such shares are
resident.
On June 15, 2006, the closing prices of our ordinary, preference and savings shares on the
Italian Stock Exchange were €10.088, €8.027 and €9.085 respectively, and the closing
price of our ordinary ADR on the New York Stock Exchange was $13.09. There was no trading in the
preference share ADRs on June 15, 2006.
ITEM 10. ADDITIONAL INFORMATION
Options to Purchase Securities from Registrant or its Subsidiaries
Our Board has approved stock option plans that have been made available to an aggregate of
approximately 900 managers at the Groups Italian and foreign companies, specifically those who
have
124
the title of direttore or who have been included in a management development program for
high-potential managers. The terms of the various stock option plans generally include the
following:
|
|
Options are granted to individual managers on the basis of
objective parameters that take into account the level of
responsibility assigned to each individual, as well as his or her
performance. |
|
|
If employment is terminated or an employees relationship with the
Group is otherwise severed, options that are not exercisable
become null and void. However, vested options may be exercised
within 30 days from the date of termination, subject to certain
exceptions. |
|
|
The option exercise price is determined based on the average price
of our ordinary shares on the Italian Stock Exchange for the month
preceding the option grant, and is subject to an adjustment in
certain circumstances involving a change in our share capital.
The exercise price must be paid in cash upon purchase of the
underlying shares. |
|
|
The options are normally exercisable starting one year after they
are granted and for a period of eight years thereafter; however,
during the first four years during which exercise is permitted,
exercise is limited to annual tranches, which are cumulative, of
no more than 25% of the total number of options granted. |
The following table lists each of our stock option plans by date, number of grantees,
total options granted, exercise price and scheduled expiration date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
No. of |
|
Options |
|
Options Still |
|
|
|
|
Year of Grant |
|
Grantees |
|
Granted |
|
Outstanding |
|
Exercise Price* |
|
Expiration |
1999(1) |
|
|
578 |
|
|
|
1,248,000 |
|
|
|
316,000 |
|
|
€26.120 |
|
Mar. 31, 2007 |
2000 |
|
|
783 |
|
|
|
5,158,000 |
|
|
|
1,788,000 |
|
|
€28.122 |
|
Feb. 18, 2008 |
2001 (February) |
|
|
16 |
|
|
|
785,000 |
|
|
|
300,000 |
|
|
€24.853 |
|
Feb. 27, 2009 |
2001 (October) |
|
|
775 |
|
|
|
5,417,500 |
|
|
|
2,299,000 |
|
|
€16.526 |
|
Oct. 31, 2009 |
2002 |
|
|
731 |
|
|
|
6,100,000 |
|
|
|
3,046,500 |
|
|
€10.397 |
|
Sept. 12, 2010 |
|
|
|
* |
|
All as adjusted following the capital increases effected by Fiat S.p.A. in 2002 and
2003. The capital increase of September 2005 did not give rise to any such adjustment. |
|
(1) |
|
Unlike the subsequent plans, the 1999 plan provided that the grantee could exercise 50%
of the options granted after two years, and the remaining balance any time from and after
the end of the third year following the grant. The subsequent plans generally contain
the terms described in the table above. |
For information on stock options that have been granted to our directors, see Item
6. Directors, Senior Management and EmployeesCompensation of Directors, Statutory Auditors
and Senior Management.
125
The table below summarizes the information on options outstanding at January 1 and
December 31 of each of 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
Number |
|
exercise |
|
Market |
|
Number |
|
exercise |
|
|
|
|
of shares |
|
price (*) |
|
price |
|
of shares |
|
price (*) |
|
Market price |
|
Options outstanding on 1/1 |
|
|
10,502,543 |
|
|
|
16.38 |
|
|
|
5.9 |
|
|
|
12,697,743 |
|
|
|
16.46 |
|
|
|
6.14 |
|
Options granted during the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired options |
|
|
2,753,043 |
|
|
|
|
|
|
|
|
|
|
|
2,195,200 |
|
|
|
|
|
|
|
|
|
Options outstanding on 12/31 |
|
|
7,749,500 |
|
|
|
17.51 |
|
|
|
7.37 |
|
|
|
10,502,543 |
|
|
|
16.38 |
|
|
|
5.9 |
|
Options exercisable on 12/31 |
|
|
6,987,875 |
|
|
|
18.28 |
|
|
|
7.37 |
|
|
|
7,144,748 |
|
|
|
18.8 |
|
|
|
5.9 |
|
|
|
|
|
|
|
(*) |
|
These exercise prices are as adjusted following the capital increases effected by Fiat
S.p.A. in 2002 and 2003. The capital increase of September 2005, did not give rise to any
such adjustment. |
|
(**) |
|
For purposes of the table, the market price for options outstanding on January 1, 2005 and
2004, means the official share price on the Italian Stock Exchange on the last trading day of
the year in 2004 and 2003, respectively; the market price for options outstanding on December
31, 2005 and 2004, means the official share price on the Italian Stock Exchange on the last
trading day of the year in those years; and the market price for options granted during the
year is calculated as the average price of our shares on the Italian Stock Exchange over the
month preceding the date of grant (the same method used to calculate the exercise price of the
option granted). |
For additional information on our stock option plans, see Note 24(v)(u) to the
Consolidated Financial Statements included in Item 18.
Finally, the general stockholders meeting held on May 3, 2006, authorized the adoption
and implementation by the Board of Directors of an incentive plan to be based on financial
instruments linked to Fiat shares that are issued by leading financial institutions. Such a
plan will be offered to a maximum of 200 Group managers who have significant impact on our
business results and will involve the equivalent of no more than of 20 million Fiat shares.
By-laws
The following is a summary of certain information concerning our shares and by-laws
(Statuto) and of Italian law applicable to Italian companies whose shares are listed in a
regulated market in the EU, as in effect at the date of this annual report. The summary
contains all the information that we consider to be material regarding the shares but does not
purport to be complete and is qualified in its entirety by reference to Italian law, namely
the Italian Civil Code and the Consolidated Financial Act (Legislative Decree n. 58, February
24, 1998, as amended, CFA) or our by-laws, as the case may be.
In December 2005, the Italian Parliament enacted Law n. 262 (Law 262), which sets forth
rules on corporate governance for listed companies. While certain of these new rules still need to
be implemented by regulation to become effective, amendments to by-laws complying with the new
statutory requirements will have to be adopted by Italian listed companies by January 2007.
According to CFA, as amended by Law 262, listed companies by-laws shall lay down (by January
2007) the procedures for appointing a manager in charge of preparing the companys financial
reports, subject to the mandatory opinion of the statutory auditors. Such manager shall also attest
that (i) the companys acts and disclosures containing financial data and information are reliable,
and (ii) the annual unconsolidated and consolidated accounts reflect the companys accounting
records.
126
General
Our issued and outstanding share capital consists of 1,092,246,316 ordinary shares,
103,292,310 preference shares and 79,912,800 savings shares, all with a par value of €5
each. All of the issued and outstanding shares are fully paid, non-assessable and in
registered form.
Fiat S.p.A., whose registered office is in Turin, Italy, at Via Nizza 250, is registered
with the Companies Registry of Turin at n. 00469580013.
As set forth in Article 3 of the by-laws, our corporate purpose is to engage in
activities relating to the passenger and commercial vehicles, transport, mechanical
engineering, agricultural equipment, energy and propulsion industries, as well as any other
manufacturing, commercial, financial or other activities and services. We are generally
authorized to take any actions necessary or useful to achieve our corporate purpose.
Authorization of Shares
An aggregate of up to 16,377,292 new ordinary shares have been authorized for issuance on
February 1, 2007 to the extent required to satisfy exercise of the warrants issued in
connection with the capital increase in 2002. The Companys capital stock may also be increased
by issuing ordinary and/or preference and/or savings shares with the same characteristics as
those already outstanding in exchange for the contribution of assets or the cancellation of
accounts payable. In addition, our Board of Directors is authorized, by and not later than
September 11, 2007, to increase the capital stock, on one or more occasions, to a maximum of
€8 billion, and to issue convertible debentures, on one or more occasions, up to the same
limit. Increases in capital pursuant to this authorization may be reserved for employees of
the Company and its subsidiaries, in accordance with the procedures and criteria established
by the Board of Directors provided the amount each time does not exceed 1% of the Companys
capital stock.
Capital stock increases deriving from the exercise of the powers delegated to the board,
including those required by the conversion of debentures or the exercise of warrants, are
implemented through the issue of shares belonging to the existing classes of shares. In the
event of a capital stock increase, the holders of shares of each class hold preemptive rights
to subscribe for a proportionate number of newly issued shares of the class they hold, or
shares of another class (or classes) if shares of their class are not available or are
insufficient. See Preemptive Rights below.
Form and Transfer of Shares
Pursuant to the CFA, Legislative Decree No. 213 of June 24, 1998 (Decree No. 213) and CONSOB
Regulation No. 11768 of December 23, 1998 (Regulation No. 11768), stockholders may no longer
obtain physical delivery of share certificates representing shares of Italian listed companies
since January 1, 1999. The transfer and exchange of shares takes place exclusively through an
electronic book-entry system. The owners of shares must accordingly, deposit all shares with an
intermediary (each an Intermediary), which is defined by Regulation No. 11768 as:
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an Italian or EU bank; a non-EU bank authorized by the Bank of Italy to operate
in the Italian market; |
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an Italian or EU investment company; |
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a non-EU investment company authorized by CONSOB to provide investment services
in Italy; |
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an Italian asset management company; |
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a stock broker; |
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the company that issued the shares, or that controls the company that issued the shares; |
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the Bank of Italy; |
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an EU or non-EU entity operating a centralized clearing system; |
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a financial intermediary operating a clearing system governed by art. 69(2) and
70 of the CFA; |
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a financial intermediary registered on the list kept by the Bank of Italy under
art. 107 of Legislative Decree No. 385 of September 1, 1993, as amended; |
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the Italian Post Office (Poste Italiane S.p.A.); |
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Cassa Depositi e Prestiti S.p.A. (a state-owned entity mainly responsible for
extending loans to public administration bodies); |
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the Ministry of Economy and Finance; or |
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the managers of foreign clearing, settlement and guarantee systems for financial
instruments, provided that they are subject to supervision equivalent to that
provided by Italian law. |
The Intermediary in turn deposits the shares with Monte Titoli S.p.A. (Monte Titoli), which
operates the Italian centralized securities clearing system, or, at the election of the company
issuing the shares, with another company authorized by CONSOB to operate a centralized clearing
system in Italy.
To transfer shares under the system introduced by Decree No. 213, an owner of shares is
required to give instructions to its Intermediary. If the transferee is a client of the
transferors Intermediary, the Intermediary transfers the shares from the transferors account to
the account of the transferee. If, however, the transferee is a client of another Intermediary,
the transferors Intermediary instructs the clearing system to transfer the shares to the account
of the transferees Intermediary, which will then credit the shares to the transferees account.
Each Intermediary maintains a custody account for each of its clients containing the clients
financial instruments and keeps a record of all transfers, payments of dividends, exercises of
rights attributable to such instruments and charges or other encumbrances on the instruments. An
account holder may obtain proof of ownership of the shares by submitting a request to the
Intermediary for the issue of a certified statement of account. The request must indicate the
quantity of the financial instruments for which the statement is requested, (ii) the rights that
the applicant intends to exercise (and, in the case of rights exercisable at stockholders
meetings, the date and nature of the meeting) and (iii) the period of time for which the
certificate is valid. Within two business days of receipt of such request, the Intermediary must
issue a certified statement of account constituting evidence of the account holders
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ownership of the financial instruments indicated. Once a certificate has been issued, the
Intermediary may not transfer any corresponding securities until the certificate expires or is
returned.
Dividend Rights
The payment by the Company of any annual dividend is proposed by the Board of Directors
and is subject to the approval of the stockholders at the annual stockholders meeting.
Before dividends may be paid out of the Companys unconsolidated net income in any fiscal
year, an amount equal to 5% of such net income must be allocated to the Companys legal
reserve until such reserve is at least equal to one-fifth of the par value of the Companys
issued share capital. If the Companys capital is reduced as a result of accumulated losses,
dividends may not be paid until the capital is reconstituted or reduced by the amount of such
losses. The Board of Directors may authorize the distribution of interim dividends, subject
to certain statutory limitations.
Dividends are payable to those persons who hold the shares through an Intermediary on the
dividend payment date declared by the stockholders meeting. Dividends not collected within
five years from the dividend payment date are waived. Payments in respect of dividends are
distributed through Monte Titoli and each stockholders Intermediary. Holders of ADSs are
entitled to receive payments in respect of dividends on the underlying shares through JPMorgan
Chase Bank, as ADR depositary (JPMorgan Chase), in accordance with the deposit agreement
relating to the ADRs. See Item 8. Financial Information-Dividend Policy.
Voting Rights
Stockholders are entitled to one vote per share, although members of the Board of
Statutory Auditors are elected through a cumulative voting system and minority stockholders
have the right to appoint at least one statutory auditor. See Statutory Auditors below.
Proxy solicitation is permitted, but may be conducted only by certain professional
investment and financial intermediaries, as well as certain companies whose sole purpose is to
carry out proxy solicitation, on behalf of a qualified soliciting stockholder (generally, one
or more stockholders who own and have owned at least 1% of the voting capital of the Company
for more than six months and who have been registered with the Company as such during that
time).
Proxies may be collected by a stockholders association provided that such association
has been formed by notarized private agreement, does not carry out business activities and is
made up of at least 50 individuals, each of whom owns not more than 0.1% of the Companys
voting capital. Members of the stockholders association may, but are not obliged to, grant
proxies to the legal representative of the association, and proxies may also be granted in
respect of only certain of the matters to be discussed at a given stockholders meeting. The
association votes in compliance with the instructions, whether the same or different, given by
each member who has granted a proxy to the association.
As a registered stockholder, JPMorgan Chase as ADR depositary or its nominee is entitled
to vote the shares underlying the ADSs. The Deposit Agreement requires JPMorgan Chase (or its
nominee) to accept voting instructions from owners of ADSs and to execute such instructions to
the extent permitted by law. Neither Italian law nor the Companys by-laws limit the right of
non-resident or foreign owners to hold or vote the shares.
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Board of Directors
Pursuant to the Companys by-laws, the Companys Board of Directors must consist of nine
to fifteen individuals. The Board of Directors is elected at a stockholders meeting for a
term of up to three fiscal years, as determined by the stockholders from time to time. The
directors, who may but are not required to be stockholders of the Company, may be re-elected
for successive terms. In accordance with the by-laws, the Board of Directors has complete
power of ordinary and extraordinary administration of the Company and in particular may
perform all acts it deems advisable for the achievement of the Companys corporate purposes,
except for the actions reserved by applicable law or the by-laws to the competence of the
stockholders.
The Board of Directors appoints from among its members a chairman, a vice chairman if
deemed advisable, and one or more CEOs. In the case of the absence or incapacity of the
chairman, the vice chairman, if appointed, will assume the chairmans functions. The chairman
of the board, the vice chairman, if appointed, and the CEO(s), separately, are the Companys
legal representatives and have the power to execute the duties conferred on them by the board.
The Board of Directors is charged with establishing a committee to supervise the internal
control system and committees for the nomination and compensation process for directors and
senior managers with strategic responsibilities, and may set up an Executive Committee and
other committees with specific functions and tasks, and fix the composition and operating
procedures of such committees (see Item 6. Directors, Senior Management and
EmployeesDirectors). The Board of Directors may also appoint one or more chief operating
officers and may designate a secretary, who need not be a member of the board.
Meetings of the Board of Directors are called by written notice, containing a full agenda
for the meetings, sent at least five days before the day on which the meeting is to be held,
except in urgent situations. Board meetings can be called by the chairman, at least once
every quarter and whenever the chairman deems it appropriate, or when requested by at least
three directors, acting together, or by one of the directors to whom powers have been
delegated. Meetings of the Board of Directors can also be called, after consultation with the
chairman, by a statutory auditor.
Board meetings are presided over by the chairman, or in his absence, by the vice
chairman, if appointed; in their absence, the board designates another director to take the
chair. Directors to whom powers have been delegated must report to the Board of Directors and
the Board of Statutory Auditors on a quarterly basis on their activities and business outlook,
as well as on transactions carried out by the Company or its subsidiaries that are
particularly significant in terms of size or characteristics, and each Director is required to
disclose any interest that he/she may have, either directly or on behalf of third parties, in
any transaction to which the Company is a party. Based on the information it receives, the
Board of Directors evaluates the adequacy of the Companys organization, administrative
structure and accounting system; reviews the Companys strategic, industrial and financial
plans; and based on reports provided by the bodies with delegated powers, assesses the general
performance of the Companys operations. The quorum for board meetings is a majority of
directors in office. Resolutions are passed by an absolute majority of votes of the directors
present. In the case of a tie, the chairman of the meeting has the deciding vote. Resolutions
are recorded in the minutes and signed by the chairman of the meeting and the secretary.
Under Italian law, directors may be removed from office at any time by the vote of
stockholders at an ordinary stockholders meeting, although, if removed in circumstances where
there was no just cause, removed directors may have a claim for indemnification against the
Company. Directors may resign at any time by written notice to the Board of Directors and to
the chairman of the Board of Statutory Auditors. The Board of Directors must appoint
substitute
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directors to fill vacancies arising from removals or resignations, subject to the
approval of the Board of Statutory Auditors, to serve until the next ordinary stockholders
meeting. If at any time more than half of the members of the Board of Directors appointed at
a stockholders meeting resign or otherwise cease to be directors, the term of the entire
Board of Directors will be considered to have lapsed and the remaining members of the Board of
Directors (or the Board of Statutory Auditors if all the members of the Board of Directors
have resigned or ceased to be directors) must promptly call an ordinary stockholders meeting
to appoint a new Board of Directors.
The compensation of directors is determined by the stockholders, and remains in effect
until they resolve otherwise. The compensation of directors holding particular offices is
determined by the Board of Directors, after consultations with the Board of Statutory
Auditors.
According to the CFA, as amended by Law 262, by-laws of Italian listed companies shall provide
for the members of the board of directors to be appointed on the basis of candidate lists and shall
specify the minimum shareholding needed to present a list (which shall not be more than one
fortieth of the share capital). Furthermore, at least one director shall be elected from the
minority list that obtained the largest number of votes. Amendments to listed companys by-laws to
comply with the new rules on appointment of directors must be adopted by January 2007.
Statutory Auditors
In addition to electing the Board of Directors, the Companys stockholders elect a Board
of Statutory Auditors (Collegio Sindacale). At ordinary stockholders meetings of the
Company, the statutory auditors are elected for a term of three fiscal years, may be
re-elected for successive terms and may be removed only for cause and with the approval of a
competent court. Each member of the Board of Statutory Auditors must provide evidence that
he/she is in good standing and meets certain standards of integrity,
professionality and
independence.
Pursuant to the CFA, as amended by Law 262:
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by-laws must specify the number of statutory auditors (not fewer
than three) and alternate members (not fewer than two); |
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CONSOB will set forth by regulation a procedure through which one
member of the board will be appointed by the minority
stockholders; |
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the statutory auditor (or one of the statutory auditors) elected
by the minority stockholders shall become Chairman of the Board; |
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statutory auditors are subject to certain limits (that shall be
set forth by CONSOB regulation) concerning the cumulation of
management and control positions that they may have in other
companies. |
The Companys by-laws (art. 17) currently provide that the Board of Statutory Auditors is
to consist of three statutory auditors and three alternate statutory auditors (who
automatically replace statutory auditors who resign or are otherwise unable to serve). The
by-laws require that each of our statutory auditors be a registered chartered accountant and
have at least three years experience as a statutory auditor. The by-laws also require that
statutory auditors not hold the position of statutory auditor in more than five other listed
companies (not including parent or subsidiaries of the Company). According to the Companys
by-laws, the statutory auditors are elected according to a cumulative voting system, whereby
each stockholder or group of stockholders holding at least 1% of
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the capital with the right to vote at an ordinary stockholders meeting may present a
slate, or a list of candidates. Each stockholder or group of stockholders may present and
vote for only one list, and each candidate may be named on only one list. Two auditors and
two alternate auditors are elected from the list which gets the highest number of votes, and
the remaining auditor and alternate auditor are elected from the list getting the
second-highest number of votes. Therefore, the minority has the right to appoint one regular
and one alternate auditor. The lists presented must be deposited at the Companys offices at
least ten days prior to the original date set for the ordinary stockholders meeting at which
the vote is to take place.
The CFA provides further that the board of statutory auditors will be required to verify that
the company (i) complies with applicable law and its by-laws, (ii) respects the principles of
correct administration, (iii) maintains adequate organizational structure, internal controls and
administrative and accounting systems, (iv) adequately instructs its subsidiaries to transmit to it
information relevant to the its disclosure obligations, and (v) correctly implements the corporate
governance rules set forth by codes of conduct drawn up by management companies of regulated
markets or by trade associations that the company, by means of public disclosures, declares to
comply with.
The
Board of Statutory Auditors is required to meet at least once every 90 days. In addition,
the statutory auditors are entitled to call and must attend the board of directors meetings, the
stockholders meetings and the executive committees (if any) meeting. In particular the right to
call the stockholders meeting must be exercised by at least two members of the board, whereas the
right to call the other meetings may be exercised individually by each statutory auditor.
Statutory auditors may exchange information with the Companys external auditors, and, even
individually, request information on the management of the Company or of its subsidiaries from the
directors and carry out inspections and verifications at the Company. The Board of Directors must
report to the statutory auditors at least quarterly on its activities and on the main transactions
carried out by the company and its subsidiaries.
The Board of Statutory Auditors may report to the competent court serious breaches of the
duties of the directors. The Companys Board of Statutory Auditors is also required to notify the
CONSOB without delay of any irregularities found during its review activities. CONSOB may report
to the competent court serious breaches of the duties of the statutory auditors of a listed
company.
External Auditors
The CFA requires companies whose shares are listed on regulated markets of EU Member
States to appoint a firm of external auditors to verify that (i) during the fiscal year, the
companys accounting records are correctly kept and accurately reflect the companys
activities, and (ii) the financial statements correspond to the accounting records and the
verifications conducted by the external auditors and comply with applicable rules. The
external auditors express their opinion on the financial statements in a report that may be
consulted by the stockholders prior to the annual stockholders meeting.
The external auditors are appointed by a resolution taken at the annual stockholders
meeting. Before the enactment of Law 262, the external auditors were appointed for a
three-year term (which could not be renewed more than twice). Under the new statutory
provisions, the external auditors are appointed for a six-year term.
The stockholders meeting held on May 13, 2003, appointed Deloitte & Touche Italia S.p.A.
as the Companys external auditors for each fiscal year in the three-year period 2003 through
2005.
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On July 31, 2003, Deloitte & Touche Italia S.p.A. contributed its audit business to a
newly incorporated company, Deloitte & Touche S.p.A., which combined the businesses of the two
previously existing Italian entities affiliated with the Deloitte Touche Tohmatsu
international network and is registered with CONSOB. As a result of this legal contribution,
Deloitte & Touche Italia S.p.A.s engagement as our external auditors for the three-year
period 2003-2005 was transferred to the new entity Deloitte & Touche S.p.A.
The stockholders meeting held on May 3, 2006, reappointed Deloitte & Touche S.p.A. as
the Companys external auditors for each fiscal year in the six-year period 2006 through 2011.
Meetings of Stockholders
Stockholders are entitled to attend and vote at ordinary and extraordinary stockholders
meetings. Votes may be cast personally or by proxy. Stockholders meetings may be called by
the Companys Board of Directors. According to the Companys by-laws (art.7), stockholders
are informed of all stockholders meetings to be held by publication of a notice in the
Italian daily newspapers La Stampa and Il Sole 24 Ore or, if both these newspapers are not
published, in the Official Gazette of the Republic of Italy. Stockholders meetings must be
convened at least once a year. Pursuant to CFA, as amended by Law 262, stockholders who,
separately or jointly, represent at least 2.5% of the share capital may request additions to
the agenda, within five days of the publication of the notice convening the meeting. The
annual unconsolidated financial statements of the Company are submitted for approval to the
ordinary stockholders meeting, which must be convened within 180 days after the end of the
Companys financial year. At ordinary stockholders meetings, stockholders also appoint the
external auditors, approve the distribution of dividends, elect and determine the remuneration
of the boards of directors and statutory auditors and vote on any other business matter the
resolution or authorization of which is entrusted to them by law or by the Companys by-laws,
including authorizing the company to purchase its own shares.
Extraordinary stockholders meetings may be called to approve spin-offs, dissolutions,
the appointment of receivers and similar extraordinary actions. Extraordinary stockholders
meetings may also be called to resolve upon proposed amendments to the by-laws, issuance of
convertible debentures, mergers and de-mergers and capital increases and reductions where such
resolutions may not be taken by the Companys Board of Directors. In particular, the
Companys Board of Directors may transfer the Companys registered office within Turin or
resolve upon other amendments to the by-laws when these amendments are required by law,
resolve upon mergers by absorption into the Company of its subsidiaries in which it holds at
least 90% of the issued share capital and reductions of the Companys share capital in case of
withdrawal of a stockholder. The Companys Board of Directors may also resolve upon the
issuance of shares or convertible debentures if such powers have been previously delegated to
the Board of Directors by vote of the extraordinary stockholders meeting.
The notice of a stockholders meeting may specify up to two meeting dates for an ordinary
stockholders meeting and three meeting dates for an extraordinary stockholders meeting; such
meeting dates are generally referred to as calls.
The quorum required for stockholder action at an ordinary stockholders meeting on first
call is at least 50% of the capital stock entitled to vote, while on second call there is no
quorum requirement. According to Article 9 of the Companys by-laws, resolutions may be
approved in either case by holders of an absolute majority of the shares present or
represented at the meeting, except for the election of directors, for which a simple majority
of the vote is sufficient, and for the
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election of statutory auditors, for which the provisions of Article 17 of the by-laws
shall apply. See Statutory Auditors above.
The quorum required at an extraordinary stockholders meeting on first call is at least
50% of the capital stock with voting rights, while on second and third call, the quorum
required is more than one-third and at least one-fifth of the capital stock, respectively.
Resolutions of any extraordinary stockholders meeting require the approval of at least
two-thirds of the shares represented at such meeting, except for special cases where
particular majorities are expressly required by law.
To attend any stockholders meeting, holders of shares must obtain a certified statement
of account evidencing their ownership of the shares. Such statements, which must be
communicated to the Company ahead of time, may be obtained by owners of shares through their
Intermediary.
Stockholders may attend the stockholders meeting by proxy. A proxy may be given only
for a single stockholders meeting (including, however, the first, second and, where
applicable, third calls of such meeting) and may be exercised only by the person expressly
named in the applicable form. The person exercising the proxy cannot be a subsidiary of the
Company, or a director, statutory auditor or employee of the Company or of any of its
subsidiaries.
Proxy
solicitation is permitted. See --Voting Rights above.
Preemptive Rights
Pursuant to Italian law, holders of shares are entitled to subscribe for new issuances of
shares, debentures convertible into shares and any other warrants, rights or options entitling
the holders to subscribe for shares in proportion to their holdings, unless such issues are
for non-cash consideration or preemptive rights are waived or limited by a resolution adopted
at an extraordinary stockholders meeting. There can be no assurance that the owners of ADSs
will be able to exercise fully any preemptive rights to which the holders of shares are
entitled.
Reports to Stockholders
The Company is required to publish, in the Italian language, its audited annual
unconsolidated financial statements and audited annual consolidated financial statements,
accompanied by a directors report on operations.
The Company is required to produce unaudited quarterly directors reports on operations
in the Italian language, semi-annual reports to stockholders in the Italian language which
contain a directors report on operations and unaudited semi-annual condensed unconsolidated
and consolidated financial statements. The Company is also required to prepare annual reports
on Form 20-F to be filed with the US Securities and Exchange Commission containing, among
other things, audited consolidated financial statements of the Company.
For fiscal years through and including the year ended December 31, 2004, the Company prepared
all of its consolidated and unconsolidated financial statements in accordance with Italian GAAP.
Since January 1, 2005, the Company publishes audited annual consolidated financial statements and
unaudited semi-annual and quarterly consolidated reports in conformity with IFRS. The Company
published its unconsolidated annual financial statements for the year 2005 in accordance with
Italian GAAP. Since January 1, 2006, the Company publishes audited annual unconsolidated financial
statements and unaudited semi-annual unconsolidated reports in conformity with IFRS. For more
information on these
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new accounting principles and certain of the differences between IFRS and Italian GAAP that
are material to us, see Item 5. Operating and Financial Review and ProspectsTransition to
International Financial Reporting Standards and Note 39 to the Consolidated Financial Statements
included in Item 18, which also contains a reconciliation to IFRS of our Italian GAAP financial
information as at January 1, 2004, and December 31, 2004, and for the year ended December 31, 2004.
Preference and Savings Shares
The Company is permitted in accordance with Italian law and its by-laws to issue
preference and savings shares. Preference shares do not typically entitle their holder to
vote at ordinary stockholders meetings, but do entitle them to vote together with the
ordinary shares at extraordinary stockholders meetings. Savings shares do not carry the
right to vote at stockholders meetings. However, Italian law provides for special meetings
of holders of each class of shares for the approval of resolutions adopted by the stockholders
which affect their rights vis-à-vis the other classes of shares.
Preference and savings shares carry preferential rights to the payment of dividends and
to the repayment of capital in the event of liquidation.
Liquidation Rights
Pursuant to Italian law and subject to the satisfaction of the claims of all other
creditors, stockholders are entitled to a distribution in liquidation that is equal to the
nominal value of their shares (to the extent available out of the net assets of the Company).
In the event of liquidation, the Companys assets shall be distributed to the stockholders in
the following order, in each case to the extent any assets are available: to savings shares,
up to their par value; to preference shares, up to their par value; to ordinary shares, up to
their par value; the balance, if any, to shares of all three classes in equal proportions.
Purchase by the Company of its Own Shares
The Company is permitted to purchase its own shares, subject to certain conditions and
limitations provided by Italian law. Shares may be purchased only out of profits available for
dividends or out of distributable reserves, in each case as appearing on the latest
stockholder-approved unconsolidated financial statements. In addition, the Company may
repurchase only fully paid-in shares. Such purchases must be authorized by a stockholders
meeting. The number of shares to be acquired, together with any shares previously acquired by
the Company or any of its subsidiaries may not (except in limited circumstances) exceed in
aggregate 10% of the total number of shares then issued, and the aggregate purchase price of
such shares may not exceed the earnings reserve specifically approved by the stockholders.
Shares held in excess of the 10% limit must be sold within one year of the date of purchase.
Similar limitations apply with respect to purchases of the shares of the Company by its
subsidiaries.
The Company must create a reserve corresponding and equal to the purchase price of any
such shares the Company has purchased in its balance sheet, and such reserve is not available
for distribution unless the shares are sold or canceled. Shares purchased and held by the
Company may be resold only pursuant to a resolution of the stockholders adopted at an ordinary
stockholders meeting. The voting rights attaching to the shares held by the Company or its
subsidiaries cannot be exercised, but the shares can be counted for quorum purposes of
stockholders meetings. Dividend
and other rights, including preemptive rights, attaching to such shares accrue to the
benefit of other stockholders.
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The CFA requires that the purchase by a listed company of its own shares and the purchase of
shares of a listed company by its subsidiaries be carried out pursuant to the Italian Civil Code so
as to ensure equal treatment of the stockholders, in accordance with procedures established by
CONSOB. Subject to certain limitations, the foregoing does not apply to shares being purchased by
a company from its employees or from the employees of its controlling company or subsidiaries.
As of June 15, 2006, Fiat S.p.A. held 4,314,458 ordinary shares in treasury.
Notification of the Acquisition of Shares and Voting Rights
Pursuant to Italian securities laws, including the CFA and Regulation No. 11971, the
acquisition of any interest in excess of 2% in the voting shares of a listed company must be
notified to CONSOB and the company whose shares are acquired. The voting rights attributable
to the shares in respect of which such notification has not been made may not be exercised.
Any resolution taken in violation of the foregoing may be annulled if the resolution would not
have been adopted in the absence of such votes.
In addition, any person whose aggregate interest in the voting shares of a listed company
exceeds or falls below 2%, 5%, 7.5%, 10% and successive percentages being multiples of 5,
respectively, of the listed companys voting share capital, is obliged to notify CONSOB and
the issuer. For the purpose of calculating these ownership thresholds, shares owned by any
person, irrespective of whether the voting rights attributable thereto are exercisable by such
person or by a third party, are taken into consideration and, except in certain circumstances,
account must also be taken of shares held through, or shares the voting rights of which are
exercisable by, subsidiaries, fiduciaries or intermediaries. For the purpose of calculating
the ownership thresholds of 5%, 10%, 25%, 50% and 75%, shares which a person either (i) has an
option to, directly or indirectly, acquire or sell or (ii) may acquire pursuant to the
exercise of a warrant or conversion right which is exercisable within 60 days, must also be
taken into account. The notification must be repeated when such person, upon the exercise of
either such right, acquires or sells shares that cause his aggregate ownership in the listed
company to exceed or fall below the relevant thresholds. Notification must be made (except in
certain circumstances) within five trading days of the event which gives rise to the
notification obligation.
Cross ownership of listed companies may not exceed 2% of their respective voting shares
and cross ownership between a listed company and an unlisted company may not exceed 2% of the
voting shares of the listed company and 10% of the voting shares of the unlisted company. If
the relative threshold is exceeded, the company which is the later in time to exceed such
threshold may not exercise the voting rights attributable to the shares in excess of the
threshold, and must sell the excess shares within a period of 12 months. If the company does
not sell the excess shares, it may not exercise the voting rights in respect of its entire
shareholding. If it is not possible to ascertain which company was the later to exceed the
threshold, the limitation on voting rights and the obligation to sell the excess shares will
apply to both companies, subject to an agreement to the contrary between them. The 2% limit
for cross ownership is increased to 5% if such limit is exceeded by the two companies only
pursuant to an agreement authorized in advance by an ordinary stockholders meeting of each
company. In addition, if a party holds an interest in excess of 2% of a listed companys
share capital, such listed company or the party which controls the listed company may not
purchase an interest above 2% in a listed company controlled by the first party. In case of
non-compliance, voting rights attributable to the shares held in excess of the limit may
not be exercised. If it is not possible to ascertain which is the later party to exceed the
limit, the limitation on voting rights will apply to both, subject to any agreement to the
contrary between the two parties. Any stockholders resolution approved in violation of the
limitation on voting rights may be declared
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null and void if the resolution would not have
been adopted in the absence of such votes. These cross-ownership provisions do not apply when
the thresholds are exceeded following a public tender offer aimed at acquiring at least 60% of
a companys ordinary shares or when a controlled company purchases shares of a controlling
company within the limits set forth in Article 2359-bis of the Italian Civil Code and
following the procedures described under Purchase by the Company of its Own Shares;
however, certain restrictions on the manner of purchase apply.
Pursuant to the CFA, agreements among stockholders of a listed company or of its parent
company, must be notified to CONSOB within five days, published in summary form in the press
within 10 days and filed with the Chamber of Commerce within 15 days. Failure to comply with
these rules will render such agreements null and void, and the votes attached to the shares
subject to such agreements cannot be exercised. These rules apply to stockholders agreements
which:
(i) concern, or require prior consultation for, the exercise of voting rights in a listed
company or its controlling company;
(ii) contain limitations on the transfer of shares of a listed company or its controlling
company, of or securities which grant the right to purchase or subscribe for such shares;
(iii) provide for the purchase of shares or securities mentioned in point (ii) above; or
(iv) have as their object or effect the exercise (including joint exercise) of a dominant
influence over a listed company or its controlling company.
Any such stockholders agreement may have a maximum term of three years, or an unlimited
term if it can be terminated by a party upon six months prior notice. In case of a public
tender offer, stockholders who intend to participate may withdraw from such an agreement
without notice, such withdrawal being effective only in the event that the relevant shares are
actually sold.
CONSOB regulations specify the method and content of the notification and publication of
such agreements, as well as of subsequent amendments thereto. The regulation also provides
that any party to an agreement referred to in points (i) or (iv) above in respect of more than
5% of the listed companys share capital is obliged to notify CONSOB and the listed company in
question of its overall shareholding in the listed company, unless such information has
already been notified in compliance with other provisions of the CFA.
In accordance with Italian antitrust laws, the Italian antitrust authority is required to
prohibit one company from acquiring control of another company if such acquisition would
create or strengthen a dominant position in the domestic market or a significant part thereof
and would result in the elimination or substantial reduction, on a lasting basis, of
competition, provided that certain minimum turnover thresholds are exceeded. However, if the
turnover of the acquiring party and the company to be acquired exceed certain higher monetary
thresholds, the antitrust review of the acquisition falls within the exclusive jurisdiction of
the European Commission.
Minority Stockholders Rights
Stockholders resolutions that are not adopted in conformity with applicable law or the
by-laws of the Company may be challenged (with certain limitations and exceptions) within 90
days by absent, dissenting or abstaining stockholders holding shares entitled to vote on the
resolution representing in the aggregate at least 0.1% of the Companys share capital, as well
as by the Companys directors or by the Board of Statutory Auditors. Stockholders not
reaching this threshold
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or stockholders not entitled to vote at the Companys meetings may not
challenge such a resolution, but may claim damages, if any, arising there from.
If stockholders resolutions are passed that approve, among other things, material
modifications of the Companys corporate purpose or of the voting rights of our shares, the
transformation of the Company from a stock corporation into a different legal entity, the
transfer of the Companys registered seat outside Italy or the de-listing of the Companys
shares, dissenting or absent stockholders may require the Company to buy back their shares at
a per-share price equal to the average closing price of the shares on the Italian Stock
Exchange over the previous six months.
Each stockholder may bring to the attention of the Board of Statutory Auditors facts or
acts that such stockholder believes should be subject to scrutiny by the Board of Statutory
Auditors, which must take any complaint into account in its report to the stockholders
meeting. If such stockholders represent more than 2% of the share capital of the Company, the
Board of Statutory Auditors must investigate without delay and report its findings and
recommendations to the stockholders meeting.
Stockholders representing more than 5% of the Companys share capital have the right to
report to the competent court serious breaches of the duties of the directors that may be
prejudicial to the Company or to its subsidiaries. In addition, stockholders representing at
least 2.5% of the Companys share capital may commence derivative suits before the competent
court against directors, statutory auditors and general managers of the Company. The Company
may waive or settle the suit unless stockholders holding more than 5% of the shares vote
against such waiver or settlement. The Company will reimburse the legal costs of such action
in the event that the claim of such stockholders is successful and the court does not award
such costs against the relevant directors, statutory auditors or general managers.
Minority stockholders may also elect one regular and one alternate member of the Board of
Statutory Auditors, pursuant to the list voting system provided in Article 17 of the Companys
by-laws. See -- Statutory Auditors above.
Tender Offer Rules
Pursuant to the CFA, a public tender offer must be made by any person who, by reason of
one or more purchases of shares, holds more than 30% of the shares of an Italian company
listed on the Italian Stock Exchange that entitle holders to elect or revoke the election of
directors or to commence derivative suits against them (as applicable to the Company, our
ordinary shares). Any such tender offer must cover all the ordinary shares of the subject
company. Similarly, a tender offer for all of the ordinary shares of a listed company must be
made by any person who, having more than 30% of the ordinary shares without exercising
majority voting rights at ordinary stockholders meetings, acquires more than 3% of the
ordinary shares during a 12-month period by way of acquisition or exercise of subscription or
conversion rights. The offer must be launched within 30 days of the date on which the
relevant threshold was exceeded, at a price not lower than the average
of the weighted average of the market price for the shares in the previous 12 months, and
the highest price paid for the ordinary shares by the offeror in the same period.
Under Regulation No. 11971, a purchaser is exempted from the tender offer obligation
when: (i) the purchasers equity interest, as a result of an acquisition, does not exceed the
30% threshold by more than 3% (provided that the purchaser commits (a) not to exercise the
voting rights pertaining to any ordinary shares exceeding the 30% threshold and (b) to sell
any shares exceeding the 30% threshold within 12 months from the date of purchase); (ii)
another person (or several
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persons acting jointly) already owns more than 50% of the
outstanding ordinary shares; (iii) the 30% threshold is exceeded as a result of a capital
increase in connection with a debt restructuring plan approved by CONSOB; (iv) the 30%
threshold is exceeded as a result of transfers of ordinary shares among related persons; (v)
the 30% threshold is exceeded as a result of the exercise of preemptive rights; or (vi) the
30% threshold is exceeded through mergers or de-mergers having an industrial purpose, approved
by the stockholders of the company whose shares would otherwise be the target of the tender
offer.
The CFA provides further that the acquisition of an interest of more than 30% of the
ordinary shares of a company does not trigger the obligation to launch a 100% tender offer if
the person concerned has exceeded the threshold as a result of a public tender offer launched
for 60% or more of the ordinary shares of the company. This exception, however, is available
only if (i) the tender offer has been approved by stockholders of the company holding a
majority of the ordinary shares (excluding the offeror and the current majority stockholder),
and (ii) the offeror (including its subsidiaries, controlling persons, related companies and
other persons connected to it by virtue of stockholders agreements, among other things) has
not acquired more than 1% of the ordinary shares of the company in the preceding 12 months.
CONSOB is responsible for ensuring compliance with these conditions before allowing a tender
offer to be launched. After such an offer has been completed, the offeror will become subject
to the duty to launch an offer for 100% of the ordinary shares if, in the course of the
subsequent 12 months, (i) it (or its affiliates) purchases more than 1% of the ordinary shares
of the company or (ii) it approves a merger or spin-off.
Finally, the CFA provides that anyone holding 90% or more of the common stock of a
company must launch an offer for the remaining voting shares unless an adequate distribution
is restored so as to ensure proper trading within a period of 120 days. Any stockholder
holding more than 98% of the common stock of a listed company following a tender offer for all
the voting shares issued by the company has the right to obtain title to the remaining voting
shares within four months of the end of the tender offer if it has stated in the offer
document its intention to make such an acquisition at a price set by a court-appointed expert.
Significant Differences with Corporate Governance Practices under NYSE Rules
Overview. Corporate governance rules for Italian stock corporations (società per azioni)
listed on the Italian Stock Exchange are set forth in the Italian Civil Code and in CFA, as
well as in the Corporate Governance Code issued by the Committee for Listed Companies
established by Borsa Italiana S.p.A., which was amended in 2006. Issuers are invited to
implement the amended Code, which replaced the 2002 Corporate Governance Code, by the end of
the 2006 fiscal year, informing the Italian market through the Report on Corporate Governance
to be published in 2007. Fiat is substantially in line with the provisions of the 2006
Corporate Governance Code. However, all references and explanations below are made to the
2002 Corporate Governance Code that is still in force.
As described in more detail below, these Italian corporate governance rules differ in a number
of ways from those applicable to US domestic companies under NYSE listing standards, as set forth
in the NYSE Manual.
As a general rule, our main corporate bodies are governed by the Italian Civil Code and the
CFA and are assigned specific powers and duties that are legally binding and from which there can
be no derogation. The Corporate Governance Code builds on the general framework provided for by
the Italian Civil Code and the CFA and sets forth recommendations for responsible corporate
governance intended to reflect generally accepted best practice. According to the CFA, as amended
by Law 262, listed companies
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are required to issue an annual compliance report disclosing
information on their adoption of the Corporate Governance Code and on their compliance with the
consequent obligations. As stated in our 2005 Annual Report on Corporate Governance, which we
issued in May 2006, the Fiat Group adopted and abides by the Corporate Governance Code of Italian
Listed Companies, supplemented and amended as necessary to ensure that the corporate governance
system it adopted is in line with the rules imposed to listing on the NYSE, including the relevant
sections of the Sarbanes-Oxley Act, and the characteristics of the Group, as described below.
We follow the traditional system of Italian corporate governance, which provides for two
main corporate governing bodies the Board of Directors and the Board of Statutory Auditors.
This system contrasts with the unitary system envisaged for US domestic companies by the NYSE
listing standards, which contemplate the Board of Directors serving as the sole governing
body. See ¾Board of Directors and ¾Statutory Auditors above for a description
of the powers and duties of our Board of Directors and of our Board of Statutory Auditors,
respectively. The members of our Board of Directors and Board of Statutory Auditors, as well
as our external auditors, are directly and separately appointed by stockholder resolution at
general stockholders meetings.
Following is a summary of the significant differences between Italian corporate
governance rules and practices, as we have implemented them, and those applicable to US
issuers under NYSE listing standards.
Independent Directors.
NYSE domestic company standards. The NYSE listing standards applicable to US companies
provide that independent directors must comprise a majority of the board. In order for a
director to be considered independent, the Board of Directors must affirmatively determine
that the director has no material direct or indirect relationship with the company. These
relationships can include commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships, among others. More specifically, a director is not
independent if such director or a member of his/her immediate family has certain specified
relationships with the company, its parent, any consolidated subsidiary, its internal or
external auditors, or any company that has significant business relationships with the
company, its parent or any consolidated subsidiary. In addition, a three-year period
following the termination of any relationship that compromised a directors independence must
lapse before that director can again be considered independent. Ownership of even a
significant amount of stock, by itself, is not a per se bar to independence.
Our practice. The CFA (as amended by Law 262) provides that, when the board of directors
has more than seven members, as in our case, at least one of them must satisfy the
independence requirements established by Italian law for the statutory auditors. Furthermore,
directors independence is the subject of a recommendation of the Corporate Governance Code
and is periodically assessed by the Board of Directors. On May 10, 2005, our Board of
Directors voluntarily adopted detailed new requirements for director independence, which go
beyond the Corporate Governance Code recommendations and are designed to be substantially in line
with the NYSE listing standards applicable to US companies. Under our director independence
criteria, a director is not considered independent if he or she:
|
(i) |
|
currently has, or in the last three years has had, economic, investment or
other relationships either directly, indirectly or on behalf of third parties,
with: |
|
|
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the Company, its subsidiaries and associated companies, or the
companies subject to joint control with the Company; |
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|
|
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the entity that, either singly or together with others, controls the
Company, participates in stockholders agreements for control thereof,
or exercises significant influence over it; or |
|
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|
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the executive directors and senior managers with strategic
responsibilities at any of these entities; |
|
(ii) |
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currently is, or in the last three years has been, an executive director
or senior manager with strategic responsibilities at any of the entities listed in
(i); |
|
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(iii) |
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has been a director of the Company for more than nine years; |
|
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(iv) |
|
is an executive director at another company in which one or more executive
directors of the Company are non-executive directors; |
|
|
(v) |
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during the last three years has been a partner or director of a primary
competitor of the Company; |
|
|
(vi) |
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has been, within the last three years, a partner or director of a rating
agency that currently or during the last three years has been in charge of
assigning a rating to the Company, its subsidiaries or an entity that controls the
Company; |
|
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(vii) |
|
currently is, or in the last three years has been, a partner, director or
member of the auditing team of an external auditor of the Company, or entities
belonging to its network, its subsidiaries, companies subject to joint control
with the Company or companies that control or have a significant influence over
the Company; or |
|
|
(viii) |
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has close family relations or lives with individuals who are in any of the
circumstances described above. |
The independence of directors is assessed by the Board of Directors during its periodic
meetings, on the basis of the information provided by the directors. If, during the course of
assessment, the Board of Directors should find that any of the relationships envisaged in point (i)
above exists, it may confirm the individuals independence if it determines that the relationship
is insignificant in terms of its nature and amount.
The stockholders meeting held on May 3, 2006 set the number of members of the Board of
Directors at fifteen and elected our current 15-member board, eight of whom qualify as independent
under our independence criteria.
The
Board of Directors on May 3, 2006, confirmed that eight of the
fifteen directors appointed by the stockholders meeting met our
independence criteria.
The members of our Board of Statutory Auditors also must meet independence requirements
mandated by Italian law. In particular, a person who (i) is a director, or the spouse or a
close relative of a director, of our company or any of our affiliates; (ii) has an employment
or consulting or similar relationship with our company or any of our affiliates; or (iii) has
an economic relationship with us or any of our affiliates which might compromise his/her
independence, cannot be appointed to our Board of Statutory Auditors. Although there is no
formal cooling-off requirement, statutory auditors who are registered chartered accountants
and have had a regular or material consulting relationship with us or our affiliates within
two years prior to the appointment, or have been employed by, or served as directors of, the
Company or our affiliates, within three years prior to the appointment, may be suspended or
cancelled from the register of chartered public accountants. Finally, we are
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required to
provide in our by-laws a mechanism to permit stockholders to propose alternative lists of
candidates for the Board of Statutory Auditors. See Statutory Auditors above.
Executive Sessions.
NYSE domestic company standards. In order to empower non-management directors of US
companies listed on the NYSE to serve as a more effective check on management, non-management
directors must meet regularly in executive sessions, and, if the board includes directors who
are not independent, the independent directors should meet alone in an executive session at
least once a year.
Our practice. In Italy, neither non-executive directors nor independent directors are
required to meet in executive sessions. The members of the Companys board of statutory auditors
are required to meet at least once every 90 days. Fiats
Board of Statutory Auditors met 23 times during 2005.
Audit Committee and Internal Audit Function.
NYSE domestic company standards. US companies listed on the NYSE are required to
establish an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange
Act and certain additional requirements set by the NYSE. In particular, all members of this
committee must be independent (defined as described above) and the committee must adopt a
written charter. The committees prescribed responsibilities include (i) the appointment,
compensation, retention and oversight of the external auditors; (ii) establishing procedures
for the handling of whistle blower complaints; (iii) discussion of financial reporting and
internal control issues and critical accounting policies (including through executive sessions
with the external auditors); (iv) the approval of audit and non-audit services performed by
the external auditors and (v) the adoption of an annual performance evaluation. Each company
must also have an internal audit function, which may be outsourced, except to its independent
auditor.
Our practice. Rule 10A-3 under the Exchange Act provides an exemption from certain of
the audit committee requirements under the rule for foreign private issuers with a board of
statutory auditors established in accordance with local law or listing requirements and
meeting specified requirements with regard to independence and responsibilities (including the
performance of most of the specific tasks assigned to audit committees by the rule, to the
extent permitted by local law) (the Statutory Auditor Requirements). Our Board of Statutory
Auditors, as defined under Italian law, meets the Statutory Auditor Requirements, and we
therefore qualify for the exemption under Rule 10A-3, which
became applicable to us starting
on July 31, 2005. We also have an internal audit function, which we have not outsourced, and
an Internal Control Committee, in accordance with the Corporate Governance Code. See Item 6.
Directors, Senior Management and EmployeesDirectors.
Compensation Committee.
NYSE domestic company standards. Under NYSE standards, the compensation of the CEO of US
companies that are listed on the NYSE must be approved by a compensation committee (or
equivalent) composed entirely of independent directors. The compensation committee must also
make recommendations to the Board of Directors with regard to the compensation of other
executive officers, incentive compensation plans and equity-based plans that are subject to
board approval. Disclosure of individual management compensation information for these
companies is mandated by the Exchange Acts proxy rules, from which foreign private issuers
are generally exempt.
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Our practice. Our Nominating and Compensation Committee is entrusted with the advisory
duties to submit to the Board of Directors proposals with respect to individual compensation
plans for the Chairman, the CEO and the other directors vested with particular offices and to
review proposals regarding appointment, compensation, appraisal criteria and succession plans
for senior management, and the general fixed and variable compensation plans applicable at
Group level. The compensation of directors is fixed periodically by the annual general
meeting of our stockholders.
The Corporate Governance Code recommends that a majority of the members of the Nominating
and Compensation Committee be non-executive directors; two out of the three members of our
committee are independent and therefore our committee meets this criterion. See Item 6. Directors, Senior
Management and EmployeesDirectors. We disclose the compensation of each of the members of
our Board of Directors (including our CEO), our Board of Statutory Auditors and our chief
operating officer, if any, in our annual financial statements prepared in accordance with
IFRS, as well as in Item 6 of this annual report on Form 20-F.
Nominating Committee.
NYSE domestic company standards. Under NYSE standards, a US company that is listed on
the NYSE must have a nominating/corporate governance committee (or equivalent) composed
entirely of independent directors that is, among other things responsible for nominating
directors and board committee members.
Our practice. Our Nominating and Compensation Committee is not responsible for nominating our
directors but it is entrusted with the advisory duties to select and propose to the Board of
Directors, on the occasion of co-optations and renewals of mandates, candidates for the post of
member of the Board of Directors, indicating their names and/or the necessary qualifications.
Directors may be nominated by any of our stockholders or our Board of Directors. For the
appointment of directors at our stockholders meeting held on May 3, 2006, the Board of Directors
proposed to establish the number of members of the Fiat Board of Directors in 15, with the majority
having the credentials for independence.
Corporate Governance Guidelines/Code of Business Conduct and Ethics.
NYSE domestic company standards. Under NYSE standards, a US company that is listed on
the NYSE must adopt corporate governance guidelines and a code of business conduct and ethics
for directors, officers and employees. A company must also publish these items on its website
and provide printed copies on request. Section 406 of the Sarbanes-Oxley Act of 2002 requires
a company to disclose whether it has adopted a code of ethics for its principal executive
officer, principal financial officer, principal accounting officer or controller, or persons
performing similar functions, and if not, the reasons why it has not done so. The NYSE
listing standards applicable to US companies provide that codes of conduct and ethics should
address, at a minimum, conflicts of interest; corporate opportunities; confidentiality; fair
dealing; protection and proper use of company
assets; legal compliance; and encouraging the reporting of illegal and unethical
behavior. Corporate governance guidelines must address, at a minimum, directors
qualification standards, responsibilities and compensation; directors access to management
and independent advisers; management succession; director orientation and continuing
education; and an annual performance evaluation of the board.
Our practice. We have adopted certain corporate governance guidelines (including with
respect to our internal control system, significant transactions, transactions with related
parties, and internal dealing), a compliance program to prevent certain criminal offenses and
a code of conduct
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for our directors, employees and others acting on our behalf. As noted in
Item 16B of this annual report, we have also adopted a code of ethics as defined in Section
406 of the Sarbanes-Oxley Act.
We believe that our codes of conduct and ethics address the relevant issues contemplated
by the NYSE standards applicable to U.S companies noted above. Our corporate governance
guidelines generally address all of the issues contemplated by the NYSE standards.
As noted above, we must issue an annual report describing our corporate governance system
and disclosing the level of our compliance with the recommendations of the Corporate
Governance Code. This report and all our guidelines, programs and codes are available, both
in English and in Italian, on our website at www.fiatgroup.com in the Corporate Governance
section. Information appearing on the website is not incorporated by reference into this
annual report.
Certifications as to Violations of NYSE Standards.
NYSE domestic company standards. Under NYSE listing standards, the CEO of a US company
that is listed on the NYSE must certify annually to the NYSE that he or she is unaware of any
violation by the company of the NYSE corporate governance listing standards. The company must
disclose that such certification, as well as that the CEO/CFO certification required under
Section 302 of the Sarbanes-Oxley Act of 2002, has been made in the companys annual report to
stockholders (or, if no annual report to stockholders is prepared, its annual report on Form
10-K). The CEO must also promptly notify the NYSE in writing if any executive officer of the
company becomes aware of any material non-compliance with the NYSE corporate governance
listing standards. A US company listed on the NYSE must also submit an annual written
affirmation to the NYSE, within 30 days after its annual stockholders meeting and in a form
specified by the NYSE, regarding its compliance with applicable NYSE corporate governance
listing standards. A US company listed on the NYSE is further required submit an interim
written affirmation to the NYSE upon the occurrence of specified events, including changes to
its board of directors or its audit, nominating/corporate governance or compensation
committees and changes in the status of independent directors.
Our practice. Under the NYSE rules currently applicable to foreign private issuers, our
CEO is not required to certify annually to the NYSE whether he is aware of any violation by us
of the NYSE corporate governance listing standards. Our CEO is only required to notify the
NYSE in writing if any of our executive officers becomes aware of any material non-compliance
by us with NYSE corporate governance listing standards. The NYSE rules regarding annual
written affirmations applied to us as of July 31, 2005. Since that date, we are required to
submit an annual written affirmation to the NYSE, in a form specified by the NYSE, regarding
our compliance with applicable NYSE corporate governance listing standards. We submitted the
2005 annual affirmation by August 30, 2005. In subsequent years, we must submit an annual
affirmation within 30 days of the filing of our annual report on Form 20-F with the SEC.
Following submission of our initial annual written affirmation, we will also be required to
submit to the NYSE an interim written
affirmation, in a form specified by the NYSE, any time we are no longer eligible to rely
on, or choose to no longer rely on, a previously applicable exemption provided by Exchange Act
Rule 10A-3, or, to the extent we have an audit committee as defined in Rule 10A-3, if a member
of such audit committee who was deemed independent is no longer independent or an audit
committee member had been added. In addition, under NYSE rules, our CEO must notify the NYSE
in writing if any executive officer becomes aware of any material non-compliance by us with
NYSE corporate governance standards, including the reason for such non-compliance and the
timing of when we expect to be in compliance again.
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Stockholder Approval of Adoption and Modification of Equity Compensation Plans.
NYSE domestic company standards. Stockholders of a US company listed on the NYSE must
approve the adoption of, and any material revision to, the companys equity compensation
plans, with certain exceptions.
Our practice. Our stockholders must authorize (i) the issuance of additional shares in
connection with capital increases, and (ii) the buy-back of our own shares, and (iii) after
Law 262 came into force, the adoption of equity compensation plans.
Taxation
The following is a summary of certain United States federal and Italian tax matters. The
summary contains a description of the principal United States federal and Italian tax
consequences of the purchase, ownership and disposition of ordinary, preference or savings
shares or ADSs by a holder who is a citizen or resident of the United States or who otherwise
will be subject to United States federal income tax on a net income basis in respect of the
ordinary, preference or savings shares or ADSs. This summary does not purport to be a
comprehensive description of all of the tax considerations that may be relevant to a decision
to purchase, hold or sell ordinary, preference or savings shares or ADSs. In particular, the
summary deals only with beneficial owners who will hold ordinary, preference or savings shares
or ADSs as capital assets and does not address the tax treatment of a beneficial owner who
owns 10% or more of the voting shares of Fiat or who may be subject to special tax rules, such
as banks, tax-exempt entities, insurance companies or dealers in securities or currencies, or
persons that will hold ordinary, preference or savings shares or ADSs as a position in a
straddle for tax purposes or as part of a constructive sale or a conversion transaction
or other integrated investment comprised of ordinary, preference or savings shares or ADSs
and one or more other investments. Nor does this summary discuss the treatment of ordinary,
preference or savings shares or ADSs that are purchased, held or sold in connection with a
permanent establishment through which a non-resident beneficial owner carries on or performs
personal services in Italy.
The summary is based upon tax laws and practice of the United States and Italy as in
effect on the date of this annual report. Prospective purchasers and current holders of
ordinary, preference or savings shares or ADSs are advised to consult their own tax advisors
as to the US, Italian or other tax consequences of the purchase, beneficial ownership and
disposition of ADSs, including, in particular, the effect of any state, local or other
national tax laws.
For purposes of the summary, beneficial owners of ordinary, preference or savings shares
or ADSs who are considered residents of the United States for purposes of the current income
tax convention between the United States and Italy (the Treaty), and are not subject to an
anti-treaty shopping provision that applies in limited circumstances, are referred to as US
owners. Beneficial owners who are citizens or residents of the United States, corporations
organized under US law, and
US partnerships, estates or trusts (to the extent their income is subject to US tax
either directly or in the hands of partners or beneficiaries) generally will be considered to
be residents of the United States under the Treaty. Special rules apply to US owners that are
also residents of Italy. A new tax treaty to replace the current Treaty was signed on August
25, 1999, but has not yet been ratified by Italy. The new treaty would not change
significantly the provisions of the current Treaty that are discussed below (except that it
would clarify the availability of benefits to certain tax-exempt organizations). These laws
are subject to change, possibly on a retroactive basis. Unless otherwise stated, this summary
assumes that a US holder is eligible for the benefits of the Treaty.
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For purposes of the Treaty and the United States Internal Revenue Code of 1986, holders
of American Depositary Receipts evidencing ADSs will be treated as the beneficial owners of
the underlying shares represented by those ADSs.
Withholding Tax on Dividends
Italian law provides for the withholding of income tax at a 27% rate on dividends paid by
Italian companies to stockholders who are not residents of Italy for tax purposes.
Accordingly, the amount initially made available to the Depositary for payment to US owners
will reflect withholding at the 27% rate.
Under domestic Italian law, a non-resident holder of shares may recover up to four-ninths
of the tax withheld on dividends by presenting evidence to the Italian tax authorities that
income tax has been fully paid on the dividends in the non-resident holders country of
residence in an amount at least equal to the total refund claimed. Non-resident holders
seeking such payments from the Italian tax authorities have experienced extensive delays and
incurred expenses.
Alternatively, the 27% withholding tax may be reduced pursuant to an income tax
convention between Italy and the non-resident holders country of residence. Generally, a
reduced 15% withholding tax would be levied under the Treaty.
Dividends paid by an Italian company to a non-resident holder of savings shares are
subject to a 12.5% withholding tax. The recovery mechanism up to four-ninths of the tax
withheld is not available with respect to such dividends.
Under current Italian law, all shares of Italian listed companies (including Fiats
ordinary, preference or savings shares) must be held in a centralized clearing system
authorized by CONSOB. Under applicable tax provisions, if the shares are held through the
centralized clearing system managed by Monte Titoli (the only such system currently authorized
in Italy), no withholding tax on dividends is applied by the Company. Instead of the
withholding tax, a substitute tax (imposta sostitutiva) is applied on dividend distributions
to non-resident holders of ordinary, preference or savings shares (or ADSs relating to such
shares) at a rate equal to the withholding tax that would otherwise be due. The substitute
tax is applied by the resident or non-resident intermediary with which the ordinary,
preference or savings shares are deposited and which participates in the Monte Titoli system
(directly or through a foreign centralized clearing system participating in the Monte Titoli
system). The procedures to be followed by a non-resident holder in order for the intermediary
with which the ordinary, preference or savings shares are deposited to apply a reduced rate of
tax pursuant to an applicable income tax convention are as follows. The intermediary must
receive (i) a declaration of the non-resident holder that contains certain data identifying
the non-resident holder and indicating the existence of all the conditions necessary for the
application of the relevant income tax convention and the determination of the applicable
treaty rate of withholding and (ii) a certification by the tax authorities of the non-resident
holders country of residence that the holder is
a resident of that country for purposes of the income tax convention and, as far as it is
known to such authorities, the holder has no permanent establishment in Italy (which
certificate will be effective until March 31 of the year following submission). If the
ordinary, preference or savings shares are deposited with a non-resident intermediary, such
intermediary must appoint as its fiscal representative in Italy a bank or an investment
services company that is resident in Italy, the permanent establishment in Italy of a
non-resident bank or investment services company, or a company licensed to manage a
centralized depository and clearing system, to carry out all duties and obligations relating
to the application and administration of the substitute tax.
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Since the ordinary, preference or savings shares underlying the ADSs will be held by the
custodian in the centralized clearing system managed by Monte Titoli, the substitute tax
regime described above will apply to the ADSs. In order to enable eligible US owners to
obtain a reduction at source or a refund of withholding tax under the Treaty, the Company and
the Depositary have agreed to certain procedures. According to such procedures, the
Depositary will send holders of the ADSs certain instructions before the dividend payment date
specifying the documentation required and the deadlines for submission. The documentation
generally will include the holders declaration and the tax certification specified under
points (i) and (ii) in the preceding paragraph. In order to comply with the documentation
requirements described under point (ii) above, eligible US owners must obtain a certificate of
residence from the US Internal Revenue Service (IRS) (Form 6166) with respect to each
dividend payment, unless a previously filed certification will be effective on the dividend
payment date, and produce it together with a statement whereby such holder represents that it
is a US resident individual or corporation and does not maintain a permanent establishment in
Italy. IRS Form 6166 may be obtained by filing a request for certification on IRS Form 8802.
(Additional information, including IRS Publication 686 and Form 8802 can be obtained from the
IRS website at www.irs.gov. Information appearing on the website is not incorporated by
reference into this annual report.) The time for processing requests for certification by the
IRS is normally six to eight weeks. Accordingly, holders requiring this certification should
submit their requests to the IRS as soon as possible after receiving instructions from the
Depositary. In the case of ADSs held through a broker or other financial intermediary, the
required documentation should be delivered to such financial intermediary for transmission to
the Depositary. In all other cases, eligible US owners should deliver the required
documentation directly to the Depositary at least five business days prior to the date set for
the payment of dividends.
If the documentation is not provided in the time allotted, or if the intermediary (i.e.,
the custodian in the case of the ADSs) determines that the provided documentation does not
satisfy the prescribed requirements or that applicable law does not permit it to apply
directly the reduced Treaty rate, the intermediary will withhold tax at the 27% rate on
dividends paid with respect to ADSs underlying shares other than savings shares, and eligible
US owners will be required to claim a Treaty refund of 12% of the dividend (representing the
difference between 27% and the 15% Treaty rate) directly from the Italian tax authorities. US
residents seeking refunds from the Italian tax authorities have encountered expenses and
extensive delays.
Distributions of profits in kind will be subject to withholding tax. In that case, prior
to receiving the distribution, the holder will be required to provide the Company with the
funds to pay the relevant withholding tax.
The gross amount of dividends (that is, the amount before reduction for Italian
withholding tax) paid to US owners will be subject to US federal income taxation as dividend
income and will not be eligible for the dividends-received deduction allowed to domestic
corporations. Subject to certain exceptions for short-term and hedged positions, the US
dollar amount of dividends received by an individual prior to January 1, 2011 with respect to
the ADSs will be subject to taxation at a
maximum rate of 15% if the dividends are qualified dividends. Dividends paid on the
ADSs will be treated as qualified dividends if (i) Fiat is eligible for the benefits of a
comprehensive income tax treaty with the United States that the IRS has approved for the
purposes of the qualified dividend rules and (ii) Fiat was not, in the year prior to the year
in which the dividend was paid, and is not, in the year in which the dividend is paid, a
passive foreign investment company (PFIC). The Income Tax Convention has been approved for
the purposes of the qualified dividend rules. Based on Fiats audited financial statements
and relevant market and stockholder data, Fiat believes that it was not treated as a PFIC for
US federal income tax purposes with respect to its 2004 or 2005 taxable year. In addition,
based on Fiats audited financial statements and its current expectations regarding the
147
value and nature of its assets, the sources and nature of its income, and relevant market and
stockholder data, Fiat does not anticipate becoming a PFIC for its 2006 taxable year.
The US Treasury has announced its intention to promulgate rules pursuant to which holders
of ADSs or common stock and intermediaries though whom such securities are held will be
permitted to rely on certifications from issuers to establish that dividends are treated as
qualified dividends. Because such procedures have not yet been issued, it is not clear
whether the Company will be able to comply with them. Holders of ADSs and common shares
should consult their own tax advisers regarding the availability of the reduced dividend tax
rate in the light of their own particular circumstances.
The Italian withholding tax (less any refunds to which such US owners are entitled under
the Treaty) will be treated as a foreign income tax which such owners may elect to deduct in
computing their taxable income or, subject to the limitations on foreign tax credits
generally, credit against their US federal income tax liability.
Tax on Capital Gains
Capital gains realized by non-resident stockholders on the disposal of a qualified
shareholding held as a capital asset and not in connection with a permanent establishment
through which such stockholders carry on or perform business services in Italy are subject to
Italian personal or corporate income tax, for an amount equal to 40% of the overall gain.
Losses can be offset against taxable gains for a corresponding amount and, if in excess, can
be carried forward up to four years. A qualified shareholding is constituted by ordinary,
preference or savings shares or ADSs and/or rights representing more than 5% of Fiats total
share capital or more than 2% of its share capital voting in the ordinary stockholders
meeting. A disposal of a qualified shareholding occurs if in any 12-month period
immediately following the date when a shareholding meets one of the thresholds illustrated
above, the stockholder engages in disposals of shares or ADSs that, individually or in
aggregate, constitute a qualified shareholding. The taxable gain realized by a non-resident
stockholder who is an individual would be subject to progressive personal income tax rates
(currently, the marginal tax rate is equal to 43%, plus a surcharge generally of up to 1.9%,
depending on the municipality in which such non-resident stockholders earns the highest
Italian-source income). The taxable gain realized by a non-resident corporate stockholder
would be subject to corporate income tax, currently levied at a rate of 33%.
Generally, a capital gains tax (CGT), levied at a rate of 12.5%, is imposed on gains
realized upon the transfer or sale of non-qualified shareholdings whether held within or
outside Italy. A non-qualified shareholding is constituted by an interest in Fiat which
does not reach the thresholds described above. However, under domestic law, an exemption
applies to gains realized on the disposal of non-qualified shareholdings in an Italian
company, the shares of which are listed on a regulated market, such as our shares, even when
such shareholdings are held in Italy. A
statement whereby the holder declares to be a non-Italian resident may be required in
order to benefit from this exemption.
Furthermore, pursuant to the Treaty, a US owner will not be subject to Italian tax on any
realized capital gains unless such US owner has a permanent establishment in Italy to which
the ordinary, preference or savings shares or ADSs are effectively connected. To this end, US
owners selling ordinary, preference or savings shares or ADSs and claiming Treaty benefits may
be required to produce appropriate documentation establishing that the above mentioned
conditions have been met. Other countries have executed income tax conventions with Italy
providing for a similar treatment of Italian tax on capital gains. No Italian tax on capital
gains will be imposed on the
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deposit or withdrawal of shares in return for ADSs. US owners of
ADSs will be subject to United States federal income tax on any capital gains to the same
extent as on other gains from the disposition of stock. The net amount of long-term capital
gain recognized by an individual holder after May 5, 2003, and before January 1, 2011,
generally is subject to taxation at a maximum rate of 15%. The net long-term capital gain
recognized by an individual holder before May 6, 2003, generally is subject to taxation at a
maximum rate of 20%.
Taxation of Distributions from Capital Reserves
Special Italian tax rules apply to the distribution of capital reserves. Under certain
circumstances, such a distribution may be considered as taxable income in the hands of the
recipient depending on the reserves of the distributing company outstanding at the time of
distribution and the actual nature of the reserves distributed. The application of such rules
may also have an impact on the tax basis in the ordinary, preference or savings shares or ADSs
held and/or the characterization of any taxable income received and the tax regime applicable
to it. Non-resident stockholders may be subject to withholding tax and CGT as a result of such
rules. You should consult your tax advisor in connection with any distribution of capital
reserves.
Transfer Tax
An Italian transfer tax is normally payable on the transfer of shares in an Italian
company. The transfer tax is not payable with respect to any transfer of ordinary, preference
or savings shares or ADSs involving non-Italian residents concluded either on a regulated
market or with a bank or an investment services company.
Estate and Gift Tax
As of October 25, 2001, the Italian estate and gift tax has been abolished and
consequently any transfer of shares or ADSs occurring by reason of death or gift as of that
date is no longer subject to any Italian estate and gift tax.
However, should a gift of ordinary, preference or savings shares or ADSs for a value
exceeding €180,759.91 occur and the relationship between the donor and the beneficiary not
qualify for the exemption regime applicable to gifts made in favor of certain family members
(e.g., spouse, parents, children, grandchildren), a registration tax of €168 would be due
insofar as the gift agreement is either executed or registered in Italy. That threshold is
increased to €516,456.91 in case the beneficiary is a person with a handicap recognized
pursuant to applicable law.
Documents On Display
Copies of Fiat S.p.A.s by-laws may be examined at its registered office and principal
place of business at Via Nizza 250, Turin, Italy.
Fiat S.p.A. also files reports, including annual reports on Form 20-F, periodic reports
on Form 6-K and other information with the SEC pursuant to the rules and regulations of the
SEC that apply to foreign private issuers. You may read and copy any materials filed with the
SEC at its Public Reference Room at 100 F Street, N.W., Washington, D.C. 20459. You may
obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. You may also read and copy any materials the Company files with the SEC at
the regional offices of the SEC located at 3 World Financial Center, Room 4300, New York, NY
10281, and at 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604.
Our
by-laws and annual reports on Form 20-F are also available on our
website, www.fiatgroup.com. Information appearing on the website is
not incorporated by reference into this annual report.
149
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Risk Analysis
As a multinational group that has operations throughout the world, we are exposed to market
risks from fluctuations in foreign currency exchange and interest rates.
The exposure to foreign currency risk arises principally in connection with the geographical
distribution of our industrial activities, which generally results in our generating revenues from
our operations and sales outside of the euro zone in currencies other than the euro that are in
excess of our costs denominated in such currencies, which are primarily incurred with respect to
our operations located in such countries, and, to a lesser extent, with respect to non-euro
denominated inputs used by our euro zone operations. As a result, the depreciation of the euro
relative to other currencies generally has a positive effect on our
net revenues and operating income,
while the appreciation of the euro has adverse effects on net revenues and operating income.
Many of our subsidiaries are located outside the euro zone, in particular in the United
States, Canada, United Kingdom, Switzerland, Brazil, Poland, Turkey, India and China. Since our
financial reporting currency is the euro, the income statements of these subsidiaries are
translated into euro for inclusion in the Consolidated Financial Statements included in Item 18.
Changes in the average exchange rate can affect the translation into euro of both revenues and
operating income denominated in another currency.
In addition, we have significant assets, liabilities and operations outside the euro zone
which are denominated in local currencies. Currently, we do not hedge our net investments in
consolidated entities whose equity is denominated in currencies other than the euro because those
investments are considered to be long-term. According to IFRS, effects from currency fluctuations
on the translation of net asset amounts into euro are directly recognized in equity and reversed on
any disposal of the relevant foreign entity. Cumulative translation differences and yearly changes
in this context are presented in Note 25 to the Consolidated Financial Statements included in Item
18.
We utilize external borrowing and sales of receivables to fund our industrial and financial
activities. Changes in interest rates affect our net income by increasing or decreasing borrowing
costs and investment income.
We regularly assess our exposure and generally seek to manage market risks principally through
the use of derivatives, such as foreign forward exchange contracts, foreign currency options,
interest rate
swaps and forward rate agreements. Our financial policy focuses particularly on the
management and control of financial risks, as they can significantly impact profits. We have
adopted a series of guidelines regarding the management of exchange rate and interest rate
exposure. Our policy allows derivatives to be used only for managing exchange and interest rates
risks connected to monetary flows and assets and liabilities, and not for speculative purposes.
We used derivative instruments primarily for the management of both interest rate exposure
deriving from our financial assets and liabilities and exchange rate exposure in relation to
import/export flows for the various products manufactured by the Group, with particular reference
to amounts expressed in US dollars, Polish zloty and British pounds, each of which represented a
significant exposure for the Group in 2005.
The net financial expense we recorded in 2005 and 2004 includes the fair market value
adjustment of those derivatives not eligible for hedge accounting under our accounting policies, as
well as the ineffectiveness of derivatives which qualify for hedge accounting. Our accounting
policies regarding derivative financial instruments and additional accounting data are further
described in the
150
Significant
accounting policies and Note
22 to the Consolidated Financial Statements included in Item 18.
We continued to apply a rigorous policy of risk management by taking into account the expected
trend in the financial markets with the aim of protecting the Group from exposure to changes in
interest and exchange rates.
Further disclosures about market risk exposures and risk management policies are found in note
34 to the Consolidated Financial Statements included in Item 18.
Sensitivity Analysis
We monitor foreign exchange risk, interest rate risk and related hedge positions using a
variety of analytical techniques, including the marking to market of financial instruments and
sensitivity analysis.
The following analysis assumes instantaneous parallel shifts in exchange rates and interest
rate yield curves. For options, which are instruments with non-linear returns, sensitivity
analysis models considering market volatility at year end are employed. While the following
results may have some limited use as benchmarks, they should not be viewed as forecasts, in part
because they are unable to reflect the complex and interrelated market reactions that normally
would arise from any given market shift.
Foreign Exchange Rate Risk
The Group is exposed to risk resulting from changes in exchange rates, which can affect its
results of operation and financial condition. In particular, when a Group company incurs costs in a
currency different from that of its revenues, any change in exchange rates can affect its operating
results. In 2005, our total trade flows exposed to exchange rate risk amounted to approximately
14% of the Groups net revenues.
The principal exchange rates to which the Group is exposed are the following:
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Euro/US Dollar, relating to sales in dollars made by Italian companies (in
particular Ferrari and Maserati) to the North American market and to other markets in
which the dollar is the trading currency, as well as to the production and purchases of CNH
in the euro zone; |
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Euro/Pounds Sterling, principally in relation to sales by
Fiat Auto and Iveco in
the United Kingdom; |
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Euro/Polish Zloty, relating to local costs incurred in Poland regarding products
sold in the euro zone; and |
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US Dollar/Brazilian Reals and Euro/Brazilian Reals, relating to Brazilian
manufacturing operations and the related import and export flows. |
It is the Groups policy to use derivative financial instruments to hedge a certain
percentage, on average between 55% and 85%, of the trading transaction exchange risk exposure
forecast for the coming 12 months (including risks arising for periods beyond 12 months when
appropriate in relation to the characteristics of the particular business) and to hedge completely
the exposure resulting from certain contractual commitments.
In addition, Group companies may have trade receivables or payables denominated in a currency
different from their reporting currency. In addition, in a limited number of cases, it may be
convenient from an economic point of view or it may be required under local market conditions, for
companies to
151
obtain finance or use funds in a currency different from their reporting currency.
Changes in exchange rates may result in exchange gains or losses arising from these situations.
It is the Groups policy to hedge fully, whenever possible, the exposure resulting from
receivables, payables and securities denominated in foreign currencies different from the relevant
companys reporting currency.
At December 31, 2005, the potential loss in fair value of the derivative financial instruments
we use to hedge exchange rate risks (foreign exchange forward contracts, currency swaps and
currency options) resulting from a hypothetical 10% change in relevant foreign currency exchange
rates would be approximately €273 million (€218 million at December 31, 2004, as calculated
in accordance with IFRS). This sensitivity analysis generally assumes an unfavorable and
instantaneous 10% fluctuation in the year-end exchange rates affecting the foreign currencies in
which these financial instruments are denominated, and no change in market volatility.
As consistently and simultaneously unfavorable movements in all relevant exchange rates are
unlikely, these assumptions may overstate the impact of 10% exchange rate fluctuations on such
derivative financial instruments. In addition, this calculation does not include receivables and
payables and forecasted cash flows related to the underlying business transactions. We believe
that it is reasonable to expect that the above movement in foreign exchange rates would produce an
opposite economic impact, of an equal or higher amount, on the underlying business transactions for
which such financial instruments are used.
Interest Rate Risk
The
Groups manufacturing companies and treasury companies make use of external funds obtained in
the form of financing and invest in monetary and financial market instruments. In addition, certain
Group companies sell receivables resulting from their activities on a continuous basis. Changes in
market interest rates can affect the cost of the various forms of financing, including the sale of
receivables, or the return on investments, and the results of investment of funds, causing an
impact on the level of net financial expenses incurred by the Group.
In addition, our financial services companies provide loans (mainly to customers and dealers),
financing themselves using a variety of instruments including debt and asset-backed financing (such
as the securitization of receivables). Where the characteristics of the variability of the interest
rate applied to loans granted differ from those of the variability of the cost of the financing
obtained, changes in the current level of interest rates can influence the operating result of
these companies and the Group as a whole.
In order to manage these risks, the Group uses interest rate derivative financial instruments,
mainly interest rate swaps and forward rate agreements, with the object of mitigating the
variability of interest rates on the net result, seeking to optimize interest rate matching for its
financial services companies.
In assessing the potential impact of changes in interest rates, the Group separates out fixed
rate financial instruments (for which the impact is assessed in terms of fair value) from floating
rate financial instruments (for which the impact is assessed in terms of cash flows).
The fixed rate financial instruments used by the Group consist principally of part of the
portfolio of the financial services companies (basically customer financing and financial leases)
and part of our debt (including subsidized loans and bonds).
152
The potential loss in fair value of the fixed rate financial instruments we held at December
31, 2005 (including the effects of interest rate derivatives), resulting from a hypothetical,
instantaneous and unfavorable change of 10% in market interest rate levels applicable to such
financial instruments would be approximately €33 million (€43 million at December 31, 2004,
as calculated in accordance with IFRS).
Our floating rate financial instruments include principally cash and cash equivalents, loans
provided by the financial services companies to the sales network and part of our debt, as well as
floating rate portions of interest rate derivatives. The sensitivity analysis also considers the
effect of the sale of receivables, as the cost of these transactions (usually performed on a
revolving basis) depends from short-term interest rates.
A hypothetical, unfavorable and instantaneous change of 10% in short-term interest rates at
December 31, 2005, applied to floating rate financial assets and liabilities, operations for the
sale of receivables and interest rate derivatives would have caused a negative impact on our
profit before taxes, on an annual basis, of approximately €17 million (€25 million at
December 31, 2004, as calculated in accordance with IFRS).
These sensitivity analyses are based on the assumption of an unfavorable and instantaneous 10%
movement in the rate of interest applicable to each homogenous category of financial assets and
liabilities. A homogeneous category is defined according to the currency in which financial assets
and liabilities are denominated and the analysis assumes the same interest rate movement within
each homogenous category (e.g. dollars and other currencies).
Despite our program to manage exchange rate and interest rate risk, there can be no assurance
that exchange rate or interest rate fluctuations will not adversely affect our results of
operations, cash flows, financial condition or relative price competitiveness in the future.
Moreover, as with all hedging instruments, there are risks associated with the use of foreign
currency forward exchange contracts, as well as with interest rate swap agreements and other risk
management tools. Although the use of such hedging instruments provides a certain degree of
protection from adverse fluctuations in currency exchange and interest rates, we may potentially
lose benefits resulting from other fluctuations in currency exchange and interest rates that might
have had a positive effect on our results as a result of using such instruments.
For a summary comparison of the nominal amounts, carrying amounts and market values of our
derivative financial instruments, see Note 22 to the Consolidated Financial Statements included in
Item 18.
Changes in Market Risk Exposure Compared to 2004
Our policy on financial risk management has not substantially changed from the preceding year.
Exchange Rate Risk
The characteristics and the mix of our financial instruments with exposure to foreign exchange
rate risk at December 31, 2005, have not changed substantially from the preceding year. The
increase in the potential loss in fair value arising from a hypothetical 10% change in relevant
foreign exchange rates (€273 million at December 31, 2005, as compared to €218 million at
December 31, 2004) noted above reflects an increase in the level of hedges outstanding at year-end.
Interest Rate Risk
The
characteristics and the mix of our financial instruments with exposure to interest rate risk at
December 31, 2005 have not
changed substantially from the preceding year. The decreases in the potential loss
153
arising
from a hypothetical 10% change in relevant interest rates in the fair value of
fixed rate financial instruments reflects the repayment of certain fixed rate exposure and a
reduction in the maturity profile of the fixed rate portfolio during
2005, while the reduced impact on pre-tax profit relating to floating rate instruments reflects a reduction in the amount of our floating rate debt
in 2005, which more than offset the impact of increases in market interest rates.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
We did not pay holders of our savings shares the minimum preferred dividend of €0.31 per
savings share in 2005 for the fourth year in a row. See Item 8. Financial InformationOther
Financial InformationDividend Policy and Note 25(i) to the Consolidated Financial
Statements included in Item 18 for additional information.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
We carried out an evaluation under the supervision and with the participation of our
management, including our CEO and principal financial officers, of the effectiveness of the design
and operation of our disclosure controls and procedures as of December 31, 2005. There are
inherent limitations to the effectiveness of any system of disclosure controls and procedures,
including the possibility of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO and
principal financial officers concluded that the disclosure controls and procedures as of December
31, 2005, were effective to provide reasonable assurance that information required to be disclosed
in the reports we file and submit under the Exchange Act, is recorded, processed, summarized and
reported as and when required. There has been no change in the Companys internal control over
financial reporting during 2005 that has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The Fiat Board of Statutory Auditors met the specified criteria
that qualify us for an
exemption under Rule 10A-3 under the Exchange Act from certain of the rules
requirements,
including the requirement to establish an audit committee, since when the rule became
applicable to
us on July 31, 2005. Each of the members of our Board of Statutory Auditors is
required to be a
registered chartered accountant with at least three years prior experience as a
statutory auditor;
we therefore believe that each is an audit committee financial expert as
defined in Item 16A of
Form 20-F. The members of the Board of Statutory Auditors are Carlo Pasteris, Chairman
of the Board, Giuseppe Camosci and Cesare Ferrero. All of the members of our Board of
Statutory Auditors meet the independence requirements provided by Italian law and the listing
standards of the Borsa Italiana, which are those applied by the New York Stock Exchange to
foreign private issuers such as Fiat in this respect. See Item 6. Directors,
Senior Management and Employees¾Board of Statutory
Auditors and Item 10. Other
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Information¾By-laws¾Significant Differences with
Corporate Governance Practices under NYSE Rules for additional information.
ITEM 16B. CODE OF ETHICS
We have adopted a broad Code of Conduct applicable to all of our employees, a copy of which is
available on our website at www.fiatgroup.com. Information posted on our website is not
incorporated by reference in this annual report. As part of this Code of Conduct, we adopted a
specific code of ethics, as defined in Item 16B of Form 20-F under the Exchange Act, that is
applicable to our CEO, principal financial officers, chief accounting officer and controller, as well as to our general
counsel, and persons performing similar functions to any of the foregoing. This code of ethics is
also available on our website. If we amend the provisions of this specific code of ethics, or if
we grant any waiver of the codes provisions, we will disclose such amendment or waiver on our
website at the same address.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit and Non-Audit Fees
Deloitte & Touche S.p.A., the member firms of Deloitte Touche Tohmatsu and their
respective affiliates (collectively, the Deloitte Entities) were appointed to serve as our
independent auditors for the year ended December 31, 2005. The Deloitte Entities billed the
following fees to us for professional services for the fiscal years ended December 31, 2005
and 2004:
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Year ended December 31, |
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2005 |
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2004 |
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(in millions of euros) |
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Audit fees |
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€16.7 |
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€15.6 |
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Audit-related fees |
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3.5 |
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2.1 |
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Tax fees |
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2.1 |
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2.6 |
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Other fees |
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2.8 |
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Total fees |
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€22.3 |
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€23.1 |
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Audit fees are the aggregate fees billed by the Deloitte Entities for the audit of
our consolidated and annual financial statements, reviews of interim financial statements and
attestation services that are provided in connection with statutory and regulatory filings or
engagements.
Audit-related fees are the aggregate fees billed by the Deloitte Entities for assurance
and related services that are reasonably related to the performance of the audit or review of
our financial statements and are not reported under Audit Fees. This category comprises
fees billed for the audit of employee benefit plans and pension schemes, agreed-upon procedure
engagements and other attestation services subject to regulatory requirements, certifications
of accounting-related internal controls, as well as advisory services associated with our
financial reporting.
Tax fees are the aggregate fees for professional services rendered by the Deloitte
Entities for tax compliance, tax advice on actual or contemplated transactions, tax consulting
associated with international transfer prices, and expatriate employee tax services.
Fees disclosed under the category Other fees are mainly related to project management
support for several of our process improvements (such as preparing for the transitions to
IFRS, inter-company matching engagement, and other services).
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Audit Committee Pre-Approval Policies and Procedures
Under our approval procedures as in effect during 2003, our Internal Control Committee
reviewed proposals submitted by candidates for the position of independent auditor, and made a
recommendation to the Board of Directors with respect to the appointment. Our Board of Directors
then submitted a resolution, together with a favorable recommendation from our Board of Statutory
Auditors, to our stockholders meeting, which under Italian law is responsible for the appointment
of the independent auditors. The stockholders meeting held on May 13, 2003 appointed Deloitte &
Touche S.p.A. (then Deloitte & Touche Italia S.p.A.) as the Companys independent auditors for each
fiscal year in the three-year period from 2003 through 2005.
Under its charter as in effect during 2004, our Internal Control Committee, upon the
recommendation of our chief administrative officer, granted prior approval of the performance by
our independent auditors or other entities affiliated with our independent auditors of
audit-related and permitted non-audit services, to the extent the relevant services are permitted
by applicable law. The Internal Control Committee, as it is permitted to do by its charter,
delegated this authority to its president, who was required to report on any approvals granted at
each committee meeting.
Our Board of Directors approved new procedures for the engagement of independent auditors on
December 23, 2004, which took effect as of January 1, 2005. The new procedures for the appointment
of our independent auditors require that our Board of Statutory Auditors approve the engagement,
and with respect to audit-related services, under the new procedures, our Board of Directors,
acting upon the recommendation of our Board of Statutory Auditors, annually approves a maximum
audit expenditure amount. The Internal Control Committee performs an initial review of any
proposals for the eventual performance by our independent auditors of audit-related services above
the audit expenditure amount and submits these proposals to our Board of Statutory Auditors, which
provides a final recommendation for any necessary action to be taken by our Board of Directors.
Except for those non-audit services being performed under previously existing contracts (which
contracts may remain in force until expiration but may not be renewed), our independent auditors
may no longer be engaged for any non-audit services.
Our Board of Directors, upon the recommendation of our Internal Control Committee and with the
approval of our Board of Statutory Auditors as required under the new procedure above mentioned,
proposed to reappoint Deloitte & Touche S.p.A. as the Companys independent auditors for each
fiscal year in the six-year term from 2006 through 2011. The stockholders meeting held on May 3,
2006, passed a resolution approving the proposal of the Board.
ITEM 16D. EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
We did not make any purchases of Fiat ordinary, preference or savings shares during 2005.
PART III
ITEM 17. FINANCIAL STATEMENTS
Not applicable.
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ITEM 18. FINANCIAL STATEMENTS
Index to Financial Statements and Schedules filed with this Annual Report
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PAGE |
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F-1 |
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Consolidated Financial Statements: |
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F-3 |
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F-5 |
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F-6 |
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F-7 |
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F-8 |
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157
ITEM 19. EXHIBITS
Index to Exhibits filed with this Annual Report
1.1 |
|
By-laws of Fiat S.p.A. (as approved by Fiat S.p.A.s stockholders at the annual general
meeting on September 20, 2005). |
|
2.1 |
|
The total amount of long-term debt securities of Fiat S.p.A. authorized under any instrument
does not exceed 10% of the total assets of the Group on a consolidated basis. Fiat S.p.A.
hereby agrees to furnish to the Securities and Exchange Commission upon request a copy of any
instrument defining the rights of holders of long-term debt of the registrant or of its
subsidiaries for which consolidated or unconsolidated financial statements are required to be
filed. |
|
8.1 |
|
List of subsidiaries of the registrant. |
|
12.1 |
|
Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
12.2 |
|
Principal Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. |
|
12.3 |
|
Principal Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. |
|
13.1 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
158
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
FIAT S.p.A.:
We have audited the accompanying consolidated balance sheets of FIAT S.p.A. (an Italian
corporation) and its subsidiaries (the Company) as of December 31, 2005 and 2004 and the related
consolidated statements of operations, changes in stockholders equity and cash flows for the years
then ended (all expressed in Euros). These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of FIAT S.p.A. and its subsidiaries as of
December 31, 2005 and 2004, and the results of their operations and their cash flows for the years
then ended in conformity with International Financial Reporting Standards as adopted by the
European Union.
International Financial Reporting Standards as adopted by the European Union vary in certain
significant respects from accounting principles generally accepted in the United States of America.
Information relating to the nature and effect of such differences is presented in Note 38 to the
consolidated financial statements.
Our audits also comprehended the translation of Euro amounts into U.S. dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note 36. Such U.S.
dollar amounts are presented solely for the convenience of readers in the United States of America.
DELOITTE & TOUCHE S.p.A.
/s/ DELOITTE & TOUCHE S.p.A.
Turin, Italy
March 2, 2006 (June 29, 2006 as to Note 38)
F-1
THE FIAT GROUP
CONSOLIDATED INCOME STATEMENT
For The Years Ended December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
2005 |
|
2005 |
|
2004 |
|
|
|
|
|
|
(in millions of |
|
|
|
|
|
|
|
|
U.S. dollars) |
|
|
|
|
|
|
|
|
(note 36) |
|
(in millions of euros) |
Net revenues |
|
|
(1 |
) |
|
|
55,117 |
|
|
|
46,544 |
|
|
|
45,637 |
|
Cost of sales |
|
|
(2 |
) |
|
|
46,923 |
|
|
|
39,624 |
|
|
|
39,121 |
|
Selling, general and administrative costs |
|
|
(3 |
) |
|
|
5,344 |
|
|
|
4,513 |
|
|
|
4,701 |
|
Research and development costs |
|
|
(4 |
) |
|
|
1,615 |
|
|
|
1,364 |
|
|
|
1,350 |
|
Other income (expenses) |
|
|
(5 |
) |
|
|
(51 |
) |
|
|
(43 |
) |
|
|
(415 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading Profit |
|
|
|
|
|
|
1,184 |
|
|
|
1,000 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on the disposal of investments |
|
|
(6 |
) |
|
|
1,072 |
|
|
|
905 |
|
|
|
150 |
|
Restructuring costs |
|
|
(7 |
) |
|
|
594 |
|
|
|
502 |
|
|
|
542 |
|
Other unusual income (expenses) |
|
|
(8 |
) |
|
|
961 |
|
|
|
812 |
|
|
|
(243 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating result |
|
|
|
|
|
|
2,623 |
|
|
|
2,215 |
|
|
|
(585 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income (expenses) |
|
|
(9 |
) |
|
|
(998 |
) |
|
|
(843 |
) |
|
|
(1,179 |
) |
Unusual financial income |
|
|
(9 |
) |
|
|
1,016 |
|
|
|
858 |
|
|
|
|
|
Result from investments |
|
|
(10 |
) |
|
|
40 |
|
|
|
34 |
|
|
|
135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result before taxes |
|
|
|
|
|
|
2,681 |
|
|
|
2,264 |
|
|
|
(1,629 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
(11 |
) |
|
|
999 |
|
|
|
844 |
|
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result from continuing operations |
|
|
|
|
|
|
1,682 |
|
|
|
1,420 |
|
|
|
(1,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net result before minority interest |
|
|
|
|
|
|
1,682 |
|
|
|
1,420 |
|
|
|
(1,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
|
|
|
|
106 |
|
|
|
89 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group interest in net result |
|
|
|
|
|
|
1,576 |
|
|
|
1,331 |
|
|
|
(1,634 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in euros) |
Earnings per ordinary and preference share |
|
|
(12 |
) |
|
|
1.480 |
|
|
|
1.250 |
|
|
|
(1.699 |
) |
Earnings per savings share |
|
|
(12 |
) |
|
|
1.480 |
|
|
|
1.250 |
|
|
|
(1.699 |
) |
Diluted earnings per ordinary and preference
share |
|
|
(12 |
) |
|
|
1.480 |
|
|
|
1.250 |
|
|
|
(1.699 |
) |
Diluted earnings per savings share |
|
|
(12 |
) |
|
|
1.480 |
|
|
|
1.250 |
|
|
|
(1.699 |
) |
The accompanying notes are an integral part of the consolidated financial statements.
F - 2
THE FIAT GROUP
CONSOLIDATED BALANCE SHEET
At December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
Note |
|
2005 |
|
2005 |
|
2004 |
|
|
|
|
|
|
(in millions of |
|
|
|
|
|
|
|
|
U.S. dollars) |
|
|
|
|
|
|
|
|
(note 36) |
|
(in millions of euros) |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
(13 |
) |
|
|
7,038 |
|
|
|
5,943 |
|
|
|
5,578 |
|
Property, plant and equipment |
|
|
(14 |
) |
|
|
13,033 |
|
|
|
11,006 |
|
|
|
9,437 |
|
Investment property |
|
|
(15 |
) |
|
|
31 |
|
|
|
26 |
|
|
|
46 |
|
Investments and other financial assets: |
|
|
(16 |
) |
|
|
2,763 |
|
|
|
2,333 |
|
|
|
4,025 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
2,087 |
|
|
|
1,762 |
|
|
|
3,490 |
|
Other investments and financial assets |
|
|
|
|
|
|
676 |
|
|
|
571 |
|
|
|
535 |
|
Leased assets |
|
|
(17 |
) |
|
|
1,485 |
|
|
|
1,254 |
|
|
|
740 |
|
Deferred tax assets |
|
|
(11 |
) |
|
|
2,491 |
|
|
|
2,104 |
|
|
|
2,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-current assets |
|
|
|
|
|
|
26,841 |
|
|
|
22,666 |
|
|
|
22,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
(18 |
) |
|
|
9,333 |
|
|
|
7,881 |
|
|
|
7,257 |
|
Trade receivables |
|
|
(19 |
) |
|
|
5,884 |
|
|
|
4,969 |
|
|
|
5,491 |
|
Receivables from financing activities |
|
|
(19 |
) |
|
|
18,915 |
|
|
|
15,973 |
|
|
|
17,498 |
|
Other receivables |
|
|
(19 |
) |
|
|
3,652 |
|
|
|
3,084 |
|
|
|
2,734 |
|
Accrued income and prepaid expenses |
|
|
(20 |
) |
|
|
322 |
|
|
|
272 |
|
|
|
295 |
|
Current financial assets: |
|
|
|
|
|
|
1,233 |
|
|
|
1,041 |
|
|
|
1,237 |
|
Current equity investments |
|
|
|
|
|
|
37 |
|
|
|
31 |
|
|
|
33 |
|
Current securities |
|
|
(21 |
) |
|
|
658 |
|
|
|
556 |
|
|
|
353 |
|
Other financial assets |
|
|
(22 |
) |
|
|
538 |
|
|
|
454 |
|
|
|
851 |
|
Cash and cash equivalents |
|
|
(23 |
) |
|
|
7,599 |
|
|
|
6,417 |
|
|
|
5,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current assets |
|
|
|
|
|
|
46,938 |
|
|
|
39,637 |
|
|
|
40,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale |
|
|
(24 |
) |
|
|
179 |
|
|
|
151 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
|
|
|
73,958 |
|
|
|
62,454 |
|
|
|
62,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets adjusted for asset-backed financing
transactions |
|
|
|
|
|
|
61,867 |
|
|
|
52,244 |
|
|
|
52,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
(25 |
) |
|
|
11,147 |
|
|
|
9,413 |
|
|
|
4,928 |
|
Stockholders equity of the Group |
|
|
|
|
|
|
10,280 |
|
|
|
8,681 |
|
|
|
4,304 |
|
Minority interest |
|
|
|
|
|
|
867 |
|
|
|
732 |
|
|
|
624 |
|
Provisions: |
|
|
|
|
|
|
10,300 |
|
|
|
8,698 |
|
|
|
7,290 |
|
Employee benefits |
|
|
(26 |
) |
|
|
4,641 |
|
|
|
3,919 |
|
|
|
3,682 |
|
Other provisions |
|
|
(27 |
) |
|
|
5,659 |
|
|
|
4,779 |
|
|
|
3,608 |
|
Debt: |
|
|
(28 |
) |
|
|
30,506 |
|
|
|
25,761 |
|
|
|
32,191 |
|
Asset-backed financing |
|
|
|
|
|
|
12,091 |
|
|
|
10,210 |
|
|
|
10,174 |
|
Other debt |
|
|
|
|
|
|
18,415 |
|
|
|
15,551 |
|
|
|
22,017 |
|
Other financial liabilities |
|
|
(22 |
) |
|
|
224 |
|
|
|
189 |
|
|
|
203 |
|
Trade payables |
|
|
(29 |
) |
|
|
13,946 |
|
|
|
11,777 |
|
|
|
11,697 |
|
Other payables |
|
|
(30 |
) |
|
|
5,709 |
|
|
|
4,821 |
|
|
|
4,561 |
|
Deferred tax liabilities |
|
|
(11 |
) |
|
|
480 |
|
|
|
405 |
|
|
|
522 |
|
Accrued expenses and deferred income |
|
|
(31 |
) |
|
|
1,516 |
|
|
|
1,280 |
|
|
|
1,130 |
|
Liabilities held for sale |
|
|
(24 |
) |
|
|
130 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity and Liabilities |
|
|
|
|
|
|
73,958 |
|
|
|
62,454 |
|
|
|
62,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity and liabilities adjusted
for asset-backed financing transactions |
|
|
|
|
|
|
61,867 |
|
|
|
52,244 |
|
|
|
52,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F - 3
THE FIAT GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Years Ended December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2005 |
|
2004 |
|
|
(in millions of |
|
|
|
|
U.S. dollars) |
|
|
|
|
(note 36) |
|
(in millions of euros) |
Cash and cash equivalents at beginning of period |
|
|
6,829 |
|
|
|
5,767 |
|
|
|
6,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) operating activities
during the period: |
|
|
|
|
|
|
|
|
|
|
|
|
Net result before minority interest |
|
|
1,682 |
|
|
|
1,420 |
|
|
|
(1,579 |
) |
Amortisation and depreciation (net of vehicles sold
under buy-back commitments) |
|
|
3,067 |
|
|
|
2,590 |
|
|
|
2,224 |
|
(Gains) losses and other non-monetary items (a) |
|
|
(1,849 |
) |
|
|
(1,561 |
) |
|
|
277 |
|
Dividends received |
|
|
56 |
|
|
|
47 |
|
|
|
28 |
|
Change in provisions |
|
|
944 |
|
|
|
797 |
|
|
|
(53 |
) |
Change in deferred income taxes |
|
|
466 |
|
|
|
394 |
|
|
|
(165 |
) |
Change in items due to buy-back commitments (b) |
|
|
(101 |
) |
|
|
(85 |
) |
|
|
(136 |
) |
Change in working capital |
|
|
135 |
|
|
|
114 |
|
|
|
1,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,400 |
|
|
|
3,716 |
|
|
|
2,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) investments activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Investments in: |
|
|
|
|
|
|
|
|
|
|
|
|
Tangible and intangible assets (net of vehicles
sold under buy-back commitments) |
|
|
(3,614 |
) |
|
|
(3,052 |
) |
|
|
(2,915 |
) |
Equity investments (c) |
|
|
(46 |
) |
|
|
(39 |
) |
|
|
(151 |
) |
Other equity investments |
|
|
(33 |
) |
|
|
(28 |
) |
|
|
(88 |
) |
Proceeds from the sale of: |
|
|
|
|
|
|
|
|
|
|
|
|
Tangible and intangible assets (net of vehicles
sold under buy-back commitments) |
|
|
506 |
|
|
|
427 |
|
|
|
246 |
|
Equity investments (c) |
|
|
54 |
|
|
|
46 |
|
|
|
173 |
|
Other equity investments |
|
|
32 |
|
|
|
27 |
|
|
|
175 |
|
Net change in receivables from financing activities |
|
|
(297 |
) |
|
|
(251 |
) |
|
|
1,960 |
|
Change in current securities |
|
|
(188 |
) |
|
|
(159 |
) |
|
|
460 |
|
Other changes (c) |
|
|
2,953 |
|
|
|
2,494 |
|
|
|
284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(633 |
) |
|
|
(535 |
) |
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in financial payables and other financial
assets/liabilities (d) |
|
|
(3,362 |
) |
|
|
(2,839 |
) |
|
|
(3,074 |
) |
Increase in capital stock (d) |
|
|
|
|
|
|
|
|
|
|
16 |
|
Dividends paid |
|
|
(34 |
) |
|
|
(29 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,396 |
) |
|
|
(2,868 |
) |
|
|
(3,078 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation exchange differences |
|
|
399 |
|
|
|
337 |
|
|
|
(155 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents |
|
|
770 |
|
|
|
650 |
|
|
|
(1,078 |
) |
Cash and cash equivalents at end of the period |
|
|
7,599 |
|
|
|
6,417 |
|
|
|
5,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
This includes, amongst other items, the unusual financial income of 858 million euros
arising from the extinguishment of the Mandatory Convertible Facility and the gain of 878
million euros realized on the sale of the investment in Italenergia Bis. |
|
(b) |
|
The cash flows for the two periods generated by the sale of vehicles with a buy-back
commitment, net of the amount already included in the net result, are included in operating
activities for the period, in a single item which includes the change in working capital,
capital expenditures, depreciation, gains and losses and proceeds from sales at the end of
the contract term, relating to assets included in Property, plant and equipment. |
|
(c) |
|
In this line are stated the effects on the Groups net assets resulting from the sale
and purchase of consolidated companies, included as part of the Scope of consolidation in
the Notes to the Consolidated Financial Statements. |
|
(d) |
|
Net of the repayment of the Mandatory Convertible Facility of 3 billion euros and of
the debt of approximately 1.8 billion euros connected with the Italenergia Bis operation,
as neither of these gave rise to cash flows. |
The accompanying notes are an integral part of the consolidated financial statements.
F - 4
THE FIAT GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
For The Years Ended December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
recognized |
|
|
|
|
|
|
Capital |
|
Treasury |
|
Capital |
|
Revenue |
|
directly in |
|
Minority |
|
|
|
|
stock |
|
stock |
|
reserves |
|
reserves |
|
equity |
|
interest |
|
Total |
|
|
(in millions of euros) |
Balances at
January 1, 2004 |
|
|
4,918 |
|
|
|
(32 |
) |
|
|
279 |
|
|
|
714 |
|
|
|
31 |
|
|
|
650 |
|
|
|
6,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cover of Fiat
S.p.A. fiscal 2003
loss by Additional
paid-in capital and
Legal reserve |
|
|
|
|
|
|
|
|
|
|
(279 |
) |
|
|
279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
(19 |
) |
Capital increase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
16 |
|
Net changes in
income (expenses)
recognized directly
in equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
(9 |
) |
|
|
(13 |
) |
Other changes |
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
(69 |
) |
|
|
(37 |
) |
Net profit (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,634 |
) |
|
|
|
|
|
|
55 |
|
|
|
(1,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
December 31, 2004 |
|
|
4,918 |
|
|
|
(26 |
) |
|
|
|
|
|
|
(615 |
) |
|
|
27 |
|
|
|
624 |
|
|
|
4,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital increase
from extinguishment
of Mandatory
Convertible
Facility |
|
|
1,459 |
|
|
|
|
|
|
|
682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,141 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29 |
) |
|
|
(29 |
) |
Changes in reserve
for share based
payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
Net changes in
income (expenses)
recognized directly
in equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
884 |
|
|
|
38 |
|
|
|
922 |
|
Other changes |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
10 |
|
|
|
19 |
|
Net profit (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,331 |
|
|
|
|
|
|
|
89 |
|
|
|
1,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
December 31, 2005 |
|
|
6,377 |
|
|
|
(28 |
) |
|
|
682 |
|
|
|
739 |
|
|
|
911 |
|
|
|
732 |
|
|
|
9,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
THE FIAT GROUP
CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE
For The Years Ended December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Gains (losses) recognized directly in the cash flow hedge reserve: |
|
|
3 |
|
|
|
25 |
|
Gains (losses) recognized directly in the reserve for fair value
measurement of available-for-sale financial assets: |
|
|
61 |
|
|
|
46 |
|
Exchange gains (losses) on the translation of foreign operations: |
|
|
861 |
|
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
Gains (losses) recognized directly in equity by the Group |
|
|
925 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Transfers from cash flow hedge reserve |
|
|
(41 |
) |
|
|
(5 |
) |
Group interest in net result |
|
|
1,331 |
|
|
|
(1,634 |
) |
|
|
|
|
|
|
|
|
|
Recognized income (expense) of the Group |
|
|
2,215 |
|
|
|
(1,638 |
) |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
at December 31, 2005 and 2004
PRINCIPAL ACTIVITIES
Fiat S.p.A. is a corporation organized under the laws of the Republic of Italy. Fiat S.p.A.
and its subsidiaries (the Group) operate in more than 190 countries. The Group is engaged
principally in the manufacture and sale of automobiles, agricultural and construction equipment and
commercial vehicles. It also manufactures other products and systems, principally
automotive-related components, metallurgical products and production systems. In addition, it is
involved in certain other sectors, including publishing and communications and service operations,
which represent a marginal portion of its activities. The head office of the Group is located in
Turin, Italy.
The consolidated financial statements are presented in euros, the Groups functional currency.
SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The 2005 consolidated financial statements have been prepared in accordance with the
International Financial Reporting Standards (the IFRS) issued by the International Accounting
Standards Board (IASB) and adopted by the European Union. The designation IFRS also includes
all valid International Accounting Standards (IAS), as well as all interpretations of the
International Financial Reporting Interpretations Committee (IFRIC), formerly the Standing
Interpretations Committee (SIC).
The Fiat Group adopted IFRS on January 1, 2005 on the coming into effect of European Union
Regulation No. 1606 of July 19, 2002. In this context, the accounting policies applied in these
financial statements are consistent with those adopted in preparing the IFRS opening consolidated
balance sheet at January 1, 2004, as well the consolidated financial statements at December 31,
2004, as restated in accordance with IFRS and presented in the Note 39 to which reference should be
made. Reconciliations between profit or loss and equity under previous GAAP (Italian GAAP) to
profit or loss and equity under IFRS for the periods shown as comparatives, as required by IFRS 1
First-time Adoption of IFRS, together with related explanatory notes, are also included in the Note
39.
Certain changes, however, have been made to the classification of the figures reported in the
Appendix to the Quarterly Report at March 31, 2005, and the comparative data for prior periods have
been reclassified accordingly. These changes have no effect on Trading profit, Operating result,
Net result or Consolidated stockholders equity and regard in particular:
|
§ |
|
Vehicles sold with a buy-back commitment are accounted for as Inventory if they
regard the Fiat Auto business (agreements with normally a short-term buy-back
commitment) and as Property, plant and equipment if they regard the Commercial Vehicles
business (agreements with normally a long-term buy-back commitment). In the balance
sheet included in the Appendix to the Quarterly Report at March 31, 2005, these
vehicles were accounted for as either Inventory or Property, plant and equipment
depending on the term of the buy-back commitment (less or more than twelve months,
respectively). |
|
|
§ |
|
In order to achieve a better presentation, more consistent between the various
Sectors, certain costs, previously classified by some Sectors as Other income
(expenses) and by others as Cost of sales or Selling, general and administrative costs,
have been recorded in the same manner by all Sectors. |
F - 7
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
§ |
|
The item Accrued income and prepaid expenses is included in Current assets. The
financial statements are prepared under the historical cost convention, modified as
required for the valuation of certain financial instruments. |
Format of the financial statements
The Fiat Group presents an income statement using a classification based on the function of
expenses within the Group (otherwise known as the cost of sales method), rather than based on
their nature, as this is believed to provide information that is more relevant. The format selected
is that used for managing the business and for management reporting purposes and is coherent with
international practice in the automotive sector.
For the balance sheet, a mixed format has been selected to present current and non-current
assets and liabilities, as permitted by paragraph 51 and following of IAS 1. In more detail, both
companies carrying out industrial activities and those carrying out financial activities are
consolidated in the Groups financial statements, including certain entities performing banking
activities. The investment portfolios of financial services companies are included in current
assets, as the investments will be realized in their normal operating cycle. Financial services
companies, though, obtain funds only partially from the market: the remaining are obtained from
Fiat S.p.A. through the Groups treasury companies (included in industrial companies), which lend
funds both to industrial Group companies and to financial services companies as the need arises.
This financial service structure within the Group means that any attempt to separate current and
non-current debt in the consolidated balance sheet cannot be meaningful. Suitable disclosure on the
due dates of liabilities is moreover provided in the notes.
Basis of consolidation
Subsidiaries
Subsidiaries are enterprises controlled by the Group, as defined in IAS 27 Consolidated and
Separate Financial Statements. Control exists when the Group has the power, directly or indirectly,
to govern the financial and operating policies of an enterprise so as to obtain benefits from its
activities. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases. The equity and
net result attributable to minority stockholders interests are shown separately in the
consolidated balance sheet and income statement, respectively. When losses in a consolidated
subsidiary pertaining to the minority exceed the minority interest in the subsidiarys equity, the
excess is charged against the Groups interest, unless the minority stockholders have a binding
obligation to reimburse the losses and are able to make an additional investment to cover the
losses, in which case the excess is recorded as an asset in the consolidated financial statements.
If no such obligation exists, should profits be realized in the future, the minority interests
share of those profits is attributed to the Group, up to the amount necessary to recover the losses
previously absorbed by the Group.
Subsidiaries either dormant or generating a negligible volume of business are not included in
the consolidated financial statements. Their influence on the Groups assets, liabilities,
financial position and earnings is immaterial.
Jointly controlled entities
Jointly controlled entities are enterprises over whose activities the Group has joint control,
as defined in IAS 31 Interests in Joint Ventures. The consolidated financial statements include
the Groups share of the earnings of jointly controlled entities using the
F - 8
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
equity method, from the
date that joint control commences until the date that joint control ceases.
Associates
Associates are enterprises over which the Group has significant influence, but no control or
joint control, over the financial and operating policies, as defined in IAS 28 Investments in
Associates. The consolidated financial statements include the Groups share of the earnings of
associates using the equity method, from the date that significant influence commences until the
date that significant influence ceases. When the Groups share of losses of an associate, if any,
exceeds the carrying amount of the associate in the Groups balance sheet, the carrying amount is
reduced to nil and recognition of further losses is discontinued except to the extent that the
Group has incurred obligations in respect of the associate.
Investments in other companies
Equity investments in other companies that are available-for-sale financial assets are
measured at fair value, when this can be reliably determined. Gains or losses arising from changes
in fair value are recognized directly in equity until the assets are sold or are impaired, when the
cumulative gains and losses previously recognized in equity are recognized in the income statement
of the period.
Investments in other companies for which fair value is not available are stated at cost less
any impairment losses.
Dividends received from these investments are included in Result from investments.
Transactions eliminated on consolidation
All significant intragroup balances and transactions and any unrealized gains and losses
arising from intragroup transactions are eliminated in preparing the consolidated financial
statements. Unrealized gains and losses arising from transactions with associates and jointly
controlled entities are eliminated to the extent of the Groups interest in those entities.
Foreign currency transactions
Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the exchange rate prevailing at that date. Exchange
differences arising on the settlement of monetary items or on reporting monetary items at rates
different from those at which they were initially recorded during the period or in previous
financial statements, are recognized in the income statement.
Consolidation of foreign entities
All assets and liabilities of foreign companies that are consolidated are translated using the
exchange rates in effect at the balance sheet date. Income and expenses are translated at the
average exchange rate for the period. Translation differences resulting from the application of
this method are classified as equity until the disposal of the investment. Average rates of
exchange are used to translate the cash flows of foreign subsidiaries in preparing the consolidated
statement of cash flows.
F - 9
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are
recorded in the relevant foreign currency and are translated using the period end exchange rate.
In the context of IFRS First-time Adoption, the cumulative translation difference arising from
the consolidation of foreign operations was set at nil as of January 1, 2004, as permitted by IFRS
1; gains or losses on subsequent disposal of any foreign operation only include accumulated
translation differences arising after January 1, 2004.
Intangible assets
Goodwill
In the case of acquisitions of businesses, the acquired identifiable assets, liabilities and
contingent liabilities are recorded at fair value at the date of acquisition. Any excess of the
cost of the business combination over the Groups interest in the fair value of those assets and
liabilities is classified as goodwill and recorded in the financial statement as an intangible
asset. If this difference is negative (negative goodwill), it is recognized in the income statement
at the time of acquisition.
Goodwill is not amortized, but is tested for impairment annually, or more frequently if events
or changes in circumstances indicate that it might be impaired. After initial recognition, goodwill
is measured at cost less any accumulated impairment losses.
On disposal of part or whole of a business which was previously acquired and which gave rise
to the recognition of goodwill, the residual amount of the related goodwill is included in the
determination of the gain or loss on disposal.
In the context of IFRS First-time Adoption, the Group elected not to apply IFRS 3 Business
Combinations retrospectively to the business combinations that occurred before January 1, 2004; as
a consequence, goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the previous Italian GAAP amounts, subject to being tested for impairment at that date.
Development costs
Development costs for vehicle project production (cars, trucks, buses, agricultural and
construction equipment, related components, engines, and production systems) are recognized as an
asset if and only if all of the following conditions are met: the development costs can be measured
reliably and the technical feasibility of the product, volumes and pricing support the view that
the development expenditure will generate future economic benefits. Capitalized development costs
comprise only expenditures that can be attributed directly to the development process.
Capitalized development costs are amortized on a systematic basis from the start of production
of the related product over the products estimated life, as follows:
|
|
|
|
|
|
|
N° of years |
|
Cars |
|
|
4 - 5 |
|
Trucks and buses |
|
|
8 |
|
Agricultural and construction equipment |
|
|
5 |
|
Engines |
|
|
8 - 10 |
|
Components |
|
|
3 - 5 |
|
All other development costs are expensed as incurred.
F - 10
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Other intangible assets
Other purchased and internally-generated intangible assets are recognized as assets in
accordance with IAS 38 Intangible Assets, where it is probable that the use of the asset will
generate future economic benefits and where the costs of the asset can be determined reliably.
Such assets are measured at purchase or manufacturing cost and amortized on a straight-line
basis over their estimated useful lives, if these assets have finite useful lives. Intangible
assets with indefinite useful lives are not amortized, but are tested for impairment annually, or
more frequently whenever there is an indication that the asset may be impaired.
Other intangible assets acquired as part of an acquisition of a business are capitalized
separately from goodwill if their fair value can be measured reliably.
Property, plant and equipment
Cost
Property, plant and equipment are stated at acquisition or production cost and are not
revalued.
Subsequent expenditures are capitalized only if they increase the future economic benefits
embodied in the related item of property, plant and equipment. All other expenditures are expensed
as incurred.
Property, plant and equipment also include vehicles sold with a buy-back commitment, which are
recognized according to the method described in the note Revenue recognition if originating from
the Commercial Vehicles business.
Assets held under finance leases, which provide the Group with substantially all the risks and
rewards of ownership, are recognized as assets of the Group at their fair value or, if lower, at
the present value of the minimum lease payments. The corresponding liability to the lessor is
included in the financial statement as a debt. The assets are depreciated by the method and at the
rates indicated below.
Leases where the lessor retains substantially all the risks and rewards of ownership of the
assets are classified as operating leases. Operating lease expenditures are expensed on a
straight-line basis over the lease terms.
Depreciation
Depreciation is calculated on a straight-line basis over the estimated useful life of the
assets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation rates |
Buildings |
|
|
2 |
% |
|
|
|
|
|
|
10 |
% |
Plant and machinery |
|
|
8 |
% |
|
|
|
|
|
|
30 |
% |
Industrial and commercial equipment |
|
|
15 |
% |
|
|
|
|
|
|
25 |
% |
Other assets |
|
|
10 |
% |
|
|
|
|
|
|
33 |
% |
Land is not depreciated.
F - 11
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Leased assets
Leased assets include vehicles leased to retail customers by the Groups leasing companies
under operating lease agreements. They are stated at cost and depreciated at annual rates of
between 15% and 25%.
Investment property
Real estate and buildings held in order to obtain rental income are carried at cost less
accumulated depreciation (charged at annual rates of between 2.5% to 5%) and impairment losses.
Impairment of assets
The Group reviews, at least annually, the recoverability of the carrying amount of intangible
assets (including capitalized development costs) and tangible assets, in order to determine whether
there is any indication that those assets have suffered an impairment loss. If indications of
impairment are present, the carrying amount of the asset is reduced to its recoverable amount. An
intangible asset with an indefinite useful life is tested for impairment annually or more
frequently, whenever there is an indication that the asset may be impaired.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount of an asset is the higher of fair value less disposal costs and its
value in use. In assessing its value in use, the pre-tax estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. An impairment loss is recognized when
the recoverable amount is lower than the carrying amount. Where an impairment loss on assets other
than goodwill subsequently no longer exists or has decreased, the carrying amount of the asset or
cash-generating unit is increased to the revised estimate of its recoverable amount, but not in
excess of the carrying amount that would have been recorded had no impairment loss been recognized.
A reversal of an impairment loss is recognized in the income statement immediately.
Financial instruments
Presentation
Financial instruments held by the Group are presented in the financial statements as described
in the following paragraphs.
Investments and other non-current financial assets comprise investments in non-consolidated
companies and other non-current financial assets (held-to-maturity securities, non-current loans
and receivables and other non-current available-for-sale financial assets).
Current financial assets include trade receivables, receivables from financing activities
(retail financing, dealer financing, lease financing and other current loans to third parties),
current securities, and other current financial assets (which include derivative financial
instruments stated at fair value as assets), as well as cash and cash equivalents.
In particular, Cash and cash equivalents include cash at banks, units in liquidity funds and
other money market securities that are readily convertible into cash and are subject to an
insignificant risk of changes in value. Current securities include short-term or marketable
securities which
F - 12
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
represent temporary investments of available funds and do not satisfy the requirements for
being classified as cash equivalents; current securities include both available-for-sale and held
for trading securities.
Financial liabilities refer to debt, which includes asset-backed financing, and other
financial liabilities (which include derivative financial instruments stated at fair value as
liabilities), trade payables and other payables.
Measurement
Investments in unconsolidated companies classified as non-current financial assets are
accounted for as described in the section Basis of consolidation.
Non-current financial assets other than equity investments, as well as current financial
assets and financial liabilities, are accounted for in accordance with IAS 39 Financial
Instruments: Recognition and Measurement.
Current financial assets and held-to-maturity securities are recognized on the basis of the
settlement date and, on initial recognition, are measured at acquisition cost, including
transaction costs.
Subsequent to initial recognition, available-for-sale and held for trading financial assets
are measured at fair value. When market prices are not available, the fair value of
available-for-sale financial assets is measured using appropriate valuation techniques e.g.
discounted cash flow analysis based on market information available at the balance sheet date.
Gains and losses on available-for-sale financial assets are recognized directly in equity
until the financial asset is disposed or is determined to be impaired, at which time the cumulative
gains or losses, including that previously recognized in equity, are included in the income
statement for the period. Gains and losses arising from changes in fair value of held for trading
financial instruments are included in the income statement for the period.
Loans and receivables which are not held by the Group for trading (originated loans and
receivables), held-to-maturity securities and all financial assets for which published price
quotations in an active market are not available and whose fair value cannot be determined
reliably, are measured, to the extent that they have a fixed term, at amortized cost, using the
effective interest method. When the financial assets do not have a fixed term, they are measured at
acquisition cost. Receivables with maturities of over one year which bear no interest or an
interest rate significantly lower than market rates, are discounted using market rates.
Assessments are made regularly as to whether there is any objective evidence that a financial
asset or group of assets may be impaired. If any such evidence exists, an impairment loss is
included in the income statement for the period.
Except for derivative instruments, financial liabilities are measured at amortized cost using
the effective interest method. Financial liabilities hedged by derivative instruments are measured
in accordance with hedge accounting principles applicable to fair value hedges: gains and losses
arising from remeasurement at fair value, due to changes in relevant hedged risk, are recognized in
the income statement and are offset by the effective portion of the loss or gain arising from
remeasurement at fair value of the hedging instrument.
Derivative financial instruments
Derivative financial instruments are only used for hedging purposes, in order to reduce
currency, interest rate and market price risks. In accordance with IAS 39, derivative financial
F - 13
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
instruments qualify for hedge accounting only when at the inception of the hedge there is
formal designation and documentation of the hedging relationship, the hedge is expected to be
highly effective, its effectiveness can be reliably measured and it is highly effective throughout
the financial reporting periods for which the hedge is designated.
All derivative financial instruments are measured in accordance with IAS 39 at fair value.
When derivative financial instruments qualify for hedge accounting, the following accounting
treatment applies:
|
§ |
|
Fair value hedge Where a derivative financial instrument is designated as
a hedge of the exposure to changes in fair value of a recognized asset or liability
that is attributable to a particular risk and could affect income statement, the gain
or loss from remeasuring the hedging instrument at fair value is recognized in the
income statement. The gain or loss on the hedged item attributable to the hedged risk
adjusts the carrying amount of the hedged item and is recognized in the income
statement. |
|
|
§ |
|
Cash flow hedge Where a derivative financial instrument is designated as a
hedge of the exposure to variability in future cash flows of a recognized asset or
liability or a highly probable forecasted transaction and could affect income
statement, the effective portion of any gain or loss on the derivative financial
instrument is recognized directly in equity. The cumulative gain or loss is removed
from equity and recognized in the income statement at the same time at which the hedged
transaction affects income statement. The gain or loss associated with a hedge or part
of a hedge that has become ineffective is recognized in the income statement
immediately. When a hedging instrument or hedge relationship is terminated but the
hedged transaction is still expected to occur, the cumulative gain or loss realized to
the point of termination remains in stockholders equity and is recognized in the
income statement at the same time as the related transaction occurs. If the hedged
transaction is no longer probable, the cumulative unrealized gain or loss held in
stockholders equity is recognized in the income statement immediately. |
If hedge accounting cannot be applied, the gains or losses from the fair value measurement of
derivative financial instruments are recognized immediately in the income statement.
Sales of receivables
The Fiat Group sells a significant part of its financial, trade and tax receivables through
either securitization programs or factoring transactions.
A securitization transaction entails the sale of a portfolio of receivables to a
securitization vehicle. This special purpose entity finances the purchase of the receivables by
issuing asset-backed securities (i.e. securities whose repayment and interest flow depend upon the
cash flow generated by the portfolio). Asset-backed securities are divided into classes according
to their degree of seniority and rating: the most senior classes are placed with investors on the
market; the junior class, whose repayment is subordinated to the senior classes, is normally
subscribed for by the seller. The residual interest in the receivables retained by the seller is
therefore limited to the junior securities it has subscribed for. In accordance with SIC-12
Consolidation Special Purpose Entities (SPE), all securitization vehicles are included in the
scope of consolidation, because the subscription of the junior asset-backed securities by the
seller entails its control in substance over the SPE.
Furthermore, factoring transactions may be with or without recourse to the seller; certain
factoring agreements without recourse include deferred purchase price clauses (i.e. the payment of
a minority portion of the purchase price is conditional upon the full collection of the
receivables),
F - 14
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
require a first loss guarantee of the seller up to a limited amount or imply a continuing
significant exposure to the receivables cash flow. These kinds of transactions do not meet IAS 39
requirements for asset derecognition, since the risks and rewards have not been substantially
transferred.
Consequently, all receivables sold through both securitization and factoring transactions
which do not meet IAS 39 derecognition requirements are recognized as such in the Group financial
statements even though they have been legally sold; a corresponding financial liability is recorded
in the consolidated balance sheet as Asset-backed financing. Gains and losses relating to the
sale of such assets are not recognized until the assets are removed from the Group balance sheet.
Inventory
Inventories of raw materials, semifinished products and finished goods are stated at the lower
of cost and net realizable value, cost being determined on a first in-first-out (FIFO) basis. The
measurement of inventories includes the direct costs of materials, labour and indirect costs
(variable and fixed). Provision is made for obsolete and slow-moving raw materials, finished goods,
spare parts and other supplies based on their expected future use and realizable value. Net
realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs for sale and distribution.
The measurement of work in progress is based on the stage of completion and is presented net
of progress billings received from customers. Any losses on such contracts are fully recorded in
the income statement when they become known.
Assets held for sale
Assets held for sale include non-current assets (or assets included in disposal groups) whose
carrying amount will be recovered principally through a sale transaction rather than through
continuing use. Assets held for sale are measured at the lower of their carrying amount and fair
value less disposal costs.
Employee benefits
Pension plans
Employees of the Group participate in several defined benefit and/or defined contribution
pension plans in accordance with local conditions and practices in the countries in which the Group
operates. Defined benefit pension plans are based on the employees years of service and the
remuneration earned by the employee during a pre-determined period.
The Groups obligation to fund defined benefit pension plans and the annual cost recognized in
the income statement is determined on an actuarial basis using the projected unit credit method.
The portion of net cumulative actuarial gains and losses which exceeds the greater of 10% of the
present value of the defined benefit obligation and 10% of the fair value of plan assets at the end
of the previous year is amortized over the average remaining service lives of the employees (the
corridor approach). In the context of IFRS First-time Adoption, the Group elected to recognize
all cumulative actuarial gains and losses that existed at January 1, 2004, even though it has
decided to use the corridor approach for subsequent actuarial gains and losses. Past service costs
are recognized on a straight-line basis over the average period remaining until the benefits become
vested. The expense related to the reversal of discounting pension obligations for all defined
benefit plans are reported
F - 15
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
separately as part of the Groups financial expense. All other costs relating to allocations
to pension provisions are allocated to costs by function in the income statement.
The post-employment benefit obligation recognized in the balance sheet represents the present
value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses,
arising from the application of the corridor method and unrecognized past service cost, reduced by
the fair value of plan assets. Any net asset resulting from this calculation is recognized at the
lower of its amount and the total of any cumulative unrecognized net actuarial losses and past
service cost, and the present value of any economic benefits available in the form of refunds from
the plan or reductions in future contributions to the plan.
Payments to defined contribution plans are recognized as an expense in the income statement as
incurred.
Post-employment plans other than pensions
The Group provides certain post-employment defined benefit schemes, mainly healthcare plans.
The method of accounting and the frequency of valuations are similar to those used for defined
benefit pension plans.
The reserve for employee severance indemnities of Italian companies (TFR) is considered a
defined benefit plan and is accounted for accordingly.
Equity compensation plans
The Group provides additional benefits to certain members of senior management and employees
through equity compensation plans (stock option plans). In accordance with IFRS 2 Share-based
Payment, these plans represent a component of recipient remuneration. The compensation expense,
corresponding to the fair value of the options at the grant date, is recognized in the income
statement on a straight-line basis over the period from the grant date to the vesting date, with
the offsetting credit recognized directly in equity. Any subsequent changes to fair value do not
have any effect on the initial measurement. In accordance with the transitional provisions of IFRS
2, the Group applied the Standard to all stock options granted after November 7, 2002 and not yet
vested at January 1, 2005, the effective date of the Standard. Detailed information is provided in
respect of all stock options granted on or prior to November 7, 2002.
Provisions
The Group records provisions when it has an obligation, legal or constructive, to a third
party, when it is probable that an outflow of Group resources will be required to satisfy the
obligation and when a reliable estimate of the amount can be made.
Changes in estimates are reflected in the income statement in the period in which the change
occurs.
Treasury shares
Treasury shares are presented as a deduction from equity. The original cost of treasury shares
and the proceeds of any subsequent sale are presented as movements in equity.
F - 16
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Revenue recognition
Revenue is recognized if it is probable that the economic benefits associated with the
transaction will flow to the Group and the revenue can be measured reliably. Revenues are stated
net of discounts, allowances, settlement discounts and rebates.
Revenues from the sale of products are recognized when the risks and rewards of ownership of
the goods are transferred to the customer, the sales price is agreed or determinable and receipt of
payment can be assumed: this corresponds generally to the date when the vehicles are made available
to non-group dealers, or the delivery date in the case of direct sales. New vehicle sales with a
buy-back commitment are not recognized at the time of delivery but are accounted for as operating
leases when it is probable that the vehicle will be bought back. More specifically, vehicles sold
with a buy-back commitment are accounted for as assets in Inventory if the sale originates from the
Fiat Auto business (agreements with normally a short-term buy-back commitment); and are accounted
for as fixed assets in Property, plant and equipment, if the sale originates from the Commercial
Vehicles business (agreements with normally a long-term buy-back commitment). The difference
between the carrying value (corresponding to the manufacturing cost) and the estimated resale value
(net of refurbishing costs) at the end of the buy-back period, is depreciated on a straight-line
basis over the same period. The initial sale price received is recognized as an advance payment
(liability). The difference between the initial sale price and the buy-back price is recognized as
rental revenue on a straight-line basis over the term of the operating lease.
Revenues from services and from construction contracts are recognized by reference to the
stage of completion (the percentage of completion method).
Revenues also include lease rentals and interest income from financial services companies.
Cost of sales
Cost of sales comprises the cost of manufacturing products and the acquisition cost of
purchased merchandise which has been sold. It includes all directly attributable material and
production costs and all production overheads. These include the depreciation of property, plant
and equipment and the amortization of intangible assets relating to production and write-downs of
inventories. Cost of sales also includes freight and insurance costs relating to deliveries to
dealers and agency fees in the case of direct sales.
Cost of sales also include provisions made to cover the estimated cost of product warranties
at the time of sale to dealer networks or to the end customer. Revenues from the sale of extended
warranties and maintenance contracts are recognized over the period during which the service is
provided.
Expenses which are directly attributable to the financial services businesses, including the
interest expense related to the financing of financial services businesses as a whole and charges
for risk provisions and write-downs, are reported in cost of sales.
Research and development costs
This item includes research costs, development costs not eligible for capitalization and the
amortization of development costs recognized as assets in accordance with IAS 38 (see Notes 4 and
13).
F - 17
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Taxes
Income taxes include all taxes based upon the taxable profits of the Group. Taxes on income
are recognized in the income statement except to the extent that they relate to items directly
charged or credited to equity, in which case the related income tax effect is recognized in equity.
Provisions for income taxes that could arise on the distribution of a subsidiarys undistributed
profits are only made where there is a current intention to distribute such profits. Other taxes
not based on income, such as property taxes and capital taxes, are included in operating expenses.
Deferred taxes are provided using the full liability method. They are calculated on all temporary
differences between the tax base of an asset or liability and the carrying values in the
consolidated financial statements, except for those arising from non tax-deductible goodwill and
for those related to investments in subsidiaries where their reversal will not take place in the
foreseeable future. Deferred tax assets relating to the carry-forward of unused tax losses and tax
credits, as well as those arising from temporary differences, are recognized to the extent that it
is probable that future profits will be available against which they can be utilized. Current and
deferred income tax assets and liabilities are offset when the income taxes are levied by the same
taxation authority and where there is a legally enforceable right of offset. Deferred tax assets
and liabilities are measured at the enacted tax rates in the respective jurisdictions in which the
Group operates that are expected to apply to taxable income in the periods in which temporary
differences will be reversed.
Dividends
Dividends payable are reported as a movement in equity in the period in which they are
approved by stockholders.
Earnings per share
Basic earnings per share are calculated by dividing the Groups net profit by the weighted
average number of shares outstanding during the year, excluding treasury shares. For diluted
earnings per share, the weighted average number of shares outstanding is adjusted assuming
conversion of all dilutive potential shares. Group net result is also adjusted to reflect the net
after-tax impact of conversion.
Use of estimates
The preparation of financial statements and related disclosures that conform to IFRS requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates. Estimates are used in many areas,
including accounting for bad debt provisions on accounts receivable, inventory obsolescence,
depreciation, asset impairment, employee benefits, taxes, restructuring reserves, provisions and
contingencies. Estimates and assumptions are reviewed periodically and the effects of any changes
are reflected immediately in the income statement.
New accounting standards
There are no revised or new standards or interpretations that became effective on January 1,
2005 that had a significant effect on the Groups financial statements.
F - 18
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
In December 2004, the IASB issued an amendment to IAS 19 Employee Benefits providing
entities with the option of recognizing actuarial gains and losses in full in the period in which
they occur, outside the income statement, in a statement of recognized income and expense. The
amendment also provides guidance on allocating the cost of a group defined benefit plan to the
entities in the Group. The amendment is effective for annual periods beginning on or after January
1, 2006. The Group is currently evaluating the impact of this amendment.
In April 2005, the IASB issued an amendment to IAS 39 Financial Instruments: Recognition and
Measurement to permit the foreign currency risk of a highly probable intragroup forecast
transaction to qualify as the hedged item in a cash flow hedge in consolidated financial statements
provided that the transaction is denominated in a currency other than the functional currency of
the entity entering into that transaction and the foreign currency risk will affect the
consolidated financial statements. The amendment also specifies that if the hedge of a forecast
intragroup transaction qualifies for hedge accounting, any gain or loss that is recognized directly
in equity in accordance with the hedge accounting rules in IAS 39 must be reclassified into income
statement in the same period or periods during which the foreign currency risk of the hedged
transaction affects consolidated income statement. The Group already adopt this approach.
In June 2005, the IASB issued the final amendment to IAS 39 Financial Instruments:
Recognition and Measurement to restrict the use of the option to designate any financial asset or
any financial liability to be measured at fair value through profit and loss (the fair value
option). The revisions limit the use of the option to those financial instruments that meet
certain conditions. Those conditions are that:
|
§ |
|
the fair value option designation eliminates or significantly reduces an accounting
mismatch; |
|
|
§ |
|
a group of financial assets, financial liabilities, or both are managed and their
performance is evaluated on a fair value basis in accordance with a documented risk
management or investment strategy; and |
|
|
§ |
|
an instrument contains an embedded derivative that meets particular conditions. |
This amendment to IAS 39 is effective for annual periods beginning on or after January 1,
2006. The Group is currently assessing the impact, if any, that this change will have.
In August 2005, the IASB issued IFRS 7 Financial Instruments: Disclosures and a
complementary amendment to IAS 1 Presentation of Financial Statements Capital Disclosures. IFRS 7
requires disclosures about the significance of financial instruments for an entitys financial
position and performance. These disclosures incorporate many of the requirements previously in IAS
32 Financial Instruments: Disclosure and Presentation. IFRS 7 also requires information about the
extent to which the entity is exposed to risks arising from financial instruments, and a
description of managements objectives, policies and processes for managing those risks. The
amendment to IAS 1 introduces requirements for disclosures about an entitys capital.
IFRS 7 and the amendment to IAS 1 are effective for annual periods beginning on or after
January 1, 2007. The Fiat Group early adopted IFRS 7 for the annual period beginning January 1,
2005: comparative information for the disclosures required by paragraphs 31-42 of this Standard are
not provided, in accordance with the transition rules included in paragraph 44.
In August 2005, the IASB issued amended requirements for financial guarantee contracts, in the
form of limited amendments to IAS 39 and IFRS 4. The amendments require that issuers of financial
guarantee contracts include the resulting liabilities in their financial statement, measured as
follows:
|
§ |
|
initially at fair value; |
F - 19
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
§ |
|
subsequently at the higher of (i) the best estimate of the expenditure required to
settle the present obligation at the balance sheet date in accordance with IAS 37 -
Provisions, Contingent Liabilities and Contingent Assets and (ii) the amount initially
recognized less, where appropriate, cumulative amortization recognized in accordance
with IAS 18 Revenue. |
These amendments are effective for annual periods beginning on or after January 1, 2006.
Management is currently assessing the impact, if any, that these changes will have.
RISK MANAGEMENT
Credit risk
The Groups credit concentration risk differs in relation to the activities carried out by the
individual sectors and as a function of the various sales markets in which the Group operates; in
all cases, however, the risk is mitigated by the large number of counterparties and customers.
Considered from a global point of view, however, there is a concentration of credit risk in trade
receivables and receivables from financing activities, in particular dealer financing and finance
leases in the European Union market for the Fiat Auto and Commercial Vehicles Sectors, and in North
America for the Agricultural and Construction Equipment Sector. For a discussion of the Groups
Sectors, see note 33.
Financial assets are recognized in the balance sheet net of write-downs for the risk that
counterparties will be unable to fulfill their contractual obligations, determined on the basis of
the available information as to the creditworthiness of the customer and historical data.
Liquidity risk
The Group is exposed to funding risk if there is difficulty in obtaining finance for
operations at any given point in time.
The cash flows, funding requirements and liquidity of Group companies are monitored on a
centralized basis, under the control of the Group Treasury. The aim of this centralized system is
to optimize the efficiency and effectiveness of the management of the Groups capital resources.
In order to minimize the cost of financing and to ensure that funding is obtainable, Group
Treasury has the committed credit facilities described in Note 28.
Interest rate risk and currency risk
As a multinational group that has operations throughout the world, the Group is exposed to
market risks from fluctuations in foreign currency exchange and interest rates.
The exposure to foreign currency risk arises both in connection with the geographical
distribution of the Groups industrial activities compared to the markets in which it sell
products, and in relation to the use of external borrowing denominated in foreign currencies.
The Group utilizes external borrowing and the sale of financial receivables as asset-backed
securities through securitizations to fund its industrial and financial activities. Changes in
interest rates could have the effect of either increasing or decreasing the Groups net result.
The Group regularly assesses its exposure to interest rate and foreign currency risk through
the use of derivative financial instruments in accordance with its established risk management
policies.
F - 20
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The Groups policy permits derivatives to be used only for managing the exposure to
fluctuation in exchange and interest rates connected to monetary flows and assets and liabilities,
and not for speculative purposes.
The Group utilizes derivative financial instruments designated as fair value hedges, mainly to
hedge:
|
§ |
|
the exchange rate risk on financial instruments denominated in foreign currency; |
|
|
§ |
|
the interest rate risk on fixed rate loans and borrowings. |
The instruments used for these hedges are mainly exchange rate swaps, forward contracts,
interest rate swaps and combined interest rate and currency financial instruments.
The Group uses derivative financial instruments as cash flow hedges for the purpose of
pre-determining:
|
§ |
|
the exchange rate at which forecasted transactions denominated in foreign currencies
will be accounted for; |
|
|
§ |
|
the interest paid on borrowings, both to match the fixed interest received on loans
(customer financing activity), and to achieve a pre-defined mix of floating versus
fixed rate funding structured loans. |
The exchange rate exposure on forecasted commercial flows is hedged by currency swaps, forward
contracts and currency options. Interest rate exposures are usually hedged by interest rate swaps
and, in limited cases, by forward rate agreements.
Counterparties to these agreements are major international financial institutions with high
credit ratings.
Information on the fair value of derivative financial instruments held at the balance sheet
date is provided in Note 22.
Additional qualitative information on the financial risks to which the Group is exposed is
provided in Note 34.
SCOPE OF CONSOLIDATION
The consolidated financial statements of the Group as of December 31, 2005 include Fiat S.p.A.
and 457 consolidated subsidiaries in which Fiat S.p.A., directly or indirectly, has a majority of
the voting rights, over which it exercises control, or from which it is able to derive benefit by
virtue of its power to govern corporate financial and operating policies.
The total number of consolidated subsidiaries at December 31, 2005 decreased by 36 compared
with that at December 31, 2004.
Excluded from consolidation are 86 subsidiaries that are either dormant or generate a
negligible volume of business: their proportion of the Groups assets, liabilities, financial
position and earnings is immaterial. In particular, of these 45 are accounted for using the cost
method; these represent 0.1 percent of Group revenues, 0.0 percent of stockholders equity and 0.1
percent of total assets.
Interests in joint ventures (20 companies) are accounted for using the equity method, except
for one investment accounted for using proportionate consolidation, although the amounts involved
in this case are not significant. The main aggregate amounts related to the Group interests in
joint ventures accounted for using the equity method are as follows:
F - 21
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
|
(in millions of euros) |
Non-current assets |
|
|
1,064 |
|
Current assets |
|
|
1,413 |
|
Total assets |
|
|
2,477 |
|
Financial debt |
|
|
710 |
|
Other liabilities |
|
|
1,062 |
|
|
|
|
|
|
|
|
2005 |
|
|
(in millions of euros) |
Net revenues |
|
|
3,464 |
|
Trading profit |
|
|
59 |
|
Operating result |
|
|
59 |
|
Result before taxes |
|
|
56 |
|
Net result |
|
|
34 |
|
Thirty six associates are accounted for using the equity method, while 43 associates,
that in aggregate are of minor importance, are stated at cost. The main aggregate amounts related
to the Fiat Group interests in associates are as follows:
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
|
(in millions of euros) |
Total assets |
|
|
7,482 |
|
Liabilities |
|
|
6,432 |
|
|
|
|
|
|
|
|
2005 |
|
|
(in millions of euros) |
Net revenues |
|
|
1,280 |
|
Net result |
|
|
71 |
|
The following acquisitions were made in 2005:
|
§ |
|
In the first quarter of 2005, Magneti Marelli increased its equity investment in the
automotive light manufacturer Mako Elektrik Sanayi Ve Ticaret A.S., thus acquiring
control from the Turkish group Koç. As a result, the company, previously accounted for
using the equity method, is now consolidated on a line-by-line basis. |
|
|
§ |
|
As of May 2005, the operations that had previously been transferred to the Fiat-GM
Powertrain joint venture were consolidated in Fiat Powertrain Technologies. Fiat
re-acquired full control of these operations upon termination of the Master Agreement
with General Motors, with the sole exception of the Polish operations that continue to
be jointly managed with General Motors. The Powertrain businesses of Iveco, C.R.F.
(Fiat Research Centre) and Elasis will subsequently be transferred to Fiat Powertrain
Technologies. |
|
|
§ |
|
At the end of 2005, the Fiat Group acquired Enels share of the joint venture Leasys
S.p.A., whose activity is the hire and management of company car fleets, thereby
obtaining 100% control. The balance sheet of this company has been consolidated from
December 31, 2005. |
The following divestitures, the proceeds of which totaled 159 million euros, were made in
2005:
F - 22
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
§ |
|
In the first quarter of 2005, 65% of the investment in the temporary employment
agency WorkNet was sold. |
|
|
§ |
|
On June 1, 2005, Iveco sold to Barclays Mercantile Business Finance Ltd a 51% stake
in Iveco Finance Holdings Limited, a company comprising certain financial services
companies of Iveco operating in France, Germany, Italy, Switzerland and the United
Kingdom. As of that date, Iveco Finance Holdings Limited was no longer consolidated on
a line-by-line basis, but accounted for using the equity method. |
Acquisitions and divestitures of businesses affected the Groups assets and liabilities as of
the dates of acquisition or divestiture as follows:
|
|
|
|
|
|
|
|
|
|
|
Acquisitions |
|
Divestitures |
|
|
(in millions of euros) |
Non-current assets |
|
|
742 |
|
|
|
125 |
|
Cash and cash equivalents |
|
|
459 |
|
|
|
2,085 |
|
Other current assets |
|
|
495 |
|
|
|
(3,099 |
) |
Total assets |
|
|
1,696 |
|
|
|
(889 |
) |
Debt |
|
|
354 |
|
|
|
(368 |
) |
Other liabilities |
|
|
1,342 |
|
|
|
(534 |
) |
Total liabilities |
|
|
1,696 |
|
|
|
(902 |
) |
Comments are provided in the following notes of the main effects of these operations on
the single items concerned.
In April 2005, the ownership of Maserati was transferred from Ferrari to Fiat Partecipazioni
S.p.A. Since April 1, 2005, therefore, a new entity has been operational comprising the group of
companies producing and selling Maserati cars. To ensure the comparability of the figures, the
Maserati business has been retrospectively separated from the Ferrari-Maserati business for 2004.
OTHER INFORMATION
Note 38 provides information on significant events which have occurred since the balance sheet
date and on transactions between Group companies and with related parties.
F - 23
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(1) Net revenues
Net revenues can be analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Revenues from: |
|
|
|
|
|
|
|
|
Sales of goods |
|
|
41,013 |
|
|
|
39,755 |
|
Rendering of services |
|
|
2,346 |
|
|
|
2,895 |
|
Contract revenues |
|
|
1,285 |
|
|
|
1,245 |
|
Rents on operating leases |
|
|
397 |
|
|
|
406 |
|
Rents on assets sold with a buy-back commitment |
|
|
323 |
|
|
|
289 |
|
Interest and other financial income from
financial services companies |
|
|
1,088 |
|
|
|
1,018 |
|
Other |
|
|
92 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
Total Net revenues |
|
|
46,544 |
|
|
|
45,637 |
|
|
|
|
|
|
|
|
|
|
(2) Cost of sales
Cost of sales comprises the following:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Cost of sales attributable to the industrial business |
|
|
38,898 |
|
|
|
38,363 |
|
Interest cost and other financial charges from financial
services companies |
|
|
726 |
|
|
|
758 |
|
|
|
|
|
|
|
|
|
|
Total Cost of sales |
|
|
39,624 |
|
|
|
39,121 |
|
|
|
|
|
|
|
|
|
|
(3) Selling, general and administrative costs
Selling costs amount to 2,533 million euros in 2005 (2,594 million euros in 2004) and comprise
mainly marketing, advertising and sales personnel costs.
General and administrative costs amount to 1,980 million euros in 2005 (2,107 million euros in
2004) and comprise mainly expenses for administration which are not attributable to sales,
production and research and development functions.
(4) Research and development costs
In 2005, Research and development costs of 1,364 million euros (1,350 million euros in 2004)
comprise all research and development costs not recognized as assets amounting to 902 million euros
(1,038 million euros in 2004) and the amortization of capitalized development costs of 462 million
euros (312 million euros in 2004). During the period the Group incurred new expenditure for
capitalized development costs of 656 million euros (753 million euros in 2004).
F - 24
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(5) Other income (expenses)
This item consists of income arising from trading operations which is not attributable to the
sale of goods and services (such as royalties and other income from licenses and know-how), net of
miscellaneous operating costs which cannot be allocated to specific functional areas, such as
post-employment benefits for retired former employees (health care service costs), indirect taxes
and duties, and accruals for various provisions.
The detail of Other income (expenses) is as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Other income: |
|
|
|
|
|
|
|
|
Gains on disposal of Property, plant and equipment and Leased assets |
|
|
166 |
|
|
|
66 |
|
Amortization of deferred government investment grants |
|
|
64 |
|
|
|
63 |
|
Government revenue grants |
|
|
58 |
|
|
|
53 |
|
Royalties and other income from licenses and know-how |
|
|
55 |
|
|
|
44 |
|
Rental income |
|
|
40 |
|
|
|
47 |
|
Recovery of expenses and compensation for damages |
|
|
145 |
|
|
|
69 |
|
Release of excess provisions |
|
|
177 |
|
|
|
104 |
|
Prior period income |
|
|
294 |
|
|
|
352 |
|
Other income |
|
|
362 |
|
|
|
688 |
|
|
|
|
|
|
|
|
|
|
Total Other income |
|
|
1,361 |
|
|
|
1,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
Indirect taxes |
|
|
106 |
|
|
|
117 |
|
Losses on disposal of Property, plant and equipment and Leased assets |
|
|
35 |
|
|
|
20 |
|
Impairment of assets |
|
|
29 |
|
|
|
336 |
|
Post-employment benefits for retired former employees |
|
|
63 |
|
|
|
58 |
|
Charges for other provisions |
|
|
533 |
|
|
|
450 |
|
Prior period expenses |
|
|
186 |
|
|
|
220 |
|
Other expenses |
|
|
452 |
|
|
|
700 |
|
|
|
|
|
|
|
|
|
|
Total Other expenses |
|
|
1,404 |
|
|
|
1,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
(43 |
) |
|
|
(415 |
) |
|
|
|
|
|
|
|
|
|
In 2005, the item Release of excess provisions includes an amount arising in the
Agricultural and Construction Equipment Sector from a structural reduction in period welfare costs
in North America, resulting in the release to income of 83 million euros previously provided.
Included under the item Impairment of assets in 2004 was an amount of 190 million euros for
the write down of plant and machinery in the Fiat Auto, Iveco, Maserati and Teksid Sectors, and the
write-down of goodwill in CNH by 121 million euros following a reassessment of the purchase
accounting regarding the Case acquisition, which relates to accumulated tax losses which became
recoverable, with the corresponding counter-entry recognized in deferred tax assets for the same
amount.
(6) Gains (losses) on the disposal of investments
This item, amounting to 905 million euros in 2005, consists of the net gain of 878 million
euros arising from the sale to EDF of the investment held by Fiat in Italenergia Bis S.p.A.. In
F - 25
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
particular, as a consequence of the notification received from EDF of its intention to withdraw its
arbitration claim, Fiat sold its holding of 24.6% of the share capital of Italenergia Bis S.p.A. to
EDF on September 9, 2005 at a price of 1,147 million euros. On the same date, the Citigroup loan
granted in September 2002 for the same amount was reimbursed, and the banks that had acquired 14%
of Italenergia Bis from Fiat in 2002, signing simultaneous agreements for a series of put and call
options, sold their stake to EDF. As a result, the possibility that Fiat be required to repurchase
the 14% holding has been eliminated (a possibility that led to the derecognition in the IFRS
financial statements of the sale of the 14% carried out in 2002 and the recognition of a liability
of approximately 600 million euros to the banks who acquired that holding). As a result of these
transactions, Group net debt decreased by approximately 1.8 billion euros (see Note 28).
The item also includes a gain of 23 million euros on the disposal of Palazzo Grassi S.p.A.
In 2004 the gain of 150 million euros included, amongst others, the gains on the following
sales: 81 million euros relating to Fiat Engineering S.p.A., 31 million euros relating to the Midas
Group, 2 million euros relating to Edison S.p.A. shares and 30 million euros relating to Edison
S.p.A. warrants.
(7) Restructuring costs
Restructuring costs amount to 502 million euros in 2005 (542 million euros in 2004) and have
been incurred by Fiat Auto for 162 million euros (355 million euros in 2004), mostly in relation to
the restructuring of the Sectors central organizations and certain foreign operations, as well as
the activities of Fiat-GM Powertrain (the joint venture wound up at the beginning of May); by Iveco
for 103 million euros (24 million euros in 2004), essentially due to a reorganization process of
the entire Sector and in particular of its staff structure; by CNH for 87 million euros (68 million
euros in 2004), regarding the reorganization in progress of its activities and the restructuring of
certain of its foreign operations; and by Comau for 46 million euros (10 million euros in 2004),
Components for 33 million euros (48 million euros in 2004), Business Solutions for 22 million euros
(9 million euros in 2004), and other Sectors for minor amounts.
(8) Other unusual income (expenses)
Other unusual income (expenses) amounts to 812 million euros in 2005 and comprises the
following items: the gain for the settlement of the Master Agreement with General Motors for 1,134
million euros (net of related expenses); a gain of 117 million euros realized on the final disposal
of the real estate properties that had been securitized in 1998; additional costs connected with
the process of reorganization and streamlining of relationships with Group suppliers, initiated in
2004, and with Fiat Auto dealers, for a total of 187 million euros; costs of 141 million euros
incurred by Fiat Auto, as a consequence of the rationalization process of the platforms and the
reallocation of production; costs of 71 million euros for an indemnity to Global Value S.p.A. for
unwinding the joint venture with IBM; 30 million euros from indemnities paid to settle contractual
guarantees granted on the sale of businesses in previous years and other minor items.
The unusual expenses of 243 million euros in 2004 related to the process of reorganization and
streamlining of relationships with Group suppliers.
F - 26
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(9) Financial income (expenses) and Unusual financial income
(i) Financial income (expenses)
In addition to the items included in the specific lines of the income statement, Net financial
income (expenses) also includes the income from financial services companies included in Net
revenues for 1,088 million euros (1,018 million euros in 2004) and the costs incurred by financial
services companies included in Interest cost and other financial charges from financial services
companies included in Cost of sales for 726 million euros (758 million euros in 2004). A
reconciliation to the income statement is provided at the foot of the following table.
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Financial income |
|
|
|
|
|
|
|
|
Interest earned and other financial income |
|
|
376 |
|
|
|
367 |
|
Interest income from customers |
|
|
968 |
|
|
|
913 |
|
Gains on disposal of securities |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Income |
|
|
1,356 |
|
|
|
1,280 |
|
|
|
|
|
|
|
|
|
|
of which: |
|
|
|
|
|
|
|
|
Financial income, excluding financial services companies |
|
|
268 |
|
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other financial expenses |
|
|
|
|
|
|
|
|
Interest expense and other financial expenses |
|
|
1,695 |
|
|
|
1,730 |
|
Write-downs of financial assets |
|
|
126 |
|
|
|
262 |
|
Losses on disposal of securities |
|
|
2 |
|
|
|
|
|
Interest costs on employee benefits |
|
|
146 |
|
|
|
127 |
|
|
|
|
|
|
|
|
|
|
Total Interest and other financial expenses |
|
|
1,969 |
|
|
|
2,119 |
|
|
|
|
|
|
|
|
|
|
Net income (expenses) from derivative financial instruments and
exchange differences |
|
|
132 |
|
|
|
(80 |
) |
|
|
|
|
|
|
|
|
|
of which: |
|
|
|
|
|
|
|
|
Interest and other financial expenses, effects resulting from
derivative financial instruments and exchange differences, excluding
financial services companies |
|
|
1,111 |
|
|
|
1,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financial income (expenses) excluding financial services companies |
|
|
(843 |
) |
|
|
(1,179 |
) |
|
|
|
|
|
|
|
|
|
Net financial expenses in 2005 (excluding financial services companies) totaled 843
million euros, decreasing from the amount of 1,179 million euros in 2004, which included the
unwinding of the equity swap agreement on General Motors shares resulting in a net loss of around
150 million euros.
The increase of 55 million euros in interest income from customers in 2005 arises from the
increase in the level of activities, partially compensated by an effect of 69 million euros
resulting from the sale in the fourth quarter of 2004 of the holding in the financial company
operating in the United Kingdom, which formed part of the overall sale to Fidis Retail Italia of
the European operations of Fiat Auto Holdings B.V., and by an effect of 79 million euros resulting
from the sale, of 51% of the interest in Iveco Finance Holdings Limited to Barclays Mercantile
Business Finance Ltd. in 2004.
Interest earned and other financial income may be analyzed as follows:
F - 27
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Interest income from banks |
|
|
58 |
|
|
|
47 |
|
Interest income from securities |
|
|
45 |
|
|
|
40 |
|
Commissions |
|
|
48 |
|
|
|
49 |
|
Other Interest earned and financial income |
|
|
225 |
|
|
|
231 |
|
|
|
|
|
|
|
|
|
|
Total Interest earned and other financial income |
|
|
376 |
|
|
|
367 |
|
|
|
|
|
|
|
|
|
|
Interest earned and other financial expenses may be analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Interest expenses on bonds |
|
|
524 |
|
|
|
587 |
|
Bank interest expenses |
|
|
397 |
|
|
|
450 |
|
Interest expenses on trade payables |
|
|
11 |
|
|
|
27 |
|
Other interest and financial expenses |
|
|
763 |
|
|
|
666 |
|
|
|
|
|
|
|
|
|
|
Total Interest and other financial expenses |
|
|
1,695 |
|
|
|
1,730 |
|
|
|
|
|
|
|
|
|
|
(ii) Unusual financial income
The item Unusual financial income consists of income of 858 million euros arising from the
increase of share capital on September 20, 2005 and the simultaneous extinguishment of the
Mandatory Convertible Facility (see Notes 25 and 28). In particular, this income corresponds to the
difference between the subscription price of 10.28 euros per share and the market value of 7.337
euros per share at the subscription date, net of associated costs. This operation led to an
increase in capital stock of 1,459 million euros and in other equity reserves of 682 million euros.
(10) Result from investments
This item includes the Groups interest in the net result of the companies accounted for using
the equity method, the write-downs connected with the loss in value of financial assets and any
reinstatement of value, the write-downs of equity investments classified as held for sale, accruals
to provisions against equity investments, income and expense arising from the adjustment to fair
value of investments in other entities held for trading, and dividend income. In particular, in
2005 there was a profit of 115 million euros representing the net result of companies accounted for
using the equity method (153 million euros in 2004, including an amount of 54 million euros
relating to Italenergia Bis S.p.A. which was sold in 2005).
The net result from investments in 2005 amounts to 34 million euros (135 million euros in
2004) and includes (amounts in millions of euros): Fiat Auto Sector companies 57 (91 in 2004),
entities of Agricultural and Construction Equipment. Sector companies 39 (25 in 2004), Commercial
Vehicles Sector companies -54 (-20 in 2004) and other companies -8 (39 in 2004, of which 54 related
to Italenergia Bis S.p.A.).
F - 28
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(11) Income taxes
Income taxes consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Current taxes: |
|
|
|
|
|
|
|
|
IRAP |
|
|
116 |
|
|
|
122 |
|
Other taxes |
|
|
184 |
|
|
|
217 |
|
|
|
|
|
|
|
|
|
|
Total Current taxes |
|
|
300 |
|
|
|
339 |
|
Deferred taxes for the period |
|
|
425 |
|
|
|
(389 |
) |
Taxes relating to prior periods |
|
|
119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income taxes |
|
|
844 |
|
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
In 2005, the increase in the charge for income taxes is due to an improvement in the
result and accruals for prior year taxes.
Deferred taxation of 425 million euros in 2005 (-389 million euros in 2004) includes:
|
§ |
|
an amount of 277 million euros, representing the realization of deferred tax assets
recognized originally in 2004 in connection with the income arising from the
termination of the Master Agreement with General Motors; and |
|
|
§ |
|
an amount of 148 million euros, being the difference between deferred tax assets
recognized in prior years and realized against 2005 profit and deferred tax assets
recognized in the year. |
Taxes relating to prior periods include the cost of finalizing certain disputes with foreign
tax authorities.
The effective tax rate for 2005 (excluding IRAP) was 32.1% (the rate was insignificant in
2004 as a result of pre-tax losses).
The reconciliation between the tax charge recorded in the consolidated financial statements
and the theoretical tax charge, calculated on the basis of the theoretical tax rate in effect in
Italy, is the following:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Theoretical income taxes |
|
|
747 |
|
|
|
(538 |
) |
Tax effect of permanent differences |
|
|
(452 |
) |
|
|
3 |
|
Taxes relating to prior years |
|
|
119 |
|
|
|
|
|
Tax effect of difference between foreign
tax rates and the theoretical Italian tax
rate |
|
|
(3 |
) |
|
|
5 |
|
Deferred tax assets not recognized |
|
|
504 |
|
|
|
459 |
|
Use of tax losses |
|
|
(83 |
) |
|
|
(128 |
) |
Other differences |
|
|
(104 |
) |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
Current and deferred income tax
recognized in the financial statements,
excluding IRAP |
|
|
728 |
|
|
|
(178 |
) |
IRAP |
|
|
116 |
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
Income taxes recorded in financial
statements (current and deferred income
taxes) |
|
|
844 |
|
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
In order to render the reconciliation between income taxes recorded in the financial
statements and theoretical income taxes more meaningful, the IRAP tax is not taken into
consideration. Since the IRAP tax has a taxable basis that is different from income before taxes,
it
F - 29
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
generates distortions between one year and another. Accordingly, theoretical income taxes are
determined by applying only the IRES tax rate (equal to 33% in 2005) in effect in Italy to income
before taxes.
Permanent differences in the above reconciliation include the tax effect of non-taxable income
of 677 million euros in 2005 (229 million euros in 2004) and of non-deductible costs of 225 million
euros in 2005 (232 million euros in 2004). In particular, the tax effect of permanent differences
arises principally from the theoretical tax effect of 283 million euros on the unusual financial
income relating to the Mandatory Convertible Facility (gross 858 million euros) and that of 290
million euros arising from the sale of Italenergia Bis S.p.A. (gross 878 million euros).
In 2005, Other differences included unrecoverable withholding tax for 21 million euros (11
million euros in 2004).
Current tax assets and liabilities in the balance sheet at December 31, 2005 amount to 778
million euros and 388 million euros, respectively (780 million euros and 334 million euros at
December 31, 2004), as described in Notes 19 and 30.
Net deferred tax assets at December 31, 2005 consist of deferred tax assets, net of deferred
tax liabilities, that have been offset where possible by the individual consolidated companies. The
net balance of Deferred tax assets and Deferred tax liabilities may be analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
Change |
|
|
(in millions of euros) |
Deferred tax assets |
|
|
2,104 |
|
|
|
2,402 |
|
|
|
(298 |
) |
Deferred tax liabilities |
|
|
(405 |
) |
|
|
(522 |
) |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
|
1,699 |
|
|
|
1,880 |
|
|
|
(181 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The reduction in net deferred tax assets is mainly due to the above-mentioned realization
of 277 million euros in deferred tax assets related to the gain on the termination of the Master
Agreement with General Motors.
Deferred tax assets, net of Deferred tax liabilities, can be analyzed as follows:
F - 30
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
|
|
|
|
Recognized |
|
|
|
|
|
Changes in the |
|
differences |
|
At |
|
|
At December |
|
in income |
|
Charged |
|
scope of |
|
and other |
|
December |
|
|
31, 2004 |
|
statement |
|
to equity |
|
consolidation |
|
changes |
|
31, 2005 |
|
|
(in millions of euros) |
Deferred tax assets arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxed provisions |
|
|
1,057 |
|
|
|
261 |
|
|
|
|
|
|
|
13 |
|
|
|
65 |
|
|
|
1,396 |
|
Inventories |
|
|
132 |
|
|
|
72 |
|
|
|
|
|
|
|
10 |
|
|
|
9 |
|
|
|
223 |
|
Taxed allowances for doubtful
accounts |
|
|
149 |
|
|
|
(7 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
2 |
|
|
|
142 |
|
Employee benefits |
|
|
630 |
|
|
|
(19 |
) |
|
|
|
|
|
|
(21 |
) |
|
|
85 |
|
|
|
675 |
|
Write-downs of financial assets |
|
|
1,660 |
|
|
|
(566 |
) |
|
|
|
|
|
|
(20 |
) |
|
|
(1 |
) |
|
|
1,073 |
|
Measurement of derivative financial
instruments |
|
|
14 |
|
|
|
4 |
|
|
|
14 |
|
|
|
|
|
|
|
(10 |
) |
|
|
22 |
|
Other |
|
|
998 |
|
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
126 |
|
|
|
1,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred tax assets |
|
|
4,640 |
|
|
|
(280 |
) |
|
|
14 |
|
|
|
(20 |
) |
|
|
276 |
|
|
|
4,630 |
|
Deferred tax liabilities arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated depreciation |
|
|
(405 |
) |
|
|
(34 |
) |
|
|
|
|
|
|
(32 |
) |
|
|
(62 |
) |
|
|
(533 |
) |
Deferred tax on gains |
|
|
(171 |
) |
|
|
91 |
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
(83 |
) |
Capital investment grants |
|
|
(24 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
Employee benefits |
|
|
(9 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(11 |
) |
|
|
|
|
|
|
(24 |
) |
Capitalization of development costs |
|
|
(692 |
) |
|
|
(84 |
) |
|
|
|
|
|
|
|
|
|
|
(46 |
) |
|
|
(822 |
) |
Other |
|
|
(872 |
) |
|
|
(159 |
) |
|
|
9 |
|
|
|
78 |
|
|
|
(67 |
) |
|
|
(1,011 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred tax liabilities |
|
|
(2,173 |
) |
|
|
(193 |
) |
|
|
9 |
|
|
|
35 |
|
|
|
(178 |
) |
|
|
(2,500 |
) |
Theoretical tax benefit arising from tax
loss carryforwards |
|
|
4,591 |
|
|
|
469 |
|
|
|
|
|
|
|
(182 |
) |
|
|
133 |
|
|
|
5,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for assets whose
recoverability is not probable |
|
|
(5,178 |
) |
|
|
(421 |
) |
|
|
|
|
|
|
244 |
|
|
|
(87 |
) |
|
|
(5,442 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred tax
assets, net of
Deferred tax
liabilities |
|
|
1,880 |
|
|
|
(425 |
) |
|
|
23 |
|
|
|
77 |
|
|
|
144 |
|
|
|
1,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decision to recognize deferred tax assets is taken by each company in the Group by
assessing critically whether the conditions exist for the future recoverability of such assets on
the basis of updated strategic plans, accompanied by the related tax plans. For this reason, the
total theoretical future tax benefits deriving from deductible temporary differences (4,630 million
euros at December 31, 2005 and 4,640 million euros at December 31, 2004) and tax loss carryforwards
(5,011 million euros at December 31, 2005 and 4,591 million euros at December 31, 2004) have been
reduced by a total of 5,442 million euros at December 31, 2005 and 5,178 million euros at December
31, 2004.
In particular, Deferred tax assets, net of Deferred tax liabilities, include 965 million euros
at December 31, 2005 (1,208 million euros at December 31, 2004) of tax benefits arising from tax
loss carryforwards. At December 31, 2005, a further tax amount of 4,046 million euros (3,383
million euros at December 31, 2004) arising from tax loss carryforwards has not been recognized.
Deferred taxes have not been provided on the undistributed earnings of subsidiaries since the
Group is able to control the timing of the distribution of these reserves and it is probable that
they will not be distributed in the foreseeable future.
The totals of deductible and taxable temporary differences and accumulated tax losses at
December 31, 2005, together with the amounts for which deferred tax assets have not been
recognized, analyzed by year of expiry, are as follows:
F - 31
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at |
|
Year of expiry |
|
|
December |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beyond |
|
Unlimited/ |
|
|
31, 2005 |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
2009 |
|
indeterminable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
Temporary differences and tax losses
relating to State taxation (IRES in the
case of Italy): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deductible temporary differences |
|
|
12,855 |
|
|
|
4,929 |
|
|
|
1,704 |
|
|
|
714 |
|
|
|
509 |
|
|
|
4,327 |
|
|
|
672 |
|
Taxable temporary differences |
|
|
(6,804 |
) |
|
|
(1,704 |
) |
|
|
(904 |
) |
|
|
(863 |
) |
|
|
(825 |
) |
|
|
(1,814 |
) |
|
|
(694 |
) |
Tax losses |
|
|
17,223 |
|
|
|
605 |
|
|
|
633 |
|
|
|
1,788 |
|
|
|
2,010 |
|
|
|
5,486 |
|
|
|
6,701 |
|
Temporary differences and tax losses
for which deferred tax assets have
not been recognized |
|
|
(18,389 |
) |
|
|
(1,987 |
) |
|
|
(1,269 |
) |
|
|
(1,845 |
) |
|
|
(2,026 |
) |
|
|
(5,856 |
) |
|
|
(5,406 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences and tax losses
relating to State taxation |
|
|
4,885 |
|
|
|
1,843 |
|
|
|
164 |
|
|
|
(207 |
) |
|
|
(332 |
) |
|
|
2,144 |
|
|
|
1,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences and tax losses
relating to local taxation (IRAP in the
case of Italy): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deductible temporary differences |
|
|
3,389 |
|
|
|
675 |
|
|
|
218 |
|
|
|
235 |
|
|
|
140 |
|
|
|
1,860 |
|
|
|
261 |
|
Taxable temporary differences |
|
|
(3,857 |
) |
|
|
(600 |
) |
|
|
(558 |
) |
|
|
(546 |
) |
|
|
(514 |
) |
|
|
(967 |
) |
|
|
(672 |
) |
Tax losses |
|
|
1,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
117 |
|
|
|
883 |
|
Temporary differences and tax losses
for which deferred tax assets have
not been recognized |
|
|
(1,330 |
) |
|
|
(163 |
) |
|
|
(52 |
) |
|
|
(35 |
) |
|
|
(22 |
) |
|
|
(360 |
) |
|
|
(698 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary differences and tax losses
relating to local taxation |
|
|
(728 |
) |
|
|
(88 |
) |
|
|
(392 |
) |
|
|
(346 |
) |
|
|
(326 |
) |
|
|
650 |
|
|
|
(226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) Earnings per share
The computation of earnings per share is based on the following figures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
Group interest in net result |
|
million euros |
|
|
1,331 |
|
|
|
(1,634 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to ordinary and preference shares |
|
million euros |
|
|
1,231 |
|
|
|
(1,501 |
) |
Profit attributable to savings shares |
|
million euros |
|
|
100 |
|
|
|
(133 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of ordinary and preference shares
outstanding |
|
number |
|
|
984,468,753 |
|
|
|
899,033,378 |
|
Average number of savings shares outstanding |
|
number |
|
|
79,912,799 |
|
|
|
79,912,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary and preference share |
|
euros |
|
|
1.250 |
|
|
|
(1.699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per savings share |
|
euros |
|
|
1.250 |
|
|
|
(1.699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per ordinary and preference share |
|
euros |
|
|
1.250 |
|
|
|
(1.699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per savings share |
|
euros |
|
|
1.250 |
|
|
|
(1.699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
There is no difference between Basic earnings per share and Diluted earnings per share
due to the negligible effect of the outstanding warrants.
F - 32
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
In accordance with IAS 33, the dilutive effects of the Mandatory Convertible Facility have not
been included in the determination of earnings per share for 2004, as there was a net loss in the
period.
(13) Intangible assets
In 2005, changes in the gross carrying amount of Intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
Changes in |
|
differences |
|
At |
|
|
December |
|
|
|
|
|
|
|
|
|
the scope of |
|
and other |
|
December |
|
|
31, 2004 |
|
Additions |
|
Divestitures |
|
consolidation |
|
changes |
|
31, 2005 |
|
|
(in millions of euros) |
Goodwill |
|
|
2,809 |
|
|
|
|
|
|
|
|
|
|
|
53 |
|
|
|
297 |
|
|
|
3,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and other intangible assets with indefinite
useful lives |
|
|
260 |
|
|
|
1 |
|
|
|
(4 |
) |
|
|
2 |
|
|
|
24 |
|
|
|
283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development costs externally acquired |
|
|
1,571 |
|
|
|
240 |
|
|
|
(7 |
) |
|
|
(7 |
) |
|
|
25 |
|
|
|
1,822 |
|
Development costs internally generated |
|
|
1,740 |
|
|
|
416 |
|
|
|
(2 |
) |
|
|
|
|
|
|
78 |
|
|
|
2,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Development costs |
|
|
3,311 |
|
|
|
656 |
|
|
|
(9 |
) |
|
|
(7 |
) |
|
|
103 |
|
|
|
4,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents, concessions and licenses externally acquired |
|
|
976 |
|
|
|
96 |
|
|
|
(114 |
) |
|
|
(59 |
) |
|
|
100 |
|
|
|
999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Patents, concessions and licenses |
|
|
976 |
|
|
|
96 |
|
|
|
(114 |
) |
|
|
(59 |
) |
|
|
100 |
|
|
|
999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets externally acquired |
|
|
520 |
|
|
|
32 |
|
|
|
(9 |
) |
|
|
30 |
|
|
|
23 |
|
|
|
596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other intangible assets |
|
|
520 |
|
|
|
32 |
|
|
|
(9 |
) |
|
|
30 |
|
|
|
23 |
|
|
|
596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances and intangible assets in progress
externally acquired |
|
|
119 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Advances and intangible assets in progress |
|
|
119 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross carrying amount of Intangible assets |
|
|
7,995 |
|
|
|
836 |
|
|
|
(136 |
) |
|
|
19 |
|
|
|
477 |
|
|
|
9,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 33
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Changes in accumulated amortization and impairment losses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in |
|
differences |
|
At |
|
|
December |
|
|
|
|
|
Impairment |
|
|
|
|
|
the scope of |
|
and other |
|
December |
|
|
31, 2004 |
|
Amortization |
|
losses |
|
Divestitures |
|
consolidation |
|
changes |
|
31, 2005 |
|
|
(in millions of euros) |
Goodwill |
|
|
652 |
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
77 |
|
|
|
741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and other intangible assets with
indefinite useful lives |
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
6 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development costs externally acquired |
|
|
341 |
|
|
|
230 |
|
|
|
100 |
|
|
|
|
|
|
|
(7 |
) |
|
|
3 |
|
|
|
667 |
|
Development costs internally generated |
|
|
481 |
|
|
|
232 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
68 |
|
|
|
784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Development costs |
|
|
822 |
|
|
|
462 |
|
|
|
103 |
|
|
|
|
|
|
|
(7 |
) |
|
|
71 |
|
|
|
1,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents, concessions and licenses externally
acquired |
|
|
504 |
|
|
|
158 |
|
|
|
|
|
|
|
(113 |
) |
|
|
(38 |
) |
|
|
19 |
|
|
|
530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Patents, concessions and licenses |
|
|
504 |
|
|
|
158 |
|
|
|
|
|
|
|
(113 |
) |
|
|
(38 |
) |
|
|
19 |
|
|
|
530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets externally acquired |
|
|
375 |
|
|
|
69 |
|
|
|
5 |
|
|
|
(9 |
) |
|
|
14 |
|
|
|
5 |
|
|
|
459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other intangible assets |
|
|
375 |
|
|
|
69 |
|
|
|
5 |
|
|
|
(9 |
) |
|
|
14 |
|
|
|
5 |
|
|
|
459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances and intangible assets in progress
externally acquired |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Advances and intangible assets in progress |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated amortisation and impairment of
Intangible assets |
|
|
2,417 |
|
|
|
689 |
|
|
|
120 |
|
|
|
(125 |
) |
|
|
(31 |
) |
|
|
178 |
|
|
|
3,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net carrying amount of Intangible assets can be analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in |
|
differences |
|
At |
|
|
December |
|
|
|
|
|
|
|
|
|
Impairment |
|
|
|
|
|
the scope of |
|
and other |
|
December |
|
|
31, 2004 |
|
Additions |
|
Amortization |
|
losses |
|
Divestitures |
|
consolidation |
|
changes |
|
31, 2005 |
|
|
(in millions of euros) |
Goodwill |
|
|
2,157 |
|
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
53 |
|
|
|
220 |
|
|
|
2,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and other
intangible assets with
indefinite useful lives |
|
|
202 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
2 |
|
|
|
18 |
|
|
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development costs
externally acquired |
|
|
1,230 |
|
|
|
240 |
|
|
|
(230 |
) |
|
|
(100 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
22 |
|
|
|
1,155 |
|
Development costs
internally generated |
|
|
1,259 |
|
|
|
416 |
|
|
|
(232 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
10 |
|
|
|
1,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Development costs |
|
|
2,489 |
|
|
|
656 |
|
|
|
(462 |
) |
|
|
(103 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
32 |
|
|
|
2,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents, concessions and
licenses externally
acquired |
|
|
472 |
|
|
|
96 |
|
|
|
(158 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
(21 |
) |
|
|
81 |
|
|
|
469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Patents, concessions
and licenses |
|
|
472 |
|
|
|
96 |
|
|
|
(158 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
(21 |
) |
|
|
81 |
|
|
|
469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets
externally acquired |
|
|
145 |
|
|
|
32 |
|
|
|
(69 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
16 |
|
|
|
18 |
|
|
|
137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other intangible assets |
|
|
145 |
|
|
|
32 |
|
|
|
(69 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
16 |
|
|
|
18 |
|
|
|
137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances and intangible
assets in progress
externally acquired |
|
|
113 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Advances and
intangible assets in
progress |
|
|
113 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net carrying amount of
Intangible assets |
|
|
5,578 |
|
|
|
836 |
|
|
|
(689 |
) |
|
|
(120 |
) |
|
|
(11 |
) |
|
|
50 |
|
|
|
299 |
|
|
|
5,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 34
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Goodwill consists principally of net goodwill resulting from the purchase of the Case
Group and other companies of the Agricultural and Construction Equipment Sector for 2,016 million
euros, the Pico Group and other companies in the Production Systems Sector for 194 million euros,
companies in the Components Sector for 46 million euros, the Irisbus Group and other minor items in
the Commercial Vehicles Sector for 56 million euros, and companies in the Metallurgical Products
Sector for 37 million euros. The amount of 53 million euros regarding the change in the scope of
consolidation is related to the acquisition of control of Leasys S.p.A. and Mako Elektrik Sanayi Ve
Ticaret A.S.
In addition to the effects resulting from the above-mentioned acquisitions and the entry into
the scope of consolidation of the Powertrain activities, previously part of Fiat-GM Powertrain, the
joint venture with General Motors, the column Change in the scope of consolidation also includes
the reclassification to assets held for sale of the intangible assets of Atlanet S.p.A., for which
a sales agreement has been signed with the British Telecom group and approved by the antitrust
authorities in February 2006.
The addition to Other intangible assets of 32 million euros relates mainly to software.
Foreign exchange gains of 402 million euros in 2005 principally reflect changes in the
euro/U.S. dollar rate.
The Group performs impairment tests at least annually, or more frequently whenever there is an
indication that the goodwill may be impaired. The recoverable amount of cash-generating units to
which goodwill has been allocated is determined on the basis of its value in use.
For the purpose of impairment testing, goodwill and other intangible assets with indefinite
useful lives are allocated to the cash-generating units to which they belong. In particular, the
vast majority of goodwill, representing 91% of the total, has been allocated to the agricultural
equipment, construction equipment and financial services cash-generating units in CNH, and the
Systems, Pico and Service cash-generating units in Comau.
The principal assumptions made in determining value in use of cash-generating units regard the
discount rate and the growth rate. In particular, the Group uses discount rates which reflect
current market assessments of the time value of money and which take account of the risks inherent
in individual cash-generating units: these pre-tax rates are in the range between 5.5% and 16%.
Taking account of the detailed structure of the Group, growth rates are based upon the forecasts of
the separate industrial Sector to which each cash-generating unit belongs. The forecasts of
operating cash flows are those included in the latest budgets and plans prepared by the Group for
the next three years, extrapolated for later years on the basis of a medium- to long-term growth
rate from 0% to 2% depending on the various sectors.
In particular, the recoverable amount of the goodwill of the CNH Sector, which represents
approximately 83% of the total goodwill recognized by the Group, has been determined on the basis
of the value in use of the cash-generating unit to which it has been allocated, using the cash
flows forecast by Sector management for the next seven years, an annual growth rate of 2% and a
pre-tax discount rate varying between 10% and 16% depending on the cash-generating unit.
Development costs recognized as assets are attributed to cash generating units and are tested
for impairment together with the related tangible fixed assets, using the discounted cash flow
method in determining their recoverable amount.
F - 35
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(14) Property, plant and equipment
In 2005, changes in the gross carrying amount of Property, plant and equipment were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
Changes in the |
|
|
|
|
|
|
|
|
|
At |
|
|
December |
|
|
|
|
|
|
|
|
|
scope of |
|
Translation |
|
Other |
|
December |
|
|
31, 2004 |
|
Additions |
|
Divestitures |
|
consolidation |
|
differences |
|
changes |
|
31, 2005 |
|
|
(in millions of euros) |
Land |
|
|
500 |
|
|
|
1 |
|
|
|
(25 |
) |
|
|
26 |
|
|
|
24 |
|
|
|
7 |
|
|
|
533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned industrial buildings |
|
|
4,088 |
|
|
|
76 |
|
|
|
(143 |
) |
|
|
93 |
|
|
|
189 |
|
|
|
49 |
|
|
|
4,352 |
|
Industrial buildings leased
under finance leases |
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrial buildings |
|
|
4,136 |
|
|
|
76 |
|
|
|
(143 |
) |
|
|
93 |
|
|
|
189 |
|
|
|
74 |
|
|
|
4,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned plant, machinery and
equipment |
|
|
19,119 |
|
|
|
1,148 |
|
|
|
(1,081 |
) |
|
|
3,839 |
|
|
|
711 |
|
|
|
477 |
|
|
|
24,213 |
|
Plant, machinery and equipment
leased under finance leases |
|
|
29 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
13 |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Plant, machinery and
equipment |
|
|
19,148 |
|
|
|
1,155 |
|
|
|
(1,081 |
) |
|
|
3,839 |
|
|
|
715 |
|
|
|
490 |
|
|
|
24,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets sold with a buy-back
commitment |
|
|
1,495 |
|
|
|
468 |
|
|
|
(396 |
) |
|
|
|
|
|
|
7 |
|
|
|
8 |
|
|
|
1,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned other tangible assets |
|
|
1,812 |
|
|
|
170 |
|
|
|
(187 |
) |
|
|
81 |
|
|
|
79 |
|
|
|
(1 |
) |
|
|
1,954 |
|
Other tangible assets leased
under finance leases |
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other tangible assets |
|
|
1,817 |
|
|
|
175 |
|
|
|
(187 |
) |
|
|
81 |
|
|
|
79 |
|
|
|
1 |
|
|
|
1,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances and tangible assets in
progress |
|
|
677 |
|
|
|
400 |
|
|
|
|
|
|
|
49 |
|
|
|
30 |
|
|
|
(541 |
) |
|
|
615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross carrying amount of
Property, plant and equipment |
|
|
27,773 |
|
|
|
2,275 |
|
|
|
(1,832 |
) |
|
|
4,088 |
|
|
|
1,044 |
|
|
|
39 |
|
|
|
33,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in accumulated depreciation and impairment losses were as follows:
F - 36
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in the |
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
|
|
|
|
scope of |
|
|
|
|
|
|
|
|
|
At |
|
|
December |
|
|
|
|
|
Impairment |
|
|
|
|
|
consoli- |
|
Translation |
|
Other |
|
December |
|
|
31, 2004 |
|
Depreciation |
|
losses |
|
Divestitures |
|
dation |
|
differences |
|
changes |
|
31, 2005 |
|
|
(in millions of euros) |
Land |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned industrial buildings |
|
|
1,931 |
|
|
|
133 |
|
|
|
30 |
|
|
|
(104 |
) |
|
|
14 |
|
|
|
85 |
|
|
|
33 |
|
|
|
2,122 |
|
Industrial buildings leased under
finance leases |
|
|
5 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrial buildings |
|
|
1,936 |
|
|
|
136 |
|
|
|
30 |
|
|
|
(104 |
) |
|
|
14 |
|
|
|
85 |
|
|
|
35 |
|
|
|
2,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned plant, machinery and equipment |
|
|
14,576 |
|
|
|
1,435 |
|
|
|
59 |
|
|
|
(1,050 |
) |
|
|
2,751 |
|
|
|
482 |
|
|
|
12 |
|
|
|
18,265 |
|
Plant, machinery and equipment leased
under finance leases |
|
|
11 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
12 |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Plant, machinery and equipment |
|
|
14,587 |
|
|
|
1,439 |
|
|
|
59 |
|
|
|
(1,050 |
) |
|
|
2,751 |
|
|
|
483 |
|
|
|
24 |
|
|
|
18,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets sold with a buy-back commitment |
|
|
389 |
|
|
|
150 |
|
|
|
24 |
|
|
|
(164 |
) |
|
|
|
|
|
|
2 |
|
|
|
5 |
|
|
|
406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned other tangible assets |
|
|
1,410 |
|
|
|
137 |
|
|
|
|
|
|
|
(107 |
) |
|
|
65 |
|
|
|
51 |
|
|
|
(26 |
) |
|
|
1,530 |
|
Other tangible assets leased under
finance leases |
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other tangible assets |
|
|
1,411 |
|
|
|
139 |
|
|
|
|
|
|
|
(107 |
) |
|
|
65 |
|
|
|
51 |
|
|
|
(25 |
) |
|
|
1,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances and tangible assets in progress |
|
|
6 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated depreciation and
impairment of Property, plant and
equipment |
|
|
18,336 |
|
|
|
1,866 |
|
|
|
113 |
|
|
|
(1,425 |
) |
|
|
2,830 |
|
|
|
622 |
|
|
|
39 |
|
|
|
22,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The column Other changes includes the reversal of impairment losses on previously
impaired assets amounting to 16 million euros in 2005 (there was no reversal of impairment losses
in 2004).
The net carrying amount of Property, plant and equipment can be analyzed as follows:
F - 37
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the |
|
|
|
|
|
|
|
|
|
At |
|
|
December |
|
|
|
|
|
|
|
|
|
Impairment |
|
|
|
|
|
scope of |
|
Translation |
|
Other |
|
December |
|
|
31, 2004 |
|
Additions |
|
Depreciation |
|
losses |
|
Divestitures |
|
consolidation |
|
differences |
|
changes |
|
31, 2005 |
|
|
(in millions of euros) |
Land |
|
|
493 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
(25 |
) |
|
|
26 |
|
|
|
24 |
|
|
|
7 |
|
|
|
526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned industrial buildings |
|
|
2,157 |
|
|
|
76 |
|
|
|
(133 |
) |
|
|
(30 |
) |
|
|
(39 |
) |
|
|
79 |
|
|
|
104 |
|
|
|
16 |
|
|
|
2,230 |
|
Industrial buildings
leased under finance
leases |
|
|
43 |
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
|
63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrial buildings |
|
|
2,200 |
|
|
|
76 |
|
|
|
(136 |
) |
|
|
(30 |
) |
|
|
(39 |
) |
|
|
79 |
|
|
|
104 |
|
|
|
39 |
|
|
|
2,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned plant, machinery and
equipment |
|
|
4,543 |
|
|
|
1,148 |
|
|
|
(1,435 |
) |
|
|
(59 |
) |
|
|
(31 |
) |
|
|
1,088 |
|
|
|
229 |
|
|
|
465 |
|
|
|
5,948 |
|
Plant, machinery and
equipment leased under
finance leases |
|
|
18 |
|
|
|
7 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
1 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Plant, machinery and
equipment |
|
|
4,561 |
|
|
|
1,155 |
|
|
|
(1,439 |
) |
|
|
(59 |
) |
|
|
(31 |
) |
|
|
1,088 |
|
|
|
232 |
|
|
|
466 |
|
|
|
5,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets sold with a buy-back
commitment |
|
|
1,106 |
|
|
|
468 |
|
|
|
(150 |
) |
|
|
(24 |
) |
|
|
(232 |
) |
|
|
|
|
|
|
5 |
|
|
|
3 |
|
|
|
1,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned other tangible assets |
|
|
402 |
|
|
|
170 |
|
|
|
(137 |
) |
|
|
|
|
|
|
(80 |
) |
|
|
16 |
|
|
|
28 |
|
|
|
25 |
|
|
|
424 |
|
Other tangible assets
leased under finance
leases |
|
|
4 |
|
|
|
5 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other tangible assets |
|
|
406 |
|
|
|
175 |
|
|
|
(139 |
) |
|
|
|
|
|
|
(80 |
) |
|
|
16 |
|
|
|
28 |
|
|
|
26 |
|
|
|
432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances and tangible assets
in progress |
|
|
671 |
|
|
|
400 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
29 |
|
|
|
(541 |
) |
|
|
606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net carrying amount of
Property, plant and
equipment |
|
|
9,437 |
|
|
|
2,275 |
|
|
|
(1,866 |
) |
|
|
(113 |
) |
|
|
(407 |
) |
|
|
1,258 |
|
|
|
422 |
|
|
|
|
|
|
|
11,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions of 2,275 million euros in 2005 mainly refer to the Automotive Sectors (Fiat
Auto, Iveco, CNH) and to the Components Sector, and do not include capitalized borrowing costs. The
amount of 1,258 million euros shown as a Change in the scope of consolidation arises mainly from
the line-by-line consolidation of the Powertrain activities, previously included in the joint
venture with General Motors, Fiat-GM Powertrain, net of the reclassification to assets held for
sale of certain plant and machinery of the subsidiary Atlanet S.p.A., for which a sales agreement
has been signed with the British Telecom group approved by the antitrust authorities in February
2006; translation gains of 422 million euros principally reflect changes in the euro/U.S. dollar
rate.
The Group has written down certain industrial buildings during the year whose carrying amount
was considered not to be fully recoverable either through use or by a possible sale. This
write-down is included in selling, general and administrative costs.
During the year the Group reviewed the recoverable amount of certain production plant in view
of its reorganization and restructuring programmes for specific Sectors. In addition, the Group
carried out a recoverability assessment for assets of businesses for which there were indications
that impairment may have occurred, using discounted cash flow methods. These assessments led to the
recognition of impairment losses of 59 million euros, of which 12 million euros is recognized in
Trading profit and 47 million euros in the item Restructuring costs.
The recoverable amount of these assets was determined with reference to their value in use,
calculated using a pre-tax discount rate varying between 9.5% and 18%, as a function of the
different business risks (these rates are unchanged from those used in 2004).
F - 38
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Additionally, at December 31, 2005, the Group recognized a write-down to market value of goods
sold with a buy-back commitment for a total of 24 million euros. This write-down is recognized in
Cost of sales.
The column Other changes includes the reduction in Advances and tangible assets in progress,
existing at the end of the prior year which was reclassified to the appropriate categories at the
time the assets were effectively acquired and put into operation. The column also includes an
amount of 32 million euros relating to the reclassification of certain properties and
industrial buildings of CNH, no longer in use, to Assets held for sale, as the consequence of the
restructuring process taking place over the past few years following the acquisition of the Case
group.
At December 31, 2005, land and industrial buildings of the Group pledged as security for debt
amounted to 195 million euros (139 million euros at December 31, 2004); plant and machinery pledged
as security for debt and other commitments amounted to 61 million euros (31 million euros at
December 31, 2004).
At December 31, 2005, the Group had contractual commitments for the acquisition of property,
plant and equipment amounting to 418 million euros (407 million euros at December 31, 2004).
(15) Investment property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
Changes in |
|
|
|
|
|
Divestitures |
|
At |
|
|
December |
|
|
|
|
|
|
|
|
|
the scope of |
|
Translation |
|
and other |
|
December |
|
|
31, 2004 |
|
Additions |
|
Depreciation |
|
consolidation |
|
differences |
|
charges |
|
31, 2005 |
|
|
(in millions of euros) |
Gross carrying amount |
|
|
63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
36 |
|
Less: Depreciation and impairment |
|
|
(17 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount of Investment
property |
|
|
46 |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group holds interests in certain property to earn rental income. This investment
property is carried at cost.
Rental income from investment property in 2005 amounted to 2 million euros, essentially in
line with the 2004 amount.
(16) Investments and other financial assets
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Investments: |
|
|
|
|
|
|
|
|
Investments accounted for using the equity method |
|
|
1,762 |
|
|
|
3,490 |
|
Investments valued at fair value with changes directly in equity |
|
|
227 |
|
|
|
168 |
|
Investments valued at cost |
|
|
101 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
Total Investments |
|
|
2,090 |
|
|
|
3,796 |
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
113 |
|
|
|
112 |
|
Other securities |
|
|
130 |
|
|
|
117 |
|
|
|
|
|
|
|
|
|
|
Total Investments and other financial assets |
|
|
2,333 |
|
|
|
4,025 |
|
|
|
|
|
|
|
|
|
|
F - 39
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The changes in Investments in 2005 are set out below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
Disposals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions |
|
|
in the scope |
|
|
|
|
|
|
and |
|
|
|
|
|
|
At December |
|
|
Revaluations/ |
|
|
and |
|
|
of |
|
|
Translations |
|
|
Other |
|
|
At December |
|
|
|
31, 2004 |
|
|
(Write-downs) |
|
|
Capitalizations |
|
|
consolidation |
|
|
differences |
|
|
changes |
|
|
31, 2005 |
|
|
|
(in millions of euros) |
|
Unconsolidated subsidiaries |
|
|
32 |
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
2 |
|
|
|
18 |
|
|
|
46 |
|
Jointly controlled entities |
|
|
1,790 |
|
|
|
39 |
|
|
|
9 |
|
|
|
(1,210 |
) |
|
|
95 |
|
|
|
(18 |
) |
|
|
705 |
|
Associates |
|
|
1,740 |
|
|
|
46 |
|
|
|
12 |
|
|
|
137 |
|
|
|
24 |
|
|
|
(901 |
) |
|
|
1,058 |
|
Other companies |
|
|
234 |
|
|
|
(7 |
) |
|
|
23 |
|
|
|
(7 |
) |
|
|
|
|
|
|
38 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments |
|
|
3,796 |
|
|
|
75 |
|
|
|
44 |
|
|
|
(1,083 |
) |
|
|
121 |
|
|
|
(863 |
) |
|
|
2,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluations and Write-downs consist of adjustments to the carrying value of investments
accounted for using the equity method for the Groups share of the result for the year of the
investee company (115 million euros in 2005 and 153 million euros in 2004). Write-downs also
include any loss in value in investments accounted for under the cost method.
Changes in the scope of consolidation of -1,083 million euros mainly relate to the
consolidation on a line by line basis of Fiat Powertrain B.V. (previously Fiat-GM Powertrain),
consolidated using the equity method until December 31, 2004, resulting in a reduction of 1,213
million euros. This reduction has been partially offset by an increase of 125 million euros arising
from the equity method valuation of the investment in the associate Iveco Finance Holdings Limited,
no longer consolidated on a line-by-line basis following the sale by the Fiat Group of 51% of the
company to Barclays Mercantile Business Finance Ltd.
Disposals and other changes of -863 million euros are made up as follows: a decrease of 856
million euros arising from the sale of the investment in Italenergia Bis S.p.A., as described in
Note 6; positive fair value adjustments of 59 million euros arising from the investment in
Mediobanca S.p.A.; dividends of 47 million euros distributed by companies accounted for using the
equity method and other, minor decreases of 19 million euros.
The item Investments in jointly controlled entities comprises the following:
F - 40
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
interest |
|
|
Amount |
|
|
interest |
|
|
Amount |
|
|
|
|
|
|
|
(in millions |
|
|
|
|
|
|
(in millions |
|
|
|
|
|
|
|
of euros) |
|
|
|
|
|
|
of euros) |
|
Tofas-Turk
Otomobil Fabrikasi Tofas A.S. |
|
|
37.9 |
|
|
|
245 |
|
|
|
37.9 |
|
|
|
183 |
|
Naveco Ltd. |
|
|
50.0 |
|
|
|
118 |
|
|
|
50.0 |
|
|
|
94 |
|
Società Europea Veicoli Leggeri-Sevel S.p.A. |
|
|
50.0 |
|
|
|
108 |
|
|
|
50.0 |
|
|
|
118 |
|
Société Européenne de Véhicules Légers du Nord-Sevelnord
Société Anonyme |
|
|
50.0 |
|
|
|
59 |
|
|
|
50.0 |
|
|
|
45 |
|
Consolidated Diesel Company |
|
|
50.0 |
|
|
|
59 |
|
|
|
50.0 |
|
|
|
49 |
|
New Holland HFT Japan Inc. |
|
|
50.0 |
|
|
|
35 |
|
|
|
50.0 |
|
|
|
30 |
|
Nan Jing Fiat Auto Co. Ltd. |
|
|
50.0 |
|
|
|
33 |
|
|
|
50.0 |
|
|
|
39 |
|
Transolver Finance Establecimiento Financiero de Credito S.A. |
|
|
50.0 |
|
|
|
17 |
|
|
|
50.0 |
|
|
|
15 |
|
CNH de Mexico SA de CV |
|
|
50.0 |
|
|
|
17 |
|
|
|
50.0 |
|
|
|
7 |
|
Fiat
Powertrain B.V. |
|
|
|
|
|
|
|
|
|
|
50.0 |
|
|
|
1,182 |
|
Other minors |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in jointly controlled entities |
|
|
|
|
|
|
705 |
|
|
|
|
|
|
|
1,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The item Investments in associates comprises the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
interest |
|
|
Amount |
|
|
interest |
|
|
Amount |
|
|
|
|
|
|
|
(in millions |
|
|
|
|
|
|
(in millions |
|
|
|
|
|
|
|
of euros) |
|
|
|
|
|
|
of euros) |
|
Fidis Retail Italia S.p.A. |
|
|
49.0 |
|
|
|
431 |
|
|
|
49.0 |
|
|
|
390 |
|
Iveco Finance Holdings Limited |
|
|
49.0 |
|
|
|
131 |
|
|
|
|
|
|
|
|
|
Kobelco Construction Machinery Co. Ltd. |
|
|
20.0 |
|
|
|
106 |
|
|
|
20.0 |
|
|
|
99 |
|
Rizzoli Corriere della Sera MediaGroup S.p.A. |
|
|
9.9 |
|
|
|
104 |
|
|
|
9.8 |
|
|
|
101 |
|
CNH Capital
Europe S.a.S. |
|
|
49.9 |
|
|
|
65 |
|
|
|
49.9 |
|
|
|
58 |
|
Turk Traktor
Ve Ziraat Makineleri A.S. |
|
|
37.5 |
|
|
|
29 |
|
|
|
37.5 |
|
|
|
30 |
|
Immobiliare Novoli S.p.A. |
|
|
40.0 |
|
|
|
21 |
|
|
|
40.0 |
|
|
|
21 |
|
LBX Company LLC |
|
|
50.0 |
|
|
|
20 |
|
|
|
50.0 |
|
|
|
16 |
|
Al-Ghazi Tractors Ltd. |
|
|
43.2 |
|
|
|
14 |
|
|
|
43.2 |
|
|
|
12 |
|
New Holland
Trakmak Traktor A.S. |
|
|
37.5 |
|
|
|
14 |
|
|
|
37.5 |
|
|
|
13 |
|
CBC-Iveco Ltd. |
|
|
50.0 |
|
|
|
|
|
|
|
50.0 |
|
|
|
21 |
|
Italenergia
Bis S.p.A. |
|
|
|
|
|
|
|
|
|
|
38.6 |
|
|
|
856 |
|
Other minors |
|
|
|
|
|
|
123 |
|
|
|
|
|
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in associates |
|
|
|
|
|
|
1,058 |
|
|
|
|
|
|
|
1,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rizzoli Corriere della Sera MediaGroup S.p.A. is a listed company in which Fiat is one of
the major shareholders, has a seat on the Board of Directors and is a party to a stockholders
agreement; as a result the company is considered to be an associate. In order to account for this
investment using the equity method, reference was made to its most recent published financial
statements being those for the third quarter of 2005, as those to be issued for financial year 2005
will be published subsequent to the publication of the consolidated financial statements of the
Fiat Group.
At December 31, 2005, the fair market value of Investments in listed jointly controlled entities
and listed associates is as follows:
F - 41
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
value |
|
|
Fair value |
|
|
|
(in millions of euros) |
|
Tofas-Turk
Otomobil Fabrikasi Tofas A.S. |
|
|
245 |
|
|
|
338 |
|
Rizzoli Corriere della Sera MediaGroup S.p.A. |
|
|
104 |
|
|
|
301 |
|
Al-Ghazi Tractors Ltd. |
|
|
14 |
|
|
|
52 |
|
|
|
|
|
|
|
|
Total Investments in listed jointly controlled
entities and associates |
|
|
363 |
|
|
|
691 |
|
|
|
|
|
|
|
|
The item Investments in other companies includes the investment in Mediobanca S.p.A. of
227 million euros (168 million euros at December 31, 2004).
At December 31, 2005, there are no investments nor other financial assets given as collateral
for financial debt. At December 31, 2004, Investments and other financial assets given as
collateral for financial debt amounted to 856 million euros, and related to the investment in
Italenergia Bis S.p.A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
Disposals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in the scope |
|
|
|
|
|
|
and |
|
|
At |
|
|
|
At December |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of |
|
|
Translations |
|
|
Other |
|
|
December |
|
|
|
31, 2004 |
|
|
Additions |
|
|
Depreciation |
|
|
Impairment |
|
|
consolidation |
|
|
differences |
|
|
changes |
|
|
31, 2005 |
|
|
|
(in millions of euros) |
|
Gross carrying amount |
|
|
1,106 |
|
|
|
409 |
|
|
|
|
|
|
|
|
|
|
|
825 |
|
|
|
37 |
|
|
|
(479 |
) |
|
|
1,898 |
|
Less: Depreciation and
impairment |
|
|
(366 |
) |
|
|
|
|
|
|
(184 |
) |
|
|
|
|
|
|
(300 |
) |
|
|
(13 |
) |
|
|
219 |
|
|
|
(644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount of
Leased assets |
|
|
740 |
|
|
|
409 |
|
|
|
(184 |
) |
|
|
|
|
|
|
525 |
|
|
|
24 |
|
|
|
(260 |
) |
|
|
1,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The column Change in the scope of consolidation includes the effect resulting from
consolidating Leasys S.p.A. on a line-by-line basis.
The Group leases out assets, mainly its own products, as part of its financial services
business. Minimum lease payments from non-cancelable operating leases amount to 420 million euros,
at December 31, 2005 (415 million euros at December 31, 2004) and fall due as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Within one year |
|
|
215 |
|
|
|
239 |
|
Between one and five years |
|
|
200 |
|
|
|
175 |
|
Beyond five years |
|
|
5 |
|
|
|
1 |
|
|
|
|
|
|
|
|
Total Minimum lease payments |
|
|
420 |
|
|
|
415 |
|
|
|
|
|
|
|
|
F - 42
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Raw materials, supplies and finished goods |
|
|
7,499 |
|
|
|
6,962 |
|
Work in progress |
|
|
2,550 |
|
|
|
2,618 |
|
Advances on contract work |
|
|
(2,168 |
) |
|
|
(2,323 |
) |
|
|
|
|
|
|
|
Total Inventories |
|
|
7,881 |
|
|
|
7,257 |
|
|
|
|
|
|
|
|
At December 31, 2005, inventories include assets sold with a buy-back commitment by Fiat
Auto for 748 million euros (771 million euros at December 31, 2004). Net of this amount,
inventories show an increase of 647 million euros in 2005, due to the foreign exchange rate effect
following the appreciation of the U.S. dollar against the euro, and the change in scope of
consolidation (approximately 480 million euros).
At December 31, 2005, Inventories include inventories measured at their net realizable value
(estimated selling price less the estimated costs of completion and the estimated costs necessary
to make the sale) amounting to 1,614 million euros (1,547 million euros at December 31, 2004).
The amount of inventory write-downs recognized as an expense during the year are 251 million
euros (244 million euros in 2004). Amounts recognized as income from the reversal of write-downs on
items sold during the year were not significant.
At December 31, 2005, the carrying amount of inventories pledged as security for loans to the
Group is 463 million euros (495 million euros at December 31, 2004).
The majority of Work in progress and Advances on contract work relates to the Production
Systems Sector (Comau) and can be analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Gross amount due from customers for contract work as an asset |
|
|
469 |
|
|
|
407 |
|
Less: Gross amount due to customers for contract work as a liability |
|
|
(87 |
) |
|
|
(112 |
) |
|
|
|
|
|
|
|
Work in progress, net of advances on contract work |
|
|
382 |
|
|
|
295 |
|
|
|
|
|
|
|
|
Aggregate amount of costs incurred and recognized profits (less
recognized losses) to date |
|
|
2,550 |
|
|
|
2,618 |
|
Less: Progress billings |
|
|
(2,168 |
) |
|
|
(2,323 |
) |
|
|
|
|
|
|
|
Work in progress, net of advances on contract work |
|
|
382 |
|
|
|
295 |
|
|
|
|
|
|
|
|
At December 31, 2005, retentions by customers on progress billings amount to 9 million
euros (1 million euros at December 31, 2004).
F - 43
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The composition of the caption and the analysis by due date is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
between |
|
|
Due |
|
|
|
|
|
|
|
|
|
|
between |
|
|
Due |
|
|
|
|
|
|
|
|
|
|
one and |
|
|
beyond |
|
|
|
|
|
|
|
|
|
|
one and |
|
|
beyond |
|
|
|
|
|
|
Due within |
|
|
five |
|
|
five |
|
|
|
|
|
|
Due within |
|
|
five |
|
|
five |
|
|
|
|
|
|
one year |
|
|
years |
|
|
years |
|
|
Total |
|
|
one year |
|
|
years |
|
|
years |
|
|
Total |
|
|
|
(in millions of euros) |
|
Trade receivables |
|
|
4,871 |
|
|
|
66 |
|
|
|
32 |
|
|
|
4,969 |
|
|
|
5,462 |
|
|
|
18 |
|
|
|
11 |
|
|
|
5,491 |
|
Receivables from
financing activities |
|
|
10,796 |
|
|
|
5,007 |
|
|
|
170 |
|
|
|
15,973 |
|
|
|
11,316 |
|
|
|
5,691 |
|
|
|
491 |
|
|
|
17,498 |
|
Other receivables |
|
|
2,600 |
|
|
|
292 |
|
|
|
192 |
|
|
|
3,084 |
|
|
|
2,457 |
|
|
|
228 |
|
|
|
49 |
|
|
|
2,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Receivables |
|
|
18,267 |
|
|
|
5,365 |
|
|
|
394 |
|
|
|
24,026 |
|
|
|
19,235 |
|
|
|
5,937 |
|
|
|
551 |
|
|
|
25,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2005, Current receivables include receivables sold and financed through
both securitization and factoring transactions of 9,604 millions of euros (9,596 millions of euros
at December 31, 2004) which do not meet IAS 39 derecognition requirements. These receivables are
recognized as such in the Group financial statements even though they have been legally sold; a
corresponding financial liability is recorded in the consolidated balance sheet as Asset-backed
financing (see Note 28).
Trade receivables are shown net of allowances for doubtful accounts of 524 million euros at
December 31, 2005 (468 million euros at December 31, 2004), determined on the basis of historical
losses on receivables. Movements in the allowance accounts during the year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
Use and |
|
Change in |
|
At |
|
|
December |
|
|
|
|
|
other |
|
the scope of |
|
December |
|
|
31, 2004 |
|
Provision |
|
changes |
|
consolidation |
|
31, 2005 |
|
|
(in millions of euros) |
Allowance for doubtful accounts |
|
|
468 |
|
|
|
136 |
|
|
|
(81 |
) |
|
|
1 |
|
|
|
524 |
|
The carrying amount of Trade receivables is considered in line with their fair value at
the date.
At December 31, 2005, trade receivables of 153 million euros were pledged as security for
loans obtained (109 million euros at December 31, 2004).
F - 44
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
(ii) |
|
Receivables from financing activities |
Receivables from financing activities include the following:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Retail financing |
|
|
6,655 |
|
|
|
6,763 |
|
Finance leases |
|
|
716 |
|
|
|
2,120 |
|
Dealer financing |
|
|
6,804 |
|
|
|
5,360 |
|
Supplier financing |
|
|
335 |
|
|
|
838 |
|
Receivables from banking activities |
|
|
1,147 |
|
|
|
1,270 |
|
Financial receivables from companies under
joint control, associates and
unconsolidated subsidiaries |
|
|
70 |
|
|
|
630 |
|
Other |
|
|
246 |
|
|
|
517 |
|
|
|
|
|
|
|
|
Total Receivables from financing activities |
|
|
15,973 |
|
|
|
17,498 |
|
|
|
|
|
|
|
|
The decrease of 1,525 million euros in Receivables from financing activities with respect
to the balance at December 31, 2004 is principally due to the combined effect of the following
matters:
|
§ |
|
a decrease of approximately 2.4 billion euros as a result of the sale by the Iveco
Sector of part of its financial services activities, and the creation of the joint
venture Iveco Finance Holdings Limited with Barclays; |
|
|
§ |
|
positive translation differences of approximately 1.4 billion euros, principally
arising from the receivables of CNH; |
|
|
§ |
|
a decrease of approximately 500 million euros in supplier financing; |
|
|
§ |
|
a decrease of 560 million euros in Financial receivables from companies under joint
control, associates and unconsolidated subsidiaries, mainly as a result of the
acquisition of 100% control of Leasys and the resulting inclusion of that company in
the scope of consolidation. |
Receivables from financing activities are shown net of an allowance for doubtful accounts
determined on the basis of specific insolvency risks. At December 31, 2005 the allowance amounts to
523 million euros (559 million euros at December 31, 2004). Movements in the allowance accounts
during the year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
Use and |
|
|
Change in |
|
|
At |
|
|
|
December |
|
|
|
|
|
|
other |
|
|
the scope of |
|
|
December |
|
|
|
31, 2004 |
|
|
Provision |
|
|
changes |
|
|
consolidation |
|
|
31, 2005 |
|
|
|
(in millions of euros) |
|
Allowance for receivables regarding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail financing |
|
|
185 |
|
|
|
41 |
|
|
|
(24 |
) |
|
|
(5 |
) |
|
|
197 |
|
Finance leases |
|
|
108 |
|
|
|
17 |
|
|
|
(22 |
) |
|
|
(5 |
) |
|
|
98 |
|
Dealer financing |
|
|
75 |
|
|
|
38 |
|
|
|
(11 |
) |
|
|
|
|
|
|
102 |
|
Supplier financing |
|
|
22 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
28 |
|
Receivables from banking activities |
|
|
39 |
|
|
|
6 |
|
|
|
(6 |
) |
|
|
|
|
|
|
39 |
|
Financial receivables from
companies under joint control,
associates and unconsolidated
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
130 |
|
|
|
12 |
|
|
|
(83 |
) |
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance on Receivables from
financing activities |
|
|
559 |
|
|
|
120 |
|
|
|
(146 |
) |
|
|
(10 |
) |
|
|
523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 45
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Finance lease receivables relate almost entirely to the vehicles of Fiat Auto, Commercial
Vehicles and Agricultural and Construction Equipment Sectors leased out under finance lease
arrangements and may be analyzed as follows stated gross of an allowance of 98 million euros at
December 31, 2005 (108 million euros at December 31, 2004):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
between |
|
|
Due |
|
|
|
|
|
|
|
|
|
|
between |
|
|
Due |
|
|
|
|
|
|
|
|
|
|
one and |
|
|
beyond |
|
|
|
|
|
|
|
|
|
|
one and |
|
|
beyond |
|
|
|
|
|
|
Due within |
|
|
five |
|
|
five |
|
|
|
|
|
|
Due within |
|
|
five |
|
|
five |
|
|
|
|
|
|
one year |
|
|
years |
|
|
years |
|
|
Total |
|
|
one year |
|
|
years |
|
|
years |
|
|
Total |
|
|
|
(in millions of euros) |
|
Receivables
for future minimum
lease payments |
|
|
433 |
|
|
|
456 |
|
|
|
36 |
|
|
|
925 |
|
|
|
894 |
|
|
|
1,553 |
|
|
|
39 |
|
|
|
2,486 |
|
Less: unrealized
interest income |
|
|
(51 |
) |
|
|
(56 |
) |
|
|
(4 |
) |
|
|
(111 |
) |
|
|
(89 |
) |
|
|
(164 |
) |
|
|
(5 |
) |
|
|
(258 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of
future minimum
lease payments |
|
|
382 |
|
|
|
400 |
|
|
|
32 |
|
|
|
814 |
|
|
|
805 |
|
|
|
1,389 |
|
|
|
34 |
|
|
|
2,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There are no contingent rents as finance lease recognized income during 2005 or 2004.
Unguaranteed residual values at December 31, 2005 and 2004 are not significant.
The interest rate implicit in the lease is determined at the commencement of the lease for the
whole lease term. The average interest rate implicit in total finance lease receivables vary
depending on prevailing market interest rates.
Receivables for dealer financing are typically generated by sales of vehicles and are
generally managed under dealer network financing programs as a component of the portfolio of the
financial services companies. These receivables are interest bearing, with the exception of an
initial limited, non-interest bearing period. The contractual terms governing the relationships
with the dealer networks vary from Sector to Sector and from country to country, although these
receivables are collected in approximately two to four months on average.
The fair value of receivables from financing activities at December 31, 2005 amounts
approximately to 15,821 million euros (17,460 million euros at December 31, 2004) and has been
calculated using a discounted cash flow method based on the following discount rates, adjusted,
where necessary, to take account of the specific risk of insolvency of the underlying financial
instrument.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EUR |
|
USD |
|
GBP |
|
CAD |
|
AUD |
|
BRL |
|
PLN |
|
|
(in %) |
Interest rate for six months |
|
|
2.64 |
|
|
|
4.70 |
|
|
|
4.59 |
|
|
|
3.81 |
|
|
|
5.64 |
|
|
|
16.06 |
|
|
|
4.60 |
|
Interest rate for one year |
|
|
2.84 |
|
|
|
4.84 |
|
|
|
4.57 |
|
|
|
4.06 |
|
|
|
5.58 |
|
|
|
15.58 |
|
|
|
4.70 |
|
Interest rate for five years |
|
|
3.22 |
|
|
|
4.88 |
|
|
|
4.54 |
|
|
|
4.18 |
|
|
|
5.70 |
|
|
|
14.73 |
|
|
|
5.15 |
|
F - 46
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
At December 31, 2005, Other receivables are as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Tax receivables |
|
|
1,903 |
|
|
|
1,759 |
|
Receivables from employees |
|
|
41 |
|
|
|
38 |
|
Receivables from social security agencies |
|
|
30 |
|
|
|
25 |
|
Other |
|
|
1,110 |
|
|
|
912 |
|
|
|
|
|
|
|
|
Total Other receivables |
|
|
3,084 |
|
|
|
2,734 |
|
|
|
|
|
|
|
|
At December 31, 2005, Tax receivables include current income tax assets of 778 million
euros (780 million euros at December 31, 2004).
The carrying amount of Other receivables is considered to be in line with their fair value at
the date.
|
(20) |
|
Accrued income and prepaid expenses |
The item Accrued income and prepaid expenses consists mainly of prepaid insurance premiums and
rent.
At December 31, 2005, current securities consist of short-term or marketable securities which
represent temporary investments, but which do not satisfy the requirements for being classified as
cash equivalents. In particular:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Current securities available-for-sale |
|
|
317 |
|
|
|
108 |
|
Current securities for trading |
|
|
239 |
|
|
|
245 |
|
|
|
|
|
|
|
|
Total Current securities |
|
|
556 |
|
|
|
353 |
|
|
|
|
|
|
|
|
During 2005, this item increased by 203 million euros as a consequence of a changed mix
in the temporary investment of funds.
F - 47
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
(22) |
|
Other financial assets and Other financial liabilities |
These items include the measurement at fair value of derivative financial instruments at the
balance sheet date. In particular:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
Positive/ |
|
|
|
Positive fair |
|
|
Negative fair |
|
|
(negative) fair |
|
|
|
value |
|
|
value |
|
|
value |
|
|
|
(in millions of euros) |
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate risk Forward contracts and
Exchange rate swaps (currency swaps) |
|
|
26 |
|
|
|
(16 |
) |
|
|
7 |
|
Interest rate risk Interest rate swaps and
Forward rate agreement |
|
|
307 |
|
|
|
(26 |
) |
|
|
467 |
|
Interest rate and exchange rate risk -
Combined interest rate and currency swaps |
|
|
9 |
|
|
|
(1 |
) |
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
Total Fair value hedges |
|
|
342 |
|
|
|
(43 |
) |
|
|
664 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate risks Forward contracts,
Exchange rate swaps (currency swaps) and
Currency options |
|
|
48 |
|
|
|
(95 |
) |
|
|
70 |
|
Interest rate swaps and Forward rate agreement |
|
|
2 |
|
|
|
(3 |
) |
|
|
(53 |
) |
Combined interest rate and currency swaps |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Total Cash flow hedges |
|
|
50 |
|
|
|
(98 |
) |
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
Derivatives for trading |
|
|
62 |
|
|
|
(48 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
Other financial assets/(liabilities) |
|
|
454 |
|
|
|
189 |
|
|
|
648 |
|
|
|
|
|
|
|
|
|
|
|
The fair value of derivative financial instruments is determined by taking into
consideration market parameters at the balance sheet date and using valuation techniques widely
accepted in the financial business environment. In particular:
|
§ |
|
the fair value of forward contracts and currency swaps is determined by taking the
prevailing exchange rate and interest rates in the two currencies at the balance sheet
date. |
|
|
§ |
|
the fair value of currency options is determined using valuation techniques based on
the Black-Scholes model or binomial models and market parameters at the balance sheet
date (in particular exchange rates, interest rates and volatility rates). |
|
|
§ |
|
the fair value of interest rate swaps and forward rate agreements is determined by
using the discounted cash flow method. |
|
|
§ |
|
the fair value of derivative financial instruments acquired to hedge interest rate
risk and exchange rate risk is determined using the exchange rates prevailing at the
balance sheet date and the discounted cash flow method. |
|
|
§ |
|
the fair value of equity swaps is determined using market prices and market interest
rates at the balance sheet date. |
The overall decrease in Other financial assets from 851 million euros at December 31, 2004 to
454 million euros at December 31, 2005, and the decrease in Other financial liabilities from 203
million euros at December 31, 2004 to 189 million euros at December 31, 2005, is due not only to
the changes in exchange rates and interest rates over the period, but also to the termination of
certain hedging operations in advance, as a consequence of the change in the Groups funding
structure.
F - 48
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
As this item consists principally of hedging instruments, the change in their value is
compensated by the change in the value of the hedged item.
At December 31, 2005, the notional amount of outstanding derivative financial instruments is
as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Exchange rate risk management |
|
|
5,992 |
|
|
|
5,612 |
|
Interest rate risk management |
|
|
10,544 |
|
|
|
13,487 |
|
Interest rate and exchange rate risk management |
|
|
204 |
|
|
|
783 |
|
Other derivative financial instruments |
|
|
1,805 |
|
|
|
2,219 |
|
|
|
|
|
|
|
|
Total notional amount |
|
|
18,545 |
|
|
|
22,101 |
|
|
|
|
|
|
|
|
At December 31, 2005, the notional amount of Other derivative instruments consists of:
|
§ |
|
For 70 million euros (66 million euros at December 31, 2004) the notional amount of
the equity swap stipulated to hedge the risk of an increase in the Fiat share price
above the exercise price of 10,670,000 stock options granted to Mr. Marchionne (see
Note 25). The risk of a significant increase in the Fiat share price above the exercise
price of these options (6.583 euros) is covered by a Total Return Equity Swap
agreement put into place at a reference price of 6.583 euros per share; this agreement
expires on October 30, 2006. Although this equity swap was entered into for hedging
purposes, it does not qualify for hedge accounting under IFRS and accordingly is
defined as a trading derivative financial instrument. At December 31, 2005, the Equity
Swap has a positive fair value of 8 million euros (a negative value of 7 million euros
at December 31, 2004). |
|
|
§ |
|
For 1,432 million euros, the notional amount of call options on General Motors
common stock purchased in 2004 in order to hedge the risk implicit in the Convertible
Bond (the residual debt of the Exchangeable bond linked to GM ordinary shares).
Following the repayment of the majority of this bond (Note 28), these options are
classified as trading instruments, even though they were originally purchased for
hedging purposes, and are measured at their fair value which at December 31, 2005 is
essentially nil (3 million euros at December 31, 2004). |
|
|
§ |
|
For 303 million euros (913 million euros at December 31, 2004). the notional amount
of derivatives embedded in certain bonds with a return linked to stock market indices
or inflation rates, as well as the notional amount of the related hedging derivatives. |
There are no significant cases at the date of preparing these financial statements in which
hedging exceeds the hedged future flows (overhedging).
The policy of the Fiat Group for managing exchange risk requires that future cash flows from
trading activities which will occur for accounting purposes within the following twelve months, and
from orders acquired (or contracts in progress), whatever their due dates, shall be hedged.
Where a derivative financial instrument is designated as a hedge of the exposure to
variability in cash flows of a recognized asset or liability or a highly probable forecasted
transaction and could affect income statement, the effective portion of any gain or loss on the
derivative financial instrument is recognized directly in equity. The cumulative gain or loss is
removed from equity and recognized in the profit and loss account at the same time in which the
hedged transaction affects
F - 49
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
income statement. The gain or loss associated with a hedge or part of a hedge that has become
ineffective is recognized in the income statement immediately. When a hedging instrument or hedge
relationship is terminated but the hedged transaction is still expected to occur, the cumulative
gain or loss realised to the point of termination remains in stockholders equity and is recognized
at the same time as the related transaction occurs. If the hedged transaction is no longer
probable, the cumulative unrealised gain or loss held in stockholders equity is recognized in the
income statement immediately.
In 2005, the Group transferred to income gains of 44 million euros net of tax effect
previously recognized directly in equity (gains of 12 million euros in 2004) presented in the
following line items:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Exchange rate risk |
|
|
|
|
|
|
|
|
Increase in Net revenues |
|
|
49 |
|
|
|
33 |
|
Decrease in Cost of sales |
|
|
8 |
|
|
|
(4 |
) |
Interest rate risk
|
|
|
|
|
|
|
|
|
Financial income (expenses) |
|
|
(15 |
) |
|
|
(14 |
) |
Taxes income (expenses) |
|
|
2 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
Total recognized in the income statement |
|
|
44 |
|
|
|
12 |
|
|
|
|
|
|
|
|
The ineffectiveness of cash flow hedges was not material for the years 2005 and 2004.
Gains and losses resulting from the measurement of interest rate derivative financial
instruments using fair value hedging rules and the gains and losses arising from the hedged item
are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Interest rate risk
|
|
|
|
|
|
|
|
|
Net gains (losses) on qualifying hedges |
|
|
(105 |
) |
|
|
86 |
|
Fair value changes in hedged items |
|
|
105 |
|
|
|
(86 |
) |
|
|
|
|
|
|
|
Net gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of fair value hedges on exchange rate risk was not material for the years 2005
and 2004.
F - 50
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
(23) |
|
Cash and cash equivalents |
Cash and cash equivalents include:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(in millions of euros) |
|
Cash at banks |
|
|
4,529 |
|
|
|
3,208 |
|
Cash with a pre-determined use |
|
|
706 |
|
|
|
669 |
|
Money market securities |
|
|
1,182 |
|
|
|
1,890 |
|
|
|
|
|
|
|
|
Total Cash and cash equivalents |
|
|
6,417 |
|
|
|
5,767 |
|
|
|
|
|
|
|
|
Amounts shown are readily convertible into cash and are subject to an insignificant risk
of changes in value. The carrying amount of cash and cash equivalents is to be considered in line
with their fair value at the balance sheet date.
Cash with a pre-determined use consists principally of cash whose use is restricted to the
repayment of the debt related to securitisations classified in the item Asset-backed financing.
The credit risk associated with Cash and cash equivalents is limited, as contracts are entered
into with primary national and international financial institutions.
|
(24) |
|
Assets and Liabilities held for sale |
The items Assets and Liabilities held for sale includes the assets and liabilities of the
subsidiary Atlanet S.p.A. at carrying values respectively of 119 million euros and 110 million
euros: an agreement for the sale of this subsidiary was signed with the British Telecom group in
the fourth quarter of 2005 and approved by the antitrust authorities in February 2006.
The item also includes an amount of 32 million euros for certain properties and industrial
buildings owned by CNH and no longer being used as a result of the restructuring process set up in
prior years following the acquisition of the Case Group.
|
(25) |
|
Stockholders equity |
Stockholders equity at December 31, 2005 increased by 4,485 million euros over that at December
31, 2004, mainly due to the increase in capital stock of 1,459 million euros on September 20, 2005
and the related increase in reserves for 682 million euros, net income for the period (1,420
million euros) and foreign exchange gains from the translation into euros of the financial
statements of subsidiaries denominated in other currencies (921 million euros).
F - 51
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
At December 31, 2005, the capital stock of Fiat S.p.A. is as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(number of shares) |
|
Shares issued and fully paid: |
|
|
|
|
|
|
|
|
Ordinary shares |
|
|
1,092,246,316 |
|
|
|
800,417,598 |
|
Preference shares |
|
|
103,292,310 |
|
|
|
103,292,310 |
|
Saving shares |
|
|
79,912,800 |
|
|
|
79,912,800 |
|
|
|
|
|
|
|
|
Total shares issued |
|
|
1,275,451,426 |
|
|
|
983,622,709 |
|
|
|
|
|
|
|
|
Issued shares have a nominal value of 5 euros, with each category having rights as
follows.
Each share conveys the right to a proportionate share of the earnings available for
distribution and of the residual net assets upon liquidation, without harming the rights of
preference and savings shares on the allocation of the earnings as described in the following
paragraph.
Each ordinary share conveys the right to vote without any restrictions whatsoever. Each
preference share conveys the right to vote only on issues that are within the purview of the
Extraordinary Stockholders Meeting and on resolutions concerning Regulations for Stockholders
Meetings. Savings shares are not entitled to vote.
The net income for the year resulting from the annual financial statements of Fiat S.p.A. is
allocated as follows:
|
§ |
|
to the Legal Reserve, 5% of net income until this reserve reaches one fifth of the
capital stock; |
|
|
§ |
|
to savings shares, a dividend of up to 0.31 euros per share; |
|
|
§ |
|
to the Legal Reserve (additional allocation), to the Extraordinary Reserve and/or to
retained earnings, such allocations as shall be decided by the Annual General Meeting
of Stockholders; |
|
|
§ |
|
to preference shares, a dividend of up to 0.31 euros per share; |
|
|
§ |
|
to ordinary shares, a dividend of up to 0.155 euros per share; |
|
|
§ |
|
to savings shares and ordinary shares, in equal proportions, an additional dividend
of up to 0.155 euros per share; |
|
|
§ |
|
to each ordinary, preference and savings share, in equal proportions, the balance of
the net income which the Stockholders Meeting resolves to distribute. |
When the dividend paid to savings shares in any year amounts to less than 0.31 euros, the
difference is added to the preferred dividend to which they are entitled in the following two
years.
If the savings shares are delisted, they are transformed into registered shares if originally
bearer shares, and have the right to a higher dividend increased by 0.175 euros, rather than 0.155
euros, with respect to the dividend received by the ordinary and preference shares.
If the ordinary shares are delisted, the higher dividend received by the savings shares with
respect to the dividend received by ordinary and preference shares is increased by 0.2 euros per
share.
F - 52
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The reconciliation of the number of shares outstanding at December 31, 2004 and at December
31, 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
(Purchases)/ |
|
|
At |
|
|
|
December |
|
|
Capital |
|
|
Sales of treasury |
|
|
December |
|
|
|
31, 2004 |
|
|
increase |
|
|
stock |
|
|
31, 2005 |
|
|
|
(number of shares in thousand) |
|
Ordinary shares issued |
|
|
800,417 |
|
|
|
291,829 |
|
|
|
|
|
|
|
1,092,246 |
|
Less: Treasury stock |
|
|
(4,384 |
) |
|
|
|
|
|
|
52 |
|
|
|
(4,332 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares outstanding |
|
|
796,033 |
|
|
|
291,829 |
|
|
|
52 |
|
|
|
1,087,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preference shares issued |
|
|
103,292 |
|
|
|
|
|
|
|
|
|
|
|
103,292 |
|
Less: Treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preference shares outstanding |
|
|
103,292 |
|
|
|
|
|
|
|
|
|
|
|
103,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Saving shares issued |
|
|
79,913 |
|
|
|
|
|
|
|
|
|
|
|
79,913 |
|
Less: Treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Saving shares outstanding |
|
|
79,913 |
|
|
|
|
|
|
|
|
|
|
|
79,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shares issued by Fiat S.p.A. |
|
|
983,622 |
|
|
|
291,829 |
|
|
|
|
|
|
|
1,275,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Treasury stock |
|
|
(4,384 |
) |
|
|
|
|
|
|
52 |
|
|
|
(4,332 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shares outstanding issued by Fiat S.p.A. |
|
|
979,238 |
|
|
|
291,829 |
|
|
|
52 |
|
|
|
1,271,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As described in Note 9, the Mandatory Convertible Facility was extinguished by its
conversion to capital stock through subscription by the Lending Banks to an increase in capital
stock for consideration, as approved by the Board of Directors on September 15, 2005; the operation
took place on September 20, 2005 (see Note 28). Capital stock increased in this manner from
4,918,113,540 euros to 6,377,257,130 euros, through the issue of 291,828,718 ordinary shares, each
of par value of 5 euros, having the same characteristics as those currently in circulation,
including dividend rights from January 1, 2005, pursuant to article 2441, paragraph 7 of the
Italian civil code, at a price of 10.28 euros, of which 5.28 euros represents share premium. The
operation increased capital stock by 1,459 million euros, other reserves by 682 million euros, and
generated unusual financial income of 858 million euros, net of related costs.
The following matters have relevance with respect to the capital stock of Fiat S.p.A.:
|
§ |
|
Pursuant to resolutions approved by the Board of Directors on December 10, 2001 and
June 26, 2003, capital may be increased through rights offerings for a maximum of
81,886,460 euros, with the issuance of a maximum of 16,377,292 ordinary shares at a par
value of 5 euros each on February 1, 2007, following the exercise of the residual FIAT
ordinary share warrants 2007. Fiat reserved the right to pay the warrant holders in
cash, starting on January 2, 2007, in lieu of the shares to be issued (shares in
exchange for warrants), for the difference between the average of the official market
price of Fiat ordinary shares in December 2006 and the warrant exercise price, unless
this difference exceeds the maximum amount set and previously communicated by Fiat, in
which case the holder of the warrants may opt to subscribe to the shares in exchange
for the warrants. |
|
|
§ |
|
Pursuant to the resolution approved by the Extraordinary Stockholders Meeting on
September 12, 2002, the Board of Directors has the right to increase the capital one or
more times by September 11, 2007, up to a maximum of 8 billion euros. |
F - 53
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
§ |
|
The resolutions for the capital increases servicing
the stock option plans (28 million euros) have been
revoked, as the Board of Directors resolved on June
26, 2003 to use ordinary treasury stock to be
purchased for this purpose. |
(ii) Stock-based compensation
At December 31, 2005, the following stock-based compensation plans relating to managers
of Fiat Group companies or members of the Board of Directors of Fiat S.p.A. were in place.
Stock Option plans linked to Fiat S.p.A. ordinary shares
The Board of Directors of Fiat S.p.A. approved certain stock option plans between March
1999 and September 2002 which provide managers of the Group with the title of Direttore and high
management potential included in management development programmes and members of the Board of
Directors of Fiat S.p.A. with the right to purchase a determined number of Fiat S.p.A. ordinary
shares at a fixed price (strike price). These rights may be exercised over a fixed period of time
from the vesting date to the expiry date of the plan. These stock option plans do not depend on any
specific market conditions.
The contractual terms of these plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strike |
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price |
|
options |
|
|
|
|
|
Vesting |
Plan |
|
Recipient |
|
Grant date |
|
Expiry date |
|
(euros) |
|
granted |
|
Vesting date |
|
portion |
|
Stock Options |
|
Managers |
|
March 30, 1999 |
|
March 31, 2007 |
|
|
26.120 |
|
|
|
1,248,000 |
|
|
April 1, 2001 |
|
|
50 |
% |
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2002 |
|
|
50 |
% |
|
Stock Options |
|
Managers |
|
February 18, 2000 |
|
February 18, 2008 |
|
|
28.122 |
|
|
|
5,158,000 |
|
|
February 18, 2001 |
|
|
25 |
% |
2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 18, 2002 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 18, 2003 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 18, 2004 |
|
|
25 |
% |
|
Stock Options |
|
Chairman |
|
July 25, 2000 |
|
July 25, 2008 |
|
|
25.459 |
|
|
|
250,000 |
|
|
July 25, 2001 |
|
|
50 |
% |
July 2000 |
|
of Fiat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 14, 2002 |
|
|
50 |
% |
|
|
S.p.A. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options |
|
Managers |
|
February 27, 2001 |
|
February 27, 2009 |
|
|
24.853 |
|
|
|
785,000 |
|
|
February 27, 2002 |
|
|
25 |
% |
February 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 27, 2003 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 27, 2004 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 27, 2005 |
|
|
25 |
% |
|
Stock Options |
|
Chairman |
|
March 29, 2001 |
|
October 30, 2008 |
|
|
23.708 |
|
|
|
1,000,000 |
|
|
July 1, 2002 |
|
|
100 |
% |
March 2001 |
|
of Fiat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S.p.A. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options |
|
Managers |
|
October 31, 2001 |
|
October 31, 2009 |
|
|
16.526 |
|
|
|
5,417,500 |
|
|
October 31, 2002 |
|
|
25 |
% |
October 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2003 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2004 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2005 |
|
|
25 |
% |
|
Stock Options |
|
Chairman |
|
May 14, 2002 |
|
January 1, 2010 |
|
|
12.699 |
|
|
|
1,000,000 |
|
|
January 1, 2005 |
|
|
100 |
% |
May 2002 |
|
of Fiat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S.p.A. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options |
|
Managers |
|
September 12, 2002 |
|
September 12, 2010 |
|
|
10.397 |
|
|
|
6,100,000 |
|
|
September 12, 2003 |
|
|
25 |
% |
September 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 12, 2004 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 12, 2005 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 12, 2006 |
|
|
25 |
% |
The Board of Directors of Fiat S.p.A. approved two Stock Option plans in October and
November 2003 providing two managers with the right to purchase a pre-determined number of Fiat
S.p.A. ordinary shares at a fixed price. These rights may be exercised over a fixed period of time
from the vesting date to the expiry date of the plan. The right to exercise the options is
subordinated to certain time limits and is contingent upon meeting a pre-established performance.
F - 54
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The contractual terms of these stock option plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strike |
|
No. of |
|
|
|
|
|
|
|
|
|
|
price |
|
options |
|
|
|
|
Plan |
|
Grant date |
|
Expiry date |
|
(euros) |
|
assigned |
|
Vesting date |
|
Vesting portion |
|
Stock Options |
|
October 1, 2003 |
|
October 1, 2010 |
|
|
6.678 |
|
|
|
598,982 |
|
|
October 1, 2004 |
|
|
1/3*50%+ |
|
October 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+1/3*50%*(target performance) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2005 |
|
|
1/3*50%+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+1/3*50%*(target performance) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3*50%+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2006 |
|
+1/3*50%*(target performance) |
|
Stock Options |
|
November 15, |
|
November 15, |
|
|
6.712 |
|
|
|
446,961 |
|
|
November 15, |
|
|
1/3*1/3+ |
|
November |
|
2003 |
|
2010 |
|
|
|
|
|
|
|
|
|
2004 |
|
+1/3*2/3*(target performance) |
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 15, |
|
|
1/3*1/3+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
+1/3*2/3*(target performance) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 15, |
|
|
1/3*1/3+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
+1/3*2/3*(target performance) |
The two managers to whom these plans relate left the Group in February 2005. Under the
stock option contract, the two former employees maintained their right to exercise the vested
portion of the options for one month following their date of leaving, although this right was not
exercised. As a consequence, the plans concerning these two former employees have ceased.
On March 27, 2003, the Board adopted a resolution to grant to the Chief Executive Officer Mr.
Giuseppe Morchio a number of options to purchase Fiat S.p.A. ordinary shares at a fixed price. The
exercise rights of this plan vested over period of time starting on the vesting date to the expiry
date of the plan. The right to exercise the options was subordinated to certain time limits and was
contingent upon meeting a pre-established performance.
Contractual terms of the plan were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strike |
|
No. of |
|
|
|
|
|
|
|
|
|
|
price |
|
options |
|
|
|
|
Plan |
|
Grant date |
|
Expiry date |
|
(euros) |
|
assigned |
|
Vesting date |
|
Vesting portion |
|
Stock Options |
|
July 31, 2003 |
|
March 27, |
|
5.623 |
|
13,338,076 |
|
March 27, 2004 |
|
|
|
20% |
March 2003 |
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 27, 2005 |
|
1/3*20%+2/3*20%*(profit objectives) |
|
|
|
|
|
|
|
|
|
|
March 27, 2006 |
|
1/3*20%+2/3*20%*(profit objectives) |
|
|
|
|
|
|
|
|
|
|
March 27, 2007 |
|
1/3*20%+2/3*20%*(profit objectives) |
|
|
|
|
|
|
|
|
|
|
March 27, 2008 |
|
1/3*20%+2/3*20%*(profit objectives) |
Mr. Morchio resigned on May 30, 2004, leading to the expiry of 10,670,461 of these
options. The remaining options have all vested and were exercisable until May 30, 2005, but expired
unexercised.
On July 26, 2004, the Board of Directors granted to Sergio Marchionne as a part of his
compensation as Chief Executive Officer options for the purchase of 10,670,000 Fiat S.p.A. ordinary
shares at the price of 6.583 euros, exercisable from June 1, 2008 to January 1, 2011. In each of
the first three years following the grant date, Mr. Marchionne accrues the right to purchase an
annual maximum of 2,370,000 shares. From June 1, 2008, he will have the right to purchase,
effective at that date, the residual portion, totalling 3,560,000 shares. Vesting of the last block
of stock options is subject to certain pre-determined profitability targets.
F - 55
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Contractual terms of the plan are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strike |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price |
|
|
N° of options |
|
|
|
|
|
|
|
Plan |
|
Grant date |
|
|
Expiry date |
|
|
(euros) |
|
|
vested |
|
|
Vesting date |
|
|
Vesting portion |
|
Stock Options July 2004 |
|
July 26, 2004 |
|
January 1, 2011 |
|
|
6.583 |
|
|
|
10,670,000 |
|
|
June 1, 2005 |
|
|
22.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 1, 2006 |
|
|
22.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 1, 2007 |
|
|
22.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 1, 2008 |
|
33.4%*( target profitability) |
A summary of outstanding stock options at December 31, 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation as member of the |
|
|
Managers compensation |
|
Board |
|
|
Options |
|
Average |
|
Options |
|
Average |
|
|
outstanding |
|
remaining |
|
outstanding at |
|
remaining |
|
|
at December |
|
contractual life |
|
December 31, |
|
contractual life |
|
|
31, 2005 |
|
(in years) |
|
2005 |
|
(in years) |
Exercise price (in euros): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.583 |
|
|
|
|
|
|
|
|
10,670,000 |
|
|
5 |
10.397 |
|
|
3,046,500 |
|
|
4.8 |
|
|
|
|
|
|
12.699 |
|
|
|
|
|
|
|
|
1,000,000 |
|
|
4 |
16.526 |
|
|
2,299,000 |
|
|
3.8 |
|
|
|
|
|
|
23.708 |
|
|
|
|
|
|
|
|
1,000,000 |
|
|
2.8 |
24.853 |
|
|
300,000 |
|
|
3.2 |
|
|
|
|
|
|
25.459 |
|
|
|
|
|
|
|
|
250,000 |
|
|
2.6 |
26.120 |
|
|
316,000 |
|
|
1.3 |
|
|
|
|
|
|
28.122 |
|
|
1,788,000 |
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at December 31, 2005 |
|
|
7,749,500 |
|
|
|
|
|
|
12,920,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes during the year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation as member of the |
|
|
Managers compensation |
|
Board |
|
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
Number of |
|
exercise price |
|
Number of |
|
exercise price |
|
|
shares |
|
(in euros) |
|
shares |
|
(in euros) |
Outstanding at the beginning of the year |
|
|
10,502,543 |
|
|
16.38 |
|
|
15,587,615 |
|
|
8.21 |
Granted during the year |
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited during the year |
|
|
|
|
|
|
|
|
|
|
|
|
Exercised during the year |
|
|
|
|
|
|
|
|
|
|
|
|
Expired during the year |
|
|
(2,753,043 |
) |
|
|
|
|
(2,667,615 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2005 |
|
|
7,749,500 |
|
|
17.51 |
|
|
12,920,000 |
|
|
8.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2005 |
|
|
6,987,875 |
|
|
18.28 |
|
|
2,250,000 |
|
|
19.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As discussed under Significant accounting policies, in the case of share-based payments
the Group applies IFRS 2 to all stock options granted after November 7, 2002 which had not yet
vested at January 1, 2005. In practice, this means that by December 31, 2005, IFRS 2 had been applied
only to the stock options granted to Mr. Marchionne, for which the estimated fair value is 2.440
euros at December 31, 2005. A binomial pricing model is used to calculated the fair value of the
options. The assumptions used under this model are as follows:
F - 56
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
Average price of Fiat S.p.A. ordinary shares (euros) |
|
|
6.466 |
Historical volatility of Fiat S.p.A ordinary shares (%) |
|
|
29.37 |
Expected dividend yield historical data (years 2003-2005) (%) |
|
|
0.00 |
Risk-free interest rate (%) |
|
|
4.021 |
The expected volatility of the Fiat S.p.A. ordinary share in the table is its historical
volatility, in line with market practice.
The total cost recognized in the income statement for share-based payments linked to Fiat
S.p.A. ordinary shares amounts to 10 million euros in 2005 (0.3 million euros in 2004, stated net
of the effect of 5.8 million euros for the options which expired during the year).
Stock Option plans linked to CNH Global N.V. ordinary shares
Certain entities of the Agricultural and Construction Equipment Sector have granted
share-based compensation to officers, employees and directors which is linked to CNH Global N.V.
(CNH) shares and whose terms are as follows:
|
§ |
|
The CNH Global N.V. Outside Directors Compensation Plan (CNH Directors Plan):
this plan, established in 1999, as last amended on May 3, 2005, provides the following
benefits for only the independent outside members of the Board of CNH Global N.V.: |
|
- |
|
the payment of an annual retainer fee of USD 65,000 and a committee
chair fee of USD 5,000 (collectively the Annual Fees) in the form of common
shares of CNH by way of quarterly stock grants at the end of each Plan Year
Quarter, unless otherwise elected (cash or stock options); |
|
|
- |
|
the payment of a meeting fee of USD 1,250 for each Board or Committee
meeting attended; |
|
|
- |
|
an annual grant of 4,000 options to purchase common shares of CNH
that vest on the third anniversary of the grant date (Annual Automatic Stock
Option). |
|
|
|
|
The Stock Option election gives the independent outside directors the option to
purchase common shares at a purchase price equal to the fair market value of the common
shares on the date that the Annual Fees would otherwise have been paid to the director.
The number of shares subject to such an option will be equal to the amount of Annual
Fees that the director elected to forego, multiplied by four and divided by the fair
market value determined as indicated in the next paragraph. Stock options granted vest
immediately upon grant, but the shares purchased under the option cannot be sold for
six months following the date of grant. No directors receive benefits upon termination
of their service as directors. |
|
§ |
|
The CNH Equity Incentive Plan (the CNH EIP): this plan provides share-based
compensation to officers and employees of CNH Global N.V. and its subsidiaries. Certain
options vest rateably over four years from the grant date, while certain
performance-based options vest subject to the attainment of specified performance
criteria but no later than seven years from the grant date. All options expire after
ten years. Except as noted below, the exercise prices of all option granted under the
CNH EIP are equal to or greater than the fair market value of CNH Global N.V. common
shares on the respective grant dates. During 2001, CNH granted stock option with an
exercise price less than the quoted market price of its common shares at the date of
grant. Under this plan, options may also
be granted on restricted shares. Certain restricted shares vest over time, while
certain performance-based restricted shares vest subject to the attainment of specified
performance criteria. Such performance-based restricted shares vest no later than seven
years from the award date. Effective for the 2002 plan year only, a special incentive
plan was approved which provided a grant of restricted stock to certain senior
executives upon |
F - 57
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
meeting a specified financial position target. In 2004, for individuals
electing to not take the restricted stock earned under this plan, CNH issued an
equivalent number of common shares to individuals who remained employed by CNH as of
the vesting date for the restricted shares. |
|
|
§ |
|
In 2004, a new performance-vesting long-term incentive award was granted to selected
key employees and executive officers, which is subject to their achieving certain
performance-based criteria over the three year period 2004-2006. At the end of the
performance cycle, any earned awards will be satisfied equally with cash and CNH common
shares, as determined at the beginning of the performance cycle, for minimum target and
maximum award levels. A minimum payout from the plan requires meeting certain threshold
levels of performance. As a transition to the plan, for the first award under the
performance cycle of 2004-2006, participants have an opportunity to receive an
accelerated payment of 50% of the targeted award after the first two years of the
performance cycle. In 2005, an additional award was approved under the same plan for
the 3 year performance cycle 2005-2007. |
A summary of outstanding stock options at December 31, 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors plan |
|
|
Equity incentive plan |
|
|
|
Options |
|
|
Average |
|
|
Options |
|
|
Average |
|
|
|
outstanding |
|
|
remaining |
|
|
outstanding at |
|
|
remaining |
|
|
|
at December |
|
|
contractual life |
|
|
December 31, |
|
|
contractual life |
|
|
|
31, 2005 |
|
|
(in years) |
|
|
2005 |
|
|
(in years) |
|
Exercise price (in USD): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.15 - 15.70 |
|
|
64,348 |
|
|
|
8.3 |
|
|
|
886,260 |
|
|
|
6.6 |
|
15.71 - 26.20 |
|
|
71,055 |
|
|
|
8.4 |
|
|
|
|
|
|
|
|
|
26.21 - 40.00 |
|
|
18,654 |
|
|
|
5.5 |
|
|
|
625,000 |
|
|
|
5.6 |
|
40.01 - 56.00 |
|
|
4,460 |
|
|
|
4.9 |
|
|
|
|
|
|
|
|
|
56.01 - 77.05 |
|
|
10,525 |
|
|
|
4.3 |
|
|
|
529,810 |
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at December 31, 2005 |
|
|
169,042 |
|
|
|
7.7 |
|
|
|
2,041,070 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes during the period are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors plan |
|
|
Equity incentive plan |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Number of |
|
|
exercise price |
|
|
Number of |
|
|
exercise price |
|
|
|
shares |
|
|
(in USD) |
|
|
shares |
|
|
(in USD) |
|
Outstanding at the beginning of the year |
|
|
142,005 |
|
|
|
22.41 |
|
|
|
2,464,575 |
|
|
|
33.68 |
|
Granted during the year |
|
|
31,037 |
|
|
|
17.90 |
|
|
|
10,000 |
|
|
|
18.06 |
|
Forfeited during the year |
|
|
(4,000 |
) |
|
|
17.28 |
|
|
|
(249,805 |
) |
|
|
49.83 |
|
Exercised during the year |
|
|
|
|
|
|
|
|
|
|
(183,700 |
) |
|
|
16.18 |
|
Expired during the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2005 |
|
|
169,042 |
|
|
|
21.71 |
|
|
|
2,041,070 |
|
|
|
34.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2005 |
|
|
141,872 |
|
|
|
22.50 |
|
|
|
1,747,634 |
|
|
|
36.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Black-Scholes pricing model is used to calculate the fair value of the share-based
compensation for the CNH Sector; based on this model, the weighted average fair value of stock
options granted for the year ended December 31, 2005 is 10.13 USD for the outside directors
compensation plan and 10.18 USD for the equity incentive plan, determined on the basis of the
following assumptions:
F - 58
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
Directors |
|
|
Equity |
|
|
|
plan |
|
|
incentive plan |
|
Option life (years) |
|
|
5 |
|
|
|
5 |
|
Expected volatility of CNH Global N.V. shares (%) |
|
|
72.0 |
|
|
|
71.5 |
|
Expected dividend yield (%) |
|
|
1.3 |
|
|
|
1.3 |
|
Risk-free interest rate (%) |
|
|
3.9 |
|
|
|
3.7 |
|
The total cost recognized in the income statement for share-based compensation linked to
CNH Global N.V. ordinary shares amounted to 1 million euros in 2005 (0.4 million euros in 2004).
Stock Option linked to Ferrari S.p.A. ordinary shares
Under this scheme, on the one hand the employees of Ferrari S.p.A., and on the other the
Chairman and the Chief Executive Officer of the company, have the option to acquire respectively
207,200 and 184, 000 Ferrari S.p.A. ordinary shares at a strike price of 175 euros per share. Under
the scheme the options may be exercised until December 31, 2010, wholly or partially, and are
subject to a limited extent to the companys listing process.
Cash-settled share-based payments
Certain entities of the Fiat Powertrain Technologies Sector have agreed with a number of
employees a total of four cash-settled share-based payment defined Stock Appreciation Rights (SAR)
plans. Under these plans, the 54 employees involved have the right to receive a payment
corresponding to the increase in share price between the grant date and the exercise date of
General Motors $1 2/3 shares listed in New York and Fiat S.p.A. ordinary shares listed in Milan.
The right is exercisable from the vesting date to the expiry date of the plans and is subordinated
to certain conditions (Non-Market Conditions NMC). The contractual terms of these rights are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rights on |
|
|
rights on |
|
|
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM $1 2/3 |
|
|
Fiat S.p.A. |
|
|
price |
|
|
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares at |
|
|
shares at |
|
|
GM $1 |
|
|
price Fiat |
|
|
|
|
|
|
|
|
|
|
Vesting date |
|
|
December |
|
|
December |
|
|
2/3 |
|
|
S.p.A. |
|
|
Vesting |
|
Plan |
|
Grant date |
|
|
From |
|
|
Until |
|
|
31, 2005 |
|
|
31, 2005 |
|
|
(in USD) |
|
|
(in euros) |
|
|
portion |
|
2001 |
|
February 12, 2002 |
|
March 1, 2002 |
|
February 12, 2009 |
|
|
45,053 |
|
|
|
217,936 |
|
|
|
49.57 |
|
|
|
15.50 |
|
|
100%*NMC |
2002 |
|
February 12, 2002 |
|
February 12, 2003 |
|
February 12, 2010 |
|
|
44,580 |
|
|
|
205,150 |
|
|
|
49.57 |
|
|
|
15.50 |
|
|
1/3*NMC |
|
|
|
|
|
|
February 12, 2004 |
|
February 12, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3*NMC |
|
|
|
|
|
|
February 12, 2005 |
|
February 12, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3*NMC |
2003 |
|
February 11, 2003 |
|
February 11, 2004 |
|
February 11, 2011 |
|
|
46,644 |
|
|
|
218,880 |
|
|
|
36.26 |
|
|
|
7.95 |
|
|
1/3*NMC |
|
|
|
|
|
|
February 11, 2005 |
|
February 11, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3*NMC |
|
|
|
|
|
|
February 11, 2006 |
|
February 11, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3*NMC |
2004 |
|
February 10, 2004 |
|
February 10, 2005 |
|
February 11, 2012 |
|
|
40,470 |
|
|
|
205,169 |
|
|
|
49.26 |
|
|
|
6.03 |
|
|
1/3*NMC |
|
|
|
|
|
|
February 10, 2006 |
|
February 11, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3*NMC |
|
|
|
|
|
|
February 10, 2007 |
|
February 11, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/3*NMC |
In accordance with IFRS 2, the Group measures the liability arising from cash-settled
share-based payment transactions at fair value at each reporting date and at the date of
settlement; the changes in the fair value of these liabilities are recognized in the income
statement for the period. At
December 31, 2005, the Group measured the fair value of the liabilities generated by these
plans using the binomial method based on the following market data:
F - 59
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiat S.p.A. |
|
|
|
GM $1 2/3 share |
|
|
ordinary share |
|
Closing price |
|
$ |
19.42 |
|
|
|
7.36 |
|
Expected volatility (%) |
|
|
77.56 |
|
|
|
28.39 |
|
Expected dividend yield (%) |
|
|
10.30 |
|
|
|
0.00 |
|
The total change in the fair value of these cash-settled share-based payment plans
recognized by the Group in the 2005 income statement amounts to 2 million euros.
(iii) Treasury stock
Treasury stock consists of 4,331,708 Fiat S.p.A. ordinary shares for an amount of 28 million
euros.
(iv) Capital reserve
At December 31, 2005, the Capital reserve represents additional paid-in capital consisting of
the share premium paid by the subscribers of the capital increase made after the extinguishment of
the Mandatory Convertible Facility on September 20, 2005 described at the paragraph Capital stock.
(v) Revenue reserves
The principal revenue reserves are as follows:
|
§ |
|
The legal reserve of Fiat S.p.A. of 447 million euros at December 31, 2005 (447
million euros at December 31, 2004); |
|
|
§ |
|
Retained losses totaling 1,052 million euros at December 31, 2005 (1,063 million
euros at December 31, 2004); |
|
|
§ |
|
The Groups interest in net result of 1,331 million euros for the year ended
December 31, 2005 (a loss of 1,634 million euros for the year ended December 31, 2004); |
|
|
§ |
|
The share based payments reserve of 13 million euros at December 31, 2005 (1 million
euros at December 31, 2004). |
(vi) Income (expense) recognized directly in equity
This item consists of accumulated other comprehensive income at December 31, 2005; changes for the
two years then ended are as follows:
F - 60
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(expense) |
|
|
Cash flow |
|
Available- |
|
Cumulative |
|
recognized |
|
|
hedge |
|
for-sale |
|
translation |
|
directly in |
|
|
reserve |
|
reserve |
|
differences |
|
equity |
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
Balances at January 1, 2004 |
|
|
2 |
|
|
|
29 |
|
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized directly in the cash flow hedge reserve |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
Gains (losses) recognized directly in the available-for-sale
reserve |
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
46 |
|
Exchange gains (losses) on the translation of foreign operations |
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
(70 |
) |
Net profit (loss) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2004 |
|
|
22 |
|
|
|
75 |
|
|
|
(70 |
) |
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized directly in the cash flow hedge reserve |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
Gains (losses) recognized directly in the available-for-sale
reserve |
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
61 |
|
Exchange gains (losses) on the translation of foreign operations |
|
|
|
|
|
|
|
|
|
|
861 |
|
|
|
861 |
|
Net profit (loss) |
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2005 |
|
|
(16 |
) |
|
|
136 |
|
|
|
791 |
|
|
|
911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(vii) Minority interest
The minority interest in stockholders equity of 732 million euros (624 million euros at
December 31, 2004) refers mainly to the following companies consolidated on a line-by-line basis:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
(% held by minority stockholders) |
Italian companies: |
|
|
|
|
|
|
|
|
Ferrari S.p.A. |
|
|
44.0 |
|
|
|
44.0 |
|
Teksid S.p.A. |
|
|
15.2 |
|
|
|
19.5 |
|
Foreign companies: |
|
|
|
|
|
|
|
|
Fiat Auto Holdings B.V |
|
|
|
|
|
|
10.0 |
|
CNH Global N.V. |
|
|
16.1 |
|
|
|
15.5 |
|
Following the finalization of the Termination Agreement with General Motors on February
13, 2005, the Group reacquired the shares in Fiat Auto Holdings B.V. held until then by minorities
and at December 31, 2005 fully owns the company.
(26) Provisions for employee benefits
Group companies provide post-employment benefits for their employees, either directly or by
contributing to independently administered funds.
The way these benefits are provided varies according to the legal, fiscal and economic
conditions of each country in which the Group operates, the benefits generally being based on the
employees remuneration and years of service. The obligations relate both to active employees and
to retirees.
Group companies provide post-employment benefits under defined contribution and/or defined
benefit plans.
F - 61
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
In the case of defined contribution plans, the company pays contributions to publicly or
privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Once
the contributions have been paid, the company has no further payment obligations. Liabilities for
contributions accrued but not paid are included in the item Other payables (see Note 30). The
entity recognise the contribution cost when the employee has rendered his service and includes this
cost in Cost of Sales, Selling, General and Administrative costs and Research and development
costs. In 2005, these expenses totalled 1,080 million euros (1,070 million euros in 2004).
Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions
by an entity, and sometimes its employees, into an entity, or fund, that is legally separate from
the employer and from which the employee benefits are paid.
In the case of funded and unfunded post employment benefits, included in the item
post-employment benefits, the Group obligation is determined on an actuarial basis, using the
Projected Unit Credit Method and is offset against the fair value of plan assets, if any. Where the
fair value of plan assets exceed the post-employment benefits obligation, and the group has a right
of reimbursement or a right to reduce future contributions, the surplus amount is recognized in
accordance with IAS 19 as an asset. As discussed in the paragraph Significant accounting policies,
actuarial gains and losses are accounted for from January 1, 2004 using the corridor approach.
Finally, the Group grants certain Other long-term benefits to its employees; these benefits
include those generally paid when the employee attains a specific seniority or in the case of
disability. In this case the measurement of the obligation reflects the probability that payment
will be required and the length of time for which payment is expected to be made. The amount of
this obligation is calculated on an actuarial basis using the Projected Unit Credit Method. The
corridor approach is not used for actuarial gains and losses arising from this obligation.
The item Other provisions for employees consists of the best estimate at the balance sheet
date of short-term employee benefits payable by the Group within twelve months after the end of the
period in which the employees render the related service.
Changes in Provisions for employee benefits for the year ended December 31, 2005 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the scope of |
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
consolidation |
|
At |
|
|
December |
|
|
|
|
|
|
|
|
|
and other |
|
December |
|
|
31, 2004 |
|
Provision |
|
Utilization |
|
changes |
|
31, 2005 |
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
Post-employment benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance indemnity |
|
|
1,179 |
|
|
|
121 |
|
|
|
(150 |
) |
|
|
133 |
|
|
|
1,283 |
|
Pension Plans |
|
|
977 |
|
|
|
55 |
|
|
|
(157 |
) |
|
|
(3 |
) |
|
|
872 |
|
Health care plans |
|
|
1,024 |
|
|
|
76 |
|
|
|
(64 |
) |
|
|
66 |
|
|
|
1,102 |
|
Other |
|
|
262 |
|
|
|
26 |
|
|
|
(39 |
) |
|
|
45 |
|
|
|
294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total post-employment benefits |
|
|
3,442 |
|
|
|
278 |
|
|
|
(410 |
) |
|
|
241 |
|
|
|
3,551 |
|
Other long-term employee benefits |
|
|
100 |
|
|
|
136 |
|
|
|
(28 |
) |
|
|
8 |
|
|
|
216 |
|
Other provisions for employees |
|
|
140 |
|
|
|
18 |
|
|
|
(13 |
) |
|
|
7 |
|
|
|
152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for employee benefits |
|
|
3,682 |
|
|
|
432 |
|
|
|
(451 |
) |
|
|
256 |
|
|
|
3,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The column Changes in the scope in consolidation and other changes includes exchange
gains of 203 million euros, set off by the effects resulting from changes in plans which led to the
release of provisions of 106 million euros to income. The effects of changes in the scope of
consolidation and other minor changes are also included in this column.
Post-employment benefits and Other long-term employee benefits are calculated on the basis of
the following actuarial assumptions:
F - 62
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
Italy |
|
USA |
|
UK |
|
Other |
|
Italy |
|
USA |
|
UK |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in %) |
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
3.53 |
|
|
|
5.50 |
|
|
|
4.75 |
|
|
|
1-5.25 |
|
|
|
3.65 |
|
|
|
5.75 |
|
|
|
5.25 |
|
|
|
2-6.7 |
|
Future salary increase |
|
|
2.58 |
|
|
|
n/a |
|
|
|
3.50 |
|
|
|
2.25-3.5 |
|
|
|
2.56 |
|
|
|
n/a |
|
|
|
3-3.5 |
|
|
|
2-3.5 |
|
Inflation rate |
|
|
2.00 |
|
|
|
n/a |
|
|
|
2.75 |
|
|
|
2.00 |
|
|
|
2.00 |
|
|
|
n/a |
|
|
|
2.75 |
|
|
|
2.00 |
|
Increase in
healthcare costs |
|
|
n/a |
|
|
|
5-10 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
5-10 |
|
|
|
n/a |
|
|
|
n/a |
|
Expected return on
plan assets |
|
|
n/a |
|
|
|
8.25 |
|
|
|
6.88 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
8.75 |
|
|
|
6.50 |
|
|
|
n/a |
|
(i) Reserve for employee severance indemnity (TFR)
The reserve for employee severance indemnities comprises liability for severance indemnities
that Italian companies accrue each year end for employees, as requested by Italian labour
legislation. This provision is settled to retiree employees and, shall be partially paid in advance
if certain condition are met. This defined benefit post-employment plan is unfunded.
(ii) Pension plans
The item Pension Plans consists principally of the obligations of Fiat Group companies
operating in the United States (mainly to the CNH Sector) and in the United Kingdom.
Under these plans a contribution is generally made to a separate fund (trust) which
independently administers the plan assets. The plan provides for a fixed contribution by employees
and for a variable contribution by the employer necessary to, at a minimum, to satisfy the funding
requirements as prescribed by the laws and regulations of each country. Prudently the Group makes
discretionary contributions in addition to the funding requirements. If these funds are overfunded,
that is if they present a surplus compared to the requirements of law, the Group companies
concerned are not required to contribute to the plan in respect of the minimum performance
requirement as long as the fund is in surplus. The administration strategy for these assets depends
on the features of the plan and on the maturity of the obligations. Typically, shorter term plan
benefit obligations are funded by investing in more equity securities; longer term plan benefit
obligations are funded by investing in more fixed income securities.
With regard to pension plans in the United States from January 1, 2003 CNH Global N.V. makes
contributions to these plans also by ordinary shares and not only by cash.
In the United Kingdom the Fiat Group participates in a multi-employer plan called the Fiat
Group Pension Scheme, amongst others. Under this plan, participating employers make contributions
on behalf of their active employees (active), retirees (pensioners) and employees who have left the
Group but have not yet retired (deferred).
(iii) Health care plans
The item Health care plans comprises obligations for health care and insurance plans granted
to employees of the Fiat Group working in the United States and Canada. These plans, which are
unfunded, generally cover all employees retiring on or after reaching the age of 55 who have had at
least 10 years of service with the Group.
F - 63
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(iv) Other
The item Other includes loyalty bonuses, which are due to employees who reach a specified
seniority and are generally settled when an employee leaves the Group; and for French entities, the
indemnité de depart à la retraite, a plan similar to the Italian TFR. These schemes are unfunded.
The amounts recognized in the balance sheet at December 31, 2005 and 2004 for post-employment
benefits are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance indemnity |
|
|
Pension Plans |
|
|
Health care plans |
|
|
Other |
|
|
|
At December 31, |
|
|
At December 31, |
|
|
At December 31, |
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of funded obligations |
|
|
|
|
|
|
|
|
|
|
2,514 |
|
|
|
2,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Fair Value of plan assets |
|
|
|
|
|
|
|
|
|
|
(2,014 |
) |
|
|
(1,623 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of unfunded obligations |
|
|
1,417 |
|
|
|
1,243 |
|
|
|
539 |
|
|
|
304 |
|
|
|
1,417 |
|
|
|
1,186 |
|
|
|
323 |
|
|
|
278 |
|
Unrecognized actuarial gains (losses) |
|
|
(134 |
) |
|
|
(64 |
) |
|
|
(163 |
) |
|
|
(105 |
) |
|
|
(370 |
) |
|
|
(172 |
) |
|
|
(28 |
) |
|
|
(16 |
) |
Less: Unrecognized past service cost |
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
(5 |
) |
|
|
55 |
|
|
|
10 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liability |
|
|
1,283 |
|
|
|
1,179 |
|
|
|
872 |
|
|
|
977 |
|
|
|
1,102 |
|
|
|
1,024 |
|
|
|
294 |
|
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in the balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
1,283 |
|
|
|
1,179 |
|
|
|
872 |
|
|
|
977 |
|
|
|
1,102 |
|
|
|
1,024 |
|
|
|
294 |
|
|
|
262 |
|
Less: Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liability |
|
|
1,283 |
|
|
|
1,179 |
|
|
|
872 |
|
|
|
977 |
|
|
|
1,102 |
|
|
|
1,024 |
|
|
|
294 |
|
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts recognized in the income statement for Post-employment benefits are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance |
|
|
|
|
|
|
|
|
|
|
indemnity |
|
Pension Plans |
|
Health care plans |
|
Other |
|
|
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
86 |
|
|
|
87 |
|
|
|
48 |
|
|
|
36 |
|
|
|
12 |
|
|
|
12 |
|
|
|
16 |
|
|
|
14 |
|
Interest costs |
|
|
33 |
|
|
|
27 |
|
|
|
140 |
|
|
|
144 |
|
|
|
60 |
|
|
|
67 |
|
|
|
9 |
|
|
|
8 |
|
Less: Expected return on
plan assets |
|
|
|
|
|
|
|
|
|
|
(127 |
) |
|
|
(119 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (gains)
losses recognized in the
year |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
14 |
|
|
|
|
|
|
|
4 |
|
|
|
1 |
|
Past service cost |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
|
(11 |
) |
|
|
|
|
|
|
1 |
|
|
|
|
|
Losses (gains) on
curtailments and
settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
Plan amendments |
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
(98 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
Other |
|
|
1 |
|
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
1 |
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost
(gains) for post employment benefits |
|
|
121 |
|
|
|
114 |
|
|
|
47 |
|
|
|
64 |
|
|
|
(22 |
) |
|
|
56 |
|
|
|
26 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets |
|
|
n/a |
|
|
|
n/a |
|
|
|
198 |
|
|
|
158 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the present value of Post-employment obligations are as follows:
F - 64
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance |
|
|
|
|
|
|
|
|
indemnity |
|
Pension Plans |
|
Health care plans |
|
Other |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of obligation at the
beginning of the year |
|
|
1,243 |
|
|
|
1,265 |
|
|
|
2,710 |
|
|
|
2,593 |
|
|
|
1,186 |
|
|
|
1,095 |
|
|
|
278 |
|
|
|
275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
|
86 |
|
|
|
87 |
|
|
|
48 |
|
|
|
36 |
|
|
|
12 |
|
|
|
12 |
|
|
|
16 |
|
|
|
14 |
|
Interest costs |
|
|
33 |
|
|
|
27 |
|
|
|
140 |
|
|
|
144 |
|
|
|
60 |
|
|
|
67 |
|
|
|
9 |
|
|
|
8 |
|
Contribution by plan participants |
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
5 |
|
|
|
7 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
Actuarial losses (gains) |
|
|
47 |
|
|
|
64 |
|
|
|
129 |
|
|
|
152 |
|
|
|
177 |
|
|
|
188 |
|
|
|
8 |
|
|
|
17 |
|
Exchange rate differences |
|
|
|
|
|
|
|
|
|
|
181 |
|
|
|
(74 |
) |
|
|
187 |
|
|
|
(94 |
) |
|
|
5 |
|
|
|
(2 |
) |
Benefits paid |
|
|
(150 |
) |
|
|
(209 |
) |
|
|
(157 |
) |
|
|
(149 |
) |
|
|
(64 |
) |
|
|
(61 |
) |
|
|
(39 |
) |
|
|
(33 |
) |
Past service cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49 |
) |
|
|
|
|
|
|
2 |
|
|
|
|
|
Change in scope of consolidation |
|
|
158 |
|
|
|
7 |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
24 |
|
|
|
|
|
Losses on curtailments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
Plan amendments |
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
(98 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
Other changes |
|
|
|
|
|
|
2 |
|
|
|
6 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
(5 |
) |
|
|
21 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of obligation at the end
of the year |
|
|
1,417 |
|
|
|
1,243 |
|
|
|
3,053 |
|
|
|
2,710 |
|
|
|
1,417 |
|
|
|
1,186 |
|
|
|
323 |
|
|
|
278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of plan amendments on the amount recognized for health care costs both in the
income statement and in the changes in the present value of obligations, is mainly due to the
structural reduction in welfare costs in North America, which led to the recognition of income of
83 million euros arising from the reduction of amounts previously provided by the CNH sector.
Changes in the fair value of plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
Pension Plans |
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Opening fair value of plan assets |
|
|
1,623 |
|
|
|
1,476 |
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
127 |
|
|
|
119 |
|
Actuarial gains (losses) |
|
|
71 |
|
|
|
39 |
|
Exchange rate differences |
|
|
144 |
|
|
|
(53 |
) |
Contribution by employer |
|
|
177 |
|
|
|
172 |
|
Contribution by plan participants |
|
|
9 |
|
|
|
6 |
|
Benefits paid |
|
|
(142 |
) |
|
|
(135 |
) |
Change in the scope of consolidation |
|
|
1 |
|
|
|
|
|
Other changes |
|
|
4 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
Closing fair value of plan assets |
|
|
2,014 |
|
|
|
1,623 |
|
|
|
|
|
|
|
|
|
|
Plan assets for Post-employment benefits mainly consist of listed equity instruments and
fixed income securities; plan assets do not include treasury stock of Fiat S.p.A. or properties
occupied by Group companies.
Plan assets may be summarised as follows:
F - 65
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
(in %) |
Third party equity instruments |
|
|
54 |
|
|
|
47 |
|
Third party debt instruments |
|
|
42 |
|
|
|
48 |
|
Properties occupied by third parties |
|
|
1 |
|
|
|
|
|
Other assets |
|
|
3 |
|
|
|
5 |
|
Assumed healthcare cost trend rates have a significant effect on the amount recognized in
the income statement. A one percentage point change in assumed healthcare cost trend rates would
have the following effects:
|
|
|
|
|
|
|
|
|
|
|
One percentage |
|
One percentage |
|
|
point increase |
|
point decrease |
|
|
(in millions of euros) |
Effect on the aggregate of the service costs and interest cost |
|
|
21 |
|
|
|
17 |
|
Effect on defined benefit obligation |
|
|
143 |
|
|
|
119 |
|
Effect on defined benefit obligation |
|
|
|
|
|
|
|
|
(27) Other provisions
Changes in Other provisions for the year ended December 31, 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
December |
|
|
|
|
|
|
|
|
|
Release |
|
Other |
|
December |
|
|
31, 2004 |
|
Charge |
|
Utilization |
|
to income |
|
changes |
|
31, 2005 |
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
Warranty provision |
|
|
893 |
|
|
|
1,033 |
|
|
|
(953 |
) |
|
|
(8 |
) |
|
|
81 |
|
|
|
1,046 |
|
Restructuring provision |
|
|
347 |
|
|
|
378 |
|
|
|
(217 |
) |
|
|
(13 |
) |
|
|
24 |
|
|
|
519 |
|
Provision on equity
investments |
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
71 |
|
Other risks |
|
|
2,368 |
|
|
|
2,318 |
|
|
|
(1,548 |
) |
|
|
(83 |
) |
|
|
88 |
|
|
|
3,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other provisions |
|
|
3,608 |
|
|
|
3,780 |
|
|
|
(2,718 |
) |
|
|
(104 |
) |
|
|
213 |
|
|
|
4,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of discounting provisions amounts to 9 million euros in 2005 and has been
included in the Other changes as has the effect of exchange rate differences amounting to 180
million euros.
The warranty provision represents managements best estimate of commitments given by the Group
for contractual, legal or constructive obligations arising from product warranties given for a
specified period of time which begins at the date of delivery to the customer. This estimate has
been calculated considering, past experience and specific contractual terms.
The restructuring provision comprises the estimated amount of benefits payable to employees on
termination in connection with restructuring plans amounting to 422 million euros at December 31,
2005 (289 million euros at December 31, 2004), other costs for exiting activities amounting to 10
million euros at December 31, 2005 (13 million euros at December 31, 2004) and other costs
totalling 87 million euros at December 31, 2005 (45 million euros at December 31, 2004).
The total balance at December 31, 2005 relates to corporate restructuring programs of the
following Sectors (in millions of euros): Fiat Auto 175 (160 at December 31, 2004); Agricultural
and Construction Equipment 72 (36 at December 31, 2004); Commercial Vehicles 109 (43 at December
31, 2004); Metallurgical Products 19 (8 at December 31, 2004); Components 59 (66 at December 31,
2004); Production Systems 48 (17 at December 31, 2004); Services 16 (6 at December 31, 2004); Other
sectors 21 (11 at December 31, 2004).
F - 66
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The provision for other risks represents the amounts set aside by the individual companies of
the Group principally in connection with contractual and commercial risks and disputes.
(28) Debt
A breakdown of debt and an analysis by due date are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
one year |
|
years |
|
years |
|
Total |
|
one year |
|
years |
|
years |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed financing |
|
|
6,907 |
|
|
|
3,254 |
|
|
|
49 |
|
|
|
10,210 |
|
|
|
6,902 |
|
|
|
3,223 |
|
|
|
49 |
|
|
|
10,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds |
|
|
2,766 |
|
|
|
2,307 |
|
|
|
2,561 |
|
|
|
7,634 |
|
|
|
2,369 |
|
|
|
3,029 |
|
|
|
3,928 |
|
|
|
9,326 |
|
Borrowings from banks |
|
|
2,877 |
|
|
|
2,557 |
|
|
|
128 |
|
|
|
5,562 |
|
|
|
8,110 |
|
|
|
2,266 |
|
|
|
74 |
|
|
|
10,450 |
|
Loans for banking
activities |
|
|
1,255 |
|
|
|
|
|
|
|
|
|
|
|
1,255 |
|
|
|
1,322 |
|
|
|
4 |
|
|
|
|
|
|
|
1,326 |
|
Other |
|
|
956 |
|
|
|
92 |
|
|
|
52 |
|
|
|
1,100 |
|
|
|
751 |
|
|
|
129 |
|
|
|
35 |
|
|
|
915 |
|
Total Other debt |
|
|
7,854 |
|
|
|
4,956 |
|
|
|
2,741 |
|
|
|
15,551 |
|
|
|
12,552 |
|
|
|
5,428 |
|
|
|
4,037 |
|
|
|
22,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt |
|
|
14,761 |
|
|
|
8,210 |
|
|
|
2,790 |
|
|
|
25,761 |
|
|
|
19,454 |
|
|
|
8,651 |
|
|
|
4,086 |
|
|
|
32,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The item Asset-backed financing represents the amount of financing received through both
securitisation and factoring transactions which do not meet IAS 39 derecognition requirements and
is recognized as an asset in the balance sheet under the item Current receivables (Note 19).
The bonds issued by the Fiat Group are governed by different terms and conditions according to
their type as follows:
|
§ |
|
Global Medium Term Note (GMTN Program): notes of approximately 5.5 billion euros
guaranteed by Fiat S.p.A. have been issued to date under this program. Issuers taking
part in the program are Fiat Finance & Trade Ltd. S.A. (for an amount outstanding of
5,426 million euros), and Fiat Finance Canada Ltd. (for an amount outstanding of 100
million euros). |
|
|
§ |
|
Convertible bonds: these represent the residual debt, 15 million euros remaining
after the partial repayment in July 2004, of the 5-year bond originally convertible
into General Motors Corporation common stock (the Exchangeable bond) at a conversion
price of 69.54 U.S. dollars per share, bearing interest at 3.25% and repayable on
January 9, 2007. In order to hedge the risk, implicit in the bond, of an increase in
the General Motors share price above 69.54 U.S. dollars, the Group purchased call
options in 2004 on General Motors common stock. These options, although originally
purchased for hedging purposes, are classified as trading (see also Note 22). |
|
|
§ |
|
Other bonds: these refer to the following issues: |
|
- |
|
Bonds issued by Case New Holland Inc. (CNH Inc.) in 2003 (bearing
coupon interest at 9.25% and repayable on August 1, 2011 for an amount of 1,050
million U.S. dollars, equivalent to 890 million euros) and in 2004 (bearing coupon
interest at 6.00% and repayable on June 1, 2009 for an amount of 500 million U.S.
dollars, equivalent |
F - 67
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
to 424 million euros); the bond indenture contains a series of
financial covenants that are common to the high yield American bond market; |
|
|
- |
|
Bonds issued by CNH America LLC and CNH Capital America for a total
amount outstanding of 381 million U.S. dollars, equivalent to 323 million euros; |
|
|
- |
|
Other minor issues for a total of 43 million euros. |
The majority of the bonds issued by the Group contain commitments (covenants) by the issuer
and in some cases by Fiat S.p.A. as the guarantor, that are common in international practice for
bond issues of this type, by the issuers in the same industrial segment as that in which the Group
operates. In particular, these covenants may include (i) a negative pledge clause which requires
that the benefit of any real present or future guarantees given as collateral on the assets of the
issuer and/or Fiat, on other bonds and other credit instruments should be extended to these bonds
to the same degree, (ii) a pari passu clause, on the basis of which obligations cannot be
undertaken which are senior to the bonds issued, (iii) an obligation to provide periodic
disclosure, (iv) for certain of the bond issues cross-default clauses, whereby the bonds become
immediately due and payable when certain defaults arise in respect of other financial instruments
issued by the Group and (v) other clauses generally present in issues of this type.
The above-mentioned bonds issued by CNH Inc. contain, moreover, financial covenants common to
the high yield American bond market which place restrictions, among other things, on the
possibility of the issuer and certain companies of the CNH group to secure new debt, pay dividends
or buy back treasury stock, realise certain investments, conclude transactions with associated
companies, give collateral on its assets, conclude sale and leaseback transactions, sell certain
fixed assets or merge with other companies, and financial covenants which impose a maximum limit on
further indebtedness by the CNH group companies which cannot exceed a specific ratio of cash flows
to dividend payments and financial expenses. Such covenants are subject to various exceptions and
limitations and, in particular, some of these would no longer be binding should the bonds be
assigned an investment grade rating by Standard & Poors Rating Services and/or Moodys Investors
Service.
The major bond issues outstanding at December 31, 2005 are the following:
F - 68
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of |
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
|
|
|
|
outstanding |
|
|
|
|
|
|
|
|
|
amount |
|
|
|
|
|
|
bonds |
|
|
|
|
|
|
|
|
|
(in millions of |
|
|
Currency |
|
(in millions) |
|
Coupon |
|
Maturity |
|
euros) |
|
|
|
Global Medium Term Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiat Finance & Trade (1) |
|
EUR |
|
|
1,678 |
|
|
|
5.75 |
% |
|
May 25, 2006 |
|
|
1,678 |
|
Fiat Finance Canada |
|
EUR |
|
|
100 |
|
|
|
5.80 |
% |
|
July 21, 2006 |
|
|
100 |
|
Fiat Finance & Trade (1) |
|
EUR |
|
|
500 |
|
|
|
5.50 |
% |
|
December 13, 2006 |
|
|
500 |
|
Fiat Finance & Trade (1) |
|
EUR |
|
|
1,000 |
|
|
|
6.25 |
% |
|
February 24, 2010 |
|
|
1,000 |
|
Fiat Finance & Trade (1) |
|
EUR |
|
|
1,300 |
|
|
|
6.75 |
% |
|
May 25, 2011 |
|
|
1,300 |
|
Fiat Finance & Trade (1) |
|
EUR |
|
|
617 |
|
|
|
(2 |
) |
|
|
|
(2 |
) |
|
617 |
|
Others (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Global Medium Term Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiat Fin. Luxembourg (4) |
|
USD |
|
|
17 |
|
|
|
3.25 |
% |
|
January 9, 2007 |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Convertible bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other bonds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CNH Capital America LLC |
|
USD |
|
|
127 |
|
|
|
6.75 |
% |
|
October 21, 2007 |
|
|
107 |
|
Case New Holland Inc. |
|
USD |
|
|
1,050 |
|
|
|
9.25 |
% |
|
August 1, 2011 |
|
|
890 |
|
Case New Holland Inc. |
|
USD |
|
|
500 |
|
|
|
6.00 |
% |
|
June 1, 2009 |
|
|
424 |
|
CNH America LLC |
|
USD |
|
|
254 |
|
|
|
7.25 |
% |
|
January 15, 2016 |
|
|
216 |
|
Others (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments and amortized cost
valuation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Bonds listed on the Mercato Obbligazionario Telematico of the Italian stock exchange
(EuroMot). In addition, the majority of the bonds issued by the Fiat Group are also listed on
the Luxembourg stock exchange. |
|
(2) |
|
Fiat Step-Up Amortizing 2001-2011 bonds repayable at face value in five equal annual
instalments each for 20% of the total issued (617 million euros) due beginning from the sixth
year (November 7, 2007) by reducing the face value of each bond outstanding by one-fifth. The
last instalment will be repaid on November 7, 2011. The bonds pay coupon interest equal to:
4.40% in the first year (November 7, 2002), 4.60% in the second year (November 7, 2003), 4.80%
in the third year (November 7, 2004), 5.00% in the fourth year (November 7, 2005), 5.20% in
the fifth year (November 7, 2006), 5.40% in the sixth year (November 7, 2007), 5.90% in the
seventh year (November 7, 2008), 6.40% in the eighth year (November 7, 2009), 6.90% in the
ninth year (November 7, 2010), 7.40% in the tenth year (November 7, 2011). |
|
(3) |
|
Bonds with amounts outstanding equal to or less than the equivalent of 50 million euros. |
|
(4) |
|
Bonds convertible into General Motors Corporation common stock. |
The Fiat Group intends to repay the issued bonds in cash at due date by utilising
available liquid resources. At December 31, 2005, the Fiat Group also had unused committed credit
lines of 1 billion euros.
In addition, the companies in the Fiat Group may from time to time buy back bonds on the
market that have been issued by the Group, also for purposes of their cancellation. Such buybacks,
if made, depend upon market conditions, the financial situation of the Group and other factors
which could affect such decisions.
The item Borrowings from banks at December 31, 2004 included the 3 billion euros Mandatory
Convertible Facility stipulated in execution of the Framework Agreement dated May 27, 2002 with
Capitalia, Banca Intesa, SanPaolo IMI and later Unicredit Banca (the Lending Banks),
F - 69
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
for the
purpose of providing the Fiat Group with the financial support needed to implement its
strategic and industrial plans. As described in Notes 9 and 25, the extinguishment of the
Mandatory Convertible Facility and its conversion to capital stock, through the subscription by the
Lending Banks of an increase in capital stock for consideration, took place on September 20, 2005.
Capital stock increased in this manner from 4,918,113,540 euros to 6,377,257,130 euros.
At December 31, 2004, the item also included 1,147 million euros of financing secured from
Citigroup and a small group of banks that was guaranteed by a put option to EDF held by the Fiat
Group on its residual interest of 24.6% in Italenergia Bis and the shares in Italenergia Bis
pledged by Fiat. In addition, the item included 603 million euros due to the other (bank)
stockholders of Italenergia Bis, who acquired 14% of Fiats interest in Italenergia Bis in 2002,
subject to a series of options expiring in 2005. Given the existence of these options, the sale of
the 14% interest did not previously satisfy the revenue recognition requirements of IAS18. As
described in Note 6, Fiat repaid the mentioned loans during the period with the proceeds of the
sale of its interest of 24.6% carried out through the exercise of the Put option, and as a result,
the possibility that Fiat will be required to repurchase the 14% holding from these stockholders
has been eliminated.
The annual interest rates and the nominal currencies of debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
less than 5% |
|
|
from 5% to 7.5% |
|
|
from 7.5% to 10% |
|
|
from 10% to 12.5% |
|
|
Greater than 12.5% |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
Euro and euro-zone currencies |
|
|
7,602 |
|
|
|
5,575 |
|
|
|
341 |
|
|
|
|
|
|
|
|
|
|
|
13,518 |
|
U.S. dollar |
|
|
5,686 |
|
|
|
1,522 |
|
|
|
928 |
|
|
|
3 |
|
|
|
|
|
|
|
8,139 |
|
Japanese yen |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
Brazilian real |
|
|
195 |
|
|
|
4 |
|
|
|
1,088 |
|
|
|
67 |
|
|
|
442 |
|
|
|
1,796 |
|
British pound |
|
|
78 |
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122 |
|
Canadian dollar |
|
|
937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
937 |
|
Other |
|
|
489 |
|
|
|
672 |
|
|
|
73 |
|
|
|
4 |
|
|
|
|
|
|
|
1,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt |
|
|
14,998 |
|
|
|
7,817 |
|
|
|
2,430 |
|
|
|
74 |
|
|
|
442 |
|
|
|
25,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial payables with annual nominal interest rates in excess of 12.5% relate
principally to Groups subsidiaries operating in Brazil.
For further information on the management of interest rate and exchange rate risk reference
should be made to the previous section Risk Management and to Note 34.
The fair value of debt at December 31, 2005 amounts to approximately to 25,624 million euros
(approximately 31,989 million euros at December 31, 2004), determined using the quoted market price
of financial instruments, if available, or the related future cash flows. The amount is calculated
using the interest rates stated in Note 19, suitably adjusted to take account of the Groups
current creditworthiness.
At December 31,
2005, the Group has
outstanding
financial lease
agreements for
certain property,
plant and equipment
whose net carrying
amount totalling 96
million euros (65
million euros at
December 31, 2004)
is included in the
item Property,
plant and equipment
(Note 14). Payables
for finance leases
included in the
item Total other
debt amount to 145
million euros at
December 31, 2005
(120 million euros
at December 31,
2004) and are
analysed as follows:
F - 70
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
between |
|
|
|
|
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
one and |
|
|
|
|
|
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
Due within |
|
five |
|
Due beyond |
|
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
one year |
|
years |
|
five years |
|
Total |
|
one year |
|
years |
|
years |
|
Total |
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum future
lease payments |
|
|
79 |
|
|
|
59 |
|
|
|
17 |
|
|
|
155 |
|
|
|
21 |
|
|
|
91 |
|
|
|
13 |
|
|
|
125 |
|
Interest expense |
|
|
(4 |
) |
|
|
(5 |
) |
|
|
(1 |
) |
|
|
(10 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of
minimum lease
payments |
|
|
75 |
|
|
|
54 |
|
|
|
16 |
|
|
|
145 |
|
|
|
20 |
|
|
|
87 |
|
|
|
13 |
|
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt secured by mortgages on assets of the Group amounts to 710 million euros at December
31, 2005 (2,510 million euros at December 31, 2004), of which 145 million euros (120 million euros
at December 31, 2004) due to creditors for assets acquired under finance leases. Of the amount at
December 31, 2004, approximately 1.8 billion euros regarding the financing obtained as part of the
Italenergia Bis operation was extinguished in September 2005. The total carrying amount of assets
acting as security for loans amounts to 872 million euros at December 31, 2005 (1,630 million euros
at December 31, 2004, including of the investment in Italenergia Bis). In addition, it is recalled
that the groups assets include current receivables and set-aside cash to be used for settling
asset-backed financing of 10,210 million euros (10,174 million euros at December 31, 2004).
(29) Trade payables
An analysis by due date of trade payables at December 31, 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
one year |
|
years |
|
years |
|
Total |
|
one year |
|
years |
|
years |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
Trade Payables |
|
|
11,773 |
|
|
|
4 |
|
|
|
|
|
|
|
11,777 |
|
|
|
11,654 |
|
|
|
43 |
|
|
|
|
|
|
|
11,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amount of Trade payables is considered in line with their fair value at the
balance sheet date.
F - 71
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(30) Other payables
An analysis of Other payables at December 31, 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Payables to personnel |
|
|
483 |
|
|
|
428 |
|
Tax payables |
|
|
969 |
|
|
|
764 |
|
Social security payables |
|
|
354 |
|
|
|
325 |
|
Advances on buy-back agreements |
|
|
2,171 |
|
|
|
1,941 |
|
Other |
|
|
844 |
|
|
|
1,103 |
|
|
|
|
|
|
|
|
|
|
Total Other payables |
|
|
4,821 |
|
|
|
4,561 |
|
|
|
|
|
|
|
|
|
|
An analysis of Other payables by due date is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
one year |
|
years |
|
years |
|
Total |
|
one year |
|
years |
|
years |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
Other payables |
|
|
3,819 |
|
|
|
879 |
|
|
|
123 |
|
|
|
4,821 |
|
|
|
3,749 |
|
|
|
723 |
|
|
|
89 |
|
|
|
4,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax payables includes current income tax liabilities for 388 million euros (334 million
euros at December 31, 2004).
The item Advances on buy-back agreements refers to agreements entered into by the Group during
the year or which still remain effective at the balance sheet date. An amount of 1,334 million
euros regards assets included in Property, plant and equipment, with the balance of 837 million
euros relating to inventories.
The item Advances on buy-back agreements represents the following:
|
§ |
|
at the date of the sale, the price received for the product is recognized as an
advance in liabilities; |
|
|
§ |
|
subsequently, since the difference between the original sales price and the
repurchase price is recognized in the income statement as operating lease installments
on a straight line basis over the lease term, the balance represents the remaining
lease installments yet to be recognized in income plus the repurchase price. |
The carrying amount of Other payables is considered in line with their fair value at the
balance sheet date.
(31) Accrued liabilities and deferred income
The item Accrued liabilities and deferred income includes public investment grants recognized
as income over the useful lives of the assets to which they relate. Furthermore, the item comprises
deferred income relating to service contracts, as well as accrued liabilities for costs that will
be settled in the following year.
F - 72
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(32) Guarantees granted, commitments and contingent liabilities
(i) Guarantees granted
At December 31, 2005, the Group had granted guarantees on the debt or commitments of third
parties or associated entities totaling 1,198 million euros (2,360 million euros at December 31,
2004). An amount of 598 million euros of the decrease of 1,162 million euros is due to lower
guarantees granted on behalf of Sava S.p.A. for the bonds it has issued.
(ii) Other commitments and important contractual rights
The Fiat Group has important commitments and rights deriving from outstanding agreements,
summarized in the following.
Fidis Retail Italia (FRI)
The associated company Fidis Retail Italia S.p.A. (FRI) was set up to take over the European
activities of the Automobile Sector in the area of consumer financing for retail automobile
purchases. To this end, the activities performed by various companies operating in different
countries in Europe were gradually sold to FRI after obtaining the necessary authorizations from
the local regulatory agencies. As envisaged by the Framework Agreement signed on May 27, 2002 by
Fiat and the Money Lending Banks (Capitalia, Banca Intesa, SanPaolo IMI and later Unicredito
Italiano), on May 27, 2003, the Fiat Group sold 51% of FRIs shares and, as a result, the control
of FRI to Synesis Finanziaria S.p.A., an Italian company held equally by the four Banks, at the
price of 370 million euros, based upon the binding agreements signed by the parties at that time.
The sale contract calls for Put and Call options that can be summarized as follows:
|
§ |
|
Call Option by Fiat Auto to purchase the 51% of Fidis Retail Italia held by Synesis
Finanziaria, exercisable quarterly up to January 31, 2008 (initially up to January 31,
2006, before the extension agreed on February 4, 2005) at a price increased pro rata
temporis over the sales price plus additional payments less any distributions. |
|
|
§ |
|
Synesis Finanziarias right to request Fiat Auto to exercise the above purchase
option on 51% of Fidis Retail Italia prior to January 31, 2008 (January 31, 2006,
before the above-mentioned extension) if there is a change in control of Fiat or Fiat
Auto (also through the sale of a substantial part of the companies owned by Fiat Auto
or one of its brands Fiat, Alfa and Lancia) as set forth in the relevant stockholders
agreement between Fiat Auto, Synesis Finanziaria and the four Money Lending Banks. |
|
|
§ |
|
So-called tag along option on behalf of Synesis Finanziaria if the same events
referred to in the preceding point occur after January 31, 2008 (originally January 31,
2006). |
|
|
§ |
|
So-called drag along option on behalf of Fiat Auto in the event of the sale of the
investment by Synesis Finanziaria after January 31, 2008 (January 31, 2006, before the
above-mentioned extension). |
As a result of the transaction, FRI was deconsolidated and has repaid all the loans it
previously obtained from the centralized treasury department of the Group.
F - 73
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Ferrari
A summary is presented below of the rights arising from the purchase in 2002 of 34% of the
capital stock of Ferrari S.p.A. for 775 million euros by Mediobanca S.p.A., within the framework of
a consortium set up for the acquisition and placement of the Ferrari shares. The sale contract sets
out the following principal elements:
|
§ |
|
Mediobanca assumed the responsibility of sole Global Coordinator in charge of
coordinating and leading the consortium, in the event of a placement by June 30, 2006. |
|
|
§ |
|
Mediobanca cannot sell its Ferrari shares to another group in the automobile
industry as long as the Fiat Group maintains a 51% controlling interest in Ferrari.
Barring certain specific assumptions, the Fiat Group can not reduce its investment in
Ferrari below 51% until the end, depending on the case, of the third or fourth year
subsequent to signing the contract. |
|
|
§ |
|
Fiat holds a call option that allows it to repurchase the Ferrari shares at any time
before June 30, 2006, except during the five months subsequent to the presentation of
an IPO application to the competent authorities. The option exercise price is equal to
the original price at which the shares were sold plus interest during the period based
on the BOT yield plus 4%. |
|
|
§ |
|
Mediobanca, moreover, does not hold any put option to resell the purchased Ferrari shares to Fiat,
even in the event that the IPO does not occur or is not completed. |
|
|
§ |
|
Fiat may share, in declining percentages, in any gain realized by Mediobanca and the
other members of the consortium in the event of an IPO. |
Teksid
Teksid S.p.A. is the object of a Put and Call contract with the partner Norsk Hydro concerning
the subsidiary Meridian Technologies Inc. (held 51% by the Teksid Group and 49% by the Norsk Hydro
Group). In particular, should there be a strategic deadlock in the management of the company
(namely in all those cases in which a unanimous vote in favour is not reached by the directors on
the board as regards certain strategic decisions disciplined by the contract between the
stockholders), the following rights would arise:
|
§ |
|
Put Option of Norsk Hydro with Teksid on the 49% holding: the sale price would be
commensurate with the initial investment made in 1998, revalued pro rata temporis, net
of dividends paid. |
|
|
§ |
|
Call Option of Teksid with Norsk Hydro on the 49% holding (exercisable whenever
Norsk Hydro renounces its right to exercise the Put Option described above): the sale
price would be the higher value between the initial investment made by Norsk Hydro in
1998, calculated according to the criteria expressed previously, and 140% of the Fair
Market Value (in this regard, an increase of 2% per year is established in the event
the
option is exercised from the start of 2008 until 2013, thus up to 150% of the relative
value). |
It should be pointed out that at present the conditions that would give rise to a strategic
deadlock are considered to be quite remote.
Fiat S.p.A. is subject to a put contract with Renault (in reference to the original investment
of 33.5% in Teksid, now 15.2%).
F - 74
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
In particular, Renault would acquire the right to exercise a sale option on the treasury stock
to Fiat, in the following cases:
|
§ |
|
in the event of nonfulfilment in the application of the protocol of the agreement
and admission to receivership or any other redressment procedure; |
|
|
§ |
|
in the event Renaults investment in Teksid falls below 15% or Teksid decides to
invest in a structural manner outside the foundry sector; |
|
|
§ |
|
should Fiat be the object of the acquisition of control by another car manufacturer. |
The exercise price of the option is established as follows:
|
§ |
|
for 6.5% of the capital stock of Teksid, the initial investment price increased pro
rata temporis; |
|
|
§ |
|
for the remaining amount of capital stock of Teksid, the share of the accounting net
equity at the exercise date. |
(iii) Sales of receivables
The Group has discounted receivables and bills without recourse having due dates after
December 31, 2005 amounting to 2,463 million euros (1,623 million euros at December 31, 2004, with
due dates after that date), which refer to trade receivables and other receivables for 2,007
million euros (1,325 million euros at December 31, 2004) and receivables from financing for 456
million euros (298 million euros at December 31, 2004). The increase during the period is mainly
connected with the sales of receivables to companies of the Iveco Finance Holdings Limited group,
which from June 1, 2005 are no longer consolidated on a line-by-line basis.
(iv) Operating lease contracts
The Group enters into operating lease contracts for the right to use industrial buildings and
equipments with an average term of 10-20 years and 3-5 years, respectively, At December 31, 2005,
the total future minimum lease payments under non-cancellable lease contracts are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
|
|
|
Due |
|
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
|
between |
|
Due |
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
|
|
|
|
|
one and |
|
beyond |
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
|
Due within |
|
five |
|
five |
|
|
|
|
one year |
|
years |
|
years |
|
Total |
|
one year |
|
years |
|
years |
|
Total |
|
|
(in millions of euros) |
Future minimum
lease payments
under operating
lease agreements |
|
|
71 |
|
|
|
171 |
|
|
|
161 |
|
|
|
403 |
|
|
|
75 |
|
|
|
177 |
|
|
|
160 |
|
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(v) Contingent liabilities
As a global company with a diverse business portfolio, the Fiat Group is exposed to numerous
legal risks, particularly in the areas of product liability, competition and antitrust law,
environmental risks and tax matters. The outcome of any current or future proceedings cannot be
predicted with certainty. It is therefore possible that legal judgments could give rise to expenses
that are not covered, or fully covered, by insurers compensation payments and could affect the
Group financial condition and results. At December 31, 2005, contingent liabilities estimated by
the Group amount to approximately 200 million euros, for which no provisions have been recognized
since an outflow of resources is not considered to be probable. Furthermore, contingent assets and
expected
F - 75
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
reimbursement in connection with these contingent liabilities for approximately 30 million
euros have been estimated but not recognized.
Instead, when it is probable that an outflow of resources embodying economic benefits will be
required to settle obligations and this amount can be reliably estimated, the Group recognises
specific provision for this purpose.
Furthermore, in connection with significant asset divestitures carried out in 2005 and in
prior years, the Group provided indemnities to purchasers with the maximum amount of potential
liability under these contracts generally capped at a percentage of the purchase price. These
liabilities primarily relate to potential liabilities arising from contingent liabilities in
existence at the time of the sale, as well as breach of representations and warranties provided in
the contracts and, in certain instances, environmental or tax matters, generally for a limited
period of time. At December 31, 2005, potential obligations with respect to these indemnities are
approximately 750 million euros, unchanged from the level at December 31, 2004. The Group have
provided certain other indemnifications that do not limit potential payment; it is not possible to
estimate a maximum amount of potential future payments that could result from claims made under
these indemnities.
Fiat has recently received a subpoena from the SEC Division of Enforcement regarding a formal
investigation entitled In the Matter of Certain Participants in the Oil-for-Food Program. Under
this subpoena, the Group is required to provide the SEC with documents relating to certain
Fiat-related entities, including certain CNH subsidiaries and Iveco, regarding matters relating to
the United Nations Oil-for-Food Program. A substantial number of companies was mentioned in the
Report of the Independent Inquiry Committee into the United Nations Oil-for-Food Programme issued
in October 2005, which alleged that these companies engaged in transactions under this programme
that involved inappropriate payments. Management is currently unable to predict what actions, if
any, may result from the SEC investigation.
(33) Segment reporting
Information
by business and geographical area is disclosed in accordance with IAS 14 Segment
reporting, and is prepared in conformity with the accounting policies adopted for preparing and
presenting the consolidated financial statements of the Group.
The primary reporting format is by business segment, while geographical segments represent the
secondary reporting format.
This decision is based on the identification of the source and nature of the Groups risks and
returns, which determine how the Group is organised and define its management structure and its
internal financial reporting system.
(i) Business segment information
The internal organisation and management structure of the Fiat Group throughout the world are
based on the business segment to which entities and divisions belong. In addition, the Group has
investments in holding entities and service providers whose activity is different from those of the
industrial businesses. The following descriptions provide additional detail of this.
The Fiat Auto Sector operates internationally with three major brands Fiat, Lancia and Alfa
Romeo and manufactures and markets automobiles and commercial vehicles.
The Maserati Sector produces and markets luxury sports cars with the brand Maserati.
The Ferrari Sector consists of the manufacturing and marketing of luxury sports cars with the
brand Ferrari and the management of the Formula One racing cars.
F - 76
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The Fiat Powertrain Technologies (FPT) Sector manufactures car engines and transmissions
(these businesses were managed by the Fiat-GM Powertrain joint venture until April 2005). Starting
from 2006 the Sector will also include Iveco, C.R.F. and the Elasis businesses which manufacture
engines and gear boxes.
The Agricultural and Construction Equipment (CNH) Sector manufactures and sells tractors and
agricultural equipment under the Case IH and the New Holland brands and construction equipment
under the Case, New Holland and Kobelco brands.
The Iveco Sector produce and sells trucks and commercial vehicles, mainly in Europe, (under
the Iveco brand), buses (under the Iveco and Irisbus brands) and special vehicles (under the Iveco,
Magirus and Astra brands).
The Components Sector (Magneti Marelli) produces and sells components for lighting systems,
engine control units, suspension systems, electronic systems and exhaust systems.
The Production System Sector (Comau) designs and produces industrial automation systems and
related products for the automotive industry.
The Metallurgical Products Sector (Teksid) produces components for engines, cast-iron
transmissions, and magnesium bodywork components.
The Services Sector (Business Solutions) provides accounting and human resources services,
almost all of which are supplied to other Group companies.
The activities of the Publishing and Communications Sector (Itedi) mainly include publishing
the newspaper La Stampa and selling advertising space in the print, television and internet media.
Total Net revenues presented by each Sector includes transactions with other Sectors carried
out at arms length prices.
Intersegment revenues and expenses are reconciled and are eliminated in the consolidated
financial statements of the Group; intersegment receivables and payables are eliminated in a
similar manner.
Segment Capital expenditure, Depreciation and amortisation, and Impairment concern intangible
assets and property, plant and equipment.
Other Sector non-cash items comprise the provision for risks and charges.
The Segment Result arising under IAS 14 is equal to the Operating result. The Operating
result and Trading profit include, respectively, Interest income and other financial income and
Interest expenses and other financial expenses of financial services companies in Net revenues and
Cost of Sales of the Sector.
Sector Assets are operating assets used by the Sector in its business and are directly
attributed or allocated, in a reasonable manner, to the Sector. These assets do not include tax
assets and investments accounted for using the equity method.
Sector Liabilities are operating liabilities used by the Sector in its business and are
directly attributed or allocated, in a reasonable manner, to the Sector. These liabilities do not
include tax liabilities.
As the Sector Result includes Interest income and other financial income and Interest expenses
and other financial expenses of financial services companies, the Assets of the Fiat Auto, Iveco
and CNH Sectors and the Assets of the Other Sectors for Banca Unione di Credito, include financial
assets (primarily the investment portfolio) of financial services companies; similarly Sector
Liabilities include the debt of financial services companies. As a result, the unallocated Group
debt represents the debt of the industrial companies.
F - 77
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
|
|
Fiat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Magneti |
|
|
|
|
|
|
|
|
|
Business |
|
|
|
|
|
elimina- |
|
FIAT |
|
|
Auto |
|
Maserati |
|
Ferrari |
|
FPT |
|
CNH |
|
Iveco |
|
Marelli |
|
Teksid |
|
Comau |
|
Solutions |
|
Itedi |
|
tions |
|
Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues |
|
|
19,533 |
|
|
|
533 |
|
|
|
1,289 |
|
|
|
1,966 |
|
|
|
10,212 |
|
|
|
9,489 |
|
|
|
4,033 |
|
|
|
1,036 |
|
|
|
1,573 |
|
|
|
752 |
|
|
|
397 |
|
|
|
(4,269 |
) |
|
|
46,544 |
|
Net revenues intersegment |
|
|
(194 |
) |
|
|
|
|
|
|
(83 |
) |
|
|
(1,513 |
) |
|
|
(3 |
) |
|
|
(355 |
) |
|
|
(1,473 |
) |
|
|
(206 |
) |
|
|
(245 |
) |
|
|
(422 |
) |
|
|
(10 |
) |
|
|
4,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from third
parties |
|
|
19,339 |
|
|
|
533 |
|
|
|
1,206 |
|
|
|
453 |
|
|
|
10,209 |
|
|
|
9,134 |
|
|
|
2,560 |
|
|
|
830 |
|
|
|
1,328 |
|
|
|
330 |
|
|
|
387 |
|
|
|
235 |
|
|
|
46,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading profit |
|
|
(281 |
) |
|
|
(85 |
) |
|
|
157 |
|
|
|
26 |
|
|
|
698 |
|
|
|
415 |
|
|
|
162 |
|
|
|
45 |
|
|
|
42 |
|
|
|
35 |
|
|
|
16 |
|
|
|
(230 |
) |
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unusual income (expenses) |
|
|
(537 |
) |
|
|
|
|
|
|
|
|
|
|
(22 |
) |
|
|
(87 |
) |
|
|
(126 |
) |
|
|
(35 |
) |
|
|
(18 |
) |
|
|
(50 |
) |
|
|
(28 |
) |
|
|
(3 |
) |
|
|
2,121 |
|
|
|
1,215 |
|
Operating result |
|
|
(818 |
) |
|
|
(85 |
) |
|
|
157 |
|
|
|
4 |
|
|
|
611 |
|
|
|
289 |
|
|
|
127 |
|
|
|
27 |
|
|
|
(8 |
) |
|
|
7 |
|
|
|
13 |
|
|
|
1,891 |
|
|
|
2,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income
(expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(843 |
) |
Unusual financial income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
858 |
|
Result from investments |
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
(54 |
) |
|
|
(3 |
) |
|
|
1 |
|
|
|
(3 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
6 |
|
|
|
34 |
|
Result before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,264 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result from continuing
operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure |
|
|
1,582 |
|
|
|
20 |
|
|
|
142 |
|
|
|
173 |
|
|
|
255 |
|
|
|
912 |
|
|
|
313 |
|
|
|
45 |
|
|
|
38 |
|
|
|
19 |
|
|
|
20 |
|
|
|
1 |
|
|
|
3,520 |
|
Depreciation and
amortization |
|
|
(1,264 |
) |
|
|
(37 |
) |
|
|
(128 |
) |
|
|
(168 |
) |
|
|
(296 |
) |
|
|
(539 |
) |
|
|
(181 |
) |
|
|
(45 |
) |
|
|
(27 |
) |
|
|
(28 |
) |
|
|
(7 |
) |
|
|
(20 |
) |
|
|
(2,740 |
) |
Impairment |
|
|
(151 |
) |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(36 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(26 |
) |
|
|
(233 |
) |
Other non-cash items |
|
|
(1,259 |
) |
|
|
(34 |
) |
|
|
(52 |
) |
|
|
(65 |
) |
|
|
(1,311 |
) |
|
|
(617 |
) |
|
|
(102 |
) |
|
|
(44 |
) |
|
|
(53 |
) |
|
|
(25 |
) |
|
|
(1 |
) |
|
|
(166 |
) |
|
|
(3,729 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
|
|
Fiat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Magneti |
|
|
|
|
|
|
|
|
|
Business |
|
|
|
|
|
elimina- |
|
FIAT |
|
|
Auto |
|
Maserati |
|
Ferrari |
|
FPT |
|
CNH |
|
Iveco |
|
Marelli |
|
Teksid |
|
Comau |
|
Solutions |
|
Itedi |
|
tions |
|
Group |
|
|
(in millions of euros) |
Total net revenues |
|
|
19,695 |
|
|
|
409 |
|
|
|
1,175 |
|
|
|
|
|
|
|
9,983 |
|
|
|
9,047 |
|
|
|
3,795 |
|
|
|
910 |
|
|
|
1,711 |
|
|
|
976 |
|
|
|
407 |
|
|
|
(2,471 |
) |
|
|
45,637 |
|
Net revenues intersegment |
|
|
(169 |
) |
|
|
(10 |
) |
|
|
(72 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
(332 |
) |
|
|
(1,226 |
) |
|
|
(112 |
) |
|
|
(427 |
) |
|
|
(399 |
) |
|
|
(9 |
) |
|
|
2,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from third
parties |
|
|
19,526 |
|
|
|
399 |
|
|
|
1,103 |
|
|
|
|
|
|
|
9,977 |
|
|
|
8,715 |
|
|
|
2,569 |
|
|
|
798 |
|
|
|
1,284 |
|
|
|
577 |
|
|
|
398 |
|
|
|
291 |
|
|
|
45,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading profit |
|
|
(822 |
) |
|
|
(168 |
) |
|
|
138 |
|
|
|
|
|
|
|
467 |
|
|
|
371 |
|
|
|
165 |
|
|
|
(39 |
) |
|
|
40 |
|
|
|
41 |
|
|
|
11 |
|
|
|
(154 |
) |
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unusual income (expenses) |
|
|
(590 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
(68 |
) |
|
|
(24 |
) |
|
|
(17 |
) |
|
|
(3 |
) |
|
|
(10 |
) |
|
|
(7 |
) |
|
|
(2 |
) |
|
|
91 |
|
|
|
(635 |
) |
Operating result |
|
|
(1,412 |
) |
|
|
(171 |
) |
|
|
136 |
|
|
|
|
|
|
|
399 |
|
|
|
347 |
|
|
|
148 |
|
|
|
(42 |
) |
|
|
30 |
|
|
|
34 |
|
|
|
9 |
|
|
|
(63 |
) |
|
|
(585 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,179 |
) |
Unusual financial income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result from investments |
|
|
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
(22 |
) |
|
|
3 |
|
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
76 |
|
|
|
135 |
|
Result before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,629 |
) |
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result from continuing
operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure |
|
|
1,793 |
|
|
|
51 |
|
|
|
143 |
|
|
|
|
|
|
|
243 |
|
|
|
737 |
|
|
|
280 |
|
|
|
44 |
|
|
|
23 |
|
|
|
25 |
|
|
|
2 |
|
|
|
(18 |
) |
|
|
3,322 |
|
Depreciation and
amortization |
|
|
(1,082 |
) |
|
|
(33 |
) |
|
|
(108 |
) |
|
|
|
|
|
|
(302 |
) |
|
|
(526 |
) |
|
|
(175 |
) |
|
|
(50 |
) |
|
|
(29 |
) |
|
|
(28 |
) |
|
|
(6 |
) |
|
|
(33 |
) |
|
|
(2,372 |
) |
Impairment |
|
|
(118 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21 |
) |
|
|
(4 |
) |
|
|
(75 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
(280 |
) |
Other non-cash items |
|
|
(549 |
) |
|
|
(25 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
(461 |
) |
|
|
(487 |
) |
|
|
(147 |
) |
|
|
(33 |
) |
|
|
(15 |
) |
|
|
(13 |
) |
|
|
(4 |
) |
|
|
(121 |
) |
|
|
(1,871 |
) |
F - 78
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
|
|
Fiat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Magneti |
|
|
|
|
|
|
|
|
|
Business |
|
|
|
|
|
elimina- |
|
FIAT |
|
|
Auto |
|
Maserati |
|
Ferrari |
|
FPT |
|
CNH |
|
Iveco |
|
Marelli |
|
Teksid |
|
Comau |
|
Solutions |
|
Itedi |
|
tions |
|
Group |
|
|
(in millions of euros) |
Sector operating assets |
|
|
16,231 |
|
|
|
235 |
|
|
|
936 |
|
|
|
2,362 |
|
|
|
17,860 |
|
|
|
7,510 |
|
|
|
2,363 |
|
|
|
671 |
|
|
|
1,091 |
|
|
|
341 |
|
|
|
186 |
|
|
|
915 |
|
|
|
50,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
1,780 |
|
|
|
1 |
|
|
|
3 |
|
|
|
6 |
|
|
|
385 |
|
|
|
346 |
|
|
|
13 |
|
|
|
13 |
|
|
|
5 |
|
|
|
1 |
|
|
|
12 |
|
|
|
(475 |
) |
|
|
2,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated Group assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from financing
activities, Non-current Other
receivables and Securities of
industrial companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents,
Current securities and Other
financial assets of
industrial companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unallocated Group assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sector operating liabilities |
|
|
15,638 |
|
|
|
270 |
|
|
|
625 |
|
|
|
1,255 |
|
|
|
14,483 |
|
|
|
6,213 |
|
|
|
1,620 |
|
|
|
419 |
|
|
|
828 |
|
|
|
437 |
|
|
|
161 |
|
|
|
719 |
|
|
|
42,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision on equity investments |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated Group liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
934 |
|
Debt and Other financial
liabilities of industrial
companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unallocated Group liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
|
|
Fiat |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Magneti |
|
|
|
|
|
|
|
|
|
Business |
|
|
|
|
|
elimina- |
|
FIAT |
|
|
Auto |
|
Maserati |
|
Ferrari |
|
FPT |
|
CNH |
|
Iveco |
|
Marelli |
|
Teksid |
|
Comau |
|
Solutions |
|
Itedi |
|
tions |
|
Group |
|
|
(in millions of euros) |
Sector operating assets |
|
|
15,967 |
|
|
|
312 |
|
|
|
837 |
|
|
|
|
|
|
|
15,224 |
|
|
|
9,797 |
|
|
|
2,228 |
|
|
|
576 |
|
|
|
1,042 |
|
|
|
636 |
|
|
|
161 |
|
|
|
1,784 |
|
|
|
48,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
2,036 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
338 |
|
|
|
194 |
|
|
|
23 |
|
|
|
13 |
|
|
|
5 |
|
|
|
11 |
|
|
|
8 |
|
|
|
1,165 |
|
|
|
3,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated Group assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from financing
activities, Non-current Other
receivables and Securities of
industrial companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents,
Current securities and Other
financial assets of
industrial companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unallocated Group assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sector operating liabilities |
|
|
15,269 |
|
|
|
302 |
|
|
|
428 |
|
|
|
|
|
|
|
12,128 |
|
|
|
8,342 |
|
|
|
1,371 |
|
|
|
389 |
|
|
|
823 |
|
|
|
604 |
|
|
|
165 |
|
|
|
1,440 |
|
|
|
41,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision on equity investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated Group liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
940 |
|
Debt and Other financial
liabilities of industrial
companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unallocated Group liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 79
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(ii) Geographical segment information
Geographical segment information on Net Revenues is based on the geographical location of the
Groups customers.
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Italy |
|
|
13,078 |
|
|
|
14,903 |
|
Europe (Italy excluded) |
|
|
18,518 |
|
|
|
17,646 |
|
North America |
|
|
6,048 |
|
|
|
6,020 |
|
Mercosur |
|
|
4,364 |
|
|
|
3,195 |
|
Other areas |
|
|
4,536 |
|
|
|
3,873 |
|
|
|
|
|
|
|
|
|
|
Net revenues of the Group |
|
|
46,544 |
|
|
|
45,637 |
|
|
|
|
|
|
|
|
|
|
The total amount of assets and capital expenditure by geographical segment are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Capital |
|
|
|
|
|
Capital |
|
|
Assets |
|
expenditure |
|
Assets |
|
expenditure |
|
|
(in millions of euros) |
Italy |
|
|
24,737 |
|
|
|
2,075 |
|
|
|
26,147 |
|
|
|
2,047 |
|
Europe (Italy excluded) |
|
|
15,908 |
|
|
|
1,011 |
|
|
|
18,516 |
|
|
|
919 |
|
North America |
|
|
15,599 |
|
|
|
165 |
|
|
|
13,043 |
|
|
|
202 |
|
Mercosur |
|
|
4,085 |
|
|
|
164 |
|
|
|
3,042 |
|
|
|
124 |
|
Other areas |
|
|
2,125 |
|
|
|
105 |
|
|
|
1,774 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
62,454 |
|
|
|
3,520 |
|
|
|
62,522 |
|
|
|
3,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34) Information on financial risks
The Group is exposed to financial risks connected with its operations:
|
§ |
|
credit risk, regarding its normal business relations with customers and dealers, and
its financing activities; |
|
|
§ |
|
liquidity risk, with particular reference to the availability of funds and access to
the credit market and to financial instruments in general; |
|
|
§ |
|
market risk (principally relating to exchange rates, interest rates), since the
Group operates at an international level in different currencies and uses financial
instruments which generate interest. |
As described in the section Risk management, the Fiat Group constantly monitors the
financial risks to which it is exposed, in order to detect those risks in advance and take the
necessary action to mitigate them.
The following section provides qualitative and quantitative disclosures on the effect that
these risks may have upon the Group.
The quantitative data reported in the following do not have any value of a prospective nature, in
particular the sensitivity analysis on market risks, is unable to reflect the complexity of the
market and its related reaction which may result from every change which may occur.
F - 80
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(i) Credit risk
The maximum credit risk to which the Group is theoretically exposed at December 31, 2005 is
represented by the carrying amounts stated for financial assets in the balance sheet and the
nominal value of the guarantees provided on liabilities or commitments to third parties as
discussed in Note 32.
Dealers and final customers are subject to specific assessments of their creditworthiness
under a detailed scoring system; in addition to carrying out this screening process, the Group also
obtains financial and non-financial guarantees for credit granted for the sale of cars, commercial
vehicles and agricultural and construction equipment. These guarantees are further strengthened by
reserve of title clauses on financed vehicle sales to the sales network and on vehicles assigned
under finance leasing agreements.
Of Receivables from financing activities amounting to 15,973 million euros at December 31,
2005, balances totalling 205 million euros have been written down on an individual basis; of the
remainder, balances totalling 226 million euros are past due up to one month, while balances
totalling 408 million euros are past due beyond one month. In the event of instalment payments,
even if only one instalment is overdue, the whole amount of the receivable is classified as
overdue.
Of Trade receivables and Other receivables totalling 8,053 million euros at December 31, 2005,
balances totalling 119 million euros have been written down on an individual basis; of the
remainder, balances totalling 400 million euros are past due up to one month, while balances
totalling 613 million euros are past due beyond one month.
Balances which are objectively uncollectible either in part or for the whole amount, are
written down on a specific basis if they are individually significant. The amount of the write-down
takes into account an estimate of the recoverable cash flows and the date of receipt, the costs of
recovery and the fair value of any guarantees received. General provisions are made for receivables
which are not written down on a specific basis, determined on the basis of historical experience
and statistical information.
(ii) Liquidity risk
Liquidity risk arises if the Group is unable to obtain under economic conditions the funds
needed to carry out its operations.
The two main factors that determine the Groups liquidity situation are on one side the funds
generated or absorbed by operating and investing activities and on the other the term of debt and
its renewal conditions or the liquidity of funds employed.
As described in the Risk management section, the Group has adopted a series of policies and
procedures whose purpose is to optimise the management of funds and to reduce the liquidity risk,
as follows:
|
§ |
|
centralizing the management of receipts and payments, where it may be economical in
the context of the local civil, currency and fiscal regulations of the countries in
which the Group is present; |
|
|
§ |
|
maintaining an adequate level of available liquidity; |
|
|
§ |
|
diversifying the means by which funds are obtained and maintaining a continuous and
active presence on the capital markets; |
|
|
§ |
|
obtaining adequate credit lines; and |
|
|
§ |
|
monitoring future liquidity on the basis of business planning. |
F - 81
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Details as to the repayment structure of the Groups financial assets and debt are provided in
Notes 19 and 28, which are entitled respectively Current receivables and Debt.
Management believes that the funds and credit lines currently available, in addition to those
funds that will be generated from operating and funding activities, will enable the Group to
satisfy its requirements resulting from its investing activities and its working capital needs and
to fulfil its obligations to repay its debts at their natural due date.
(iii) Exchange rate risk
The group is exposed to risk resulting from changes in exchange rates, which can affect its
result and its equity. In particular:
|
§ |
|
Where a Group company incurs costs in a currency different from that of its
revenues, any change in exchange rates can affect the operating result of that company. |
|
|
|
|
In 2005, the total trade flows exposed to exchange rate risk amounted to the equivalent
of approximately 14% of the Groups turnover. |
|
|
|
|
The principal exchange rates to which the Group is exposed are the following: |
|
|
|
EUR/USD, relating to sales in dollars made by Italian companies (in
particular Ferrari and Maserati) to the North American market and to other markets
in which the dollar is the trading currency, and to the production and purchases
of the CNH Sector in the euro area; |
|
|
|
|
EUR/GBP, principally in relation to sales by Fiat Auto and Iveco on
the UK market; |
|
|
|
|
EUR/PLN, relating to local costs incurred in Poland regarding
products sold in the euro area; |
|
|
|
|
USD/BRL and EUR/BRL, relating to Brazilian manufacturing operations
and the related import and export flows, for which the company is a net exporter
in US dollars. |
|
|
|
The trading flows exposed to changes in these exchange rates amounted in 2005 to about
75% of the total exchange rate risk from trading transactions. |
|
|
|
|
Other significant exposures regard the exchange rates EUR/CHF, EUR/TRY, USD/CAD
USD/AUD, USD/GBP and USD/JPY. None of these exposures, taken individually, exceeded 5%
of the Groups total transaction exchange risk exposure in 2005. |
|
|
|
|
It is the Groups policy to use derivative financial instruments to hedge a certain
percentage, on average between 55% and 85%, of the trading transaction exchange risk
exposure forecast for the coming 12 months (including such risk beyond that date where
it is believed to be appropriate in relation to the characteristics of the business)
and to hedge completely the exposure resulting from certain contractual commitments. |
|
|
§ |
|
Group companies may find themselves with trade receivables or payables denominated
in a currency different from the money of account of the company itself. In addition,
in a limited number of cases, it may be convenient from an economic point of view or it
may be required under local market conditions, for companies to obtain finance or use
funds in a currency different from the money of account. Changes in exchange rates may
result in exchange gains or losses arising from these situations. |
|
|
§ |
|
It is the Groups policy to hedge fully, whenever possible, the exposure resulting
from receivables, payables and securities denominated in foreign currencies different
from the companys money of account. |
|
|
§ |
|
Certain of the Groups subsidiaries are located in countries which are not members
of the European monetary union, in particular the United States, Canada, United
Kingdom, |
F - 82
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
Switzerland, Brazil, Poland, Turkey, India and China. As the Groups reference currency is the Euro,
the income statements of those countries are converted into euros using the average
exchange rate for the period, and while revenues and margins are unchanged in local
currency, changes in exchange rates may lead to effects on the converted balances of
revenues, costs and the result in Euros. |
|
|
§ |
|
The assets and liabilities of consolidated companies whose money of account is
different from the euro may acquire converted values in euros which differ as a
function of the variations in exchange rates. The effects of these changes are
recognized directly in the item Cumulative translation differences included in
stockholders equity (see Note 25). |
The Group monitors its principal exposure to conversion exchange risk, although there was no
specific hedging in this respect at the balance sheet date.
Sensitivity analysis
The potential loss in fair value of derivative financial instruments held by the Group at
December 31, 2005 for managing exchange risk (currency swaps/forward, currency options and interest
rate and currency swaps), which would arise in the case of a hypothetical and unfavourable change
of 10% in the exchange rates of the major foreign currencies with the euro, amounts to
approximately 273 million euros. Receivables, payables and future trade flows for which detailed
hedging operations have been carried out are not included in this analysis. It is reasonable to
expect that future changes in exchange rates would produce an opposite economic impact, of an equal
or higher amount, on the underlying hedged transactions.
This analysis assumes that, in general terms, an unfavourable and instantaneous fluctuation of
10% in exchange rates compared with the euro. For currency options sensitivity analysis models have
been employed which presuppose unchanged market volatility at the end of the year.
(iv) Interest rate risk
The manufacturing companies and treasuries of the Group make use of external funds obtained in
the form of financing and invest in monetary and financial market instruments. In addition, Group
companies make sales of receivables resulting from their trading activities on a continuing basis.
Changes in market interest rates can affect the cost of the various forms of financing, including
the sale of receivables, or the return on investments, and the employment of funds, causing an
impact on the level of net financial expenses incurred by the Group.
In addition, the financial services companies provide loans (mainly to customers and dealers),
financing themselves using various forms of direct debt or asset-backed financing (e.g.
securitisation of receivables). Where the characteristics of the variability of the interest rate
applied to loans granted differ from those of the variability of the cost of the financing
obtained, changes in the current level of interest rates can influence the operating result of
those companies and the Group as a whole.
In order to manage these risks, the Group uses interest rate derivative financial instruments,
mainly interest rate swaps and forward rate agreements, with the object of mitigating the
variability of interest rates on the net result, ensuring the correct interest rate matching for
financial services companies.
F - 83
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Sensitivity analysis
In assessing the potential impact of changes in interest rates, the Group separates out fixed
rate financial instruments (for which the impact is assessed in terms of fair value) from floating
rate financial instruments (for which the impact is assessed in terms of cash flows).
The fixed rate financial instruments used by the Group consist principally of part of the
portfolio of the financial services companies (basically customer financing and financial leases)
and part of debt (including subsidised loans and bonds).
The potential loss in fair value of fixed rate financial instruments (including the effect of
interest rate derivative financial instruments) held at December 31, 2005, resulting from a
hypothetical, unfavourable and instantaneous change of 10% in market interest rates, would have
been approximately 33 million euros.
Floating rate financial instruments include principally cash and cash equivalents, loans
provided by the financial services companies to the sales network and part of debt. The sensitivity
analysis considers also the effect of the sale of receivables.
A hypothetical, unfavourable and instantaneous change of 10% in short-term interest rates at
December 31, 2005, applied to floating rate financial assets and liabilities, operations for the
sale of receivables and derivatives financial instruments, would have caused increased net expenses
before taxes, on an annual basis, of approximately 17 million euros.
This analysis is based on the assumption that there is a general and instantaneous change of
10% in interest rates across homogeneous categories. A homogeneous category is defined on the basis
of the currency in which the financial assets and liabilities are denominated.
(35) Other information
The income statement includes personnel costs for 6,158 million euros in 2005 (6,167 million
euros in 2004).
An analysis of the average number of employees by category is provided as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
Average number of employees |
|
|
|
|
|
|
|
|
Managers |
|
|
2,595 |
|
|
|
2,644 |
|
White-collar |
|
|
54,489 |
|
|
|
53,783 |
|
Blue-collar |
|
|
112,987 |
|
|
|
105,589 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
170,071 |
|
|
|
162,016 |
|
|
|
|
|
|
|
|
|
|
The aggregate expense incurred in 2005 and accrued at year end for the compensation of
key management personnel of the Group amounts to approximately 12 million euros (approximately 12
million euros in 2004). This amount is inclusive of the following:
|
§ |
|
the provision charged by the Group in respect of mandatory severance indemnity,
amounting to 0.7 million euros (0.7 million euros in 2004); |
|
|
§ |
|
the amount contributed by the Fiat Group to a defined contribution fund, amounting
to 0.3 million euros in 2005 (0.3 million euros in 2004); |
F - 84
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
§ |
|
the amount contributed by the Fiat Group to a special defined benefit plan for
certain senior executives (the Individual Top Hat Scheme) amounting to 0.9 million
euros in 2005 (0.6 million euros in 2004). |
|
(36) |
|
Translation of financial statements denominated in a currency other
than the euro |
The principal exchange rates used in 2005 and 2004 to translate into euros the financial
statements prepared in currencies other than the euros were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
2004 |
|
|
|
|
|
Average |
|
At December 31, 2005 |
|
Average |
|
At December 31, 2004 |
U.S. dollar |
|
|
1.244 |
|
|
|
1.180 |
|
|
|
1.244 |
|
|
|
1.362 |
|
Pound sterling |
|
|
0.684 |
|
|
|
0.685 |
|
|
|
0.679 |
|
|
|
0.705 |
|
Swiss franc |
|
|
1.548 |
|
|
|
1.555 |
|
|
|
1.544 |
|
|
|
1.543 |
|
Polish zloty |
|
|
4.023 |
|
|
|
3.860 |
|
|
|
4.526 |
|
|
|
4.084 |
|
Brazilian real |
|
|
3.027 |
|
|
|
2.761 |
|
|
|
3.635 |
|
|
|
3.615 |
|
Argentine peso |
|
|
3.637 |
|
|
|
3.589 |
|
|
|
3.664 |
|
|
|
4.045 |
|
Amounts stated in dollars refer to U.S. dollars and, unless otherwise indicated, have
been translated from euros at an assumed rate of U.S. dollars 1.1842 = euro 1, which is the noon
buying rate in the City of New York for cable transfers in foreign currencies as announced by the
Federal Reserve Bank of New York for customs purposes on December 31, 2005. The translation into
U.S. dollars has been made solely for convenience and should not be construed as representations
that the euro amounts actually could have been converted into U.S. dollars at the rate indicated.
(37) Emoluments to directors and statutory auditors
The fees of the Directors and Statutory Auditors of Fiat S.p.A. for carrying out their
respective functions, including those in other consolidated companies, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
Fiat S.p.A. |
|
|
Subsidiaries |
|
|
Total |
|
|
Fiat S.p.A. |
|
|
Subsidiaries |
|
|
Total |
|
|
|
(in thousands of euros) |
|
Directors |
|
|
8,633 |
|
|
|
7,640 |
|
|
|
16,273 |
|
|
|
5,128 |
|
|
|
7,167 |
|
|
|
12,295 |
|
Statutory Auditors |
|
|
147 |
|
|
|
30 |
|
|
|
177 |
|
|
|
147 |
|
|
|
30 |
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Emoluments |
|
|
8,780 |
|
|
|
7,670 |
|
|
|
16,450 |
|
|
|
5,275 |
|
|
|
7,197 |
|
|
|
12,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 85
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
(38) |
|
Significant differences between IFRS and United States generally accepted
accounting principles (US GAAP) |
The Groups consolidated financial statements are prepared in accordance with International
Financial Reporting Standards, as adopted by the European Union (hereinafter also referred to
collectively as IFRS) and as described above in the note Significant accounting policies, which
differ in certain significant respects from accounting principles generally accepted in the United
States of America (US GAAP).
Prior to 2005, the Fiat Group prepared its consolidated financial statements in accordance
with Italian GAAP and provided reconciliations of the net result and stockholders equity to US
GAAP. As of January 1, 2005, the Group adopted IFRS as its primary reporting GAAP with a transition
date of January 1, 2004. The SEC permits foreign private issuers that are IFRS first-time adopters
to file only one year of comparative information in the 2005 annual report on Form 20-F, as
compared to the generally required two years.
As a result of adopting IFRS, a number of accounting policy decision have been made, some of
which were transitional decisions, relevant for determining the opening balance under IFRS. Changes
in accounting policies and transitional arrangements upon the adoption of IFRS are disclosed in
Note 39 to the consolidated financial statements.
The effects of the application of US GAAP on net income and stockholders equity are set out
as follows:
Reconciliation of net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
Reference |
|
2005 |
|
2005 |
|
2004 |
|
|
|
|
|
|
(in millions |
|
|
|
|
|
|
|
|
of US |
|
|
|
|
|
|
|
|
Dollars) |
|
(in millions |
|
|
|
|
|
|
(note 36) |
|
of euros) |
Net income (loss) in accordance with IFRS |
|
|
|
|
|
|
1,682 |
|
|
|
1,420 |
|
|
|
(1,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments required to conform with US GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expensing of development costs recognized as
intangible assets, net |
|
|
(b |
) |
|
|
(97 |
) |
|
|
(82 |
) |
|
|
(395 |
) |
Accounting for employee benefits |
|
|
(d |
) |
|
|
(308 |
) |
|
|
(260 |
) |
|
|
(138 |
) |
Impairment of property, plant and equipment |
|
|
(e |
) |
|
|
(67 |
) |
|
|
(57 |
) |
|
|
72 |
|
Restructuring provisions |
|
|
(f |
) |
|
|
131 |
|
|
|
111 |
|
|
|
(62 |
) |
Securitization of financial assets |
|
|
(g |
) |
|
|
(19 |
) |
|
|
(16 |
) |
|
|
2 |
|
Sale and leaseback transactions |
|
|
(h |
) |
|
|
(151 |
) |
|
|
(127 |
) |
|
|
(4 |
) |
Stock-based compensation |
|
|
(i |
) |
|
|
19 |
|
|
|
16 |
|
|
|
(3 |
) |
Extinguishment of Mandatory Convertible Facility |
|
|
(j |
) |
|
|
(1,016 |
) |
|
|
(858 |
) |
|
|
|
|
Other accounting differences |
|
|
(k |
) |
|
|
(155 |
) |
|
|
(131 |
) |
|
|
(25 |
) |
Deferred income taxes |
|
|
(l |
) |
|
|
155 |
|
|
|
131 |
|
|
|
74 |
|
Minority interest |
|
|
(m |
) |
|
|
(26 |
) |
|
|
(22 |
) |
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) in accordance with US GAAP |
|
|
|
|
|
|
148 |
|
|
|
125 |
|
|
|
(2,100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations in
accordance with US GAAP |
|
|
|
|
|
|
176 |
|
|
|
149 |
|
|
|
(2,088 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations in
accordance with US GAAP |
|
|
(n |
) |
|
|
(28 |
) |
|
|
(24 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) in accordance with US GAAP |
|
|
|
|
|
|
148 |
|
|
|
125 |
|
|
|
(2,100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 86
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
Reference |
|
2005 |
|
2005 |
|
2004 |
|
|
|
|
|
|
(in |
|
(in euros) |
|
|
|
|
|
|
US Dollars ) |
|
|
|
|
|
|
|
|
(note 36) |
|
|
Earnings per Ordinary and Preference share amounts in accordance
with US GAAP: |
|
|
(a |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) from continuing operations per
Ordinary and Preference share |
|
|
|
|
|
|
0.17 |
|
|
|
0.14 |
|
|
|
(2.14 |
) |
Basic and diluted income (loss) from discontinued operations per
Ordinary and Preference share |
|
|
|
|
|
|
(0.03 |
) |
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per Ordinary and Preference share |
|
|
|
|
|
|
0.14 |
|
|
|
0.12 |
|
|
|
(2.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Savings share amounts in accordance with US GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) from continuing operations per
Saving share |
|
|
|
|
|
|
0.17 |
|
|
|
0.14 |
|
|
|
(2.14 |
) |
Basic and diluted income (loss) from discontinued operations per
Saving share |
|
|
|
|
|
|
(0.03 |
) |
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per Savings share |
|
|
|
|
|
|
0.14 |
|
|
|
0.12 |
|
|
|
(2.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of stockholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
At December 31, |
|
|
Reference |
|
2005 |
|
2005 |
|
2004 |
|
|
|
|
|
|
(in millions of US |
|
(in millions of euros) |
|
|
|
|
|
|
Dollars) |
|
|
|
|
|
|
|
|
(note 36) |
|
|
Stockholders equity in accordance with IFRS |
|
|
|
|
|
|
11,147 |
|
|
|
9,413 |
|
|
|
4,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments required to conform with US GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expensing of development costs recognized as
intangible assets, net |
|
|
(b |
) |
|
|
(3,084 |
) |
|
|
(2,604 |
) |
|
|
(2,489 |
) |
Accounting for goodwill |
|
|
(c |
) |
|
|
549 |
|
|
|
464 |
|
|
|
487 |
|
Accounting for employee benefits |
|
|
(d |
) |
|
|
182 |
|
|
|
154 |
|
|
|
363 |
|
Impairment of property, plant and equipment |
|
|
(e |
) |
|
|
212 |
|
|
|
179 |
|
|
|
236 |
|
Restructuring provisions |
|
|
(f |
) |
|
|
199 |
|
|
|
168 |
|
|
|
34 |
|
Securitization of financial assets |
|
|
(g |
) |
|
|
60 |
|
|
|
51 |
|
|
|
76 |
|
Sale and leaseback transactions |
|
|
(h |
) |
|
|
(194 |
) |
|
|
(164 |
) |
|
|
(35 |
) |
Other accounting differences |
|
|
(k |
) |
|
|
(36 |
) |
|
|
(32 |
) |
|
|
65 |
|
Deferred income taxes |
|
|
(l |
) |
|
|
(230 |
) |
|
|
(194 |
) |
|
|
(295 |
) |
Minority interest |
|
|
(m |
) |
|
|
(854 |
) |
|
|
(721 |
) |
|
|
(652 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity in accordance with US GAAP |
|
|
|
|
|
|
7,951 |
|
|
|
6,714 |
|
|
|
2,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 87
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Changes in US GAAP stockholders equity for the years ended December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
earnings |
|
|
Cumulative |
|
|
Available |
|
|
Derivative |
|
|
Minimum |
|
|
|
|
|
|
|
|
|
Capital |
|
|
paid-in |
|
|
(deficit) and |
|
|
translation |
|
|
for-sale |
|
|
financial |
|
|
pension |
|
|
Treasury |
|
|
|
|
|
|
stock |
|
|
capital |
|
|
reserves |
|
|
adjustment |
|
|
securities |
|
|
instruments |
|
|
liability |
|
|
stock |
|
|
Total |
|
|
|
(in millions of euros) |
|
Balance at December
31, 2003 |
|
|
4,918 |
|
|
|
3,253 |
|
|
|
(789 |
) |
|
|
(2,005 |
) |
|
|
26 |
|
|
|
(20 |
) |
|
|
(416 |
) |
|
|
(32 |
) |
|
|
4,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
(2,100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,100 |
) |
Other comprehensive
income (loss), net
of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(128 |
) |
|
|
58 |
|
|
|
22 |
|
|
|
(39 |
) |
|
|
|
|
|
|
(87 |
) |
(Income) loss
reclassified to
earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,223 |
) |
Changes in treasury
stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2004 |
|
|
4,918 |
|
|
|
3,253 |
|
|
|
(2,889 |
) |
|
|
(2,133 |
) |
|
|
48 |
|
|
|
2 |
|
|
|
(455 |
) |
|
|
(26 |
) |
|
|
2,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital increase
from extinguishment
of Mandatory
Convertible
Facility |
|
|
1,459 |
|
|
|
1,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125 |
|
Other comprehensive
income (loss), net
of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
818 |
|
|
|
95 |
|
|
|
10 |
|
|
|
(10 |
) |
|
|
|
|
|
|
913 |
|
(Income) loss
reclassified to
earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
997 |
|
Changes in treasury
stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Balance at December
31, 2005 |
|
|
6,377 |
|
|
|
4,793 |
|
|
|
(2,762 |
) |
|
|
(1,315 |
) |
|
|
143 |
|
|
|
(29 |
) |
|
|
(465 |
) |
|
|
(28 |
) |
|
|
6,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 88
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Description of reconciling items
Comments on the above and other differences between the Groups accounting policies and
US GAAP are as follows:
(a) Earnings per share
The earnings per share amounts in accordance with US GAAP (basic and diluted) for each of the
years ended December 31, 2005 and 2004 have been calculated in accordance with the provisions of
SFAS No. 128 Earnings per Share (SFAS No. 128 and EPS, respectively), using the method for
two-class ordinary shares and participating securities, as prescribed therein. Under this method
both for the basic and the diluted earnings per share computation, net income (loss) remaining
after dividends allocated to ordinary, preference and savings shares was allocated equally to the
aggregate weighted average number of ordinary, preference and savings shares outstanding.
For the basic and diluted EPS calculation, no dividends were allocated to ordinary, preference
or saving shares in 2005 and 2004. The weighted average number of outstanding shares for basic and
diluted EPS are the same under IFRS and US GAAP. See Note 12 Earnings per share.
(b) Expensing of development costs recognized as intangible assets, net
Under IFRS, costs relating to development projects are recognized as intangible assets when
certain criteria are met as indicated in the note Significant accounting policies. Under US GAAP,
capitalization of development costs is prohibited, unless such costs pertain to specific elements
of internally developed computer software capitalized in accordance with SOP 81-1 Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use. As a result, all costs
incurred related to development projects that do not relate to internally developed computer
software and that have been capitalized under IFRS are expensed as incurred under US GAAP.
Amortization expenses, net result on disposal and impairment charges of previously capitalized
development costs recorded under IFRS have been reversed under US GAAP. In 2005, the Group
capitalized 656 million euros (753 million euros in 2004) of development costs, amortized 462
million euros (312 million euros in 2004) of previously capitalized development costs and recorded
impairment charges and net result on disposal of 112 million euros (46 million euros in 2004) that
were reversed under US GAAP.
(c) Accounting for goodwill
The Groups accounting policy related to accounting for goodwill under IFRS is described in
the note Significant accounting policies. These policies differ in certain respects from those
required under US GAAP. Furthermore, in the context of IFRS First-Time Adoption, the Group elected
not to apply IFRS 3 Business Combinations retrospectively to the business combinations that
occurred before January 1, 2004. As a consequence, goodwill arising on acquisitions that occurred
before the date of transition to IFRS has been retained at the previous Italian GAAP amounts,
subject to being tested for impairment at that date. Differences in accounting for goodwill are as
follows:
F - 89
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(c.i) Initial recognition and measurement of goodwill
Pursuant to the exemption available under IFRS 1, the Group elected not to restate the
carrying amount of goodwill arising from business combinations completed prior to January 1, 2004
from its previous balance under Italian GAAP.
Under Italian GAAP, goodwill on acquisitions through December 31, 1993 was accounted for as a
direct reduction of stockholders equity. Effective January 1, 1994, goodwill was recorded as an
intangible asset and amortized on a straight-line basis over its estimated period of
recoverability, not exceeding 20 years. Subsequent to the IFRS transition date, goodwill is no
longer amortized but rather tested for impairment at least annually.
Under US GAAP through December 31, 2001, goodwill was recorded as an intangible asset and
amortized to income on a straight-line basis over a period not exceeding 40 years. Upon adoption
of SFAS No.142 Goodwill and Other Intangible Assets (SFAS No. 142), the Group does not amortize
goodwill and other intangible assets with indefinite useful lives. This reconciling item also
includes other differences on goodwill recorded in purchase accounting subsequent to 1993 due to US
GAAP adjustments applicable to acquired companies.
The Groups goodwill previously charged to equity under Italian GAAP that has been reinstated
under US GAAP was 542 million euros at December 31, 2005 (538 million euros at December 31, 2004).
The stockholders equity reconciliation also reflects the difference in amortization periods before
the adoption of SFAS No. 142 and the reversal of goodwill amortization recorded in the Italian GAAP
consolidated financial statements until December 31, 2003 for an amount of 419 million euros at
December 31, 2005 (390 million euros at December 31, 2004).
Furthermore, the financial statements of the Case Group, which was acquired on November 12,
1999, were not included in the Fiat Group Italian GAAP consolidated financial statements at
December 31, 1999 on the basis that it would not have been practicable to obtain the necessary
information on a timely basis without disproportionate expense; accordingly, for Italian GAAP
purposes, the Case Group was consolidated and the related purchase accounting entries were recorded
effective January 1, 2000. Due to the above-mentioned exemption adopted in the IFRS First-Time
Adoption of IFRS 3, the Fiat Group did not restate the accounting for the Case acquisition. US GAAP
in effect at the acquisition date did not permit the exclusion of controlled companies from
consolidation unless control was considered to be temporary. Accordingly, for US GAAP purposes, the
net loss incurred by the Case Group from the date of acquisition to December 31, 1999 was included
in determining net income (loss) and stockholders equity of the Group in accordance with US GAAP
as of December 31, 1999. The stockholders equity reconciliation includes a negative adjustment of
31 million euros at December 31, 2005 (26 million euros at December 31, 2004) related to the effect
of this difference on the calculation of goodwill arising on the acquisition of the Case Group,
which was first recognized in the Italian GAAP consolidated financial statements on January 1,
2000.
(c.ii) Impairment of goodwill
Reconciling items related to impairment of goodwill arise based on differences in the initial
recognition and measurement of goodwill upon completion of a business combination as described
above and the impairment test itself. For IFRS, impairment testing is conducted by comparing the
carrying amount of a cash-generating unit to which goodwill is allocated to its recoverable amount,
which is measured by using the higher of the fair value less costs to sell or the value in use of
the
asset. For US GAAP, the impairment test is comprised of two steps. The initial step is
designed to identify potential goodwill impairment by comparing an estimate of the fair value of a
reporting unit to its carrying amount including goodwill. If the carrying amount exceeds the fair
value of the reporting unit, a second step is performed, which compares the implied fair value of
the applicable
F - 90
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
reporting units goodwill with the carrying amount of that goodwill, to measure the amount of
goodwill impairment, if any.
An analysis of the variations in the cumulative impairment charges recorded for US GAAP by
sector in 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on |
|
|
|
|
Effect on |
|
|
|
|
|
|
|
|
|
|
|
|
|
net |
|
Effect on |
|
|
stockholders |
|
Exchange |
|
|
|
|
|
|
|
|
|
income |
|
stockholders |
|
|
equity at |
|
rate |
|
|
|
|
|
|
|
|
|
(loss) for |
|
equity at |
Sector |
|
Jan. 1, 2005 |
|
differences |
|
Disposals |
|
Other |
|
2005 |
|
Dec. 31, 2005 |
|
|
(in millions of euros) |
Fiat Auto |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26 |
) |
Agricultural and
Construction Equipment |
|
|
(259 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(296 |
) |
Commercial Vehicles |
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
(42 |
) |
Components |
|
|
(186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(186 |
) |
Production Systems |
|
|
(158 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(172 |
) |
Metallurgical Products |
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44 |
) |
Services |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20 |
) |
Other companies |
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Group |
|
|
(793 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
(856 |
) |
Less: Impairment charges
recorded for IFRS |
|
|
378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total US GAAP adjustments |
|
|
(415 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(466 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
An analysis of the changes of the cumulative impairment charges recorded for US GAAP by
sector during 2004 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on |
|
|
|
|
Effect on |
|
|
|
|
|
|
|
|
|
|
|
|
|
net |
|
Effect on |
|
|
stockholders |
|
Exchange |
|
|
|
|
|
|
|
|
|
income |
|
stockholders |
|
|
equity at |
|
rate |
|
|
|
|
|
|
|
|
|
(loss) for |
|
equity at |
Sector |
|
Jan. 1, 2004 |
|
differences |
|
Disposals |
|
Other |
|
2004 |
|
Dec. 31, 2004 |
|
|
(in millions of euros) |
Fiat Auto |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26 |
) |
Agricultural and
Construction Equipment |
|
|
(277 |
) |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(259 |
) |
Commercial Vehicles |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20 |
) |
|
|
(30 |
) |
Components |
|
|
(186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(186 |
) |
Production Systems |
|
|
(162 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158 |
) |
Metallurgical Products |
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
(44 |
) |
Services |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20 |
) |
Other companies |
|
|
(71 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Group |
|
|
(791 |
) |
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
(25 |
) |
|
|
(793 |
) |
Less: Impairment charges
recorded for IFRS |
|
|
353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total US GAAP adjustments |
|
|
(438 |
) |
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(415 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 91
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(d) Employee benefits
Under IFRS, pension costs and similar obligations are accounted for in accordance with IAS 19
Employee Benefits. Under US GAAP, pension costs are accounted for in accordance with SFAS No. 87
Employers Accounting for Pensions, curtailments, settlements and certain other termination
benefits are accounted for in accordance with SFAS No. 88 Employers Accounting for Settlements
and Curtailments of Defined Benefits Other Than Pension Plans and Termination Benefits, and other
post-employment benefits are accounted for in accordance with SFAS No. 106 Employers Accounting
for Postretirement Benefits Other Than Pensions. Accounting for these plans under IFRS and US GAAP
differs in the following respects as it relates to the Groups plans:
(d.i) Italian severance indemnity (TFR)
The provisions of the Italian severance pay statute (TFR) require that the benefit an
employee has accrued for service to date is payable immediately upon separation. Accordingly, the
undiscounted value of that benefit payable exceeds the actuarial present value of that benefit
because payment is assumed to occur at the employees expected termination date. Under IFRS, the
TFR is accounted for as a defined benefit plan using the projected unit credit method. Under US
GAAP, in accordance with EITF 88-1, employers may choose to measure the vested benefit obligation
of such plans at either the actuarial present value of the vested benefits to which the employee is
entitled if the employee separates immediately (Approach 1) or the actuarial present value of the
vested benefits to which the employee is currently entitled but based on the employees expected
date of separation or retirement (Approach 2). Under US GAAP, the Group applies Approach 1 to
measure the vested benefit obligation for these Italian benefit plans, which differs from the
accounting treatment adopted under IFRS.
(d.ii) Actuarial gains and losses
Under IFRS, following the optional exemptions of IFRS 1 First-time Adoption, the Fiat Group
elected to recognize against equity all cumulative actuarial gains and losses arising from the
application of the projected unit credit method to pension and other defined benefit plans at
January 1, 2004. Under US GAAP, the IFRS impact on equity was reversed, and the actuarial gains and
losses existing at the IFRS transition date continue to be amortized over the employees remaining
service period.
(d.iii) Additional minimum liability
SFAS No. 87 requires the Group to recognize an additional minimum pension liability if the
accumulated benefit obligation exceeds the fair value of plan assets. The portion of the additional
minimum liability that corresponds to prior year service cost and the unamortized transition
obligation are debited to intangible assets and any remaining balance is recorded as a reduction to
other comprehensive income. The recognition of an additional minimum liability is not required
under IFRS.
(d.iv) Plan amendment and curtailments
Under IAS 19, the Group recognizes past service cost as an expense on a straight line basis
over the average period until the benefits become vested. To the extent that the benefits are
already vested immediately following the introduction of, or changes to, a defined benefit plan,
the Group recognizes past service costs immediately. Under US GAAP, immediate recognition of prior
service cost due to a retroactive plan amendment of a pension plan is permitted only if the
employer does not expect to obtain any future economic benefits from the amendment. For
postretirement benefits other than pensions, immediate recognition is not permitted.
F - 92
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Under IFRS, the Group recognizes gains or losses on a curtailment of a defined benefit plan
when the Group is demonstrably committed to make a material reduction in the number of employee
covered by the plan, or amend the terms of the plan such a material element of future service
by current employees will no longer qualify for benefits, or will qualify only for reduced
benefits. The curtailment gain or loss is comprised of any resulting change in the fair value of
plan assets and any related actuarial gains and losses and past service cost that had not been
previously recognized. Under US GAAP, curtailments are comprised of the proportionate amount of
unrecognized prior service cost and any gains or losses due to related changes in the projected
benefit obligation. If the curtailment will result in a loss, it is recognized in earnings when it
is probable that a curtailment will occur and the effects can be reasonably estimated. If the
curtailment will result in a gain, recognition is deferred until the related employees terminate or
the plan suspension or amendment is adopted.
During 2005 and 2004, the Fiat Group retroactively amended certain of its postretirement
benefit plans and pension plans. As a result of these plan amendments, the Group recognized gains
under IFRS of 106 million euros and 22 million euros in 2005 and 2004, respectively. Under US GAAP
these gains have been deferred and are amortized over the remaining life expectancy of plan
participants.
(e) Impairment of property, plant and equipment
The Groups accounting policy related to property, plant and equipment under IFRS is described
in the note Significant accounting policies.
While the triggering events under both IFRS and US GAAP that require an impairment test to be
performed on property, plant and equipment are the same, there is a difference in the impairment
test itself. Under IFRS an impairment loss is recognized when the recoverable amount of the asset
is less than its carrying amount. An assets recoverable amount is the higher of its fair value
less cost to sell and its value in use. The value in use calculation involves discounting the
expected future cash flows to be generated by the asset to their net present value. Under SFAS No.
144 Accounting for the Impairment or Disposal of Long Lived Assets, the impairment test for
long-lived assets is conducted in two steps. The first step is to compare the carrying amount to
undiscounted future cash flows expected from the use and eventual disposition of the asset. If the
carrying amount is higher than the sum of the undiscounted cash flows, the second step is to
calculate the impairment based on discounted cash flows.
In addition, under IFRS previously recorded impairment losses are reversed if a change in the
estimate of the assets recoverable amount indicates that the impairment no longer exists. Under US
GAAP, such reversals on assets held for use are prohibited. Differences arise due to the difference
in methodologies of IFRS and US GAAP, as explained above, as well as differences in the underlying
carrying amounts.
Impairment losses of property, plant and equipment, net of related depreciation expense on
different carrying values, were 179 million euros and 236 million euros lower under US GAAP than
under IFRS as of December 31, 2005 and 2004, respectively.
F - 93
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The following table summarizes the impact of the net impairment differences recognized under
US GAAP on the reconciliation of the consolidated net income and consolidated stockholders equity
by sector:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
Net income (loss) |
|
At December 31, |
Sector |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Fiat Auto |
|
|
(16 |
) |
|
|
(42 |
) |
|
|
105 |
|
|
|
121 |
|
Maserati |
|
|
(11 |
) |
|
|
46 |
|
|
|
35 |
|
|
|
46 |
|
Metallurgical Products |
|
|
(29 |
) |
|
|
68 |
|
|
|
39 |
|
|
|
68 |
|
Other companies |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Group |
|
|
(57 |
) |
|
|
72 |
|
|
|
179 |
|
|
|
236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f) Restructuring provisions
The Group from time to time puts into effect corporate reorganization and restructuring plans.
The principal difference between IFRS and US GAAP with respect to accruing for restructuring costs
is that IFRS places emphasis on the recognition of the costs of the exit plan as a whole, whereas
US GAAP requires that each type of cost is examined individually to determine when it may be
accrued. As it relates to the Groups restructuring plans, the principal difference in accounting
for restructuring costs relates to termination benefits paid pursuant to the Groups restructuring
plans.
Under IFRS, the Group applies the provision of IAS 37 Provisions, Contingent Liabilities and
Contingent Assets in order to assess restructuring liabilities at the balance sheet date. Under IAS
37, a provision for restructuring costs is recognized when the Group has a constructive obligation
to restructure.
Under US GAAP, termination benefits are recognized in the period in which a liability is
incurred, which depends on whether the termination costs relate to (i) contractual termination
benefits or special termination benefits accounted for under SFAS No. 88, (ii) an on-going
severance plan accounted for under SFAS No. 112 Employers Accounting for Post-employment
Benefits, or (iii) one-time termination benefits accounted for under SFAS No. 146 Accounting for
Costs Associated With Exit or Disposal Activities. The application of US GAAP often results in a
later recognition of restructuring costs for the Groups restructuring activities.
(g) Securitization of financial assets
Under IFRS, in accordance with SIC 12 Consolidation Special Purpose Entities, a Special Purpose
Entity (SPE) is consolidated when the substance of the relationship between an entity and the SPE
indicates that the SPE is controlled by the entity. In all of the Groups securitization
transactions, the subscription of the junior asset-backed securities by the Group entails its
control in substance over the SPE, which is consequently consolidated. Under US GAAP, the Group
follows SFAS No. 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (SFAS No. 140) and other related US GAAP guidance related to the
Groups securitization of financial assets and extinguishments of liabilities. The rules in SFAS
No. 140 have a more limited scope than SIC 12 and are therefore applied only when the assets
transferred are financial assets and the SPE is a Qualifying Special Purpose Entity; in these
cases, securitized portfolios are derecognized for US GAAP purposes. This reconciling item
principally includes gains arising from the securitization transactions on the retail portfolio of
receivables of financial services companies, realized under US GAAP and not yet realized under
IFRS. Additionally, in accounting periods subsequent to a securitization, the fair
value of beneficial interests in securitized financial assets that are classified as
available for sale is recorded within other comprehensive income under US GAAP in accordance
with SFAS No. 115 Accounting for Certain Investments in Debt and
Equity Securities.
F - 94
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(h) Sale and leaseback transactions
This difference relates principally to a sale and leaseback transaction entered
into during 2005. The events leading to this transaction are described below.
In 1998, the Group entered into a real estate sale-leaseback transaction. The Group determined
that the counterparty to the transaction Corso Marconi Immobilare (CMI), should be considered a
special purpose entity (SPE) and should be consolidated under IFRS and under US GAAP because the
majority owner of the SPE made only a nominal capital investment, the activities of the SPE were
virtually all on the Groups behalf, and the substantive risks and rewards of the SPE rested with
the Group. In 2005, the Group obtained legal ownership of the underlying properties of CMI and
entered into a sale and leaseback transaction with an entity in which the Group acquired an
insignificant equity interest. Under IFRS, the Group determined that the transaction qualified as a
sale and operating leaseback because substantially all risks and rewards of ownership were
transferred to the buyer and the transaction was established at fair value. Accordingly, a gain of
117 million euros was recognized under IFRS. Under US GAAP, sale and leaseback accounting for real
estate transactions is only permitted in certain limited circumstances as described in SFAS No. 98
Accounting for Leases. Because of the Groups retained equity interest in the buyer, under US
GAAP this transaction has been accounted for under the finance method, whereby the sale proceeds
have been reported as a financing obligation and the properties remain on the balance sheet. The
gain realized under IFRS has been deferred and the assets continue to be depreciated.
(i) Stock-based Compensation
The Groups accounting policies related to accounting for stock based-compensation under IFRS
are described in the note Significant accounting policies. These policies differ in certain
respects from those required under US GAAP, as further described below.
Under IFRS 2 Share-based Payment stock options plans are required to be recognized as an
expense based on the fair value of the equity instruments granted. The Group applied the
transitional provision provided by IFRS 2 and therefore applied this standard to all stock options
granted after November 7, 2002 and not yet vested at the effective date of the standard (January 1,
2005). No compensation expense was recognized for stock options granted prior to November 7, 2002.
Under US GAAP, the Group applies the intrinsic value based method of accounting for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25 Accounting for Stock
Issued to Employees (APB No. 25) and FIN 44
Accounting for Certain Transactions Involving Stock
Compensation, to all stock options, including those granted before
November 1, 2002. This line item comprises the difference in measurement of stock
options granted to employees.
During 2004 and 2005, certain employees forfeited their award due solely to termination of their
employment. As a consequence, the Group adjusted the compensation expense recorded in previous
periods, as required by APB No. 25.
F - 95
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(j) Extinguishment of Mandatory Convertible Facility
Under
IFRS, the Company
recognized an unusual financial gain of 858 million euros arising from the increase of
share capital on September 20, 2005 through the conversion of the Mandatory Convertible
Facility (see Notes 9, 25 and 28). The gain corresponds to the difference between the
subscription price of 10.28 euros per share and the market value of 7.337 euros per share
at the subscription date, net of issuance costs. Under IFRS, the Mandatory Convertible
Facility was considered a financial liability with a conversion feature that was considered
an embedded derivative that should be separated from the debt instrument at inception,
with subsequent changes in fair value to be recognized in the income statement. Due to
significant uncertainty about whether the positive fair value and gains of the embedded
derivative could actually be realized by the Group, the positive fair value adjustments
were not recognized over the life of the instrument. When the uncertainty surrounding
the ability to convert and realize the gains was resolved through actual conversion, an
858 million euro gain was recognized under IFRS. Under US GAAP, the embedded conversion
feature was not bifurcated pursuant to SFAS No. 133 Accounting for Derivative Instruments
and Hedging Activities, (as amended and interpreted), EITF Issue
No. 01-6 The Meaning
of Indexed to a Companys Own Stock and EITF
Issue No. 00-19 Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock. Because
no beneficial conversion feature existed immediately prior to conversion, the carrying amount
of the debt upon conversion was debited with a corresponding credit to common stock and
additional paid-in capital. That is, the conversion of the Mandatory Convertible Facility
pursuant to its original terms did not result in a gain on conversion of the facility,
and the difference between the carrying value of the Mandatory Convertible Facility, which
equals the gain recognized under IFRS, was recorded directly in equity. Accordingly, no
difference exists in stockholders equity between the IFRS and US GAAP as a result of this
instrument.
(k) Other accounting differences
Other adjustments to reconcile IFRS to US GAAP refer to differences that are not individually
significant for the Group and are therefore shown as a combined total. Other differences arose due
to the different treatment in the following matters:
(k.i)
Adjustment on equity investments
IFRS and US GAAP are similar in the applications of the equity method of accounting to
associated companies. These differences principally relate to accounting for goodwill recorded on
acquisition of an interest in the equity method investees, as described in note 38(c), as well as
IFRS US GAAP differences arising in the financial statements of the investees themselves. At
December 31, 2005, these differences resulted in a positive effect of 20 million euros on the
stockholders equity (141 million euros at December 31, 2004), a negative effect on net income of
157 million euros in 2005 and a positive effect of 11 million euros in 2004. The difference in 2005
net income results principally from the reversal of differences in the carrying value of the
Groups investment in Italenergia Bis S.p.A. (Italenergia) upon the sale of the Groups interest
in that company in 2005. The facts and circumstances giving rise to the sale and the resulting
difference in net income are described below.
As described more fully in note 3 to the consolidated financial statements at December 31,
2004, effective July 2001, Fiat, together with other industrial and financial partners, formed
Italenergia, a company that acquired control of the Italian energy companies Montedison S.p.A. and
Edison S.p.A. through tender offers. Fiats initial investment, representing a 38.6% stake in
Italenergia, was accounted for under the equity method under both IFRS and US GAAP. In 2002, Fiat
reduced its directly-held stake in Italenergia to 24.6% in a transaction that comprised, inter
alia, Fiats sale of a 14.0% stake in Italenergia to certain other stockholders of the company and
a related agreement between Fiat and Electricité de France (EDF) pursuant to which, among other
things, EDF granted Fiat the right to sell to EDF its remaining 24.6% interest in Italenergia in
March and April 2005 at a price of not less than 1,147 million (after deducting a premium of up to
127 million, payable only in the event the option was exercised) (the EDF Put). However, due to
the existence of certain put and call options and the constraints on the transferees ability to
pledge or exchange the transferred assets in the period from the sale through 2005, this
transaction did not qualify for sale accounting under IFRS or US GAAP. Accordingly, Fiat continued
to account for its 38.6% stake in Italenergia under the equity method under both IFRS and US GAAP
through December 31, 2004.
In December 2004, EDF initiated arbitration proceedings in respect of the EDF Put on the basis
of a claim that certain changes to Italian legislation had raised uncertainty regarding the nature
and extent of rights and interests that it would acquire under such Put Option Agreement; Fiat
contested these claims and communicated its intention to exercise the EDF Put in accordance with
its terms, which subsequently occurred in March 2005. Principally as a consequence of these events,
in the first quarter of 2005 Fiat determined that it was no longer in a position to exert
significant influence over the operations of the investee and, accordingly, ceased accounting for
its investment under the equity method. For 2005 financial reporting through the date of final
sale, under both IFRS and US GAAP the investment was accounted for under the cost method on the
basis of the carrying value as of December 31, 2004.
Following EDFs withdrawal with prejudice of the arbitration claim it had brought to challenge
the validity of the put, Fiat sold its entire interest in Italenergia to EDF in September 2005.
Under both IFRS and US GAAP, the gain on the sale of the 38.6% interest was recognized in 2005.
Under US GAAP, the gain was 150 million euros lower than under IFRS principally due to differences
in the accounting for goodwill in the investee.
F - 96
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(k.ii) Translation of financial statements of subsidiaries operating in highly inflationary
economies
The financial statements of subsidiaries operating in highly inflationary economies have been
adjusted in accordance with inflation accounting procedures (consistent with IAS 29 Financial
Reporting in Hyperinflationary Economies), calculating historical costs on the basis of indices
deemed representative of the real change in the purchasing power of the local currencies.
Consistent with this procedure, the financial statements are translated into the Groups reporting
currency at year-end exchange rates. Economies are defined as being highly inflationary when
cumulative inflation exceeds 100% over the latest three-year period. The Groups inflation
accounting policy and procedures differ from the US GAAP requirements of SFAS No. 52, Foreign
Currency Translation with respect to the translation of financial statements of entities operating
in highly inflationary economies. Under US GAAP, the translation of financial statements of
subsidiaries operating in highly inflationary economies is based on local currency financial
statements on a historical cost basis after reversing all adjustments made to take into account of
inflation. These financial statements are then translated into the Groups reporting currency by
applying historical exchange rates to non-monetary items and current exchange rates to monetary
items. All exchange adjustments arising in this remeasurement process are recorded in income.
As permitted by Item 18 of Form 20-F, foreign registrants that account for operations in
highly inflationary economies in a manner consistent with IAS 29 using the historical cost/constant
currency method, need not quantify the differences in translation methodology compared to US GAAP.
Nevertheless, where practicable, the Group has included the differences between accounting for
operations in highly inflationary economies using IFRS and US GAAP in the reconciliations of net
income (loss) and stockholders equity under this caption.
(k.iii) Capitalized interest on constructed or produced fixed assets
Under IFRS, the Group has elected to expense all borrowing costs that are directly
attributable to the acquisition, construction, or production of a qualifying asset. The Fiat Group
elected not to apply the alternative treatment, which is to capitalize borrowing costs arising on
qualifying assets. In accordance with FASB No. 34, interest costs (even if theoretical) are
capitalized as part of the cost of an asset that is constructed or produced for a companys own
use. The stockholders equity reconciliation includes a positive adjustment of 11 million euros at
December 31, 2005 (10 million euros at December 31, 2004) related to the effect of capitalization
of interest costs on constructed or produced fixed assets.
(k.iv) Discounting provisions
IAS 37 requires the amount of a provision to be determined as the present value of the cash
outflows expected to be required to settle the obligation using a pre-tax discount rate that
reflects current market assessments of the time value of money and those risks specific to the
liability that have not been reflected in the best estimate of the expenditure, except where the
effect of the time value of money is immaterial. Further, if there is a change in discount rates
the entire provision must be recalculated using the current discount rate. Except for asset
retirement obligations, US GAAP only permits a provision to be discounted where the amount of the
liability and the timing of payments are fixed or reliably determinable (consequently, discounting
under US GAAP is rare in practice).
F - 97
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(l) Accounting for deferred income taxes
The Groups policy for accounting for deferred income taxes under IFRS is described in the
note Significant accounting policies. This policy is similar to US GAAP, except for certain
aspects of the recognition and valuation of deferred tax assets and liabilities. The most
significant of such differences relates to the criterion applied in determining the valuation
allowance for deferred tax assets. Under the accounting policy applied in the Groups consolidated
financial statements, the recoverability of deferred tax assets is evaluated on the basis of
information relating to managements projected taxable income, tax planning strategies, if any, and
consideration of other information such as the carry-forward period of unused tax losses. Under
IFRS no valuation allowance is recorded for the portion of the deferred tax assets for which future
recovery is probable based on analysis of such information.
Under US GAAP, the need to record a valuation allowance is based on an assessment of the
relative impact of positive and negative evidence available, whereby objectively verifiable
evidence takes precedence over other forms of evidence.
During 2003, changes in Italian tax regulations led to the conclusion that a tax-planning
strategy, which was previously considered objectively verifiable positive evidence for the
recoverability of a portion of the deferred tax assets reported under US GAAP, was no longer
feasible. This did not impact the IFRS financial statements, in which recoverability was supported
by managements forward-looking plans and the indefinite carry-forward period of certain unused tax
losses. However the change in the Italian tax regulations, combined with the cumulative losses
incurred in recent years, resulted in an increase of 366 million euros in the valuation allowance
provided against deferred tax assets reported under US GAAP at December 31, 2003, since, under US
GAAP, more weight was given to the objectively verifiable negative evidence in the form of
cumulative losses incurred by the Group than the forms of positive evidence, which at that time
were mainly based on managements forward-looking plans.
The line item in the US GAAP reconciliation includes the effect of the above-mentioned
differences in accounting for deferred income taxes, which had the effect of reducing stockholders
equity for US GAAP purposes at December 31, 2005 and 2004 by
366 million euros and 366 million
euros respectively, and the net deferred tax effects, after providing a valuation allowance, on
other US GAAP reconciling items, as appropriate, which increased stockholders equity for US GAAP
at December 31, 2005 by 172 million euros (increase of 71 million euros at December 31, 2004). The
net deferred tax assets recognized on reconciling items at December 31, 2005 refer principally to
the tax effects of differences in accounting for employee benefits.
F - 98
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(m) Minority interest
IAS 1 requires minority interests to be included in the determination of the net result and
stockholders equity. Under US GAAP, minority interests are deducted in the determination of US
GAAP net result and excluded from stockholders equity. This line item also comprises the impact of
differences between IFRS and US GAAP on the minority interest in the net result and stockholders
equity as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
Net income (loss) |
|
At December 31, |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Deduction of IFRS minority interest |
|
|
(89 |
) |
|
|
(55 |
) |
|
|
(732 |
) |
|
|
(624 |
) |
Impact of differences between IFRS and
US GAAP on minority interest |
|
|
67 |
|
|
|
13 |
|
|
|
11 |
|
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(22 |
) |
|
|
(42 |
) |
|
|
(721 |
) |
|
|
(652 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(n) Discontinued operations
The criteria for recognizing non-current assets or disposal groups as held for sale are
similar under IFRS and US GAAP. However, certain divestments or planned divestments meet the
definition of a discontinued operation under US GAAP, but not under IFRS. Under IFRS, the
divestment must represent a separate major line of business or geographical area of operations,
whereas under US GAAP, a component of an entity can be classified as a discontinued operation. In
2005, the Groups divestment of Palazzo Grassi S.p.A. and its
planned divestment of a French
subsidiary (SBFM) qualified as discontinued operations under US GAAP but not under IFRS. The effect
of these differences is to reclassify -24 million euros and -12 million euros from income from
continuing operations under IFRS to income from discontinued operations under US GAAP in 2005 and
2004, respectively.
The income statement of the discontinued operations related to Palazzo Grassi, included in the
Other Sector, is as follows:
|
|
|
|
|
|
|
|
|
|
|
2005* |
|
2004 |
|
|
(in millions of euros) |
Amounts as reported under IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes |
|
|
|
|
|
|
(5 |
) |
Income taxes |
|
|
|
|
|
|
|
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) |
|
|
|
|
|
|
(5 |
) |
Gain on disposal, net of taxes |
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) on discontinued operations |
|
|
23 |
|
|
|
(5 |
) |
U.S. GAAP adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) on discontinued operations under U.S. GAAP |
|
|
23 |
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
(*) |
|
Since the transaction was effective January 1, 2005, there was no operating activity
related to Palazzo Grassi during 2005. |
At December 31, 2004, the total assets of Palazzo Grassi as reported under IFRS amounted
to 8 million euros.
F - 99
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The income statement of the discontinued operations related to SBFM, included in the
Metallurgical Products Sector is as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
Amounts as reported under IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues |
|
|
91 |
|
|
|
91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes |
|
|
(3 |
) |
|
|
(9 |
) |
Income taxes |
|
|
|
|
|
|
|
|
Minority interest |
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
Net Income (loss) |
|
|
(2 |
) |
|
|
(7 |
) |
Gain on disposal, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) on discontinued operations |
|
|
(2 |
) |
|
|
(7 |
) |
U.S. GAAP adjustments |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) on discontinued operations under U.S. GAAP |
|
|
(27 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
Moreover, in 2005 the Group accrued an amount of 20 million euros related to contingent
liabilities that were directly related to the disposal of entities classified as US GAAP
discontinued operations occurred in previous years. Accordingly, these adjustments have been
classified separately in the current period in discontinued operations under US GAAP. Under IFRS,
this adjustment was recorded within income from continuing operations because the entities had not
been classified as discontinued operations under IFRS.
The Group considers that none of the events of 2004 gives rise to the requirement to report
the results of operations as discontinued operations, as that term is defined in SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Asset (SFAS No. 144).
Supplementary disclosure
(i) Classification differences
Purchase accounting adjustments
In connection with the purchase price allocation relating to the Groups acquisition of the
Case Group in 1999, the Group did not recognize deferred tax assets relating to certain operating
loss carry-forwards of the Case Group because the Group did not believe it was probable that the
operating loss carry-forwards could be utilized. During 2004 and 2005, the likelihood of
realization of the tax benefits of these tax loss carry-forwards increased, resulting in the
recognition of the related deferred tax assets. Under IFRS, the recognition of these deferred tax
assets was recorded as deferred tax income of 121 million euros in 2004. In addition, the Group
reduced the carrying amount of goodwill to the amount that would have been recognized if the
deferred tax asset had been recognized on the acquisition date and recognized the reduction in the
carrying amount of the goodwill as an expense. Under US GAAP, the reduction of the valuation
allowance directly reduced the carrying value of goodwill in accordance with EITF Issue No. 93-7
Uncertainties Relating to Income Taxes in a Purchase Business Combination and SFAS No. 109
Accounting for Income Taxes.
F - 100
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Deferred income taxes:
As discussed in the Significant accounting policies note, the Group records net deferred tax
assets and liabilities as a separate line item in non-current assets and liabilities, respectively.
US GAAP requires deferred tax assets and liabilities to be classified as current or non-current on
the basis of the classification of the asset or liability to which they refer, unless they are not
directly associated with an asset or liability, in which case they should be classified according
to the date of their expected recovery or settlement.
Classification of liabilities
Under IFRS, a mixed basis of presentation has been used by the Group to present its current
and non-current assets and liabilities, as permitted by IAS 1. Under US GAAP, no such
accommodation exists. Consequently, liabilities that are presented in increasing order of
liquidity in the Groups IFRS balance sheet are required to be presented as current and non-current
under US GAAP.
(ii) Scope of consolidation
The Group accounts for its investment in the joint venture Fiat-GM Powertrain Polska S.P. ZOO
using the proportional consolidation method beginning from May 2005.
Under U.S. GAAP, investments in joint ventures are accounted for under the equity method. The
differences in accounting treatment between proportionate consolidation and the equity method of
accounting have no impact on the Groups consolidated stockholders equity or net income. Rather,
they relate solely to matters of classification and display. Item 17(vii) of Form 20-F permits the
omission of such differences in classification and display in the reconciliation to US GAAP
provided certain criteria have been met; however, certain amounts proportionately consolidated are
disclosed herein.
Condensed financial information relating to the Groups pro-rata interest in the joint venture
accounted for using the proportionate consolidation method is as follows:
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
|
(in millions of euros) |
Non-current assets |
|
|
149 |
|
Current assets |
|
|
73 |
|
Total assets |
|
|
222 |
|
Debt |
|
|
10 |
|
Other liabilities |
|
|
65 |
|
|
|
|
|
|
|
|
2005 |
|
|
(in millions of euros) |
Net sales |
|
|
117 |
|
Trading profit |
|
|
18 |
|
Net income |
|
|
17 |
|
F - 101
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Condensed cash flow information resulting from investees activities is summarized as follows:
|
|
|
|
|
|
|
2005 |
|
|
(in millions of euros) |
Cash flows from (used in) operating activities during the period: |
|
|
32 |
|
Cash flows from (used in) investments activities: |
|
|
(31 |
) |
Cash flows from (used in) financing activities: |
|
|
10 |
|
(iii) Intangible assets
The next table sets forth, for each of the five succeeding years, the estimated aggregate
amortization expense of intangible assets, excluding the amortization of development costs
capitalized for IFRS purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
|
(in millions of euros) |
Patents, concessions and licenses |
|
|
128 |
|
|
|
110 |
|
|
|
70 |
|
|
|
63 |
|
|
|
43 |
|
Other intangible assets |
|
|
35 |
|
|
|
27 |
|
|
|
19 |
|
|
|
11 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected amortization |
|
|
163 |
|
|
|
137 |
|
|
|
89 |
|
|
|
74 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(iv) Pension and Other Post Employment Benefits
SFAS No. 132 (Revised 2003) Employers Disclosure about Pensions and Other Postretirement
Benefits, requires additional disclosures regarding defined benefit pension plans and other defined
benefit postretirement plans. These disclosures are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other post- |
|
|
Pension benefits |
|
retirement benefits |
|
|
(in millions of euros) |
Employer contribution: |
|
|
|
|
|
|
|
|
2006 (expected) |
|
|
169 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
The following summarizes the cash flow related to the total benefits expected to be paid
from the plan or from the Groups assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other post- |
|
|
|
|
|
|
retirement benefits |
|
|
Pension benefits |
|
(including TFR) |
|
|
(in millions of euros) |
Expected benefit payments: |
|
|
|
|
|
|
|
|
2006 |
|
|
146 |
|
|
|
262 |
|
2007 |
|
|
151 |
|
|
|
256 |
|
2008 |
|
|
156 |
|
|
|
255 |
|
2009 |
|
|
159 |
|
|
|
261 |
|
2010 |
|
|
163 |
|
|
|
263 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
775 |
|
|
|
1,297 |
|
|
|
|
|
|
|
|
|
|
The aggregate projected benefit obligation, aggregate accumulated benefit obligation and
aggregate fair value of plan assets for pension plans with benefit obligation in excess of plan
assets were 2.6 billion euros, 2.4 billion euros and 1.7 billion euros, respectively, as of
December 31, 2005 and 2.2 billion euros, 2.1
F - 102
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
billion euros and 1.3 billion euros, respectively, as of December 31, 2004. Consequently,
accumulated other comprehensive income determined in accordance with US GAAP includes an amount of
-465 million euros at December 31, 2005 (-455 million euros at December 31, 2004) due to the
recognition of an additional minimum pension liability.
The expected long-term rate of return on plan assets shown in the note 26 reflects managements
expectations on long-term average rates of return on funds invested to provide for benefits
included in the projected benefit obligation. Beginning with the year ended December 31, 2005
valuations, the expected return is based on the outlook for inflation, fixed income returns and
equity returns, while also considering assets allocations and investments strategy, premiums for
active management to the extent asset classes are actively managed and plan expenses. Historical
return patterns and correlations, consensus return forecasts and other relevant financial factors
are analyzed to check for reasonability and appropriateness. Prior to this time assumptions were
based on surveys of large asset portfolio managers and peer group companies based on a combination
of past experience in the markets as well as future return expectations over the next ten years.
In May 2004, the FASB issued FSB No. 106-2, Accounting and Disclosure requirements related to
Medicare Prescription Drug, Improvement and Modernization Act of 2003. In accordance with the
provision of FSP No. 106-2 and the Medicare Act, the Group re-measured its related plans in 2004.
This resulted in a reduction in the accumulated postretirement benefit obligation for the subsidy
related to benefits attributed to past service of approximately 51 million euros. The Group has
elected to reflect the impact of the Medicare Act prospectively from the date of the change. The
subsidy resulted in a reduction in 2005 and 2004 net periodic postretirement benefit costs of
approximately 8 million euros. The Group as not incurred a reduction in current gross benefit
payments and expects to receive subsidy payments beginning in 2006.
(v) Restructuring provision
The Groups restructuring programs primarily relate to restructuring and rationalization
activities in the Fiat Auto, Agricultural and Construction Equipment, Commercial Vehicles,
Metallurgical Products, Components, Production Systems and Services Sectors. Management
periodically reassesses its estimate of remaining costs to be incurred for such programs and
adjusts the related reserves as appropriate. Provision is not made for future operating losses.
Changes in the IFRS restructuring reserves provided by the Group for the years ended December
31, 2005, may be summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange |
|
|
|
|
|
|
|
|
|
At December |
|
|
|
|
|
|
Changes in |
|
|
Utilization |
|
|
rate |
|
|
Other |
|
|
At December |
|
|
|
31, 2004 |
|
|
Additions |
|
|
Estimates |
|
|
/Reversals |
|
|
differences |
|
|
changes |
|
|
31, 2005 |
|
|
|
(in millions of euros) |
|
Headcount reduction |
|
|
289 |
|
|
|
276 |
|
|
|
(13 |
) |
|
|
(170 |
) |
|
|
|
|
|
|
40 |
|
|
|
422 |
|
Plant rationalization |
|
|
13 |
|
|
|
14 |
|
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
10 |
|
Other provisions |
|
|
45 |
|
|
|
88 |
|
|
|
|
|
|
|
(30 |
) |
|
|
3 |
|
|
|
(19 |
) |
|
|
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
347 |
|
|
|
378 |
|
|
|
(13 |
) |
|
|
(217 |
) |
|
|
3 |
|
|
|
21 |
|
|
|
519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The most significant restructuring activities may be summarized as follows:
|
§ |
|
An amount of 148 million euros was outstanding at December 31, 2004 for
headcount reduction costs under a new restructuring program. In 2005, an
amount of 62 million euros was utilized and an amount of 88 million euros was
accrued for further Sector headcount reduction costs in connection with the
downsizing of the central business |
F - 103
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
governance structures in Italy and in connection with restructuring plans of
certain companies outside Italy. |
|
|
|
Agricultural and Construction Equipment Sector: |
|
§ |
|
An amount of 27 million euros was provided at December 31, 2004 for
headcount reduction costs under new restructuring plans for the CNH Group. In
2005, an amount of 33 million euros was utilized and an amount of 80 million
euros attributable to the ongoing reorganization of activities and
restructuring process underway at certain production plants was accrued. |
|
|
|
Commercial vehicles Sector: |
|
§ |
|
An amount of 17 million euros was outstanding at December 31, 2004 for
headcount reduction reserve. In 2005, an amount of 10 million euros was
utilized and an amount of 63 million euros for further headcount reduction in
connection with the reorganization of the staff structures was accrued. |
|
§ |
|
Reserves of 55 million euros were outstanding at December 31, 2004 as
headcount reduction reserve relating to Magneti Marelli Motopropulsion in the
Components Sector. In 2005, an amount of 21 million euros was utilized and an
amount of 15 million euros was accrued as additions to the headcount
reduction reserve relating to certain minor companies in the Components
Sector. |
|
|
§ |
|
An amount of 14 million euros was accrued in 2005 as headcount reduction
reserve relating to Fiat Powertrain Technologies Sector in connection with
the Fiat GM Powertrain activities reorganization. |
The Group wrote off certain assets of the Fiat Auto, Commercial Vehicles, Components and
Production System Sectors in 2005 and 2004, relating to the restructuring programs of those years;
the amounts written off amounted to approximately 10 million euros and 84 million euros
respectively. As these write-offs were recorded as a direct reduction of the carrying value of the
related assets, they do not appear in the table above.
(vi) Securitization
The information that follows represents supplemental disclosure required under SFAS No. 140.
Receivables securitizations - The Group uses securitization to accelerate the receipt of cash
related to its receivables portfolio.
The Group funds a portion of its wholesale receivables by means of sales on a revolving basis
pursuant to several privately structured asset-backed commercial paper programs.
The Group securitizes part of its retail receivables as privately and publicly placed
asset-backed securities. These securitization transactions call for the sale without recourse of a
portfolio of receivables to Qualifying Special Purpose Entities (QSPE), which finance the
purchased assets by issuing medium term asset-backed notes.
Securitization of European Wholesale Receivables (Fiat Auto Sector) Fiat Auto funds a
portion of its European wholesale receivables by means of sales on a revolving basis pursuant to
securitization programs through several privately structured facilities, mainly consisting of
364-day facilities, renewable annually. Receivables sold under these programs totaled 8,649 million
euros and 7,268 million euros in 2005 and 2004, respectively.
F - 104
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The following table summarizes the gross cash flows of the above-mentioned wholesale
securitizations in 2004 and 2005:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
|
2005 |
|
At December 31, 2004 |
|
|
(in millions of euros) |
Proceeds from new wholesale securitization |
|
|
|
|
|
|
703 |
|
Proceeds from collections reinvested in revolving period securitization |
|
|
8,637 |
|
|
|
6,565 |
|
Repurchase of receivables |
|
|
12 |
|
|
|
|
|
At December 31, 2005, wholesale receivables outstanding under these facilities amounted
to 1,712 million euros (1,605 million euros at December 31, 2004), including retained interests of
258 million euros (256 million euros at December 31, 2004). The retained interests provide limited
first loss protection to investors and are recorded, under US GAAP, at cost, which approximates
fair value due to the short-term nature of the receivables. The Fiat Group also services the sold
portfolios during the life of the transaction.
Securitization of Wholesale Receivables (Agricultural and Construction Equipment Sector CNH)
- CNH sells eligible receivables on a revolving basis to privately and publicly structured
securitization facilities. The receivables are initially sold to wholly owned bankruptcy-remote
special purpose entities (SPE), where required by bankruptcy laws, which are consolidated by CNH,
but legally isolate the receivables from the creditors of CNH. In turn, these subsidiaries
establish separate trusts to which the receivables are transferred in exchange for proceeds from
debt issued by the trusts. Each trust qualifies as a QSPE under SFAS No. 140, and accordingly is
not consolidated by CNH under US GAAP. These transactions are utilized as an alternative to the
issuance of debt and allow CNH to realize a lower cost of funds due to the asset-backed nature of
the receivables and the credit enhancements offered to investors.
The facilities consist of a master trust facility in the US, Canada and Australia. The U.S
master trust facility consists of the following: $521 million term senior and subordinated
asset-backed notes with a three year maturity issued in June 2003; $750 million term senior and
subordinated asset-backed notes issued with a three year maturity issued in June 2005 and a 364-day
$700 million conduit facility that is renewable annually (September 2006) at the sole discretion of
the purchasers. The Canadian master trust facility consists of the following: C$162 million term
senior and subordinated asset-backed notes with a two year maturity issued in July 2004; C$189
million term senior and subordinated asset-backed notes with a three year maturity issued in July
2004 and a 364-day C$250 million conduit facility that is renewable annually (August 2006) at the
sole discretion of the purchaser. The Australian facility consists of a 364-day, A$165 million
conduit facility that is renewable annually (May 2006) at the sole discretion of the purchasers.
At December 31, 2005, $2 billion, C$445 million and A$108 million were outstanding under these
facilities, consisting of $2.4 billion, C$569 million and A$149 million of wholesale receivables
sold less CNHs retained undivided interests of $452 million, C$124 million and A$41 million. At
December 31, 2004, $1.5 billion was outstanding under the US facility, consisting of $1.9 billion
of wholesale receivables sold less CNHs retained undivided interest of $330 million. Under the
Canadian facility at December 31, 2004, C$405 million was outstanding, consisting of C$507 million
of wholesale receivables sold less CNHs retained undivided interest of C$102 million. Under the
Australian facility at December 31, 2004 A$90 million was outstanding, consisting of A$ 128 million
of wholesale receivables sold less CNHs retained undivided interests of A$38 million. The retained
undivided interest provides recourse to investors in the event of default and, under US GAAP, is
recorded at cost, which approximates fair value due to the short-term nature of the receivables.
The retained undivided interests represent collateralized wholesale receivables that provide
recourse to investors in the event of default. In addition, CNH retains other interests in the sold
receivables including interest-only strips and spread accounts.
F - 105
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The cash flows between CNH and the facilities for the years ended December 31, 2005 and 2004
included:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of US Dollars) |
Proceeds from new securitizations |
|
|
630 |
|
|
|
874 |
|
Repurchase of receivables |
|
|
183 |
|
|
|
605 |
|
Proceeds from collections reinvested in the facilities |
|
|
6,824 |
|
|
|
6,618 |
|
In June 2005, CNH entered into a wholesale securitization program in Europe, with three
additional sellers. The outstanding balance as of December 31, 2005 was $709 million and a
Financial Services subsidiary subscribed to $251 million of notes representing retained undivided
interests. At December 31, 2004, the amount outstanding under the original program was $466
million, and the Financial Services subsidiary had a retained undivided interest of $228 million.
In addition to the securitizations described above, certain foreign subsidiaries of CNH
securitized or discounted receivables without recourse. As of December 31, 2005, there were no
outstanding discounted receivables without recourse. As of December 31, 2004, $108 million of
wholesale receivables were outstanding. CNH records a discount each time receivables are sold to
the counterparties in the facilities. This discount, which reflects the difference between interest
income earned on the receivables sold and interest expense paid to the investors in the facilities,
along with related transaction expenses, is computed at the then prevailing market rates as stated
in the sale agreement.
Securitizations of Retail Receivables (Agricultural and Construction Equipment Sector CNH) -
CNH funds a significant portion of its retail receivable originations by means of retail receivable
securitizations. Within CNHs asset securitization program, qualifying retail finance receivables
are sold to limited purpose, bankruptcy-remote consolidated subsidiaries of CNH, where required by
bankruptcy laws. In turn, these subsidiaries establish separate trusts to which the receivables are
transferred in exchange for proceeds from asset-backed securities issued by the trusts. Due to the
nature of the assets held by the trusts and the limited nature of each trusts activities, they are
each classified as a QSPE under SFAS No. 140. The QSPEs have a limited life and generally terminate
upon final distribution of amounts owed to investors or upon exercise of a cleanup-call option by
CNH. No recourse provisions exist that allow holders of the QSPEs asset-backed securities to put
those securities back to CNH. CNH does not guarantee any securities issued by the QSPEs.
CNH securitized retail notes with a net principal value of $2.9 billion and $2.3 billion in
2005, and 2004, respectively. CNH recognized gains on the sales of these receivables of $83 million
and $70 million in 2005 and 2004, respectively.
In conjunction with these sales, CNH retains certain interests in the sold receivables
including ABS certificates issued, interest-only strips, spread accounts and the rights to service
the sold receivables. The investors and the securitization trusts have no recourse beyond CNHs
retained interest assets for failure of debtors to pay when due. CNHs retained interests are
subordinate to investors interests, and are subject to credit, prepayment and interest rate risks
on the transferred financial assets.
Spread accounts are created through the reduction of proceeds received by CNH from sales to
provide security to investors in the event that cash collections from the receivables are not
sufficient to remit principal and interest payments on the securities. In 2005 and 2004, the
creation of new spread accounts reduced proceeds from the sales of retail receivables by $58
million and $48 million, respectively. Total spread account balances were $258 million and $294
million at December 31, 2005 and 2004, respectively.
The components of CNHs retained interests as of December 31, 2005 and 2004 were as follows:
F - 106
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
(in millions of US Dollars) |
Receivables: |
|
|
|
|
|
|
|
|
Collateralized wholesale receivables |
|
|
588 |
|
|
|
448 |
|
Interest only strip |
|
|
83 |
|
|
|
103 |
|
Spread and other |
|
|
353 |
|
|
|
389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount |
|
|
1,024 |
|
|
|
940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
ABS Certificates |
|
|
180 |
|
|
|
241 |
|
Other investments in ABS trusts |
|
|
251 |
|
|
|
228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount |
|
|
431 |
|
|
|
469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retained interests |
|
|
1,455 |
|
|
|
1,409 |
|
|
|
|
|
|
|
|
|
|
Key assumptions utilized in measuring the initial fair value of retained interests for
securitizations completed during 2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range |
|
Weighted Average |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Constant prepayment rate |
|
|
17.00 - 20.00 |
% |
|
|
17.00 - 20.00 |
% |
|
|
17.28 |
% |
|
|
17.39 |
% |
Expected credit loss rate |
|
|
0.57 - 0.68 |
% |
|
|
0.37 - 0.83 |
% |
|
|
0.67 |
% |
|
|
0.48 |
% |
Discount rate |
|
|
8.50 13.00 |
% |
|
|
8.50 10.00 |
% |
|
|
10.62 |
% |
|
|
9.52 |
% |
Remaining maturity in months |
|
|
20 - 24 |
|
|
|
20 22 |
|
|
|
22 |
|
|
|
22 |
|
CNH monitors the fair value of its retained interests outstanding each period by
discounting expected future cash flows based on similar assumptions. The fair value is compared to
the carrying value of the retained interests and any excess of carrying value over fair value
results in an impairment of the retained interests with a corresponding offset to earnings. Based
on this analysis, CNH reduced the value of its interest-only strips by $9 million and $7 million in
2005 and 2004, respectively.
Impact on Fair Value The significant assumptions used in estimating the fair values of
retained interests from sold receivables, which remain outstanding, and the sensitivity of the
current fair value to a 10% and 20% adverse change at December 31, 2005 and 2004, are as follows
(in millions of US Dollars unless stated otherwise):
F - 107
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
|
|
|
|
10% |
|
20% |
|
|
|
|
|
10% |
|
20% |
|
|
Assumption |
|
Change |
|
Change |
|
Assumption |
|
Change |
|
Change |
|
|
(Weighted Average) |
|
(Weighted Average) |
Constant prepayment rate |
|
|
15.82 |
% |
|
$ |
1.0 |
|
|
$ |
1.2 |
|
|
|
16.56 |
% |
|
$ |
1.9 |
|
|
$ |
3.5 |
|
Expected credit loss rate |
|
|
0.70 |
% |
|
$ |
2.6 |
|
|
$ |
5.1 |
|
|
|
0.69 |
% |
|
$ |
2.4 |
|
|
$ |
4.9 |
|
Discount rate |
|
|
10.68 |
% |
|
$ |
6.9 |
|
|
$ |
13.0 |
|
|
|
9.37 |
% |
|
$ |
4.0 |
|
|
$ |
6.9 |
|
Remaining maturity in months |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
The changes shown above are hypothetical. They are computed based on variations of
individual assumptions without considering the interrelationship between these assumptions. As a
change in one assumption may affect the other assumptions, the magnitude of the impact on fair
value of actual changes may be greater or less than those illustrated above. Weighted-average
remaining maturity represents the weighted-average number of months that the current collateral
balance is expected to remain outstanding.
Actual and expected credit losses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables securitized in |
|
|
2002 |
|
2003 |
|
2004 |
|
2005 |
As of December 31, 2005 |
|
|
0.65 |
% |
|
|
0.68 |
% |
|
|
0.54 |
% |
|
|
0.56 |
% |
As of December 31, 2004 |
|
|
0.58 |
% |
|
|
0.89 |
% |
|
|
0.57 |
% |
|
|
|
|
Credit losses are calculated by summing the actual and projected future credit losses and
dividing them by the original balance of each pool of assets securitized.
CNHs cash flows related to securitization activities for the years ended December 31, 2005
and 2004 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
|
(in millions of US Dollars) |
Proceeds from new retail securitizations |
|
|
2,799 |
|
|
|
2,218 |
|
Servicing fees received |
|
|
40 |
|
|
|
37 |
|
Cash received on retained interests |
|
|
93 |
|
|
|
85 |
|
Cash paid upon cleanup call |
|
|
104 |
|
|
|
77 |
|
Other Receivables Securitizations (Agricultural and Construction Equipment Sector CNH)
- In addition to the wholesale and retail securitizations described above, a master note trust was
formed in September 2004 to facilitate the financing of US credit card receivables. Credit card
receivables are transferred, without recourse, to a bankruptcy remote SPE through which the
receivables are then transferred to a trust. The maximum amount of funding eligible through the
facility is $250 million and is accounted for as a secured financing. At December 31, 2005 and
2004, total receivables pledged under this program were $160 million and $159 million,
respectively. The facility is renewable in June 2007.
In November 2004, a trust was formed for the securitization of retail receivables in
Australia. The Group transfers the receivables to a bankruptcy remote trust, which will have a
limited life and terminate upon final distribution of amounts owed to investors or upon exercise of
a clean-up call option by CNH. At December 31, 2004, A$416 million of receivables were transferred
to the trusts, which were accounted for as a secured financing. No such trusts were formed in 2005.
F - 108
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
In December 31, 2005, Financial Services entered into a transaction to securitize certain of
its retained interests which resulted from its US retail asset backed securitization programs. The
retained interests were sold without recourse to a newly formed bankruptcy remote SPE which, in
turn, pledged the retained interests as collateral for a revolving loan from a third-party
multi-seller asset backed commercial paper (ABCP) conduit facility. The maximum amount of funding
eligible through the facility is $300 million and it is accounted for as a secured financing. At
December 31, 2005, total retained interests pledged under this program were $324 million. The
facility is renewable in December 2008.
Securitization of Commercial Vehicles Sector Receivables (Wholesale and Retail) Until the
sale of the 51% stake of Iveco Finance Holdings Ltd to Barclays Mercantile Business Finance Ltd on
June 1, 2005, Iveco funded a portion of its European wholesale and retail receivables by means of
sales on a revolving basis pursuant to securitization programs.
Securitization of European Wholesale Receivables European wholesale securitization programs were
put in place through several privately structured facilities, mainly consisting of 364-day
facilities, renewable annually. Receivables sold under these programs totaled 1,679 million euros
in 2004.
The following table summarizes the gross cash flows of the above-mentioned wholesale
securitizations in 2004:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
(in millions of US Dollars) |
Proceeds from new wholesale securitization |
|
|
|
|
|
|
38 |
|
Proceeds from collections reinvested in revolving period securitization |
|
|
|
|
|
|
1,641 |
|
Repurchase of receivables |
|
|
|
|
|
|
|
|
At December 31, 2004, wholesale receivables outstanding under these facilities amounted
to 443 million euros, including a retained interest of 109 million euros. The retained interests
provide limited first loss protection to investors and were recorded, under US GAAP, at cost, which
approximates fair value due to the short-term nature of receivables.
Securitization of European Retail Receivables In 2004, the Fiat Group funded a portion of
its Italian truck loan and financial lease originations by means of a securitization carried out by
Iveco Finanziaria S.p.A. through the securitization vehicle First Italian Truck Securitization
(FITS), established under Italian Law No. 130 of April 1999 (the Italian Securitization Law or
Legge sulla Cartolarizzazione dei Crediti), which for US GAAP reporting is considered a QSPE. The
amount sold during 2004 was 236 million euros.
The above transaction was considered, for US GAAP purposes, as a sale of receivables and
entailed the purchase of an initial pool of loans and financial lease receivables by FITS, followed
by further monthly purchases during a 3-year revolving period. The Fiat Group serviced the sold
receivables on a revolving basis.
The following table summarizes the cash flows and the profit and loss impact of the
above-mentioned securitization.
F - 109
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
|
|
|
|
FITS |
|
|
|
|
|
FITS |
|
|
FITS |
|
(Financial |
|
FITS |
|
(Financial |
|
|
(Loans) |
|
Leases) |
|
(Loans) |
|
Leases) |
|
|
(in millions of euros) |
Proceeds from new retail securitizations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from collections reinvested in revolving -
period securitization |
|
|
|
|
|
|
|
|
|
|
137 |
|
|
|
99 |
|
Repurchase of loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
Servicing fees received |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Cash received on retained interests (Subordinated Notes) |
|
|
|
|
|
|
|
|
|
|
0.22 |
|
|
|
4 |
|
Gain (loss) on sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
In conjunction with these sales, Fiat retained certain interests in the sold receivables
through subordinated tranches of asset backed securities issued by the securitization vehicles. The
risk for the seller was therefore limited to the portion of the securities that it subscribed.
These subordinated notes, under US GAAP, were initially recorded at their nominal values; they were
then evaluated at the end of each accounting period on the basis of the performance of the
receivables sold and could have been written down on the basis of this evaluation. As of December
31, 2004, the subordinated notes subscribed for in connection with the outstanding retail
securitization transactions amounted to 111 million euros. Fiat monitored the fair value of its
outstanding retained interests during each accounting period on the basis of estimated discounted
future cash flows.
The fair value of retained interests and their sensitivity to the above 10% and 20% changes at
December 31, 2004 for the transactions originated by the financial services companies were as
follows (impact on fair value in millions of euros):
FITS Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
December 31, 2004 |
|
|
|
|
|
|
Assumption |
|
10% change |
|
20% change |
Constant prepayment rate |
|
|
1.04 |
% |
|
|
0.01 |
|
|
|
0.02 |
|
Annual credit loss rate |
|
|
0.20 |
% |
|
|
(0.14 |
) |
|
|
(0.27 |
) |
Discount rate |
|
|
4.46 |
% |
|
|
(0.59 |
) |
|
|
(1.16 |
) |
Actual and expected static pool losses as of December 31, 2004 |
|
|
0.44 |
% |
|
|
|
|
|
|
|
|
FITS Leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
December 31, 2004 |
|
|
|
|
|
|
Assumption |
|
10% change |
|
20% change |
Constant prepayment rate |
|
|
1.25 |
% |
|
|
(0.02 |
) |
|
|
(0.03 |
) |
Annual credit loss rate |
|
|
0.38 |
% |
|
|
(0.33 |
) |
|
|
(0.67 |
) |
Discount rate |
|
|
4.40 |
% |
|
|
(0.92 |
) |
|
|
(1.83 |
) |
Actual and expected static pool losses as of December 31, 2004 |
|
|
0.87 |
% |
|
|
|
|
|
|
|
|
Static pool losses are calculated by totaling the actual and projected future credit
losses and dividing them by the original balance of each pool of securitized assets.
The changes shown above are hypothetical. They are computed according to variations of
individual assumptions without considering the interrelationship between these assumptions. As a
change in one assumption may affect the other assumptions, the magnitude of the impact on fair
value of actual changes
F - 110
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
might be greater or less than those illustrated above. These changes are based on the balance
of securitized receivables outstanding as of December 31, 2004.
(vii) Fair value of financial instruments
The summary of fair value of financial instruments and related IFRS carrying amount is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
(in millions of euros) |
|
|
Carrying |
|
|
|
|
|
Carrying |
|
|
|
|
amount |
|
Fair Value |
|
amount |
|
Fair Value |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current receivables |
|
|
24,026 |
|
|
|
23,874 |
|
|
|
25,723 |
|
|
|
25,685 |
|
Current securities |
|
|
556 |
|
|
|
556 |
|
|
|
353 |
|
|
|
353 |
|
Other financial assets and (liabilities) |
|
|
265 |
|
|
|
265 |
|
|
|
648 |
|
|
|
648 |
|
Cash and cash equivalents |
|
|
6,417 |
|
|
|
6,417 |
|
|
|
5,767 |
|
|
|
5,767 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
|
25,761 |
|
|
|
25,624 |
|
|
|
32,191 |
|
|
|
31,989 |
|
Trade payables |
|
|
11,777 |
|
|
|
11,777 |
|
|
|
11,697 |
|
|
|
11,697 |
|
Other payables |
|
|
4,821 |
|
|
|
4,821 |
|
|
|
4,561 |
|
|
|
4,561 |
|
(viii) Accumulated other comprehensive income (loss)
The components of accumulated other comprehensive income (loss), on a US GAAP basis, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2005 |
|
2004 |
|
|
Gross |
|
Tax |
|
Net |
|
Gross |
|
Tax |
|
Net |
|
|
(in million of euros) |
Cumulative translation adjustment |
|
|
(1,315 |
) |
|
|
|
|
|
|
(1,315 |
) |
|
|
(2,133 |
) |
|
|
|
|
|
|
(2,133 |
) |
Available for sale securities |
|
|
144 |
|
|
|
(1 |
) |
|
|
143 |
|
|
|
49 |
|
|
|
(1 |
) |
|
|
48 |
|
Cash flow hedge reserve |
|
|
(39 |
) |
|
|
10 |
|
|
|
(29 |
) |
|
|
(5 |
) |
|
|
7 |
|
|
|
2 |
|
Minimum pension liability |
|
|
(706 |
) |
|
|
241 |
|
|
|
(465 |
) |
|
|
(705 |
) |
|
|
250 |
|
|
|
(455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other
comprehensive income (loss) |
|
|
(1,916 |
) |
|
|
250 |
|
|
|
(1,666 |
) |
|
|
(2,794 |
) |
|
|
256 |
|
|
|
(2,538 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under IFRS, in accordance with IFRS 1, the Group elected to recognize all cumulative
translation adjustments of foreign subsidiaries into opening retained earnings as of January 1,
2004. All cumulative translation adjustments for foreign operations were, therefore, deemed to be
zero at that date, and the gain or loss on a subsequent disposal of any foreign operation excludes
any translation that arose before the IFRS transition date but includes later translation
adjustments. Under US GAAP, cumulative translation adjustments continue to be accounted for on a
cumulative basis, and, as such, have a different balance compared to IFRS.
The estimated net amount of the existing losses recognized in the cash flow hedge reserve at
the reporting date that are expected to be reclassified into earnings within the next 12 months is
5 million euros.
F - 111
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(ix) Stock-based compensation
Changes
in Fiat S.p.A. stock option plans during 2005 are presented in note 25, Stockholders
equity. Changes in Fiat S.p.A. stock option plans during 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2004 |
|
|
|
|
|
|
|
|
|
|
Compensation as member of the |
|
|
Managers compensation |
|
Board |
|
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
Number of |
|
exercise price |
|
Number of |
|
exercise price |
|
|
shares |
|
(in euros) |
|
shares |
|
(in euros) |
Outstanding at the beginning of the year |
|
|
12,697,743 |
|
|
|
16.46 |
|
|
|
15.588.076 |
|
|
|
7.55 |
|
Granted during the year |
|
|
|
|
|
|
|
|
|
|
10.670.000 |
|
|
|
6.58 |
|
Forfeited during the year |
|
|
(2,195,000 |
) |
|
|
16.84 |
|
|
|
(10.670.461 |
) |
|
|
5.62 |
|
Exercised during the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired during the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2004 |
|
|
10,502,543 |
|
|
|
16.38 |
|
|
|
15,587,615 |
|
|
|
8.21 |
|
Exercisable at December 31, 2004 |
|
|
7,144,748 |
|
|
|
18.80 |
|
|
|
3,917,615 |
|
|
|
11.50 |
|
As
part of the Groups US GAAP significant accounting policies, the
Group adopted the additional disclosure requirements of SFAS No. 123 Accounting for
Stock-Based Compensation, and SFAS 148 Accounting for Stock-Based Compensation Transition and
Disclosure which require pro-forma disclosures of net income and earnings per share as if the fair
value based method of accounting for stock-based compensation had been applied. The Black-Scholes
formula was the option pricing model used to estimate fair value for stock options granted through
December 31, 2003. For all stock options granted on or after January 1, 2004, the Fiat Group
utilizes the binomial method to determine the fair value.
The fair value of each option grant was estimated on the date of grant using the following
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk free |
|
Dividend |
|
Stock price |
|
Option life |
|
|
interest rate |
|
yield |
|
volatility |
|
(years) |
Stock Options 1999 |
|
|
4.3 |
% |
|
|
2.1 |
% |
|
|
45.2 |
% |
|
|
8 |
|
Stock Options February 2000 |
|
|
5.9 |
% |
|
|
1.9 |
% |
|
|
31.8 |
% |
|
|
8 |
|
Stock option July 2000 |
|
|
5.8 |
% |
|
|
2.2 |
% |
|
|
34.0 |
% |
|
|
8 |
|
Stock option February 2001 |
|
|
5.2 |
% |
|
|
2.3 |
% |
|
|
25.5 |
% |
|
|
8 |
|
Stock Option March 2001 |
|
|
5.1 |
% |
|
|
2.5 |
% |
|
|
19.5 |
% |
|
|
8 |
|
Stock Option October 2001 |
|
|
4.6 |
% |
|
|
3.4 |
% |
|
|
33.4 |
% |
|
|
8 |
|
Stock option February 2002 |
|
|
5.1 |
% |
|
|
4.2 |
% |
|
|
37.4 |
% |
|
|
8 |
|
Stock Option May 2002 |
|
|
5.4 |
% |
|
|
4.6 |
% |
|
|
38.7 |
% |
|
|
8 |
|
Stock option September 2002 |
|
|
4.6 |
% |
|
|
2.7 |
% |
|
|
45.0 |
% |
|
|
8 |
|
Stock Option March 2003 |
|
|
4.0 |
% |
|
|
0.5 |
% |
|
|
45.7 |
% |
|
|
7 |
|
Stock option October 2003 |
|
|
3.8 |
% |
|
|
0.5 |
% |
|
|
43.6 |
% |
|
|
7 |
|
Stock option November 2003 |
|
|
4.2 |
% |
|
|
0.5 |
% |
|
|
39.8 |
% |
|
|
7 |
|
Stock Option July 2004 |
|
|
4.0 |
% |
|
|
0.0 |
% |
|
|
29.3 |
% |
|
|
7 |
|
If a compensation cost for stock option plans for the two years ended December 31, 2005
and 2004 had been determined based on the fair value of each set of options at the grant date as
required by SFAS No. 123, using the Black Scholes option-pricing model through December 31, 2003
and the binomial method
F - 112
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
from January 1, 2004, the Groups pro forma net result and earnings per share amounts as
determined on a US GAAP basis would have been as follows (in millions of euros except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
|
2005 |
|
2004 |
Net income (loss) in accordance with US GAAP as reported |
|
|
125 |
|
|
|
(2,100 |
) |
Add: Stock-based compensation (income) expense, included in
reported net result, net of related tax effects (APB 25) |
|
|
(6 |
) |
|
|
2 |
|
Deduct: Stock-based compensation income (expense) (SFAS No. 123) |
|
|
(12 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
Pro-forma Net income (loss) |
|
|
107 |
|
|
|
(2,117 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted EPS per ordinary and preference shares as
reported in accordance with US GAAP |
|
|
0.12 |
|
|
|
(2.15 |
) |
Basic and diluted EPS per ordinary and preference shares pro-forma |
|
|
0.10 |
|
|
|
(2.16 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted EPS per savings share as reported |
|
|
0.12 |
|
|
|
(2.15 |
) |
Basic and diluted EPS per savings share pro-forma |
|
|
0.10 |
|
|
|
(2.16 |
) |
(x) Advertising costs
Advertising costs amounting to 862 million euros in 2005 and 802 million euros in 2004 have
been included in Selling, general and administrative costs.
(xi) Segment information
Information on the industry sectors and geographic areas in which the Group operates is
included in Note 33. Net revenues by area of origin or asset location, required by US GAAP and not
presented in Note 33, are included herein. All amounts presented in the accompanying table
originate from the consolidated financial statements prepared in accordance with IFRS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
Net Revenues |
|
Domestic |
|
Export |
|
Total |
|
Domestic |
|
Export |
|
Total |
|
|
(in millions of euros) |
Italy |
|
|
11,404 |
|
|
|
9,312 |
|
|
|
20,716 |
|
|
|
11,261 |
|
|
|
9,240 |
|
|
|
20,501 |
|
Europe (Italy excluded) |
|
|
8,141 |
|
|
|
4,231 |
|
|
|
12,372 |
|
|
|
9,778 |
|
|
|
3,483 |
|
|
|
13,261 |
|
North America |
|
|
5,231 |
|
|
|
1,421 |
|
|
|
6,652 |
|
|
|
4,848 |
|
|
|
1,492 |
|
|
|
6,340 |
|
Mercosur |
|
|
4,153 |
|
|
|
494 |
|
|
|
4,647 |
|
|
|
3,014 |
|
|
|
314 |
|
|
|
3,328 |
|
Other areas |
|
|
1,166 |
|
|
|
991 |
|
|
|
2,157 |
|
|
|
1,237 |
|
|
|
970 |
|
|
|
2,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues of the Group |
|
|
30,095 |
|
|
|
16,449 |
|
|
|
46,544 |
|
|
|
30,138 |
|
|
|
15,499 |
|
|
|
45,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues shown above include the change in contract work in progress of 144 million
euros and 204 million euros, in 2005, and 2004, respectively. In addition, net revenues shown above
are to third parties only, and exclude intersegment sales between consolidated subsidiaries which
in 2005 and 2004 amounted to 4,786 million euros, and 3,129 million euros, respectively. Such
sales between geographical areas are generally within the same industry sector and are accounted
for at prices which approximate prices to unaffiliated customers in the same markets.
F - 113
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
US GAAP New accounting pronouncements
In November 2004, the FASB issued SFAS No. 151 Inventory Costs an amendment of ARB No. 43,
Chapter 4 (SFAS No. 151), to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs and wasted material (spoilage). ARB No. 43 previously stated,
under some circumstances, items such as idle facility expense, excessive spoilage, double freight
and re-handling costs may be so abnormal as to require treatment as current period charges. SFAS
No. 151 requires that these items be recognized as current period charges regardless of whether
they meet the criterion of so abnormal. In addition, SFAS No. 151 requires that the allocation of
fixed production of overheads to the costs of conversion be based on the normal capacity of the
production facilities. The provisions of SFAS No. 151 are effective for inventory costs incurred
during fiscal years beginning after June 15, 2005. The Group does not believe that the adoption of
SFAS No. 151 will have a significant effect on its future consolidated financial statements.
In December 2004, the FASB issued SFAS No. 152 Accounting for Real Estate Time-Sharing
Transactions an amendment of FASB Statements No. 66 and 67, (SFAS No. 152). This Statement
amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial
accounting and reporting guidance for real estate time-sharing transactions that is provided in
AICPA Statement of Position (SOP) 04-2. The Statement also amends FASB Statement No. 67,
Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the
guidance for incidental operations and costs incurred to sell real estate projects does not apply
to real estate time-sharing transactions and that the accounting for those operations and costs is
subject to the guidance in SOP 04-2. SFAS No. 152 is effective for fiscal years beginning after
June 15, 2005. The Group does not believe that the adoption of SFAS No. 152 will have a significant
effect on its future consolidated financial statements.
In December 2004, the FASB issued SFAS No. 153 Exchanges of Non-monetary Assets an
amendment of APB Opinion No. 29, (SFAS No. 153). The guidance in APB Opinion No. 29 Accounting
for Non-monetary Transactions, is based on the principle that exchanges of non-monetary assets
should be measured based on the fair value of the assets exchanged. This guidance, however,
contains certain exceptions to that principle. SFAS No. 153 amends Opinion 29 to eliminate the
exception for non-monetary exchanges of similar productive assets and replaces it with a general
exception for exchanges of non-monetary assets that do not have commercial substance. The Group
does not believe that the adoption of SFAS No. 153 will have a significant effect on its future
consolidated financial statements.
In December 2004, the FASB issued SFAS No. 123 (revised 2004) Share-Based Payment (SFAS No.
123R), a revised version of SFAS No. 123 Accounting for Stock-Based Compensation. SFAS No. 123R
supersedes APB Opinion No. 25 Accounting for Stock Issued to Employees and its related
implementation guidance. In January 2005, the SEC issued Staff Accounting Bulletin No. 107, which
provides supplemental implementation guidance for SFAS No. 123R. In April 2005, the SEC extended
the compliance date of SFAS No. 123R, with the result that this standard will be effective for the
Group beginning with the first quarter of 2006. SFAS No. 123R eliminates the possibility of using
the intrinsic value method of accounting in APB Opinion No. 25 that was provided as an alternative
in SFAS No. 123 as originally issued. SFAS No. 123R requires entities to recognize the cost of
employee services received in exchange for the award of equity instruments based on the grant-date
fair value of those awards, with certain limited exceptions. SFAS No. 123R became effective on
January 1, 2006 for the Fiat Group. The Group is in process of assessing the impact of adoption of
SFAS No. 123R, given its effect on prospective options granted prior to its adoption of SFAS No.
123 under the fair value method and is considering whether to expense these amounts in the income
statement over the share options remaining vesting period.
In May 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset
Retirement Obligations an interpretation of FASB Statement No. 143 (FIN 47). This
Interpretation clarifies that the term conditional asset retirement as used in FASB Statement No.
143 refers to a legal obligation to perform an asset retirement activity in which the timing and
(or) method of settlement are
F - 114
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
conditional on a future event that may or may not be within the control of the entity; that
is, the obligation is unconditional, although uncertainty exists as to the timing and (or) method
of settlement. FIN 47 requires that this uncertainty be factored into the measurement of the fair
value of the conditional asset when sufficient information exists, acknowledging that in some cases
sufficient information may not be available to reasonably estimate the fair value of an asset
retirement obligation. The Interpretation was adopted from January 1, 2005 and did not have a
material impact on the Fiat Group US GAAP reconciliation.
In May 2005, the FASB issued SFAS No. 154 Accounting Changes and Error Corrections a
replacement of APB Opinion No. 20 and FASB Statement No. 3, (SFAS No. 154), which modifies the
requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154
applies to all voluntary changes in accounting principle and to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include specific transition
provisions. Opinion 20 previously required that most voluntary changes in accounting principle be
recognized by including the cumulative effect of the change in the net income of the period of
change. SFAS No. 154 requires in general retrospective application to the financial statements of
prior periods of changes in accounting principle. SFAS No. 154 carries forward without change the
guidance contained in Opinion 20 for reporting the correction of an error and a change in
accounting estimate. SFAS No. 154 is effective for accounting changes and corrections of errors,
which occur in fiscal years beginning after December 15, 2005 and accordingly became effective for
the Fiat Group in the consolidated financial statements for the year beginning January 1, 2006.
In February 2006, the FASB issued SFAS No. 155 Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements No. 133 and 140, (SFAS No. 155). The Statement
allows financial instruments that have embedded derivatives to be accounted for as a whole
(eliminating the need to bifurcate the derivative from its host) if the holder elects to account
for the whole instrument on a fair value basis. Moreover, the standards: (a) clarifies which
interest-only strips and principal-only strips are not subject to the requirements of Statement
133; (b) establishes a requirement to evaluate interests in securitized financial assets to
identify interests that are freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation; (c) clarifies that concentrations of credit
risk in the form of subordination are not embedded derivatives; (d) amends Statement 140 to
eliminate the prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another derivative financial
instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the
beginning of an entitys first fiscal year that begins after September 15, 2006 and accordingly
will become effective for the Fiat Group in the consolidated financial statements for the year
beginning January 1, 2007. The Group is the process of assessing the impact of adoption of SFAS No.
155.
In March 2006, the FASB issued SFAS No. 156 Accounting for Servicing of Financial Assets -
an amendment of FASB Statement No. 140, (SFAS No. 156). This Statement addresses the recognition
and measurement of separately recognized servicing assets and liabilities and provides an approach
to simplify efforts to obtain hedge-like (offset) accounting. The standard also clarifies when an
obligation to service financial assets should be separately recognized as a servicing asset or a
servicing liability, requires all separately recognized servicing assets and servicing liabilities
to be initially measured at fair value, if practicable, and permits an entity with a separately
recognized servicing assets or servicing liability to choose between an amortization method and a
fair value method for subsequent measurement. The statement is effective for all separately
recognized servicing assets and liabilities acquired or issued after the beginning of an entitys
fiscal year that begins after September 15, 2006 and accordingly will become effective for the Fiat
Group in the consolidated financial statements for the year beginning January 1, 2007. The Group is
in process of assessing the impact of adoption of SFAS No. 156.
F - 115
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Transactions among Group Companies and with Related Parties
Transactions among Group companies, whether they are made to support vertical manufacturing
integration or to provide services, are carried out at terms that, considering the quality of the
goods or services involved, are competitive with those available in the marketplace.
The main transactions that took place during 2005 between the Parent Company, Fiat S.p.A., and
its subsidiaries and associated companies are summarized below:
|
§ |
|
Subscription to capital increases of subsidiaries as described in the Notes to the
financial statements of Fiat S.p.A.; |
|
|
§ |
|
Licensing of the right to use the Fiat trademark, for a consideration based on a
percentage of sales, to Fiat Auto S.p.A.; |
|
|
§ |
|
Contributions provided to Group companies for initiatives to enhance the Groups image; |
|
|
§ |
|
Services provided by Fiat S.p.A. managers to Fiat Auto S.p.A., Iveco S.p.A., Teksid
S.p.A., Magneti Marelli Holding S.p.A., Comau S.p.A., Business Solutions S.p.A., Itedi
S.p.A. and other minor Group companies; |
|
|
§ |
|
Grant of suretyships and guarantees in connection with the issuance of bonds (essentially
Fiat Finance and Trade Ltd.), loans provided by banks (Fiat Finance S.p.A. formerly Fiat
Ge.Va. S.p.A., FMA Fabbrica Motori Automobilistici S.r.l., Banco CNH Capital S.A., CNH
America LLC, Fiat Automoveis S.A. and other minor companies), the issuance of billets de
tresorerie (Fiat Finance and Trade Ltd.), credit lines (CNH Global N.V., CNH Capital
America LLC, CNH Capital Canada Ltd., NH Credit Company LLC and other minor companies) and
payment obligations under building rental contracts (Fiat Auto S.p.A. and its subsidiaries).
In addition, a $1 billion direct credit line is in place between Fiat S.p.A. and CNH Global
N.V.; |
|
|
§ |
|
Rental of buildings to Ingest Facility S.p.A.; |
|
|
§ |
|
Current accounts and short-term financings management (Fiat Finance S.p.A.), purchase of
administrative, fiscal, corporate affairs and consulting services (Fiat Gesco S.p.A.),
payroll and other general services (Fiat Servizi per lIndustria S.c.p.A.); |
|
|
§ |
|
Purchase of inspection and internal auditing services from Fiat-Revisione Interna S.c.r.l.; |
|
|
§ |
|
Purchase of information technology services provided by PDL Service S.r.l. and eSPIN S.p.A.; |
|
|
§ |
|
Purchase of external relations services provided by Fiat Information & Communication
Services società consortile per azioni; |
|
|
§ |
|
Office space and real property maintenance services provided by Ingest Facility S.p.A.; |
|
|
§ |
|
Security services and other services provided by Consorzio Orione and Sirio S.c.p.A.; |
|
|
§ |
|
Purchase of automobiles from Fiat Auto S.p.A. |
Fiat S.p.A., as consolidating company, and almost all its Italian subsidiaries decided to
comply with the national tax consolidation program according to articles 177/129 of T.U.I.R.
(Consolidated Law on Income Tax).
Relationships with related parties, whose definition was extended in accordance with IAS 24,
include not only normal business relationships with listed groups or other major groups in which
the directors of the Company or its parent companies hold a significant position, but also
purchases of Group products at normal market prices or, in the case of individuals, the prices that
are usually charged to employees. Transactions with related parties to be mentioned include
professional services rendered by Mr. Franzo
F - 116
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Grande Stevens (consultancies and activities performed in his capacity as secretary of the
Board of Directors) to Fiat S.p.A. for a total of 940 thousand euros.
Based on the information received from the various Group companies, there were no atypical or
unusual transactions during the year.
Extraordinary transactions among Group companies or with related parties that occurred during
the year are as follows:
|
§ |
|
Ferrari S.p.A.: an entity comprising the group of companies that manufacture and sell
Maserati cars was transferred to a company that simultaneously assumed the name Maserati
S.p.A. and was sold to Fiat Partecipazioni S.p.A; |
|
|
§ |
|
Within the framework of the reorganization of central activities in France, aimed at
transferring the role of national company to the main operating company, Fiat France S.A.
was merged into Fiat Auto France S.A. which took its name. Before the merger, Fiat France
S.A. had been sold by Fiat Partecipazioni S.p.A. to Fiat Finance Netherlands B.V.;
concurrently, Fiat France S.A. sold its 100% interest in La Stampa Europe S.a.s. to Itedi
S.p.A. |
Subsequent events
On January 3, 2006, Fiat Auto and Severstal Auto signed an industrial agreement for the
assembly in Russia of the Fiat Palio and Fiat Albea models based on CKDs produced in Turkey by
Tofas, a joint venture with the Koç Group. Assembly of these models at Severstal Autos Naberejniye
Chelni plant near Kazan in the Volga region is scheduled in 2007. On February 8, Fiat Auto and
Severstal extended the agreement to cover Fiat Doblò models (the kits for which are also produced
in Turkey).
On January 13, 2006, the Fiat Group and Tata Motors Ltd. signed a cooperation agreement
providing for dealer network sharing for the sale of Fiat branded cars in Tata outlets throughout
India. As a result of this agreement, in March 2006, the Tata dealership network began to sell a
targeted selection of Fiat cars, as well as the complete Tata product range (together with spare
parts and sales and services assistance for both brands). The dealerships involved in this program
now display the new Fiat logo alongside the Tata logo.
On February 10, 2006, Fiat closed the offering of 1 billion of 6.625% Senior Notes with an
issue price of 100% and a maturity date of February 15, 2013 (the 2013 Notes). The 2013 Notes,
which were issued by Fiat Finance and Trade Ltd. Société Anonyme, (Fiat Finance and Trade), a
wholly-owned subsidiary of Fiat S.p.A., and guaranteed by Fiat S.p.A. , were offered to
institutional investors outside the United States and have been admitted to listing on the Irish
Stock Exchange. The 2013 Notes were rated Ba3 by Moodys Investors Service, BB- by Standard &
Poors Ratings Services and BB- by Fitch Ratings, in line with agencies rating of the Fiat Groups
long-term debt. In January 2006, Fitch Ratings and Moodys changed their outlook on Fiat S.p.A.
from negative to stable, as Standard & Poors Rating Services had already done in August 2005.
On February 13, 2006, the Piedmont Region and the Fiat Group announced, by means of a joint
press release, a wide-ranging cooperative program for hydrogen fuelled transport, as envisaged in
the protocol of intent signed at the end of December 2005. Fiat and the Piedmont Region will
cooperate on local and European-level programs over the short, medium and long term. They will
promote the Piedmont Region as a key research and development centre in this innovative area. Fiat
will support these initiatives by lending some of its internationally recognized experts, including
available resources at the Centro Ricerche Fiat in Orbassano and at the Fiat Auto innovation
facilities.
On February 19, 2006, the Italian Ministry of Productive Activities, Fiat Auto and Elasis
signed an agreement to renew the Groups manufacturing facility at Termini Imerese in Sicily under
the conditions of the Program Agreement signed with the Italian government in December 2002. The
Termini Imerese project,
F - 117
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
which has involved Fiat Auto, the Ministry of Productive Activities and Sicilys regional
administration since April 2004 comprises two major initiatives. The first initiative provides for
Fiat to make industrial investments in the Termini Imerese plant amounting to approximately 31
million to prepare the Sicilian facility to produce the Lancia Ypsilon and the models subsequent
facelifts. These investments are part of Fiats 2005-2008 Development Plans. The second phase of
the plan focuses on the research and development, where Elasis is expected to invest approximately
13 million on improving the plants manufacturing processes. Public funding for the project is
expected to amount to about 10 million, of which 1.6 million will be provided by the
Sicilian regional administration.
On February 21, 2006, the Italian Ministry of Productive Activities, Fiat Powertrain Italia
S.r.l. (FPI), Fabbrica Motori Automobilistici (FMA a wholly owned subsidiary of FPI), and
Elasis signed a project agreement providing for an investment plan to support Fiats manufacturing
plants at Pratola Serra near Avellino and Termoli near Campobasso, as well as improving research
activities carried out at Pomigliano dArco plant near Naples. The Fiat Group has committed 647
million to this project, which is expected to be supplemented by contribution by the Italian public
authorities.
On March, 2006, CNH closed a private placement to institutional investors of US$500 million in
7.125% Senior Notes due 2014 issued by its wholly owned subsidiary, Case New Holland Inc., and
guaranteed by CNH.
On March 23, 2006, Fiat increased its stake in CNH from approximately 84% to approximately 90%
as a result of the automatic conversion of the CNH Series A Preference Shares it had held into CNH
common shares. The conversion (which was triggered by the average of the NYSE closing price for
CNHs common shares having exceeded US$24.00 over the preceding 30 trading days) resulted in Fiat
receiving 100 million newly issued CNH common shares, and did affect the Group consolidated
financial statements significantly.
The
most significant condition precedent to the closing of sale of Atlanet S.p.A. (which
provides telecommunication services in Italy to the Fiat Group) to the BT Group for a consideration
of approximately 80 million was satisfied in the first quarter of 2006 upon our receipt of
approval from the Italian Antitrust Authority. The sale of our telecommunication businesses in
Poland and Brazil is currently being finalized.
In April 2006, Fiat Powertrain Technologies signed an Agreement with Beijing Public Transport
Company for the supply of 1,000 natural gas engines. This supply of natural gas-powered heavy
engines is the largest ever made by the Fiat Group and one of the most important in the world.
These engines, manufactured at the FPT facility in Turin, will equip locally manufactured buses
which will be circulating in the Chinese capital in the coming months.
On May 12, 2006, Fiat closed the offering of 1 billion of 6.625% Senior Notes due November
2011, with an issue price of 99.565% (the 2011 GMTNs). The 2011 GMTNs were issued by Fiat Finance
and Trade and guaranteed by Fiat S.p.A. under the Fiat Group 15 billion Global Medium Term Note
Programme, which was recently renewed and allows for the offering to institutional investors of
Fiat S.p.A guaranteed debt securities by three of the Group s finance subsidiaries. The 2011 GMTNs
were offered to institutional investors outside the United States and have been admitted to listing
on the Irish Stock Exchange. The 2011 GMTNs were rated Ba3 by Moodys Investors Service, BB- by
Standard & Poors Ratings Services and BB- by Fitch Ratings, in line with the agencies current
ratings of the Fiat Groups long-term debt.
On May 11, 2006, Fiat and PSA Peugeot Citroën signed a new industrial agreement. Starting in
2007, the Fiat Auto plant in Cordoba, Argentina, will assemble a PSA Peugeot Citroën gearbox to be
mounted on Peugeot and Citroën cars sold in South America. Within this 10-year agreement annual
production is scheduled at 140,000 units.
In May 2006, the transfer of approximately 60% of Société Bretonne de Fonderie et de Mécanique
S.A. (SBFM), a French company that was part of the Teksids Cast Iron Unit, was completed. Under
the terms and conditions of the transaction, Teksid and the transferee have respective put and call
options on Teksid remaining stake through the end of 2008.
F - 118
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The Fiat Group, through IHF Internazionale Holding Fiat, and BSI SA, a Generali Group
company, reached an agreement in June 2006 whereby BSI will purchase 100% of the capital stock of
Banca Unione di Credito (BUC), a Swiss bank owned by IHF, from IHF. The value of the transaction,
subject to the results of due diligence, is approximately 400 million Swiss francs, or about
260 million. Closing of the transaction is subject to the approval by regulatory and antitrust
authorities. This transaction is consistent with Fiat Groups strategy of focusing on its core
business through the sale of non-strategic assets.
In June 2006, Fiat Partecipazioni sold its 10% residual stake in IPI S.p.A. to Risanamento
S.p.A., for a consideration of approximately 25.7 million, thus recording a gain of
approximately 9 million on a consolidated basis. The transaction was envisaged in the
agreements signed with Risanamento S.p.A. in March 2003 and is consistent with the Groups strategy
of focusing on the core automotive business.
On June 29, 2006 Fiat, through Fiat Partecipazioni S.p.A. and Business Solutions S.p.A.
completed the divestiture of its entire stake in Sestriere S.p.A., which manages the lift
facilities in the Via Lattea ski area, for a consideration of approximately 26 million.
In June 2006, the expiration date for the call option Fiat holds on Ferrari shares was extended to
September 30, 2006. This option, which forms part of the 2002 contract pursuant to which Fiat sold
the shares to Mediobanca, allows Fiat to buy them at any time during its term other than during the
five months following the presentation of an application to the relevant authorities for an IPO of
Ferrari. No such application has been presented at this time.
F - 119
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
(39) Transition to International Financial Reporting Standards (IFRS)
Following the coming into force of European Regulation No. 1606 dated July 19, 2002, starting
from January 1, 2005, the Fiat Group adopted International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB). This Note provides the IFRS
reconciliations of balance sheet data as of January 1 and December 31, 2004, and of income
statement data for the year ended December 31, 2004 as required by IFRS 1 First-time Adoption of
IFRS, together with the related explanatory notes.
This information has been prepared as part of the Groups conversion to IFRS and in connection
with the preparation of its 2005 consolidated financial statements in accordance with IFRS, as
adopted by the European Union.
Reconciliations required by IFRS 1
As required by IFRS 1, this note describes the polices adopted in preparing the IFRS opening
consolidated balance sheet at January 1, 2004, the main differences in relation to Italian GAAP
used to prepare the consolidated financial statements until December 31, 2004, as well as the
consequent reconciliations between the figures already published, prepared in accordance with
Italian GAAP, and the corresponding figures remeasured in accordance with IFRS.
The 2004 restated IFRS consolidated balance sheet and income statement have been prepared in
accordance with IFRS 1 First-time Adoption of IFRS. In particular, the IFRS applicable from
January 1, 2005, as published as of December 31, 2004, have been adopted, including the following:
|
§ |
|
IAS 39 Financial Instruments: Recognition and Measurement in its entirety. In
particular, the Group adopted derecognition requirements retrospectively from the date
on which financial assets and financial liabilities had been derecognized under Italian
GAAP. |
|
|
§ |
|
IFRS 2 Share-based Payment, which was published by the IASB on February 19, 2004
and adopted by the European Commission on February 7, 2005. |
First-time adoption of IFRS
General principle
The Group applied the accounting standards in force at December 31, 2004 retrospectively to
all periods presented, and to the opening balance sheet, except for certain exemptions adopted by
the Group in accordance with IFRS 1, as described in the following paragraph.
The opening balance sheet at January 1, 2004 reflects the following differences as compared to
the consolidated balance sheet prepared at December 31, 2003 in accordance with Italian GAAP:
|
§ |
|
all assets and liabilities qualifying for recognition under IFRS, including assets
and liabilities that were not recognized under Italian GAAP, have been recognized and
measured in accordance with IFRS; |
|
|
§ |
|
all assets and liabilities recognized under Italian GAAP that do not qualify for
recognition under IFRS have been eliminated; |
|
|
§ |
|
certain balance sheet items have been reclassified in
accordance with IFRS; and |
|
|
§ |
|
the impact of these adjustments is recognised directly in opening equity at the date
of transition to IFRS (January 1, 2004). |
F - 120
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Optional exemptions adopted by the Group
Business combinations: The Group elected not to apply IFRS 3 Business Combinations
retrospectively to the business combinations that occurred before the date of transition to IFRS.
Employee benefits: The Group elected to recognize all cumulative actuarial gains and
losses that existed at January 1, 2004, even though it decided to use the corridor approach for
later actuarial gains and losses.
Cumulative translation differences: The cumulative translation differences arising
from the consolidation of foreign operations have been set at nil as at January 1, 2004; gains or
losses on subsequent disposal of any foreign operation shall only include accumulated translation
differences after January 1, 2004.
F - 121
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Effects of transition to IFRS on the Consolidated Balance Sheet at January 1, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Italian |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
GAAP |
|
|
Reclassifications |
|
|
Adjustments |
|
|
IAS/IFRS |
|
|
|
Intangible fixed assets |
|
|
3,724 |
|
|
|
|
|
|
|
1,774 |
|
|
|
5,498 |
|
|
Intangible assets: |
- Goodwill |
|
|
2,402 |
|
|
|
|
|
|
|
|
|
|
|
2,402 |
|
|
- Goodwill |
- Other intangible fixed assets |
|
|
1,322 |
|
|
|
|
|
|
|
1,774 |
|
|
|
3,096 |
|
|
- Other intangible assets |
Property, plant and equipment |
|
|
9,675 |
|
|
|
(945 |
) |
|
|
817 |
|
|
|
9,547 |
|
|
Property, plant and equipment |
- Property, plant and equipment |
|
|
8,761 |
|
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
-Operating leases |
|
|
914 |
|
|
|
(914 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
31 |
|
|
Investment property |
Financial fixed assets |
|
|
3,950 |
|
|
|
70 |
|
|
|
(121 |
) |
|
|
3,899 |
|
|
Investment and other financial assets |
Financial receivables held as fixed assets |
|
|
29 |
|
|
|
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
914 |
|
|
|
(50 |
) |
|
|
864 |
|
|
Leased assets |
Deferred tax assets |
|
|
1,879 |
|
|
|
|
|
|
|
266 |
|
|
|
2,145 |
|
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current assets |
|
|
19,257 |
|
|
|
41 |
|
|
|
2,686 |
|
|
|
21,984 |
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net inventories |
|
|
6,484 |
|
|
|
|
|
|
|
1,113 |
|
|
|
7,597 |
|
|
Inventories |
Trade receivables |
|
|
4,553 |
|
|
|
(682 |
) |
|
|
2,678 |
|
|
|
6,549 |
|
|
Trade receivables |
|
|
|
|
|
|
|
12,890 |
|
|
|
7,937 |
|
|
|
20,827 |
|
|
Receivables from financing activities |
Other receivables |
|
|
3,081 |
|
|
|
(148 |
) |
|
|
541 |
|
|
|
3,474 |
|
|
Other receivables |
|
|
|
|
|
|
|
407 |
|
|
|
10 |
|
|
|
417 |
|
|
Accrued income and prepaid expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,129 |
|
|
Current financial assets: |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
32 |
|
|
- Current equity investments |
|
|
|
|
|
|
|
515 |
|
|
|
260 |
|
|
|
775 |
|
|
- Current securities |
|
|
|
|
|
|
|
430 |
|
|
|
892 |
|
|
|
1,322 |
|
|
- Other financial assets |
Financial assets not held as fixed assets |
|
|
120 |
|
|
|
(120 |
) |
|
|
|
|
|
|
|
|
|
|
Financial lease contracts receivable |
|
|
1,797 |
|
|
|
(1,797 |
) |
|
|
|
|
|
|
|
|
|
|
Financial receivables |
|
|
10,750 |
|
|
|
(10,750 |
) |
|
|
|
|
|
|
|
|
|
|
Securities |
|
|
3,789 |
|
|
|
(3,789 |
) |
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
3,211 |
|
|
|
3,214 |
|
|
|
420 |
|
|
|
6,845 |
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current assets |
|
|
33,785 |
|
|
|
202 |
|
|
|
13,851 |
|
|
|
47,838 |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accruals and deferrals |
|
|
407 |
|
|
|
(407 |
) |
|
|
|
|
|
|
|
|
|
|
Financial accruals and deferrals |
|
|
386 |
|
|
|
(386 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
21 |
|
|
Assets held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
53,835 |
|
|
|
(550 |
) |
|
|
16,558 |
|
|
|
69,843 |
|
|
TOTAL ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
7,494 |
|
|
|
|
|
|
|
(934 |
) |
|
|
6,560 |
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,455 |
|
|
Provisions |
Reserves for employee severance indemnities |
|
|
1,313 |
|
|
|
1,503 |
|
|
|
1,224 |
|
|
|
4,040 |
|
|
- Employee benefits |
Reserves for risks and charges |
|
|
5,168 |
|
|
|
(1,550 |
) |
|
|
(203 |
) |
|
|
3,415 |
|
|
- Other provisions |
Deferred income tax reserves |
|
|
211 |
|
|
|
(211 |
) |
|
|
|
|
|
|
|
|
|
|
|
Long-term financial payables |
|
|
15,418 |
|
|
|
6,501 |
|
|
|
14,790 |
|
|
|
36,709 |
|
|
Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,581 |
|
|
- Asset-backed financing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,128 |
|
|
- Other debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-current liabilities |
|
|
22,110 |
|
|
|
6,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
568 |
|
|
|
(223 |
) |
|
|
345 |
|
|
Other financial liabilities |
Trade payables |
|
|
12,588 |
|
|
|
|
|
|
|
(297 |
) |
|
|
12,291 |
|
|
Trade payables |
Others payables |
|
|
2,742 |
|
|
|
|
|
|
|
1,948 |
|
|
|
4,690 |
|
|
Other payables |
Short-term financial payables |
|
|
6,616 |
|
|
|
(6,616 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current liabilities |
|
|
21,946 |
|
|
|
(6,048 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211 |
|
|
|
274 |
|
|
|
485 |
|
|
Deferred tax liabilities |
Trade accruals and deferrals |
|
|
1,329 |
|
|
|
|
|
|
|
(21 |
) |
|
|
1,308 |
|
|
Accrued expenses and deferred income |
|
Financial accruals and deferrals |
|
|
956 |
|
|
|
(956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
53,835 |
|
|
|
(550 |
) |
|
|
16,558 |
|
|
|
69,843 |
|
|
TOTAL STOCKHOLDERS EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 122
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Effects of transition to IFRS on the Consolidated Balance Sheet at December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Italian |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
GAAP |
|
|
Reclassifications |
|
|
Adjustments |
|
|
IAS/IFRS |
|
|
|
Intangible fixed assets |
|
|
3,322 |
|
|
|
|
|
|
|
2,256 |
|
|
|
5,578 |
|
|
Intangible assets: |
- Goodwill |
|
|
2,140 |
|
|
|
|
|
|
|
17 |
|
|
|
2,157 |
|
|
- Goodwill |
- Other intangible fixed assets |
|
|
1,182 |
|
|
|
|
|
|
|
2,239 |
|
|
|
3,421 |
|
|
- Other intangible assets |
Property, plant and equipment |
|
|
9,537 |
|
|
|
(874 |
) |
|
|
774 |
|
|
|
9,437 |
|
|
Property, plant and equipment |
- Property, plant and equipment |
|
|
8,709 |
|
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
-Operating leases |
|
|
828 |
|
|
|
(828 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
46 |
|
|
Investment property |
Financial fixed assets |
|
|
3,779 |
|
|
|
86 |
|
|
|
160 |
|
|
|
4,025 |
|
|
Investment and other financial assets |
Financial receivables held as fixed assets |
|
|
19 |
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
828 |
|
|
|
(88 |
) |
|
|
740 |
|
|
Leased assets |
Deferred tax assets |
|
|
2,161 |
|
|
|
|
|
|
|
241 |
|
|
|
2,402 |
|
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-current assets |
|
|
18,818 |
|
|
|
67 |
|
|
|
3,343 |
|
|
|
22,228 |
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net inventories |
|
|
5,972 |
|
|
|
|
|
|
|
1,285 |
|
|
|
7,257 |
|
|
Inventories |
Trade receivables |
|
|
4,777 |
|
|
|
(755 |
) |
|
|
1,469 |
|
|
|
5,491 |
|
|
Trade receivables |
|
|
|
|
|
|
|
9,662 |
|
|
|
7,836 |
|
|
|
17,498 |
|
|
Receivables from financing activities |
Other receivables |
|
|
3,021 |
|
|
|
(508 |
) |
|
|
221 |
|
|
|
2,734 |
|
|
Other receivables |
|
|
|
|
|
|
|
398 |
|
|
|
(103 |
) |
|
|
295 |
|
|
Accrued income and prepaid expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,237 |
|
|
Current financial assets: |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
33 |
|
|
- Current equity investments |
|
|
|
|
|
|
|
135 |
|
|
|
218 |
|
|
|
353 |
|
|
- Current securities |
|
|
|
|
|
|
|
599 |
|
|
|
252 |
|
|
|
851 |
|
|
- Other financial assets |
Financial assets not held as fixed assets |
|
|
117 |
|
|
|
(117 |
) |
|
|
|
|
|
|
|
|
|
|
Financial lease contracts receivable |
|
|
1,727 |
|
|
|
(1,727 |
) |
|
|
|
|
|
|
|
|
|
|
Financial receivables |
|
|
7,151 |
|
|
|
(7,151 |
) |
|
|
|
|
|
|
|
|
|
|
Securities |
|
|
2,126 |
|
|
|
(2,126 |
) |
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
3,164 |
|
|
|
1,896 |
|
|
|
707 |
|
|
|
5,767 |
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current assets |
|
|
28,055 |
|
|
|
339 |
|
|
|
11,885 |
|
|
|
40,279 |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accruals and deferrals |
|
|
398 |
|
|
|
(398 |
) |
|
|
|
|
|
|
|
|
|
|
Financial accruals and deferrals |
|
|
327 |
|
|
|
(327 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
15 |
|
|
Assets held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
47,598 |
|
|
|
(319 |
) |
|
|
15,243 |
|
|
|
62,522 |
|
|
TOTAL ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
5,757 |
|
|
|
|
|
|
|
(829 |
) |
|
|
4,928 |
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,290 |
|
|
Provisions |
Reserves for employee severance indemnities |
|
|
1,286 |
|
|
|
1,432 |
|
|
|
964 |
|
|
|
3,682 |
|
|
- Employee benefits |
Reserves for risks and charges |
|
|
5,185 |
|
|
|
(1,449 |
) |
|
|
(128 |
) |
|
|
3,608 |
|
|
- Other provisions |
Deferred income tax reserves |
|
|
197 |
|
|
|
(197 |
) |
|
|
|
|
|
|
|
|
|
|
|
Long-term financial payables |
|
|
8,933 |
|
|
|
9,611 |
|
|
|
13,647 |
|
|
|
32,191 |
|
|
Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,174 |
|
|
- Asset-backed financing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,017 |
|
|
- Other debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-current liabilities |
|
|
15,601 |
|
|
|
9,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
629 |
|
|
|
(426 |
) |
|
|
203 |
|
|
Other financial liabilities |
Trade payables |
|
|
11,955 |
|
|
|
|
|
|
|
(258 |
) |
|
|
11,697 |
|
|
Trade payables |
Others payables |
|
|
2,565 |
|
|
|
|
|
|
|
1,996 |
|
|
|
4,561 |
|
|
Other payables |
Short-term financial payables |
|
|
9,810 |
|
|
|
(9,810 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current liabilities |
|
|
24,330 |
|
|
|
(9,181 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
325 |
|
|
|
522 |
|
|
Deferred tax liabilities |
Trade accruals and deferrals |
|
|
1,178 |
|
|
|
|
|
|
|
(48 |
) |
|
|
1,130 |
|
|
Accrued expenses and deferred income |
|
Financial accruals and deferrals |
|
|
732 |
|
|
|
(732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
47,598 |
|
|
|
(319 |
) |
|
|
15,243 |
|
|
|
62,522 |
|
|
TOTAL STOCKHOLDERS EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 123
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Reconciliation of Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Stockholders Equity under Italian GAAP |
|
|
|
|
7,494 |
|
|
|
5,757 |
|
|
|
|
|
|
|
|
|
|
|
|
Development costs |
|
A |
|
|
1,876 |
|
|
|
2,320 |
|
Employee benefits |
|
B |
|
|
(1,247 |
) |
|
|
(1,089 |
) |
Business combinations |
|
C |
|
|
|
|
|
|
40 |
|
Revenue recognition sales with a buy-back commitment |
|
D |
|
|
(180 |
) |
|
|
(177 |
) |
Revenue recognition other |
|
E |
|
|
(296 |
) |
|
|
(375 |
) |
Scope of consolidation |
|
F |
|
|
(371 |
) |
|
|
(390 |
) |
Property, plant and equipment |
|
G |
|
|
(164 |
) |
|
|
(150 |
) |
Write-off of deferred costs |
|
H |
|
|
(134 |
) |
|
|
(115 |
) |
Impairment of assets |
|
I |
|
|
(169 |
) |
|
|
(282 |
) |
Reserves for risks and charges |
|
L |
|
|
(195 |
) |
|
|
(256 |
) |
Recognition and measurement of derivatives |
|
M |
|
|
450 |
|
|
|
145 |
|
Treasury stock |
|
N |
|
|
(32 |
) |
|
|
(26 |
) |
Adjustments to the valuation of investments in associates |
|
P |
|
|
(152 |
) |
|
|
(134 |
) |
Sales of receivables |
|
Q |
|
|
(69 |
) |
|
|
(24 |
) |
Other adjustments |
|
|
|
|
(243 |
) |
|
|
(232 |
) |
Accounting for deferred income taxes |
|
R |
|
|
(8 |
) |
|
|
(84 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity under IAS/IFRS |
|
|
|
|
6,560 |
|
|
|
4,928 |
|
|
|
|
|
|
|
|
|
|
Details of the effects of transition to IFRS on the Balance sheet
The final section of this Note contains explanatory notes describing the main reconciling
items between Italian GAAP and IFRS, which are cross referenced to the following detailed analysis
by means of the letters associated with each line item.
Goodwill
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Business combinations goodwill depreciation write down |
|
|
C |
|
|
|
|
|
|
|
159 |
|
Business combinations restatement of CNH purchase accounting for deferred tax assets |
|
|
C |
|
|
|
|
|
|
|
(121 |
) |
Business combinations reinstatement of MMSE goodwill |
|
|
C |
|
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Development costs |
|
A |
|
|
2,090 |
|
|
|
2,499 |
|
Write-off of deferred costs |
|
H |
|
|
(288 |
) |
|
|
(218 |
) |
Impairment of assets |
|
I |
|
|
|
|
|
|
(10 |
) |
Recognition and measurement of derivatives measurement of borrowings at amortised cost |
|
M |
|
|
(28 |
) |
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,774 |
|
|
|
2,239 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
to Leased assets change in balance sheet format |
|
|
|
|
|
|
(914 |
) |
|
|
(828 |
) |
to Investment property change in balance sheet format |
|
|
|
|
|
|
(31 |
) |
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(945 |
) |
|
|
(874 |
) |
|
|
|
|
|
|
|
|
|
|
|
F - 124
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue recognition sales with a buy-back commitment |
|
D |
|
|
1,001 |
|
|
|
1,106 |
|
Revenue recognition other real estate transactions |
|
E |
|
|
80 |
|
|
|
49 |
|
Scope of consolidation |
|
F |
|
|
93 |
|
|
|
90 |
|
Property, plant and equipment elimination of revaluations |
|
G |
|
|
(242 |
) |
|
|
(236 |
) |
Property, plant and equipment elimination of depreciation of land |
|
G |
|
|
85 |
|
|
|
89 |
|
Impairment of assets |
|
I |
|
|
(168 |
) |
|
|
(244 |
) |
Other adjustments |
|
|
|
|
(32 |
) |
|
|
(80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
817 |
|
|
|
774 |
|
|
|
|
|
|
|
|
|
|
Investment property
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Property, plant and equipment change in balance sheet format |
|
|
|
|
|
|
31 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other financial assets
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Financial assets not held as fixed assets change in balance sheet format |
|
|
|
|
|
|
56 |
|
|
|
58 |
|
from Treasury stock change in balance sheet format |
|
|
|
|
|
|
32 |
|
|
|
26 |
|
from Financial receivables held as fixed assets change in balance sheet format |
|
|
|
|
|
|
29 |
|
|
|
19 |
|
from Other provisions investments provision change in balance sheet format |
|
|
|
|
|
|
(47 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue recognition other |
|
E |
|
|
292 |
|
|
|
342 |
|
Scope of consolidation |
|
F |
|
|
(327 |
) |
|
|
(180 |
) |
Recognition and measurement of derivatives fair value measurement of investments and securities |
|
M |
|
|
55 |
|
|
|
160 |
|
Treasury stock |
|
N |
|
|
(32 |
) |
|
|
(26 |
) |
Adjustments to the valuation of investments in associates |
|
P |
|
|
(152 |
) |
|
|
(135 |
) |
Other adjustments |
|
|
|
|
43 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121 |
) |
|
|
160 |
|
|
|
|
|
|
|
|
|
|
Leased assets
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Operating leases change in balance sheet format |
|
|
|
|
|
|
914 |
|
|
|
828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
914 |
|
|
|
828 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue recognition sales with a buy-back commitment for intra-group transactions |
|
|
D |
|
|
|
(41 |
) |
|
|
(83 |
) |
Other adjustments |
|
|
|
|
|
|
(9 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50 |
) |
|
|
(88 |
) |
|
|
|
|
|
|
|
|
|
|
|
F - 125
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Inventories
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue recognition sales with a buy-back commitment |
|
D |
|
|
608 |
|
|
|
695 |
|
Scope of consolidation |
|
F |
|
|
513 |
|
|
|
582 |
|
Recognition and measurement of derivatives |
|
M |
|
|
3 |
|
|
|
25 |
|
Other adjustments |
|
|
|
|
(11 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,113 |
|
|
|
1,285 |
|
|
|
|
|
|
|
|
|
|
Trade receivables
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Reclassifications to receivables for financing activities of dealer financing free period |
|
|
|
|
|
|
(682 |
) |
|
|
(755 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(682 |
) |
|
|
(755 |
) |
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue recognition sales with a buy-back commitment |
|
D |
|
|
38 |
|
|
|
95 |
|
Scope of consolidation SCDR |
|
F |
|
|
(924 |
) |
|
|
(789 |
) |
Sales of receivables |
|
Q |
|
|
3,563 |
|
|
|
2,130 |
|
Other adjustments |
|
|
|
|
1 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,678 |
|
|
|
1,469 |
|
|
|
|
|
|
|
|
|
|
Receivables from financing activities
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Financial receivables change in balance sheet format |
|
|
|
|
10,750 |
|
|
|
7,151 |
|
from Financial lease contract receivables change in balance sheet format |
|
|
|
|
1,797 |
|
|
|
1,727 |
|
from Financial deferred income measurement at amortised cost |
|
|
|
|
(331 |
) |
|
|
(198 |
) |
to Other financial assets change in balance sheet format |
|
|
|
|
(261 |
) |
|
|
(386 |
) |
from Securities change in balance sheet format |
|
|
|
|
105 |
|
|
|
105 |
|
from Other receivables guarantee deposits arising from securitisations of dealer financing free period |
|
|
|
|
148 |
|
|
|
508 |
|
Reclassifications from trade receivables of dealer financing free period |
|
|
|
|
682 |
|
|
|
755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,890 |
|
|
|
9,662 |
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue recognition sales with a buy-back commitment |
|
D |
|
|
(194 |
) |
|
|
(244 |
) |
Revenue recognition other |
|
E |
|
|
(100 |
) |
|
|
(106 |
) |
Scope of consolidation |
|
F |
|
|
2,140 |
|
|
|
1,111 |
|
Sales of receivables |
|
Q |
|
|
6,127 |
|
|
|
6,997 |
|
Other adjustments |
|
|
|
|
(36 |
) |
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,937 |
|
|
|
7,836 |
|
|
|
|
|
|
|
|
|
|
F - 126
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Other receivables
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
to Receivables for financing activities guarantee deposits on securitisations of dealer financing free period |
|
|
|
|
|
|
(148 |
) |
|
|
(508 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(148 |
) |
|
|
(508 |
) |
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Development costs |
|
A |
|
|
(208 |
) |
|
|
(183 |
) |
Revenue recognition sales with a buy-back commitment |
|
D |
|
|
9 |
|
|
|
11 |
|
Revenue recognition other real estate transactions |
|
E |
|
|
|
|
|
|
(110 |
) |
Scope of consolidation |
|
F |
|
|
213 |
|
|
|
168 |
|
Write-off of deferred costs |
|
H |
|
|
26 |
|
|
|
18 |
|
Sales of receivables |
|
Q |
|
|
501 |
|
|
|
475 |
|
Other adjustments |
|
|
|
|
|
|
|
|
(158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
541 |
|
|
|
221 |
|
|
|
|
|
|
|
|
|
|
Accrued income and prepaid expenses
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Employee benefits |
|
|
B |
|
|
|
2 |
|
|
|
(110 |
) |
Other adjustments |
|
|
|
|
|
|
8 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
(103 |
) |
|
|
|
|
|
|
|
|
|
|
|
Current securities
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from
Securities change in balance sheet format |
|
|
|
|
|
|
3,789 |
|
|
|
2,126 |
|
to Cash and cash equivalents for liquid funds and highly liquid debt securities |
|
|
|
|
|
|
(3,214 |
) |
|
|
(1,896 |
) |
to Receivables for financing activities change in balance sheet format |
|
|
|
|
|
|
(105 |
) |
|
|
(105 |
) |
from Financial accrued income change in balance sheet format |
|
|
|
|
|
|
45 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
515 |
|
|
|
135 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Scope of consolidation B.U.C. |
|
|
F |
|
|
|
231 |
|
|
|
210 |
|
Other adjustments |
|
|
|
|
|
|
29 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
260 |
|
|
|
218 |
|
|
|
|
|
|
|
|
|
|
|
|
F - 127
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Other financial assets
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Receivables from financing activities change in balance sheet format derivatives |
|
|
|
|
|
|
261 |
|
|
|
386 |
|
from Financial accrued income change in balance sheet format |
|
|
|
|
|
|
201 |
|
|
|
224 |
|
from Financial deferred income |
|
|
|
|
|
|
(32 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
430 |
|
|
|
599 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Scope of consolidation |
|
F |
|
|
15 |
|
|
|
25 |
|
Recognition and measurement of derivatives |
|
M |
|
|
864 |
|
|
|
232 |
|
Other adjustments |
|
|
|
|
13 |
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
892 |
|
|
|
252 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Marketable securities for liquid funds and highly liquid debt securities |
|
|
|
|
|
|
3,214 |
|
|
|
1,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,214 |
|
|
|
1,896 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Scope of consolidation |
|
F |
|
|
30 |
|
|
|
135 |
|
Sales of receivables securitizations vehicles liquidity |
|
Q |
|
|
390 |
|
|
|
572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420 |
|
|
|
707 |
|
|
|
|
|
|
|
|
|
|
Financial accrued income and prepaid expenses
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
to Debt change in balance sheet format |
|
|
|
|
|
|
(85 |
) |
|
|
(52 |
) |
to Marketable securities change in balance sheet format |
|
|
|
|
|
|
(45 |
) |
|
|
(10 |
) |
to Other financial liabilities change in balance sheet format |
|
|
|
|
|
|
(55 |
) |
|
|
(41 |
) |
to Other financial assets change in balance sheet format |
|
|
|
|
|
|
(201 |
) |
|
|
(224 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(386 |
) |
|
|
(327 |
) |
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Assets held for sale reclassification |
|
|
|
|
|
|
17 |
|
|
|
12 |
|
Other adjustments |
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
F - 128
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Employees benefits
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Reserve for employee pensions and similar obligations change in balance sheet format |
|
|
|
|
|
|
1,503 |
|
|
|
1,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,503 |
|
|
|
1,432 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Employee benefits |
|
|
B |
|
|
|
1,224 |
|
|
|
964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,224 |
|
|
|
964 |
|
|
|
|
|
|
|
|
|
|
|
|
Other provisions
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
to Employees benefits change in balance sheet format |
|
|
|
|
|
|
(1,503 |
) |
|
|
(1,432 |
) |
to
Investments and other financial assets, investments provision change in balance sheet format |
|
|
|
|
|
|
(47 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,550 |
) |
|
|
(1,449 |
) |
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue recognition sales with a buy-back commitment |
|
D |
|
|
(283 |
) |
|
|
(279 |
) |
Reserves for risks and charges vehicle sales incentives |
|
L |
|
|
260 |
|
|
|
273 |
|
Reserves for risks and charges other |
|
L |
|
|
(65 |
) |
|
|
(20 |
) |
Sales of receivables |
|
Q |
|
|
(51 |
) |
|
|
(60 |
) |
Other adjustments |
|
|
|
|
(64 |
) |
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(203 |
) |
|
|
(128 |
) |
|
|
|
|
|
|
|
|
|
Debt
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Financial accrued expenses change in balance sheet format |
|
|
|
|
|
|
123 |
|
|
|
93 |
|
from Financial prepaid expenses change in balance sheet format |
|
|
|
|
|
|
(85 |
) |
|
|
(52 |
) |
to Other financial liabilities change in balance sheet format |
|
|
|
|
|
|
(153 |
) |
|
|
(240 |
) |
from Short term financial payables change in balance sheet format |
|
|
|
|
|
|
6,616 |
|
|
|
9,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,501 |
|
|
|
9,611 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue
recognition other |
|
E |
|
|
673 |
|
|
|
697 |
|
Scope of consolidation |
|
F |
|
|
2,583 |
|
|
|
2,078 |
|
Recognition and measurement of derivatives |
|
M |
|
|
813 |
|
|
|
470 |
|
Sales of receivables |
|
Q |
|
|
10,581 |
|
|
|
10,174 |
|
Other adjustments |
|
|
|
|
140 |
|
|
|
228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,790 |
|
|
|
13,647 |
|
|
|
|
|
|
|
|
|
|
F - 129
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Other financial liabilities
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
from Debt change in balance sheet format derivatives |
|
|
|
|
|
|
153 |
|
|
|
240 |
|
from Financial accrued expenses change in balance sheet format |
|
|
|
|
|
|
470 |
|
|
|
430 |
|
from Financial prepaid expenses change in balance sheet format |
|
|
|
|
|
|
(55 |
) |
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
568 |
|
|
|
629 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Recognition and measurement of derivatives |
|
|
M |
|
|
|
(257 |
) |
|
|
(217 |
) |
Other adjustments |
|
|
|
|
|
|
34 |
|
|
|
(209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(223 |
) |
|
|
(426 |
) |
|
|
|
|
|
|
|
|
|
|
|
Trade payables
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Scope of consolidation |
|
|
F |
|
|
|
(284 |
) |
|
|
(168 |
) |
Other adjustments |
|
|
|
|
|
|
(13 |
) |
|
|
(90 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(297 |
) |
|
|
(258 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other payables
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Revenue recognition sales with a buy-back commitment |
|
|
D |
|
|
|
1,851 |
|
|
|
2,031 |
|
Scope of consolidation |
|
|
F |
|
|
|
42 |
|
|
|
47 |
|
Other adjustments |
|
|
|
|
|
|
55 |
|
|
|
(82 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,948 |
|
|
|
1,996 |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and deferred income
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
Write-off of deferred costs |
|
|
H |
|
|
|
(35 |
) |
|
|
(44 |
) |
Other adjustments |
|
|
|
|
|
|
14 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21 |
) |
|
|
(48 |
) |
|
|
|
|
|
|
|
|
|
|
|
Financial accrued expenses and deferred income
Reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
At January 1, 2004 |
|
|
At December 31, 2004 |
|
to Receivables from financing activities measurement at amortised cost |
|
|
|
|
|
|
(331 |
) |
|
|
(198 |
) |
to Other
financial assets change in balance sheet format derivatives |
|
|
|
|
|
|
(32 |
) |
|
|
(11 |
) |
to Other
financial liabilities change in balance sheet format derivatives |
|
|
|
|
|
|
(470 |
) |
|
|
(430 |
) |
to Debt change in balance sheet format |
|
|
|
|
|
|
(123 |
) |
|
|
(93 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(956 |
) |
|
|
(732 |
) |
|
|
|
|
|
|
|
|
|
|
|
F - 130
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Effects
of transition to IFRS on the Income statement for the year ended
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
Italian GAAP |
|
|
Reclassifications |
|
|
Adjustments |
|
|
IAS/IFRS |
|
|
|
|
|
Net revenues |
|
|
46,703 |
|
|
|
|
|
|
|
(1,066 |
) |
|
|
45,637 |
|
|
|
|
Net revenues |
Cost of sales |
|
|
39,623 |
|
|
|
675 |
|
|
|
(1,177 |
) |
|
|
39,121 |
|
|
|
|
Cost of sales |
Gross operating result |
|
|
7,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overhead |
|
|
4,629 |
|
|
|
51 |
|
|
|
21 |
|
|
|
4,701 |
|
|
|
|
Selling, general and administrative costs |
Research and development |
|
|
1,810 |
|
|
|
1 |
|
|
|
(461 |
) |
|
|
1,350 |
|
|
|
|
Research and development costs |
Other operating income (expenses) |
|
|
(619 |
) |
|
|
346 |
|
|
|
(142 |
) |
|
|
(415 |
) |
|
|
|
Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating result |
|
|
22 |
|
|
|
(381 |
) |
|
|
409 |
|
|
|
50 |
|
|
|
|
Trading Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154 |
|
|
|
(4 |
) |
|
|
150 |
|
|
|
|
Gains (losses) on the disposal of investments |
|
|
|
|
|
|
|
496 |
|
|
|
46 |
|
|
|
542 |
|
|
|
|
Restructuring costs |
|
|
|
|
|
|
|
(243 |
) |
|
|
|
|
|
|
(243 |
) |
|
|
|
Other unusual income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(966 |
) |
|
|
359 |
|
|
|
(585 |
) |
|
|
|
Operating result |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(641 |
) |
|
|
(538 |
) |
|
|
(1,179 |
) |
|
|
|
Financial income (expenses) |
Result of Investments |
|
|
8 |
|
|
|
|
|
|
|
127 |
|
|
|
135 |
|
|
|
|
Result from investments |
Non-operating income (expenses) |
|
|
(863 |
) |
|
|
863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT |
|
|
(833 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income (expenses) |
|
|
(744 |
) |
|
|
744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes |
|
|
(1,577 |
) |
|
|
|
|
|
|
(52 |
) |
|
|
(1,629 |
) |
|
|
|
Result before taxes |
Income taxes |
|
|
(29 |
) |
|
|
|
|
|
|
(21 |
) |
|
|
(50 |
) |
|
|
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net result of normal operations |
|
|
(1,548 |
) |
|
|
|
|
|
|
(31 |
) |
|
|
(1,579 |
) |
|
|
|
Results from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net result before minority interest |
|
|
(1,548 |
) |
|
|
|
|
|
|
(31 |
) |
|
|
(1,579 |
) |
|
|
|
Net result before minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of the Net result
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
Net result before minority interest under Italian GAAP |
|
|
|
|
|
|
(1,548 |
) |
|
Development costs |
|
|
A |
|
|
|
436 |
|
Employee benefits |
|
|
B |
|
|
|
94 |
|
Business combinations |
|
|
C |
|
|
|
53 |
|
Revenue
recognition sales with a buy-back commitment |
|
|
D |
|
|
|
1 |
|
Revenue
recognition other |
|
|
E |
|
|
|
(20 |
) |
Scope of consolidation |
|
|
F |
|
|
|
3 |
|
Property, plant and equipment |
|
|
G |
|
|
|
14 |
|
Write-off of deferred costs |
|
|
H |
|
|
|
19 |
|
Impairment of assets |
|
|
I |
|
|
|
(114 |
) |
Reserves for risks and charges |
|
|
L |
|
|
|
(67 |
) |
Recognition and measurement of derivatives |
|
|
M |
|
|
|
(454 |
) |
Treasury stock |
|
|
N |
|
|
|
|
|
Adjustments to the valuation of investments in associates |
|
|
P |
|
|
|
(15 |
) |
Sales of receivables |
|
|
Q |
|
|
|
(4 |
) |
Other adjustments |
|
|
|
|
|
|
2 |
|
Accounting for deferred income taxes |
|
|
R |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
Net result before minority interest under IAS/IFRS |
|
|
|
|
|
|
(1,579 |
) |
|
|
|
|
|
|
|
|
F - 131
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Details of the effects of transition to IFRS on the Income statement
The final section of this Note contains explanatory notes describing the main reconciling
items between Italian GAAP and IFRS, which are cross referenced to the following detailed analysis
by means of the letters associated with each line item.
Net revenues
Adjustments
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
Revenue recognition sales with a buy-back commitment |
|
|
D |
|
|
|
(1,103 |
) |
Scope of consolidation |
|
|
F |
|
|
|
16 |
|
Reserve for risks and charges vehicle sales incentives |
|
|
L |
|
|
|
(10 |
) |
Sales of receivables |
|
|
Q |
|
|
|
187 |
|
Other adjustments |
|
|
|
|
|
|
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,066 |
) |
|
|
|
|
|
|
|
|
Cost of sales
Reclassifications
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
from Financial income (expenses) for rental companies included in Financial Services |
|
|
|
|
|
|
36 |
|
from Selling, general and administrative costs change in income statement format |
|
|
|
|
|
|
48 |
|
from Other income (expenses) change in income statement format |
|
|
|
|
|
|
524 |
|
to Financial income (expenses) for interest costs on defined benefit plans |
|
|
|
|
|
|
(127 |
) |
from Financial income (expenses) interest compensation to financial services on dealer free period |
|
|
|
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
675 |
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
Revenue recognition sales with a buy-back commitment |
|
|
D |
|
|
|
(1,090 |
) |
Employee benefits |
|
|
B |
|
|
|
(37 |
) |
Impairment of assets |
|
|
I |
|
|
|
(35 |
) |
Other Adjustments |
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,177 |
) |
|
|
|
|
|
|
|
|
Selling, general and administrative costs
Reclassifications
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
from Cost of sales change in income statement format |
|
|
|
|
|
|
(48 |
) |
from Other
income (expenses) change in income statement format |
|
|
|
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
Research and development costs
Adjustments
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
Development costs |
|
|
A |
|
|
|
(461 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(461 |
) |
|
|
|
|
|
|
|
|
F - 132
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Other income (expenses)
Reclassifications
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
to Cost of sales change in income statement format |
|
|
|
|
|
|
524 |
|
to Selling, general and administrative costs change in income statement format |
|
|
|
|
|
|
99 |
|
to Research and development costs change in income statement format |
|
|
|
|
|
|
1 |
|
to Restructuring costs change in income statement format |
|
|
|
|
|
|
508 |
|
from Non-operating income (expenses) change in income statement format |
|
|
|
|
|
|
(1,017 |
) |
to Other unusual income (expenses) change in income statement format |
|
|
|
|
|
|
231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
346 |
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
Business combinations goodwill depreciation write down |
|
|
C |
|
|
|
174 |
|
Business combinations purchase accounting CNH |
|
|
C |
|
|
|
(121 |
) |
Employee benefits |
|
|
B |
|
|
|
72 |
|
Impairment of assets |
|
|
I |
|
|
|
(148 |
) |
Scope of consolidation |
|
|
F |
|
|
|
(114 |
) |
Other adjustments |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(142 |
) |
|
|
|
|
|
|
|
|
Gains (losses) on the disposal of investments
Reclassifications
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
from Non-operating income (expenses) change in income statement format |
|
|
|
|
|
|
154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154 |
|
|
|
|
|
|
|
|
|
Restructuring costs
Reclassifications
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
from Other income (expenses) change in income statement format |
|
|
|
|
|
|
508 |
|
to Other unusual income (expenses) change in income statement format |
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
496 |
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
Reserves for risks and charges restructuring |
|
|
L |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
Other unusual income (expenses)
Reclassifications
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
from Non-operating income (expenses) change in income statement format |
|
|
|
|
|
|
(231 |
) |
from Restructuring costs change in income statement format |
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(243 |
) |
|
|
|
|
|
|
|
|
F - 133
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Financial income (expenses)
Reclassifications
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
to Cost of sales for renting companies included in Financial Services |
|
|
|
|
|
|
36 |
|
from Cost of sales for interest costs on defined benefit plans |
|
|
|
|
|
|
(127 |
) |
to Cost of sales interest compensation to financial services on dealer free period |
|
|
|
|
|
|
194 |
|
from Financial income (expenses) change in income statement format |
|
|
|
|
|
|
(744 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(641 |
) |
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
Recognition and measurement of derivatives Equity swap |
|
|
M |
|
|
|
(445 |
) |
Other adjustments |
|
|
|
|
|
|
(93 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(538 |
) |
|
|
|
|
|
|
|
|
Result from investments
Adjustments
|
|
|
|
|
|
|
|
|
(in millions of euros) |
|
|
|
|
|
2004 |
|
Adjustments on the valuation of investments in associates |
|
|
P |
|
|
|
87 |
|
Other adjustments |
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127 |
|
|
|
|
|
|
|
|
|
Description of main differences between Italian GAAP and IFRS
The following paragraphs provide a description of the main differences between Italian GAAP
and IFRS that have had effects on Fiats consolidated balance sheet and income statement. Amounts
are shown pre-tax and the related tax effects are separately summarized in the item R. Accounting
for deferred income taxes.
A. Development costs
Under Italian GAAP applied research and development costs may alternatively be capitalized or
charged to operations when incurred. Fiat Group has mainly expensed R&D costs when incurred. IAS 38
Intangible Assets requires that research costs be expensed, whereas development costs that meet
the criteria for capitalization must be capitalized and then amortized from the start of production
over the economic life of the related products.
Under IFRS, the Group has capitalized development costs in the Fiat Auto, Ferrari-Maserati,
Agricultural and Construction Equipment, Commercial Vehicle and Components Sectors, using the
retrospective approach in compliance with IFRS 1.
The positive impact of 1,876 million euros on the opening IFRS stockholders equity at January
1, 2004, corresponds to the cumulative amount of qualifying development expenditures incurred in
prior years by the Group, net of accumulated amortization. Consistently, intangible assets show an
increase of 2,090 million euros and of 2,499 million euros at January 1, 2004 and at December 31,
2004, respectively.
F - 134
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
The 2004 net result was positively impacted by 436 million euros in the year, reflecting the
combined effect of the capitalization of development costs incurred in the period that had been
expensed under Italian GAAP, and the amortization of the amount that had been capitalized in the
opening IFRS balance sheet at January 1, 2004. This positive impact has been accounted for in
Research and development costs.
In accordance with IAS 36 Impairment of Assets, development costs capitalized as intangible
assets shall be tested for impairment and an impairment loss shall be recognized if the recoverable
amount of an asset is less than its carrying amount, as further described in the paragraph I.
Impairment of assets.
B. Employee benefits
The Group sponsors funded and unfunded defined benefit pension plans, as well as other long
term benefits to employees.
Under Italian GAAP, these benefits, with the exception of the Reserve for Employee Severance
Indemnities (TFR) that is accounted for in compliance with a specific Italian law, are mainly
recorded in accordance with IAS 19 Employee Benefits, applying the corridor approach, which
consists of amortizing over the remaining service lives of active employees only the portion of net
cumulative actuarial gains and losses that exceeds the greater of 10% of either the defined benefit
obligation or the fair value of the plan assets, while the portion included in the 10% remains
unrecognized.
With the adoption of IFRS, TFR is considered a defined benefit obligation to be accounted for
in accordance with IAS 19 and consequently has been recalculated applying the Projected Unit Credit
Method.
Furthermore, as mentioned in the paragraph Optional exemptions, the Group elected to
recognize all cumulative actuarial gains and losses that existed at January 1, 2004, with a
negative impact on opening stockholders equity at that date of 1,247 million euros.
Consequently pension and other post-employment benefit costs recorded in the 2004 IFRS income
statement do not include any amortization of unrecognized actuarial gains and losses deferred in
previous years in the IFRS financial statements under the corridor approach, and recognised in the
2004 income statement under Italian GAAP, resulting in a benefit of 94 million euros.
The Group has elected to use the corridor approach for actuarial gains and losses arising
after January 1, 2004.
Furthermore, the Group elected to state the expense related to the reversal of discounting on
defined benefit plans without plan assets separately as Financial expenses, with a corresponding
increase in Financial expenses of 127 million euros in 2004.
C. Business combinations
As mentioned above, the Group elected not to apply IFRS 3 Business Combinations
retrospectively to business combinations that occurred before the date of transition to IFRS.
As prescribed in IFRS 3, starting from January 1, 2004, the IFRS income statement no longer
includes goodwill amortization charges, resulting in a positive impact on Other operating income
and expense of 162 million euros in 2004.
D. Revenue recognition sales with a buy-back commitment
Under Italian GAAP, the Group recognised revenues from sales of products at the time title
passed to the customer, which was generally at the time of shipment. For contracts for vehicle
sales with a buy-back commitment at a specified price, a specific reserve for future risks and
charges was set aside based on the difference between the guaranteed residual value and the
estimated realizable value of vehicles, taking into account the probability that such option would
be exercised. This reserve was set up at the time of the initial sale and adjusted periodically
over the period of the contract. The costs of refurbishing the vehicles, to be
F - 135
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
incurred when the buy-back option is exercised, were reasonably estimated and accrued at the
time of the initial sale.
Under IAS 18 Revenue, new vehicle sales with a buy-back commitment do not meet criteria for
revenue recognition, because the significant risks and rewards of ownership of the goods are not
necessarily transferred to the buyer. Consequently, this kind of contract is treated in a manner
similar to an operating lease transaction. More specifically, vehicles sold with a buy-back
commitment are accounted for as Inventory if they regard the Fiat Auto business (agreements with
normally a short-term buy-back commitment) and as Property, plant and equipment if they regard the
Commercial Vehicles business (agreements with normally a long-term buy-back commitment). The
difference between the carrying value (corresponding to the manufacturing cost) and the estimated
resale value (net of refurbishing costs) at the end of the buy-back period, is depreciated on a
straight-line basis over the duration of the contract. The initial sale price received is accounted
for as a liability. The difference between the initial sale price and the buy-back price is
recognised as rental revenue on a straight-line basis over the duration of the contract.
Opening IFRS stockholders equity at January 1, 2004 includes a negative impact of 180 million
euros mainly representing the portion of the margin accounted for under Italian GAAP on vehicles
sold with a buy-back commitment prior to January 1, 2004, that will be recognised under IFRS over
the remaining buy-back period, net of the effects due to the adjustments to the provisions for
vehicle sales with a buy-back commitment recognised under Italian GAAP.
This accounting treatment results in increases in the tangible assets reported in the balance
sheet (1,001 million euros at January 1, 2004 and 1,106 million euros at December 31, 2004), in
inventory (608 million euros at January 1, 2004 and 695 million euros at December 31, 2004), in
advances from customers (equal to the operating lease rentals prepaid at the date of initial sale
and recognised in the item Other payables), as well as in Trade payables, for the amount of the
buy-back price, payable to the customer when the vehicle is bought back. In the income statement, a
significant impact is generated on revenues (reduced by 1,103 million euros in 2004) and on cost of
sales (reduced by 1,090 million euros in 2004), while no significant impact is generated on the net
operating result; furthermore, the amount of these impacts in future years will depend on the
changes in the volume and characteristics of these contracts year-over-year. Notwithstanding this,
these changes are not expected to have a particularly significant impact on Group reported earnings
in the coming years.
E. Revenue recognition Other
Under Italian GAAP the recognition of disposals is based primarily on legal and contractual
form (transfer of legal title).
Under IFRS, when risks and rewards are not substantially transferred to the buyer and the
seller maintains a continuous involvement in the operations or assets being sold, the transaction
is not recognized as a sale.
Consequently, certain disposal transactions, such as the disposal of the 14% interest in
Italenergia Bis and certain minor real estate transactions, have been reversed retrospectively: the
related asset has been recognised in the IFRS balance sheet, the initial gain recorded under
Italian GAAP has been reversed and the cash received at the moment of the sale has been accounted
for as a financial liability.
In particular, in 2001 the Group acquired a 38.6% shareholding in Italenergia S.p.A., now
Italenergia Bis S.p.A. (Italenergia), a company formed between Fiat, Electricité de France
(EDF) and certain financial investors for the purpose of acquiring control of the Montedison -
Edison (Edison) group through tender offers. Italenergia assumed effective control of Edison at
the end of the third quarter of that year and consolidated Edison from October 1, 2001. In 2002 the
shareholders of Italenergia entered into agreements which resulted, among other things, in the
transfer of a 14% interest in Italenergia from Fiat to other shareholders (with a put option that
would require Fiat to repurchase the shares transferred in certain
F - 136
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
circumstances) and the assignment to Fiat of a put option to sell its shares in Italenergia to
EDF in 2005, based on market values at that date, but subject to a contractually agreed minimum
price in excess of book value.
Under Italian GAAP, Fiat accounted for its investments in Italenergia under the equity method,
based on a 38.6% shareholding through September 30, 2002 and a 24.6% shareholding from October 1,
2002; in addition it recorded a gain of 189 million euros before taxes on the sale of its 14%
interest in the investee to other shareholders effective September 30, 2002.
Under IFRS, the transfer of the 14% interest in Italenergia to the other shareholders was not
considered to meet the requirements for revenue recognition set out in IAS 18, mainly due to the
existence of the put options granted to the transferees and de facto constraints on the
transferees ability to pledge or exchange the transferred assets in the period from the sale
through 2005. Accordingly, the gain recorded in 2002 for the sale was reversed, and the results of
applying the equity method of accounting to the investment in Italenergia was recomputed to reflect
a 38.6% interest in the net results and stockholders equity of the investee, as adjusted for the
differences between Italian GAAP and IFRS applicable to Italenergia.
This adjustment decreased the stockholders equity at January 1, 2004 and at December 31, 2004
by an amount of 153 million euros and 237 million euros, respectively. Furthermore this adjustment
increased the investment for an amount of 291 million euros at January 1, 2004 and of 341 million
euros at December 31, 2004 and financial debt for amounts of 572 million euros at January 1, 2004
and of 593 million euros at December 31, 2004, as a consequence of the non-recognition of the
transfer of the 14% interest in Italenergia.
F. Scope of consolidation
Under Italian GAAP, the subsidiary B.U.C. Banca Unione di Credito, as required by law, was
excluded from the scope of consolidation as it had dissimilar activities, and was accounted for
using the equity method.
IFRS does not permit this kind of exclusion: consequently, B.U.C. is included in the IFRS
scope of consolidation.
Furthermore, under Italian GAAP investments that are not controlled on a legal basis or a de
facto basis determined considering voting rights were excluded from the scope of consolidation.
Under IFRS, in accordance with SIC 12 Consolidation Special Purpose Entities, a Special
Purpose Entity (SPE) shall be consolidated when the substance of the relationship between an
entity and the SPE indicates that the SPE is controlled by that entity.
This standard has been applied to all receivables securitization transactions entered into by
the Group (see the paragraph Q. Sales of receivables below), to a real estate securitization
transaction entered into in 1998 and to the sale of the Fiat Auto Spare Parts business to Società
di Commercialization e Distribuzione Ricambi S.p.A. (SCDR) in 2001.
In particular, in 1998 the Group entered in a real estate securitization and, under Italian
GAAP, the related revenue was recognised at the date of the legal transfer of the assets involved.
In the IFRS balance sheet at January 1, 2004, these assets have been written back at their
historical cost, net of revaluations accounted before the sale, if any. Cash received at the time
of the transaction has been accounted for in financial debt for an amount of 188 million euros at
January 1, 2004.
The IFRS stockholders equity at January 1, 2004 was negatively impacted for 105 million euros
by the cumulative effect of the reversal of the capital gain on the initial disposal and of the
revaluation previously recognised under Italian GAAP, net of the related effect of asset
depreciation, as well as the recognition of financial charges on related debt, net of the reversal
of rental fees paid, if any. The impact on the 2004 net result is not material.
F - 137
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
Furthermore, in 2001 the Group participated with a specialist logistics operator and other
financial investors in the formation of Società di Commercialization e Distribuzione Ricambi
S.p.A. (SCDR), a company whose principal activity is the purchase of spare parts from Fiat Auto
for resale to end customers. At that date Fiat Auto and its subsidiaries sold their spare parts
inventory to SCDR recording a gain of 300 million euros. The Groups investment in SCDR represents
19% of SCDRs stock capital and was accounted for under the equity method for Italian GAAP.
Under IFRS, SCDR qualifies as a Special Purpose Entity (SPE) as defined by SIC 12 due to the
continuing involvement of Fiat Auto in SCDR operations. Consequently, SCDR has been consolidated on
a line by line basis in the IFRS consolidated financial statements, with a consequent increase in
financial debt of 237 million euros and of 471 million euros at January 1, 2004 and at December 31,
2004, respectively. Opening stockholders equity at January 1, 2004 was reduced by 266 million
euros by the amount corresponding to the unrealized intercompany profit in inventory held by SCDR
on that date; this amount did not change significantly at the end of 2004.
G. Property, plant and equipment
Under Italian GAAP and IFRS, assets included in Property, Plant and Equipment were generally
recorded at cost, corresponding to the purchase price plus the direct attributable cost of bringing
the assets to their working condition.
Under Italian GAAP, Fiat revalued certain Property, Plant and Equipment to amounts in excess
of historical cost, as permitted or required by specific laws of the countries in which the assets
were located. These revaluations were credited to stockholders equity and the revalued assets were
depreciated over their remaining useful lives.
Furthermore, under Italian GAAP, the land directly related to buildings included in Property,
Plant and Equipment was depreciated together with the related building depreciation.
The revaluations and land depreciation are not permitted under IFRS. Therefore IFRS
stockholders equity at January 1, 2004 reflects a negative impact of 164 million euros, related to
the effect of the elimination of the asset revaluation recognised in the balance sheet, partially
offset by the reversal of the land depreciation charged to prior period income statements.
In the 2004 IFRS income statement, the above-mentioned adjustments had a positive impact of 14
million euros in 2004 due to the reversal of the depreciation of revalued assets, net of
adjustments on gains and losses, if any, on disposal of the related assets, and to the reversal of
land depreciation.
H. Write-off of deferred costs
Under Italian GAAP, the Group deferred and amortized certain costs (mainly start-up and
related charges). IFRS require these to be expensed when incurred.
In addition, costs incurred in connection with share capital increases, which are also
deferred and amortized under Italian GAAP, are deducted directly from the proceeds of the increase
and debited to stockholders equity under IFRS.
I. Impairment of assets
Under Italian GAAP, the Group tested its intangible assets with indefinite useful lives
(mainly goodwill) for impairment annually by comparing their carrying amount with their recoverable
amount in terms of the value in use of the asset itself (or group of assets). In determining the
value in use the Group estimated the future cash inflows and outflows of the asset (or group of
assets) to be derived from the continuing use of
F - 138
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
the asset and from its ultimate disposal, and discounted those future cash flows. If the
recoverable amount was lower than the carrying value, an impairment loss was recognized for the
difference.
With reference to tangible fixed assets, under Italian GAAP the Group accounted for specific
write-offs when the asset was no longer to be used. Furthermore, in the presence of impairment
indicators, the Group tested tangible fixed assets for impairment using the undiscounted cash flow
method in determining the recoverable amount of homogeneous group of assets. If the recoverable
amount thus determined was lower than the carrying value, an impairment loss was recognised for the
difference.
Under IFRS, intangible assets with indefinite useful lives are tested for impairment annually
by a methodology substantially similar to the one required by Italian GAAP. Furthermore,
development costs, capitalized under IFRS and expensed under Italian GAAP, are attributed to the
related cash generating unit and tested for impairment together with the related tangible assets,
applying the discounted cash flow method in determining their recoverable amount.
Consequently, the reconciliation between Italian GAAP and IFRS reflects adjustments due to
both impairment losses on development costs previously capitalized for IFRS purposes, and the
effect of discounting on the determination of the recoverable amount of tangible fixed assets.
L. Reserves for risks and charges
Differences between Italian GAAP and IFRS refer mainly to the following items:
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Restructuring reserve: the Group provided restructuring reserves based upon
managements best estimate of the costs to be incurred in connection with each of its
restructuring programs at the time such programs were formally decided. Under IFRS the
requirements to recognise a constructive obligation in the financial statements are
more restrictive, and some restructuring reserves recorded under Italian GAAP have been
eliminated. |
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Reserve for vehicle sales incentives: under Italian GAAP Fiat Auto accounted
for certain incentives at the time at which a legal obligation to pay the incentives
arose, which may have been in periods subsequent to that in which the initial sale to
the dealer network was made. Under IAS 37 companies are required to make provision not
only for legal, but also for constructive, obligations based on an established pattern
of past practice. In the context of the IFRS restatement exercise, Fiat has reviewed
its practice in the area of vehicle sales incentives and has determined that for
certain forms of incentives a constructive obligation exists which should be provided
under IFRS at the date of sale. |
M. Recognition and measurement of derivatives
Beginning in 2001 the Fiat Group adopted to the extent that it is consistent and not in
contrast with general principles set forth in the Italian law governing financial statements IAS
39 Financial Instruments: Recognition and Measurement. In particular, taking into account the
restrictions under Italian law, the Group maintained that IAS 39 was applicable only in part and
only in reference to the designation of derivative financial instruments as hedging or
non-hedging instruments and with respect to the symmetrical accounting of the result of the
valuation of the hedging instruments and the result attributable to the hedged items (hedge
accounting). The transactions which, according to the Groups policy for risk management, were
able to meet the conditions stated by the accounting principle for hedge accounting treatment, were
designated as hedging transactions; the others, although set up for the purpose of managing risk
exposure (inasmuch as the Groups policy does not permit speculative transactions), were designated
as trading.
The main differences between Italian GAAP and IFRS may be summarized as follows:
F - 139
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
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Instruments designated as hedging instruments under Italian GAAP, the instrument
was valued symmetrically with the underlying hedged item. Therefore, where the hedged
item was not been adjusted to fair value in the financial statements, the hedging
instrument was also not adjusted. Similarly, where the hedged item had not yet been
recorded in the financial statements (hedging of future flows), the valuation of the
hedging instrument at fair value was deferred. |
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In the case of a fair value hedge, the gains or losses from remeasuring
the hedging instrument at fair value shall be recognised in the income statement
and the gains or losses on the hedged item attributable to the hedge risk shall
adjust the carrying amount of the hedged item and be recognised in the income
statement. Consequently, no impact arises on net income (except for the ineffective
portion of the hedge, if any) and on net equity, while adjustments impact the
carrying values of hedging instruments and hedged items. |
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In the case of a cash flow hedge (hedging of future flows), the portion
of gains or losses on the hedging instrument that is determined to be an effective
hedge shall be recognised directly in equity through the statement of changes in
equity; the ineffective portion of the gains or losses shall be recognised in the
income statement. Consequently, with reference to the effective portion, only a
difference in net equity arises between Italian GAAP and IFRS. |
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Instruments designated as non-hedging instruments(except for foreign currency
derivative instruments) under Italian GAAP, these instruments were valued at market
value and the differential, if negative, compared to the contractual value, was
recorded in the income statement, in accordance with the concept of prudence. Under IAS
39 also the positive differential should also be recorded. With reference to foreign
currency derivative instruments, instead, the accounting treatment adopted under
Italian GAAP was in compliance with IAS 39. |
In this context, as mentioned in the consolidated financial statements as of December 31,
2003, Fiat was party to a Total Return Equity Swap contract on General Motors shares, in order to
hedge the risk implicit in the Exchangeable Bond on General Motors shares. Although this equity
swap was entered into for hedging purposes it does not qualify for hedge accounting and accordingly
it was defined as a non-hedging instrument. Consequently, the positive fair value of the instrument
as of December 31, 2003, amounting to 450 million euros, had not been recorded under Italian GAAP.
During 2004 Fiat terminated the contract, realizing a gain of 300 million euros.
In the IFRS restatement, the above mentioned positive fair value at December 31, 2003 has been
recognized in opening equity, while, following the unwinding of the swap, a negative adjustment of
the same amount has been recorded in the 2004 income statement.
N. Treasury stock
In accordance with Italian GAAP, the Group accounted for treasury stock as an asset and
recorded related valuation adjustments and gains or losses on disposal in the Income statement.
Under IFRS, treasury stock is deducted from stockholders equity and all movements in treasury
stock are recognised in stockholders equity rather than in the income statement.
O. Stock options
Under Italian GAAP, with reference to share-based payment transactions, no obligations or
compensation expenses were recognised.
In accordance with IFRS 2 Share-based Payment, the full amount fair value of stock options
on the date of grant must be expensed. Changes in fair value after the grant date have no impact on
the initial
F - 140
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
measurement. The compensation expense corresponding to the options fair value is recognised
in payroll costs on a straight-line basis over the period from the grant date to the vesting date,
with the offsetting credit recognised directly in equity.
The Group applied the transitional provision provided by IFRS 2 and therefore applied this
standard to all stock options granted after November 7, 2002 and not yet vested at the effective
date of IFRS 2 (January 1 , 2005). No compensation expense is required to be recognised for stock
options granted prior to November 7, 2002, in accordance with transitional provision of IFRS 2.
P. Adjustments to the valuation of investments in associates
These items represent the effect of the IFRS adjustments on the Group portion of the net
equity of associates accounted for using the equity method.
Q. Sales of receivables
The Fiat Group sells a significant part of its finance, trade and tax receivables through
either securitization programs or factoring transactions.
A securitization transaction entails the sale without recourse of a portfolio of receivables
to a securitization vehicle (special purpose entity). This special purpose entity finances the
purchase of the receivables by issuing asset-backed securities (i.e. securities whose repayment and
interest flow depend upon the cash flow generated by the portfolio). Asset-backed securities are
divided into classes according to their degree of seniority and rating: the most senior classes are
placed with investors on the market; the junior class, whose repayment is subordinated to the
senior classes, is normally subscribed for by the seller. The residual interest in the receivables
retained by the seller is therefore limited to the junior securities it has subscribed for.
Factoring transactions may be with or without recourse on the seller; certain factoring
agreements without recourse include deferred purchase price clauses (i.e. the payment of a minority
portion of the purchase price is conditional upon the full collection of the receivables), require
a first loss guarantee of the seller up to a limited amount or imply a continuing significant
exposure to the receivables cash flow.
Under Italian GAAP, all receivables sold through either securitization or factoring
transactions (both with and without recourse) had been derecognized. Furthermore, with specific
reference to the securitization of retail loans and leases originated by the financial services
companies, the net present value of the interest flow implicit in the installments, net of related
costs, had been recognised in the income statement.
Under IFRS:
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As mentioned above, SIC 12 Consolidation Special Purpose Entities states that an
SPE shall be consolidated when the substance of the relationship between the entity and
the SPE indicates that the SPE is controlled by that entity, therefore all
securitisation transactions have been reversed. |
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IAS 39 allows for the derecognition of a financial asset when, and only when, the
risks and rewards of the ownership of the assets are substantially transferred:
consequently, all portfolios sold with recourse, and the majority of those sold without
recourse, have been reinstated in the IFRS balance sheet. |
The impact of such adjustments on stockholders equity and on net income is not material. In
particular, it refers mainly to the reversal of the gains arising from the related securitization
transactions on the retail portfolio of receivables of financial service companies, realized under
Italian GAAP and not yet realized under IFRS.
F - 141
THE FIAT GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
at December 31, 2005 and 2004
With regards to financial structure, the reinstatement in the balance sheet of the receivables
and payables involved in these sales transactions causes a significant increase in trade and
financial receivables and in financial debt balances, and a worsening in net debt. In particular,
in consequence of these reinstatements, trade receivables increase by
3,563 million euros and 2,134, euros at January 1, 2004 and at December 31, 2004, respectively; at the same dates, financial
receivables increase by 6,127 million euros and 6,997 euros, and financial debt increased by
10,581 million euros and 10,174 million euros, respectively.
R. Accounting for deferred income taxes
This item includes the combined effect of the net deferred tax effects, after allowance, on
the above mentioned IFRS adjustments, as well as other minor differences between Italian GAAP and
IFRS on the recognition of tax assets and liabilities.
F - 142
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
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FIAT S.p.A. |
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(Registrant)
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/s/ ALESSANDRO BALDI
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Name: |
Alessandro Baldi |
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Title: |
Group Controller |
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/s/ MAURIZIO FRANCESCATTI
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Name: |
Maurizio Francescatti |
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Title: |
Group Treasurer |
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Date: June 30, 2006
Exhibit 1.1
STATUTO DELLA FIAT S.P.A.
(Con modifiche in vigore dal 20 settembre 2005)
Art. 1 Denominazione
È costituita una società per azioni denominata Fiat S.p.A..
La denominazione può essere scritta in lettere maiuscole o minuscole, con o senza
interpunzione.
Art. 2 Sede
La società ha sede in Torino.
Art. 3 Oggetto
La società ha per oggetto lesercizio, attraverso società od enti di partecipazione, o
direttamente, di attività nel campo della motorizzazione civile e commerciale, dei
trasporti, della meccanizzazione, dellequipaggiamento agricolo, dellenergia e della
propulsione, nonché di qualsiasi altra attività industriale, commerciale, finanziaria e
terziaria in genere.
Per il conseguimento e nellambito di tali finalità la società potrà:
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operare, tra laltro, nei settori
dellindustria meccanica, elettrica,
elettromeccanica, termomeccanica,
elettronica, nucleare, chimica,
mineraria, siderurgica, metallurgica;
delle telecomunicazioni;
dellingegneria civile, industriale,
agraria; delleditoria e
dellinformazione; del turismo e di
altre industrie terziarie; |
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assumere partecipazioni ed
interessenze in società ed imprese di
ogni tipo e forma; acquistare, vendere
e collocare azioni, quote,
obbligazioni; |
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provvedere al finanziamento delle
società ed enti di partecipazione ed
al coordinamento tecnico, commerciale,
finanziario ed amministrativo delle
loro attività; |
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acquisire, nellinteresse proprio e
delle società ed enti di
partecipazione, titolarità ed uso di
diritti su beni immateriali,
disponendone lutilizzo nellambito
delle medesime società ed enti di
partecipazione; |
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promuovere ed assicurare lo
svolgimento di attività di ricerca e
sperimentazione e lutilizzo e lo
sfruttamento dei risultati; |
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compiere, nellinteresse proprio e
delle società ed enti di
partecipazione, qualsiasi operazione
mobiliare, immobiliare, finanziaria,
commerciale, |
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associativa, comprese lassunzione di mutui e finanziamenti e la prestazione, anche a
favore di terzi, di avalli, fidejussioni e altre garanzie, reali comprese. |
Art. 4 Durata
La durata della società è stabilita fino al 31 dicembre 2100.
Art. 5 Capitale Sociale
Il capitale sociale è di Euro 6.377.257.130, suddiviso in numero 1.092.246.316 azioni
ordinarie, numero 103.292.310 azioni privilegiate e numero 79.912.800 azioni di risparmio
tutte da nominali Euro 5 cadauna.
A seguito delle deliberazioni assunte dal consiglio di amministrazione in data 10
dicembre 2001 e 26 giugno 2003, il capitale sociale potrà aumentare, a pagamento, per
massimi Euro 81.886.460 mediante emissione di massime n. 16.377.292 azioni ordinarie da
nominali Euro 5 cadauna da emettersi il 1° febbraio 2007 a seguito dellesercizio dei
Warrant FIAT ordinarie 2007.
Gli amministratori hanno la facoltà, entro il giorno 11 settembre 2007, di aumentare in
una o più volte il capitale fino ad un ammontare di Euro 8 miliardi e di emettere in una
o più volte obbligazioni convertibili fino allo stesso ammontare.
Gli aumenti di capitale deliberati in esecuzione della delega possono essere riservati,
nel limite dell1% del capitale sociale, a dipendenti della società e/o di società
controllate, secondo modalità e criteri stabiliti dal consiglio di amministrazione.
Nellesercizio di tale delega, laumento del capitale sociale, anche al servizio della
conversione di obbligazioni o dellesercizio di warrant, può avvenire mediante emissione
di azioni di categorie già esistenti.
Art. 6 Categorie di azioni e rappresentante comune
Le azioni ordinarie e quelle privilegiate sono nominative; le azioni di risparmio sono al
portatore o nominative a scelta dellazionista o per disposto di legge; tutte le azioni
sono emesse in regime di dematerializzazione.
Ogni azione attribuisce il diritto ad una parte proporzionale degli utili di cui sia
deliberata la distribuzione e del patrimonio netto risultante dalla liquidazione, salvi i
diritti stabiliti a favore delle azioni privilegiate e di risparmio, di cui ai successivi
articoli 20 e 23.
Ogni azione ordinaria attribuisce il diritto di voto senza limitazione alcuna. Ogni
azione privilegiata attribuisce il diritto di voto limitatamente alle materie di
competenza dellassemblea straordinaria e quando si deve deliberare in merito al
Regolamento dellAssemblea. Le azioni di risparmio sono prive del diritto di voto.
In caso di aumento del capitale sociale i possessori di azioni di ciascuna categoria
hanno diritto proporzionale di ricevere in opzione azioni di nuova emissione della
propria categoria e, in mancanza o per la differenza, di azioni di altra categoria (o
delle altre categorie).
Il capitale sociale può essere aumentato anche con conferimenti in natura o di crediti
mediante emissione di azioni ordinarie e/o privilegiate e/o di risparmio.
Le deliberazioni di emissione di nuove azioni privilegiate e di risparmio aventi le
stesse caratteristiche di quelle in circolazione, per aumento del capitale e per
conversione di azioni di altra categoria, non richiedono ulteriori approvazioni da parte
di assemblee speciali.
In caso di loro esclusione dalle negoziazioni di borsa le azioni di risparmio, se al
portatore, sono trasformate in azioni nominative ed hanno il diritto di percepire un
dividendo maggiorato di 0,175 Euro, anziché di 0,155 Euro, rispetto al dividendo
percepito dalle azioni ordinarie e privilegiate.
In caso di esclusione dalle negoziazioni delle azioni ordinarie, la maggiorazione del
dividendo spettante alle azioni di risparmio, rispetto al dividendo percepito dalle
azioni ordinarie e privilegiate, è aumentata a 0,2 Euro per azione.
Le spese necessarie per la tutela dei comuni interessi dei possessori di azioni
privilegiate e di risparmio, per le quali è deliberata dalle loro assemblee speciali la
costituzione dei rispettivi fondi, sono sostenute dalla società fino allammontare annuo
di Euro 30.000 per ciascuna categoria.
Al fine di assicurare ai rappresentanti comuni dei possessori di azioni privilegiate e di
risparmio adeguata informazione sulle operazioni che possono influenzare landamento
delle quotazioni delle azioni, ai medesimi devono essere inviate tempestivamente, a cura
dei legali rappresentanti, le comunicazioni relative alle predette materie.
Art. 7 Assemblee degli azionisti
Lassemblea è convocata anche fuori dal comune della sede sociale, purchè in Italia,
mediante inserzione, nei termini di legge, di avviso sui quotidiani La Stampa e il Sole
24 Ore o in caso di mancata pubblicazione di tali entrambi quotidiani sulla Gazzetta
Ufficiale della Repubblica Italiana. Nellavviso possono essere previste la seconda e,
limitatamente allassemblea straordinaria, la terza convocazione.
Lassemblea ordinaria, essendo la società tenuta alla redazione del bilancio consolidato,
deve essere convocata entro centottanta giorni dalla chiusura dellesercizio sociale.
Lassemblea è inoltre convocata ogni qualvolta il consiglio di amministrazione lo ritenga
opportuno e nei casi previsti dalla legge.
Art. 8 Intervento e rappresentanza in assemblea
Possono intervenire allassemblea, o farsi rappresentare nei modi di legge, i titolari di
diritto di voto che abbiano ottenuto dallintermediario abilitato lattestazione della
loro legittimazione, comunicata alla società in conformità alla normativa applicabile,
comprovante il deposito delle azioni in regime di dematerializzazione da almeno due
giorni non festivi precedenti la riunione.
Lassemblea può essere tenuta con gli intervenuti dislocati in più luoghi, contigui o
distanti, collegati con mezzi di telecomunicazione, nel rispetto del metodo collegiale e
dei principi di buona fede e di parità di trattamento dei soci.
In tale evenienza:
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sono indicati nellavviso di convocazione i luoghi audio/video
collegati a cura della società, nei quali gli intervenuti
possono affluire, e la riunione si considera tenuta nel luogo
ove sono presenti il presidente e il soggetto verbalizzante; |
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il presidente dellassemblea, anche a mezzo del proprio ufficio
di presidenza o dei preposti presenti nei luoghi audio/video
collegati, deve poter garantire la regolarità della
costituzione, accertare lidentità e la legittimazione degli
intervenuti, regolare lo svolgimento delladunanza e accertare i
risultati della votazione; |
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il soggetto verbalizzante deve poter percepire adeguatamente gli
eventi assembleari oggetto di verbalizzazione; |
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gli intervenuti devono poter partecipare alla discussione e alla
votazione simultanea sugli argomenti allordine del giorno. |
Art. 9 Costituzione delle assemblee e validità delle deliberazioni
Le deliberazioni dellassemblea, prese in conformità della legge e del presente statuto,
vincolano tutti i soci, ancorché non intervenuti o dissenzienti.
Lassemblea ordinaria è regolarmente costituita: in prima convocazione, con la presenza
di tanti azionisti che rappresentino almeno la metà del capitale avente diritto di voto;
in seconda convocazione, qualunque sia la parte di capitale, con diritto di voto,
rappresentata.
Le deliberazioni sono prese in ogni caso a maggioranza assoluta di voti, salvo che per la
nomina degli amministratori, per la quale è sufficiente la maggioranza relativa, e per la
nomina dei membri del collegio sindacale, cui si applica quanto previsto allart. 17.
Lassemblea straordinaria è regolarmente costituita, in prima convocazione, con la
partecipazione di tanti azionisti che rappresentino almeno la metà del capitale avente
diritto di voto, mentre in seconda ed in terza convocazione, con la partecipazione di
tanti azionisti che rispettivamente rappresentino più di un terzo e almeno un quinto del
capitale stesso.
Lassemblea straordinaria delibera in prima, seconda e terza convocazione con il voto
favorevole di almeno due terzi del capitale rappresentato in assemblea.
Sono fatte salve le particolari maggioranze previste dalla legge nonché le norme
applicabili alle assemblee speciali di categoria.
Art. 10 Presidenza dellassemblea
Lassemblea è presieduta dal presidente del consiglio di amministrazione o, in sua
assenza, dal vice presidente, se nominato; in mancanza, da persona designata
dallassemblea stessa.
Il segretario è nominato dallassemblea, su proposta del presidente. Nei casi di legge, o
quando è ritenuto opportuno dal presidente dellassemblea, il verbale è redatto da un
notaio scelto dallo stesso presidente, nel qual caso non è necessaria la nomina del
segretario.
Art. 11 Consiglio di amministrazione
La società è amministrata da un consiglio di amministrazione formato da un numero di
componenti variabile da nove a quindici, secondo la determinazione fatta dallassemblea.
Non può essere nominato amministratore chi ha compiuto il settantacinquesimo anno di età.
Nomina, revoca, cessazione, sostituzione e decadenza degli amministratori sono regolate
dalla legge. Peraltro qualora, per dimissioni od altre cause, venga a cessare la
maggioranza degli amministratori di nomina assembleare, lintero consiglio si intenderà
cessato e lassemblea per la nomina del nuovo consiglio dovrà essere convocata durgenza
dagli amministratori rimasti in carica.
Art. 12 Cariche sociali, comitati e compensi agli amministratori
Il consiglio di amministrazione nomina fra i suoi componenti il presidente, un vice
presidente, se lo ritiene opportuno, e uno o più amministratori delegati. In caso di
assenza o impedimento del presidente il vice presidente, se nominato, ne assume le
funzioni.
Il consiglio di amministrazione può istituire un comitato esecutivo e/o altri comitati
con funzioni e compiti specifici, stabilendone composizione e modalità di funzionamento.
In particolare il consiglio istituisce un comitato per vigilare sul sistema di controllo
interno e comitati per le nomine ed i compensi degli amministratori e dei dirigenti con
responsabilità strategiche.
Il consiglio di amministrazione può nominare anche uno o più direttori generali e può
designare un segretario anche allinfuori dei suoi componenti.
I compensi spettanti al consiglio di amministrazione ed al comitato esecutivo sono
determinati dallassemblea e restano validi fino a diversa deliberazione. La
remunerazione degli amministratori investiti di particolari cariche è stabilita dal
consiglio di amministrazione, sentito il parere del collegio sindacale. Lassemblea può
tuttavia determinare un importo complessivo per la remunerazione di tutti gli
amministratori, inclusi quelli investiti di particolari cariche.
Art. 13 Riunioni e compiti del consiglio di amministrazione
Il consiglio di amministrazione si riunisce, su convocazione del presidente, di regola
almeno trimestralmente e ogniqualvolta questi lo ritenga opportuno o quando ne facciano
richiesta almeno tre amministratori o un amministratore cui siano stati delegati poteri.
Il Consiglio di Amministrazione può inoltre essere convocato, previa comunicazione al
Presidente, da almeno due sindaci.
La convocazione avviene con comunicazione scritta corredata da tutti gli elementi utili
per deliberare ed inviata almeno cinque giorni prima di quello fissato per la riunione,
salvo i casi di urgenza.
Le riunioni sono presiedute dal presidente e, in caso di sua assenza, dal vice
presidente, se nominato; in mancanza la presidenza è assunta da altro amministratore
designato dal consiglio di amministrazione.
Nel corso delle riunioni, gli amministratori cui sono stati delegati poteri devono
riferire con periodicità almeno trimestrale al consiglio di amministrazione ed al
collegio sindacale sul generale andamento della gestione e sulla sua prevedibile
evoluzione nonché sulle operazioni di maggior rilievo, per le loro dimensioni o
caratteristiche, effettuate dalla società o dalle società controllate e ciascun
amministratore deve riferire ogni interesse che, per conto proprio o di terzi, abbia in
una determinata operazione della società.
Il consiglio di amministrazione valuta, sulla base delle informazioni ricevute,
ladeguatezza dellassetto organizzativo, amministrativo e contabile della società,
esamina i piani strategici, industriali e finanziari e valuta, sulla base della relazione
degli organi delegati, il generale andamento della gestione.
È ammessa la possibilità per gli amministratori ed i sindaci di partecipare alle riunioni
mediante mezzi di telecomunicazione. In tale evenienza la riunione si considera tenuta
nel luogo in cui si trova il presidente della stessa e dove deve pure trovarsi il
segretario; inoltre i partecipanti devono poter essere identificati e deve essere loro
consentito di seguire la discussione, di intervenire in tempo reale alla trattazione
degli argomenti affrontati e di ricevere, trasmettere o visionare documenti.
Art. 14 Deliberazioni del consiglio di amministrazione
Per la validità delle deliberazioni del consiglio di amministrazione è necessaria la
presenza della maggioranza degli amministratori in carica. Le deliberazioni sono prese a
maggioranza assoluta dei voti dei presenti; in caso di parità prevale il voto di chi
presiede la riunione.
Delle deliberazioni si fa constare con verbali firmati dal presidente della riunione e
dal segretario.
Art. 15 Poteri del consiglio di amministrazione
Il consiglio di amministrazione è investito, senza alcuna limitazione, dei più ampi
poteri per lamministrazione ordinaria e straordinaria della società, con facoltà di
compiere tutti gli atti, anche di disposizione, ritenuti opportuni per il raggiungimento
degli scopi sociali, nessuno escluso od eccettuato ivi compresi quelli di consentire
iscrizioni, surroghe, postergazioni e cancellazioni di ipoteche e privilegi sia totali
che parziali, nonché fare e cancellare trascrizioni e annotamenti di qualsiasi specie,
anche indipendentemente dal pagamento dei crediti cui le dette iscrizioni, trascrizioni e
annotamenti si riferiscono tranne quanto riservato per legge alla competenza
dellassemblea.
Il consiglio di amministrazione è inoltre competente, oltre che ad emettere obbligazioni
non convertibili, ad assumere le deliberazioni concernenti:
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lincorporazione e la scissione di società, nei particolari casi
previsti dalla legge, |
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listituzione o la soppressione di sedi secondarie, |
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lindicazione di quali tra gli amministratori hanno la
rappresentanza della società, |
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la riduzione del capitale in caso di recesso del socio, |
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gli adeguamenti dello statuto a disposizioni normative, |
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il trasferimento della sede sociale nel territorio nazionale. |
Art. 16 Rappresentanza
La rappresentanza della società spetta agli amministratori che rivestono la carica di
presidente del consiglio di amministrazione, vice presidente e amministratore delegato,
in via fra loro disgiunta, per lesecuzione delle deliberazioni del consiglio di
amministrazione ed in giudizio, nonché per lesercizio dei poteri loro conferiti dal
consiglio stesso.
Il consiglio di amministrazione può inoltre delegare ad altri amministratori proprie
attribuzioni con la relativa rappresentanza della società di fronte ai terzi ed in
giudizio, ivi incluso il potere di rendere linterrogatorio formale ai sensi di legge.
Art. 17 Nomina e requisiti dei sindaci
Il collegio sindacale è costituito da 3 sindaci effettivi e da 3 sindaci supplenti. Alla
minoranza è riservata lelezione di un sindaco effettivo e di un supplente.
Tutti i sindaci devono essere iscritti nel registro dei revisori contabili ed aver
esercitato lattività di controllo legale dei conti per un periodo non inferiore a tre
anni.
La nomina del collegio sindacale avviene sulla base di liste presentate dagli azionisti
nelle quali i candidati sono elencati mediante un numero progressivo. La lista si compone
di due sezioni: una per i candidati alla carica di sindaco effettivo, laltra per i
candidati alla carica di sindaco supplente.
Hanno diritto a presentare le liste soltanto gli azionisti che, da soli o insieme ad
altri, siano complessivamente titolari di azioni con diritto di voto rappresentanti
almeno l1% delle azioni ordinarie.
Ogni azionista, nonché gli azionisti appartenenti ad un medesimo gruppo, non possono
presentare, neppure per interposta persona o società fiduciaria, più di una lista né
possono votare liste diverse. Ogni candidato può presentarsi in una sola lista a pena di
ineleggibilità.
Non possono essere inseriti nelle liste candidati che ricoprano già incarichi di sindaco
effettivo in altre cinque società quotate, con esclusione delle società controllanti e
controllate della Fiat S.p.A., o che non siano in possesso dei
requisiti di onorabilità, professionalità e indipendenza stabiliti dalla normativa
applicabile e dal presente articolo. I sindaci uscenti sono rieleggibili.
Le liste presentate devono essere depositate presso la sede della società almeno dieci
giorni prima di quello fissato per lassemblea in prima convocazione e di ciò sarà fatta
menzione nellavviso di convocazione.
Unitamente a ciascuna lista, entro il termine sopra indicato, sono depositate le
dichiarazioni con le quali i singoli candidati accettano la candidatura e attestano,
sotto la propria responsabilità, linesistenza di cause di ineleggibilità e di
incompatibilità, nonché lesistenza dei requisiti normativamente e statutariamente
prescritti per le rispettive cariche. La lista per la quale non sono osservate le
statuizioni di cui sopra è considerata come non presentata.
Allelezione dei sindaci si procede come segue:
1. |
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dalla lista che ha ottenuto in assemblea il maggior numero di voti sono tratti, in
base allordine progressivo con il quale sono elencati nelle sezioni della lista,
due sindaci effettivi e due sindaci supplenti; |
2. |
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dalla seconda lista che ha ottenuto in assemblea il maggior numero di voti sono
tratti, in base allordine progressivo con il quale sono elencati nelle sezioni
della lista, il restante sindaco effettivo e laltro sindaco supplente. |
La presidenza del collegio sindacale spetta al primo candidato della lista che ha
ottenuto il maggior numero di voti.
Qualora non sia possibile procedere alle nomine con il sistema di cui sopra, lassemblea
delibera a maggioranza relativa.
Nel caso vengano meno i requisiti normativamente e statutariamente richiesti, il sindaco
decade dalla carica.
In caso di sostituzione di un sindaco, subentra fino alla scadenza dei sindaci in carica,
ove disponibile, il primo supplente appartenente alla medesima lista di quello cessato,
il quale abbia confermato lesistenza dei requisiti prescritti per la carica. In caso di
sostituzione del presidente tale carica è assunta dallaltro sindaco effettivo della
medesima lista.
Le precedenti statuizioni in materia di elezione dei sindaci non si applicano nelle
assemblee che devono provvedere alla nomina dei sindaci supplenti qualora ne sia rimasto
in carica uno solo. In tali casi lassemblea delibera a maggioranza relativa.
È ammessa la possibilità che le adunanze del collegio sindacale si tengano con mezzi di
telecomunicazione. In tale evenienza la riunione si considera tenuta nel luogo di
convocazione ove deve essere presente almeno un sindaco; inoltre i partecipanti devono
poter essere identificati e deve essere loro consentito di seguire la discussione, di
intervenire in tempo reale alla trattazione degli argomenti affrontati e di ricevere,
trasmettere o visionare documenti.
Art. 18 Controllo contabile
Il controllo contabile è esercitato da una società di revisione avente i requisiti di
legge.
Il conferimento e la revoca dellincarico alla società di revisione e la determinazione
del relativo compenso sono di competenza dellassemblea.
La durata dellincarico, i diritti, i compiti e le prerogative della società di revisione
sono regolati dalla legge.
Art. 19 Esercizi sociali
Lesercizio chiude al 31 dicembre di ogni anno.
Art. 20 Ripartizione degli utili e dividendi
Gli utili netti risultanti dal bilancio annuale sono così destinati:
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alla riserva legale il 5% fino a che questa non abbia raggiunto il quinto del capitale
sociale; |
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alle azioni di risparmio fino a concorrenza di Euro 0,31 per azione; |
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ad ulteriore accantonamento a riserva legale, alla riserva straordinaria e/o ad utili
portati a nuovo eventuali assegnazioni deliberate dallassemblea; |
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alle azioni privilegiate fino a concorrenza di Euro 0,31 per azione; |
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alle azioni ordinarie fino a concorrenza di Euro 0,155 per azione; |
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alle azioni di risparmio e ordinarie in egual misura una ulteriore quota fino a concorrenza
di Euro 0,155 per azione; |
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a ciascuna delle azioni ordinarie, privilegiate e di risparmio in egual misura gli utili che
residuano di cui lassemblea deliberi la distribuzione. |
Quando in un esercizio sia stato assegnato alle azioni di risparmio un dividendo
inferiore a 0,31 Euro la differenza è computata in aumento del dividendo privilegiato
loro spettante nei due esercizi successivi.
I suddetti importi saranno proporzionalmente adeguati in caso di modificazione del valore
nominale delle azioni.
Il consiglio di amministrazione, nel corso dellesercizio ed in quanto lo ritenga
opportuno in relazione alle risultanze della gestione, verificate le condizioni di legge,
può deliberare il pagamento di acconti sul dividendo per lesercizio stesso.
I dividendi non riscossi entro il quinquennio dal giorno in cui sono divenuti esigibili
si prescrivono a favore della società.
Art. 21 Recesso degli azionisti
Il diritto di recesso è disciplinato dalla legge, fermo restando che non hanno diritto di
recedere gli azionisti che non hanno concorso allapprovazione delle deliberazioni
riguardanti la proroga del termine e lintroduzione o la rimozione di vincoli alla
circolazione delle azioni.
I termini e le modalità dellesercizio del diritto di recesso, i criteri di
determinazione del valore delle azioni ed il relativo procedimento di liquidazione sono
regolati dalla legge.
Art. 22 Domicilio degli azionisti
Il domicilio degli azionisti, relativamente a tutti i rapporti con la società, è quello
risultante dal libro dei soci.
Art. 23 Liquidazione
La liquidazione della società ha luogo nei casi e secondo le norme di legge.
Lassemblea nomina uno o più liquidatori e ne determina i poteri.
In caso di liquidazione il patrimonio sociale è così ripartito in ordine di priorità:
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alle azioni di risparmio fino a concorrenza del loro valore nominale; |
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alle azioni privilegiate fino a concorrenza del loro valore nominale; |
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alle azioni ordinarie fino a concorrenza del loro valore nominale; |
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alle azioni delle tre categorie, in egual misura, leventuale residuo. |
NOTE ABOUT TRANSLATION:
The following is an English translation of the original Italian-language version. In preparing
this translation, an attempt has been made to translate as literally as possible without
jeopardizing the overall continuity of the text. However, differences may occur in translation.
In the event of any such differences or other doubts, the original Italian text shall prevail.
In addition, in this translation, Italian legal concepts are expressed in English terms. These
concepts as used and understood in Italy may not be identical to those described by the English
terms as such terms may be used and understood under the laws of other jurisdictions.
11
ARTICLES OF ASSOCIATION OF FIAT S.p.A.
(as amended on September 20, 2005)
Art. 1 Name
A Joint Stock Company is hereby incorporated under the name of FIAT Società per Azioni.
The name may be written in either capital or small letters, with or without punctuation marks.
Art. 2 Registered Office
The Companys registered office is located in Turin.
Art. 3 Objects
The objects of the Company are: the carrying out, through wholly or partially owned companies or
other entities, or directly, of activities relating to the passenger and commercial vehicles,
transport, mechanical engineering, agricultural equipment, energy and propulsion industries, as
well as any other manufacturing, commercial, financial or other activities and services.
In order to achieve the above objects and within their scope the Company may:
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operate, among others, in the mechanical, electrical, electromechanical,
thermomechanical, electronic, nuclear, chemical, mining, steel and metallurgical
industries, as well as in the fields of telecommunications, civil, industrial and
agricultural engineering, publishing, information services, tourism and other
activities in the field of services; |
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acquire shareholdings and equity interests in companies and enterprises of any kind and
form; purchase, sell and place shares, quotas and debentures; |
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finance wholly or partially owned companies and entities, and carry on the technical,
commercial, financial and administrative coordination of their activities; |
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acquire, in its own interest and in the interests of wholly or partially owned
companies and entities, ownership of rights on intangible assets providing for their
use by such companies and entities; |
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promote and ensure the performance of research and development activities, as well as
the use and exploitation of the results thereof; |
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carry out, in its own interest and in the interests of wholly or partially owned
companies and entities, any transaction whatsoever concerning personal and real
property, finance, trade, and association including loans and financing in general and
granting, also in favor of third parties, of guarantees, suretyships and warranties,
secured and unsecured by mortgage. |
Art. 4 Duration
The Company is established for a period ending on December 31, 2100.
Art. 5 Capital stock
The capital stock of the Company amounts to 6,377,257,130 euros and comprises 1,092,246,316
ordinary shares, 103,292,310 preference shares and 79,912,800 savings shares, all with a par value
of 5 euros each.
Pursuant to the resolutions approved by the Board of Directors on December 10, 2001 and June 26,
2003, the amount of the Companys capital stock may be raised, through a contributory capital
increase, by a maximum of 81,886,460 euros by issuing up to 16,377,292 ordinary shares with a par
value of 5 euros each, to be issued on February 1, 2007 following exercise of the FIAT Ordinary
Share Warrants 2007.
Until September 11, 2007, the Directors shall have the power to increase the capital stock, on one
or more occasions, to a maximum of 8 billion euros and may float one or more convertible bond
issues to the same maximum amount.
Increases in capital made pursuant to said powers may, within a limit of 1% of the capital stock,
be reserved for employees of the Company and/or its subsidiaries, in accordance with procedures and
criteria established by the Board of Directors.
Capital stock increases deriving from the exercise of powers delegated to the Board, including
those required by the conversion of debentures or the exercise of warrants, shall be implemented
through the issue of shares belonging to the existing classes of shares.
Art. 6 Classes of Shares and Common Representative
Ordinary and preference shares are registered shares. Savings shares can be either bearer or
registered shares, at the option of their holder or as required by law. All shares are issued in
dematerialized form.
Each share conveys the right to a proportionate share of the earnings available for distribution
and of the residual net assets upon liquidation, without harming the rights of preference and
savings shares, which are discussed in Articles 20 and 23 below.
Each ordinary share conveys the right to vote without any restrictions whatsoever. Each preference
share conveys the right to vote only on issues that are within the purview of the Extraordinary
Stockholders Meeting and on resolutions concerning Regulations for Stockholders Meetings. Savings
shares are not entitled to vote.
When the capital stock is increased, the holders of each class of shares have the right to receive
a proportionate number of newly issued shares of the same class, or of another class (or classes)
if shares of the same class are not available or their number is insufficient.
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The Companys capital stock may also be increased by issuing ordinary and/or preference and/or
savings shares in exchange for the contribution of assets or the cancellation of accounts payable.
Resolutions authorizing the issuance of new preference or savings shares with the same
characteristics as those already outstanding in connection with capital increases and the
conversion of shares into shares of another class do not require further approval by Special
Stockholders Meetings.
If the savings shares are delisted, they shall be transformed into registered shares if originally
bearer shares, and they shall have the right to a higher dividend increased by 0.175 euros, rather
than 0.155 euros, with respect to the dividend received by the ordinary and preference shares.
If the ordinary shares are delisted, the higher dividend received by the savings shares with
respect to the dividend received by ordinary and preference shares shall be increased by 0.2 euros
per share.
The outlays needed to safeguard the common interests of the holders of preference and savings
shares, which are financed with reserves established for that purpose by the respective Special
Stockholders Meetings, shall be borne by the Company up to a maximum annual amount of 30,000 euros
for each class of shares.
In order to provide the Common Representatives of the holders of preference and savings shares with
adequate information about transactions that may affect share prices, the Companys legal
representatives shall promptly inform the Common Representatives of any such issues.
Art. 7 Stockholders Meetings
The Stockholders Meeting may be convened at the Companys Registered Office, or elsewhere in Italy,
by means of a Notice published within statutory deadlines in the newspapers La Stampa and Il Sole
24 Ore or, if both these newspapers are not published, in the Official Gazette of the Republic of
Italy. The Notice may provide for a second call and, in the case of Extraordinary Stockholders
Meetings only, a third call.
Since the company is required to prepare consolidated financial statements, it must convene an
Ordinary Stockholders Meeting within 180 days after the end of the fiscal year.
A Stockholders Meeting may also be convened whenever the Board of Directors deems it appropriate
and must be convened when required by law.
Art. 8 Attendance and Representation at Stockholders Meetings
Stockholders who are entitled to vote may attend the Meeting or be represented at it pursuant to
law if they have obtained certification from an authorized intermediary, and if this has been
communicated to the Company ahead of time in accordance with the applicable statute. This
certificate must attest to their right to attend the Meeting and to deposit of their dematerialized
shares at least two non-holidays before the Meeting.
Stockholders may attend Meetings from multiple contiguous or remote locations that are linked by
means of telecommunication systems, acting in accordance with the rules of collegiality, the
principles of good faith and equal treatment for all stockholders. In such cases:
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The Notice of the Stockholders Meeting must list the audio/video
linkup locations where the attendees can convene, and the Meeting
will be deemed to have been held at the location where the
Chairman and the person drawing up the Minutes of the Meeting are
present; |
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The Chairman of the Meeting, using the resources of his/her
office, or the officers of the Meeting who are present at the
various linkup locations, shall ensure that the meeting is duly
convened, ascertain the identity of the attendees and their right
to attend the Meeting, manage the Meeting and verify the results
of any votes; |
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The person drawing up the Minutes of the Meeting must be able to
adequately hear and see sufficiently well any Meeting developments
that require inclusion in the Minutes; |
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The attendees must be allowed to participate in the discussion and
cast votes simultaneously on the items on the Agenda. |
Art. 9 Convening of Stockholders Meetings and Adoption of Valid Resolutions
Resolutions adopted by the Stockholders Meeting pursuant to law and these Articles of Association
are binding on all stockholders, including those who are absent or dissenting.
Ordinary Meetings are properly constituted on first call by the attendance of stockholders
representing at least one half of the capital stock entitled to vote; on second call, by the
attendance of stockholders representing any portion of the capital stock entitled to vote.
Resolutions are always adopted by an absolute majority of the votes, except for the election of
Directors, which requires only a relative majority, and the election of Statutory Auditors, which
is governed by the provisions of Article 17.
An Extraordinary Stockholders Meeting is duly convened, on the first call, if stockholders
representing at least half of the voting capital are present. On the second call and third call,
the stockholders in attendance must represent more than one-third and at least one-fifth,
respectively, of the voting capital.
An Extraordinary Stockholders Meeting can adopt a resolution, on the first, second or third call,
with the favorable vote of at least two-thirds of the capital represented at the Meeting.
The foregoing provisions have no effect on special majorities required pursuant to law or on the
provisions that govern Special Meetings for holders of shares of a single class.
Art. 10 Chairmanship of the Stockholders Meetings
At Stockholders Meetings, the Chair is taken by the Chairman of the Board or, in his absence, by
the Vice Chairman, if appointed; in their absence, by a person designated by the meeting.
The Secretary is appointed by the meeting upon proposal of the Chairman. Where the law so provides,
or when it is deemed appropriate by the Chairman of the meeting, the minutes may be drawn up by a
notary public designated by the Chairman himself, in which case there is no need to appoint a
Secretary.
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Art. 11 Board of Directors
The Company is managed by a Board of Directors consisting of a number varying from nine to fifteen
members, as determined by the Stockholders Meeting.
No one over the age of 75 shall be appointed as a Director.
The appointment, revocation, expiration of the term of office, replacement or lapsing of Directors
is governed by the applicable statutes. However, if as a result of resignations or other reasons
the majority of the Directors elected by the Stockholders Meeting is no longer in office, the term
of office of the entire Board of Directors will be deemed to have expired, and a Stockholders
Meeting will be convened on an urgent basis by the Directors still in office for the purpose of
electing a new Board of Directors.
Art. 12 Corporate Offices, Committees and Directors fees
The Board of Directors shall appoint from among its members a Chairman, a Vice Chairman, if deemed
advisable, and one or more Chief Executive Officers. In the case of the absence or incapacity of
the Chairman, the Vice Chairman, if appointed, will assume his functions.
The Board of Directors may set up an Executive Committee and/or other Committees with specific
functions and tasks, fixing its/their composition and operating procedures. More specifically, the
Board of Directors shall establish a Committee to supervise the Internal Control System and
Committees for the nomination and compensation of Directors and senior managers with strategic
responsibilities.
The Board of Directors may also appoint one or more Chief Operating Officers and may designate a
Secretary, who need not be a member of the Board.
The fees payable to the Directors and members of the Executive Committee shall be determined by the
Stockholders Meeting and will be effective until the Meeting resolves otherwise. The compensation
of the Directors vested with particular offices shall be determined by the Board of Directors,
after having received the opinion of the Statutory Auditors. Nevertheless, the Stockholders Meeting
may determine an aggregate amount for compensation of all the Directors, including those vested
with particular offices.
Art. 13 Meetings of the Board of Directors
Meetings of the Board of Directors are convened by the Chairman at least once every quarter and
whenever the Chairman deems it appropriate, or when requested by at least three Directors or by one
of the Directors to whom powers have been delegated.
The Board of Directors can also be called, after the Chairman has been informed, by at least two
statutory auditors.
Meetings are called by written notice, containing all elements necessary for the discussion, to be
sent at least five days before the day on which the meeting is to be held, except in cases of
urgency.
Meetings are presided over by the Chairman or, in his absence, by the Vice Chairman, if appointed;
in their absence the Chair shall be taken by another Director designated by the Board.
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In the course of meetings, the Directors to whom powers have been delegated must report to the
Board of Directors and the Board of Statutory Auditors at least once every quarter on their
activities and business outlook, as well as on transactions carried out by the Company or its
subsidiaries that are particularly significant in terms of size or characteristics, and each
Director is required to disclose any interest that he/she may have, either directly or on behalf of third parties, in any transaction to which the Company is a party.
Based on the information it receives, the Board of Directors evaluates the adequacy of the
Companys organization, administrative structure and accounting system; reviews the Companys
strategic, industrial and financial plans; and based on reports provided by the bodies with
delegated powers, assesses the general performance of the Companys operations.
Directors and Statutory Auditors may attend meetings by means of telecommunication systems. In such
cases, the meeting is deemed to have been held at the location where both the meetings Chairman
and Secretary are present. In addition, it must be possible to identify the attendees, and they
must be able to follow the proceedings, intervene in real time in the discussion of the topics on
the Agenda and receive, send or view documents.
Art. 14 Resolutions of the Board of Directors
The Boards resolutions shall be valid if the majority of Directors in office are present.
Resolutions are passed by an absolute majority of votes of the Directors present. In the case of a
tie, the Chairman of the meeting shall have the casting vote.
Resolutions shall be recorded in minutes, to be signed by the Chairman of the meeting and the
Secretary.
Art. 15 Powers of the Board of Directors
The Board is vested, without any limitation, with full powers for the ordinary and extraordinary
management of the Company, with the authority to carry out all transactions, including disposals,
deemed appropriate to achieve the Companys purposes, excluding and excepting none including the
granting of mortgages or liens, on the whole or part of property, to be registered, postponed and
cancelled, as well as effecting or canceling registrations or notes of any kind, also regardless of
the payment of debts which such registrations or notes relate to with the exception of those
transactions which are reserved by law to the competence of the Stockholders Meeting.
In addition to the power to issue nonconvertible bonds, the Board of Directors is also authorized
to adopt resolutions concerning:
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The absorption and demerger of companies, when specifically allowed by law; |
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The opening or closing of secondary offices; |
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The designation of Directors empowered to represent the Company; |
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The reduction of capital stock when stockholders exercise the right to have their shares redeemed; |
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The amendment of the Articles of Association that reflect changes in the law; |
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The transfer of the Companys registered office to another location in Italy. |
17
Art. 16 Representation
The representation of the Company is invested in the Directors who serve as Chairman of the Board,
Vice Chairman and Chief Executive Officer, separately, for the execution of the resolutions of the
Board of Directors and in legal proceedings, as well as for the execution of the powers conferred
on them by the Board.
The Board of Directors may also delegate to other Directors the power granted to it to represent
the Company vis-à-vis third parties and in legal proceedings, including the power to provide formal
depositions when required by law.
Art. 17 Appointment and Qualifications of the Statutory Auditors
The Board of Statutory Auditors is composed of 3 regular members and 3 alternate members. The
minority has the right to appoint one regular and one alternate auditor.
All statutory auditors must be entered in the register of auditors and possess at least three
years experience as a statutory account auditor.
The Board of Statutory Auditors is appointed on the basis of lists presented by stockholders on
which candidates are listed in numerical order. The list consists of two sections: one for
candidates to the office of regular auditor, the other for candidates to the office of alternate
auditor.
Only those stockholders who, alone or with others, hold in total voting shares representing at
least 1% of the ordinary shares have the right to present lists of candidates.
No single stockholder, nor stockholders belonging to the same group, can present, even by means of
third parties or a trustee company, more than one list, nor can they vote for different lists. Each
candidate can be present in one list only, otherwise he will be considered ineligible.
Candidates who already serve as Statutory Auditors in five other publicly traded companies, not
counting the controlling companies and subsidiaries of Fiat S.p.A., or fail to meet the
requirements of integrity, professionalism and independence set forth in the pertinent statute and
this article may not be included in lists of candidates. Statutory Auditors whose term of office
has expired may be reelected.
The lists presented must be deposited at the companys offices at least ten days prior to the date
set for the Meeting on first call, and mention of such term must be made in the document calling
the Meeting.
Together with each list and within the time limit indicated above, declarations will be deposited
in which single candidates accept the candidature and, on their own responsibility, state that
there are no grounds for ineligibility or incompatibility, and that they fulfill the requirements
laid down by law and by the companys Articles of Association for the offices in question. Any list
for which the above conditions are not observed will be considered as not presented.
The statutory auditors are elected as follows:
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two regular auditors and two alternate auditors are drawn from the list that has obtained
most votes at the Stockholders Meeting, on the basis of the numerical order under which they
appear in each section of the list; |
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the remaining regular auditor and the other alternate auditor are drawn from the second list
that has obtained most votes at the Stockholders Meeting, on the basis of the numerical order
under which they appear in each section of the list. |
The chairmanship of the Board of Statutory Auditors will go to the first candidate from the list
that has obtained most votes.
Should it be impossible to proceed with the appointment according to the above described
system, the Stockholders Meeting shall resolve by relative majority.
Where the requirements of the law or company articles are not met, the statutory auditor forfeits
his office.
In the event of a statutory auditor being replaced, the first alternate auditor, if available,
belonging to the same list as the auditor being substituted and after having confirmed the
existence of the prescribed requirements, will join the Board for the remainder of the auditors
term of office. In the event of a replacement of the Chairman, the office will be taken over by the
other regular statutory auditor belonging to the same list.
Prior conditions in matters of the appointment of statutory auditors do not apply to Statutory
Meetings that have to appoint alternate auditors in the case only one auditor has remained in
office. In such cases, the Stockholders Meeting resolves by relative majority.
Meetings of the Statutory Auditors may be held by means of telecommunication systems. In such
cases, the meeting is deemed to have been held at the location where it was convened and where at
least one Statutory Auditor was to be present. In addition,
it must be possible to identify the attendees, and they must be able to follow the proceedings,
intervene in real time in the discussion of the topics on the Agenda and receive, send or view
documents.
Art. 18 Independent Audits
Independent audits are performed by external auditors who meet statutory requirements.
The Stockholders Meeting has jurisdiction over the granting and revocation of the audit assignment
to external auditors and the determination of the applicable fee.
The duration of the assignment, as well as the rights, duties and prerogatives of external auditors
are governed by the applicable statute.
Art. 19 Financial Year
The Companys financial year ends on December 31 each year.
Art. 20 Allocation of Net Income
The net income for the year resulting from the annual financial statements shall be allocated as
follows:
19
|
|
to the Legal Reserve, 5% of net income until this reserve reaches
one fifth of the capital stock; |
|
|
|
to savings shares, a dividend of up to 0.31 euros per share; |
|
|
|
to the Legal Reserve (additional allocation), to the Extraordinary
Reserve and/or to retained earnings, such allocations as shall be
decided by the Annual General Meeting of Stockholders; |
|
|
|
to preference shares, a dividend of up to 0.31 euros per share; |
|
|
|
to ordinary shares, a dividend of up to 0.155 euros per share; |
|
|
|
to savings shares and ordinary shares, in equal proportions, an
additional dividend of up to 0.155 euros per share; |
|
|
|
to each ordinary, preference and savings shares, in equal
proportions, the balance of the net income which the Stockholders
Meeting resolves to distribute. |
When the dividend paid to savings shares in any year amounts to less than 0.31 euros, the
difference shall be added to the preferred dividend to which they are entitled in the following two
years.
In case of
modification of the par value of shares, the above mentioned amounts will be on a
pro-rata basis.
During the course of the year, if the results of the Companys operations justify it and the law
allows it, the Board of Directors may authorize the payment of interim dividends.
Dividends not collected within five years from the day they became payable shall be forfeited to
the benefit of the Company.
Art. 21 Stockholders Right to Have Their Shares Redeemed
The right of stockholders to have their shares redeemed is governed by the applicable statute, it
being understood that this right is not available to stockholders who, either because absent or
dissenting, did not vote in support of resolutions extending duration or introducing or removing
restrictions on the circulation of shares.
The terms and procedures for the exercise of this right, the criteria used to determine share
values and the share redemption process are governed by the applicable statute.
Art. 22 Stockholders Domicile
The stockholders domicile, for all matters concerning his or her relationship with the Company, is
that recorded in the book of stockholders.
Art. 23 Liquidation of the Company
The Company shall be put into liquidation in the cases provided for and in accordance with the
terms of the law.
The Stockholders Meeting shall appoint one or more liquidators and determine their powers.
In the event of liquidation, the Companys assets shall be distributed in the following order:
20
|
|
to the savings shares up to their par value; |
|
|
|
to the preference shares up to their par value; |
|
|
|
to the ordinary shares up to their par value; |
|
|
|
the balance, if any, to shares of all three classes in equal proportions. |
21
Exhibit 8.1
Controlling company
Parent company
|
|
|
Fiat S.p.A.
|
|
Italy |
|
|
|
Subsidiaries consolidated on a line-by-line basis |
|
|
|
|
|
Automobiles |
|
|
Fiat Auto Holdings B.V.
|
|
Netherlands |
Andalcar Motor S.L.
|
|
Spain |
Banco Fidis de Investimento SA
|
|
Brazil |
Clickar Assistance S.R.L.
|
|
Italy |
Easy Drive S.r.l.
|
|
Italy |
FAL Fleet Services S.A.S.
|
|
France |
Fiat Auto Argentina S.A.
|
|
Argentina |
Fiat Auto (Belgio) S.A.
|
|
Belgium |
Fiat Auto Contracts Ltd
|
|
United Kingdom |
Fiat Auto Dealer Financing SA
|
|
Belgium |
Fiat Auto España S.A.
|
|
Spain |
Fiat Auto Financial Services (Wholesale) Ltd.
|
|
United Kingdom |
Fiat Auto Hellas S.A.
|
|
Greece |
Fiat Auto (Ireland) Ltd.
|
|
Ireland |
Fiat Auto Japan K.K.
|
|
Japan |
Fiat Auto Kreditbank GmbH
|
|
Austria |
Fiat Auto Lease N.V.
|
|
Netherlands |
Fiat Auto Maroc S.A.
|
|
Morocco |
Fiat Auto Nederland B.V.
|
|
Netherlands |
Fiat Auto Poland S.A.
|
|
Poland |
Fiat Auto Portuguesa S.A.
|
|
Portugal |
Fiat Auto South Africa (Proprietary) Ltd
|
|
South Africa |
Fiat Auto S.p.A.
|
|
Italy |
Fiat Auto (Suisse) S.A.
|
|
Switzerland |
Fiat Auto Trasporti S.r.l.
|
|
Italy |
Fiat Auto (U.K.) Ltd
|
|
United Kingdom |
Fiat Auto Var S.r.l.
|
|
Italy |
Fiat Automobil AG
|
|
Germany |
Fiat Automobil GmbH
|
|
Austria |
Fiat Automobil Vertriebs GmbH
|
|
Germany |
Fiat Automobiler Danmark A/S
|
|
Denmark |
Fiat Automoveis S.A. FIASA
|
|
Brazil |
Fiat Center Italia S.p.A.
|
|
Italy |
Fiat Center (Suisse) S.A.
|
|
Switzerland |
Fiat CR Spol. S.R.O.
|
|
Czech Republic |
Fiat Credit Belgio S.A.
|
|
Belgium |
Fiat Credito Compania Financiera S.A.
|
|
Argentina |
Fiat Distribuidora Portugal S.A.
|
|
Portugal |
Fiat Finance Holding S.A.
|
|
Luxembourg |
Fiat Finance Netherlands B.V.
|
|
Netherlands |
Fiat France
|
|
France |
Fiat Handlerservice GmbH
|
|
Germany |
Fiat India Automobiles Private Limited
|
|
India |
Fiat India Private Ltd.
|
|
India |
Fiat Magyarorszag Kereskedelmi KFT.
|
|
Hungary |
|
|
|
Fiat Motor Sales Ltd
|
|
United Kingdom |
Fiat Purchasing Italia S.r.l.
|
|
Italy |
FIAT Purchasing Poland Sp. z o.o.
|
|
Poland |
Fiat SR Spol. SR.O.
|
|
Slovack Republic |
Fiat Versicherungsdienst GmbH
|
|
Germany |
Fidis Credit Danmark A/S
|
|
Denmark |
Fidis Dealer Services B.V.
|
|
Netherlands |
Fidis Faktoring Polska Sp. z o.o.
|
|
Poland |
Fidis Finance Polska Sp. z o.o.
|
|
Poland |
Fidis Hungary KFT
|
|
Hungary |
Fidis Renting Italia S.p.A.
|
|
Italy |
Fidis S.p.A.
|
|
Italy |
Finplus Renting S.A.
|
|
Spain |
Inmap 2000 Espana S.L.
|
|
Spain |
International Metropolitan Automotive Promotion (France) S.A.
|
|
France |
Italian Automotive Center S.A.
|
|
Belgium |
Leasys S.p.A.
|
|
Italy |
Multipoint Sevilla S.A.
|
|
Spain |
Sata-Società Automobilistica Tecnologie Avanzate S.p.A.
|
|
Italy |
Savarent Società per Azioni
|
|
Italy |
Sofice-Société de Financement des Concessionnaires s.a.s.
|
|
France |
Tarfin S.A.
|
|
Switzerland |
Targa Rent S.r.l.
|
|
Italy |
Targasys Espana S.L.
|
|
Spain |
Targasys Stock SA
|
|
Spain |
|
|
|
Ferrari |
|
|
Ferrari S.p.A.
|
|
Italy |
Charles Pozzi S.a.r.l.
|
|
France |
Ferrari Deutschland GmbH
|
|
Germany |
Ferrari GB Limited
|
|
United Kingdom |
Ferrari GE.D. S.p.A.
|
|
Italy |
Ferrari International S.A.
|
|
Luxembourg |
Ferrari N.America Inc.
|
|
U.S.A. |
Ferrari San Francisco Inc.
|
|
U.S.A. |
Ferrari (Suisse) SA
|
|
Switzerland |
Ferrari West Europe S.A.
|
|
France |
GSA-Gestions Sportives Automobiles S.A.
|
|
Switzerland |
Pozzi Rent Snc
|
|
France |
Société Française de Participations Ferrari S.F.P.F. S.A.R.L.
|
|
France |
410 Park Display Inc.
|
|
U.S.A. |
|
|
|
Maserati |
|
|
Maserati S.p.A.
|
|
Italy |
Maserati North America Inc.
|
|
U.S.A. |
|
|
|
Agricultural and Construction Equipment |
|
|
CNH Global N.V.
|
|
Netherlands |
Austoft Industries Limited
|
|
Australia |
Banco CNH Capital S.A.
|
|
Brazil |
Bli Group Inc.
|
|
U.S.A. |
Blue Leaf I.P. Inc.
|
|
U.S.A. |
|
|
|
Case Brazil Holdings Inc.
|
|
U.S.A. |
Case Canada Receivables, Inc.
|
|
Canada |
Case Credit Australia Investments Pty Ltd
|
|
Australia |
Case Credit Holdings Limited
|
|
U.S.A. |
Case Equipment Holdings Limited
|
|
U.S.A. |
Case Equipment International Corporation
|
|
U.S.A. |
Case Europe S.a.r.l.
|
|
France |
Case Harvesting Systems GmbH
|
|
Germany |
Case India Limited
|
|
U.S.A. |
Case International Marketing Inc.
|
|
U.S.A. |
Case LBX Holdings Inc.
|
|
U.S.A. |
Case Machinery (Shanghai) Co. Ltd.
|
|
Peoples Rep.of China |
Case New Holland Inc.
|
|
U.S.A. |
Case United Kingdom Limited
|
|
United Kingdom |
CNH America LLC
|
|
U.S.A. |
CNH Argentina S.A.
|
|
Argentina |
CNH Asian Holding Limited
|
|
Mauritius |
CNH Australia Pty Limited
|
|
Australia |
CNH Baumaschinen GmbH
|
|
Germany |
CNH Belgium N.V.
|
|
Belgium |
CNH Canada, Ltd.
|
|
Canada |
CNH Capital America LLC
|
|
U.S.A. |
CNH Capital Australia Pty Limited
|
|
Australia |
CNH Capital Benelux
|
|
Belgium |
CNH Capital Canada Ltd.
|
|
Canada |
CNH Capital (Europe) plc
|
|
Ireland |
CNH Capital Insurance Agency Inc.
|
|
U.S.A. |
CNH Capital LLC
|
|
U.S.A. |
CNH Capital plc
|
|
Ireland |
CNH Capital RACES LLC
|
|
U.S.A. |
CNH Capital Receivables LLC
|
|
U.S.A. |
CNH Capital U.K. Ltd
|
|
United Kingdom |
CNH Componentes, S.A. de C.V.
|
|
Mexico |
CNH Danmark A/S
|
|
Denmark |
CNH Deutschland GmbH
|
|
Germany |
CNH Engine Corporation
|
|
U.S.A. |
CNH Financial Services
|
|
France |
CNH Financial Services A/S
|
|
Denmark |
CNH Financial Services GmbH
|
|
Germany |
CNH Financial Services S.r.l.
|
|
Italy |
CNH France S.A.
|
|
France |
CNH International S.A.
|
|
Luxembourg |
CNH Italia s.p.a.
|
|
Italy |
CNH Latin America Ltda.
|
|
Brazil |
CNH Maquinaria Spain S.A.
|
|
Spain |
CNH Osterreich GmbH
|
|
Austria |
CNH Polska Sp. z o.o.
|
|
Poland |
CNH Portugal-Comercio de Tractores e Maquinas Agricolas Ltda
|
|
Portugal |
CNH Receivables LLC
|
|
U.S.A. |
CNH Serviços Técnicos e Desenvolvimento de Negocios Ltda
|
|
Brazil |
CNH Trade N.V.
|
|
Netherlands |
CNH U.K. Limited
|
|
United Kingdom |
|
|
|
CNH Wholesale Receivables LLC
|
|
U.S.A. |
Fiatallis North America LLC
|
|
U.S.A. |
Flexi-Coil (U.K.) Limited
|
|
United Kingdom |
Harbin New Holland Tractors Co., Ltd.
|
|
Peoples Rep.of China |
HFI Holdings Inc.
|
|
U.S.A. |
JV Uzcaseagroleasing LLC
|
|
Uzbekistan |
JV UzCaseMash LLC
|
|
Uzbekistan |
JV UzCaseService LLC
|
|
Uzbekistan |
JV UzCaseTractor LLC
|
|
Uzbekistan |
Kobelco Construction Machinery America LLC
|
|
U.S.A. |
Kobelco Construction Machinery Europe BV in liquidation
|
|
Netherlands |
MBA AG
|
|
Switzerland |
New Holland Australia Pty Ltd
|
|
Australia |
New Holland Credit Australia Pty Limited
|
|
Australia |
New Holland Credit Company, LLC
|
|
U.S.A. |
New Holland Excavator Holdings LLC
|
|
U.S.A. |
New Holland Holding Limited
|
|
United Kingdom |
New Holland Holdings Argentina S.A.
|
|
Argentina |
New Holland Kobelco Construction Machinery Belgium SA
|
|
Belgium |
New Holland Kobelco Construction Machinery S.p.A.
|
|
Italy |
New Holland Ltd
|
|
United Kingdom |
New Holland Tractor Ltd. N.V.
|
|
Belgium |
New Holland Tractors (India) Private Ltd
|
|
India |
O & K Hilfe GmbH
|
|
Germany |
Pryor Foundry Inc.
|
|
U.S.A. |
Receivables Credit II Corporation
|
|
Canada |
RosCaseMash
|
|
Russia |
Shanghai New Holland Agricultural Machinery Corporation Limited
|
|
Peoples Rep.of China |
|
|
|
Powertrain Technologies |
|
|
Fiat Powertrain Technologies S.p.A.
|
|
Italy |
Fiat Powertrain Italia S.r.l.
|
|
Italy |
FMA Fabbrica Motori Automobilistici S.r.l.
|
|
Italy |
Powertrain Mekanik Sanayi ve Ticaret Limited Sirketi
|
|
Turkey |
|
|
|
Commercial Vehicles |
|
|
Iveco S.p.A.
|
|
Italy |
Amce-Automotive Manufacturing Co.Ethiopia
|
|
Ethiopia |
Astra Veicoli Industriali S.p.A.
|
|
Italy |
Brandschutztechnik Gorlitz GmbH
|
|
Germany |
C.A.M.I.V.A. Constructeurs Associés de Matériels S.A.
|
|
France |
Componentes Mecanicos S.A.
|
|
Spain |
Effe Grundbesitz GmbH
|
|
Germany |
Elettronica Trasporti Commerciali S.r.l. (Eltrac S.r.l.)
|
|
Italy |
Euromoteurs S.A.
|
|
France |
European Engine Alliance S.c.r.l.
|
|
Italy |
Heuliez Bus S.A.
|
|
France |
IAV-Industrie-Anlagen-Verpachtung GmbH
|
|
Germany |
Ikarus Egyedi Autobusz GY
|
|
Hungary |
Ikarus Trade Kft.
|
|
Hungary |
Ikarusbus Jamugyarto RT
|
|
Hungary |
Industrial Vehicles Center Hainaut S.A.
|
|
Belgium |
Irisbus Australia Pty. Ltd.
|
|
Australia |
|
|
|
Irisbus Benelux Ltd.
|
|
Luxembourg |
Irisbus Deutschland GmbH
|
|
Germany |
Irisbus Italia S.p.A.
|
|
Italy |
Irisbus (U.K.) Ltd
|
|
United Kingdom |
IVC Brabant N.V. S.A.
|
|
Belgium |
IVC Nutzfahrzeuge AG
|
|
Switzerland |
IVC Véhicules Industriels S.A.
|
|
Switzerland |
Iveco Argentina S.A.
|
|
Argentina |
Iveco Austria GmbH
|
|
Austria |
Iveco Bayern GmbH
|
|
Germany |
Iveco Contract Services Limited
|
|
United Kingdom |
Iveco Danmark A/S
|
|
Denmark |
Iveco España S.L.
|
|
Spain |
Iveco Est Sas
|
|
France |
Iveco Eurofire (Holding) GmbH
|
|
Germany |
Iveco Fiat Brasil Ltda
|
|
Brazil |
Iveco Finland OY
|
|
Finland |
Iveco France S.A.
|
|
France |
Iveco Holdings Limited
|
|
United Kingdom |
Iveco International Trade Finance S.A.
|
|
Switzerland |
Iveco Investitions GmbH
|
|
Germany |
Iveco Latin America Ltda
|
|
Brazil |
Iveco Limited
|
|
United Kingdom |
Iveco L.V.I. S.a.s.
|
|
France |
Iveco Magirus AG
|
|
Germany |
Iveco Magirus Brandschutztechnik GmbH
|
|
Germany |
Iveco Mezzi Speciali S.p.A.
|
|
Italy |
Iveco Motorenforschung AG
|
|
Switzerland |
Iveco Motors of North America Inc.
|
|
U.S.A. |
Iveco Nederland B.V.
|
|
Netherlands |
Iveco Nord Nutzfahrzeuge GmbH
|
|
Germany |
Iveco Nord-Ost Nutzfahrzeuge GmbH
|
|
Germany |
Iveco Norge A.S.
|
|
Norway |
Iveco Otomotiv Ticaret A.S.
|
|
Turkey |
Iveco Partecipazioni Finanziarie S.r.l.
|
|
Italy |
Iveco Participations S.A.
|
|
France |
Iveco Pension Trustee Ltd
|
|
United Kingdom |
Iveco Poland Ltd.
|
|
Poland |
Iveco Portugal-Comercio de Veiculos Industriais S.A.
|
|
Portugal |
Iveco (Schweiz) AG
|
|
Switzerland |
Iveco South Africa (Pty) Ltd.
|
|
South Africa |
Iveco Sud-West Nutzfahrzeuge GmbH
|
|
Germany |
Iveco Sweden A.B.
|
|
Sweden |
Iveco Trucks Australia Limited
|
|
Australia |
Iveco Ukraine Inc.
|
|
Ukraine |
Iveco Venezuela C.A.
|
|
Venezuela |
Iveco West Nutzfahrzeuge GmbH
|
|
Germany |
Karosa A.S.
|
|
Czech Republic |
Karosa r.s.o.
|
|
Slovack Republic |
Lohr-Magirus Feuerwehrtechnik GmbH
|
|
Austria |
Mediterranea de Camiones S.L.
|
|
Spain |
Officine Brennero S.p.A.
|
|
Italy |
|
|
|
S.A. Iveco Belgium N.V.
|
|
Belgium |
S.C.I. La Méditerranéenne
|
|
France |
Seddon Atkinson Vehicles Ltd
|
|
United Kingdom |
Sicca S.p.A.
|
|
Italy |
Société Charolaise de Participations S.A.
|
|
France |
Société de Diffusion de Vehicules Industriels-SDVI S.A.S.
|
|
France |
Transolver Service S.A.
|
|
Spain |
Transolver Service S.p.A.
|
|
Italy |
Transolver Services GmbH
|
|
Germany |
Trucksure Services Ltd
|
|
United Kingdom |
Utilitaries & Véhicules Industriels Franciliens-UVIF SAS
|
|
France |
Zona Franca Alari Sepauto S.A.
|
|
Spain |
2 H Energy S.A.S.
|
|
France |
|
|
|
Components |
|
|
Magneti Marelli Holding S.p.A.
|
|
Italy |
Automotive Lighting Brotterode GmbH
|
|
Germany |
Automotive Lighting Holding GmbH in liquidation
|
|
Austria |
Automotive Lighting Italia S.p.A.
|
|
Italy |
Automotive Lighting LLC
|
|
U.S.A. |
Automotive Lighting o.o.o.
|
|
Russia |
Automotive Lighting Polska Sp. z o.o.
|
|
Poland |
Automotive Lighting Rear Lamps Deutschland GmbH
|
|
Germany |
Automotive Lighting Rear Lamps Espana S.A.
|
|
Spain |
Automotive Lighting Rear Lamps France S.A.
|
|
France |
Automotive Lighting Rear Lamps Italia S.p.A.
|
|
Italy |
Automotive Lighting Reutlingen GmbH
|
|
Germany |
Automotive Lighting S.R.O.
|
|
Czech Republic |
Automotive Lighting UK Limited
|
|
United Kingdom |
Fiat CIEI S.p.A.
|
|
Italy |
Iluminacao Automotiva Ltda
|
|
Brazil |
Industrial Yorka de Mexico S.A. de C.V.
|
|
Mexico |
Industrial Yorka de Tepotzotlan S.A. de C.V.
|
|
Mexico |
Industrias Magneti Marelli Mexico S.A. de C.V.
|
|
Mexico |
Kadron S/A
|
|
Brazil |
Magneti Marelli After Market S.p.A.
|
|
Italy |
Magneti Marelli Argentina S.A.
|
|
Argentina |
Magneti Marelli Automotive Components (WUHU) Co. Ltd.
|
|
Peoples Rep.of China |
Magneti Marelli Cofap Companhia Fabricadora de Pecas
|
|
Brazil |
Magneti Marelli Components B.V.
|
|
Netherlands |
Magneti Marelli Conjuntos de Escape S.A.
|
|
Argentina |
Magneti Marelli Controle Motor Ltda.
|
|
Brazil |
Magneti Marelli Deutschland GmbH
|
|
Germany |
Magneti Marelli do Brasil Industria e Comercio SA
|
|
Brazil |
Magneti Marelli Electronica SL
|
|
Spain |
Magneti Marelli Elektronische Systeme GmbH
|
|
Germany |
Magneti Marelli Eletronica Ltda
|
|
Brazil |
Magneti Marelli Escapamentos Ltda
|
|
Brazil |
Magneti Marelli Exhaust Systems Polska Sp. z o.o.
|
|
Poland |
Magneti Marelli France S.a.s.
|
|
France |
Magneti Marelli Guangzhou Motor Vehicle Instruments Co. Limited
|
|
Peoples Rep.of China |
Magneti Marelli Holding U.S.A. Inc.
|
|
U.S.A. |
|
|
|
Magneti Marelli Iberica S.A.
|
|
Spain |
Magneti Marelli Motopropulsion France SAS
|
|
France |
Magneti Marelli North America Inc.
|
|
U.S.A. |
Magneti Marelli Poland S.A.
|
|
Poland |
Magneti Marelli Powertrain GmbH
|
|
Germany |
Magneti Marelli Powertrain (Shanghai) Co. Ltd.
|
|
Peoples Rep.of China |
Magneti Marelli Powertrain S.p.A.
|
|
Italy |
Magneti Marelli Powertrain U.S.A. LLC
|
|
U.S.A. |
Magneti Marelli Sistemas Electronicos Mexico S.A.
|
|
Mexico |
Magneti Marelli Sistemi di Scarico S.p.A.
|
|
Italy |
Magneti Marelli Sistemi Elettronici S.p.A.
|
|
Italy |
Magneti Marelli South Africa (Proprietary) Limited
|
|
South Africa |
Magneti Marelli Suspension Systems Poland Sp. z o.o.
|
|
Poland |
Magneti Marelli Tubos de Escape SL
|
|
Spain |
Magneti Marelli U.K. Limited
|
|
United Kingdom |
Mako Elektrik Sanayi Ve Ticaret A.S.
|
|
Turkey |
Malaysian Automotive Lighting SDN. BHD
|
|
Malaysia |
Servicios Administrativos Corp. IPASA S.A.
|
|
Mexico |
Sistemi Sospensioni S.p.A.
|
|
Italy |
Tecnologia de Iluminacion Automotriz S.A. de C.V.
|
|
Mexico |
Tutela Lubrificantes S.A.
|
|
Brazil |
Ufima S.A.S.
|
|
France |
Yorka de Mexico S.r.l. de CV
|
|
Mexico |
|
|
|
Metallurgical Products |
|
|
Teksid S.p.A.
|
|
Italy |
Accurcast Limited in liquidation
|
|
Canada |
Compania Industrial Frontera S.A. de C.V.
|
|
Mexico |
Fonderie du Poitou Fonte S.A.S.
|
|
France |
Funfrap-Fundicao Portuguesa S.A.
|
|
Portugal |
Jutras Die Casting Limited in liquidation
|
|
Canada |
Magnesium Products of America Inc.
|
|
U.S.A. |
Magnesium Products of Italy S.r.l.
|
|
Italy |
Meridian Deutschland GmbH
|
|
Germany |
Meridian Magnesium LLC in liquidation
|
|
U.S.A. |
Meridian Technologies Inc.
|
|
Canada |
Meridian Technologies Japan Inc.
|
|
Canada |
Shanghai Meridian Magnesium Products Company Limited
|
|
Peoples Rep.of China |
Société Bretonne de Fonderie et de Mécanique S.A.
|
|
France |
Teksid Acquisition Inc.
|
|
Canada |
Teksid do Brasil Ltda
|
|
Brazil |
Teksid Hierro De Mexico Arrendadora S.A. de C.V.
|
|
Mexico |
Teksid Hierro de Mexico S.A. de C.V.
|
|
Mexico |
Teksid Inc.
|
|
U.S.A. |
Teksid Iron Poland Sp. z o.o.
|
|
Poland |
|
|
|
Production Systems |
|
|
Comau S.p.A.
|
|
Italy |
Autodie International, Inc.
|
|
U.S.A. |
Comau France S.A.
|
|
France |
Comau Argentina S.A.
|
|
Argentina |
Comau Belgium N.V.
|
|
Belgium |
|
|
|
Comau Deutschland GmbH
|
|
Germany |
Comau do Brasil Industria e Comercio Ltda.
|
|
Brazil |
Comau Estil Unl.
|
|
United Kingdom |
Comau India Private Limited
|
|
India |
COMAU Ingest Sverige AB
|
|
Sweden |
Comau Pico Expatriate, Inc.
|
|
U.S.A. |
Comau Pico Holdings Corporation
|
|
U.S.A. |
Comau Pico Iaisa S.de R.L. de C.V.
|
|
Mexico |
Comau Pico Inc.
|
|
U.S.A. |
Comau Pico Mexico S.de R.L. de C.V.
|
|
Mexico |
Comau Pico of Canada Inc.
|
|
Canada |
Comau Pico Pitex S.de R.L. C.V.
|
|
Mexico |
Comau Pico Resources, Inc.
|
|
U.S.A. |
Comau Pico Trebol S.de R.L. de C.V.
|
|
Mexico |
Comau Poland Sp. z o.o.
|
|
Poland |
Comau Romania S.R.L.
|
|
Romenia |
Comau Russia OOO
|
|
Russia |
Comau SA Body Systems (Pty) Ltd.
|
|
South Africa |
Comau SA Press Tools and Parts (Pty) Ltd.
|
|
South Africa |
Comau SA Properties (Pty) Ltd.
|
|
South Africa |
Comau Service Systems S.L.
|
|
Spain |
Comau Service U.K. Ltd
|
|
United Kingdom |
Comau (Shanghai) Automotive Equipment Co. Ltd.
|
|
Peoples Rep.of China |
Comau South Africa (Pty) Ltd.
|
|
South Africa |
Mecaner S.A.
|
|
Spain |
Pico Europe, Inc.
|
|
U.S.A. |
Precision Pico Products Inc.
|
|
U.S.A. |
|
|
|
Services |
|
|
Business Solutions S.p.A.
|
|
Italy |
Building Services S.r.l.
|
|
Italy |
Building Support S.r.l.
|
|
Italy |
Business Solutions Argentina S.A.
|
|
Argentina |
Business Solutions Deutschland FiatGroup GmbH
|
|
Germany |
Business Solutions do Brasil Ltda
|
|
Brazil |
Business Solutions Polska Sp. z o.o.
|
|
Poland |
eSPIN S.p.A.
|
|
Italy |
Fiat Finance et Services S.A.
|
|
France |
Fiat GES.CO. Belgium N.V.
|
|
Belgium |
Fiat Gesco S.p.A.
|
|
Italy |
Fiat Iberica S.A.
|
|
Spain |
Fiat Servizi per l`Industria S.c.p.a.
|
|
Italy |
Fiat U.K. Limited
|
|
United Kingdom |
Ingest Facility Polska Sp. z o.o.
|
|
Poland |
Ingest Facility S.p.A.
|
|
Italy |
ITS GSA FiatGroup France S.A.S.
|
|
France |
ITS-GSA Deutschland GmbH
|
|
Germany |
ITS-GSA U.K. Limited
|
|
United Kingdom |
KeyG Consulting S.p.A.
|
|
Italy |
PDL Services S.r.l.
|
|
Italy |
Risk Management S.p.A.
|
|
Italy |
Sadi Brasil Ltda.
|
|
Brazil |
|
|
|
Sadi Polska-Agencja Celna Sp. z o.o.
|
|
Poland |
Servizi e Attività Doganali per l`Industria S.p.A.
|
|
Italy |
Sestrieres S.p.A.
|
|
Italy |
Sporting Club Sestrieres S.R.L.
|
|
Italy |
Telexis do Brasil Ltda.
|
|
Brazil |
Trantor S.r.l.
|
|
Italy |
|
|
|
Publishing and Communications |
|
|
Itedi-Italiana Edizioni S.p.A.
|
|
Italy |
BMI S.p.A.
|
|
Italy |
Editrice La Stampa S.p.A.
|
|
Italy |
La Stampa Europe SAS
|
|
France |
Publikompass S.p.A.
|
|
Italy |
|
|
|
Holding companies and Other companies |
|
|
Banca Unione di Credito (Cayman) Ltd
|
|
Cayman Islands |
BUC Banca Unione di Credito
|
|
Switzerland |
Centro Ricerche Plast-Optica S.p.A.
|
|
Italy |
C.R.F. Società Consortile per Azioni
|
|
Italy |
Deposito Avogadro S.r.l.
|
|
Italy |
Elasis-Società Consortile per Azioni
|
|
Italy |
Fahag Immobilien-und Finanz-Gesellschaft AG
|
|
Switzerland |
Fast Buyer do Brasil Ltda
|
|
Brazil |
Fast Buyer France S.a.r.l.
|
|
France |
Fast-Buyer S.p.A.
|
|
Italy |
Fias Fiat Administration und Service GmbH
|
|
Germany |
Fiat Argentina S.A.
|
|
Argentina |
Fiat Attività Immobiliari S.p.A.
|
|
Italy |
Fiat do Brasil S.A.
|
|
Brazil |
Fiat Financas Brasil Ltda
|
|
Brazil |
Fiat Finance and Trade Ltd
|
|
Luxembourg |
Fiat Finance Canada Ltd.
|
|
Canada |
Fiat Finance Luxembourg S.A.
|
|
Luxembourg |
Fiat Finance North America Inc.
|
|
U.S.A. |
Fiat Ge.Va. S.p.A.
|
|
Italy |
Fiat Information & Communication Services società consortile per azioni
|
|
Italy |
Fiat Netherlands Holding N.V.
|
|
Netherlands |
Fiat Partecipazioni S.p.A.
|
|
Italy |
Fiat Partecipazioni (U.K.) Limited
|
|
United Kingdom |
Fiat Polska Sp. z o.o.
|
|
Poland |
Fiat Servizi S.A.
|
|
Switzerland |
Fiat U.S.A. Inc.
|
|
U.S.A. |
Fiat-Revisione Interna S.c.r.l.
|
|
Italy |
IHF-Internazionale Holding Fiat S.A.
|
|
Switzerland |
Intermap (Nederland) B.V.
|
|
Netherlands |
Isvor Fiat Società consortile di sviluppo e addestramento industriale per Azioni
|
|
Italy |
Luganova S.A.
|
|
Switzerland |
Neptunia Assicurazioni Marittime S.A.
|
|
Switzerland |
New Business 7 S.p.A.
|
|
Italy |
New Business 8 S.p.A.
|
|
Italy |
Rimaco S.A.
|
|
Switzerland |
SIRIO Sicurezza Industriale Società consortile per azioni
|
|
Italy |
|
|
|
Sisport Fiat S.p.A.
|
|
Italy |
|
|
|
Associated companies and their subsidiaries consolidated on a line-by line basis under IFRS |
|
|
|
|
|
Automobiles |
|
|
Società di Commercializzazione e Distribuzione Ricambi S.p.A.
|
|
Italy |
SCDR Automotive Limited
|
|
United Kingdom |
SCDR (Ireland) Limited
|
|
Ireland |
SCDR (Switzerland) S.A.
|
|
Switzerland |
Società di Distribuzione e Commercializzazione Ricambi Hellas M.E.P.E.
|
|
Greece |
|
|
|
Commercial Vehicles |
|
|
Afin Leasing AG
|
|
Austria |
Afin Asigurari S.r.l.
|
|
Romenia |
Afin Bohemia
|
|
Czech Republic |
Afin Bulgaria EAD
|
|
Bulgaria |
Afin Hungary Kereskedelmi KFT.
|
|
Hungary |
Afin Insurance
|
|
Bulgaria |
Afin Slovakia S.R.O.
|
|
Slovack Republic |
AS Afin Baltica
|
|
Estonia |
OOO Afin Vostok Limited Liability Company
|
|
Russia |
s.c. Afin Romania S.A.
|
|
Romenia |
UAB Afin Baltica (Lithuania)
|
|
Lithuania |
|
|
|
Jointly-controlled entities accounted for using the equity method |
|
|
|
|
|
Automobiles |
|
|
G.E.I.E. Gisevel
|
|
France |
G.E.I.E.-Sevelind
|
|
France |
Nan Jing Fiat Auto Co. Ltd.
|
|
Peoples Rep.of China |
Società Europea Veicoli Leggeri-Sevel S.p.A.
|
|
Italy |
Société Européenne de Véhicules Légers du Nord-Sevelnord Société Anonyme
|
|
France |
Tofas-Turk Otomobil Fabrikasi Tofas A.S.
|
|
Turkey |
|
|
|
Agricultural and Construction Equipment |
|
|
CNH de Mexico SA de CV
|
|
Mexico |
Consolidated Diesel Company
|
|
U.S.A. |
L&T Case Equipment Limited
|
|
India |
New Holland HFT Japan Inc.
|
|
Japan |
|
|
|
Commercial Vehicles |
|
|
GEIE V.IV.RE
|
|
France |
Haveco Automotive Transmission Co. Ltd.
|
|
Peoples Rep.of China |
Iveco Fiat Oto Melara Società consortile r.l.
|
|
Italy |
Naveco Ltd.
|
|
Peoples Rep.of China |
Transolver Finance Establecimiento Financiero de Credito S.A.
|
|
Spain |
V.IVE.RE Gruppo Europeo di Interesse Economico
|
|
Italy |
|
|
|
Components |
|
|
Gestamp Marelli Autochasis S.L.
|
|
Spain |
|
|
|
Metallurgical Products |
|
|
Hua Dong Teksid Automotive Foundry Co. Ltd.
|
|
Peoples Rep.of China |
|
|
|
Services |
|
|
Global Value Soluçoes Ltda
|
|
Brazil |
|
|
|
Subsidiaries accounted for using the equity method |
|
|
|
|
|
Automobiles |
|
|
Alfa Romeo Inc.
|
|
U.S.A. |
Alfa Romeo Motors Ltd.
|
|
Thailand |
Auto Italia Erfurt GmbH in liquidation
|
|
Germany |
F.A. Austria Commerz GmbH
|
|
Austria |
Fiat Auto Egypt Industrial Company SAE
|
|
Egypt |
Fiat Auto Egypt S.A.E.
|
|
Egypt |
Fiat Auto S.A. de Ahorro para Fines Determinados
|
|
Argentina |
Fiat Auto Thailand Pvt. Ltd.
|
|
Thailand |
Italcar SA
|
|
Morocco |
Sirio Polska Sp. z o.o.
|
|
Poland |
Zao Nizhegorod Motors
|
|
Russia |
|
|
|
Agricultural and Construction Equipment |
|
|
Farmers New Holland Inc.
|
|
U.S.A. |
Medicine Hat New Holland Ltd.
|
|
Canada |
Memphis New Holland Inc.
|
|
U.S.A. |
Northside New Holland Inc.
|
|
U.S.A. |
Ridgeview New Holland Inc.
|
|
U.S.A. |
St. Anthony New Holland, Inc.
|
|
U.S.A. |
St. Catharines New Holland Ltd.
|
|
Canada |
Sunrise Tractor & Equipment Inc.
|
|
U.S.A. |
Tri-County New Holland Inc.
|
|
U.S.A. |
|
|
|
Commercial Vehicles |
|
|
Altra S.p.A.
|
|
Italy |
F. Pegaso S.A.
|
|
Spain |
Financière Pegaso France S.A.
|
|
France |
Iveco Colombia Ltda.
|
|
Colombia |
Iveco Plan S.A. de Ahorro para fines determinados
|
|
Argentina |
Iveco S.P.R.L.
|
|
Congo (Dem. Rep. Congo) |
|
|
|
Components |
|
|
Cofap Fabricadora de Pecas Ltda
|
|
Brazil |
Seima Italiana Auto Svet
|
|
Russia |
|
|
|
Metallurgical Products |
|
|
Teksid of India Private Limited Company in liquidation
|
|
India |
|
|
|
Production Systems |
|
|
Comau AGS S.p.A.
|
|
Italy |
Comau Australia Pty. Ltd
|
|
Australia |
|
|
|
Services |
|
|
Atlanet S.p.A.
|
|
Italy |
Cromos Consulenza e Formazione S.r.l. in liquidation
|
|
Italy |
Matrix S.r.l. in liquidation
|
|
Italy |
|
|
|
Holding companies and Other companies |
|
|
Centro Studi sui Sistemi di Trasporto-CSST S.p.A.
|
|
Italy |
European Engine Alliance EEIG
|
|
United Kingdom |
Fiat (China) Business Co., Ltd.
|
|
Peoples Rep.of China |
Fiat Russia OOO
|
|
Russia |
Isvor Dealernet S.r.l. in liquidation
|
|
Italy |
SGR-Sociedad para la Gestion de Riesgos S.A.
|
|
Argentina |
Sistemi Ambientali S.p.A. in liquidation
|
|
Italy |
|
|
|
Subsidiaries valued at cost |
|
|
|
|
|
Automobiles |
|
|
Fiat Auto Espana Marketing Instituto Agrupacion de Interes Economico
|
|
Spain |
Fiat Auto Marketing Institute (Portugal) ACE
|
|
Portugal |
Nuove Iniziative Finanziarie 2 S.r.l.
|
|
Italy |
Powertrain India Pvt. Ltd. in liquidation
|
|
India |
|
|
|
Maserati |
|
|
Maserati Deutschland GmbH
|
|
Germany |
Maserati GB Limited
|
|
United Kingdom |
Maserati West Europe societé par actions simplifiée
|
|
France |
|
|
|
Agricultural and Construction Equipment |
|
|
Case Credit Wholesale Pty. Limited
|
|
Australia |
Fermec North America Inc.
|
|
U.S.A. |
International Harvester Company
|
|
U.S.A. |
J.I. Case Company Limited
|
|
United Kingdom |
|
|
|
Commercial Vehicles |
|
|
Consorzio per la Formazione Commerciale Iveco-Coforma
|
|
Italy |
Irisbus North America Limited Liability Company
|
|
U.S.A. |
Iveco Defence Vehicles S.p.A.
|
|
Italy |
Iveco Motors of China Limited
|
|
Peoples Rep.of China |
M.R. Fire Fighting International S.A.
|
|
Romenia |
|
|
|
Components |
|
|
Automotive Lighting Japan K.K.
|
|
Japan |
Magneti Marelli Automotive Components (India) Limited
|
|
India |
Magneti Marelli Electronic Systems (Asia) Limited
|
|
Peoples Rep.of China |
Yorka Northamerica Corp.
|
|
U.S.A. |
|
|
|
Production Systems |
|
|
Comau (Shanghai) International Trading Co. Ltd.
|
|
Peoples Rep.of China |
Comau U.K. Limited
|
|
United Kingdom |
Consorzio Fermag in liquidation
|
|
Italy |
Synesis
|
|
Italy |
|
|
|
Services |
|
|
CONSORZIO SERMAGEST Servizi Manutentivi Gestionali
|
|
Italy |
Fiat Common Investment Fund Limited
|
|
United Kingdom |
Gestione Servizi Territoriali S.r.l.
|
|
Italy |
|
|
|
Polaris Consorzio fra Imprese con Attività Esterna in liquidation
|
|
Italy |
|
|
|
Publishing and Communications |
|
|
To-dis S.r.l. a socio unico
|
|
Italy |
|
|
|
Holding companies and Other companies |
|
|
Fast Buyer Middle East A.S.
|
|
Turkey |
Fiat Gra.De EEIG
|
|
United Kingdom |
Fiat Media Center S.p.A.
|
|
Italy |
Fiat Oriente S.A.E. in liquidation
|
|
Egypt |
Fides Corretagens de Securos Ltda
|
|
Brazil |
ISVOR DILTS Leadership Systems Inc. in liquidation
|
|
U.S.A. |
Isvor Fiat India Private Ltd. in liquidation
|
|
India |
New Business 16 S.r.l.
|
|
Italy |
New Business 17 S.r.l.
|
|
Italy |
Norfinance & Associés S.A. in liquidation
|
|
Switzerland |
Nuova Immobiliare Cinque S.r.l.
|
|
Italy |
Nuova Immobiliare Quattro S.r.l.
|
|
Italy |
Nuova Immobiliare Tre S.p.A.
|
|
Italy |
Nuove Iniziative Finanziarie 4 S.r.l.
|
|
Italy |
Orione-Consorzio Industriale per la Sicurezza e la Vigilanza
|
|
Italy |
|
|
|
Associated companies accounted for using the equity method |
|
|
|
|
|
Automobiles |
|
|
Fidis Bank G.m.b.H.
|
|
Austria |
Fidis Retail Italia S.p.A.
|
|
Italy |
GM-Fiat Worldwide Purchasing B.V. in liquidation
|
|
Netherlands |
IN ACTION S.r.l.
|
|
Italy |
Targasys S.r.l.
|
|
Italy |
|
|
|
Ferrari |
|
|
Ferrari Maserati Cars International Trading (Shanghai) Co. Ltd.
|
|
Peoples Rep.of China |
|
|
|
Agricultural and Construction Equipment |
|
|
Al-Ghazi Tractors Ltd
|
|
Pakistan |
Challenger New Holland Ltd.
|
|
Canada |
CNH Capital Europe S.a.S.
|
|
France |
CNH Servicios Comerciales, S.A. de C.V.
|
|
Mexico |
Employers Health Initiatives LLC
|
|
U.S.A. |
Kobelco Construction Machinery Co. Ltd.
|
|
Japan |
LBX Company LLC
|
|
U.S.A. |
Megavolt L.P. L.L.L.P.
|
|
U.S.A. |
New Holland Finance Ltd
|
|
United Kingdom |
New Holland Trakmak Traktor A.S.
|
|
Turkey |
Rathell Farm Equipment Company Inc.
|
|
U.S.A. |
Turk Traktor Ve Ziraat Makineleri A.S.
|
|
Turkey |
|
|
|
Powertrain Technologies |
|
|
Powertrain Industrial Services S.C.R.L. in liquidation
|
|
Italy |
|
|
|
Commercial Vehicles |
|
|
Closed Joint Stock Company AUTO-MS
|
|
Ukraine |
|
|
|
Iveco Finance Holdings Limited
|
|
United Kingdom |
Iveco Uralaz Ltd.
|
|
Russia |
Machen-Iveco Holding S.A.
|
|
Luxembourg |
Otoyol Sanayi A.S.
|
|
Turkey |
|
|
|
Production Systems |
|
|
Gonzalez Production Systems Inc.
|
|
U.S.A. |
G.P. Properties I L.L.C.
|
|
U.S.A. |
|
|
|
Services |
|
|
Servizio Titoli S.p.A.
|
|
Italy |
|
|
|
Publishing and Communications |
|
|
Editalia S.r.l.
|
|
Italy |
Editoriale Corriere Romagna S.r.l.
|
|
Italy |
Edizioni Dost S.r.l.
|
|
Italy |
Società Editrice Mercantile S.r.l.
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Italy |
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Holding companies and Other companies |
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IPI S.p.A.
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Italy |
Livingstone Motor Assemblers Ltd.
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Zambia |
Lombard Bank Malta PLC
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Malta |
Rizzoli Corriere della Sera MediaGroup S.p.A.
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Italy |
WorkNet S.p.A.
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Italy |
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Associated companies valued at cost |
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Automobiles |
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Car City Club S.r.l.
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Italy |
Consorzio per la Reindustrializzazione Area di Arese S.r.l. in liquidation
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Italy |
Fabrication Automobiles de Tiaret SpA
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Algeria |
Fidis Rent GmbH
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Germany |
N. Technology S.p.A.
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Italy |
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Ferrari |
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Iniziativa Fiorano S.r.l.
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Italy |
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Commercial Vehicles |
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CBC-Iveco Ltd.
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Peoples Rep.of China |
Sotra S.A.
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Ivory Coast |
Trucks & Bus Company
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Libya |
Zastava-Kamioni D.O.O.
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Serbia |
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Components |
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Flexider S.p.A.
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Italy |
Mars Seal Private Limited
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India |
Matay Otomotiv Yan Sanay Ve Ticaret A.S.
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Turkey |
M.I.P.-Master Imprese Politecnico
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Italy |
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Metallurgical Products |
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S.A.S.-Società Assofond Servizi S.r.l.
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Italy |
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Production Systems |
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Consorzio Generazione Forme-CO.GE.F.
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Italy |
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Services |
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Multiservizi Reggio Calabria Società per Azioni
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Italy |
S.I.MA.GEST2 Società Consortile a Responsabilità Limitata
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Italy |
Società Cooperativa Delta Più r.l. in liquidation
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Italy |
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Publishing and Communications |
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Le Monde Europe S.A.
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France |
Le Monde Presse S.A.S.
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France |
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Holding companies and Other companies |
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Agenzia Internazionalizzazione Imprese Torino S.r.l. in liquidation
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Italy |
Alcmena S.a.r.l.
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Luxembourg |
Ascai Servizi S.r.l. in liquidation
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Italy |
Ciosa S.p.A. in liquidation
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Italy |
Concordia Finance S.A.
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Luxembourg |
CONFORM Consorzio Formazione Manageriale
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Italy |
Consorzio Oto-BPD in liquidation
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Italy |
Consorzio Parco Industriale di Chivasso
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Italy |
Consorzio per lo Sviluppo delle Aziende Fornitrici in liquidation
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Italy |
Consorzio Prode
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Italy |
Consorzio Scire
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Italy |
Consorzio Scuola Superiore per lAlta Formazione Universitaria Federico II
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Italy |
Expo 2000 S.p.A.
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Italy |
FMA-Consultoria e Negocios Ltda
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Brazil |
Giraglia Immobiliare S.p.A.
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Italy |
Immobiliare Novoli S.p.A.
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Italy |
Interfinanziaria S.A.
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Switzerland |
MB Venture Capital Fund I N.V.
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Netherlands |
Nuova Didactica S.c. a r.l.
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Italy |
QSF Qualità Servizi Formazione GEIE
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Italy |
Tecnologie per il Calcolo Numerico-Centro Superiore di Formazione S.c. a r.l.
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Italy |
Zetesis S.p.A.
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Italy |
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Other companies valued at cost |
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Agricultural and Construction Equipment |
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Polagris S.A.
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Lithuania |
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Commercial Vehicles |
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Consorzio Bolzano Energia
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Italy |
Consorzio Spike
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Italy |
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Services |
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H.R.O. Polska Sp. z o.o.
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Poland |
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Holding companies and Other companies |
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Consorzio Sorore
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Italy |
Consorzio Technapoli
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Italy |
Ercole Marelli & C. S.p.A. in liquidation
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Italy |
Euromedia Luxembourg One S.A.
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Luxembourg |
Fin.Priv. S.r.l.
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Italy |
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IRCC-Istituto per la Ricerca e la Cura del Cancro-Torino S.p.A.
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Italy |
Torino Zerocinque Investment S.p.A.
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Italy |
Torino Zerocinque Trading S.p.A.
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Italy |
Exhibit 12.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Sergio Marchionne, certify that:
1. |
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I have reviewed this annual report on Form 20-F of Fiat S.p.A.; |
2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the company as of, and for, the periods presented in this report; |
4. |
|
The companys other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the company and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the companys disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the companys internal control over
financial reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially affect, the
companys internal control over financial reporting; and
5. |
|
The companys other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the companys auditors and the
audit committee of the companys board of directors (or persons performing the equivalent
functions): |
(a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the companys ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the companys internal control over financial
reporting.
Date: June 30, 2006
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Name: Sergio Marchionne |
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Title: Chief Executive Officer |
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Exhibit 12.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Alessandro Baldi, certify that:
1. |
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I have reviewed this annual report on Form 20-F of Fiat S.p.A.; |
2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the company as of, and for, the periods presented in this report; |
4. |
|
The companys other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the company and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the companys disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the companys internal control over
financial reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially affect, the
companys internal control over financial reporting; and
5. |
|
The companys other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the companys auditors and the
audit committee of the companys board of directors (or persons performing the equivalent
functions): |
(a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the companys ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the companys internal control over financial
reporting.
Date: June 30, 2006
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Name: Alessandro Baldi |
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Title: Group Controller |
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Exhibit 12.3
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Maurizio Francescatti, certify that:
1. |
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I have reviewed this annual report on Form 20-F of Fiat S.p.A.; |
2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the company as of, and for, the periods presented in this report; |
4. |
|
The companys other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the company and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the companys disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the companys internal control over
financial reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially affect, the
companys internal control over financial reporting; and
5. |
|
The companys other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the companys auditors and the
audit committee of the companys board of directors (or persons performing the equivalent
functions): |
(a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the companys ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the companys internal control over financial
reporting.
Date: June 30, 2006
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/s/ MAURIZIO FRANCESCATTI
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Name: Maurizio Francescatti |
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Title: Group Controller |
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Exhibit 13.1
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 (Section 906) of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers
of Fiat S.p.A. (the Company), does hereby certify, to such officers knowledge, that:
The Companys Annual Report on Form 20-F for the fiscal year ended December 31, 2005 (the
Form 20-F), fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, and information contained in the Form 20-F fairly presents, in all
material respects, the financial condition and results of operations of the Company.
Dated: June 30, 2006
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/s/ SERGIO MARCHIONNE |
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Name: Sergio Marchionne
Title: Chief Executive Officer |
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Dated: June 30, 2006
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/s/ ALESSANDRO BALDI |
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Name: Alessandro Baldi |
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Title: Group Controller |
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Dated: June 30, 2006
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/s/ MAURIZIO FRANCESCATTI |
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Name: Maurizio Francescatti
Title: Group Treasurer |
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A signed original of this written statement required by Section 906 has been provided to Fiat
S.p.A. and will be retained by Fiat S.p.A. and furnished to the Securities and Exchange Commission
or its staff upon request.