Annual Report - Borsa Italiana
Annual Report
2005 Consolidated and
Statutory Financial Statements
100th Fiscal Year
Annual Report
2005 Consolidated and
Statutory Financial Statements
Stockholders Meeting
Stockholders are invited to attend the Ordinary Stockholders Meeting to be held at the Fiat
Historical Centre, 20 via Chiabrera, Turin, on May 2, 2006 on the first call and on May 3,
2006 on the second call, at 1:00 p.m. to resolve on the following
Agenda
1. Statutory and Consolidated Financial Statements at December 31, 2005, and on Report on
Operations; related resolutions.
2. Appointment of the Board of Directors after determining the number of its Members and their
fees.
3. Appointment of the Board of Statutory Auditors, its Chairman and determination of the
relevant fees.
4. Engagement of the External Auditors.
5. Incentive Plan: resolutions pursuant to Article 114 bis of Legislative Decree 58/98.
CONTENTS
2
4
4
5
7
8
10
11
14
17
37
41
42
43
45
46
50
51
52
53
55
59
61
62
63
64
65
66
67
68
69
70
71
137
161
182
183
186
191
194
196
234
236
Stockholders Meeting
Agenda
Board of Directors and Control Bodies
Letter from the Chairman and the Chief Executive Officer
Report on Operations
The Fiat Group
Highlights - Group
Highlights by Sector
Stockholders
Sustainability Report
Research and Innovation
Human Resources
Financial Review of the Group
Corporate Governance
Stock Option Plans
Transactions among Group Companies and with Related Parties
Significant Events Occurring since the End of the Fiscal Year and Business Outlook
Operating Performance by Sector of Activity
- Fiat Auto – Fiat, Alfa Romeo, Lancia and Fiat Veicoli Commerciali
- Maserati
- Ferrari
- Fiat Powertrain Technologies
- Agricultural and Construction Equipment
- Commercial Vehicles
- Components
- Metallurgical Products
- Production Systems
- Services
- Publishing and Communications
Motion for Approval of the Financial Statements and Allocation of Net Income
Fiat Group – Consolidated Financial Statements at December 31, 2005
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Statement of Changes in Stockholders’ Equity
Notes to the Consolidated Financial Statements
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
Appendix 2 – Fiat Group Companies
Fiat S.p.A. – Financial Statements at December 31, 2005
Financial Review of Fiat S.p.A.
Transition to International Financial Reporting Standards (IFRS) by Fiat S.p.A.
Balance Sheet
Income Statement
Notes to the Financial Statements
Auditors’ Reports
Reports of the Board of Statutory Auditors
Fiat S.p.A.
Registered Office: Via Nizza 250, Turin, Italy
Paid-in capital: 6,377,257,130 euros
Entered in the Turin Company Register
Fiscal Code: 00469580013
This Report has been translated into English from the original version in Italian.
In case of doubt the Italian version shall prevail.
BOARD OF DIRECTORS AND CONTROL BODIES
Board of Directors
Chairman
Luca Cordero di Montezemolo (3)
Vice Chairman
John Elkann (1) (3)
Chief Executive Officer
Sergio Marchionne (3)
Directors
Andrea Agnelli
Angelo Benessia (2)
Tiberto Brandolini d’Adda
Flavio Cotti (1)
Luca Garavoglia (1)
Gian Maria Gros-Pietro (1)
Hermann-Josef Lamberti (2)
Vittorio Mincato (3)
Virgilio Marrone
Pasquale Pistorio (3)
Daniel John Winteler (1)
Mario Zibetti (2)
Secretary of the Board
Franzo Grande Stevens
(1) Member of the Nominating and Compensation Committee
(2) Member of the Internal Control Committee
(3) Member of the Strategic Committee
Board of Statutory Auditors
Statutory Auditors
Cesare Ferrero – Chairman
Giuseppe Camosci
Giorgio Ferrino
Alternate Auditors
Giorgio Giorgi
Natale Ignazio Girolamo
Piero Locatelli
External Auditors
Deloitte & Touche S.p.A.
Letter from the Chairman and the Chief Executive Officer
2005 marked a turning point for Fiat.
We delivered on our commitments, we met all of our targets and we even exceeded a number of them.
We had promised that 2004 would be Fiat’s final year of net losses – and we achieved net income of over 1.4 billion
euros in 2005.
We had committed to a drastic cut in net industrial debt – and it was reduced by two-thirds.
We had decided to focus on the relaunch of our Automobile activities, and in the last quarter of 2005 Fiat Auto posted a
trading profit of 21 million euros after 17 consecutive quarters of losses.
This has contributed to restoring Fiat’s credibility, not only in Italy, but internationally, as evidenced by the improvement
in our debt ratings and our ability to attract a large number of institutional investors in our debt raising activities.
Our reputation has also benefited from the launch of new models across all brands that have been received extremely
well by the public for their creativity, style, technology, and innovation, qualities that have distinguished the best Fiat cars
since the firm was founded.
These breakthroughs, as well as all the other operational and financial improvements highlighted in this annual report,
could not have been achieved without the strenuous efforts of the entire Fiat community, each and every one of whose
members contributed to the relaunch of the Group with dedication and discipline. To do so, the Fiat people had to
endorse fundamental changes in attitude, to assume greater responsibility and accountability, and to show their
determination to deliver. We would like to express our sincere thanks to all of them.
During 2005, we also built a strong base for more effective and profitable operations in the future.
First of all, we successfully resolved all pending strategic and financial issues: we settled our outstanding matters with
General Motors and received a 1.56 billion euro cash payment; the Italenergia Bis transaction led to a 1.8 billion euro
reduction in net industrial debt; and finally, conversion of the Mandatory Convertible Facility resulted in a 3 billion euro
debt reduction and a sharp improvement in Group equity.
Fiat’s business governance structure, especially in Automobiles, was right-sized to match realistic demand and market
conditions. In Autos we have put in place a fully market-oriented organization, unbundling the brands: Fiat, Lancia and
Alfa Romeo now face the customer on their own, while sharing key functions such as manufacturing, quality and safety.
Everything is driven by the brands and for the brands. Similarly, in Agricultural and Construction Equipment, Case New
Holland was reorganized along four brands rather than regions.
And we have begun to aggressively streamline processes throughout the organization.
The Company will reap the benefits of these structural improvements in 2006 and beyond.
Last year, we made other important decisions that will shape the Group’s future, in the form of targeted industrial
alliances with major international partners. Seven such agreements were struck in the Automobile Sector – with Pars
Industrial Development Foundation (PDIF), PSA-Tofas, Zastava, Suzuki, Ford, Severstal Auto and Tata Motors – while
another partnership was established in commercial vehicles and industrial engines, between Iveco and SAIC.
***
Though much was done in 2005 to set the Company on course towards a real, lasting rebirth of our Group, the process
is far from over and much remains to be done. Nonetheless, today’s Fiat is a much different company from what it was
just a year ago.
The Group improved all key financial indicators. Our cash position – about 7 billion euros at 2005 year end – is strong.
The financial markets are showing increased confidence in our prospects, as demonstrated by the steady appreciation of
the Fiat share price. We have nearly completed the process of making our Internal Control System fully Sarbanes-Oxley
compliant, a move that will further enhance confidence in the Group at the international level.
The Fiat we are talking about is a Group with a reinvigorated managerial structure, a leaner organization, a solid financial
structure and stronger market positions thanks to new products. This new Fiat can achieve new, challenging targets in
2006.
Letter from the Chairman and the Chief Executive Officer
2
At Group level, we aim to deliver positive cash flow from operations, a trading profit between 1.6 and 1.8 billion euros,
and net income of about 700 million euros.
While we do not expect market conditions for our operating Sectors to change materially this year, we have set high
trading margin targets (trading profit as a percentage of revenues) for all of them: 7% to 7.5% at CNH, 5.5% to 6% at
Iveco, and 3.5% to 4% in Components and Production Systems.
The Automobile Sector should also turn in a positive performance, with a trading margin of 0.5% to 1%. This result will
be supported by the full-year contribution of new models already rolled out. These will be joined in coming months by
other new models, as we implement our aggressive product renewal plan calling for the launch of 20 new cars and the
restyling of 23 current models between 2005 and 2008.
***
We made a clean break with the past, while respecting all commitments made to stakeholders. We are clearly within
reach of recovering our position as a competitive automotive Group.
This is why we are keeping up the pressure that has enabled us to get this far, demanding much from ourselves and
from all the men and women of the Fiat community. We have no intention of lessening the momentum that has allowed
Fiat to generate a series of steady improvements, quarter after quarter, throughout 2005.
We will remain focused on reducing costs in non-essential areas, while continuing to invest in innovation. We will
complement our advanced technological resources with better commercial organization and more efficient services.
Finally, we will continue to seek new international opportunities, implementing our strategy of targeted alliances with key
partners who will help us reduce capital commitments, and share investments and risks.
It is for all these reasons that we feel confident about our future.
Turin, February 28, 2006
Luca Cordero di Montezemolo
Sergio Marchionne
Chairman
Chief Executive Officer
Letter from the Chairman and the Chief Executive Officer
3
REPORT ON OPERATIONS
The Fiat Group
The Fiat Group performs automotive manufacturing and financial service activities in approximately 190 countries.
Below is a description of how the Group is currently structured, as a result of its refocusing on the automotive business
started in 2003 and continued in 2004. In 2005, reporting of Group activities was redefined by Business Areas as follows:
Automobiles
Fiat Auto produces and sells automobiles under the Fiat, Alfa Romeo and Lancia brands and light commercial vehicles
under the Fiat brand. It provides financing services to its dealers and suppliers and rental services to its customers.
The Sector is represented by Fiat Auto S.p.A. and its subsidiaries.
The Fiat Group also controls Maserati and Ferrari. They produce luxury sports cars that excel for their exclusive
characteristics, technology and performance. Following transfer of the ownership of Maserati from Ferrari to Fiat
Partecipazioni S.p.A., as of April 2005 the two companies are represented separately.
Fiat Powertrain Technologies is the new Sector which groups all passenger car engine and transmission activities. Fiat
regained control over these activities in May 2005 following termination of the Master Agreement with General Motors.
Starting in 2006, the Sector will also include the engine and transmission operations of Iveco, Centro Ricerche Fiat and
Elasis.
Agricultural and Construction Equipment
CNH operates in the field of tractors and agricultural equipment through the Case IH and New Holland brands and in the
construction equipment business through the Case and New Holland brands. Its financial services provide support to its
end customers and dealers.
Commercial Vehicles
Iveco designs, produces and sells a complete line of commercial vehicles under the Iveco brand, buses under the Irisbus
brand, and fire-fighting and special purpose vehicles under the Iveco, Astra and Magirus brands. In addition, Iveco
provides financing services to its dealer network and rental services to customers.
Components and Production Systems
Magneti Marelli produces components for lighting systems, exhaust systems, suspensions and shock absorbers, engine
control units, and electronic systems.
Teksid supplies engine blocks, cylinder heads and other cast-iron components for engines; cast-iron components for
transmissions, gearboxes and suspensions; and magnesium bodywork components.
Comau produces industrial automation systems for the automotive industry in the areas of product and process
engineering, logistics and management, manufacturing, installation, production start-up and maintenance.
Other Businesses
This area includes the Services Sector and the Publishing and Communications Sector, engaged in the following
businesses:
ƒ
Services in the areas of personnel administration and administrative and corporate finance consulting, mainly
provided to Group companies.
ƒ
Publication of the La Stampa daily newspaper, and sale of advertising space for multimedia customers through
Publikompass.
Other Businesses also include Holding companies and Other companies, among which Banca Unione di Credito, a group
performing banking activities in Switzerland.
Report on Operations – The Fiat Group
4
Highlights – Group
2005
2004
Net revenues
46,544
45,637
Trading profit
1,000
50
Operating result
2,215
(585)
Income/(loss) before taxes
2,264
(1,629)
Net income/(loss) before minority interest
1,420
(1,579)
Group interest in net income/(loss)
1,331
(1,634)
1.250
1.250
(1.699)
(1.699)
3,052
656
2,915
753
1,558
62,454
1,791
62,522
18,523
25,423
of which: Net industrial debt
Stockholders’ equity before minority interest
3,219
9,447
9,413
4,928
Group interest in stockholders’ equity
8,681
4,304
173,695
161,066
(in millions of euros)
Earnings per share (ordinary, preference, and savings) (in euros)
Diluted earnings per share (ordinary, preference, and savings) (in euros)
(1)
(1)
Investments in tangible and intangible assets (net of vehicles sold under buy-back commitments)
of which: Capitalised R&D costs
R&D expenses
Total assets
(2)
Net debt
Employees at year-end (number)
Effective January 1, 2005, the Fiat Group adopted the International Financial Reporting Standards (IFRS). The comparative data for 2004 have thus been
restated in accordance with the new accounting standards. For additional information on the impact of their adoption on 2004 figures that had already been
published, reference is made to the Appendix 1 of the Consolidated Financial Statements.
(1) 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.
(2) Includes capitalised R&D costs and costs charged directly to operations for the fiscal year.
SELECTED DATA BY REGION
Number of
Companies (*)
2005
2004
Number
of Employees (*)
2005
2004
Number of
Facilities
2005
2004
Number of
R&D Centres (*)
2005
2004
Revenues
(in millions of euros)
2005
2004
Italy
155
173
77,070
71,469
56
54
52
53
13,078
14,903
Europe excluding Italy
280
305
43,376
43,253
58
56
32
33
18,518
17,646
North America
80
89
12,572
12,400
28
28
17
17
6,048
6,020
Mercosur
40
43
29,132
24,229
20
19
10
10
4,364
3,195
Other regions
99
104
11,545
9,715
27
23
9
9
4,536
3,873
654
714
173,695
161,066
189
180
120
122
46,544
45,637
Total
(*) Fiscal 2004 figures are different from those published until now due to the impact of changes in the scope of consolidation resulting from the adoption,
from January 1, 2005, of International Financial Reporting Standards (IFRS).
Report on Operations – Highlights - Group
5
ƒ
Fiat Group recorded revenues of 46.5 billion euros in 2005, up 2% from 45.6 billion euros in 2004. All automotive
Sectors posted improvements, apart from a slight decrease (-0.8%) at Fiat Auto as a recovery in car sales volumes
in the last quarter was insufficient to offset the trend of the first nine months, when sales slowed down ahead of new
model launches.
ƒ
Group trading profit for the year came in at 1.0 billion euros, compared with 50 million euros in 2004. The 950 million
euro improvement in trading profit reflected a 541 million euro reduction in trading losses at Fiat Auto and the
positive performance of all other industrial Sectors, which met or exceeded their trading margin targets (trading profit
as a percentage of revenues). In particular, trading margins were as follows: Fiat Auto -1.4%, in line with the target
set; CNH 6.8%, against a target of 6/6.5%; Iveco 4.4%, higher than its 4% target; the Components and Production
Systems business area 3.7%, higher than its 3% target.
ƒ
Operating result for the year was positive by 2.2 billion euros, compared with an operating loss of 585 million euros
in 2004. The year benefited from the improvement in trading profit and, more particularly, from the gain of 1.1 billion
euros from the General Motors settlement and the gain realised on the sale of the investment in Italenergia Bis (878
million euros).
ƒ
Income before taxes was 2.3 billion euros, compared with a loss of 1.6 billion euros in 2004. The 3.9 billion euro
improvement reflected an increase in operating result (+2.8 billion euros), the unusual financial income of 858 million
euros associated with the capital increase to service the Mandatory Convertible Facility and a decrease in net
financial expenses.
ƒ
Consolidated net income (Group and third parties) amounted to 1.4 billion euros, against a loss of 1.6 billion euros in
2004.
ƒ
Net industrial debt amounted to 3.2 billion euros, showing a decrease during the year of approximately 6.2 billion
euros, mainly reflecting the conversion of the Mandatory Convertible Facility, the repayment of financial debt related
to the Italenergia Bis transaction, and the receipt of the General Motors indemnity following the settlement of the
Master Agreement.
ƒ
The Group’s cash position at December 31, 2005 was approximately 7 billion euros, up from 6.1 billion euros at
January 1, 2005, after the utilisation of 1.9 billion euros of cash for the repayment of bonds.
Report on Operations – Highlights - Group
6
HIGHLIGHTS BY SECTOR
Net revenues
(in millions of euros)
Fiat Auto
Maserati
Trading profit
Operating result
Total
operating assets
2005
2004
2005
2004
2005
2004
2005
2004
19,533
19,695
(281)
(822)
(818)
(1,412)
16,231
15,967
533
409
(85)
(168)
(85)
(171)
235
312
Ferrari
1,289
1,175
157
138
157
136
936
837
Fiat Powertrain Technologies
1,966
-
26
-
4
-
2,362
-
10,212
9,983
698
467
611
399
17,860
15,224
Commercial Vehicles (Iveco)
9,489
9,047
415
371
289
347
7,510
9,797
Components (Magneti Marelli)
4,033
3,795
162
165
127
148
2,363
2,228
Metallurgical Products (Teksid)
1,036
910
45
(39)
27
(42)
671
576
Production Systems (Comau)
1,573
1,711
42
40
(8)
30
1,091
1,042
Agricultural and Construction Equipment (CNH)
Services (Business Solutions)
752
976
35
41
7
34
341
636
Publishing and Communications (Itedi)
397
407
16
11
13
9
186
161
Holding companies, Other companies and Eliminations
(4,269)
(2,471)
(230)
(154)
1,891
(63)
915
1,784
Total for the Group
46,544
45,637
1,000
50
2,215
(585)
50,701
48,564
Total
operating liabilities
(in millions of euros)
Investments (*)
Number of
employees
R&D expenses (**)
2005
2004
2005
2004
2005
2004
2005
2004
Fiat Auto
15,638
15,269
1,582
1,792
665
952
46,099
45,122
Maserati
270
302
20
51
57
72
606
652
Ferrari
625
428
142
143
86
75
2,809
2,670
Fiat Powertrain Technologies
1,255
-
173
-
2
-
10,111
-
14,483
12,128
255
243
234
221
25,420
25,746
Commercial Vehicles (Iveco)
6,213
8,342
444
330
277
243
32,373
31,037
Components (Magneti Marelli)
1,620
1,371
313
280
197
193
24,213
21,868
Metallurgical Products (Teksid)
419
389
45
44
5
4
8,952
8,571
Production Systems (Comau)
828
823
38
23
20
17
12,725
13,328
Services (Business Solutions)
437
604
19
25
-
-
5,436
6,519
Publishing and Communications (Itedi)
161
165
20
2
-
-
846
849
Holding companies, Other companies and Eliminations
719
1,440
1
(18)
15
14
4,105
4,704
42,668
41,261
3,052
2,915
1,558
1,791
173,695
161,066
Agricultural and Construction Equipment (CNH)
Total for the Group
(*) Investments in tangible and intangible assets (net of vehicles sold with buy-back commitments).
(**) Including capitalised R&D costs and costs charged directly to operations during the fiscal year.
Report on Operations – Highlights by Sector
7
STOCKHOLDERS
Financial communication
Average monthly trading volumes (in milions of shares)
Fiat maintains a constant dialogue with its Stockholders and Institutional
600
Investors, pursuing a policy of open communication with them through its Investor
Relations function. Over the course of the year, the Investor Relations function
500
organizes presentations, live or through conference calls, after the regular
publication of Group results or other events requiring direct communications with
400
the market. Moreover, the programme includes several seminars that provide a
more in-depth understanding of the operating performance and strategies of the
300
principal Group Sectors, as well as meetings and roadshows that permit a direct
relationship between the financial community and the Group’s top management.
200
More information is available at the Group’s institutional website
www.fiatgroup.com. The Investor Relations section provides historical financial
100
data, institutional presentations, periodic publications, and real time updates on
Fiat stock.
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Fiat stockholders may also contact:
For holders of Fiat shares:
Toll-free telephone number in Italy:
E-mails:
800-804027
Ordinary
[email protected]
Preference
Savings
[email protected]
For holders of ADRs:
Toll-free telephone number in the USA and Canada:
800 900 11 35
Outside the USA and Canada:
Website: www.adr.com
781 575 43 28
Performance of FIAT stock with respect to MIBTEL index and Eurostoxx since January 1, 2005 (1/1/05=100)
Fiat vs. Mibtel & Eurostoxx Auto
140
140
130
130
120
120
110
110
100
100
Eurostoxx Auto
Mibtel
Dec-05
Dec-05
Nov-05
Nov-05
Oct-05
Oct-05
Sep-05
Sep-05
Aug-05
Aug-05
Aug-05
Jul-05
Jul-05
Jun-05
Jun-05
May-05
May-05
Apr-05
Apr-05
50
Mar-05
60
50
Mar-05
70
60
Feb-05
70
Feb-05
80
Jan-05
90
80
Jan-05
90
Fiat
Stock markets worldwide posted strong gains in 2005, except for the New York Stock Exchange, which rose by only 3%.
In Italy the S&P/MIB grew by 15.5%, while the Vienna (+50%), Zurich (+33%), Frankfurt (26%), and Paris (+22%) stock exchanges stood out at
the European level.
During the year, the European automotive market staged a recovery from 2004 levels, with the automotive sector index (Dow Jones Eurostoxx
Auto) posting an increase of 18%.
Against this background, Fiat stock was up by 23.5%. The market rewarded the successful resolution of all its principal strategic and financial
issues (relations with General Motors, Italenergia Bis, and the Mandatory Convertible Facility), the successful roll-out of important new models,
the announcements of targeted industrial agreements with international partners, and achievement of its financial targets for 2005.
Report on Operations – Stockholders
8
Major Stockholders
There are more than 300 thousand individual Fiat stockholders. A total of 1,092,246,316 ordinary shares were outstanding at
December 31, 2005. As of today, the following individual and institutional investors have holdings exceeding 2% of total
outstanding ordinary stock.
Major Stockholders
Ordinary shares: 1,092,246,316
IFIL Investments S.p.A.
(*)
30.46%
Banca Intesa
6.08%
Unicredito
5.58%
Capitalia
3.80%
BNL
2.73%
Generali
2.38%
Libyan Arab Foreign Inv. Co.
2.28%
International Institutional Investors
approx.
12.5%
Italian Institutional Investors
approx.
10%
Other stockholders
approx.
Other stockholders; 24%
LAFICO; 2.28%
Generali; 2.38%
BNL; 2.73%
Capitalia; 3.80%
24%
Intesa; 6.08%
2005
2004
Earnings per share (ordinary,
preference and savings)
(1)
1.250
(1.699)
Diluted earnings per share
(ordinary, preference and savings)
(1)
1.250
(1.699)
(1)
International
Institutional Investors;
12.50%
Unicredito; 5.58%
(*) Including 0.4% of treasury stock held by Fiat S.p.A.
Highlights per share (in euros)
IFIL; 30.46%
Italian
Institutional
Investors; 10%
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.
Official price per share (in euros)
12/30/05 12/30/04 12/30/03 12/30/02 12/28/01 12/29/00
Ordinary shares
7.333
5.897
6.142
7.704
17.921
26.340
Preference shares
5.935
3.976
3.704
4.348
12.267
17.606
Savings shares
6.558
4.243
3.957
4.183
11.459
15.149
Minimumand maximummonthly price in 2005 (in euros)
Fiat Ordinary shares
8
7
Fiat Savings shares
Fiat Preference shares
8
8
7
7
6
6
5
5
4
4
3
3
6
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Report on Operations – Stockholders
9
Sustainability Report –
Economic, environmental and social responsibility
One year ago, even though it was a period when pulling the company out of the crisis was the top priority for everyone at
Fiat, the Group took the time to publish its first Sustainability Report.
This was considered a way of reasserting the importance Fiat assigns to providing the public with balanced information
about the issues associated with management accountability, respect for the environment, and corporate social
responsibility. A way of emphasising that for Fiat, dialogue with the community is far from marginal: instead, it’s a vital part
of its business.
The Sustainability Report testifies not only to the work Fiat has performed on its finances, manufacturing programmes and
products, but also to the great strides forward made by the Group in corporate responsibility, as it believes that these
efforts do not hamper its business, but add to its value.
The Sustainability Report is divided into three sections, dealing in turn with the Fiat Group’s economic, environmental and
social responsibility. Several additions have been made since the first issue, reflecting the goals that were set out in last
year’s Report and which to a large extent have been met.
Because this is yet another area where Fiat has made good on its promises. And it also bears out the Report’s twofold
aim: to take stock of what has been done, and to establish the targets to which the future work must tend.
In economic responsibility, Fiat has reached its goal of increasing the Group’s value and competitiveness. In doing so, it
has stayed true to its Code of Conduct, and made significant progress in ensuring that its suppliers abide by the principles
of the Code of Conduct and those of the Compliance Programme. In this connection, Fiat has concluded its awarenessraising efforts and is now monitoring results.
In environmental responsibility, Fiat’s commitment took concrete shape with the new central Research and Innovation
function, set up in 2005 to provide a better way of making sure that technological development also lightens the impact of
products on the environment. At the same time, the number of plants which have received ISO 14001 certification
increased, from 84 in 2004 to 89 in 2005. In addition, the Environmental Management System has been extended to
many more manufacturing sites, and the results of the first efforts at tying respect for the environment in with Fiat’s
business targets are promising.
In the area of social responsibility, significant progress has been made. The information provided in the section on
Human Resources now covers worldwide data. In addition, the Group continued to support major programmes designed
to help the disadvantaged in countries such as Brazil, and embarked on new initiatives in Europe and elsewhere. Fiat
devotes particular attention to developing services and individual and collective transportation means to help people who
face special challenges that can limit their mobility: ways such as the Autonomy Programme, the range of agricultural
equipment for the disabled, and Fiat’s contribution to the Torino 2006 Paralympic Games, where the Group provided
funding and management expertise.
Report on Operations – Sustainability Report
10
Research and Innovation
In 2005, a central “Research and Innovation” function was set up with the aim of:
Overseeing multi-sectorial research and innovation, ensuring a uniform approach and cost containment;
Optimising and facilitating the transfer of results achieved within the Group and guaranteeing synergies between the
Sectors in projects of common interest;
Promoting opportunities for public funding in the Group;
Protecting and enhancing intellectual property;
Promoting the Group’s high-tech image.
The new function groups together human and engineering resources already available at the Centro Ricerche Fiat, Elasis
and the corresponding development centres within the single Sectors (Fiat Auto, CNH, Iveco, Magneti Marelli and
Comau).
Consistently with this approach, a multi-sectorial innovation team has been set up, which is composed of upper echelon
engineering and marketing personnel from each Sector.
In 2005, the Group’s two R&D companies, the Centro Ricerche Fiat (C.R.F.) and Elasis, intensified their interactions with
the operating Sectors. Improved coordination of policies, objectives and initiatives made it possible to rationalise skills and
make the most of each centre’s areas of excellence.
1
In 2005, R&D expenses totalled approximately 1.6 billion euros, equal to about 3.5% of net revenues of industrial
operations. The plan covering the 2006-2008 period calls for R&D expenses for a total of approximately 5.9 billion euros.
Overall, R&D activities involved approximately 13,200 people at 120 centres in Italy and abroad.
Centro Ricerche Fiat (C.R.F.)
Environmentally-friendly engines, innovative vehicle structures, electronic chassis control systems, onboard electronic
systems, integrated transportation safety, environmental protection and advanced manufacturing methods. These are the
fields where the Centro Ricerche Fiat concentrated its work in 2005. In addition to its headquarters in Orbassano on the
outskirts of Torino, the Fiat Research Centre 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 C.R.F., 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 C.R.F. made significant progress during the year, with R&D output
totalling 460 projects. Eighty new patent applications were filed, bringing the total number of patents held by the Centre to
over 1,400. A further 1,000 patents are currently pending. In addition, the C.R.F. was awarded 115 projects in the EU’s
Sixth Framework Programme, confirming its leadership in European research.
Of the many awards testifying to the high quality of the Centre’s work, some of the most important included:
- The Special Prize for “Innovative Concepts for the Vehicle of the Future” which the jury awarded to the Centre’s trailblazing “Sportiva Latina” prototype at the 33rd Barcelona International Motor Show.
- The “Oscar Masi” 2005 award for new production technologies based on research by the C.R.F., which was assigned to
Comau for the new AgiLaser laser welding system.
- The “International Engine of the Year” award for 2005 assigned to the 1.3-litre Multijet engine, currently in production at
Fiat Powertrain Technologies plants and developed from C.R.F. innovations and patents.
- The “EuroCarBody Award” for 2005 – Recognition went to the outstanding work performed by the Fiat Auto and Centro
Ricerche Fiat project team in developing, planning and producing the chassis for the Grande Punto.
The major accomplishments of the Centro Ricerche Fiat in 2005 are reviewed below:
ƒ Panda Natural Power. Fuelled with compressed natural gas, this version of the Fiat Panda promises to be the new
benchmark in sustainable urban mobility.
The floor pan, derived from the 4x4 version, houses two separate natural gas tanks with a total capacity of 70 litres.
Compared to the Fiat Punto now in production, cruising range is increased by 20%.
1
Including capitalised R&D costs and costs charged directly to operations during the fiscal year.
Report on Operations – Research and Innovation
11
The two fuel tanks are so well integrated that the car offers just as much room for passengers and luggage as the
original version.
ƒ Fiat Panda Hydrogen. The Orbassano laboratories are continuing to develop fuel cell propulsion systems. After the
Seicento Elettra H2 Fuel Cell and the Seicento Hydrogen, the Panda Hydrogen has now made its debut.
With the fuel cell engine neatly stowed away beneath the floor pan, the Panda Hydrogen retains all of the distinctive
features of the New Panda’s 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. Grade
driveaway capability is 23%. The hydrogen tank, with its total volume of 68 litres, gives the Panda Hydrogen a cruising
range of over 200 kilometres in stop-and-go city traffic.
Refueling, moreover, takes less than five minutes: much the same as a natural gas-powered car.
ƒ Infonebbia Fog Warning System – Experimental Torino-Caselle link. During the Olympic Winter Games, 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 Centre mobility and emergency management system.
Several kilometres of the motorway have been equipped with intelligent safety aids: technologies that check on
visibility, devices for keeping road users informed, systems for detecting and announcing traffic jams and a control
centre that handles wireless monitoring for the entire test site.
Four “safety cars” equipped with radar and telematic systems ply the road in order to provide assistance to drivers in
potentially critical conditions.
ƒ 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.
ƒ Lightweight materials for commercial vehicles. The Centro Ricerche Fiat assisted Iveco in developing new ways to
increase the competitiveness of the Daily line. The goal for 2005 – reducing vehicle weight without penalising costs and
investments – was reached through the use of high strength steels and flexible manufacturing technologies such as
hydroforming and profiling.
ƒ High performance thin seat structure. The C.R.F. 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 on a conventional seat, while
continuing to provide excellent performance in terms of postural comfort and active and passive safety.
ƒ Spark ignition Multiair engine. The work of the Centro Ricerche Fiat on optimising the performance of the original
UNIAIR electronic valve control technology in terms of feasibility and costs has made it possible to extend this system’s
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 specialised research centre whose work addresses technological innovation, complete vehicle
development, mobility and its environmental impact, and traffic safety.
The Centre has a staff of over 800 employees at its two sites in Pomigliano and Lecce, both located in Southern Italy. It is
provided with sophisticated computer-aided design tools and advanced physical and virtual testing equipment which are
based on an ability to develop and manage information systems that puts Elasis in the front ranks of the world’s R&D
centres.
In 2005, Elasis continued to pursue its strategic goal of forging new links in the research/innovation system’s value chain
and of promoting local development:
- Upstream, by working together with universities, private institutions and consortia in basic research and training, and
- Downstream, by continuing to work on the issues related to mobility and its environmental impact, and by cooperating
with employers’ associations and chambers of commerce in Southern Italy to help the area’s SMEs make the most of
their skills.
Report on Operations – Research and Innovation
12
Significant achievements were made in the following areas:
Biomechanics. The Elasis Biomechanics Centre developed simulation methods for the crash tests called for by
international regulatory requirements and rating systems. This work has extended the range of experimental tests that can
be simulated, and ensured that simulations are more representative of the complex physical phenomena that take place
during impact. Simulations have been developed for frontal, side and rear impact tests, whiplash tests and knee impact
tests with adult occupants and children. These testing and statistical analysis methods were applied during the
development of all new Fiat Auto models, and contributed significantly to the achievement of the 5-star Euro NCAP ratings
for Fiat Croma, Grande Punto and Alfa 159.
225 Minicargo development project. As part of the joint venture between Fiat Auto and PSA, Elasis is working together
with Tofas to develop the body shell, trim and closure panels for this new vehicle. Particular attention is devoted to
optimising weight and standardising components by applying innovative robust design methods and an integrated system
of product archetypes based on Knowledge Based Engineering (KBE) technology.
New product planning. During 2005, Elasis worked together with Fiat Auto in setting 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 frontengined roadster, which will be the forerunner of the Ferrari’s future 12-cylinder offerings.
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.
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 litres. In particular, the first engine in the
new FIRE family was developed and put into production: a 1.4-litre 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 addition, a demonstrator (engine plus vehicle) for the turbocharged 16-valve 1.4-litre Fire powerplant was developed on
the Alfa 147 platform. Elasis is now engineering this unit for installation on the Grande Punto and 198 Stilo.
Product Lifecycle Management. Elasis employs a systematic Product Lifecycle Management approach which integrates
CAD, CAE, CAM, CAT, Digital Mock-Up, Virtual Reality, Product Data Management and Engineering BOM solutions. In
addition to being a key factor in the Centre’s work, these capabilities are also transferred to the various Sectors to
encourage cross-functional coordination and the spread of best practices.
New “Hardware In the Loop!” (HIL) model. A project was launched to develop a vehicle dynamics model that can be used
in realtime hardware-in-the-loop applications, and should be concluded by the end of 2006. A simulation model is now
nearing completion which implements the control logic that superintends driveability and will thus make it possible to
assess vehicle handling early in the design stage.
Workplace ergonomics. The work stations along the Alfa 159 assembly lines were certified, and Elasis cooperated with
the Centro Ricerche Fiat in several newly-launched studies for determining and validating ergonomic indexes.
Traffic safety and mobility. In partnership with the Province of Milan, Elasis continued to work on the SUMMIT project.
The project, which focuses on innovative models and methods for road user safety, is partially funded by the Lombardy
regional administration.
In the area of education and prevention, Elasis and Italy’s State Police jointly developed the ICARO project, which aims at
promoting a culture of traffic safety through a presentation which will tour a number of Italian cities.
Report on Operations – Research and Innovation
13
Human Resources
At December 31, 2005, the Group had 173,695 employees, compared with 161,066 at the end of 2004 (this figure is
different from the one published until now due to the impact of changes in the scope of consolidation resulting from the
adoption, from January 1, 2005, of International Financial Reporting Standards IFRS). The Group hired around 15,800
new employees in 2005, while a total of around 17,000 employees left the Company. As the net result of changes in the
scope of consolidation, the Group added around 13,900 employees. The consolidation of the activities originally conveyed
to the Fiat-GM Powertrain joint venture, which returned to Fiat’s control after the termination of the Master Agreement with
General Motors, the acquisition of a controlling interest in Mako, the consolidation of Leasys and the sale of WorkNet
account for most of the change. As regards recruitment, over 600 recent university graduates were added to Group staff,
mainly in engineering departments.
The Group’s high skill staff (“professionals”) totally exceed 25,000, 44% of whom work outside Italy.
ORGANISATIONAL AND MANAGEMENT CHANGES
The organisation of the Fiat Group underwent major changes in 2005.
Fiat Powertrain Technologies is the new sector into which the engine and transmission activities that returned to Fiat after
the termination of the Master Agreement with General Motors were conveyed. Starting in 2006, it also groups the
powertrain businesses of Iveco, C.R.F. and Elasis. These organisational changes will enable Fiat Powertrain Technologies
to take an integrated approach to the management of multiple cutting-edge research and engineering centres, with the
resulting benefit of gaining a significant advantage in the development of innovative and competitive products.
Iveco and CNH went through major organisational changes in accordance with common guidelines that were consistent
with the organisational model adopted by Fiat Auto starting from 2004.
CNH’s new organisation is characterised, on the one hand, by a differentiation of its brands as reference and contact
points with the marketplace and, on the other, by the establishment of global functions with governance responsibility over
the main business processes.
Iveco’s new organisation is structured as follows:
•
functions focused on customer service and its development;
•
platforms focused on products;
•
functions focused on the efficiency of global processes;
•
business units dedicated to managing specific businesses;
•
staff functions that support strategically Sector’s overall objectives.
In 2005, the Group continued to strengthen its management organisation, adding a considerable number of managers with
international experience.
A total of 113 managers were hired from outside the Group, including 9 who were selected to fill top positions in the
Group’s Sectors.
In 2005, the management assessment process, which involved more than 2,200 employees, was completed in
accordance with a new leadership model that has become an integral part of the Group’s management system.
Professional Development
In 2005, the Group invested approximately 90 million euros (2.1% of its total payroll) in training programmes designed to
support the operations of the Group and the professional development of its employees.
About 89,000 employees received training and professional development support.
Isvor Fiat, the training organisation within the Fiat Group, was the main provider of training services.
Isvor Fiat provided training, consulting and professional support programmes representing a total of 15,475
classroom/training days.
An additional 26,189 users received a total of 137,748 hours of Web-based distance learning support.
Report on Operations – Human Resources
14
Grants and Scholarships
The Fiat Grants and Scholarships Programme, which was created to help the children of active employees in Italy and in
other countries in which the Group has a significant presence, is continuing with considerable success.
In 2005, Fiat awarded 581 grants — 185 to students in Italy and 396 to students in other countries — at a total cost of
1,032,600 euros.
INDUSTRIAL RELATIONS
The discussions carried out in 2005 with the trade unions and representatives of employees at the company level focused
on finding consensus solutions to handle the social impact of the programmes implemented by the various Group
companies to restructure and streamline their organisations and recover competitiveness. The social dialogue concerned
mainly the measures needed to bring the Group’s manufacturing operations in line with market needs, to improve their
efficiency and operational flexibility and to manage the impact on staffing levels of reorganisation programmes
implemented to reduce business governance costs.
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 Group’s restructuring process. A key meeting with
trade unions, national government and local authorities was held on August 3, 2005 at Palazzo Chigi, the building where
the Prime Minister’s office is located. At that meeting, Sergio Marchionne, Fiat’s Chief Executive Officer, explained the
Group’s situation, focusing in particular on Fiat Auto’s operating performance and development plan as it applies to
product range planning, to production allocations and to Fiat Auto’s capital investment programme and the conditions for
implementation of the programme. The situation for the other Group Sectors was discussed in detail at other meetings
held in the 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 programmes 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 programmes, with the goal
of finding consensus solutions to manage the programmes’ impact on employees and identify the most appropriate
measures for each case.
At Fiat Auto, the capacity underutilisation at its plants, due 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 a reduction in sales volumes and ongoing organisational changes. At the end of 2005, the number of employees in
Fiat Auto’s administrative, technical and sales departments who were receiving Cassa Integrazione benefits, while
significantly less than the 1,800 envisioned when the application process got under way in April, numbered about 900.
As a result, at the beginning 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 are of a view that the mobilità lunga (long-term mobility benefit to bridge the period prior to retirement) system
could be the most appropriate tool.
The Cassa Integrazione Straordinaria (Longer-term Temporary Layoff Benefits Fund) was used in connection with the
manufacturing rationalisation and reorganisation plan launched by Fiat Powertrain Italia at the end of 2004. This plan
affected the Mirafiori (Turin) and Arese (Milan) Fiat Powertrain production facilities. At the end of 2005, 370 Fiat Auto
employees in Arese were still receiving Cassa Integrazione Straordinaria benefits.
On the other hand, in areas in which a favourable demand trend produced an increase in manufacturing activity, the
Group took action to increase plant utilisation. 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 the production organisation at the Sata plant in Melfi, specifically to ramp up production of the Grande
Punto, and at Fiat Powertrain’s factories in Termoli and Pratola Serra) and the use of overtime work (e.g., CNH’s plant in
Jesi).
Solutions designed to improve the use of the Group’s manufacturing capacity are also being planned in Poland, where
Fiat Auto and Fiat Powertrain Technologies plan to resume Saturday overtime work and where Teksid will introduce an
Report on Operations – Human Resources
15
18-shift rotation. Agreements that improve working flexibility have been reached by Iveco at its Ulm plant in Germany and
by CNH in Belgium.
Issues concerning the condition of the Fiat Group, especially those that have a transnational impact, were the subject of
information and consultation with the members of the Fiat Group European Works Council, as required under the
applicable EU Directive. Under an agreement signed on June 29, 2005 with the European Metalworkers Union and Italian
unions, the Council’s charter was renewed for an additional four years. The new agreement changed the country
allocation of the seats in the European Works Council to include representatives from the countries that had joined the
“enlarged” European Union. The Council’s 30 seats were allocated according to the current employment distribution of the
Fiat Group in Europe. This resulted in the awarding of seats to representatives of Poland, Hungary and the Czech
Republic and in the reduction of the number of seats available to representatives from France, Germany, the U.K. and
Spain. The number of seats held by representatives from Italy, Belgium, Portugal and Austria remained the same.
Sergio Marchionne, the Group’s Chief Executive Officer, spoke at the annual plenary meeting of the Council, which took
place on November 21 and 22, 2005, providing an update on the results achieved, the actions that are being implemented
and the Group’s objectives.
With regard to collective bargaining involving compensation issues, the agreements reached with the unions call for wage
increases that are generally in line with or slightly higher than the rate of inflation. The purpose of these agreements was
to help employees preserve their purchasing power and link any further increases to the achievement of the targets to
improve the Company’s performance.
In Italy, metalworking companies began negotiations for a two-year renewal of the compensation provisions of the
National Collective Labour Agreement for Metalworkers (white and blue collar). This contract, which covers about 75,000
of the Fiat Group’s employees, expired at the end of 2004. Negotiations between Federmeccanica (a national organisation
that represents Italian metalworking industry) and the national unions (Fim-Cisl, Fiom-Cgil and Uilm-Uil) were particularly
long and challenging. Only an agreement to extend the validity of the new contract by six months (i.e., until June 30, 2007)
succeeded in breaking a stalemate in negotiations at the beginning of 2006. When fully operational, the agreement signed
on January 19, 2006 will provide an overall increase in compensation of about 6%, as follows: an average wage increase
of 100 euros (implemented in three stages: 60 euros beginning in January 2006, 25 euros in October 2006 and 15 euros
in March 2007) plus a lump-sum payment of 320 euros for 2005.
The agreement with the unions also included new rules regarding the contract for apprentices, providing the option of
extending the use of apprenticeship contracts to assembly line workers who perform relatively simple tasks.
As part of the bargaining process, the national trade unions called strikes for a total of 60 hours. These strikes, which took
place between May 2005 and January 2006, were scheduled and implemented differently at different locations. At Fiat
Group companies, the contract renewal strikes varied between 30 and 58 hours, depending on the location, with about
25% of potentially affected workers walking off the job.
In Italy Group employees were also awarded the Annual Performance Bonus. Under the Group-wide Agreement of 1996,
which is still in force, the bonus was computed on the basis of indicators of the Group’s overall performance, as
determined from the 2004 Consolidated Financial Statements, and quality indicators for the individual Sectors.
Outside Italy, the main labour agreements included completion of annual labour negotiations in France, which resulted in
wage increases that averaged between 2% and 3%, depending on the company involved. In Poland as well, the majority
of Group companies reached wage agreements with the unions, granting average raises of 110 to 150 zlotys per month.
The wage increases granted in Brazil were in line with those granted by other large groups, and employees received
annual bonuses that varied according to company results.
In the United States, negotiations with the UAW for the renewal of a company-level contract covering 650 employees that
are represented by the UAW at CNH plants in Racine, Wisconsin, and Burlington, Iowa, and at an engineering centre in
Burr Ridge, Illinois, and a depot in St. Paul, Minnesota, were completed in March. This agreement provided wage
increases that were in line with those offered by competitors. At the same time, it enabled CNH to reduce costs in
particular by scaling back retiree health-care benefits.
With the exception of the strikes called in Italy for the renewal of the National Collective Labour Agreement for
Metalworkers (mentioned above), instances of labour unrest were relatively minor.
Report on Operations – Human Resources
16
Financial Review of the Group
INTRODUCTION
Significant transactions occurred in the year
ƒ
On February 13, 2005 the Boards of Directors of Fiat and General Motors approved a contract pursuant to which
General Motors paid Fiat 1.56 billion euros to terminate the Master Agreement, including cancellation of the put
option, unwinding of all joint ventures and return of GM’s 10% equity interest in Fiat Auto Holdings B.V. to Fiat.
Under the agreement, GM continues to use some of Fiat’s diesel technology and acquired a 50% interest in the
Bielsko-Biala (Poland) plant which manufactures 1.3 liter diesel engines.
ƒ
On September 9, 2005 Fiat sold 24.6% of the share capital of Italenergia Bis to EDF at a price of 1,147 million euros.
Concurrently the Citigroup financing of the same amount that had been extended in September 2002 was
reimbursed.
ƒ
Pursuant to the delegation of authority granted by the Extraordinary Stockholders Meeting held on September 12,
2002, the Board of Directors resolved on a capital increase to service the Mandatory Convertible Facility that fell due
on September 20, 2005, through the issuance of 291,828,718 ordinary shares at the price of 10.28 euros each.
Pursuant to the last section of article 2441 of the Italian Civil Code, the lending banks subscribed the new shares on
September 20, 2005 through a set-off against the total debt of 3 billion euros owed to them.
The operating and financial impact of the above transactions is described in this Financial Review of the Group and in the
Notes to the Financial Statements. Refer to these sections for additional information.
Principal transactions that affected the scope of consolidation in 2005
ƒ
In the first quarter of 2005, Magneti Marelli increased its investment in the automotive lighting manufacturer Mako
Elektrik Sanayi Ve Ticaret A.S. by purchasing a further interest from the Turkish group Koç, thereby acquiring
control. As a result, this company, previously accounted for by using the equity method, is consolidated on a line by
line basis from January 1, 2005.
ƒ
A 65% interest in the temporary employment agency WorkNet was sold in the first quarter of 2005.
ƒ
The operations that had previously been transferred to the Fiat-GM Powertrain joint venture were consolidated in
Fiat Powertrain Technologies (Automobiles business area) as of May 2005. Fiat regained 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 operations of Iveco, CRF (Fiat
Research Centre) and Elasis will subsequently be transferred to Fiat Powertrain Technologies. Significant data
regarding these businesses are included in the comments of the respective Sectors they currently belong to.
ƒ
On June 1, 2005, Iveco sold to Barclays Mercantile Business Finance Limited a 51% stake of Iveco Finance
Holdings Limited, which comprised certain financial services companies of Iveco operating in France, Germany,
Italy, Switzerland and the United Kingdom. As of that date, Iveco Finance Holdings was deconsolidated and
accounted for by using the equity method.
ƒ
At the end of 2005, the Fiat Group acquired Enel’s share of the Leasys joint venture, active in the hire and
management of company car fleets, thereby obtaining 100% control. The balance sheet of this company was
consolidated on a line-by-line basis at December 31, 2005 and its results are being consolidated from January 1,
2006.
These changes in the scope of operations do not have a significant overall impact on the comparability of the data for the
two reference periods. Nevertheless, analyses of both the Group as a whole and the individual areas highlight the
respective effects.
In April 2005 the ownership of Maserati was transferred from Ferrari S.p.A. to Fiat Partecipazioni S.p.A. As a
consequence, a new entity is operational from April 1, 2005 which comprises the group of companies producing and
selling Maserati cars. To assure comparability of the reported figures, fiscal 2004 data of the Maserati business have been
retrospectively separated from the Ferrari-Maserati business.
Report on Operations – Financial Review of the Group
17
For reporting purposes, starting January 1 2005, Group’s activities are aggregated in five business areas. In more detail:
-
Fiat Auto, Fiat Powertrain Technologies (consolidated on a line by line basis effective May 2005 following
termination of the Master Agreement with General Motors), Maserati and Ferrari are included in the Automobiles
business area;
-
CNH and Iveco continue to report as separate entities;
-
Magneti Marelli, Teksid and Comau make up the Components and Production Systems business area;
-
all remaining activities are grouped together under Other Businesses.
Report on Operations – Financial Review of the Group
18
FINANCIAL REVIEW OF THE GROUP
OPERATING PERFORMANCE OF THE GROUP
(in millions of euros)
Net revenues
2005
2004
46,544
45,637
Cost of sales
39,624
39,121
Selling, general and administrative costs
4,513
4,701
Research and development costs
1,364
1,350
(43)
(415)
1,000
50
Gains (losses) on the disposal of equity investments
905
150
Restructuring costs
502
542
Other unusual income (expenses)
812
(243)
Other income (expenses)
Trading profit
Operating result
2,215
(585)
Financial income (expenses)
(843)
(1,179)
Unusual financial income
Result from equity investments
Income/(loss) before taxes
Income taxes
Result of continuing operations
Result of discontinued operations
Net income/(loss) before minority interest
Minority interest
Group interest in net income/(loss)
858
-
34
135
2,264
(1,629)
844
(50)
1,420
(1,579)
-
-
1,420
(1,579)
89
55
1,331
(1,634)
In order to achieve a better presentation, more consistent between the various Sectors, certain costs that in the Appendix to the First Quarter 2005 Report
were classified by certain Sectors as Other income (expenses) and by other Sectors as Cost of sales or Selling, general and administrative costs, are now
recorded in the same manner by all Sectors. This reclassification has no impact on Trading profit, Operating result or Net result.
In the review that follows, net revenues and trading profit are discussed by single Business area/Sector; the other data
refer to the Group as a whole.
Net revenues
Fiat Group recorded net revenues of 46,544 million euros, up 2% from 2004. The increase reported by industrial Sectors
was offset in part by decreases in the Other Businesses.
Revenues by Business area
(in millions of euros)
Automobiles (Fiat Auto, Maserati, Ferrari and Fiat Powertrain Technologies)
2005
2004
% change
21,729
21,207
2.5%
Agricultural and Construction Equipment (CNH)
10,212
9,983
2.3%
Commercial Vehicles (Iveco)
9,489
9,047
4.9%
Components and Production Systems (Magneti Marelli, Teksid and Comau)
Other Businesses (Services, Publishing and Communications, Holding companies
and Other companies)
Eliminations
6,642
6,416
3.5%
1,618
2,003
-19.2%
(3,146)
(3,019)
-
Total for the Group
46,544
45,637
2.0%
Report on Operations – Financial Review of the Group
19
A detailed review of net revenues by Business area/Sector is provided below.
Automobiles business area
In 2005 the Automobiles business area recorded net revenues of 21,729 million euros, up 2.5% on the prior year. This
increase is the result of improvements posted by Ferrari (+9.7%) and Maserati (+30.3%), and the consolidation of the
powertrain operations as of May 2005. Fiat Auto instead showed a slight decrease (-0.8%).
2005
2004
19,533
19,695
-0.8%
533
409
30.3%
Ferrari
1,289
1,175
9.7%
Fiat Powertrain Technologies
1,966 (1)
-
-
(in millions of euros)
Fiat Auto
Maserati
% change
Eliminations
(1,592)
(72)
-
Total
21,729
21,207
2.5%
(1) Includes revenues from Fiat Auto for 1,512 million euros.
ƒ
In 2005 Fiat Auto recorded net revenues of 19,533 million euros, reflecting a slight decrease (-0.8%) from the 19,695
million euros of 2004. The decrease was due to lower volumes, partially offset by a better mix and positive exchange
rate impacts.
The decrease in volumes was mainly concentrated in the first nine months of the year, principally due to the impact of
slower sales of older models ahead of new product launches, the Group’s focus on more profitable sales channels, and
intense competitive pressure. This decline was in part offset by an increase in sales in the fourth quarter of the year
due to the contribution of new models: Grande Punto, Croma and Alfa 159.
Fiat Auto delivered a total of 1,697,300 units in 2005, 3.9% less than in 2004. A total of 1,100,000 units were
delivered in Western Europe (-7.8%); the decline recorded for the year levelled off in the fourth quarter due to the
positive contribution of new models. While sales were down in most leading countries of Europe, the decline was
less pronounced in Italy (-2.4%) and Spain (-3%). France represented the exception, where deliveries increased by
8.3%. Fiat Auto had a 28% share of the Italian car market (the same as in 2004) and 6.5% in Western Europe (-0.7
percentage points from 2004).
Outside Western Europe, the unfavourable trend of the Polish market severely impacted Fiat Auto sales, which fell
by 44.3% from 2004. In Brazil, Fiat Auto exploited expansion on the domestic market by increasing its sales 12.9%
and achieving a 24.4% share of the car market and a 28.8% share of the light commercial vehicle market, reflecting
increases of 0.9 and 4.5 percentage points, respectively.
ƒ
Maserati had revenues of 533 million euros in 2005. The significant improvement (30.3%) from 2004 was due to the
success of the Quattroporte and the sales of the special MC12 street version.
ƒ
Ferrari posted revenues of 1,289 million euros in 2005. The 9.7% increase from 2004 was largely attributable to the
good performance of the F430 and 612 Scaglietti models. Revenues were also boosted by sales of the
Superamerica and the FXX models, produced in limited edition.
ƒ
Fiat Powertrain Technologies is the new Sector which groups all passenger car engine and transmission activities.
Fiat regained control over these activities in May 2005 following termination of the Master Agreement with General
Motors. Starting in 2006, the Sector will also include the engine and transmission operations of Iveco, Centro
Ricerche Fiat and Elasis. This Sector had revenues of 1,966 million euros between May and December 2005. The
Sector’s sales were realised in part with Fiat Auto and for 23% with third parties.
Agricultural and Construction Equipment
In 2005, CNH revenues totalled 10,212 million euros, up 2.3% from 2004. Higher sales of construction equipment and
improved prices were partially offset by lower agricultural equipment volume.
Demand for tractors was down in Western Europe and Latin America and stable in North America. CNH recorded decreases
across all of these regions. On the other hand, the increase in demand in Rest of the World markets drove the increase in
Report on Operations – Financial Review of the Group
20
sales recorded by CNH in this region. Combine harvester volumes were stable in Western Europe, grew in North America
and the rest of the world, but fell by half in Latin America, reflecting a drastic downturn in demand in this market.
CNH benefited from the good performance of the global construction equipment market and reported an increase in sales
volumes for all the main products. The Sector performed well in Latin America, North America, and in the rest of the world,
with the only slight decrease being recorded in Western Europe.
Iveco
Iveco revenues totalled 9,489 million euros in 2005. This represented a 4.9% increase, largely reflecting a higher number
of units delivered across its principal product lines, particularly heavy and light vehicles.
Moreover, the volumes reflect vehicles billed, 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 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 the year, Iveco delivered a total of 172,500 vehicles (15,400 of which sold with buy-back commitments), up 6.3%
from 2004. A total of 134,900 vehicles, or a 2.3% increase over 2004, were delivered in Western Europe, where the Sector
benefited from the general growth recorded in all markets with the exception of Italy. The significant increases posted in
France, Germany, Spain and the United Kingdom, were offset in part by a decrease in Italy. Sales in Latin America were
quite strong.
At 10.9%, Iveco’s share of the Western European market was virtually unchanged from the prior year, despite a downturn
in the medium range segment.
Components and Production Systems business area
The Components and Production Systems business area had revenues of 6,642 million euros, for an overall increase of
3.5%, due to the positive performance of Magneti Marelli (+6.3%) and Teksid (+13.8%), partly offset by a reduction at
Comau (-8.1%).
(in millions of euros)
Components (Magneti Marelli)
2005
2004
4,033
3,795
% change
6.3%
Metallurgical Products (Teksid)
1,036
910
13.8%
Production Systems (Comau)
1,573
1,711
-8.1%
Total
6,642
6,416
3.5%
ƒ
Magneti Marelli had revenues of 4,033 million euros in 2005. The 6.3% increase compared to 2004 partly reflected
the consolidation of Mako from January 1, 2005. Excluding changes in the scope of consolidation and exchange
rate effects, revenues increased by roughly 2.0%. 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.
ƒ
Teksid had revenues of 1,036 million euros, up 13.8% from 2004. Higher volumes at the Cast Iron Business Unit
(+4.6%), the positive impact of exchange rates, and the recovery of higher raw materials costs through higher sales
prices contributed to the improved performance, more than offsetting lower volume in the Magnesium Business Unit
(-6.8%).
ƒ
Comau had revenues of 1,573 million euros in 2005. The 8.1% reduction from 2004 reflected the transfer of
Comau’s European service activities to Iveco, Magneti Marelli, and CNH. When calculated on a comparable scope
of consolidation, Comau’s revenues rose by approximately 6%, reflecting a strong performance in the Car Bodywork
and Maintenance areas.
Report on Operations – Financial Review of the Group
21
Other Businesses
Other Businesses recorded an overall decrease of 19.2% from 2004 due to the performance of Business Solutions and
Other companies.
2005
2004
% change
752
976
-23.0%
Publishing and Communications (Itedi)
397
407
-2.5%
Holding companies and Other companies
469
620
-24.4%
1,618
2,003
-19.2%
(in millions of euros)
Services (Business Solutions)
Total
ƒ
Business Solutions had revenues of 752 million euros in 2005, down 23% from 2004. The decrease stemmed in
part from the change in the scope of consolidation (sale of the temporary employment agency WorkNet). On a
comparable scope of consolidation, the decrease in 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.
ƒ
In 2005, Itedi had revenues of 397 million euros, down 2.5% from the previous year. The downturn is attributable to
lower advertising revenues following termination of a major concession agreement, lower newspaper sales
revenues, and a more selective and profitability-oriented approach to brand stretching initiatives.
Trading profit
Trading profit increased significantly from 50 million euros in 2004 to 1,000 million euros in 2005. The 950 million euro
increase is due to the 669 million euro reduction in the losses reported by the Automobiles business area (of which 541
million euros related to Fiat Auto), as well as the positive performances of the other industrial Sectors. On the other hand,
Other Businesses posted a decrease of 77 million euros.
Trading profit by Business Area
(in millions of euros)
Automobiles (Fiat Auto, Maserati, Ferrari and Fiat Powertrain Technologies)
2005
2004
Change
(183)
(852)
669
Agricultural and Construction Equipment (CNH)
698
467
231
Commercial Vehicles (Iveco)
415
371
44
Components and Production Systems (Magneti Marelli, Teksid and Comau)
249
166
83
Other Businesses (Services, Publishing and Communications, Holding companies
and Other companies) and Eliminations
(179)
(102)
-77
Total for the Group
1,000
50
950
The breakdown of trading profit by Business area/Sector is illustrated below.
Automobiles business area
Trading profit of the Automobiles business area improved by 669 million euros, from a loss of 852 million euros in 2004 to
a loss of 183 million euros in 2005. This improvement stemmed from the strong reduction in losses at Fiat Auto and
Maserati, higher trading profit reported by Ferrari and the consolidation of Fiat Powertrain Technologies.
(in millions of euros)
Fiat Auto
2005
2004
Change
(281)
(822)
541
Maserati
(85)
(168)
83
Ferrari
157
138
19
26
-
26
(183)
(852)
669
Fiat Powertrain Technologies
Total
Report on Operations – Financial Review of the Group
22
ƒ
Fiat Auto had a trading loss of 281 million euros in 2005, a sharp improvement from the loss of 822 million euros of
2004. This change was mainly attributable to an improved product mix due to the new models, a reduction in
product cost due to purchasing efficiencies, a strong focus on more profitable sales channels and a drastic reduction
in business governance costs.
ƒ
The trading loss of Maserati was 85 million euros, as compared to a loss of 168 million euros in 2004, which included
46 million euros in fixed asset write-downs. Higher sales volumes and a better product mix accounted for the further
reduction in the Sector’s trading loss.
ƒ
In 2005, Ferrari had a trading profit of 157 million euros, up from a profit of 138 million euros in 2004. The
improvement reflected higher sales volumes and efficiency gains, which were partially offset by the negative impact
of exchange rates.
ƒ
Fiat Powertrain Technologies achieved a trading profit of 26 million euros between May and December 2005.
Agricultural and Construction Equipment
In 2005, CNH reported trading profit of 698 million euros, compared with 467 million euros in 2004. Improved pricing,
higher volumes of construction equipment, manufacturing efficiencies, and greater profitability in financial services more
than offset higher raw material prices, lower volumes in the agricultural equipment segment and increased R&D costs.
The Sector also benefited from a structural reduction in employee healthcare costs in North America, which also resulted
in a positive 83 million euro reversal to previously accrued reserves.
Iveco
Iveco had a trading profit of 415 million euros, 44 million euros higher than in 2004, reflecting increased volume and
improved pricing, which offset higher raw materials prices and a less favourable market mix.
Components and Production Systems business area
The aggregate trading profit of the Components and Production Systems business area was 249 million euros. This
reflected an increase of 83 million euros, generated primarily by Teksid which however had reported major charges in
2004 due to write-downs of fixed assets.
(in millions of euros)
Components (Magneti Marelli)
Metallurgical Products (Teksid)
Production Systems (Comau)
Total
ƒ
2005
2004
Change
162
165
-3
45
(39)
84
42
40
2
249
166
83
Magneti Marelli posted a trading profit of 162 million euros, virtually unchanged from 2004 (165 million euros) as
efficiency gains offset the unfavourable price-cost ratio resulting from higher raw materials prices.
ƒ
Teksid closed 2005 with a trading profit of 45 million euros, against a trading loss of 39 million euros in 2004, which
was impacted by writedowns of fixed assets for 68 million euros. The improvement reported by the Sector is
noteworthy (+16 million euros) even excluding this item.
ƒ
Comau’s trading profit was 42 million euros in 2005, compared with 40 million euros in 2004. On a comparable
scope of activity, the improvement was equal to 8 million euros, as the company began to benefit from the
restructuring and cost-reduction plans implemented mainly in its North American operations.
Report on Operations – Financial Review of the Group
23
Other Businesses
The combined trading loss reported by the Other Businesses amounted to 179 million euros, 77 million euros
worse than in the prior year.
(in millions of euros)
Services (Business Solutions)
Publishing and Communications (Itedi)
2005
2004
Change
35
41
-6
16
11
5
Holding companies, Other companies and Eliminations
(230)
(154)
-76
Total
(179)
(102)
-77
ƒ
Trading profit of Business Solutions was 35 million euros in 2005, a 6 million euro decrease over 2004, which
primarily reflected the contraction in the Sector’s activities and changes in the scope of consolidation.
ƒ
In 2005 Itedi recorded a trading profit of 16 million euros, compared with 11 million euros in 2004. The improvement
stemmed from industrial, distribution and marketing efficiencies.
ƒ
In 2005, trading loss of Holding companies, Other companies and Eliminations increased by 76 million euros, from
a trading loss of 154 million euros in 2004 to a loss of 230 million euros in 2005, mainly due to a reduction in
revenues related to the “High Speed Railway” (TAV) project and the changing mix of services provided to the
Group’s other Sectors.
Operating result
Operating result was positive by 2,215 million euros in 2005, compared with a loss of 585 million euros in 2004. The
2,800 million euro increase reflects the improvement in trading profit (+950 million euros), higher gains on sales of equity
investments, which increased by 755 million euros, the increase of 1,055 million euros in other unusual income (expenses)
and lower restructuring costs for 40 million euros.
Net gains on sales of equity investments, totalling 905 million euros, include the gain of 878 million euros from the sale of
the investment in Italenergia Bis to Electricité De France and the gain of 23 million euros realised upon sale of Palazzo
Grassi S.p.A. In 2004, this item amounted to 150 million euros, mainly consisting of the gain on the sale of Fiat
Engineering S.p.A. (81 million euros), the Midas activities (31 million euros), and Edison shares and warrants (32 million
euros).
Restructuring costs totalled 502 million in 2005 and were distributed as follows amongst the principal Sectors:
ƒ
Fiat Auto: 162 million euros for the rightsizing of the central business governance structures of the Sector and of
certain companies outside Italy, as well as the restructuring of the Fiat-GM Powertrain activities (a joint-venture that
was unwound in May);
ƒ
Iveco: 103 million euros, mainly for the reorganisation of the entire Sector, particularly staff structures;
ƒ
CNH: 87 million euros, attributable to the ongoing reorganisation of activities and the restructuring process
underway at certain production plants.
ƒ
Comau, Magneti Marelli, and Business Solutions reported restructuring costs of 46, 33, and 22 million euros,
respectively.
In 2004, restructuring costs totalling 542 million euros regarded mainly Fiat Auto (355 million euros), CNH (68 million
euros), Magneti Marelli (48 million euros) and Iveco (24 million euros).
Other unusual income (expenses) was positive by 812 million euros and included the following: a gain from the
termination of the Master Agreement with General Motors of 1,134 million euros (net of accessory costs); a gain of 117
million euros realised upon the final sale of the real estate that had been securitised in 1998; expenses of 187 million
euros related to the reorganisation and rationalisation of both Group suppliers (started in 2004) and Fiat Auto dealers; Fiat
Auto expenses of 141 million euros associated with platform rationalisation and production relocation, 71 million euros in
expenses for the indemnity recognised to Global Value for the unwinding of the joint-venture with IBM; indemnities relating
to prior year business disposals, totalling 30 million euros and other minor items.
In 2004 this item reflected unusual expenses of 243 million euros, principally in connection with the process of
reorganising and rationalising relationships with Group suppliers.
Report on Operations – Financial Review of the Group
24
The following table illustrates the components of operating result broken down by Sector:
Trading Profit
Gains/Losses
on sales of
equity
investments
2005
2004
Restructuring
costs
Other
unusual
income
(expenses)
2005
2004
2005
(818) (1,412)
Operating
result
2005
2004
2005
2004
(281)
(822)
-
3
162
355
(375)
(238)
Maserati
(85)
(168)
-
-
-
-
-
(3)
(85)
(171)
Ferrari
157
138
-
-
-
-
-
(2)
157
136
Fiat Powertrain Technologies
26
-
-
-
17
-
(5)
-
4
-
Agricultural and Construction
Equipment (CNH)
698
467
-
-
87
68
-
-
611
399
Commercial Vehicles (Iveco)
415
371
(10)
-
103
24
(13)
-
289
347
Components (Magneti Marelli)
162
165
-
31
33
48
(2)
-
127
148
Metallurgical Products (Teksid)
45
(39)
5
-
14
3
(9)
-
27
(42)
Production Systems (Comau)
40
41
(1)
-
46
10
(3)
-
(8)
30
Services (Business Solutions)
42
35
9
2
22
9
(15)
-
7
34
Publishing and Communications (Itedi)
2
2
(1)
-
13
9
(in millions of euros)
Fiat Auto
2004
16
11
-
-
Holding companies, Other companies
and Eliminations
(230)
(154)
902
114
16
23
1,235
-
1,891
(63)
Total for the Group
1,000
50
905
150
502
542
812
(243)
2,215
(585)
The other unusual expenses of Fiat Auto are principally connected with ongoing rationalisation and reorganisation
processes, as mentioned above. The 2005 operating result of Holding companies and Other companies includes the gain
of 878 million euros resulting from the disposal of the investment in Italenergia Bis and, under other unusual income, an
amount of 1,134 million euros (net of ancillary costs) related to the General Motors settlement.
Net income
Net financial expenses totalled 843 million euros in 2005, down from the 1,179 million euros in 2004. Moreover, the
unwinding of the equity swap on General Motors shares in 2004 resulted in a net loss of approximately 150 million euros
(determined according to IFRS). This was in addition to approximately 100 million euros due to writedowns of
financial receivables. Excluding these non-recurring items, the decrease is attributable to the lower net debt of Group
industrial companies, partly in consequence of the conversion of the Mandatory Convertible Facility and the completion of
the Italenergia Bis transaction but also the more efficient mix of funding, in spite of higher borrowing costs following the
rise in interest rates (particularly in the dollar zone).
Financial expenses include the interest cost component of pension plans and other employee benefits, totalling 146 million
euros in 2005 (127 million euros in the previous year).
Unusual financial income of 858 million euros was booked in 2005 relating to the capital increase of September 20, 2005
following the conversion of the Mandatory Convertible Facility. The income represents the difference between the
subscription price of the shares and their stock market price at the date of subscription (see the Notes to the Consolidated
Financial Statements for additional details).
Investment income was 34 million euros in 2005, down 101 million euros from 2004. The result for 2005 was impacted by
allowances for risks and charges of 74 million euros on investments in China (20 million euros in 2004). The effect of the
sale of Italenergia Bis and the consolidation of Fiat-GM Powertrain on a line by line basis, no longer accounted for by
using the equity method, also had an impact.
Result before taxes increased from the loss of 1,629 million euros of 2004 to the income of 2,264 million euros of 2005.
The improvement totals 3,893 million euros and is attributable for 2,800 million euros to the increase in operating result,
for 858 million euros to the unusual financial gain posted in 2005, and for 336 million euros to lower net financial
expenses, offset by lower income from equity investments (down by 101 million euros).
Income taxes totalled 844 million euros in 2005 and include 277 million euros for the reversal of deferred tax assets
posted at December 31, 2004 by Fiat S.p.A. in connection with the income resulting from the termination of the Master
Report on Operations – Financial Review of the Group
25
Agreement with General Motors. The remaining amount includes: 116 million euros for IRAP, 332 million euros for
current and deferred tax charges, primarily attributable to companies outside Italy, and 119 million euros in income taxes
for previous years. In 2004, income taxes totalled 50 million euros, of which 122 million euros for IRAP and 217 million
euros for other current income taxes, which were offset by the recording of deferred tax assets of 389 million euros.
Net income before minority interest was 1,420 million euros in 2005, against a loss of 1,579 million euros in 2004.
Group interest in net income amounted to 1,331 million euros in 2005, against a loss of 1,634 million euros in 2004.
Report on Operations – Financial Review of the Group
26
CONSOLIDATED STATEMENT OF CASH FLOWS
The consolidated statement of cash flows is presented as a component of the Consolidated Financial Statements. A
condensed version thereof as well as comments are provided below.
In 2005 cash flows from operating activities
totalled 3,716 million euros.
(in millions of euros)
2005
2004
The income cash flow, or in other words net
income plus depreciation, amortisation, and
A) Cash and cash equivalents at beginning of period
5,767
6,845
changes in provisions and items relating to sales
Cash flows from (used in)
B) operating activities
3,716
2,011
with buy-back commitments, net of
“Gains/losses and other non-monetary items”,
Cash flows from (used in)
C)
(535)
144
investment activities
amounted to 3,555 million euros. The gains
Cash flows from (used in)
deducted from the income for the year include
D)
(1)
(2,868)
(3,078)
financing activities
the gain of 878 million euros realised upon sale
Translation exchange differences
337
(155)
of the investment in Italenergia Bis and the
unusual financial income of 858 million euros
E) Total change in cash and cash equivalents
650
(1,078)
resulting from the capital increase servicing the
Mandatory Convertible Facility. In addition to
F) Cash and cash equivalents at end of period
6,417
5,767
the income cash flow, there was cash generated
(1) Net of the repayment of the Mandatory Convertible Facility of 3 billion euros and of
by a decrease in working capital, which, when
debt of approximately 1.8 billion euros connected with the Italenergia Bis
transaction, as neither of these gave rise to cash flows.
calculated on a comparable consolidation and
exchange rate basis, amounted to 114 million
euros. The cash flows from operating activities of the year included the collection of approximately 1.1 billion euros
corresponding to the gain resulting from the termination of the Master Agreement with General Motors.
Cash flows used in investment activities totalled 535 million euros. Net of the increase in current securities (159 million
euros), which mainly represent a temporary investment of funds, investment activities absorbed a total of 376 million
euros. The reimbursement of loans extended by the Group’s centralised cash management to the financial services
companies sold by Iveco resulted in receipts of approximately 2 billion euros, while the unwinding of the joint ventures with
General Motors contributed approximately 500 million euros. These amounts are included under the item “Other changes”
which totalled 2,494 million euros. Proceeds from the sale of non-current assets amounted to 500 million euros, of which
73 million euros from the sale of equity investments, 115 million euros mainly resulting from vehicles sold under long-term
leases (financial services companies), and 312 million euros from the sale by industrial companies of properties and other
tangible assets. The increase in “Receivables from financing activities”, attributable to an increase in financing provided by
CNH and Fiat Auto to the dealer networks, that was in part offset by the collection of financial receivables and a decrease
in loans extended to Fiat Auto suppliers, generated a net outflow of 251 million euros.
Net of vehicles sold under buy-back commitments, investments in tangible assets, (including investments in vehicles for
long-term leasing operations for 409 million euros) and intangible assets totalled 3,052 million euros.
Financing activities absorbed a total of 2,868 million euros, mainly due to the repayment of bonds on maturity for
approximately 1.9 billion euros and the repayment of other loans.
Report on Operations – Financial Review of the Group
27
BALANCE SHEET OF THE GROUP AT DECEMBER 31, 2005
At December 31, 2005 total assets amounted to 62,454 million euros, substantially in line with the figure of 62,522 million
euros at December 31, 2004.
During the year non-current assets increased by 438 million euros. In particular, increases were reported in “Intangible
assets” (+365 million euros), mainly due to the euro/dollar translation impact on CNH goodwill, in “Property, plant and
equipment” (+1,569 million euros), largely attributable to the consolidation of the powertrain operations in Fiat Auto
following the unwinding of the joint ventures with General Motors, and in “Leased assets” (+514 million euros), as a result
of the consolidation of Leasys activities. These increases were offset by the decrease (-1,692 million euros) in “Equity
investments and other fixed assets”, mainly due to the abovementioned unwinding of the joint ventures (approximately 1.2
billion euros in carrying value at December 31, 2004) and the sale of the investment in Italenergia Bis (carrying amount of
856 million euros) at the beginning of September, and a decrease in deferred tax assets (-298 million euros).
Receivables from financing activities at December 31, 2005 amounted to 15,973 million euros with a decrease of 1,525
million euros from December 31, 2004. If the following are excluded:
ƒ
a decrease of approximately 2.4 billion euros due to the deconsolidation of certain Iveco financial services
companies, which were sold in the first half of 2005 following the set-up of the Iveco Finance Holdings jointventure with Barclays;
ƒ
a decrease of approximately 0.6 billion euros in financial receivables from associated companies, mainly due to
the mentioned consolidation of Leasys;
ƒ
the positive effect of foreign currency translation differences amounting to approximately 1.4 billion euros (mainly
relating to CNH activities); and
ƒ
the writedowns made of approximately 130 million euros,
the residual change consisted of an increase of approximately 250 million euros. The higher levels of activity at CNH and
Fiat Auto, and the related increase in the loans provided to the dealer network and end-customers, were offset by the
reduction in factoring activities with Fiat Auto suppliers and the collection of other financial receivables.
Working capital, net of the items connected with sales of vehicles with buy-back commitments, is negative by 249 million
euros, a 191 million euro increase with respect to December 31, 2004, when it was negative by 440 million euros.
Net inventories grew by 647 million euros. The increase is attributable for approximately 480 million euros to foreign
At
12.31.2005
At
12.31.2004
(1)
7,133
6,486
647
Trade receivables
4,969
5,491
-522
(11,777)
(11,697)
-80
(574)
(720)
146
(249)
(440)
191
(in millions of euros)
Inventories
Trade payables
Other receivables/(payables),
Accruals and deferrals (2)
Working capital
Change
(1)
“Inventories” are shown net of the value of vehicles sold with buy-back
commitments by Fiat Auto.
(2)
”Other payables” included in the balance of “Other receivables/(payables),
Accruals and deferrals”, exclude amounts due to customers corresponding to
the buy-back price due upon expiration of the related contracts and the amount
of the fees paid in advance by customers for vehicles sold with buy-back
commitments, which is equal to the difference at the date of signing the contract
between the sales price and the buy-back price and which is allocated over the
term of the entire agreement.
currency translation differences (mainly
appreciation of the dollar against the euro) and
the consolidation of the powertrain operations of
the former joint-venture with GM. The remaining
increase of approximately 170 million euros is
mainly attributable to the Production Systems
Sector due to lower advances received for
contract work in progress and new contracts in
consequence of stiffer competition on the market.
The overall decrease in trade receivables totalled
522 million euros and is essentially attributable to
an increase in sales of receivables without
recourse.
At December 31, 2005, trade receivables, other
receivables and receivables from financing
activities falling due after that date that had been
sold without recourse (in compliance with IAS 39 de-recognition requirements) totalled 2,463 million euros (1,623 million
euros at December 31, 2004). Approximately 500 million euros of this increase is attributable to the change in the scope
of consolidation resulting from the establishment of the joint-venture Iveco Finance Holdings with Barclays.
Report on Operations – Financial Review of the Group
28
At December 31, 2005 consolidated net debt totalled 18,523 million euros, for a decrease of 6.9 billion euros with respect
to 25,423 million euros at December 31, 2004. During 2005 a number of financial transactions were carried out that led to
a gradual reduction in the net debt of the Fiat Group and more than offset foreign currency translation differences (mainly
referring to debt of financial services companies denominated in dollars and reais).
(in millions of euros)
Debt
At 12.31.2005
(25,761)
At 12.31.2004
(32,191)
- Asset-backed financing
(10,210)
(10,174)
- Other debt
(15,551)
(22,017)
(189)
(203)
Other financial assets (1)
454
851
Current securities
556
353
6,417
5,767
(18,523)
(25,423)
Other financial liabilities (1)
Cash and cash equivalents
Net debt
Industrial Activities
(3,219)
(9,447)
Financial Services
(15,304)
(15,976)
(1) This item includes the asset and liability fair values of derivative financial instruments.
More specifically, the net debt of the Group decreased as a result of the following transactions:
• the collection of 1.56 billion euros from General Motors (partially reduced by the effect of the consolidation of the
powertrain activities amounting to approximately 400 million euros);
• the reimbursement of approximately 2 billion euros in financing that had previously been extended by central cash
management to the financial services companies sold by Iveco to Barclays;
• the conversion of the Mandatory Convertible Facility amounting to 3 billion euros;
• the completion of the Italenergia Bis transaction for approximately 1.8 billion euros; following the sale to EDF of the
24.6% shareholding owned by the Fiat Group, the financing of 1,147 million euros provided by Citigroup and a restricted
pool of banks was reimbursed. In addition, the payable of approximately 600 million euros to the bank shareholders of
Italenergia Bis that purchased 14% of the shares of Italenergia Bis from Fiat in 2002 was eliminated (see the “Notes to
the Consolidated Financial Statements” for further information on this transaction).
Cash position (cash, cash equivalents and current securities), which totalled 6,973 million euros at December 31, 2005,
increased by 873 million euros compared to 6,120 million euros at December 31, 2004.
At December 31, 2005, “Cash and cash equivalents” included approximately 700 million euros (approximately 600 million
euros at December 31, 2004) specifically allocated to service the debt for securitisation structures recognised mainly
under “Asset-backed financing.”
Report on Operations – Financial Review of the Group
29
INDUSTRIAL ACTIVITIES AND FINANCIAL SERVICES ACTIVITIES: PERFORMANCE IN 2005
The following analyses of the consolidated income statement, balance sheet and statement of cash flows present
separately the consolidated data of the Group's Industrial Activities and Financial Services activities (consisting of the
retail financing, leasing, and rental companies of Fiat Auto, CNH and Iveco and the banking activities performed by Banca
Unione di Credito–BUC).
Principles of analysis
A classification was made between Industrial Activities and Financial Services activities by preparing specific subconsolidated financial statements on the basis of the normal business performed by each Group company.
The equity investments held by companies belonging to an activity segment in companies included in another segment
were accounted for by using the equity method.
To avoid a misleading presentation of the net result, the effect of this accounting is classified in the income statement item
“Result of intersegment equity investments.”
The holding companies (Fiat S.p.A., IHF-Internazionale Holding Fiat S.A., Fiat Partecipazioni S.p.A., Fiat Netherlands
Holding N.V.) were classified under Industrial Activities.
The sub-consolidated financial statements of Industrial Activities also include companies that operate centralised cash
management activities, that is which raise financial resources on the market and finance Group companies without
providing financial services support to third parties.
Report on Operations – Financial Review of the Group
30
Operating Performance by Activity Segment
2005
Consolidated
Industrial
Activities
Financial
Services
46,544
45,350
2,023
39,624
39,006
1,447
Selling, general and administrative costs
4,513
4,261
Research and development costs
1,364
(in millions of euros)
Net revenues
Cost of sales
Other income (expenses)
Trading profit
2004
Consolidated
Industrial
Activities
Financial
Services
45,637
44,291
2,123
39,121
38,306
1,592
252
4,701
4,394
307
1,364
-
1,350
1,350
-
(43)
(37)
(6)
(415)
(467)
52
1,000
682
318
50
(226)
276
Gains (losses) on the disposal of equity investments
905
906
(1)
150
148
2
Restructuring costs
502
501
1
542
540
2
Other unusual income (expenses)
812
812
-
(243)
(243)
-
Operating result
2,215
1,899
316
(585)
(861)
276
Financial income (expenses)
(843)
(843)
-
(1,179)
(1,179)
-
858
858
-
-
-
-
Unusual financial income
Result from equity investments (*)
Income/(loss)before taxes
Income taxes
Net income/(loss)
Result of intersegment equity investments
Net income/(loss) before minority interest
34
1
33
135
101
34
2,264
1,915
349
(1,629)
(1,939)
310
844
744
100
(50)
(146)
96
1,420
1,171
249
(1,579)
(1,793)
214
-
248
-
-
214
-
1,420
1,419
249
(1,579)
(1,579)
214
(*) This item includes investment income as well as writedowns and upward adjustments in non-intersegment equity investments accounted for by using the equity
method.
Industrial Activities
In 2005 net revenues of Industrial Activities totalled 45,350 million euros, representing an increase of 2.4% with respect to
the previous year, following growth in the Automobiles business area, Iveco, CNH and the Components and Production
Systems business area.
The trading profit of Industrial Activities totalled 682 million euros in 2005, against a loss of 226 million euros in 2004.
The improvement is mainly attributable to the reduction of 546 million euros in the trading loss of Fiat Auto, as well as
growth at Iveco, CNH and the Components and Production Systems business area.
The operating result of Industrial Activities improved from an operating loss of 861 million euros in 2004 to an operating
profit of 1,899 million euros in 2005, as a result of the improvement in trading profit and the significant contribution of
unusual income, particularly that of 1,134 million euros resulting from the General Motors indemnity and the gain on the
sale to EDF of the equity investment in Italenergia Bis (878 million euros).
Financial Services
Revenues
(in millions of euros)
Fiat Auto
2005
2004
% change
-16.7%
619
743
Agricultural and Construction Equipment (CNH)
879
727
20.9%
Commercial Vehicles (Iveco)
457
591
-22.7%
Holding companies and Other companies (1)
Total
68
62
9.7%
2,023
2,123
-4.7%
(1) These amounts refer to the banking activities performed by Banca Unione di Credito.
Report on Operations – Financial Review of the Group
31
In 2005, the net revenues of Financial Services totalled 2,023 million euros, 4.7% less than in 2004. Growth at CNH only
partially offset the decreases at Fiat Auto and Iveco. In particular:
ƒ the Financial Services of Fiat Auto generated revenues of 619 million euros, compared with 743 million euros in 2004.
This decrease principally reflects the sale of retail financing activities in the United Kingdom in the fourth quarter of
2004 and the reduced financing to suppliers;
ƒ CNH’s Financial Services reported revenues of 879 million euros, up 20.9% from 2004. This growth reflects improved
yield and greater financing of the dealer network;
ƒ Iveco’s Financial Services generated net revenues of 457 million euros (591 million euros in 2004). The decrease
stemmed mainly from the sale of operations within the framework of the transaction with Barclays, which therefore
contributed only for the first five months of 2005.
Trading profit
2005
2004
60
65
-5
235
188
47
Commercial Vehicles (Iveco)
10
11
-1
Holding companies and Other companies (1)
13
12
1
318
276
42
(in millions of euros)
Fiat Auto
Agricultural and Construction Equipment (CNH)
Total
Change
(1) These amounts refer to the banking activities performed by Banca Unione di Credito.
The trading profit of Financial Services was 318 million euros, compared with a profit of 276 million euros in 2004. In
particular:
ƒ the decrease reported by Fiat Auto’s Financial Services (in 2005, its trading profit was 60 million euros, compared with
65 million euros in 2004) was mainly due to the contraction in financing to suppliers and the previously mentioned
change in scope of consolidation, which were only partially offset by improvement in financing activity outside of Europe
(Brazil and Argentina);
ƒ the trading profit of CNH’s Financial Services rose from 188 million euros in 2004 to 235 million euros in 2005. The
improvement stemmed from higher margins and volumes for dealer network financing and continued improvement in
portfolio quality;
ƒ Iveco’s Financial Services closed the year with a trading profit of 10 million euros, which was substantially in line with
the trading profit of 11 million euros reported in 2004, in spite of the previously mentioned sale of activities.
Report on Operations – Financial Review of the Group
32
Balance Sheet by Activity Segment
At December 31, 2005
(in millions of euros)
Consolidated
Industrial
Activities
Financial
Services
Intangible assets
5,943
5,762
181
- Goodwill
2,418
2,259
159
- Other intangible assets
3,525
3,503
22
11,006
10,961
26
Investments and other financial assets
2,333
Leased assets
Deferred tax assets
Property, plant and equipment (1)
Investment property
Total Non-current Assets
At December 31, 2004
Industrial
Activities
Financial
Services
5,578
5,468
110
2,157
2,067
90
3,421
3,401
20
45
9,437
9,391
46
26
-
46
46
-
4,184
796
4,025
5,834
565
1,254
4
1,250
740
7
733
2,104
1,930
174
2,402
2,286
117
1,571
Consolidated
22,666
22,867
2,446
22,228
23,032
Inventories (1)
7,881
7,809
76
7,257
7,168
89
Trade receivables
4,969
4,856
341
5,491
5,517
445
15,973
4,881
15,856
17,498
7,474
17,418
3,084
2,922
243
2,734
2,673
216
272
253
21
295
257
39
1,041
663
378
1,237
1,086
215
Receivables from financing activities
Other receivables
Accrued income and prepaid expenses (2)
Current financial assets
- Current equity investments
- Current securities
- Other financial assets
Cash and cash equivalents
Total Current assets
Assets held for sale
(2)
(2)
31
31
-
33
33
-
556
204
352
353
239
189
454
428
26
851
814
26
6,417
5,517
900
5,767
4,893
873
39,637
26,901
17,815
40,279
29,068
19,295
151
151
-
15
11
4
52,111
20,870
TOTAL ASSETS
62,454
49,919
20,261
62,522
Total assets adjusted for asset-backed
financing transactions
52,244
48,388
11,316
52,348
49,489
12,956
Stockholders’ equity
9,413
9,409
2,479
4,928
4,928
2,173
Provisions
8,698
8,499
199
7,290
7,117
173
- Employee benefits
3,919
3,894
25
3,682
3,656
26
- Other provisions
4,779
4,605
174
3,608
3,461
147
Debt
25,761
13,782
16,915
32,191
22,039
17,808
- Asset-backed financing
10,210
1,531
8,945
10,174
2,622
7,914
- Other debt
15,551
12,251
7,970
22,017
19,417
9,894
189
180
9
203
177
27
Trade payables
11,777
11,700
297
11,697
12,010
220
Other payables
4,821
4,698
205
4,561
4,352
303
405
375
29
522
481
40
1,280
1,166
128
1,130
1,007
126
110
110
-
-
-
-
62,454
49,919
20,261
62,522
52,111
20,870
52,244
48,388
11,316
52,348
49,489
12,956
Other financial liabilities
Deferred tax liabilities
Accrued expenses and deferred income
Liabilities held for sale
TOTAL STOCKHOLDERS’ EQUITY
AND LIABILITIES
Total liabilities adjusted for assetbacked financing transactions
(1) With respect to the figures as of December 31, 2004 published in the Quarterly Report at March 31, 2005, an amount of 416 million euros has been
reclassified from “Property, plant and equipment” to “Inventories”. This reclassification became necessary following the change in procedures for accounting
for sales with buy-back commitments, as described in the section “Significant Accounting Policies” of the Notes to the Consolidated Financial Statements.
(2) As described in the section “Significant Accounting Policies” of the Notes to the Consolidated Financial Statements, certain of the figures at December 31,
2004 published in the Quarterly Report at March 31, 2005 have been reclassified at and from December 31, 2005. In particular, at and from that date, the
item “Accrued income and prepaid expenses” is included in “Current assets” and the item “Assets held for sale” is excluded from “Current assets” and
presented separately. The corresponding figures at December 31, 2004 have therefore similarly been reclassified.
Report on Operations – Financial Review of the Group
33
Net Debt by Activity Segment
At December 31, 2005
At December 31, 2004
Consolidated
Industrial
Activities
Financial
Services
Debt
(25,761)
(13,782)
(16,915)
Consolidated
(32,191)
- Asset-backed financing
(10,210)
(1,531)
(8,945)
- Other debt
Intersegment financial receivables
(15,551)
(12,251)
(7,970)
-
4,594
(25,761)
454
(in millions of euros)
Financial payables net of
intersegment balances
Other financial assets
Other financial liabilities
(1)
(1)
Current securities
Cash and cash equivalents
Net debt
Industrial
Activities
(22,039)
Financial
Services
(17,808)
(10,174)
(2,622)
(7,914)
(22,017)
(19,417)
(9,894)
342
-
6,823
771
(9,188)
(16,573)
(32,191)
(15,216)
(17,037)
428
26
851
814
26
(203)
(177)
(27)
(189)
(180)
(9)
556
204
352
353
239
189
4,893
873
(9,447)
(15,976)
6,417
5,517
900
5.767
(18,523)
(3,219)
(15,304)
(25,423)
(1)This item includes the asset and liability fair values of derivative financial instruments.
“Financial payables” under Industrial Activities partly include funds raised by the central cash management and transferred
to financial services companies in support of their activity (represented under the item “Intersegment financial
receivables”).
“Intersegment financial receivables” in financial services companies represent loans or advances to industrial companies,
mainly relating to the sales of receivables by industrial to financial companies in transactions that do not comply with the
requirements of IAS 39 for recognition of those sales.
“Cash and cash equivalents” include approximately 700 million euros at December 31, 2005 (approximately 600 million
euros at December 31, 2004) mainly relating to financial services companies and allocated to service the debt for
securitisation structures, classified as “Asset-backed financing.”
The net debt of financial services companies at December 31, 2005 was 672 million euros lower than at December 31,
2004. This decrease is mainly attributable to the sale of the Iveco financial services companies within the context of the
Barclays transaction, partly offset by the net increase of the financed portfolio and the effect of foreign currency translation
differences.
During 2005 net industrial debt decreased by
6,228 million euros.
Change in net industrial debt
(in millions of euros)
Net industrial debt at beginning of period
Net income
Amortisation and depreciation (net of vehicles sold under buy-back
commitments)
Change in provisions for risks and charges and other changes
Cash flows from (used in) operating activities during the period,
net of change in working capital
Change in working capital
Cash flows from (used in) operating activities during the period
Investments in tangible and intangible assets
(net of vehicles sold under buy-back commitments)
Cash flows from (used in) operating activities during the period,
net of capital expenditures
Net change in receivables from financing activities
Change in scope of consolidation and other changes
Net cash flows from (used in) Industrial Activities excluding
capital contributions and dividends paid
Capital increases and dividends, net
Translation exchange differences
Change in net industrial debt
Net industrial debt at end of period
2005
(9,447)
1,419
2,392
(544)
3,267
92
3,359
(2,636)
723
409
2,285
3,417
2,971
(160)
6,228
(3,219)
Operating activities for the period generated a
positive cash flow of 3,359 million euros, including
1.1 billion euros from the gain on the General
Motors settlement. Net of industrial capital
expenditures of 2,636 million euros, the operating
cash flow amounted to 723 million euros.
The collection of financial receivables, mainly by
Fiat Partecipazioni and Iveco, generated a positive
cash flow of 409 million euros.
The item “Change in scope of consolidation and
other changes” includes the reduction in net debt
resulting from the completion of the Italenergia Bis
transaction (1.8 billion euros), sales of real estate
(0.3 billion euros) and the net surplus (cash net of
acquired debt) of 0.1 billion euros resulting from
the unwinding of the joint-ventures with General
Motors.
The conversion of the Mandatory Convertible
Facility contributed for 3 billion euros to the
reduction in net debt.
Report on Operations – Financial Review of the Group
34
Statement of Cash Flows by Activity Segment
Fiscal 2005
Consolidated
Industrial
Activities
Financial
Services
5,767
4,893
873
Net result before minority interest
1,420
1,419
249
Amortisation and depreciation (net of vehicles sold under buy-back commitments)
2,590
2,392
198
(1,561)
(1,923)
114
47
132
3
Change in provisions
797
816
(18)
Change in deferred income taxes
394
438
(43)
(85)
(7)
(74)
114
92
13
3,716
3,359
442
(3,052)
(2,636)
(416)
- Equity investments
(67)
(152)
(33)
Proceeds from the sale of non-current assets
500
385
115
(251)
409
(660)
(in millions of euros)
A) Cash and cash equivalents at beginning of period
B) Cash flows from (used in) operating activities during the period:
(Gains)/losses and other non-monetary items
(a)
Dividends received
Change in items due to buy-back commitments
(b)
Change in working capital
Total
C) Cash flows from (used in) investment activities:
Investments in:
- Tangible and intangible assets (net of vehicles sold under buy-back commitments)
Net change in receivables from financing activities
Change in current securities
(159)
(19)
(140)
Other changes
2,494
2,252
244
Total
(535)
239
(890)
D) Cash flows from (used in) financing activities:
Net change in financial payables and other financial assets/liabilities
(c)
(2,839)
(3,159)
321
Increase in capital stock
(c)
-
-
119
Dividends paid
Total
Translation exchange differences
E) Total change in cash and cash equivalents
F) Cash and cash equivalents at end of period
(29)
(29)
(88)
(2,868)
(3,188)
352
337
214
123
650
624
27
6,417
5,517
900
(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 realised 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 result, are
included in operating activities for the period, in a single item which includes the change in working capital, investments, 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)
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 transaction, as neither of these gave rise to cash flows.
Industrial Activities
In 2005, Industrial Activities generated cash and cash equivalents totalling 624 million euros, and in particular:
ƒ
operating activities generated 3,359 million euros: cash flow (net income plus amortisation and depreciation), net of
“(Gains)/losses and other non-monetary items”, and taking into consideration the changes in provisions, deferred
taxes and items relating to the management of sales with buy-back commitments, was positive for 3,135 million
euros, to which dividends for 132 million euros should be added. Working capital, which decreased slightly, generated
an additional 92 million euros;
Report on Operations – Financial Review of the Group
35
ƒ
investment activities generated a total of 239 million euros as a consequence of the reimbursement of the financial
payables of the sold Iveco financial services companies and the cash resulting from the unwinding of the joint
ventures with GM (included under “Other changes”), in addition to the collection of financial receivables. These
resources more than offset the investments in property, plant and equipment and intangible fixed assets (2,636 million
euros);
ƒ
financing activities absorbed 3,188 million euros, largely in consequence of the reimbursement of bonds at maturity
(approximately 1.9 billion euros) and other borrowings.
Financial Services
Cash and cash equivalents of Financial Services at December 31, 2005 amounted to 900 million euros, substantially in
line with the 873 million euros at December 31, 2004.
The 27 million euros in cash generated by financial services companies during the year was the result of the following:
ƒ
operating activities generated 442 million euros in cash mainly as a result of net income plus amortisation and
depreciation;
ƒ
investment activities absorbed 890 million euros in cash, mainly due to the increase in the portfolio (660 million
euros), investment needs (416 million euros), largely connected with vehicles to be used in long-term leasing
operations and the temporary investment of funds, net of the disposal of assets (mainly the sale of vehicles leased out
under operating leases);
ƒ
cash generated by operations and financing activities during the year substantially offset the cash requirements
generated by investment activities.
Report on Operations – Financial Review of the Group
36
Corporate Governance
Introduction
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 for
listing on the NYSE, including the relevant sections of the Sarbanes-Oxley Act, and the characteristics of the Group.
In accordance with the regulatory requirements of Borsa Italiana, an “Annual Report on Corporate Governance” is
prepared and made available on the occasion of the annual stockholders meeting that approves the financial statements.
It is also available in the section “Investor Relations” on the website www.fiatgroup.com, which also contains documents
regarding the Fiat Group corporate governance system. In compliance with the guidelines issued by Assonime and
Emittenti Titoli S.p.A., this Report is composed of four sections: the first containing a general description of the structure
of corporate governance, the second analysing in detail the implementation of the provisions of the Corporate Governance
Code, the third highlighting certain of the more significant aspects of the applicable United States law, and the fourth
containing summary tables and the corporate governance documents of the Fiat Group. The aspects of significance for
this Report on Operations are illustrated below.
Direction and Coordination Activities
Fiat S.p.A. is not subject to direction and coordination activities by companies or entities. The companies that Fiat S.p.A.
directly and indirectly controls, with the exception of particular cases, have identified Fiat S.p.A. itself as the entity that
performs direction and coordination activities, pursuant to Article 2497 bis of the Italian Civil Code. This activity consists in
indicating the general strategic and operating guidelines of the Group and takes concrete form in the definition and
updating of the corporate governance and internal control model, issuance of a Code of Conduct adopted by the Group,
and elaboration of the general policies for the management of human and financial resources, purchasing of factors of
production, and communication. Furthermore, coordination of the Group envisages centralized management, through
dedicated companies, of cash management, corporate and administrative, internal audit, and training services.
This allows the subsidiaries, which retain full management and operating autonomy, to realize economies of scale by
availing themselves of professional and specialized services with improving levels of quality and to concentrate their
resources on the management of their core business.
Board of Directors
As envisaged in the Articles of Association, the number of members of the Board of Directors ranges from nine to fifteen.
In order to have a majority of independent directors, the Stockholders Meeting held on June 23, 2005 increased the
number of members of the Board of Directors from eleven to fifteen and they shall remain in office until the date of the
Stockholders Meeting that will be called to approve the 2005 financial statements.
As envisaged in Article 16 of the Company’s Articles of Association, the representation of the Company is vested,
severally, in all executive directors, and as envisaged in Article 12, the Vice Chairman, if appointed, shall act as Chairman
if the latter is absent or prevented from acting. As in the past, the Board of Directors adopted a model for delegation of
broad operating powers to the Chairman and the Chief Executive Officer, authorizing them to severally perform all ordinary
and extraordinary acts that are consistent with the Company’s purpose and not reserved by law or otherwise delegated or
reserved to the Board of Directors itself. In practice, the Chairman exercises coordination and strategic guidance within
the activities of the Board of Directors, while the Chief Executive Officer is in charge of the operating management of the
Group.
The Board defined the “Guidelines for Significant Transactions and Transactions with Related Parties,” by which it
reserved the right to examine and approve in advance any transaction of significance in the balance sheet, economic and
Report on Operations – Corporate Governance
37
financial figures, including the most significant transactions with related parties, and subject all transactions with related
parties to special criteria of substantial and procedural fairness.
Therefore, decisions regarding significant transactions are excluded from the mandate granted to executive directors. The
term “significant transactions” refers to those transactions that in and of themselves require the company to inform the
market thereof, in accordance with rules established by market supervisory authorities.
When the Company needs to execute significant transactions, the executive directors shall provide the Board of Directors
reasonably in advance with a summary analysis of the strategic consistency, economic feasibility, and expected return for
the Company.
Decisions regarding the most significant transactions with related parties are also excluded from the mandate granted to
executive directors, with all transactions being subject to special rules of substantial and procedural fairness and
disclosure to the Board.
The Board is comprised by three executive directors and twelve non-executive directors – that is, who do not hold
delegated authority or perform executive functions in the Company or the Group –, eight of whom are independent.
The executive directors are the Chairman, the Vice Chairman, who substitutes for the Chairman if the latter is absent or
prevented from acting, and the Chief Executive Officer. They also hold management positions in subsidiaries: Luca
Cordero di Montezemolo is Chairman and Chief Executive Officer of Ferrari S.p.A., John Elkann is Chairman of Itedi
S.p.A., and Sergio Marchionne, in addition to being Chairman of the principal subsidiaries, is also Chief Executive Officer
of Fiat Auto S.p.A.
An adequate number of independent directors is essential to protect the interests of stockholders, particularly minority
stockholders, and third parties. At its meeting on May 10, 2005, the Board of Directors resolved to submit a motion to the
Stockholders Meeting to increase the number of independent directors so that they would constitute a majority on the
board. The Board of Directors held that enhancing protections against potential conflicts of interest was a priority for the
Company, particularly in those areas less prone to control by the Stockholders Meeting. The Board of Directors also
proposed that new and more selective criteria for determining independence be adopted. Following the resolutions
passed by the Stockholders Meeting on June 23, 2005, the Board of Directors has a majority of independent directors.
The qualifications of independent directors are assessed annually and based on the absence or insignificance during the
previous three years of investment, economic, or other relationships maintained directly, indirectly, or on behalf of third
parties with the Company, its executive directors and managers with strategic responsibilities, its controlling companies or
subsidiaries, or with parties otherwise related to the Company.
At its meeting held on February 28, 2006, the Board of Directors confirmed that the directors Angelo Benessia, Flavio
Cotti, Luca Garavoglia, Gian Maria Gros-Pietro, Hermann-Josef Lamberti, Vittorio Mincato, Pasquale Pistorio and Mario
Zibetti satisfied these requirements of independence.
By going beyond the recommendations of the Corporate Governance Code, having a board with a majority of independent
directors implements one of the fundamental rules of the NYSE, even though non-US issuers are not required to adopt it.
Some of the current directors also hold positions at other listed companies or companies of a significant interest.
Excluding the previously mentioned positions held by executive directors at the Fiat Group, the most significant are as
follows:
•
Angelo Benessia: Vice Chairman of RCS Quotidiani S.p.A.;
•
Tiberto Brandolini D’Adda: Chairman and General Manager of Sequana Capital; Vice Chairman and Chief
Executive Officer of Exor Group; Director of: Giovanni Agnelli e C. S.a.p.az., Espírito Santo Financial Group, IFIL
Investments S.p.A., SGS S.A. and Vittoria Assicurazioni S.p.A.;
•
Luca Cordero di Montezemolo: Director of: Tod’s S.p.A., Merloni Elettrodomestici S.p.A., Pinault Printemps
Redoute, Le Monde; Member of the International Advisory Board of Citigroup Inc.;
•
Flavio Cotti: Chairman of the Advisory Board of Credit Suisse Group; Director of Georg Fischer AG;
•
John Elkann: Vice Chairman of Giovanni Agnelli e C. S.a.p.az.; Vice Chairman of IFIL Investments S.p.A.;
Director of: IFI S.p.A., Exor Group and RCS MediaGroup;
Report on Operations – Corporate Governance
38
•
Luca Garavoglia: Chairman of Davide Campari Milano S.p.A.;
•
Gian Maria Gros-Pietro: Chairman of Autostrade S.p.A.; Director of: Edison S.p.A. and Seat Pagine Gialle;
Member of the Supervisory Board of Sofipa Equity Fund;
•
Hermann-Josef Lamberti: Member of the Management Board of Deutsche Bank AG, of the Supervisory Board of
Deutsche Bank Privat- und Geschäftskunden AG; Member of the Supervisory Board of Deutsche Börse AG;
Member of the Supervisory Board of Schering AG; Member of the Supervisory Board of Carl Zeiss AG;
•
Sergio Marchionne: Vice Chairman of the SGS Group; Director of Serono S.A. and President of ACEA (European
Automobile Manufacturers Association);
•
Virgilio Marrone: General Manager of IFI S.p.A.; Director of: Exor Group and Sanpaolo Imi;
•
Vittorio Mincato: Chairman of Poste Italiane S.p.A.; Director of Parmalat S.p.A.;
•
Pasquale Pistorio: Honorary Chairman of S.T. Microelectronics; Director of: Chartered Semiconductor
Manufacturing and Telecom Italia S.p.A.;
•
Daniel J. Winteler: Chairman and Chief Executive Officer of Alpitour S.p.A.; Director of: IFIL Investments S.p.A.
and Sequana Capital;
•
Mario Zibetti: Director of Ersel Finanziaria S.p.A.
Committees established by the Board of Directors
During 2005 the Board of Directors revised the Charters of the Internal Control Committee and of the Nominating and
Compensation Committee supplementing roles and requirements. In particular, the Board entrusted the Nominating and
Compensation Committee with the task of selecting and proposing nominees for the post of Director and it also
established the Strategic Committee, on which it relies for the preparation of Company and Group strategies.
Internal Control System
In 2002, amending what was defined in 1999, partly in order to receive the changes made to the Corporate Governance
Code, the Board adopted the “Guidelines for the Internal Control System,” which came into effect on January 1, 2003.
Essential parts of the Internal Control System are the Code of Conduct that replaced the Code of Ethics in 2002, and the
Compliance Program adopted by the Board of Directors on February 28, 2003 and subsequently amended on February
28, 2005 pursuant to the “Norms governing the Administrative Liability of Legal Entities” envisaged in Legislative Decree
no. 231/2001, as amended.
The Code of Conduct expresses the professional principles of corporate conduct that Fiat has adopted and with which
directors, statutory auditors, employees, consultants, and partners are requested to conform to.
The Compliance Program of Fiat S.p.A., which was prepared in compliance with the guidelines prepared by Confindustria,
envisages a system of procedures and controls designed to reduce the risk that the offenses envisaged in Legislative
Decree no. 231/2001 be committed and is comprised by a General Part and Special Parts that govern, for each type of
offense, the system of procedures and controls applicable to the Company. A Compliance Officer function was
established, headed by the Head of Internal Audit/Compliance Officer, with the mission of promoting effective and proper
implementation of the Compliance Program, including monitoring of corporate conduct and the right to constant
disclosures on significant activities. Group companies are steadily adopting compliance programs that are in line with
Group’s general principles, after identifying their respective sensitive processes and the specific procedures to be
implemented at each individual company.
In application of the Compliance Program, the Code of Conduct, and the Sarbanes Oxley Act Section 301 on
whistleblowings, the Procedure for Whistleblowings Management was adopted in order to regulate the management of
reports and claims filed by individuals inside and outside the Company regarding suspected or presumed violations of the
code of conduct, financial and/or accounting fraud against the company, oppressive behaviour towards employees or third
parties, and complaints regarding bookkeeping, internal audits, and independent audits.
The Procedure for the Engagement of Auditing Firms regulates the engagement of Group external auditors by Fiat S.p.A.
and its subsidiaries, as well as the commissioning of the companies and professional firms that maintain an ongoing
Report on Operations – Corporate Governance
39
relationship with those external auditors (so-called network) in order to ensure the mandatory independence of the
auditing firm.
Documents and information regarding the Company are disseminated in compliance with the “Disclosures Controls &
Procedures" adopted in conformity with the Securities Exchange Act of 1934 and the Sarbanes Oxley Act of 2002.
Periodic and extraordinary financial information and price sensitive information is disseminated on the basis of these
Disclosures Controls & Procedures. These disclosures are also posted on the Group website.
Board of Statutory Auditors
The Board of Statutory Auditors is comprised of three Statutory Auditors and three Alternates, all of whom, as required by
Article 17 of the Articles of Association, must be entered in the Auditors’ Register and have at least three years’
experience as chartered accountants. Furthermore, they may not hold the position of statutory auditor in more than five
other listed companies, with the exception of the controlling companies and subsidiaries of Fiat S.p.A.
The members of the Board of Statutory Auditors, which acts as Audit Committee pursuant to US law, are Cesare Ferrero,
Chairman, Giuseppe Camosci and Giorgio Ferrino. Their term expires on the date of the stockholders meeting that
approves the 2005 financial statements. In addition to the positions respectively held as Chairman of the Board of
Statutory Auditors and statutory auditor at the controlling companies IFI S.p.A. and IFIL S.p.A., Cesare Ferrero also holds
the position of director at Autostrada Torino Milano S.p.A., Davide Campari Milano S.p.A., Pininfarina S.p.A. and that of
statutory auditor of Toro Assicurazioni S.p.A. The other statutory auditors do not hold other positions in listed companies.
In accordance with Article 17 of the Company’s Articles of Association and as envisaged under the Consolidated Law on
Financial Intermediation, properly organized minority groups may appoint one Statutory Auditor. The minimum equity
interest needed to submit a slate of candidates is equal to 1% of the ordinary capital. Thus far, the minority stockholders
have not exercised this right, although Fiat believes that the independence of its Board of Statutory Auditors is guaranteed
by the requirements of independence and professionalism prescribed by law and the Articles of Association, and the
unquestioned professional authoritativeness that has always distinguished its members. Furthermore, in accordance with
the Articles of Association, the slates of candidates must be deposited at the registered office of the company at least ten
days before the scheduled date of the Stockholders Meeting on its first call and be accompanied by statements certifying
satisfaction of the requirements prescribed by law and the Articles of Association and that they are not ineligible or
incompatible, on penalty of rejection of those slates.
Report on Operations – Corporate Governance
40
Stock Options Plans
Thus far, the Board has approved Stock Option Plans offered to about 900 managers of the Group’s Italian and foreign
companies who are qualified as “Direttore” or have been included in the Management Development Program for highpotential managers. Plan regulations share these common features:
ƒ
Options are granted to individual managers on the basis of objective parameters that take into account the level of
responsibility assigned to each person and his or her performance.
ƒ
If employment is terminated or an employee’s 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, with certain exceptions.
ƒ
The option exercise price, which is determined on the basis of the average stock market price for the month
preceding the option grant, can vary as a result of transactions affecting the Company’s capital stock. It must be paid
in cash upon the purchase of the underlying shares.
ƒ
The options are normally exercisable starting one year after they are granted and for the following eight years, but
during the first four years, exercise is limited to annual tranches, which may be accumulated, of no more than 25% of
the total granted.
In consideration of the options previously granted under the aforesaid plans and that have since expired upon termination
of employment, a total of 7,749,500 option rights corresponding to the same number of shares represent treasury stock to
be assigned to the holders of options pursuant to the conditions envisaged in the specific Regulations.
In addition, the Board of Directors granted Mr. Sergio Marchionne, as a portion of his variable compensation as Chief
Executive Officer, options for the purchase of 10,670,000 Fiat ordinary shares at the price of 6.583 euros per share,
exercisable from June 1, 2008 to January 1, 2011. In each of the first three years since the grant, he accrues the right to
purchase, from June 1, 2008, a maximum of 2,370,000 shares per year and on June 1, 2008 he accrues the right to
purchase, effective that date, the residual portion amounting to 3,560,000 shares. The right to exercise the options related
to this last portion of shares is subject to certain predetermined profitability targets that should be reached during the
reference period.
Ferrari S.p.A. granted its Chairman and Chief Executive Officer, Luca Cordero di Montezemolo, options for the purchase
of 184,000 Ferrari shares at the price of 175 euros 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.
Options granted as part of Stock Options Plans on Fiat shares and outstanding at December 31, 2005 are shown below.
Options granted to Board Members are instead shown in a specific table in the Notes to the Financial Statements.
2005
2004
Number of shares
Average exercise price (*)
Market price
10,502,543
16.38
5.9
12,697,743
16.46
-
-
-
-
-
-
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
Options outstanding on 1/1
Options granted during the year
Number of shares Average exercise price (*)
Market price
6.14
(*) Following the capital increases in January 2002 and July 2003, the exercise prices were adjusted by applying the factors calculated by Borsa Italiana, in the amount of 0.98543607 and 0.93167321.
The capital increase of September 2005, factor equal to 1, did not give rise to adjustments.
Interests held by Directors and Statutory Auditors (Article 79 of Consob Regulation, Resolution No. 11971 of 5.14.1999)
(number of shares)
Number of shares
held at Dec. 31, 2004
Number of shares
bought in 2005
19,172
-
Fiat ordinary
-
Fiat ordinary
1
First name and last name
Description of investments
Luca Cordero di Montezemolo
Fiat ordinary
Sergio Marchionne
Cesare Ferrero
Number of shares Number of shares held
sold in 2005
at Dec. 31, 2005
-
19,172
220,000
-
220,000
-
-
1
Report on Operations – Stock Option Plans
41
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:
ƒ
Subscription to capital increases of subsidiaries as described in the Notes to the financial statements of Fiat S.p.A.;
ƒ
Licensing of the right to use the Fiat trademark, for a consideration based on a percentage of sales, to Fiat Auto S.p.A.;
ƒ
Contributions provided to Group companies for initiatives to enhance the Group’s image;
ƒ
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;
ƒ
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.;
ƒ
Rental of buildings to Ingest Facility S.p.A.;
ƒ
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
l’Industria S.c.p.A.);
ƒ
Purchase of inspection and internal auditing services from Fiat-Revisione Interna S.c.r.l.;
ƒ
Purchase of information technology services provided by PDL Service S.r.l. and eSPIN S.p.A.;
ƒ
Purchase of external relations services provided by Fiat Information & Communication Services società consortile per
azioni;
ƒ
Office space and real property maintenance services provided by Ingest Facility S.p.A.;
ƒ
ƒ
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 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:
ƒ 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;
ƒ
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 S.p.A.
Report on Operations – Transactions among Group Companies and with Related Parties
42
Significant Events Occurring since the End of the Fiscal Year and
Business Outlook
Significant events occurring since the end of the fiscal year
The most significant transactions completed by the Fiat Group during early 2006 are set out below:
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
On January 3, 2006, Fiat Auto and Severstal Auto announced that they had signed an industrial agreement for the
assembly in Russia of Fiat Palio and Fiat Albea models based on CKDs produced in Turkey by Tofas, the joint
venture between Fiat Auto and the Koç Group. The assembly will start in 2007 in the Severstal Auto plant of
Naberejniye Chelni near Kazan in the Volga region. On February 8, Fiat Auto and Severstal extended the reach of the
industrial agreement to Fiat Doblò models (which are also produced in Turkey), that will be assembled in Russia in
the same manner as the Fiat Palio and Fiat Albea models.
On January 13, 2006, the Fiat Group and Tata Motors Ltd. announced, by means of a joint press release, that they
had signed an agreement to co-operate on dealer network sharing, which covers the sale of Fiat branded cars in Tata
outlets throughout India. As a result of this agreement, a targeted selection of Fiat cars and the complete Tata product
range along with service and sale of spare parts will be available from March 2006 through the Tata dealership
network. Dealers will display the new Fiat logo alongside the Tata logo at their outlets.
Following its announcement on January 30, 2006, Fiat communicated on February 10 that it had successfully closed
its offer to issue 6.625% Senior Notes having a face value of 1 billion euros and maturing on February 15, 2013,
whose price was set on February 7, 2006 at face value. The Notes, which were issued by Fiat Finance and Trade Ltd.
Société Anonyme, a wholly-owned subsidiary of Fiat S.p.A., have been admitted to listing on the Irish Stock Exchange
and were rated Ba3 by Moody’s Investors Service, BB- by Standard & Poor’s Ratings Services and BB- by Fitch
Ratings. These ratings are in line with the agencies’ ratings of the Fiat Group’s long-term debt. In January 2006, Fitch
Ratings and Moody’s changed their outlook on Fiat S.p.A. from negative to stable, as Standard & Poor’s 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 wideranging 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 recognised 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 (Fiat’s advanced research
center headquartered in Pomigliano d’Arco near Naples) signed a contract for renewal of the Group’s Termini Imerese
manufacturing facility. The contract is part of a more general Program Agreement drawn up with the government in
December 2002, and follows through on a project that Fiat Auto submitted to the Ministry and Sicily’s regional
administration in April 2004. The project will involve action along two fronts.
In the first area, and in line with the Fiat development plan, the project calls for industrial investments in the Termini
Imerese plant amounting to approximately 31 million euros to prepare the Sicilian facility to produce the Lancia
Ypsilon and the model’s subsequent facelifts.
The second area of action is that of research and development, where Elasis will work on improving the plant’s
manufacturing processes. Investments in this area will amount to approximately 13 million euros.
The Fiat Group has committed a total of 44 million euros to the project. Public funding will amount to about 10 million
euros, of which 1.6 million euros has been provided by the Sicilian regional administration.
On February 21, 2006, the Italian Ministry of Productive Activities, Fiat Powertrain Italia, Fabbrica Motori
Automobilistici (FMA), and Elasis signed a project agreement providing for an investment plan to support Fiat’s
manufacturing plants at Pratola Serra near Avellino and Termoli near Campobasso and the research activities carried
out at Pomigliano d’Arco (Naples).
This agreement is part of the general Programme Agreement reached with the Italian Government in December 2002.
The plan calls for the following measures:
Report on Operations – Significant Events Occurring since the End of the Fiscal Year and Business Outlook
43
−
−
−
industrial capital expenditures of approximately 180 million euros in the FMA plant at Pratola Serra for the
production of new diesel engines (1.6 and 1.9 JTD two- and four-valve engines);
industrial capital expenditures of approximately 434 million euros in the Powertrain Italia plant at Termoli for a
new highly automated and flexible production line that will make advanced generation petrol-powered engines
able to respond quickly to changes in demand, and the new M40 transmission for light commercial vehicles of
Sevel Val di Sangro;
an investment of approximately 33 million euros earmarked for research and development specifically performed
by Elasis in the design of new engines.
The Fiat Group’s commitment of 647 million euros will be supplemented by a Government contribution of
approximately 82 million euros.
ƒ
On February 24, 2006, CNH announced that its wholly owned subsidiary, Case New Holland Inc., issued senior notes
with a face value of $500 million maturing in 2014 (fixed annual interest rate of 7.125%) to professional investors. The
company expects to complete the transaction at the beginning of March 2006.
Furthermore, the obligations imposed by the “Personal Data Protection Code” (Legislative Decree no. 196/2003) were
satisfied in compliance with the provisions of the “Technical Regulation of Minimum Security Measures” (Appendix B of the
Code). Consequently, the Fiat S.p.A. Security Planning Document was updated by the addition of the Plan for additional
measures reinforcing security levels in order to combat the evolution of emerging risk factors.
Business 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 Group’s 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 reorganisation, 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 labour and utilities costs. Iveco is planning major
improvements to 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 confirms its targets for 2006: positive
operating cash flow, trading profit between 1.6 and 1.8 billion euros and net income of about 700 million euros.
Broken down by Sector, full-year 2006 trading margin targets (trading profit as a percentage of revenues) are as follows:
•
•
•
•
Autos (excluding Maserati and Ferrari), 0.5% to 1.0%,
CNH, 7.0% to 7.5%;
Iveco, 5.5% to 6.0%; and
Components, 3.5% to 4.0%.
The Fiat Group will continue to implement its strategy of targeted alliances, in order to reduce capital commitments, and
share investments and risks. Efforts will be made to complement Fiat’s advanced technological resources with better
quality, commercial distribution and customer service capabilities.
Report on Operations – Significant Events Occurring since the End of the Fiscal Year and Business Outlook
44
OPERATING PERFORMANCE BY SECTOR OF ACTIVITY
45
Fiat Auto – Fiat, Alfa Romeo, Lancia and Fiat Veicoli Commerciali
Operating Performance
Highlights
(in millions of euros)
2005
2004
19,533
19,695
(281)
(822)
Operating result (*)
(818)
(1,412)
Investments in tangible and intangible assets
1,582
1,792
- of which capitalised R&D costs
310
500
Total R&D expenses (**)
665
952
1,697,300
1,766,000
46,099
45,122
Net revenues
Trading profit/(loss)
Automobiles and light commercial vehicles
delivered (number)
Employees at year-end (number)
(*)
Demand in Western Europe in the automobile
market was substantially in line (-0.2%) with the
previous year. The largest declines occurred in
Italy (-1.3%) and the United Kingdom (-5.0%),
offset in part by gains in France (+2.6%),
Germany (+1.6%) and Spain (+0.9%).
Outside Western Europe, demand was off
sharply in Poland (-26.5%), while the Brazilian
market continued on its growth track, with
demand rising by 9.1%.
The Western European market for light
commercial vehicles posted an overall increase
of 2.8% over 2004. This increase was the net
result of gains of 13.4% in Spain, 3.4% in
France and 3.1% in Germany and decreases of
Including restructuring costs and unusual income (expenses).
(**) Including R&D capitalised and charged to operations.
1.8% in Italy and 1.3% in the United Kingdom.
Fiat Auto’s share of the automobile market held at 28.0% in Italy (about the same as in 2004), but declined to 6.5% for
Western Europe as a whole (0.7 percentage points less than in 2004).
The Sector’s share of the market for light commercial vehicles was virtually unchanged, registering 10.4% for all of
Western Europe (-0.2 percentage points compared with 2004) and 42.3% for Italy (in line with 2004).
In Brazil, Fiat Auto’s share of the automobile and light commercial vehicle markets increased to 24.4% (+0.9 percentage
points) and 28.8% (+4.5 percentage points), respectively.
In 2005, Fiat Auto sold a total of 1,697,300 vehicles, or 3.9% less than in 2004. In Western Europe, shipments were down
7.8% to 1,100,000 units. Strong competitive pressure and, early in the year, the expected launch of new models account
for the reduction in unit sales. Once new models became available, sales rebounded both in Italy and Europe as a whole,
particularly in the fourth quarter.
Sales Performance
- Automobiles and Light Commercial Vehicles
2005
2004
France
79.3
73.2
8.3
Germany
90.8
107.8
(15.8)
(38.5)
(in thousands of units)
Automobile Market
2005
2004
France
2,058.1
2,005.3
2.6
United Kingdom
Germany
3,250.1
3,198.3
1.6
Italy
United Kingdom
2,443.5
2,572.8
(5.0)
Italy
2,234.2
2,264.7
(1.3)
Spain
1,527.3
1,514.1
0.9
14,415.8
14,449.2
(0.2)
234.2
318.5
(26.5)
1,414.8
1,297.3
9.1
(in thousands of units)
Western Europe
Poland
Brazil
% change
Spain
% change
53.3
86.7
687.7
704.3
(2.4)
70.3
72.4
(3.0)
(20.3)
118.5
148.8
1,099.9
1,193.2
(7.8)
Poland
33.8
60.6
(44.3)
Brazil
404.3
358.1
12.9
Rest of the world
159.3
154.1
3.3
1,697.3
1,766.0
(3.9)
Rest of Western Europe
Western Europe
Total sales
Associated companies
Grand total
107.3
90.7
18.3
1,804.6
1,856.7
(2.8)
Report on Operations – Fiat Auto
46
In 2005, Fiat Auto’s sales volume was down 2.4% in Italy (but increased by 14.7% in the fourth quarter of 2005) and 3% in
Spain. The decrease was more pronounced in Germany (-15.8%) and the United Kingdom (-38.5%, owing to a sharp drop
in market demand). Among all major European markets, only France bucked the trend, posting an 8.3% increase in
shipments.
In Poland, weak demand had a strong negative impact on Fiat Auto’s sales volume, which contracted by 44.3% compared
with 2004.
In 2005, Fiat Auto intensified its activity in those markets outside the EU where it already has an established presence,
such as Brazil, Argentina and Turkey, while at the same time launching programmes 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 (alcohol and gasoline bi-fuel) versions of the Palio and Mille
models, which were introduced during the first half of the year, account for this outstanding performance.
In Argentina, where consumer demand continued to improve after the deep crisis of 2002, the automobile market
expanded at a rate of 35.6% compared with 2004 and Fiat Auto increased its market share to 12.4% (up 0.6% percentage
points compared with 2004). Thanks to the positive impact of new products and the contribution of a revamped sales
network, deliveries of automobiles and light commercial vehicles increased by 43.1% to 44,100 units.
In Turkey, 2005 was a good year for the economy in general and the automobile industry in particular. Demand for
automobiles and light commercial vehicles increased to about 720,000 units (+2.9% compared with 2004). In this
environment, Tofas (a local joint venture in which Fiat Auto has a 37.9% interest) achieved a market share of 11.2% and
increased deliveries by 8.1%. Tofas’s improved performance over 2004, both in the domestic and export markets, was
made possible by the start of production of the new Doblò and the market launch of the new Palio and Albea.
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, 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
(Spain +11.6%, France +3.9%, United Kingdom +1.4%).
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 Italy. These agreements will provide the
foundation for increasing the competitiveness of Fiat Auto’s products and expand its presence in emerging markets.
This was the rationale for the agreements signed in 2005 with Pars Industrial Development Foundation for the production
and sale of Fiat cars in Iran, with PSA and Tofas to design and produce a new light commercial vehicle in Turkey, with
Ford to develop and manufacture A Segment automobiles at a Fiat Auto plant in Poland, with Zastava to assemble the
Fiat Punto under license at a Zastava plant in Serbia, and with Suzuki to study the feasibility of producing new Multijet
engines in Asia under license.
Two additional agreements were executed in January 2006: one in India with Tata Motors Ltd that involves the sharing of
the dealer network and the distribution of Fiat-branded cars through Tata’s dealers in India; and another in Russia with
Severstal Auto for the assembly in Russia of the Fiat Palio and Fiat Albea using CKD kits manufactured in Turkey by
Tofas. In February 2006, industrial cooperation with Severstal was extended to Fiat Doblò models, which will be
assembled in Russia using CKD kits manufactured by Tofas.
Innovation and Products
In 2005, Fiat Auto continued to pursue a strategy focused on upgrading, improving and completing its model lineup.
As part of its effort to round out its model line, Fiat launched the Croma, a new entry in the medium-high segment. This
car, which is notable for its high levels of performance and comfort, was brought to market in May 2005. It was very well
received by customers, with over 27,000 orders by the end of the year.
The Grande Punto was launched in September and generated an excellent response among customers at dealership
showrooms during the “Open Doors” promotion. As the availability of the Grande Punto was gradually expanded to the
Report on Operations – Fiat Auto
47
rest of Western Europe, the year ended with registrations of more than 35,000 units and new orders for 88,000 cars, with
customers outside Italy accounting for 45% of the total.
The launch of the Fiat Panda Cross and Fiat Sedici during the second half of the year helped the Fiat brand reclaim 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 fourwheel-drive Panda. The Fiat Sedici, which is being built in partnership with Suzuki at a plant owned by Suzuki in Hungary,
is Fiat’s first entry ever into the C 4x4 segment of the market. Its standing will benefit from being chosen as the official car
of the 2006 Turin Winter Olympic Games.
At the Bologna Motor Show, which was held at the beginning of December, Fiat presented the Panda Monster, a further
evolution of the Panda four-wheel-drive, and the Fiat Oltre, a show car based on a powerful Iveco multi-function vehicle.
Alfa Romeo continued to renovate its product line. The Alfa 159 (brought to market in October 2005) belongs to the great
Alfa Romeo tradition of automobiles with distinctive styling. At the end of December, the Alfa 159 had generated more
than 14,000 orders. In October, Alfa Romeo unveiled the Brera coupé, an upscale sports car whose styling elicited
accolades both from the industry press and the public in general.
In anticipation of the celebrations of its 100th birthday in November 2006, Lancia presented important upgrades of some
of its most successful models: new versions of the Ypsilon (the Momo Design in particular), Musa (Platino+) and Phedra
(Unique Edition).
Due to the launch of numerous new models, the Fiat and Alfa Romeo brands ended 2005 with a lineup of models that, on
average, are less than two years old and, consequently, are highly competitive. The competitiveness of the product line is
bolstered by the significant success achieved in terms of safety and customer satisfaction. Three new models introduced
in 2005 — the Fiat Croma, Alfa 159 and Grande Punto — were awarded five stars, placing them at the top of the Euro
NCAP safety ranking. The Grande Punto was also honoured 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).
The Fiat Veicoli Commerciali (Fiat Light Commercial Vehicles) brand also had a very positive year with the launch in
October of the new Doblò, which was awarded the coveted Van of the Year 2006 international prize and was able to
achieve a high level of market penetration. By the end of 2005, a total of 3 million vehicles had been produced at the Sevel
Val di Sangro plant, which also set a record by manufacturing more than 200,000 units in 12 months.
The Sector’s 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
International B Segment; and starting the development of the Nuova Stilo and Fiat 500.
Another area of activity involved basic research in engines and components for future applications.
Financial Services
In 2005, Sector companies that provide financing to the sales network handled loans totalling about 9,810 million euros
(11,090 million euros in 2004). When combined with other financial instruments available to provide financing support to
the sales network, these operations generated financing averaging about 3,150 million euros in 2005 (3,660 million euros
in 2004).
The reduction in business volume reflects a decrease in sales in some European countries, a policy designed to reduce
and selectively control dealer inventories and a change in the scope of consolidation due to the sale of retail financing
activities in the United Kingdom in the fourth quarter of 2004. In Brazil, on the contrary, lending activity mirrored the
positive sales performance in the local market.
In 2005, the total loan volume handled by the Sector’s activities that provide financing to suppliers declined to 3,670
million euros (6,342 million euros in 2004), for an average loan position of 560 million euros (990 million euros in 2004).
This decrease reflects a selective approach to the portfolio of loans held by these operations and the decision to focus on
Fiat Auto’s strategic suppliers.
Report on Operations – Fiat Auto
48
In the renting business, Fiat Auto strengthened its position in Italy by acquiring, at the end of 2005, full control of Leasys,
a joint venture that it had established with Enel and that is active in the field of company fleet management.
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.
The work done in previous years to strengthen their sales and customer support network enabled these two companies to
end 2005 with a portfolio of more than 39,000 contracts (+14% compared with 2004). Their rental fleet also increased,
rising to 144,500 vehicles at the end of 2005, or 3% more than a year earlier.
Report on Operations – Fiat Auto
49
Maserati
Operating Performance
Highlights
(in millions of euros)
2005
2004
Net revenues
533
409
Trading profit/(loss)
(85)
(168)
Operating result (*)
(85)
(171)
20
51
Investments in tangible and intangible assets
9
-
Total R&D expenses (**)
57
72
Cars delivered (number)
5,568
4,765
606
652
- of which capitalised R&D costs
Employees at year-end (number)
(*)
Including restructuring costs and unusual income (expenses).
In April 2005, ownership of Maserati was
transferred from Ferrari S.p.A. to Fiat
Partecipazioni S.p.A. (a holding company
owned directly by Fiat S.p.A.). The transfer
resulted in the creation of a new entity,
established on April 1, 2005, to which the
business operations that produce and sell
cars under the Maserati brand have been
conveyed.
For comparison purposes, the Maserati
business operations have been separated
from those of Ferrari-Maserati retrospectively
to 2004.
Maserati achieved major commercial and
racing objectives in 2005. The success of the
Quattroporte drove sales significantly higher,
causing revenues to soar by 30.3% compared with 2004. Maserati products — the Quattroporte, the MC12 and the
Pininfarina Birdcage 75th concept car — were honoured on 11 separate occasions by the international press.
(**)
Including R&D capitalised and charged to operations.
In December 2005, the Maserati Corse organisation won the FIA GT Constructors’ Cup and, racing as part of the
Vitaphone team, the FIA GT Team Cup. In July 2005, the Maserati MC12 scored a prestigious victory at the Spa 24 Hours
Race.
In the eight major markets in which Maserati operates, demand in the key Coupé and Spyder market segments contracted
by 8.4% and 15.9%, respectively.
In the luxury sedan segment, demand was down 3% compared with 2004, but the success of the Quattroporte enabled
Maserati to more than double its market share, which rose from 2.1% in 2004 to 4.6% in 2005.
Maserati delivered 5,568 cars to its sales network, a gain of 16.9% compared with the 4,765 cars shipped in 2004. The
outstanding performance of the Quattroporte accounts for this improvement. With 2005 sales totalling 2,311 units (1,124 in
2004), the United States remained Maserati’s most important market.
At the end of 2005, Maserati had orders for 789 cars, 613 of which were for the Quattroporte.
Innovation and Products
In 2005, Maserati completed the product line renewal process that got under way in 2004 with the introduction of several
new models. The Quattroporte is now available in three configurations: Standard, Executive GT and Sport GT. These new
versions, which were presented at the Frankfurt Motor Show in September 2005, emphasise the multifaceted nature of
this car, which combines the highest level of comfort with an unmistakably sporty character. The Quattroporte was
Maserati’s top selling model in 2005.
Lastly, the GranSport line was completed with the entry of the GranSport Spyder.
Report on Operations – Maserati
50
Ferrari
Operating Performance
Highlights
(in millions of euros)
2005
2004
Net revenues
1,289
1,175
Trading profit
157
138
Operating result (*)
157
136
Investments in tangible and intangible assets
142
143
- of which capitalised R&D costs
46
37
Total R&D expenses (**)
86
75
Cars delivered to the network (number)
5,399
4,866
Employees at year-end (number)
2,809
2,670
(*)
Including restructuring costs and unusual income (expenses).
(**) Including R&D capitalised and charged to operations.
In 2005, Ferrari once again demonstrated the
extraordinary appeal of its products, not only in
the brand’s traditional markets, but also in those
that it has entered recently. While its cars are
intrinsically exclusive objects, rising customer
demand caused Ferrari to increase annual
deliveries to end customers to 5,409 cars,
mainly with the goal of reducing delivery wait
time and meeting the demand from new
markets, where the sales trend has been
particularly strong. These achievements were
made possible by the performance of the F430
(both the berlinetta and spider versions), the
612 Scaglietti and Superamerica, which was
produced in limited-edition run.
Shipment to the sales network totalled 5,399 cars in 2005, a gain of 11% over the 4,866 units delivered in 2004. With
1,580 cars sold (+9%), the United States was once again Ferrari’s biggest market, followed by Europe with 2,908 units
(+13.7%), including 662 cars sold in Italy (+26%).
A total of 5,409 cars were delivered to end customers, an increase of 8.7% compared with the 4,975 units shipped in
2004. The positive performance achieved in 2005 was made possible by rising demand in North America (unit sales were
up about 8% compared with 2004), Italy, the United Kingdom and France. New and developing markets also provided a
significant contribution (Middle East +41%, Eastern Europe +92%, South America +36%), generating a significant increase
in volume without compromising the exclusivity of the Ferrari brand. In China, a brand-new sales network shipped 82 cars,
double the number sold in 2004.
Innovation and Products
The outstanding results achieved in 2005 were made possible by the success of the F430 in the berlinetta and spider
versions, both of which feature innovations derived directly from Formula One racing (such as an electronic differential and
controls placed directly on the steering wheel), and the 612 Scaglietti, a car that combines top-level performance with an
uncompromising commitment to interior comfort.
The Superamerica also provided a significant contribution to 2005 results. This car was produced in a limited run of 559
units, all of which were sold in a few months. The Superamerica embodies a highly original and innovative approach to the
challenge of combining the high performance of a 12-cylinder berlinetta with the versatility of a convertible. It is the first car
in the world to use a breakthrough roof design that relies on electrochromic crystal technology applied to large glass
surfaces to transform itself from a coupé to a convertible in just a few seconds. As a result, it offers the driver both the
characteristic qualities of an open car and the functional advantages of a coupé. Powered by a 540-HP 12-cylinder engine,
the Superamerica is also the fastest convertible in the world.
Report on Operations – Ferrari
51
Fiat Powertrain Technologies
Operating Performance
Highlights
(Data refer to the period from May 1 to December 31, 2005)
(in millions of euros)
2005
Net revenues
1,966
Trading profit
26
Operating result (*)
Investments in tangible and intangible assets
- of which capitalised R&D costs
Total R&D expenses (**)
Employees at year-end (number)
(*)
Including restructuring costs and unusual income (expenses).
(**) Including R&D capitalised and charged to operations.
4
173
2
10,111
Fiat Powertrain Technologies is a new Sector to
which the Group has transferred the operations
(automobile engines and transmissions) that were
returned to Fiat’s control following the termination
of the Master Agreement with General Motors. As
of May 2005, all of the operations originally
conveyed to the Fiat-GM Powertrain joint venture
are being consolidated into Fiat Powertrain
Technologies. The only exceptions are the
activities in Poland, which continue to operate as a
joint venture with General Motors.
In 2006, Fiat Powertrain Technologies will also
include the powertrain businesses of Iveco, C.R.F
and Elasis.
Most of the Sector’s production, which amounted
to 1,966 million euros for the period from May to December 2005, was absorbed by Fiat Auto, with noncaptive customers
accounting for 23% of the total.
Innovation and Products
Currently, the operating arm of Fiat Powertrain Technologies is its Product Line Passenger & Commercial Vehicles (FPTP&CV) Division. Working with Fiat Auto, its largest customer, FPT-P&CV designs and builds innovative powertrain
systems for Fiat, Lancia and Alfa Romeo, delivering products that are consistent with Fiat Auto’s strategy of renewing,
relaunching and repositioning its product line.
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 8v 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 sixcylinder HFV6 3.2. Both engines, which are available in the newly launched Alfa Romeo 159, use a JTS direct injection
system with continuous intake and exhaust phasing transformers.
In the field of diesel engines, FPT-P&CV’s 1.3-liter Piccolo Diesel engine won Engine of the Year 2005 honours (1.0 to
1.4 liter category) in the International Engine of the Year Awards 2005 contest beating major European and Japanese
competitors. The output of this engine has since been increased to 90 HP and the engine has been made compliant with
the Euro 4 pollution standards by adding a diesel particulate filter (DPF). 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 Croma, delivering a level of specific
power that places it at the top of its class.
For 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 in pursuit of this strategy include: development of a 1.6 diesel engine that
targets a new segment of the market, extension of PDA technology to the Fire engines, use of turbocharging technology in
gasoline engines, launch of a new M40 transmission and more widespread use of the Selespeed automatic transmission.
Report on Operations – Fiat Powertrain Technologies
52
Agricultural and Construction Equipment — CNH
Operating Performance
Highlights
(in millions of euros)
2005
2004
Net revenues
10,212
9,983
Trading profit
698
467
Operating result (*)
611
399
Investments in tangible and intangible assets
255
243
40
32
234
221
25,420
25,746
- of which capitalised R&D costs
Total R&D expenses (**)
Employees at year-end (number)
(*)
Including restructuring costs and unusual income (expenses).
In 2005, the worldwide market for agricultural
equipment experienced a slight increase in
tractor sales (+5%) and a decline in combines
(- 16%). In tractors, market demand was down in
Latin America (-19%) and Western Europe
(- 6%), it increased significantly in the Rest of the
World markets (26%) and remained flat in North
America. With respect to 2004, the combines
market declined sharply in Latin America (-58%),
it increased in Western Europe (+6%) and in the
Rest of the World markets (+10%) and remained
flat in North America.
(**) Including R&D capitalised and charged to operations.
Sales of CNH tractors decreased across all
regions with respect to 2004, except for the Rest
of the World markets which recorded an increase in volumes. Overall CNH reported a slight decrease in market share.
CNH unit sales of combines were also down compared to 2004: a sharp decline in Latin America was only partially offset
by higher volumes in North America and in the Rest of the World markets. Overall market share was almost unchanged;
the decrease in Latin America was compensated by the increase in the Rest of the World markets.
The global market for construction equipment expanded in 2005 compared to 2004 (+11%). Retail unit demand for loader
backhoes rose 15% worldwide thanks to a significant increase in Latin America (+47%) and to growth on the North
American market (+8%). Market demand for skid steer loaders was up 4% worldwide as a result of positive performances
in Latin America (+34%) and Western Europe (+9%). Retail unit demand for heavy equipment increased 8% worldwide,
with sales growth posted in Latin America (+18%), in North America (+15%) and in Western Europe (+4%).
In 2005, CNH benefited from the rising demand, increasing its total shipments of construction equipment at a rate
consistent with that of the overall market in the different market regions. Only in Western Europe there was a slight
decrease.
Growth Strategies
CNH reorganized its operations in the fourth quarter of 2005 to focus on its four distinct global brands, giving each one full
independent profit and loss accountability — Case IH and New Holland in agricultural equipment and Case and New
Holland in construction equipment — in order to invigorate the brands and satisfy more effectively the differentiated needs
of the customers and dealers of each brand. CNH is allocating new resources to provide additional dedicated sales and
marketing personnel and materials, and additional technical support and training to its dealers.
The Sector has, in particular, defined the following:
•
refocus 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 by delivering efficiencies in purchasing and manufacturing structure;
•
reduce debt and strengthen its consolidated balance sheet by increasing cash flow.
A full-line company in both the agricultural and construction equipment industries, CNH has strong and usually leading
positions in most significant geographical areas and product categories in both businesses. As of December 31, 2005,
CNH was manufacturing products in 39 facilities throughout the world and distributing its products in approximately 160
countries around the world.
Report on Operations – CNH
53
Innovation and Products
The company has recently completely renewed products lineup across all of its brands. It is now shifting product
development, management and manufacturing efforts to focus on achieving best-in-class product quality and reliability. In
addition, CNH intends to introduce greater differentiation between its brands to increase their market attractiveness. The
Sector will action these plans by optimising research and developments expenses, through the continued use of common
architectures, the development of engines through joint ventures and introducing new engines that meet tightening
emissions standards.
Improved product quality and reliability should lead to future reductions in warranty costs and create wider appreciation of
CNH products.
Case IH and New Holland are also responding to customer interest in the use of bio-fuels and fuel efficiency. In 2005 its
brands have led the way in the agricultural industry with the first common rail fuel injection to be utilized in agricultural
tractors. In connection with the expanded use of Bio-Diesel in farming, which is also encouraged by government subsidies
in various countries, Case IH and New Holland agricultural machinery offer unaltered performance level with the use of
RME blends up to 20%, provided that recommended maintenance and service requirements are met.
A number of CNH products were singled out for recognition in 2005.
Construction Equipment magazine named Case 335 and 340 articulated dump trucks and Case CX27B, CX31B, CX36B
and CX50B compact excavators from Case Construction Equipment as winners of its “Top 100 New Products” Awards.
The listing emphasises innovative products and highlights manufacturers who are investing in research and development.
The American Society of Agricultural Engineers gave prestigious AE 50 Recognition Awards for 2005 to the new
generation New Holland Speedrower™ self-propelled windrowers and the new generation Case IH ASM 24/20 planter.
In Brazil, CNH’s combines received an important award from one of the biggest trade publications of the country.
In Italy, the New Holland E215LC "Multi-Function" excavator was awarded the Samoter 2005 Novelties Award at the
Verona Expo.
Services
In North America, New Holland’s “Easier To Do Business” (“ETDB”) initiative gained momentum. In 2005, more than 60
projects were launched to improve relationships with agricultural equipment dealers and help them work more profitably.
The ETDB projects are based on suggestions and feedback through many dealership channels including: business
meetings, advisory councils, surveys and through New Holland's field sales and service managers.
Case Construction Equipment revamped its Dealer Advisory Council in order to better focus on specific issues.
Financial Services Operations have increasingly focused their actions on the sale of Sector’s products, by providing
support to dealers and end customers in the different regions.
Report on Operations – CNH
54
Commercial Vehicles — IVECO
Operating Performance
Highlights
(in millions of euros)
2005
2004
Net revenues
9,489
9,047
Trading profit
415
371
Operating result (*)
289
347
Investments in tangible and intangible assets (**)
444
330
- of which capitalised R&D costs
175
114
Total R&D expenses (***)
277
243
32,373
31,037
Employees at year-end (number)
(*)
Including restructuring costs and unusual income (expenses).
(**) Net of vehicles sold with buy-back commitments.
(***) Including R&D capitalised and charged to operations.
In 2005, Western European demand for
commercial vehicles (GVW > 2.8 tons)
increased to 1,109,700 units, or 5.2% more
than in 2004. The largest gains occurred 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 was down 1.7%.
New registrations of light commercial
vehicles (GVW between 2.8 and 6 tons) grew
to 779,800 units, for an increase of 4.3%
compared with 2004. Demand was particularly
strong in Spain (+9.4%) and France (+8.2%),
expanded more moderately in Germany
(+1.5%) and the United Kingdom (+3.8%), and
contracted in Italy (-2.1%).
Demand for medium vehicles (GVW between 6.1 and 15.9 tons) also improved, rising to 79,100 units (+2.9% compared
with 2004). All of the European markets benefited from the increase in demand, especially Germany (+8.7%) and Spain
(+9.3%). The exceptions were the United Kingdom, where new registrations were flat, and Italy, where shipments were
down (-6.6% with respect to 2004).
New registrations of heavy vehicles (GVW > 16 tons) grew to 250,800 units, or 8.6% more than in 2004. The largest gains
were recorded in Spain (+10.0%), France (+21.6%), the United Kingdom (+5.0%) and Germany (+4.1%). Demand held
relatively steady in Italy (+1.1%) but was up a healthy 8.9% in the remaining countries of Western Europe.
In Western Europe, the bus market expanded to 34,800 units, or 6.6% more than in 2004. This improvement is the result
of a positive trend in France (+11.9%), the United Kingdom (+23.3%) and Spain (+15.9%), and steady demand in
Germany and Italy.
Iveco’s share of the Western European market for vehicles with a curb weight of 2.8 tons or more settled at 10.9% (0.2
percentage points less than in 2004), due mainly to weakness in Italy, where the Sector’s share went from 29.8% in 2004
to 29.4% in 2005. In the light-vehicle segment (Daily), Iveco’s market share held steady at 9.3%, with minor changes in the
different markets. In the medium-vehicle segment (Eurocargo), the Sectors’ market share decreased to 26.3%, or 1.7
percentage points less than in 2004. Nevertheless, Iveco was able to maintain and consolidate its rank as the second
largest producer. At 11.1%, Iveco’s share of the heavy-vehicle segment was about the same as in 2004 (11.3%).
Commercial Vehicles Market (GVW > 2,8 tons)
(in thousands of units)
France
Germany
United Kingdom
Italy
Spain
Other Western European Countries
Western Europe
Commercial Vehicles Market (GVW > 2,8 tons)
2005
2004
% change
(in thousands of units)
194.0
238.1
196.6
122.6
118.5
239.9
1,109.7
175.0
231.3
189.6
124.7
108.1
226.2
1,054.9
10.8
2.9
3.7
(1.7)
9.6
6.0
5.2
Heavy
Medium
Light
Western Europe
2004
% change
250.8
230.8
79.1
76.8
779.8
747.3
1,109.7 1,054.9
2005
8.6
2.9
4.3
5.2
Report on Operations – Iveco
55
The Irisbus Group’s penetration of the Western European market (20.4% in 2005) declined by 1 percentage point
compared with 2004. The Sector’s market share contracted in Italy (-3.3 percentage points) and France (-3.0 percentage
points), where Iveco still controls a significant portion of the market (about 45% to 50%), 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).
Iveco sold 172,500 vehicles worldwide (+6.3% compared with 2004). The Sector’s affiliates in India and Turkey shipped
approximately 64,800 units (+12.8%). In Western Europe, Iveco sold about 134,900 vehicles, or 2.3% more than in the
previous year. This positive sales performance reflects favourable conditions in all European markets with the exception of
Italy, where the sales volume contracted by 3.8%. In the rest of the world, sales volumes were buoyed by a strong
performance in Latin America, where Iveco shipped 11,900 vehicles, for a gain of 22.8% compared with 2004.
The Irisbus Group sold a total of 8,526 vehicles in 2005, in line with the previous year (8,553 vehicles).
Iveco produced about 435,300 engines, about the same as in 2004. 41% of this production was used directly by the
Sector, while 48% of it was sold to CNH and Sevel, a joint venture between Fiat Auto and the PSA Group.
The powertrain operations generated revenues of 2,554 million euros in 2005 (58% coming from intra-Sector sales), for a
year-over-year gain of 6.3%, and a trading profit of 83 million euros, up from 76 million euros in 2004.
In China, Naveco, a 50-50 joint venture with the Yueijin Group, produced and sold around 18,000 light vehicles (+20%
compared with 2004).
In Turkey, the Otoyol licensee sold 5,200 vehicles (about the same as in 2004), while in India the associated company
Ashok Leyland manufactured and shipped 59,600 units (+14% compared with 2004).
Innovation and Products
Iveco’s R&D operations developed highly innovative solutions for all three major vehicle components: chassis, engine and
cab. Many of these innovations are protected by international patents.
The Sector did further research in the areas of aerodynamics, welding techniques that reduce weight by increasing the
rigidity of a vehicle’s body, cab structures that can absorb energy in the event of a crash and cab climate control solutions.
In the field of advanced materials, research focused on high-resistance steel, light alloys, nanocomposites, multifunctional
glass and shape-retaining intelligent materials. A total of 20 research projects have been selected for their potential to
deliver crucial advantages in the areas of vehicle, cab and powertrain structure.
Sales Performance
Commercial Vehicles sold by Country
(in thousands of units)
France
Germany
United Kingdom
Italy
Spain
Other Western European Countries
Western Europe
Eastern Europe
Rest of the World
Total units sold
Associated companies
Grand total
Sales Performance
Commercial Vehicles sold by Product Segment
2004
% change
26.4 24.6
17.3 17.0
17.1 16.1
39.0 40.6
19.8 18.5
15.3 15.0
134.9 131.8
13.3 12.9
24.3 17.6
172.5 162.3
64.8 57.5
237.3 219.8
2005
7.5
1.9
6.5
(3.8)
7.1
0.7
2.3
3.0
38.0
6.3
12.8
8.0
(in thousands of units)
Heavy
Medium
Light
Buses
Divisions (*)
Total units sold
2004
% change
42.8 37.6
21.3 21.1
95.7 91.0
8.5
8.6
4.2
4.0
172.5 162.3
2005
13.8
0.9
5.1
0.0
3.5
6.3
(*) Astra, Defence and Fire-fighting Vehicles.
Report on Operations – Iveco
56
Studies in the transmission area focused on the use of new, low-friction lubricants and extremely high-resistance cast iron.
Research in the field of safety concentrated on developing integrated solutions that use sensors to take advantage of such
technologies as video cameras, infrared video cameras and short-range and long-range radars.
In many cases, these innovative programs attracted the attention of other Group Sectors, providing the opportunity for
synergies.
In the area of environmental issues, Iveco introduced the Stralis Euro 4/Euro 5, a heavy vehicle that is already in
compliance with 2009 European emission ceilings.
With regard to its manufacturing processes, in keeping with the guidelines provided in the 2004 Sustainability Report of
the Fiat Group, Iveco, which has already received ISO 14001 certification, made further progress in applying EU principles
to materials that can be recycled at the end of a vehicle’s life. About 92% of the Daily van is made with materials that can
be recycled at the end of the vehicle’s life, even though the relevant EU regulations, which are in effect until 2015, require
only 85% recyclability.
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. The Daily was honoured for
the second time in a few months with the title of “Van of the Year 2005.” Coming on the heels of the “Fleet Van of the Year
2005” listing by the magazine Motor Transport, this prestigious honour was bestowed on the Daily by What Van?, the most
widely read industry magazine in Great Britain. A new version of this vehicle, the Daily Euro 4, is scheduled for launch in
2006.
At the RAI Expo in Amsterdam, Iveco presented a version of the Eurocargo that already meets the Euro 5 emissions
ceilings, achieving compliance in advance of the statutory deadline and before all competitors.
The Sector also introduced the ES, a new version of the Stralis, its pride and joy in the heavy road vehicle segment. The
main innovations offered in this version are two safety devices: the ESP (an electronic stability control system that can
take action to correct a vehicle’s path) and Lane Departure Warning System (a device that signals when a vehicle is
crossing over a lane dividing line).
At the Samoter, the International Earthmoving and Building Machinery and Equipment Expo in Verona, the judges of the
Technical Innovation Contest awarded the Innovation Prize to the Astra RD32 rigid dumper, naming it a completely
innovative product for the adoption and integration of cutting-edge technological solutions and best production practices in
specific aspects of the production of numerous components used in the vehicle.
Irisbus also broadened its product line, focusing on low-emission vehicles, with special emphasis on urban transportation
vehicles fuelled 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 the environmental requirements of the Euro 4
standard. 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.
Services
The Iveco Customer Centre continued to improve its performance in 2005, cutting the response time to customer calls by
more than 30%. In addition, the Customer Centre used the existing platform to establish an ongoing dialogue with
customers, which significantly improved Iveco’s direct marketing capabilities.
During 2005, the Iveco replacement parts distribution system achieved an excellent level of service, setting records in
terms of parts availability while at the same time optimising warehouse inventories.
The integration of the systems that distribute bus and commercial vehicle replacement parts was extended to include the
French bus products. These products are now distributed from a single logistics hub in Paris, which has taken over the
operations of the Lyon warehouse.
In anticipation of the need to tackle the increasingly complex repair situations that result from the steadily growing use of
onboard vehicle electronics, the Sector’s technical support organisation worked on two key areas in 2005: a) developing
powerful but simple-to-use diagnostic tools and b) boosting the skill level of mechanics in the aftersale network.
Report on Operations – Iveco
57
In the first half of 2005, as part of its effort to deliver increasingly innovative and competitive financial solutions, Iveco and
Barclays Mercantile Business Finance Ltd. entered into an agreement that established Iveco Finance Holdings Limited.
Iveco conveyed some of its finance companies in France, Germany, Italy, Switzerland and the United Kingdom to this new
company, which will provide financing and leasing solutions for commercial vehicles. On June 1, 2005, Iveco sold 51% of
Iveco Finance Holdings Limited to Barclays Mercantile Business Finance Ltd. Iveco Finance Holdings Limited was
deconsolidated as of the same date and is accounted for from that date using the equity method.
In 2005, Iveco Finance provided funding for 23.4% of all of the vehicles sold by the Sector.
The pool of long-term rental vehicles managed by the Transolver Services companies numbered 3,116 units at the end of
2005.
Report on Operations – Iveco
58
Components — Magneti Marelli
Highlights
Operating Performance
(in millions of euros)
2005
2004
Net revenues
4,033
3,795
Trading profit
162
165
Operating result (*)
127
148
Investments in tangible and intangible assets
313
280
67
70
- of which capitalised R&D costs
197
193
24,213
21,868
Total R&D expenses (**)
Employees at year-end (number)
Despite a lacklustre reference market in 2005,
Magneti Marelli increased its revenues by 2.0%,
on a comparable basis. All of the Sector’s
business units contributed to this growth, booking
major orders for new car models which will make it
possible to diversify the customer portfolio even
further. Highlights of the performance of each
business unit are outlined below.
Lighting Group
Revenues for 2005 totalled 1,261 million euros, an
increase of approximately 180 million euros in
(**) Including R&D capitalised and charged to operations.
absolute terms. A significant factor in this growth
was the acquisition of Mako Elektrik Sanayi Ve
Ticaret A.S. from the Turkish Koç Group, which
took effect on January 1, 2005. The company, in which Magneti Marelli already had an equity interest, produces lighting,
HVAC and electromechanical equipment. On a comparable consolidation and exchange rate basis, the increase
amounted to 4.4%.
(*)
Including restructuring costs and unusual income (expenses).
Though sales volumes were substantially unchanged in 2005, the business unit was able to increase its revenues thanks
to the introduction of new products and changes in the high-tech product mix. A significant boost came from 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.
During 2005, orders were received from major European automakers such as PSA, Volvo and Audi, while manufacturing
operations got under way in China.
Powertrain (Engine Control)
Revenues for 2005 totalled 788 million euros, a 1.1% increase over the previous year’s 761 million euros on a comparable
exchange rate basis.
During 2005 sales of diesel injection systems increased, and the designing and prototyping works continued. Investment
plans are now being drawn up for a new injector design, dubbed the Pico-Eco, which will consolidate and increase the
business unit’s market share in this area.
Among orders received during the year, special mention goes to the complete JTD 1.3 diesel system for Fiat and General
Motors vehicles.
Cofap Automotive Suspension
Revenues for 2005 amounted to 1,052 million euros as against 1,011 million euros in 2004, a decrease of 0.5% from the
previous year’s figures on a comparable exchange basis. Increased volumes for the Panda in Poland offset declining
sales in Italy, where the market picked up again late in the year thanks to the newly-introduced models, and to the Grande
Punto in particular.
The business unit’s work on product innovation included developing new mono-tube high pressure gas shock absorbers,
and presenting the technology to customers in the United States.
Gestamp Marelli Autochasis S.L., a joint venture with Spain’s Metalbages, was established in February 2005. This
agreement reinforces the company’s ability to serve customers with manufacturing facilities in Spain, in particular Opel.
In Europe, important new orders were received from PSA and Iveco.
Report on Operations – Magneti Marelli
59
Electronic Systems
Total revenues for 2005 amounted to 513 million euros, against 476 million euros in the previous year. On a comparable
exchange rate basis, this was a 6.2% increase.
Fiat and PSA continued to be the Electronic Systems business unit’s largest customers, while there was an increase in
sales to the Volkswagen-Audi Group. In the course of the year, orders reflected the unit’s globe-spanning reach: in the
Mercosur, Fiasa placed orders for instrument panels, and in Europe, IP orders were received for the Alfa 159, the new 500
and the new Stilo, while Iveco ordered navigation products. In China, orders were booked by PSA and Volkswagen for the
instrument panels installed on their new passenger cars produced in that country, as well as by the local maker Chery.
In September 2005, the unit penned an agreement with Autoliv, a leading Swedish manufacturer of automotive safety
systems. Under the terms of the agreement, the two groups will cooperate in developing, producing and marketing
electronic systems.
Exhaust Systems
Revenues for 2005 were 404 million euros, a 4.5% increase over the 365 million euros recorded in 2004 on a comparable
exchange basis.
In Europe, major new orders were acquired in the course of the year for new models or applications with DPF (diesel
particulate filters) for Opel, Mitsubishi and Mercedes. In addition, the business unit received its first order from
Volkswagen, together with orders for systems installed on new versions of Nissan vehicles.
In the Mercosur, orders were received for the exhaust system on the new Fiasa model and on Volkswagen and Ford vans
and light trucks. In China, an order was received for the new applications with the 1.7 Nanjing-Fiat engine.
Motorsport
Magneti Marelli participates in the major motorsport championships as a technical partner. In 2005, it supplied electronic
control systems, fuel system and electromechanical components, and telemetry and data acquisition systems to the
leading Formula 1 teams. In addition to Formula 1, Magneti Marelli is also active in other championships. It participates in
the World Rally Championship, supplying electronic control systems to a number of teams, and in the Moto GP1
championship, where it provided fuel injection and electronics systems to Yamaha – 2005’s winner – as well as to Ducati
and Kawasaki. Magneti Marelli also helped bring Maserati to victory in the FIA GT1 championship.
Report on Operations – Magneti Marelli
60
Metallurgical Products — Teksid
Highlights
Operating Performance
(in millions of euros)
2005
2004
1,036
910
Trading profit/(loss)
45
(39)
Operating result (*)
27
(42)
Investments in tangible and intangible assets
45
44
-
-
Net revenues
- of which capitalised R&D costs
5
4
8,952
8,571
Total R&D expenses (**)
Employees at year-end (number)
(*)
Including restructuring costs and unusual income (expenses).
In 2005, the high cost of raw materials and an
unsettled energy market continued to put strong
pressure on the metallurgical industry. Against this
challenging background, the Sector’s
diversification in terms of customers, products and
geographical destination, as well as ongoing
improvements in process efficiency and logistics,
made it possible to improve overall performance.
In 2005, Teksid’s revenues thus rose by 13.8%,
with a major impetus coming from the Cast Iron
Business Unit.
The Cast Iron Business Unit increased its
revenues by 20.4% thanks to a 4.6% rise in sales,
the favourable effect of exchange rates and
successful efforts to recover the increased cost of raw materials. Volumes in particular benefited from the sharp upswing
in demand, especially in North America and Brazil. Restructuring also continued at the Crescentino plant, which is
sharpening its focus on the manufacture of components for light vehicles. In Brazil, production of a significant number of
products, including those previously manufactured by the former General Motors foundries, was transferred to the Sector’s
plants in 2005.
(**)
Including R&D capitalised and charged to operations.
The Magnesium Business Unit (where Teksid operates through its subsidiary Meridian Technologies Inc., in which Teksid
holds a 51% interest and Norway’s Norsk Hydro group the remaining 49%) saw revenues decrease by 1% and volumes
drop by 6.8% as major reference markets lost momentum, particularly the North American SUV market. Nevertheless,
North America continued to account for around 80% of revenues in 2005.
Marketing efforts in 2005 enabled both the Cast Iron Business Unit and the Magnesium Business Unit to win major orders
from leading international automakers.
Report on Operations – Teksid
61
Production Systems — Comau
Highlights
Operating Performance
(in millions of euros)
2005
2004
1,573
1,711
Trading profit
42
40
Operating result (*)
(8)
30
Investments in tangible and intangible assets
38
23
Net revenues
9
-
20
17
12,725
13,328
- of which capitalised R&D costs
Total R&D expenses (**)
Employees at year-end (number)
(*)
Including restructuring costs and unusual income (expenses).
(**) Including R&D capitalised and charged to operations.
In 2005, the Sector’s reference markets continued
to be impacted by uncertainty, shrinking volumes
and intense pressure on prices.
Most car makers in the Western world scaled back
their investment programs. Though continuing to
put new models on the market, they focused on
converting existing facilities and rationalising
production capacity. Major greenfield investments,
on the other hand, were suspended or postponed.
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.
Comau continued to restructure its business
portfolio, with the transfer of its European service activities to Iveco, Magneti Marelli and CNH, effective January 1, 2005. If
the effect of changes in the scope of consolidation is not taken into account, revenues rose by approximately 6%, largely
because of the strong performance shown by the Bodywork and Service business units.
With markets shrinking nearly everywhere, new orders received in 2005 totalled 1,448 million euros, 9% less than the
previous year on a comparable scope of consolidation.
In 2005, new orders for contract work came to 1,210 million euros, a 14% decrease over 2004 on a comparable scope of
activity. Overall, 48% of the orders for contract work were acquired in Europe and 35% in the Nafta area, while the
remaining 17% came from the Mercosur and new markets (7% from China). 17% of all orders came from Fiat Group
companies and 83% from other manufacturers.
At December 31, 2005, the backlog amounted to 713 million euros, a decrease of approximately 20% from the previous
year on a comparable basis.
For Service operations, 2005 saw a significant increase in orders, which rose 30% on a comparable scope of activity.
Total value reached 238 million euros, 26% of which coming from Fiat Group companies.
Report on Operations – Comau
62
Services — Business Solutions
Highlights
Operating Performance
(in millions of euros)
2005
2004
Net revenues
752
976
Trading profit
35
41
7
34
19
25
5,436
6,519
Operating result (*)
Investments in tangible and intangible assets
Employees at year-end (number)
(*)
Including restructuring costs and unusual income (expenses).
In 2005, the Sector further accelerated its efforts
to concentrate on the captive market, confirming
the strategy outlined in 2004. Excluding the impact
of changes in the scope of consolidation, Business
Solutions limited the shortfall in revenues to
approximately 5%, a decrease attributable to
reassignments of the services provided to Group
companies, which brought less administrative
services to the Sector.
The Sector operates through the following units:
ƒ
Human Resources: This unit provides payroll
and HR services. The unit was radically restructured in 2005, with the sale of companies operating on the non-captive
market (in particular the sale of WorkNet, a temporary employment agency).
ƒ
Facility Management: Through Ingest Facility S.p.A., the unit handles regular and extraordinary maintenance of
industrial and non-industrial buildings.
ƒ
Administration: During 2005, parameters and boundaries for the unit’s work for the Group were reviewed, clarifying
service levels and mutual responsibilities. This approach rationalised the unit’s activities, cutting volumes but boosting
efficiency.
ƒ
I.C.T. - Information and Communication Technology: This unit has been deeply affected by restructuring in order to
improve efficiency and competitiveness. As part of this effort, an agreement was reached between Fiat and IBM at
the end of June which, among its other provisions, enabled Business Solutions to dispose of its equity investments in
Global Value Services and Global Value S.p.A. Also as part of the unit’s reorganisation, an agreement (subject to
approval from the antitrust authorities, which was obtained in February 2006) with British Telecom was signed in
December 2005 for the sale of Atlanet, a provider of fixed telephony services and connectivity in general. Fiat’s
connectivity needs will be served by British Telecom in the coming years.
Report on Operations – Business Solutions
63
Publishing and Communications — Itedi
Highlights
(in millions of euros)
Operating Performance
2005
2004
Net revenues
397
407
Trading profit
16
11
Operating result (*)
13
9
Investments in tangible and intangible assets
Employees at year-end (number)
20
2
846
849
In 2005, average daily sales of newspapers in Italy
were slightly down (approximately -3%) from the
previous year.
The Italian advertising market as a whole grew by
2.8% with respect to 2004, making 2005 a year of
consolidation after the strong 7.4% gains achieved
in 2004.
Editrice La Stampa S.p.A. reported an average
daily circulation of 312,000 copies in 2005, an 8%
drop from the 339,000 copies of 2004. This
erosion was largely due to the fact that several joint marketing arrangements with other papers were discontinued during
the year, as well as to lower newsstand sales.
(*)
Including restructuring costs and unusual income (expenses).
Brand stretching initiatives designed to increase newsstand sales of additional products leveraging the paper’s brand
name continued in 2005, following a new sales strategy aimed at giving preference to profitability rather than volumes.
Efforts to expand newspaper readership also continued, most notably by distributing the paper in schools. Revenues from
the sale of newspapers and other publishing products totalled 70 million euros in 2005, approximately 12% less than in
2004. This decrease was chiefly due to the abovementioned lower revenues from brand stretching initiatives and the drop
off in sales volumes, which was also due to 6 strike days more than in 2004. However, despite this unfavourable
environment, the newsstand channel began to show signs of recovery from August. Advertising revenues amounted to 94
million euros, substantially in line with the previous year.
Publikompass S.p.A. booked advertising billings of 328 million euros, compared with 330 million euros in 2004: a slight
(-0.6%) decrease in revenues stemming from the termination on June 30, 2004 of an advertising arrangement with SKY
which the latter’s parent company decided to manage independently.
On October 3, 2005, Editrice La Stampa S.p.A. signed a letter of intent with M-dis S.p.A., one of Italy’s major distributors
of publishing products, for the disposal of the unit’s distribution activities. Under this agreement, To-dis s.r.l. was set up,
and from 2006, this company will handle distribution of the products managed by M-dis (the newspapers Corriere della
Sera and La Gazzetta dello Sport, and other publishing products) and Editrice La Stampa (the daily La Stampa and other
publishing products).
Report on Operations – Itedi
64
Motion for Approval of the Financial Statements and Allocation of Net Income
Stockholders,
We propose that you approve the Statutory Financial Statements at December 31, 2005.
We also submit for your approval a motion to allocate the net income of 223,019,671 euros to partially cover the losses
carried forward, which consequently amount to 726,080,851 euros.
Turin, February 28, 2006
Board of Directors
By:
Luca Cordero di Montezemolo
Chairman
Report on Operations – Motion for Approval of the Financial Statements and Allocation of Net Income
65
Fiat Group
Consolidated Financial Statements
at December 31, 2005
Consolidated Financial Statements at December 31, 2005
66
Consolidated Income Statement
(in millions of euros)
Note
2005
2004
Net revenues
Cost of sales
(1)
46,544
45,637
(2)
39,624
Selling, general and administrative costs
39,121
(3)
4,513
4,701
Research and development costs
(4)
1,364
1,350
Other income (expenses)
(5)
(43)
(415)
Trading profit
1,000
50
150
Gains (losses) on the disposal of equity investments
(6)
905
Restructuring costs
(7)
502
542
Other unusual income (expenses)
(8)
812
(243)
Operating result
2,215
(585)
Financial income (expenses)
(9)
(843)
(1,179)
Unusual financial income
(9)
858
-
(10)
34
135
2,264
(1,629)
Result from equity investments
Result before taxes
844
(50)
1,420
(1,579)
Result from discontinued operations
-
-
Net result before minority interest
1,420
(1,579)
Income taxes
Result from continuing operations
(11)
89
55
1,331
(1,634)
1.250
(1.699)
Earnings per savings share
1.250
(1.699)
Diluted earnings per ordinary and preference share
1.250
(1.699)
Diluted earnings per savings share
1.250
(1.699)
Minority interest
Group interest in net result
(in euros)
Earnings per ordinary and preference share
Consolidated Financial Statements at December 31, 2005
67
Consolidated Balance Sheet
(in millions of euros)
(Note)
At December 31, 2005
At December 31, 2004
ASSETS
Intangible assets
(13)
5,943
5,578
Property, plant and equipment
(14)
11,006
9,437
Investment property
(15)
26
46
Investments and other financial assets:
(16)
- Investments accounted for using the equity method
- Other investments and financial assets
2,333
4,025
1,762
3,490
571
535
Leased assets
(17)
1,254
740
Deferred tax assets
(11)
2,104
2,402
22,666
22,228
7,881
7,257
Total Non-current assets
Inventories
(18)
Trade receivables
(19)
4,969
5,491
Receivables from financing activities
(19)
15,973
17,498
Other receivables
(19)
3,084
2,734
Accrued income and prepaid expenses
(20)
Current financial assets:
- Current equity investments
272
295
1,041
1,237
31
33
353
- Current securities
(21)
556
- Other financial assets
(22)
454
851
Cash and cash equivalents
(23)
6,417
5,767
39,637
40,279
Total Current assets
Assets held for sale
(24)
TOTAL ASSETS
Total assets adjusted for asset-backed financing transactions
151
15
62,454
62,522
52,244
52,348
LIABILITIES
Stockholders' equity:
(25)
- Stockholders' equity of the Group
- Minority interest
9,413
4,928
8,681
4,304
732
624
8,698
7,290
- Employee benefits
(26)
3,919
3,682
- Other provisions
(27)
4,779
3,608
Debt:
(28)
Provisions:
25,761
32,191
- Asset-backed financing
10,210
10,174
- Other debt
15,551
22,017
Other financial liabilities
(22)
189
203
Trade payables
(29)
11,777
11,697
Other payables
(30)
4,821
4,561
Deferred tax liabilities
(11)
405
522
Accrued expenses and deferred income
(31)
1,280
1,130
Liabilities held for sale
(24)
110
-
62,454
62,522
52,244
52,348
TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES
Total stockholders’ equity and liabilities adjusted for assetbacked financing transactions
Consolidated Financial Statements at December 31, 2005
68
Consolidated Statement of Cash Flows
(in millions of euros)
2005
2004
5,767
6,845
Net result before minority interest
1,420
(1,579)
Amortisation and depreciation (net of vehicles sold under buy-back commitments)
2,590
2,224
(1,561)
277
A) Cash and cash equivalents at beginning of period
B) Cash flows from (used in) operating activities during the period:
(Gains)/ losses and other non-monetary items
(a)
47
28
Change in provisions
797
(53)
Change in deferred income taxes
394
(165)
Dividends received
Change in items due to buy-back commitments
(b)
Change in working capital
Total
(85)
(136)
114
1,415
3,716
2,011
(3,052)
(2,915)
(39)
(151)
(28)
(88)
427
246
46
173
C) Cash flows from (used in) investment activities:
Investments in:
- Tangible and intangible assets (net of vehicles sold under buy-back commitments)
- Equity investments
(c)
- Other equity investments
Proceeds from the sale of:
- Tangible and intangible assets (net of vehicles sold under buy-back commitments)
- Equity investments
(c)
- Other equity investments
Net change in receivables from financing activities
Change in current securities
Other changes
(c)
Total
27
175
(251)
1,960
(159)
460
2,494
284
(535)
144
(3,074)
D) Cash flows from (used in) financing activities:
Net change in financial payables and other financial assets/liabilities
(d)
(2,839)
Increase in capital stock
(d)
-
16
(29)
(20)
(2,868)
(3,078)
Dividends paid
Total
Translation exchange differences
E) Total change in cash and cash equivalents
F) Cash and cash equivalents at end of period
337
(155)
650
(1,078)
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 realised 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 Group’s 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.
Consolidated Financial Statements at December 31, 2005
69
Statement of Changes in Stockholders’ Equity
(in millions of euros)
Income (expense)
recognised
Revenue
reserves directly in equity
Capital stock
Treasury
stock
Capital
reserves
4,918
(32)
279
714
31
Balances at January 1, 2004
Cover of Fiat S.p.A. fiscal 2003 loss by Additional paid-in
capital and Legal reserve
Minority
interest
650
Total
6,560
-
-
(279)
279
-
-
-
Dividends
-
-
-
-
-
(19)
(19)
Capital increase
Net changes in Income (expenses) recognised directly in
equity
-
-
-
-
-
16
16
-
-
-
-
(4)
(9)
(13)
Other changes
-
6
-
26
-
(69)
(37)
Net profit (loss)
-
-
-
(1,634)
-
55
(1,579)
4,918
(26)
-
(615)
27
624
4,928
1,459
-
682
-
-
-
2,141
Balances at December 31, 2004
Capital increase from extinguishment of Mandatory
Convertible Facility
Dividends
-
-
-
-
-
(29)
(29)
Changes in reserve for share based payments
Net changes in Income (expenses) recognised directly in
equity
-
-
-
12
-
-
12
-
-
-
-
884
38
922
Other changes
-
(2)
-
11
-
10
19
Net profit (loss)
-
-
-
1,331
-
89
1,420
6,377
(28)
682
726
911
732
9,413
Balances at December 31, 2005
Consolidated Statement of Recognised Income and Expense
(in millions of euros)
2005
2004
3
25
61
46
Exchange gains (losses) on the translation of foreign operations
861
(70)
Gains (losses) recognised 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)
Recognised income (expense) of the Group
2,215
(1,638)
Gains (losses) recognised directly in the cash flow hedge reserve
Gains (losses) recognised directly in reserve for fair value measurement of available-for-sale financial assets
Consolidated Financial Statements at December 31, 2005
70
Notes to Consolidated
Financial Statements
PRINCIPAL ACTIVITIES
Fiat S.p.A. is a corporation organised 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.
Adoption of IFRS, together with related explanatory
notes, are included in this Appendix.
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:
ƒ
Vehicles sold with a buy-back commitment are
accounted for as Inventory if they regard the Fiat
Auto business (agreements with normally a shortterm 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 buyback commitment (less or more than twelve
months, respectively).
ƒ
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.
ƒ
The item Accrued income and prepaid expenses is
included in Current assets.
The consolidated financial statements are presented in
euros, the Group’s 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
endorsed 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 Appendix attached to these
notes 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
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
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
71
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 Group’s 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 realised 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 Group’s 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 subsidiary’s equity, the excess is charged against
the Group’s 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 realised 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 Group’s
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 Group’s share of the
earnings of jointly controlled entities using the 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 Group’s 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 Group’s share of
losses of an associate, if any, exceeds the carrying
amount of the associate in the Group’s 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 recognised
directly in equity until the assets are sold or are
impaired, when the cumulative gains and losses
previously recognised in equity are recognised 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 equity investments.
Transactions eliminated on consolidation
All significant intragroup balances and transactions and
any unrealised gains and losses arising from intragroup
transactions, are eliminated in preparing the
consolidated financial statements. Unrealised gains and
losses arising from transactions with associates and
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
72
jointly controlled entities are eliminated to the extent of
the Group’s 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
recognised 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.
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.
recognised in the income statement at the time of
acquisition.
Goodwill is not amortised, 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 recognised 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. Capitalised development costs comprise only
expenditures that can be attributed directly to the
development process.
Capitalised development costs are amortised on a
systematic basis from the start of production of the
related product over the product ‘s estimated life, as
follows:
N° of years
Intangible assets
Cars
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
Group’s 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
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
73
Other intangible assets
Depreciation
Other purchased and internally-generated intangible
assets are recognised 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.
Depreciation is calculated on a straight-line basis over
the estimated useful life of the assets as follows:
Such assets are measured at purchase or
manufacturing cost and amortised 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 amortised, 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 capitalised separately from
goodwill if their fair value can be measured reliably.
Depreciation rates
Buildings
Plant and machinery
2% - 10%
8% - 30%
Industrial and commercial equipment
15% - 25%
Other assets
10% - 33%
Land is not depreciated.
Leased assets
Property, plant and equipment
Leased assets include vehicles leased to retail
customers by the Group's leasing companies under
operating lease agreements. They are stated at cost and
depreciated at annual rates of between 15% and 25%.
Cost
Investment property
Property, plant and equipment are stated at acquisition
or production cost and are not revalued.
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.
Subsequent expenditures are capitalised 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 recognised
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.
Impairment of assets
The Group reviews, at least annually, the recoverability
of the carrying amount of intangible assets (including
capitalised 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 recognised
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
74
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 cashgenerating 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 recognised. A reversal of an
impairment loss is recognised 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 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 assetbacked 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 recognised 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 recognised 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 recognised 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-tomaturity 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 amortised 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 amortised 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
recognised in the income statement and are offset by
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
75
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 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:
ƒ
Fair value hedge – Where a derivative financial
instrument is designated as a hedge of the
exposure to changes in fair value of a recognised
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 recognised 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 recognised in the income
statement.
ƒ
Cash flow hedge – Where a derivative financial
instrument is designated as a hedge of the
exposure to variability in future cash flows of a
recognised 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 recognised
directly in equity. The cumulative gain or loss is
removed from equity and recognised 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 recognised 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 in the income statement 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 recognised 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 recognised immediately in the
income statement.
Sales of receivables
The Fiat Group sells a significant part of its financial,
trade and tax receivables through either securitisation
programs or factoring transactions.
A securitisation transaction entails the sale of a portfolio
of receivables to a securitisation 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 securitisation 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), 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
securitisation and factoring transactions which do not
meet IAS 39 derecognition requirements are recognised
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 recognised until the
assets are removed from the Group balance sheet.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
76
Inventory
Inventories of raw materials, semifinished products and
finished goods are stated at the lower of cost and net
realisable value, cost being determined on a first in-firstout (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 realisable value. Net realisable 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.
January 1, 2004, even though it has decided to use the
corridor approach for subsequent actuarial gains and
losses. Past service costs are recognised on a straightline 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 separately as part of
the Group’s 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 recognised in
the balance sheet represents the present value of the
defined benefit obligation as adjusted for unrecognised
actuarial gains and losses, arising from the application
of the corridor method and unrecognised past service
cost, reduced by the fair value of plan assets. Any net
asset resulting from this calculation is recognised at the
lower of its amount and the total of any cumulative
unrecognised 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 recognised
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.
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 Group's obligation to fund defined benefit pension
plans and the annual cost recognised in the income
statement is determined by independent actuaries 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 amortised over
the average remaining service lives of the employees
(the “corridor approach”). In the context of IFRS Firsttime Adoption, the Group elected to recognise all
cumulative actuarial gains and losses that existed at
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 recognised in the income statement on a
straight-line basis over the period from the grant date to
the vesting date, with the offsetting credit recognised
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
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
77
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.
difference between the initial sale price and the buyback price is recognised as rental revenue on a straightline basis over the term of the operating lease.
Provisions
Revenues from services and from construction contracts
are recognised by reference to the stage of completion
(the percentage of completion method).
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.
Revenue recognition
Revenue is recognised 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 recognised
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 recognised 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
recognised as an advance payment (liability). The
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 amortisation 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, as well as costs
for sales incentive programs, determined on the basis of
historical costs, country by country, and charged against
profit for the period in which the corresponding sales are
recognised. The Group's incentive programs include the
granting of retail financing at significant discount to
market interest rates. The corresponding cost is
recognised at the time of the initial sale.
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 recognised 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 writedowns, are reported in cost of sales.
Research and development costs
This item includes research costs, development costs
not eligible for capitalisation and the amortisation of
development costs recognised as assets in accordance
with IAS 38 (see Notes 4 and 13).
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
78
Taxes
Use of estimates
Income taxes include all taxes based upon the taxable
profits of the Group. Taxes on income are recognised 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 subsidiary’s 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 recognised to the extent that it is
probable that future profits will be available against
which they can be utilised. 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.
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.
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
Group’s 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 aftertax impact of conversion.
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 Group’s financial statements.
In December 2004, the IASB issued an amendment to
IAS 19 – Employee Benefits providing entities with the
option of recognising actuarial gains and losses in full in
the period in which they occur, outside the income
statement, in a statement of recognised 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 recognised
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
79
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:
ƒ
the fair value option designation eliminates or
significantly reduces an accounting mismatch;
ƒ
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
ƒ
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 entity’s 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 management’s objectives, policies
and processes for managing those risks. The
amendment to IAS 1 introduces requirements for
disclosures about an entity’s 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:
ƒ
initially at fair value;
ƒ
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
recognised less, where appropriate, cumulative
amortisation recognised 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 Group’s credit concentration risk is different, as a
function of the activities carried out by the individual
sectors and as a function of the various sales markets in
which the Group operates; in both 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.
Financial assets are recognised in the balance sheet net
of write-downs for the risk that counterparties will be
unable to fulfil 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 centralised basis,
under the control of the Group Treasury. The aim of this
centralised system is to optimise the efficiency and
effectiveness of the management of the Group’s capital
resources
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
80
In order to minimise 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
Group’s 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 utilises external borrowing and the sale of
financial receivables as asset-backed securities through
securitisations to fund its industrial and financial
activities. Changes in interest rates could have the effect
of either increasing or decreasing the Group’s 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.
The Group’s 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 utilises derivative financial instruments
designated as fair value hedges, mainly to hedge:
ƒ
the exchange rate risk on financial instruments
denominated in foreign currency;
ƒ
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:
ƒ
ƒ
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 Group’s 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:
(in millions of euros)
At December 31,
2005
Non-current assets
1,064
Current assets
1,413
Total assets
2,477
Financial debt
Other liabilities
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
710
1,062
81
ƒ
In the first quarter of 2005, 65% of the investment
in the temporary employment agency WorkNet was
sold.
ƒ
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.
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:
(in millions of euros)
At December 31,
2005
Total assets
7,482
Liabilities
6,432
Acquisitions and divestitures of businesses affected the
Group’s assets and liabilities as of the dates of
acquisition or divestiture as follows:
(in millions of euros)
2005
(in millions of euros)
Net revenues
1,280
Net result
71
Acquisitions
Divestitures
Non-current assets
742
125
Cash and cash equivalents
459
2,085
495
(3,099)
Other current assets
Total assets
1,696
(889)
354
(368)
The following acquisitions were made in 2005:
Debt
ƒ
Other liabilities
1,342
(534)
Total liabilities
1,696
(902)
ƒ
ƒ
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 Enel’s
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.
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
Specific sections of the Report on operations provide
information on significant events which have occurred
since the balance sheet date and on transactions
between Group companies and with related parties.
The following divestitures, the proceeds of which totalled
159 million euros, were made in 2005:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
82
COMPOSITION AND PRINCIPAL CHANGES
Income Statement
1. Net revenues
Net revenues can be analysed as follows:
(in millions of euros)
2005
2004
Revenues from:
41,013
39,755
Rendering of services
2,346
2,895
Contract revenues
Sales of goods
1,285
1,245
Rents on operating leases
397
406
Rents on assets sold with a buy-back commitment
323
289
1,088
1,018
Interest and other financial income from financial services companies
Other
Total Net revenues
92
29
46,544
45,637
2. Cost of sales
Cost of sales comprises the following:
(in millions of euros)
Cost of sales attributable to the industrial business
Interest cost and other financial charges from financial services companies
Total Cost of sales
2005
2004
38,898
38,363
726
758
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 recognised as assets amounting to 902 million euros (1,038 million euros in 2004) and the
amortisation of capitalised development costs of 462 million euros (312 million euros in 2004). During the period the Group
incurred new expenditure for capitalised development costs of 656 million euros (753 million euros in 2004).
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
83
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 licences 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:
(in millions of euros)
2005
2004
Other income
166
66
Amortisation of deferred government investment grants
64
63
Government revenue grants
58
53
Royalties and other income from licences and know-how
55
44
40
47
Gains on disposal of Property, plant and equipment and Leased assets
Rental income
Recovery of expenses and compensation for damages
145
69
Release of excess provisions
177
104
Prior period income
294
352
Other income
362
688
1,361
1,486
Total Other income
Other expenses
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
1,404
1,901
(43)
(415)
Indirect taxes
Total Other expenses
Other income (expenses)
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 recognised in deferred tax assets for the
same amount.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
84
6. Gains (losses) on the disposal of equity 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 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 Sector’s central organisations
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 reorganisation 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
reorganisation 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 realised on the final disposal of the real estate properties that had been securitised in 1998; additional costs
connected with the process of reorganisation 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 rationalisation 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 reorganisation and streamlining of
relationships with Group suppliers.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
85
9. Financial income (expenses) and Unusual financial income
Financial income (expenses)
In addition to the items included in the specific line 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.
(in millions of euros)
2005
2004
Financial income
Interest earned and other financial income
376
367
Interest income from customers
968
913
Gains on disposal of securities
Total Financial income
12
-
1,356
1,280
268
262
1,695
1,730
126
262
of which:
Financial income, excluding financial services companies
Interest and other financial expenses
Interest expense and other financial expenses
Write-downs of financial assets
Losses on disposal of securities
Interest costs on employee benefits
Total Interest and other financial expenses
Net income (expenses) from derivative financial instruments and exchange differences
2
-
146
127
1,969
2,119
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) totalled 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 analysed as follows:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
86
(in millions of euros)
2005
2004
Interest income from banks
58
47
Interest income from securities
45
40
48
49
Other Interest earned and financial income
225
231
Total Interest earned and other financial income
376
367
(in millions of euros)
2005
2004
Interest expenses on bonds
524
587
Bank interest expenses
397
450
Commissions
Interest and other financial expenses may be analysed as follows:
Interest expenses on trade payables
11
27
Other interest and financial expenses
763
666
1,695
1,730
Total Interest and other financial expenses
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 accessory 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 equity investments
This item includes the Group’s interest in the net result of the companies accounted for using the equity method, the writedowns 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 equity 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 CNH Global N.V. 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.).
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
87
11. Income taxes
Income taxes consist of the following:
2005
(in millions of euros)
2004
Current taxes:
IRAP
116
Other taxes
184
122
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:
ƒ
an amount of 277 million euros, representing the realisation of deferred tax assets recognised originally in 2004 in
connection with the income arising from the termination of the Master Agreement with General Motors; and
ƒ
an amount of 148 million euros, being the difference between deferred tax assets recognised in prior years and
realised against 2005 profit and deferred tax assets recognised in the year.
Taxes relating to prior periods include the cost of finalising 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:
(in million di euros)
2005
2004
Theoretical income taxes
747
(538)
(452)
3
119
-
Tax effect of permanent differences
Taxes relating to prior years
Tax effect of difference between foreign tax rates and the theoretical Italian tax rate
(3)
5
504
459
Use of tax losses
(83)
(128)
Other differences
(104)
21
Current and deferred income tax recognised in the financial statements, excluding IRAP
728
(178)
IRAP
Income taxes recorded in financial statements (current and deferred income taxes)
116
844
128
(50)
Deferred tax assets not recognised
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 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).
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
88
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 analysed as follows:
At December 31, 2005
At December 31, 2004
Deferred tax assets
2,104
2,402
Deferred tax liabilities
(405)
(522)
117
Net deferred tax assets
1,699
1,880
(181)
(in millions of euros)
Change
(298)
The reduction in net deferred tax assets is mainly due to the above-mentioned realisation 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 analysed as follows:
(in millions of euros)
At
December
31, 2004
Recognised
in income
statement
Charged to
equity
Changes in
the scope of
consolidation
Translation
differences
and other
changes
At
December
31, 2005
Deferred tax assets arising from:
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
1,660
(566)
-
(20)
(1)
1,073
Taxed provisions
Write-downs of financial assets
14
4
14
-
(10)
22
998
(25)
-
-
126
1,099
4,640
(280)
14
(20)
276
4,630
Accelerated depreciation
(405)
(34)
-
(32)
(62)
(533)
Deferred tax on gains
(171)
91
-
-
(3)
(83)
(24)
(3)
-
-
-
(27)
(9)
(4)
-
(11)
-
(24)
(692)
(84)
-
-
(46)
(822)
Measurement of derivative financial instruments
Other
Total Deferred tax assets
Deferred tax liabilities arising from:
Capital investment grants
Employee benefits
Capitalisation of development costs
Other
Total Deferred tax liabilities
Theoretical tax benefit arising from tax loss carryforwards
Adjustments for assets whose recoverability is not probable
Total Deferred tax assets, net of Deferred tax liabilities
(872)
(159)
9
78
(67)
(1,011)
(2,173)
(193)
9
35
(178)
(2,500)
4,591
469
-
(182)
133
5,011
(5,178)
(421)
-
244
(87)
(5,442)
1,880
(425)
23
77
144
1,699
The decision to recognise 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 recognised.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
89
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 recognised, analysed by year of expiry, are as follows:
Year of expiry
(in millions of euros)
Temporary differences and tax losses relating to
State taxation (IRES in the case of Italy):
Deductible temporary differences
Taxable temporary differences
Tax losses
Temporary differences and tax losses for which
deferred tax assets have not been recognised
Temporary differences and tax losses relating
to State taxation
Temporary differences and tax losses relating to
local taxation (IRAP in the case of Italy):
Deductible temporary differences
Taxable temporary differences
Tax losses
Temporary differences and tax losses for which
deferred tax assets have not been recognised
Temporary differences and tax losses relating
to local taxation
Total at
December
31, 2005
2006
2007
2008
2009
Beyond 2009
Unlimited/
indeterminable
12,855
(6,804)
17,223
4,929
(1,704)
605
1,704
(904)
633
714
(863)
1,788
509
(825)
2,010
4,327
(1,814)
5,486
672
(694)
6,701
(18,389)
(1,987)
(1,269)
(1,845)
(2,026)
(5,856)
(5,406)
4,885
1,843
164
(207)
(332)
2,144
1,273
3,389
(3,857)
1,070
675
(600)
-
218
(558)
-
235
(546)
-
140
(514)
70
1,860
(967)
117
261
(672)
883
(1,330)
(163)
(52)
(35)
(22)
(360)
(698)
(728)
(88)
(392)
(346)
(326)
650
(226)
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
90
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.
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
91
Balance Sheet
13. Intangible assets
In 2005 changes in the gross carrying amount of Intangible assets were as follows:
At
December 31,
2004
(in millions of euros)
Goodwill
Trademarks and other intangible assets with indefinite useful
lives
Changes in the
Translation
scope of differences and
Divestitures
consolidation other changes
Additions
At
December 31,
2005
2,809
-
-
53
297
3,159
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
3,311
656
(9)
(7)
103
4,054
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
520
32
(9)
30
23
596
Total Development costs
Patents, concessions and licenses externally acquired
Total Other intangible assets
Advances and intangible assets in progress externally
acquired
119
51
-
-
(70)
100
Total Advances and intangible assets in progress
119
51
-
-
(70)
100
7,995
836
(136)
19
477
9,191
Total gross carrying amount of Intangible assets
Changes in accumulated amortisation and impairment losses were as follows:
At
December 31,
2004
(in millions of euros)
Impairment
losses
Amortisation
Translation
differences
At
and other December 31,
changes
2005
Changes in
the scope of
consolidation
Divestitures
652
-
12
-
-
77
741
58
-
-
(3)
-
6
61
Development costs externally acquired
341
230
100
-
(7)
3
667
Development costs internally generated
481
232
3
-
-
68
784
822
462
103
-
(7)
71
1,451
Goodwill
Trademarks and other intangible assets with indefinite
useful lives
Total Development costs
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
375
69
5
(9)
14
5
459
Patents, concessions and licenses externally acquired
Total Other intangible assets
Advances and intangible assets in progress externally
acquired
6
-
-
-
-
-
6
Total Advances and intangible assets in progress
6
-
-
-
-
-
6
2,417
689
120
(125)
(31)
178
3,248
Total accumulated amortisation and impairment of
Intangible assets
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
92
The net carrying amount of Intangible assets can be analysed as follows:
At
December
31, 2004
(in millions of euros)
Goodwill
Translation
differences
and other
changes
Change in the
scope of
Impairment
losses Divestitures consolidation
Additions Amortisation
At
December
31, 2005
2,157
-
-
(12)
-
53
220
2,418
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
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
145
32
(69)
(5)
-
16
18
137
Trademarks and other intangible assets with
indefinite useful lives
Total Development costs
Total Other intangible assets
Advances and intangible assets in progress
externally acquired
Total Advances and intangible assets in progress
Total net carrying amount of Intangible assets
113
51
-
-
-
-
(70)
94
113
51
-
-
-
-
(70)
94
5,578
836
(689)
(120)
(11)
50
299
5,943
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
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
93
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 recognised 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 recognised 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.
14. Property, plant and equipment
In 2005 changes in the gross carrying amount of Property, plant and equipment were as follows:
At
December 31,
2004
(in millions of euros)
Land
Owned industrial buildings
Additions
Change in the
scope of
Divestitures consolidation
Translation
differences
At
Other December 31,
changes
2005
500
1
(25)
26
24
7
533
4,088
76
(143)
93
189
49
4,352
48
-
-
-
-
25
73
4,136
76
(143)
93
189
74
4,425
19,119
1,148
(1,081)
3,839
711
477
24,213
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
Industrial buildings leased under finance leases
Total Industrial buildings
Owned plant, machinery and equipment
Plant, machinery and equipment leased under finance
leases
Other tangible assets leased under finance leases
Total Other tangible assets
Advances and tangible assets in progress
5
5
-
-
-
2
12
1,817
175
(187)
81
79
1
1,966
677
400
-
49
30
(541)
615
27,773
2,275
(1,832)
4,088
1,044
39
33,387
Total gross carrying amount of Property, plant and
equipment
Changes in accumulated depreciation and impairment losses were as follows:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
94
(in millions of euros)
Land
Owned industrial buildings
Industrial buildings leased under finance leases
Total Industrial buildings
Owned plant, machinery and equipment
Plant, machinery and equipment leased under
finance leases
Total Plant, machinery and equipment
Assets sold with a buy-back commitment
Owned other tangible assets
Other tangible assets leased under finance leases
Total Other tangible assets
Advances and tangible assets in progress
Translation
differences
Other
changes
At
December
31, 2005
-
-
-
7
(104)
14
85
33
2,122
-
-
-
2
10
30
(104)
14
85
35
2,132
59
(1,050)
2,751
482
12
18,265
Change in
the scope of
Impairment
losses Divestitures consolidation
At
December
31, 2004
Depreciation
7
-
-
-
1,931
133
30
5
3
-
1,936
136
14,576
1,435
11
4
-
-
-
1
12
28
14,587
1,439
59
(1,050)
2,751
483
24
18,293
389
150
24
(164)
-
2
5
406
1,410
137
-
(107)
65
51
(26)
1,530
1
2
-
-
-
-
1
4
1,411
139
-
(107)
65
51
(25)
1,534
6
2
-
-
-
1
-
9
18,336
1,866
113
(1,425)
2,830
622
39
22,381
Total accumulated depreciation and
impairment of Property, plant and equipment
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 analysed as follows:
At
December
31, 2004
(in millions of euros)
Land
Owned industrial buildings
Industrial buildings leased under finance
leases
Additions Depreciation
Impairment
losses
Change in the
scope of
Divestitures consolidation
Translation
differences
Other
changes
At
December
31, 2005
493
1
-
-
(25)
26
24
7
526
2,157
76
(133)
(30)
(39)
79
104
16
2,230
43
-
(3)
-
-
-
-
23
63
2,200
76
(136)
(30)
(39)
79
104
39
2,293
Owned plant, machinery and equipment
Plant, machinery and equipment leased
under finance leases
4,543
1,148
(1,435)
(59)
(31)
1,088
229
465
5,948
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
402
170
(137)
-
(80)
16
28
25
424
Total Industrial buildings
Owned other tangible assets
Other tangible assets leased under
finance leases
Total Other tangible assets
Advances and tangible assets in progress
4
5
(2)
-
-
-
-
1
8
406
175
(139)
-
(80)
16
28
26
432
671
400
(2)
-
-
49
29
(541)
606
9,437
2,275
(1,866)
(113)
(407)
1,258
422
-
11,006
Total net carrying amount of Property,
plant and equipment
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
95
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 capitalised 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 reorganisation 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 recognised
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).
Additionally, at December 31, 2005 the Group recognised 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 recognised 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
December
31, 2004
(in millions of euros)
Gross carrying amount
Less: Depreciation and impairment
Net carrying amount of Investment
property
Additions
Change in the
scope of
consolidation
Depreciation
At
December
31, 2005
Divestitures
and other
changes
Translation
differences
63
-
-
-
-
(27)
36
(17)
-
(1)
-
-
8
(10)
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
96
16. Investments and other financial assets
(in millions of euros)
At December 31, 2005
At December 31, 2004
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
2,090
3,796
Receivables
113
112
Other securities
130
117
2,333
4,025
Total Investments
Total Investments and other financial assets
Investments
The changes in Investments in 2005 are set out below:
(in millions of euros)
Unconsolidated subsidiaries
At
December 31,
2004
Revaluations/
(Write-downs)
Acquisitions
and
capitalisations
Change in the
scope of
consolidation
Translation
differences
Disposals
and other
changes
At
December 31,
2005
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
234
(7)
23
(7)
-
38
281
3,796
75
44
(1,083)
121
(863)
2,090
Other companies
Total Investments
Revaluations and Write-downs consist of adjustments to the carrying value of investments accounted for using the equity
method for the Group’s 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:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
97
At December 31, 2005
(in millions of euros)
At December 31, 2004
% of interest
Amount
% of interest
Amount
Tofas-Turk Otomobil Fabrikasi Tofas A.S.
37.9
Naveco Ltd.
50.0
245
37.9
183
118
50.0
Società Europea Veicoli Leggeri-Sevel S.p.A.
94
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
-
50.0
1,182
-
Fiat Powertrain B.V.
14
28
705
1,790
Other minors
Total Investments in jointly controlled entities
The item Investments in associates comprises the following:
At December 31, 2005
(in millions of euros)
At December 31, 2004
% of interest
Amount
% of interest
Amount
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
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
-
38.6
Rizzoli Corriere della Sera MediaGroup S.p.A.
-
Italenergia Bis S.p.A
Other minors
Total Investments in associates
856
123
123
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:
(in millions of euros)
Carrying value
Fair Value
Tofas-Turk Otomobil Fabrikasi Tofas A.S.
245
338
Rizzoli Corriere della Sera MediaGroup S.p.A.
104
301
Al-Ghazi Tractors Ltd.
Total Investments in listed jointly controlled entities and associates
14
52
363
691
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
98
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.
17. Leased assets
Change in the
scope of
consolidation
Translation Disposals and
differences other changes
At December
31, 2004
Additions
Gross carrying amount
1,106
409
-
-
825
37
(479)
1,898
Less: Depreciation and impairment
Net carrying amount of Leased
assets
(366)
-
(184)
-
(300)
(13)
219
(644)
740
409
(184)
-
525
24
(260)
1,254
(in millions of euros)
Depreciation
Impairment
At December
31, 2005
The column Change in the scope of consolidation includes the effect resulting from consolidating Leasys S.p.A. on a lineby-line basis.
The Group leases out assets, mainly its own products, as part of its financial services business. Minimum lease payments
from non-cancellable 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
At
December 31, 2004
Within one year
215
239
Between one and five years
200
175
(in millions of euros)
Beyond five years
Total Minimum lease payments
5
1
420
415
18. Inventories
At
December 31, 2005
At
December 31, 2004
Raw materials, supplies and finished goods
7,499
6,962
Work in progress
2,550
2,618
(2,168)
(2,323)
7,881
7,257
(in millions of euros)
Advances on contract work
Total Inventories
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 realisable 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 recognised as an expense during the year are 251 million euros (244 million euros in
2004). Amounts recognised 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).
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
99
The majority of Work in progress and Advances on contract work relates to the Production Systems Sector (Comau) and
can be analysed as follows:
At
December 31, 2005
(in millions of euros)
At
December 31, 2004
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 recognised profits (less recognised losses) to date
Less: Progress billings
2,550
2,618
(2,168)
(2,323)
382
295
Work in progress, net of advances on contract work
At December 31, 2005, retentions by customers on progress billings amount to 9 million euros (1 million euros at
December 31, 2004).
19. Current receivables
The composition of the caption and the analysis by due date is as follows:
At December 31, 2005
(in millions of euros)
Trade receivables
Receivables from financing activities
Other receivables
Total Current receivables
At December 31, 2004
due within
one year
due
between
one and
five years
due beyond
five years
Total
4,969
5,462
18
11
5,491
170
15,973
11,316
5,691
491
17,498
192
3,084
2,457
228
49
2,734
24,026
19,235
5,937
551
25,723
due within
one year
due
between
one and
five years
due beyond
five years
Total
4,871
66
32
10,796
5,007
2,600
292
18,267
5,365
394
At December 31, 2005 Current receivables include receivables sold and financed through both securitisation 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 recognised 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 Assetbacked financing (see Note 28).
Trade receivables
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:
(in millions of euros)
Allowances for doubtful accounts
At
December 31,
2004
Provision
Use and other
changes
Change in the
scope of
consolidation
At
December 31
, 2005
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).
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
100
Receivables from financing activities
Receivables from financing activities include the following:
(in millions of euros)
At
December 31, 2005
At
December 31, 2004
Retail financing
6,655
6,763
Finance leases
716
2,120
6,804
5,360
Dealer financing
Supplier financing
Receivables from banking activities
335
838
1,147
1,270
70
630
Financial receivables from companies under joint control, associates and unconsolidated
subsidiaries
Other
Total Receivables from financing activities
246
517
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:
ƒ
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;
ƒ
positive translation differences of approximately 1.4 billion euros, principally arising from the receivables of CNH;
ƒ
a decrease of approximately 500 million euros in Supplier financing;
ƒ
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
December 31,
2004
Provisions
Use and other
changes
Change in the
scope of
consolidation
At
December 31,
2005
Retail financing
185
41
(24)
(5)
197
Finance leases
108
17
(22)
(5)
98
Dealer financing
75
38
(11)
-
102
(in millions of euros)
Allowance for receivables regarding:
Supplier financing
22
6
-
-
28
Receivables from banking activities
Financial receivables from companies under joint control,
associates and unconsolidated subsidiaries
39
6
(6)
-
39
Other
Total allowance on Receivables from financing activities
-
-
-
-
-
130
12
(83)
-
59
559
120
(146)
(10)
523
Finance lease receivables relate almost entirely to Fiat Auto, Commercial Vehicles and Agricultural and Construction
Equipment leased out under finance lease arrangements and may be analysed as follows stated gross of an allowance of
98 million euros at December 31, 2005 (108 million euros at December 31, 2004):
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
101
At December 31, 2005
due
within
one year
(in millions of euros)
Receivables for future minimum lease
payments
Less: unrealised interest income
Present value of future minimum
lease payments
due
between
one and five
years
due
beyond five
years
At December 31, 2004
Total
due within one
year
due
between
one and
five years
due
beyond five
years
Total
433
456
36
925
894
1,553
39
2,486
(51)
(56)
(4)
(111)
(89)
(164)
(5)
(258)
382
400
32
814
805
1,389
34
2,228
There are no contingent rents as finance lease recognised 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.
In %
EUR
USD
GBP
CAD
AUD
BRL
PLN
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
Other receivables
At December 31, 2005 Other receivables are as follows:
(in millions of euros)
Tax receivables
At December 31, 2005
At December 31, 2004
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
102
20. Accrued income and prepaid expenses
The item Accrued income and prepaid expenses consists mainly of prepaid insurance premiums and rent.
21. Current securities
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:
(in millions of euros)
At December 31, 2005
At December 31, 2004
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.
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
(in millions of euros)
Fair value hedges:
Exchange rate risk - Forward contracts and Exchange rate
swaps (currency swaps)
Interest rate risk - Interest rate swaps and Forward rate
agreement
Interest rate and exchange rate risk - Combined interest rate
and currency swaps
Total Fair value hedges
Cash flow hedge:
Exchange rate risks - Forward contracts, Exchange rate
swaps (currency swaps) and Currency options
Interest rate swaps and Forward rate agreement
At December 31, 2004
Positive fair value
Negative fair value
Positive/(negative) fair value
26
(16)
7
307
(26)
467
9
(1)
190
342
(43)
664
48
(95)
70
2
(3)
(53)
-
-
2
Total Cash flow hedges
50
(98)
19
Derivatives for trading
62
(48)
(35)
454
189
648
Combined interest rate and currency swaps
Other financial assets/(liabilities)
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:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
103
ƒ
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.
ƒ
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).
ƒ
the fair value of interest rate swaps and forward rate agreements is determined by using the discounted cash flow
method.
ƒ
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.
ƒ
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 Group’s
funding structure.
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:
(in millions of euros)
At December 31, 2005
Exchange rate risk management
Interest rate risk management
Interest rate and exchange rate risk management
Other derivative financial instruments
Total notional amount
At December 31, 2004
5,992
5,612
10,544
13,487
204
783
1,805
2,219
18,545
22,101
At December 31, 2005 the notional amount of Other derivative instruments consists of:
ƒ
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 the aforementioned “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).
ƒ
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).
ƒ
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).
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
104
Cash flow hedges
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
recognised 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 recognised directly in equity. The cumulative gain or
loss is removed from equity and recognised in the profit and loss account at the same time in 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 recognised 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 recognised 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 recognised
in the income statement immediately.
In 2005 the Group transferred to income gains of 44 million euros net of tax effect previously recognised directly in equity
(gains of 12 million euros in 2004) presented in the following line items:
(in millions of euros)
2005
2004
Exchange rate risk
Increase in Net revenues
49
33
Decrease in Cost of sales
8
(4)
(15)
(14)
2
(3)
44
12
Interest rate risk
Financial income (expenses)
Taxes income (expenses)
Total recognised in the income statement
The ineffectiveness of cash flow hedges was not material for the years 2005 and 2004.
Fair value hedge
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:
(in millions of euros)
2005
2004
Interest rate risk
Net gains (losses) on qualifying hedges
(105)
86
105
(86)
-
-
Fair value changes in hedged items
Net gains (losses)
The effect of fair value hedges on exchange rate risk was not material for the years 2005 and 2004.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
105
23. Cash and cash equivalents
Cash and cash equivalents include:
(in millions of euros)
Cash at banks
At December 31, 2005
At December 31, 2004
4,529
3,208
706
669
Money market securities
1,182
1,890
Total Cash and cash equivalents
6,417
5,767
Cash with a pre-determined use
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 equivalent 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).
Capital stock
At December 31, 2005, the capital stock of Fiat S.p.A. is as follows:
(number of shares)
At December 31, 2005
At December 31, 2004
Shares issued and fully paid
Ordinary shares
Preference shares
Saving shares
Total shares issued
1,092,246,316
800,417,598
103,292,310
103,292,310
79,912,800
79,912,800
1,275,451,426
983,622,708
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
106
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:
ƒ
to the Legal Reserve, 5% of net income until this reserve reaches one fifth of the capital stock;
ƒ
to savings shares, a dividend of up to 0.31 euros per share;
ƒ
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;
ƒ
to preference shares, a dividend of up to 0.31 euros per share;
ƒ
to ordinary shares, a dividend of up to 0.155 euros per share;
ƒ
to savings shares and ordinary shares, in equal proportions, an additional dividend of up to 0.155 euros per share;
ƒ
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.
The reconciliation of the number of shares outstanding at December 31, 2004 and at December 31, 2005 is as follows:
(number of shares in thousand)
At
December 31, 2004
Capital increase
Ordinary shares issued
800,417
(4,384)
Ordinary shares outstanding
796,033
Preference shares issued
103,292
103,292
-
Less: Treasury stock
Less: Treasury stock
Preference shares outstanding
(Purchases)/Sales
of treasury stock
At
December 31, 2005
291,829
-
1,092,246
-
52
(4,332)
291,829
52
1,087,914
-
-
103,292
-
-
-
-
103,292
79,913
Saving shares issued
79,913
-
-
Less: Treasury stock
-
-
-
-
79,913
-
-
79,913
983,622
291,829
-
1,275,451
(4,384)
-
52
(4,332)
979,238
291,829
52
1,271,119
Saving shares outstanding
Total Shares issued by Fiat S.p.A.
Less: Treasury stock
Total Shares outstanding issued by Fiat S.p.A.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
107
As described in Note 9, the Mandatory Convertible Facility was extinguished by its conversion to capital stock through
subscription by the Lending Banks of an increase in capital stock for consideration, 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 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.:
ƒ
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.
ƒ
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.
ƒ
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.
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:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
108
Grant date
Expiry date
Strike
price
(euros)
Managers
March 30, 1999
March 31, 2007
26.120
1,248,000
Managers
February 18, 2000
February 18, 2008
28.122
5,158,000
July 25, 2000
July 25, 2008
25.459
250,000
February 27, 2001
February 27, 2009
24.853
785,000
March 29, 2001
October 30, 2008
23.708
1,000,000
October 31, 2001
October 31, 2009
16.526
5,417,500
May 14, 2002
January 1, 2010
12.699
1,000,000
September 12, 2002
September 12, 2010
10.397
6,100,000
Plan
Recipient
Stock Options
1999
Stock Options
2000
Stock Options
July 2000
Stock Options
February 2001
Chairman of
Fiat S.p.A.
Managers
Stock Options
March 2001
Stock Options
October 2001
Chairman of
Fiat S.p.A.
Managers
Stock Options
May 2002
Stock Options
September 2002
Chairman of
Fiat S.p.A.
Managers
Number of
options granted
Vesting date
Vesting
portion
April 1, 2001
April 1, 2002
February 18, 2001
February 18, 2002
February 18, 2003
February 18, 2004
July 25, 2001
May 14, 2002
February 27, 2002
February 27, 2003
February 27, 2004
February 27, 2005
July 1, 2002
50%
50%
25%
25%
25%
25%
50%
50%
25%
25%
25%
25%
100%
October 31, 2002
October 31, 2003
October 31, 2004
October 31, 2005
January 1, 2005
25%
25%
25%
25%
100%
September 12, 2003
September 12, 2004
September 12, 2005
September 12, 2006
25%
25%
25%
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.
The contractual terms of these stock option plans were as follows:
Plan
Stock Options
October 2003
Grant date
Expiry date
Strike
price
(euros)
No. of options
assigned
Vesting date
Vesting portion
October 1, 2003
October 1, 2010
6.678
598,982
October 1, 2004
1/3*50%+
+1/3*50%*(target performance)
1/3*50%+
+1/3*50%*(target performance)
1/3*50%+
+1/3*50%*(target performance)
1/3*1/3+
+1/3*2/3*(target performance)
1/3*1/3+
+1/3*2/3*(target performance)
1/3*1/3+
+1/3*2/3*(target performance)
October 1, 2005
October 1, 2006
Stock Options
November 2003
November 15, 2003
November 15, 2010
6.712
446,961
November 15, 2004
November 15, 2005
November 2006
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:
Plan
Stock Options March
2003
Grant date
Expiry date
Strike price
(euros)
No. of options
assigned
July 31, 2003
March 27, 2010
5.623
13,338,076
Vesting date
Vesting portion
March 27, 2004
March 27, 2005
March 27, 2006
March 27, 2007
March 27, 2008
20%
1/3*20%+2/3*20%*(profit objectives)
1/3*20%+2/3*20%*(profit objectives)
1/3*20%+2/3*20%*(profit objectives)
1/3*20%+2/3*20%*(profit objectives)
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
109
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.
Contractual terms of the plan are as follows:
Grant date
Expiry date
Strike
price
(euros)
N° of options vested
Vesting date
Vesting portion
July 26, 2004
January 1, 2011
6.583
10,670,000
June 1, 2005
June 1, 2006
June 1, 2007
June 1, 2008
22.2%
22.2%
22.2%
33.4%*( target profitability)
Plan
Stock Options July
2004
A summary of outstanding stock options at December 31, 2005 is as follows:
Managers compensation
Average remaining
contractual life
(in years)
Options outstanding
at December 31,
2005
Exercise price (in euros)
6.583
Compensation as member of the Board
Average remaining
Options outstanding
contractual life
at December 31,
(in years)
2005
-
-
10,670,000
10.397
3,046,500
4.8
-
5
-
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:
Managers compensation
Outstanding at the beginning of the year
Number of shares
Average exercise price
(in euros)
Compensation as member of the Board
Average
exercise price
(in euros)
Number of shares
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:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
110
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) (%)
Risk-free interest rate (%)
0.00
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 recognised 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 Industrial 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:
ƒ
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.
ƒ
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 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.
ƒ
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,
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
111
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:
Exercise price (in USD)
Options outstanding at
December 31, 2005
Directors’ plan
Average remaining
contractual life
(in years)
Options outstanding at
December 31, 2005
Equity incentive plan
Average remaining
contractual life
(in years)
6.6
9.15 - 15.70
64,348
8.3
886,260
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
169,042
7.7
2,041,070
5.6
Total at December 31. 2005
Changes during the period are as follows:
Number of
shares
Outstanding at the beginning of the year
Directors’ plan
Average exercise
price
(in USD)
Number of
shares
Equity incentive plan
Average
exercise price
(in USD)
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
-
-
(183,700)
16.18
Exercised during the year
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:
Option life (years)
Expected volatility of CNH Global N.V. shares (%)
Directors’ plan
Equity incentive plan
5
5
72.0
71.5
Expected dividend yield (i%)
1.3
1.3
Risk-free interest rate (%)
3.9
3.7
The total cost recognised 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 company’s listing process.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
112
Cash-settled share-based payments
Certain entities of the Fiat Powertrain Technologies Sector have agreed with a number of employees a total of four cashsettled 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:
Until
Outstanding
rights on GM $1
2/3 shares at
December 31,
2005
Outstanding
rights on Fiat
S.p.A. shares at
December 31,
2005
Grant price
GM $1 2/3
(in USD)
Grant price
Fiat S.p.A.
(in euros)
Vesting
portion
Vesting date
Plan
Grant date
From
2001
February 12, 2002
March 1, 2002
February 12, 2009
45,053
217,936
49.57
15.50
100%*NMC
2002
February 12, 2002
205,150
49.57
15.50
February 11, 2003
46,644
218,880
36.26
7.95
2004
February 10, 2004
February 12, 2010
February 12, 2010
February 12,2010
February 11, 2011
February 11, 2011
February 11, 2011
February 11, 2012
February 11, 2012
February 11, 2012
44,580
2003
February 12, 2003
February 12, 2004
February 12, 2005
February 11, 2004
February 11, 2005
February 11, 2006
February 10, 2005
February 10, 2006
February 10, 2007
40,470
205,169
49.26
6.03
1/3*NMC
1/3*NMC
1/3*NMC
1/3*NMC
1/3*NMC
1/3*NMC
1/3*NMC
1/3*NMC
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
recognised 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:
Closing price
GM $1 2/3 share
Fiat S.p.A.
ordinary share
$ 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 recognised by the Group in the 2005
income statement amounts to 2 million euros.
Treasury Stock
Treasury stock consists of 4,331,708 Fiat S.p.A. ordinary shares for an amount of 28 million euros.
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.
Revenue reserves
The principal revenue reserves are as follows:
ƒ
The legal reserve of Fiat S.p.A. of 447 million euros at December 31, 2005 (447 million euros at December 31,
2004);
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
113
ƒ
Retained losses totalling 1,052 million euros at December 31, 2005 (1,063 million euros at December 31, 2004);
ƒ
The net result before minority interest 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);
ƒ
The share based payments reserve of 13 million euros at December 31, 2005 (1 million euros at December 31,
2004).
Income (expense) recognised 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:
(in millions of euros)
Balances at January 1, 2004
Gains (losses) recognised directly in the cash flow hedge reserve
Gains (losses) recognised directly in the available-for-sale reserve
Exchange gains (losses) on the translation of foreign operations
Cash flow
hedge
reserve
Availablefor-sale
reserve
Cumulative
translation
differences
Income (expense)
recognised
directly in equity
31
2
29
-
25
-
-
25
-
46
-
46
-
-
(70)
(70)
Net profit (loss)
(5)
-
-
(5)
Balances at December 31, 2004
22
75
(70)
27
Gains (losses) recognised directly in the cash flow hedge reserve
3
-
-
3
Gains (losses) recognised 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
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:
% held by minority stockholders
At December 31, 2005
At December 31, 2004
Ferrari S.p.A.
44.0
44.0
Teksid S.p.A.
15.2
19.5
-
10.0
16.1
15.5
Italian companies:
Foreign companies:
Fiat Auto Holdings B.V.
CNH Global N.V.
Following the finalisation 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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
114
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.
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 recognised 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:
(in millions of euros)
At December 31, 2004
Provision
Utilisation
Change in the
scope of
consolidation and
other changes
1,179
121
(150)
133
At December 31,
2005
1,283
Post-employment benefits:
Employee severance indemnity
Pension Plans
Health care plans
Other
977
55
(157)
(3)
872
1,024
76
(64)
66
1,102
262
26
(39)
45
294
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
3,682
432
(451)
256
3,919
Total post-employment benefits
Total provision for employee benefits
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
115
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:
At December 31, 2005
In %
Italy
USA
At December 31, 2004
Uk
Other
Italy
USA
Uk
5.50
4.75
1-5.25
3.65
5.75
5.25
Other
2-6.7
Discount rate
3.53
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
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.
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).
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, that 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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
116
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 recognised in the balance sheet at December 31, 2005 and 2004 for post-employment benefits are as
follows:
(in millions of euros)
Employee severance indemnity
At December
At December
31, 2005
31, 2004
At December
31, 2005
Pension Plans
At December
31, 2004
Health care plans
At December
At December
31, 2005
31, 2004
At December
31, 2005
Other
At December
31, 2004
Present value of funded obligations
-
-
2,514
2,406
-
-
-
-
Less: Fair Value of plan assets
-
-
(2,014)
1,623
-
-
-
-
-
-
500
783
-
-
-
-
1,417
1,243
539
304
1,417
1,186
323
278
(134)
(64)
(163)
(105)
(370)
(172)
(28)
(16)
Present value of unfunded
obligations
Unrecognised actuarial gains
(losses)
Less: Unrecognised past service
cost
Net liability
-
-
(4)
(5)
55
10
(1)
-
1,283
1,179
872
977
1,102
1,024
294
262
1,283
1,179
872
977
1,102
1,024
294
262
-
-
-
-
-
-
-
-
1,283
1,179
872
977
1,102
1,024
294
262
Amounts in the balance sheet
Liabilities
Less : Assets
Net liability
The amounts recognised in the income statement for Post-employment benefits are as follows:
Employee severance indemnity
(in millions of euros)
Pension Plans
Health care plans
Other
2005
2004
2005
2004
2005
2004
2005
2004
Current service cost
86
87
48
36
12
12
16
14
Interest costs
33
27
140
144
60
67
9
8
-
-
(127)
(119)
-
-
-
-
Less: Expected return on plan assets
Net actuarial (gains) losses recognised
in the year
1
-
-
1
14
-
4
1
Past service cost
Losses (Gains) on curtailments and
settlements
-
-
1
1
(11)
-
1
-
-
-
-
1
-
-
(1)
-
Plan amendments
-
-
(8)
-
(98)
(22)
-
-
Other
Total cost (gains) for postemployment benefits
1
-
(7)
-
1
(1)
(3)
-
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:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
117
Employee severance
indemnity
(in millions of euros)
Present value of obligation at the
beginning of the year
Pension Plans
Health care plans
Other
2005
2004
2005
2004
2005
2004
2005
2004
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
-
-
5
5
7
6
-
-
47
64
129
152
177
188
8
17
Contribution by plan participants
Actuarial losses (gains)
Exchange rate differences
Benefits paid
-
-
181
(74)
187
(94)
5
(2)
(150)
(209)
(157)
(149)
(64)
(61)
(39)
(33)
Past service cost
Change in scope of consolidation
-
-
-
-
(49)
-
2
-
158
7
(1)
1
-
-
24
-
Losses on curtailments
-
-
-
1
-
-
(1)
-
Plan amendments
-
-
(8)
-
(98)
(22)
-
-
Other changes
Present value of obligation at the end
of the year
-
2
6
1
(1)
(5)
21
(1)
1,417
1,243
3,053
2,710
1,417
1,186
323
278
The effect of plan amendments on the amount recognised 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
(in millions of euros)
Opening fair value of plan assets
Expected return on plan assets
Actuarial gains (losses)
2005
2004
1,623
1,476
127
119
71
39
Exchange rate differences
144
(53)
Contribution by employer
177
172
Contribution by plan participants
Benefits paid
9
6
(142)
(135)
Change in the scope of consolidation
1
-
Other changes
4
(1)
2,014
1,623
Closing fair value of plan assets
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:
In %
At December 31, 2005
At December 31, 2004
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 recognised in the income statement. A one
percentage point change in assumed healthcare cost trend rates would have the following effects:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
118
One percentage point
increase
(in millions of euros)
Effect on the aggregate of the service costs and interest cost
Effect on defined benefit obligation
One percentage point
decrease
21
17
143
119
27. Other provisions
Changes in Other provisions for the year ended December 31, 2005 are as follows:
At December 31,
2004
Charge
Utilisation
Warranty provision
893
1,033
Restructuring provision
347
378
-
Other risks
Total Other provisions
(in millions of euros)
Investment provision
Release to
income
Other
changes
At December 31,
2005
(953)
(8)
81
1,046
(217)
(13)
24
519
51
-
-
20
71
2,368
2,318
(1,548)
(83)
88
3,143
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 management’s 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 245 million euros at December 31, 2005 (148 million euros at December
31, 2004), other costs for exiting activities amounting to 7 million euros at December 31, 2005 (13 million euros at
December 31, 2004) and other costs totalling 267 million euros at December 31, 2005 (186 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).
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
119
28. Debt
A breakdown of debt and an analysis by due date are as follows:
At December 31, 2005
due within
one year
due
between
one and five
years
due beyond
five years
Total
6,907
3,254
49
Bonds
2,766
2,307
Borrowings from banks
2,877
2,557
Loans for banking activities
1,255
-
956
92
7,854
4,956
14,761
8,210
(in millions of euros)
Asset-backed financing
At December 31, 2004
due within
one year
due
between
one and five
years
due beyond
five years
Total
10,210
6,902
3,223
49
10,174
2,561
7,634
2,369
3,029
3,928
9,326
128
5,562
8,110
2,266
74
10,450
-
1,255
1,322
4
-
1,326
52
1,100
751
129
35
915
2,741
15,551
12,552
5,428
4,037
22,017
2,790
25,761
19,454
8,651
4,086
32,191
Other debt:
Other
Total Other debt
Total Debt
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 recognised 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:
ƒ
Euro Medium Term Note (EMTN 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).
ƒ
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).
ƒ
Other bonds: these refer to the following issues:
-
Bonds issued by Case New Holland Inc. (“CNH Inc.”) in 2004 (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 2005
(bearing coupon interest at 6.00% and repayable on June 1, 2009 for an amount of 500 million U.S. dollars,
equivalent 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 prospectuses and offering circulars, or their abstracts, relating to these principal bond issues are available on the
Group’s website at www.fiatgroup.com under “Shareholders and Investors – Financial Publications”.
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, when the issuers are 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
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
120
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 periodical 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 Case New Holland 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 & Poor’s Rating
Services and/or Moody’s Investors Service.
The major bond issues outstanding at December 31, 2005 are the following:
Currency
Face value of
outstanding bonds
(in millions)
Coupon
Maturity
Outstanding
amount
(in millions of euros)
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
Euro Medium Term Notes:
Others (3)
331
Total Euro 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 amortised cost valuation
Total Bonds
413
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
121
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”), 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 the EDF Put option (reference should be made to details of the EDF Put option described in
Note 3 of the Consolidated Financial Statements at December 31, 2004) 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 Fiat’s 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:
less
from 5%
from 7.5%
from 10%
greater
than 5%s
to 7.5%
to 10%
to 12.5%
than 12.5%
Total
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
122
Interest rate
(in millions of euros)
British pound
78
44
-
-
-
Canadian dollar
937
-
-
-
-
937
Other
489
672
73
4
-
1,238
14,998
7,817
2,430
74
442
25,761
Total Debt
Financial payables with annual nominal interest rates in excess of 12.5% relate principally to Group’s 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 Group’s 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:
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
122
At December 31, 2005
Total
due between
one and five
years
due beyond
five years
Total
155
21
91
13
125
(1)
(10)
(1)
(4)
-
(5)
16
145
20
87
13
120
due between
one and five
years
due beyond
five years
Minimum future lease payments
79
59
17
Interest expense
Present value of minimum lease
payments
(4)
(5)
75
54
(in millions of euros)
At December 31, 2004
due within
one year
due within
one year
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 group’s 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
(in millions of euros)
Trade payables
Due within
one year
Due
between
one and
five years
Due
beyond
five years
11,773
4
-
At December 31, 2004
Total
Due within
one year
Due
between
one and
five years
Due
beyond
five years
Total
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.
30. Other payables
An analysis of Other payables at December 31, 2005 is as follows:
(in millions of euros)
At December 31, 2005
At December 31, 2004
Payables to personnel
483
428
Tax payables
969
764
Social security payables
354
325
2,171
1,941
844
1,103
4,821
4,561
Advances on buy-back agreements
Other
Total Other payables
An analysis of Other payables by due date is as follows:
At December 31, 2005
(in millions of euros)
Other payables
due within
one year
due between
one and five
years
due beyond
five years
Total
3,819
879
123
4,821
At December 31, 2004
due within
one year
due between
one and five
years
due beyond
five years
Total
3,749
723
89
4,561
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
123
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:
ƒ
at the date of the sale, the price received for the product is recognised as an advance in liabilities;
ƒ
subsequently, since the difference between the original sales price and the repurchase price is recognised in the
income statement as operating lease instalments on a straight line basis over the lease term, the balance represents
the remaining lease instalments yet to be recognised 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 recognised 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.
32. Guarantees granted, commitments and contingent liabilities
Guarantees granted
At December 31, 2005 the Group had granted guarantees on the debt or commitments of third parties or associated
entities totalling 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.
Other commitments and important contractual rights
The Fiat Group has important commitments and rights deriving from outstanding agreements, summarised 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
authorisations 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 FRI’s shares and, as a result, the relative control, 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 summarised as follows:
ƒ
Call Option by Fiat Auto to purchase 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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
124
ƒ
Synesis Finanziaria’s right to request Fiat Auto to exercise the above purchase option on 51% of Fidis Retail Italia in
the event of which by January 31, 2008 (January 31, 2006, before the above-mentioned extension) 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 relative stockholders’ agreement between Fiat Auto, Synesis
Finanziaria and the four money lending banks.
ƒ
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).
ƒ
So-called “drag along” option on behalf of Fiat Auto in the event of the sale of the investment 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
centralised treasury department of the Group.
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:
ƒ
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.
ƒ
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.
ƒ
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%.
ƒ
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.
ƒ
Fiat may share, in declining percentages, in any gain realised 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:
ƒ
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.
ƒ
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).
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
125
It should be pointed out that at present the conditions that would give rise to the 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%).
In particular, Renault would acquire the right to exercise a sale option on the treasury stock to Fiat, in the following cases:
ƒ
in the event of nonfulfilment in the application of the protocol of the agreement and admission to receivership or any
other redressment procedure;
ƒ
in the event Renault’s investment in Teksid falls below 15% or Teksid decides to invest in a structural manner outside
the foundry sector;
ƒ
should Fiat be the object of the acquisition of control by another car manufacturer.
The exercise price of the option is established as follows:
ƒ
for 6.5% of the capital stock of Teksid, the initial investment price increased pro rata temporis;
ƒ
for the remaining amount of capital stock of Teksid, the share of the accounting net equity at the exercise date.
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.
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.
December 31, 2005
(in millions of euros)
due within
one year
due between
one and five
years
due beyond
five years
Total
71
171
161
403
December 31, 2004
due within
one year
due between
one and five
years
due beyond
five years
Total
75
177
160
412
Future minimum lease payments under
operating lease agreements
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 recognised since an outflow of resources is not
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
126
considered to be probable. Furthermore, contingent assets and expected reimbursement in connection with these
contingent liabilities for approximately 30 million euros have been estimated but not recognised.
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 Group’s risks and returns, which determine how
the Group is organised and define its management structure and its internal financial reporting system.
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.
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 business which manufactures engines and gear boxes.
The Agricultural and Industrial 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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
127
The Iveco Sector produce and sells 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 includes transactions with other Sectors carried out at arm’s 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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
128
Fiat
Auto
Maserati
Ferrari
19,533
533
(194)
-
19,339
Trading profit
Unusual income (expenses)
Operating result
(818)
(in millions of euros)
Business
Solutions
Itedi
Other
and
eliminations
FIAT
Group
46,544
Magneti
Marelli
Teksid
Comau
9,489
4,033
1,036
1,573
752
397
(4,269)
(355)
(1,473)
(206)
(245)
(422)
(10)
4,504
-
9,134
2,560
830
1,328
330
387
235
46,544
16
(230)
1,000
(3)
2,121
1,215
1,891
2,215
FPT
CNH
Iveco
1,289
1,966
10,212
(83)
(1,513)
(3)
533
1,206
453
10,209
(281)
(85)
157
26
698
415
162
45
42
35
(537)
-
-
(22)
(87)
(126)
(35)
(18)
(50)
(28)
(85)
157
4
611
289
127
27
(8)
7
13
2005
Total net revenues
Net revenues intersegment (*)
Net revenues from third parties
(843)
Financial income (expenses)
858
Unusual financial income
Result from equity investments
68
-
-
-
39
(54)
(3)
1
(3)
(20)
-
6
34
Result before taxes
2,264
Income taxes
Result from continuing
operations
1,420
844
Other information
Capital expenditure
Depreciation and amortisation
Impairment
Other non-cash items
(in millions of euros)
1,582
20
142
173
255
912
313
45
38
19
20
1
3,520
(1,264)
(37)
(128)
(168)
(296)
(539)
(181)
(45)
(27)
(28)
(7)
(20)
(2,740)
(151)
-
-
(1)
-
(36)
(16)
-
-
(3)
-
(26)
(233)
(1,259)
(34)
(52)
(65)
(1,311)
(617)
(102)
(44)
(53)
(25)
(1)
(166)
(3,729)
Magneti
Marelli
Teksid
Comau
Business
Solutions
Itedi
Other
and
eliminations
FIAT
Group
Fiat
Auto
Maserati
Ferrari
FPT
CNH
Iveco
19,695
409
(169)
(10)
1,175
-
9,983
9,047
3,795
910
1,711
976
407
(2,471)
45,637
(72)
-
(6)
(332)
(1,226)
(112)
(427)
(399)
(9)
2,762
45,637
2004
Total net revenues
Net revenues intersegment (*)
Net revenues from third parties
19,526
399
1,103
-
9,977
8,715
2,569
798
1,284
577
398
291
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)
(1,412)
(171)
136
-
399
347
148
(42)
30
34
9
(63)
Operating result
(585)
(1,179)
Financial income (expenses)
-
Unusual financial income
Result from equity investments
89
-
-
-
20
(22)
3
(3)
(4)
(24)
-
76
135
Result before taxes
(1,629)
Income taxes
Result from continuing
operations
(1,579)
50
Other information
Capital expenditure
1,793
51
143
-
243
737
280
44
23
25
2
(18)
3,322
(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)
Depreciation and amortisation
(*)
Intersegment net sales and revenues include revenues earned with consolidated Group companies relating to different Sectors. Intersegment sales are accounted
for at transfer prices that are substantially in line with market conditions.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
129
(in millions of euros)
Other
and
eliminations
FIAT
Group
Fiat
Auto
Maserati
Ferrari
FPT
CNH
Iveco
Magneti
Marelli
Teksid
Comau
Business
Solutions
Itedi
16,231
235
936
2,362
17,860
7,510
2,363
671
1,091
341
186
915
50,701
1,780
1
3
6
385
346
13
13
5
1
12
(475)
2,090
At December 31, 2005
Sector operating assets
Investments
Unallocated Group assets:
Tax assets
Receivables from financing activities,
Non-current Other receivables and
Securities of industrial companies
Cash and cash equivalents, Current
securities and Other financial assets
of industrial companies
2,882
632
6,149
9,663
Total unallocated Group assets
62,454
Total assets
Sector operating liabilities
15,638
270
625
1,255
14,483
6,213
1,620
419
828
437
161
719
42,668
Provision for investments
21
-
-
-
-
46
2
-
2
-
-
-
71
Unallocated Group liabilities
934
Tax liabilities
Debt and Other financial liabilities of
industrial companies
9,368
Total unallocated Group liabilities
10,302
Total liabilities
53,041
(in millions of euros)
Fiat
Auto
Iveco
Magneti
Marelli
Maserati
Ferrari
FPT
CNH
Teksid
15,967
312
837
-
2,036
-
3
-
15,224
9,797
2,228
338
194
23
Itedi
Other
and
eliminations
FIAT
Group
636
161
1,784
48,564
11
8
1,165
3,796
Comau
Business
Solutions
576
1,042
13
5
At December 31, 2004
Sector operating assets
Investments
Unallocated Group assets:
Tax assets
Receivables from financing activities,
Non-current Other receivables and
Securities of industrial companies
Cash and cash equivalents, Current
securities and Other financial assets
of industrial companies
3,182
1,034
5,946
Total unallocated Group assets
10,162
Total assets
62,522
Sectors operating liabilities
Provision for investments
15,269
302
428
-
12,128
8,342
1,371
389
823
604
165
1,440
41,261
-
-
-
-
-
-
-
-
-
-
-
-
-
Unallocated Group liabilities
Tax liabilities
Debt and Other financial liabilities of
industrial companies
940
15,393
Total unallocated Group liabilities
16,333
Total liabilities
57,594
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
130
Geographical segment information
Geographical segment information on Net Revenues is based on the geographical location of the Group’s customers.
(in millions of euros)
2005
2004
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
46,544
45,637
Net revenues of the Group
The total amount of assets and capital expenditure by geographical segment are as follows:
At December 31, 2005
(in millions of euros)
At December 31, 2004
Assets
Capital expenditure
Assets
Capital expenditure
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
62,454
3,520
62,522
3,322
Total
34. Information on financial risks
The Group is exposed to financial risks connected with its operations:
ƒ
credit risk, regarding its normal business relations with customers and dealers, and its financing activities;
ƒ
liquidity risk, with particular reference to the availability of funds and access to the credit market and to financial
instruments in general;
ƒ
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.
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
131
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.
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 Group’s 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:
ƒ
centralising 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;
ƒ
maintaining an adequate level of available liquidity;
ƒ
diversifying the means by which funds are obtained and maintaining a continuous and active presence on the capital
markets;
ƒ
obtaining adequate credit lines;
ƒ
monitoring future liquidity on the basis of business planning.
Details as to the repayment structure of the Group’s 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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
132
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:
ƒ
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
Group’s 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 Group’s total transaction exchange risk
exposure in 2005.
It is the Group’s 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 that
going 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.
ƒ
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 Group’s policy to hedge fully, whenever possible, the exposure resulting from receivables, payables and
securities denominated in foreign currencies different from the company’s money of account.
ƒ
Certain of the Group’s subsidiaries are located in countries which are not members of the European monetary union,
in particular the United States, Canada, United Kingdom, Switzerland, Brazil, Poland, Turkey, India and China. As
the Group’s 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.
ƒ
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 recognised 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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
133
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.
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.
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.
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
134
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
2,595
2,644
White-collar
54,489
53,783
Blue-collar
112,987
105,589
170,071
162,016
Managers
Total
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:
ƒ
the provision charged by the Group in respect of mandatory severance indemnity, amounting to 0.7 million euros (0.7
million euros in 2004);
ƒ
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);
ƒ
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:
Average
2005
At December
31, 2005
Average
2004
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
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
135
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:
2005
(in thousands of euros)
Directors
Statutory auditors
Total Emoluments
2004
Fiat S.p.A.
Subsidiaries
Total
Fiat S.p.A.
Subsidiaries
Total
8,633
7,640
16,273
5,128
7,167
12,295
147
30
177
147
30
177
8,780
7,670
16,450
5,275
7,197
12,472
Consolidated Financial Statements at December 31, 2005 – Notes to the Consolidated Financial Statements
136
Appendix 1
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 Appendix 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 Group’s 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:
ƒ
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.
ƒ
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:
ƒ
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;
ƒ
all assets and liabilities recognized under Italian GAAP that do not qualify for recognition under IFRS have been
eliminated;
ƒ
certain balance sheet items have been reclassified in accordance with IFRS.
The impact of these adjustments is recognised directly in opening equity at the date of transition to IFRS (January 1,
2004).
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
137
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 recognise 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.
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
138
Effects of transition to IFRS on the Consolidated Balance Sheet at January 1, 2004
(in millions of euros)
Intangible fixed assets
- Goodwill
- Other intangible fixed assets
Property, plant and equipment
- Property, plant and equipment
-Operating leases
Financial fixed assets
Financial receivables held as fixed assets
Deferred tax assets
Total Non-Current assets
Net inventories
Trade receivables
Other receivables
Italian
GAAP
3,724
2,402
1,322
9,675
8,761
914
3,950
29
1,879
19,257
6,484
4,553
3,081
Reclassifications
(945)
(31)
(914)
31
70
(29)
914
41
(682)
12,890
(148)
407
32
515
430
(120)
(1,797)
(10,750)
(3,789)
3,214
202
(407)
(386)
Adjustments
1,774
1,774
817
IAS/IFRS
5,498
2,402
3,096
9,547
(121)
31
3,899
(50)
266
2,686
1,113
2,678
7,937
541
10
Intangible assets:
- Goodwill
- Other intangibleassets
Property, plant and equipment
Investment property
Investment and other financial assets
260
892
864
2,145
21,984
7,597
6,549
20,827
3,474
417
2,129
32
775
1,322
Leased assets
Deferred tax assets
Non-current assets
Inventories
Trade receivables
Receivables from financing activities
Other receivables
Accrued income and prepaid expenses
Current financial assets:
- Current equity investments
- Current securities
- Other financial assets
420
13,851
6,845
47,838
Cash and cash equivalents
Current assets
21
16,558
(934)
21
69,843
6,560
7,455
4,040
3,415
Assets held for sale
TOTAL ASSETS
Stockholders’ equity
Provisions
- Employee benefits
- Other provisions
Financial assets not held as fixed assets
Financial lease contracts receivable
Financial receivables
Securities
Cash
Total Current assets
Trade accruals and deferrals
Financial accruals and deferrals
120
1,797
10,750
3,789
3,211
33,785
407
386
TOTAL ASSETS
Stockholders' equity
53,835
7,494
(550)
1,313
5,168
211
1,503
(1,550)
(211)
1,224
(203)
Long-term financial payables
15,418
6,501
14,790
36,709
10,581
26,128
Debt
- Asset-backed financing
- Other debt
Total Non-current liabilities
22,110
6,243
Trade payables
Others payables
Short-term financial payables
Total Current liabilities
12,588
2,742
6,616
21,946
(223)
(297)
1,948
345
12,291
4,690
Other financial liabilities
Trade payables
Other payables
Trade accruals and deferrals
1,329
274
(21)
485
1,308
(934)
69,843
Reserves for employee severance indemnities
Reserves for risks and charges
Deferred income tax reserves
568
Financial accruals and deferrals
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(6,616)
(6,048)
211
956
(956)
53,835
(550)
Deferred tax liabilities
Accrued expenses and deferred income
Liabilities held for sale
TOTAL STOCKHOLDERS’ EQUITY AND LIABILITIES
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
139
Effects of transition to IFRS on the Consolidated Balance Sheet at December 31, 2004
(in millions of euros)
Intangible fixed assets
- Goodwill
- Other intangible fixed assets
Property, plant and equipment
- Property, plant and equipment
-Operating leases
Financial fixed assets
Financial receivables held as fixed assets
Deferred tax assets
Total Non-current assets
Net inventories
Trade receivables
Other receivables
Italian
GAAP
3,322
2,140
1,182
9,537
8,709
828
3,779
19
2,161
18,818
5,972
4,777
3,021
Reclassifications
(874)
(46)
(828)
46
86
(19)
828
67
(755)
9,662
(508)
398
33
135
599
(117)
(1,727)
(7,151)
(2,126)
1,896
339
(398)
(327)
Adjustments
2,256
17
2,239
774
IAS/IFRS
5,578
2,157
3,421
9,437
160
46
4,025
(88)
241
3,343
1,285
1,469
7,836
221
(103)
Intangible assets:
- Goodwill
- Other intangible assets
Property, plant and equipment
Investment property
Investment and other financial assets
218
252
740
2,402
22,228
7,257
5,491
17,498
2,734
295
1,237
33
353
851
Leased assets
Deferred tax assets
Non-current assets
Inventories
Trade receivables
Receivables from financing activities
Other receivables
Accrued income and prepaid expenses
Current financial assets:
- Current equity investments
- Current securities
- Other financial assets
707
11,885
5,767
40,279
Cash and cash equivalents
Current assets
15
15,243
(829)
15
62,522
4,928
7,290
3,682
3,608
Assets held for sale
TOTAL ASSETS
Stockholders’ equity
Provisions
- Employee benefits
- Other provisions
Financial assets not held as fixed assets
Financial lease contracts receivable
Financial receivables
Securities
Cash
Total Current assets
Trade accruals and deferrals
Financial accruals and deferrals
117
1,727
7,151
2,126
3,164
28,055
398
327
TOTAL ASSETS
Stockholders' equity
47,598
5,757
(319)
Reserves for employee severance indemnities
Reserves for risks and charges
Deferred income tax reserves
1,286
5,185
197
1,432
(1,449)
(197)
964
(128)
Long-term financial payables
8,933
9,611
13,647
32,191
10,174
22,017
Debt
- Asset-backed financing
- Other debt
Total Non-current liabilities
15,601
9,397
Trade payables
Others payables
Short-term financial payables
Total Current liabilities
11,955
2,565
9,810
24,330
(426)
(258)
1,996
203
11,697
4,561
Other financial liabilities
Trade payables
Other payables
Trade accruals and deferrals
1,178
325
(48)
522
1,130
(829)
62,522
629
Financial accruals and deferrals
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(9,810)
(9,181)
197
732
(732)
47,598
(319)
Deferred tax liabilities
Accrued expenses and deferred income
Liabilities held for sale
TOTAL STOCKHOLDERS’EQUITY AND LIABILITIES
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
140
Reconciliation of Stockholders’ Equity
(in millions of euros)
Stockholders' Equity under Italian GAAP
Development costs
Employee benefits
Business combinations
Revenue recognition – sales with a buy-back commitment
Revenue recognition – other
Scope of consolidation
Property, plant and equipment
Write-off of deferred costs
Impairment of assets
Reserves for risks and charges
Recognition and measurement of derivatives
Treasury stock
Adjustments to the valuation of investments in associates
Sales of receivables
Other adjustments
Accounting for deferred income taxes
Stockholders' equity under IAS/IFRS
A
B
C
D
E
F
G
H
I
L
M
N
P
Q
R
At January 1, 2004
7,494
At December 31, 2004
5,757
1,876
(1,247)
(180)
(296)
(371)
(164)
(134)
(169)
(195)
450
(32)
(152)
(69)
(243)
(8)
2,320
(1,089)
40
(177)
(375)
(390)
(150)
(115)
(282)
(256)
145
(26)
(134)
(24)
(232)
(84)
6,560
4,928
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
141
Details of the effects of transition to IFRS on the Balance sheet
The final section of this Appendix 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)
C
C
C
Business combinations - goodwill depreciation write down
Business combinations - restatement of CNH purchase accounting for deferred tax assets
Business combinations - reinstatement of MMSE goodwill
At January 1, 2004
At December 31, 2004
-
159
(121)
(21)
17
At January 1, 2004
At December 31, 2004
2,090
(288)
(28)
1,774
2,499
(218)
(10)
(32)
2,239
At January 1, 2004
At December 31, 2004
(914)
(31)
(945)
(828)
(46)
(874)
At January 1, 2004
At December 31, 2004
1,001
80
93
(242)
85
(168)
(32)
817
1,106
49
90
(236)
89
(244)
(80)
774
At January 1, 2004
At December 31, 2004
31
31
46
46
Other intangible assets
Adjustments
(in millions of euros)
A
H
I
M
Development costs
Write-off of deferred costs
Impairment of assets
Recognition and measurement of derivatives - measurement of borrowings at amortised cost
Property, plant and equipment
Reclassifications
(in millions of euros)
to Leased assets - change in balance sheet format
to Investment property - change in balance sheet format
Adjustments
(in millions of euros)
D
E
F
G
G
I
Revenue recognition - sales with a buy-back commitment
Revenue recognition - other - real estate transactions
Scope of consolidation
Property, plant and equipment - elimination of revaluations
Property, plant and equipment - elimination of depreciation of land
Impairment of assets
Other adjustments
Investment property
Reclassifications
(in millions of euros)
from Property, plant and equipment - change in balance sheet format
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
142
Investment and other financial assets
Reclassifications
(in millions of euros)
from Financial assets not held as fixed assets - change in balance sheet format
from Treasury stock - change in balance sheet format
from Financial receivables held as fixed assets - change in balance sheet format
from Other provisions - investments provision - change in balance sheet format
At January 1, 2004
At December 31, 2004
56
32
29
(47)
70
58
26
19
(17)
86
At January 1, 2004
At December 31, 2004
292
(327)
55
(32)
(152)
43
(121)
342
(180)
160
(26)
(135)
(1)
160
At January 1, 2004
At December 31, 2004
914
914
828
828
At January 1, 2004
At December 31, 2004
(41)
(9)
(50)
(83)
(5)
(88)
At January 1, 2004
At December 31, 2004
608
513
3
(11)
1,113
695
582
25
(17)
1,285
Adjustments
(in millions of euros)
E
F
M
N
P
Revenue recognition - other
Scope of consolidation
Recognition and measurement of derivatives - fair value measurement of investments and securities
Treasury stock
Adjustments to the valuation of investments in associates
Other adjustments
Leased assets
Reclassifications
(in millions of euros)
from Operating leases - change in balance sheet format
Adjustments
(in millions of euros)
D
Revenue recognition - sales with a buy-back commitment for intra-group transactions
Other adjustments
Inventories
Adjustments
(in millions of euros)
Revenue recognition - sales with a buy-back commitment
Scope of consolidation
Recognition and measurement of derivatives
Other adjustments
D
F
M
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
143
Trade receivables
Reclassifications
(in millions of euros)
Reclassifications to receivables for financing activities of dealer financing free period
At January 1, 2004
At December 31, 2004
(682)
(682)
(755)
(755)
At January 1, 2004
At December 31, 2004
38
(924)
3,563
1
2,678
95
(789)
2,130
33
1,469
At January 1, 2004
At December 31, 2004
10,750
1,797
(331)
(261)
105
148
682
12,890
7,151
1,727
(198)
(386)
105
508
755
9,662
At January 1, 2004
At December 31, 2004
(194)
(100)
2,140
6,127
(36)
7,937
(244)
(106)
1,111
6,997
78
7,836
At January 1, 2004
At December 31, 2004
(148)
(148)
(508)
(508)
At January 1, 2004
At December 31, 2004
(208)
9
213
26
501
541
(183)
11
(110)
168
18
475
(158)
221
Adjustments
(in millions of euros)
D
F
Q
Revenue recognition - sales with a buy-back commitment
Scope of consolidation - SCDR
Sales of receivables
Other adjustments
Receivables from financing activities
Reclassifications
(in millions of euros)
from Financial receivables - change in balance sheet format
from Financial lease contract receivables - change in balance sheet format
from Financial deferred income - measurement at amortised cost
to Other financial assets - change in balance sheet format
from Securities - change in balance sheet format
from Other receivables - guarantee deposits arising from securitisations of dealer financing free period
Reclassifications from trade receivables of dealer financing free period
Adjustments
(in millions of euros)
D
E
F
Q
Revenue recognition - sales with a buy-back commitment
Revenue recognition - other
Scope of consolidation
Sales of receivables
Other adjustments
Other receivables
Reclassifications
(in millions of euros)
to Receivables for financing activities - guarantee deposits on securitisations of dealer financing free period
Adjustments
(in millions of euros)
Development costs
Revenue recognition - sales with a buy-back commitment
Revenue recognition - other real estate transactions
Scope of consolidation
Write-off of deferred costs
Sales of receivables
Other adjustments
A
D
E
F
H
Q
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
144
Accrued income and prepaid expenses
Adjustments
(in millions of euros)
B
Employee benefits
Other adjustments
At January 1, 2004
At December 31, 2004
2
8
10
(110)
7
(103)
At January 1, 2004
At December 31, 2004
3,789
(3,214)
(105)
45
515
2,126
(1,896)
(105)
10
135
At January 1, 2004
At December 31, 2004
231
29
260
210
8
218
At January 1, 2004
At December 31, 2004
261
201
(32)
430
386
224
(11)
599
At January 1, 2004
At December 31, 2004
15
864
13
892
25
232
(5)
252
At January 1, 2004
At December 31, 2004
3,214
3,214
1,896
1,896
At January 1, 2004
At December 31, 2004
30
390
420
135
572
707
Current securities
Reclassifications
(in millions of euros)
from Securities – change in balance sheet format
to Cash and cash equivalents for liquid funds and highly liquid debt securities
to Receivables for financing activities - change in balance sheet format
from Financial accrued income - change in balance sheet format
Adjustments
(in millions of euros)
F
Scope of consolidation - B.U.C.
Other adjustments
Other financial assets
Reclassifications
(in millions of euros)
from Receivables from financing activities - change in balance sheet format - derivatives
from Financial accrued income - change in balance sheet format
from Financial deferred income
Adjustments
(in millions of euros)
F
M
Scope of consolidation
Recognition and measurement of derivatives
Other adjustments
Cash and cash equivalents
Reclassifications
(in millions of euros)
from Marketable securities for liquid funds and highly liquid debt securities
Adjustments
(in millions of euros)
Scope of consolidation
Sales of receivables - securitizations' vehicles liquidity
F
Q
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
145
Financial accrued income and prepaid expenses
Reclassifications
(in millions of euros)
to Debt - change in balance sheet format
to Marketable securities - change in balance sheet format
to Other financial liabilities - change in balance sheet format
to Other financial assets - change in balance sheet format
At January 1, 2004
At December 31, 2004
(85)
(45)
(55)
(201)
(386)
(52)
(10)
(41)
(224)
(327)
At January 1, 2004
At December 31, 2004
17
4
21
12
3
15
At January 1, 2004
At December 31, 2004
1,503
1,503
1,432
1,432
At January 1, 2004
At December 31, 2004
1,224
1,224
964
964
At January 1, 2004
At December 31, 2004
(1,503)
(47)
(1,550)
(1,432)
(17)
(1,449)
At January 1, 2004
At December 31, 2004
(283)
260
(65)
(51)
(64)
(203)
(279)
273
(20)
(60)
(42)
(128)
Assets held for sale
Adjustments
(in millions of euros)
Assets held for sale reclassification
Other adjustments
Employees benefits
Reclassifications
(in millions of euros)
from Reserve for employee pensions and similar obligations - change in balance sheet format
Adjustments
(in millions of euros)
B
Employee benefits
Other provisions
Reclassifications
(in millions of euros)
to Employees benefits - change in balance sheet format
to Investments and other financial assets, investments provision- change in balance sheet format
Adjustments
(in millions of euros)
Revenue recognition - sales with a buy-back commitment
Reserves for risks and charges - vehicle sales incentives
Reserves for risks and charges - other
Sales of receivables
Other adjustments
D
L
L
Q
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
146
Debt
Reclassifications
(in millions of euros)
from Financial accrued expenses - change in balance sheet format
from Financial prepaid expenses - change in balance sheet format
to Other financial liabilities - change in balance sheet format
from Short term financial payables - change in balance sheet format
At January 1, 2004
At December 31, 2004
123
(85)
(153)
6,616
6,501
93
(52)
(240)
9,810
9,611
At January 1, 2004
At December 31, 2004
673
2,583
813
10,581
140
14,790
697
2,078
470
10,174
228
13,647
At January 1, 2004
At December 31, 2004
153
470
(55)
568
240
430
(41)
629
At January 1, 2004
At December 31, 2004
(257)
34
(223)
(217)
(209)
(426)
At January 1, 2004
At December 31, 2004
(284)
(13)
(297)
(168)
(90)
(258)
At January 1, 2004
At December 31, 2004
1,851
42
55
1,948
2,031
47
(82)
1,996
Adjustments
(in millions of euros)
E
F
M
Q
Revenue recognition – other
Scope of consolidation
Recognition and measurement of derivatives
Sales of receivables
Other adjustments
Other financial liabilities
Reclassifications
(in millions of euros)
from Debt - change in balance sheet format - derivatives
from Financial accrued expenses - change in balance sheet format
from Financial prepaid expenses - change in balance sheet format
Adjustments
(in millions of euros)
M
Recognition and measurement of derivatives
Other adjustments
Trade payables
Adjustments
(in millions of euros)
F
Scope of consolidation
Other adjustments
Other payables
Adjustments
(in millions of euros)
Revenue recognition - sales with a buy-back commitment
Scope of consolidation
Other adjustments
D
F
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
147
Accrued expenses and deferred income
Adjustments
(in millions of euros)
Write-off of deferred costs
Other adjustments
H
At January 1, 2004
At December 31, 2004
(35)
14
(21)
(44)
(4)
(48)
At January 1, 2004
At December 31, 2004
(331)
(32)
(470)
(123)
(956)
(198)
(11)
(430)
(93)
(732)
Financial accrued expenses and deferred income
Reclassifications
(in millions of euros)
to Receivables from financing activities - measurement at amortised cost
to Other financial assets - change in balance sheet format – derivatives
to Other financial liabilities - change in balance sheet format – derivatives
to Debt - change in balance sheet format
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
148
Effects of transition to IFRS on the Income statement for the year ended December 31, 2004
(in millions of euros)
Net revenues
Cost of sales
Gross operating result
Overhead
Research and development
Other operating income (expenses)
Operating result
Result of equity Investments
Non-operating income (expenses)
EBIT
Financial income (expenses)
Income (loss) before taxes
Income taxes
Net result of normal operations
Result from discontinued operations
Net result before minority interest
Italian
GAAP
46,703
39,623
7,080
4,629
1,810
(619)
22
8
(863)
(833)
(744)
(1,577)
(29)
(1,548)
(1,548)
Reclassifications
Adjustments
IAS/IFRS
675
51
1
346
(381)
154
496
(243)
(966)
(641)
863
744
-
(1,066)
(1,177)
45,637
39,121
Net revenues
Cost of sales
21
(461)
(142)
409
(4)
46
359
(538)
127
4,701
1,350
(415)
50
150
542
(243)
(585)
(1,179)
135
Selling, general and administrative costs
Research and development costs
Other income (expenses)
Trading Profit
Gains (losses) on the disposal of equity investments
Restructuring costs
Other unusual income (expenses)
Operating result
Financial income (expenses)
Result from equity investments
(52)
(21)
(31)
(31)
(1,629)
(50)
(1,579)
(1,579)
Result before taxes
Income taxes
Results from continuing operations
Result from discontinued operations
Net result before minority interest
-
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
149
Reconciliation of the Net result
(in millions of euros)
2004
Net result before minority interest under Italian GAAP
Development costs
Employee benefits
Business combinations
Revenue recognition – sales with a buy-back commitment
Revenue recognition – other
Scope of consolidation
Property, plant and equipment
Write-off of deferred costs
Impairment of assets
Reserves for risks and charges
Recognition and measurement of derivatives
Treasury stock
Adjustments to the valuation of investments in associates
Sales of receivables
Other adjustments
Accounting for deferred income taxes
(1,548)
A
B
C
D
E
F
G
H
I
L
M
N
P
Q
R
Net result before minority interest under IAS/IFRS
436
94
53
1
(20)
3
14
19
(114)
(67)
(454)
(15)
(4)
2
21
(1,579)
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
150
Details of the effects of transition to IFRS on the Income statement
The final section of this Appendix 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
D
F
L
Q
Revenue recognition - sales with a buy-back commitment
Scope of consolidation
Reserve for risks and charges - vehicle sales incentives
Sales of receivables
Other adjustments
(1,103)
16
(10)
187
(156)
(1,066)
Cost of sales
Reclassifications
(in millions of euros)
2004
from Financial income (expenses) for rental companies included in Financial Services
from Selling, general and administrative costs - change in income statement format
from Other income (expenses) - change in income statement format
to Financial income (expenses) for interest costs on defined benefit plans
from Financial income (expenses) interest compensation to financial services on dealer free period
36
48
524
(127)
194
675
Adjustments
(in millions of euros)
2004
D
B
I
Revenue recognition - sales with a buy-back commitment
Employee benefits
Impairment of assets
Other Adjustments
(1,090)
(37)
(35)
(15)
(1,177)
Selling, general and administrative costs
Reclassifications
(in millions of euros)
2004
from Cost of sales - change in income statement format
from Other income (expenses) – change in income statement format
(48)
99
51
Research and development costs
Adjustments
(in millions of euros)
Development costs
2004
A
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
(461)
(461)
151
Other income (expenses)
Reclassifications
(in millions of euros)
2004
to Cost of sales - change in income statement format
to Selling, general and administrative costs - change in income statement format
to Research and development costs - change in income statement format
to Restructuring costs - change in income statement format
from Non-operating income (expenses) - change in income statement format
to Other unusual income (expenses) - change in income statement format
524
99
1
508
(1,017)
231
346
Adjustments
(in millions of euros)
2004
C
C
B
I
F
Business combinations - goodwill depreciation write down
Business combinations - purchase accounting CNH
Employee benefits
Impairment of assets
Scope of consolidation
Other adjustments
174
(121)
72
(148)
(114)
(5)
(142)
Gains (losses) on the disposal of equity 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
to Other unusual income (expenses) - change in income statement format
508
(12)
496
Adjustments
(in millions of euros)
2004
L
Reserves for risks and charges - restructuring
46
46
Other unusual income (expenses)
Reclassifications
(in millions of euros)
from Non-operating income (expenses) - change in income statement format
from Restructuring costs - change in income statement format
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
2004
(231)
(12)
(243)
152
Financial income (expenses)
Reclassifications
(in millions of euros)
2004
to Cost of sales for renting companies included in Financial Services
from Cost of sales for interest costs on defined benefit plans
to Cost of sales - interest compensation to financial services on dealer free period
from Financial income (expenses) - change in income statement format
36
(127)
194
(744)
(641)
Adjustments
(in millions of euros)
2004
M
Recognition and measurement of derivatives - Equity swap
Other adjustments
(445)
(93)
(538)
Result from equity investments
Adjustments
(in millions of euros)
Adjustments on the valuation of investments in associates
Other adjustments
2004
P
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
87
40
127
153
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 Fiat’s consolidated balance sheet and income statement. Amounts are shown pre-tax and the related tax effects
are separately summarised in the item R. Accounting for deferred income taxes.
A. Development costs
Under Italian GAAP applied research and development costs may alternatively be capitalised 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 capitalisation must be capitalised and
then amortised from the start of production over the economic life of the related products.
Under IFRS, the Group has capitalised 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
amortisation. 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.
The 2004 net result was positively impacted by 436 million euros in the year, reflecting the combined effect of the
capitalisation of development costs incurred in the period that had been expensed under Italian GAAP, and the
amortisation of the amount that had been capitalised 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 recognised 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 amortising 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 unrecognised.
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 recognise 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 amortisation of unrecognised 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.
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
154
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 realisable 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 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 buyback 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.
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
155
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 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 securitisation transactions entered into by the Group (see the paragraph
Q. Sales of receivables below), to a real estate securitisation transaction entered into in 1998 and to the sale of the Fiat
Auto Spare Parts business to “Società di Commercializzazione e Distribuzione Ricambi S.p.A." ("SCDR") in 2001.
In particular, in 1998 the Group entered in a real estate securitisation 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.
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
156
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.
Furthermore, in 2001 the Group participated with a specialist logistics operator and other financial investors in the
formation of "Società di Commercializzazione 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 Group's investment in
SCDR represents 19% of SCDR's 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 unrealised 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 amortised 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 amortised 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 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.
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
157
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, capitalised 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 capitalised 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:
ƒ
Restructuring reserve: the Group provided restructuring reserves based upon management’s 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.
ƒ
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 Group’s 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 Group’s policy does not permit speculative transactions), were designated as “trading”.
The main differences between Italian GAAP and IFRS may be summarized as follows:
ƒ
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.
Under IFRS:
-
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.
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
158
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.
-
ƒ
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.
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, realising 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 measurement. The compensation
expense corresponding to the option’s 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.
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
159
Q. Sales of receivables
The Fiat Group sells a significant part of its finance, trade and tax receivables through either securitisation programs or
factoring transactions.
A securitisation transaction entails the sale without recourse of a portfolio of receivables to a securitisation 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 securitisation or factoring transactions (both with and without
recourse) had been derecognized. Furthermore, with specific reference to the securitisation of retail loans and leases
originated by the financial services companies, the net present value of the interest flow implicit in the instalments, net of
related costs, had been recognised in the income statement.
Under IFRS:
ƒ
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.
ƒ
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 securitisation transactions on the retail portfolio of receivables of financial
service companies, realised under Italian GAAP and not yet realised under IFRS.
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.
Appendix 1 – Transition to International Financial Reporting Standards (IFRS)
160
Appendix 2
FIAT GROUP COMPANIES
As required by Consob Resolution No. 11971 of May 14, 1999 as amended (Article 126 of the Regulations), a complete
list of the companies and significant equity investments of the Group is provided in the following pages.
The companies on this list have been classified according to percentage of ownership, method of consolidation and type
of business.
The information provided for each company includes: name, registered office, country and capital stock stated in the
original currency. Percentage of Group consolidation and the percentage held by Fiat S.p.A. or its subsidiaries are also
shown.
A separate column shows percentage held of the voting rights at the ordinary stockholders meeting, when this figure
differs from the percentage interest held in the company.
Appendix 2 – Fiat Group Companies 161
Appendix 2 - Fiat Group Companies
162
Trappes
Buenos Aires
Brussels
Slough Berkshire
Brussels
Alcalá De Henares
Slough Berkshire
Argyroupoli
Dublin
Minatu-Ku. Tokyo
Vienna
FAL Fleet Services S.A.S.
Fiat Auto Argentina S.A.
Fiat Auto (Belgio) S.A.
Fiat Auto Contracts Ltd
Fiat Auto Dealer Financing SA
Fiat Auto España S.A.
Fiat Auto Financial Services (Wholesale) Ltd.
Fiat Auto Hellas S.A.
Fiat Auto (Ireland) Ltd.
Fiat Auto Japan K.K.
Fiat Auto Kreditbank GmbH
Vienna
Frankfurt
Glostrup
Betim
Turin
Geneva
Turin
Turin
Clickar Assistance S.R.L.
Easy Drive S.r.l.
Fiat Automobil GmbH
Fiat Automobil Vertriebs GmbH
Fiat Automobiler Danmark A/S
Fiat Automoveis S.A. - FIASA
Fiat Center Italia S.p.A.
Fiat Center (Suisse) S.A.
Jerez
Betim
Andalcar Motor S.L.
Banco Fidis de Investimento SA
Amsterdam
Casablanca
Lijnden
Bielsko-Biala
Alges
Sunninghill
Turin
Schlieren
Turin
Slough Berkshire
Turin
Heilbronn
Netherlands
Amsterdam
Fiat Auto Lease N.V.
Fiat Auto Maroc S.A.
Fiat Auto Nederland B.V.
Fiat Auto Poland S.A.
Fiat Auto Portuguesa S.A.
Fiat Auto South Africa (Proprietary) Ltd
Fiat Auto S.p.A.
Fiat Auto (Suisse) S.A.
Fiat Auto Trasporti S.r.l.
Fiat Auto (U.K.) Ltd
Fiat Auto Var S.r.l.
Fiat Automobil AG
Italy
Turin
Austria
Germany
Denmark
Brazil
Italy
Switzerland
Netherlands
Morocco
Netherlands
Poland
Portugal
South Africa
Italy
Switzerland
Italy
United Kingdom
Italy
Germany
United Kingdom
Greece
Ireland
Japan
Austria
United Kingdom
Belgium
Spain
Belgium
France
Argentina
Italy
Italy
Spain
Brazil
Country
Registered office
Name
Controlling company
Parent company
Fiat S.p.A.
Subsidiaries consolidated on a line-by-line basis
Automobiles
Fiat Auto Holdings B.V.
37,000
8,700,000
55,000,000
1,233,506,013
2,000,000
13,000,000
454,000
1,000,000
5,672,250
660,334,600
8,000,000
640
2,500,000,000
21,400,000
10,000
44,600,000
7,370,000
97,280,000
3,500,000
60,533,499
5,078,952
420,000,000
5,000,000
EUR
EUR
DKK
BRL
EUR
CHF
EUR
MAD
EUR
PLN
EUR
ZAR
EUR
CHF
EUR
GBP
EUR
EUR
GBP
EUR
EUR
JPY
EUR
16,000,000 GBP
62,000 EUR
60,696,601 EUR
20,951,220 EUR
3,000,000 EUR
377,439,448 ARS
335.632 EUR
10,400 EUR
2,186,928 EUR
116,235,465 BRL
1,000,000 EUR
6,377,257,130 EUR
Capital stock Currency
Interest held by
100.00 Fiat Partecipazioni S.p.A.
Fiat Auto Holdings B.V.
100.00 Inmap 2000 Espana S.L.
100.00 Fidis S.p.A.
Fiat Automoveis S.A. - FIAS
100.00 Fidis S.p.A.
100.00 Fiat Auto S.p.A.
Fiat Center Italia S.p.A.
100.00 Fidis Renting Italia S.p.A.
100.00 Fiat Auto S.p.A.
Fiat Automoveis S.A. - FIAS
Fiat Argentina S.A.
100.00 Fiat Finance Netherlands B.
Fiat Auto (Suisse) S.A.
100.00 Fidis Renting Italia S.p.A.
99.84 Fiat Auto (Belgio) S.A.
100.00 Fiat Finance Netherlands B.
Fiat Auto (Suisse) S.A.
100.00 Fidis S.p.A.
100.00 Fiat Finance Netherlands B.
100.00 Fiat Finance Netherlands B.
100.00 Fiat Auto S.p.A.
100.00 Fiat Auto S.p.A.
Fidis S.p.A.
100.00 Fidis Renting Italia S.p.A.
99.95 Fiat Auto S.p.A.
100.00 Fiat Auto Holdings B.V.
100.00 Fiat Auto S.p.A.
100.00 Fiat Finance Netherlands B.
100.00 Fiat Auto S.p.A.
100.00 Fiat Auto Holdings B.V.
100.00 Fiat Auto S.p.A.
100.00 Fiat Auto S.p.A.
100.00 Fiat Finance Netherlands B.
100.00 Fiat Auto S.p.A.
100.00 Fiat Finance Netherlands B.
Fiat Auto (Suisse) S.A.
100.00 Fiat Finance Netherlands B.
100.00 Fiat Automobil AG
100.00 Fiat Finance Netherlands B.
100.00 Fiat Auto S.p.A.
100.00 Fiat Auto S.p.A.
100.00 Fiat Auto (Suisse) S.A.
- -
% of Group
consolidation
-
90,000
10,000
100,000
98,970
1,030
100,000
99,000
1,000
100,000
65,278
34,721
0.001
99,998
0.002
100,000
99,839
99,998
0.002
100,000
100,000
100,000
100,000
50,000
50,000
100,000
99,950
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
99,000
1,000
100,000
100,000
100,000
100,000
100,000
100,000
-
100,000
0.000
% interest % of voting
held
rights
Appendix 2 - Fiat Group Companies
163
Spain
Spain
France
Belgium
Italy
Spain
Italy
Italy
France
Switzerland
Italy
Spain
Spain
Italy
France
Germany
United Kingdom
Italy
Luxembourg
Amsterdam
Trappes
Heilbronn
Mumbai
Mumbai
Budapest
Slough Berkshire
Turin
Bielsko-Biala
Bratislava
Heilbronn
Glostrup
Utrecht
Warsaw
Warsaw
Budapest
Turin
Turin
Madrid
Alcalá De Henares
Trappes
Brussels
Fiumicino
Seville
Melfi
Turin
Trappes
Schlieren
Turin
Alcalá De Henares
Alcalá De Henares
Modena
Levallois-Perret
Wiesbaden
Slough Berkshire
Modena
Luxembourg
Fiat Finance Netherlands B.V.
Fiat France
Fiat Handlerservice GmbH
Fiat India Automobiles Private Limited
Fiat India Private Ltd.
Fiat Magyarorszag Kereskedelmi KFT.
Fiat Motor Sales Ltd
Fiat Purchasing Italia S.r.l.
FIAT Purchasing Poland Sp. z o.o.
Fiat SR Spol. SR.O.
Fiat Versicherungsdienst GmbH
Fidis Credit Danmark A/S
Fidis Dealer Services B.V.
Fidis Faktoring Polska Sp. z o.o.
Fidis Finance Polska Sp. z o.o.
Fidis Hungary KFT
Fidis Renting Italia S.p.A.
Fidis S.p.A.
Finplus Renting S.A.
Inmap 2000 Espana S.L.
International Metropolitan Automotive Promotion (France) S.A.
Italian Automotive Center S.A.
Leasys S.p.A.
Multipoint Sevilla S.A.
Sata-Società Automobilistica Tecnologie Avanzate S.p.A.
Savarent Società per Azioni
Sofice-Société de Financement des Concessionnaires s.a.s.
Tarfin S.A.
Targa Rent S.r.l.
Targasys Espana S.L.
Targasys Stock SA
Ferrari
Ferrari S.p.A.
Charles Pozzi S.a.r.l.
Ferrari Deutschland GmbH
Ferrari GB Limited
Ferrari GE.D. S.p.A.
Ferrari International S.A.
Hungary
Italy
Italy
Poland
Denmark
Netherlands
Poland
Hungary
United Kingdom
Italy
Poland
Slovack Republic
Germany
Netherlands
France
Germany
India
India
Portugal
Luxembourg
Lisbon
Luxembourg
Fiat Distribuidora Portugal S.A.
Fiat Finance Holding S.A.
Czech Republic
Belgium
Argentina
Prague
Evere
Buenos Aires
Fiat CR Spol. S.R.O.
Fiat Credit Belgio S.A.
Fiat Credito Compania Financiera S.A.
HUF
GBP
EUR
PLN
SKK
EUR
EUR
EUR
EUR
INR
INR
20,000,000
959.519
1,000,000
50,000
31,000,000
13,112,000
3,955,986
2,448,955
2,977,680
19,749,554
77,499,400
851.578
276,640,000
21,000,000
3,353,600
500,000
310,000
5,000
5,108,799
EUR
EUR
EUR
GBP
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
CHF
EUR
EUR
EUR
13,000 EUR
5,800,000 EUR
311,232,342 EUR
10,000,000 PLN
500,000 DKK
698,000 EUR
1,000,000 PLN
150,000,000
1,500,000
600,000
300,000
1,000,000
26,000
690,000,000
235,480,520
5,100,000
18,780,741,500
8,363,617,700
450,300 EUR
2,300,000 EUR
1,000,000 CZK
3,718,500 EUR
119,791,680 ARS
56.00
56.00
56.00
56.00
56.00
56.00
Fiat S.p.A.
Ferrari West Europe S.A.
Ferrari International S.A.
Ferrari International S.A.
Ferrari S.p.A.
Ferrari S.p.A.
Ferrari N.America Inc.
100.00 Fiat Auto S.p.A.
100.00 Fidis S.p.A.
100.00 Fidis S.p.A.
Fiat Auto Argentina S.A.
100.00 Fiat Auto Portuguesa S.A.
100.00 Fidis S.p.A.
Fiat Finance Netherlands B.
100.00 Fiat Auto S.p.A.
100.00 Fiat Finance Netherlands B.
100.00 Fiat Automobil AG
100.00 Fiat Auto S.p.A.
99.87 Fiat Auto S.p.A.
Fiat India Automobiles Priva
100.00 Fiat Auto S.p.A.
100.00 Fiat Auto (U.K.) Ltd
100.00 Fiat Auto Holdings B.V.
100.00 Fiat Auto Holdings B.V.
100.00 Fiat Auto S.p.A.
100.00 Fiat Automobil AG
Rimaco S.A.
100.00 Fiat Finance Netherlands B.
100.00 Fiat Auto Nederland B.V.
100.00 Fidis S.p.A.
Fiat Polska Sp. z o.o.
100.00 Fidis S.p.A.
Fiat Polska Sp. z o.o.
100.00 Fidis S.p.A.
100.00 Fiat Auto S.p.A.
100.00 Fiat Auto S.p.A.
Nuove Iniziative Finanziarie
100.00 Fidis Renting Italia S.p.A.
100.00 Fiat Auto España S.A.
100.00 Fiat France
100.00 Fiat Auto (Belgio) S.A.
100.00 Fidis Renting Italia S.p.A.
100.00 Inmap 2000 Espana S.L.
100.00 Fiat Auto S.p.A.
100.00 Fidis Renting Italia S.p.A.
100.00 Fiat France
100.00 Fidis S.p.A.
100.00 Fidis S.p.A.
100.00 Fiat Auto España S.A.
100.00 Fiat Auto España S.A.
56,000
100,000
100,000
100,000
100,000
99,999
0.001
100,000
99,999
99,999
0.001
100,000
99,995
0.005
100,000
100,000
100,000
100,000
57,532
42,337
100,000
100,000
100,000
100,000
100,000
51,000
49,000
100,000
100,000
99,950
0.050
99,980
0.020
100,000
100,000
99,900
0.100
100,000
100,000
99,997
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
57,181
42,687
Appendix 2 - Fiat Group Companies
164
Italy
U.S.A.
Netherlands
Modena
Englewood Cliffs
Amsterdam
Bundaberg
Curitiba
Wilmington
Wilmington
Wilmington
Calgary
St. Marys
Wilmington
Wilmington
Wilmington
Le Plessis-Belleville
Neustadt
Wilmington
Wilmington
Wilmington
Shanghai
Wilmington
Basildon
Wilmington
Buenos Aires
Ebene
St. Marys
Berlin
Zedelgem
Toronto
Wilmington
St. Marys
Zedelgem
Calgary
Dublin
Austoft Industries Limited
Banco CNH Capital S.A.
Bli Group Inc.
Blue Leaf I.P. Inc.
Case Brazil Holdings Inc.
Case Canada Receivables, Inc.
Case Credit Australia Investments Pty Ltd
Case Credit Holdings Limited
Case Equipment Holdings Limited
Case Equipment International Corporation
Case Europe S.a.r.l.
Case Harvesting Systems GmbH
Case India Limited
Case International Marketing Inc.
Case LBX Holdings Inc.
Case Machinery (Shanghai) Co. Ltd.
Case New Holland Inc.
Case United Kingdom Limited
CNH America LLC
CNH Argentina S.A.
CNH Asian Holding Limited
CNH Australia Pty Limited
CNH Baumaschinen GmbH
CNH Belgium N.V.
CNH Canada, Ltd.
CNH Capital America LLC
CNH Capital Australia Pty Limited
CNH Capital Benelux
CNH Capital Canada Ltd.
CNH Capital (Europe) plc
Ireland
Canada
Mauritius
Australia
Germany
Belgium
Canada
U.S.A.
Australia
Belgium
U.S.A.
U.S.A.
U.S.A.
Canada
Australia
U.S.A.
U.S.A.
U.S.A.
France
Germany
U.S.A.
U.S.A.
U.S.A.
People's Rep.of China
U.S.A.
United Kingdom
U.S.A.
Argentina
Australia
Brazil
U.S.A.
U.S.A.
Switzerland
France
Switzerland
France
France
U.S.A.
Englewood Cliffs
Mill Valley
Nyon
Levallois-Perret
Meyrin
Lyon
Levallois-Perret
New York
Ferrari N.America Inc.
Ferrari San Francisco Inc.
Ferrari (Suisse) SA
Ferrari West Europe S.A.
GSA-Gestions Sportives Automobiles S.A.
Pozzi Rent Snc
Société Française de Participations Ferrari - S.F.P.F. S.A.R.L.
410 Park Display Inc.
Maserati
Maserati S.p.A.
Maserati North America Inc.
Agricultural and Construction Equipment
CNH Global N.V.
USD
USD
CHF
EUR
CHF
EUR
EUR
USD
USD
AUD
EUR
EUR
CAD
USD
AUD
EUR
USD
USD
USD
CAD
AUD
USD
USD
USD
EUR
EUR
USD
USD
USD
USD
USD
GBP
USD
ARS
38,100 EUR
1 CAD
78,571,333
306,785,439
61,355,030
27,268,300
28,000,100
0
83,248,874
6,350,000
1,000
1,000
1,000
1
71,516,000
5
5
1,000
7.622
281.211
5
5
5
2,250,000
5
3,763,618
0
29,611,105
16,353,225 AUD
252,285,242 BRL
321,795,983 EUR
40,000,000 EUR
1,000 USD
200,000
100,000
1,000,000
280,920
1,000,000
15.256
6,000,000
100
Ferrari S.p.A.
Ferrari N.America Inc.
Ferrari International S.A.
Société Française de Partici
Ferrari International S.A.
Ferrari West Europe S.A.
Ferrari International S.A.
Ferrari N.America Inc.
83.90 Fiat Netherlands Holding N.V
CNH Global N.V.
83.90 CNH Australia Pty Limited
83.90 CNH Global N.V.
CNH Latin America Ltda.
83.90 CNH America LLC
83.90 Bli Group Inc.
83.90 CNH America LLC
83.90 CNH Capital America LLC
83.90 CNH Australia Pty Limited
83.90 CNH Capital America LLC
83.90 CNH America LLC
83.90 CNH America LLC
83.90 CNH America LLC
83.90 CNH America LLC
83.90 CNH America LLC
83.90 CNH America LLC
83.90 CNH America LLC
83.90 CNH America LLC
83.90 CNH Global N.V.
83.90 CNH America LLC
83.90 Case New Holland Inc.
83.90 New Holland Holdings Argen
CNH Latin America Ltda.
83.90 CNH Global N.V.
83.90 CNH Global N.V.
83.90 CNH International S.A.
83.90 CNH International S.A.
83.90 CNH Global N.V.
83.90 CNH Capital LLC
83.90 CNH Australia Pty Limited
83.90 CNH Global N.V.
CNH Capital U.K. Ltd
83.90 Case Credit Holdings Limite
CNH Canada, Ltd.
83.90 CNH Capital plc
CNH Global N.V.
CNH Financial Services A/S
CNH International S.A.
100.00 Fiat Partecipazioni S.p.A.
100.00 Maserati S.p.A.
56.00
56.00
56.00
56.00
56.00
56.00
56.00
56.00
83,810
0.108
100,000
59,760
40,240
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
80,654
19,346
100,000
100,000
100,000
100,000
100,000
100,000
100,000
99,000
1,000
99,500
0.500
99,984
0.005
0.003
0.003
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
83,901
0.000
Appendix 2 - Fiat Group Companies
165
Wilmington
Wilmington
Dublin
Wilmington
Wilmington
Basildon
São Pedro
Hvidovre
Heilbronn
Wilmington
Puteaux
Hvidovre
Heilbronn
Modena
Le Plessis-Belleville
Luxembourg
Modena
Contagem
Coslada
St. Valentin
Plock
Carnaxide
Wilmington
Curitiba
Amsterdam
Basildon
Wilmington
Wilmington
Basildon
Harbin
Wilmington
Tashkent
Tashkent
Tashkent
Tashkent
Wilmington
Almere
Bassersdorf
Riverstone
Riverstone
Wilmington
Wilmington
London
Buenos Aires
CNH Capital Insurance Agency Inc.
CNH Capital LLC
CNH Capital plc
CNH Capital RACES LLC
CNH Capital Receivables LLC
CNH Capital U.K. Ltd
CNH Componentes, S.A. de C.V.
CNH Danmark A/S
CNH Deutschland GmbH
CNH Engine Corporation
CNH Financial Services
CNH Financial Services A/S
CNH Financial Services GmbH
CNH Financial Services S.r.l.
CNH France S.A.
CNH International S.A.
CNH Italia s.p.a.
CNH Latin America Ltda.
CNH Maquinaria Spain S.A.
CNH Osterreich GmbH
CNH Polska Sp. z o.o.
CNH Portugal-Comercio de Tractores e Maquinas Agricolas Ltda
CNH Receivables LLC
CNH Serviços Técnicos e Desenvolvimento de Negocios Ltda
CNH Trade N.V.
CNH U.K. Limited
CNH Wholesale Receivables LLC
Fiatallis North America LLC
Flexi-Coil (U.K.) Limited
Harbin New Holland Tractors Co., Ltd.
HFI Holdings Inc.
JV Uzcaseagroleasing LLC
JV UzCaseMash LLC
JV UzCaseService LLC
JV UzCaseTractor LLC
Kobelco Construction Machinery America LLC
Kobelco Construction Machinery Europe BV in liquidation
MBA AG
New Holland Australia Pty Ltd
New Holland Credit Australia Pty Limited
New Holland Credit Company, LLC
New Holland Excavator Holdings LLC
New Holland Holding Limited
New Holland Holdings Argentina S.A.
U.S.A.
Uzbekistan
Uzbekistan
Uzbekistan
Uzbekistan
U.S.A.
Netherlands
Switzerland
Australia
Australia
U.S.A.
U.S.A.
United Kingdom
Argentina
U.S.A.
Brazil
Netherlands
United Kingdom
U.S.A.
U.S.A.
United Kingdom
People's Rep.of China
Portugal
Spain
Austria
Poland
U.S.A.
U.S.A.
Ireland
U.S.A.
U.S.A.
United Kingdom
Mexico
Denmark
Germany
U.S.A.
France
Denmark
Germany
Italy
France
Luxembourg
Italy
Brazil
USD
USD
EUR
USD
USD
GBP
MXN
DKK
EUR
USD
EUR
DKK
EUR
EUR
EUR
USD
EUR
BRL
1,000
0
0
0
0
0
567.225
4,000,000
1
725.834
0
0
165,000,000
23,555,415
0
1,000,000
50,000
91,262,275
0
32
1,000
2,859,091
USD
USD
USD
USD
USD
USD
EUR
CHF
AUD
AUD
USD
USD
GBP
ARS
USD
BRL
EUR
GBP
USD
USD
GBP
USD
498.798 EUR
21,000,000 EUR
2,000,000 EUR
162,591,660 PLN
5
0
6,386,791
1,000
0
10,000,001
135,634,842
12,000,000
18,457,650
1,000
3,738,141
500,000
200,000
10,400
138,813,150
300,000,000
15,600,000
674,264,183
83.90
42.79
50.34
42.79
42.79
54.54
62.61
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
83.90
CNH Trade N.V.
CNH Financial Services S.r.
CNH Capital America LLC
CNH America LLC
CNH Global N.V.
CNH Capital America LLC
CNH Capital America LLC
CNH Global N.V.
CNH America LLC
CNH International S.A.
CNH International S.A.
CNH America LLC
CNH Global N.V.
CNH Global N.V.
CNH International S.A.
CNH Global N.V.
CNH International S.A.
CNH Global N.V.
CNH Global N.V.
CNH Global N.V.
Case Brazil Holdings Inc.
Case Equipment Internation
CNH International S.A.
CNH Global N.V.
CNH Belgium N.V.
Fiat Polska Sp. z o.o.
CNH International S.A.
CNH Italia s.p.a.
CNH Capital America LLC
Banco CNH Capital S.A.
CNH Global N.V.
New Holland Holding Limited
CNH Capital America LLC
CNH America LLC
CNH Canada, Ltd.
CNH Asian Holding Limited
CNH International S.A.
CNH America LLC
Case Credit Holdings Limite
Case Equipment Holdings L
Case Equipment Holdings L
Case Equipment Holdings L
New Holland Excavator Hold
New Holland Kobelco Const
CNH Global N.V.
CNH Australia Pty Limited
CNH Capital Australia Pty L
CNH Capital LLC
CNH America LLC
CNH International S.A.
CNH Latin America Ltda.
0.003
0.002
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
87,880
10,610
1,510
99,999
100,000
99,995
0.005
99,980
0.020
100,000
100,000
100,000
100,000
100,000
100,000
100,000
99,000
1,000
100,000
51,000
60,000
51,000
51,000
65,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
Appendix 2 - Fiat Group Companies
166
Italy
Italy
Italy
Turkey
Orbassano
Turin
Pratola Serra
Demirtas-Bursa
Turin
Addis Ababa
Piacenza
Gürlitz
Saint-Alban-Leysse
Barcelona
Ulm
Turin
Garchizy
Turin
Rorthais
Ulm
Budapest
Budapest
Budapest
Charleroi
Dandenong
Leudelange
Mainz-Mombach
Turin
Watford
Groot
Hendschiken
Morges
Cordoba
Vienna
Commercial Vehicles
Iveco S.p.A.
Amce-Automotive Manufacturing Co.Ethiopia
Astra Veicoli Industriali S.p.A.
Brandschutztechnik Gorlitz GmbH
C.A.M.I.V.A. Constructeurs Associés de Matériels S.A.
Componentes Mecanicos S.A.
Effe Grundbesitz GmbH
Elettronica Trasporti Commerciali S.r.l. (Eltrac S.r.l.)
Euromoteurs S.A.
European Engine Alliance S.c.r.l.
Heuliez Bus S.A.
IAV-Industrie-Anlagen-Verpachtung GmbH
Ikarus Egyedi Autobusz GY
Ikarus Trade Kft.
Ikarusbus Jamugyarto RT
Industrial Vehicles Center Hainaut S.A.
Irisbus Australia Pty. Ltd.
Irisbus Benelux Ltd.
Irisbus Deutschland GmbH
Irisbus Italia S.p.A.
Irisbus (U.K.) Ltd
IVC Brabant N.V. S.A.
IVC Nutzfahrzeuge AG
IVC Véhicules Industriels S.A.
Iveco Argentina S.A.
Iveco Austria GmbH
Switzerland
Switzerland
Argentina
Austria
Germany
Italy
United Kingdom
Belgium
Australia
Luxembourg
Belgium
Hungary
Hungary
Hungary
France
Germany
Italy
France
Italy
Italy
Ethiopia
Italy
Germany
France
Spain
Germany
Belgium
Italy
United Kingdom
Belgium
India
Germany
U.S.A.
Canada
Russia
People's Rep.of China
Herstal-lez-Liege
San Mauro Torinese
Basildon
Antwerp
New Delhi
Berlin
Oklahoma City
Calgary
Saratov
Shanghai
New Holland Kobelco Construction Machinery Belgium SA
New Holland Kobelco Construction Machinery S.p.A.
New Holland Ltd
New Holland Tractor Ltd. N.V.
New Holland Tractors (India) Private Ltd
O & K - Hilfe GmbH
Pryor Foundry Inc.
Receivables Credit II Corporation
RosCaseMash
Shanghai New Holland Agricultural Machinery Corporation Limited
Powertrain Technologies
Fiat Powertrain Technologies S.p.A.
Fiat Powertrain Italia S.r.l.
FMA - Fabbrica Motori Automobilistici S.r.l.
Powertrain Mekanik Sanayi ve Ticaret Limited Sirketi
EUR
ETB
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
TRY
EUR
EUR
GBP
EUR
INR
EUR
USD
CAD
RUR
USD
3,500,000
1,200,000
130,237,793
6,178,000
22,000,000
100,635,750
200,000
800,000
CHF
CHF
ARS
EUR
EUR
EUR
GBP
EUR
1,500,000 AUD
594,000 EUR
600,000 EUR
974,268,827 HUF
350,000,000 HUF
423,220,000 HUF
9,000,000 EUR
25.565 EUR
109,200 EUR
2,098,560 EUR
32,044,797 EUR
858,400,000
3,000,000
10,400,000
511.292
1,870,169
37,405,038
10,225,838
5,120,000
740,100,000
306,186,210
75,329,600,000
247,900
80,025,291
1,000,000
9,631,500
194,983,580,400
25.565
1,000
1
200,000
35,000,000
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
68.15
100.00
100.00
100.00
100.00
100.00
61.30
100.00
70.00
100.00
88.00
99.96
59.39
100.00
100.00
100.00
100.00
100.00
62.61
62.61
83.90
83.90
83.90
83.90
83.90
83.90
32.09
50.34
Fiat Netherlands Holding N.V
Iveco S.p.A.
Iveco S.p.A.
Iveco Magirus Brandschutzt
Iveco Eurofire (Holding) Gm
Iveco España S.L.
Iveco Investitions GmbH
Iveco S.p.A.
Iveco S.p.A.
Iveco Participations S.A.
CNH Global N.V.
Iveco S.p.A.
Société Charolaise de Partic
Iveco Investitions GmbH
Iveco S.p.A.
Iveco España S.L.
Ikarusbus Jamugyarto RT
Iveco España S.L.
Irisbus Italia S.p.A.
Iveco France S.A.
S.A. Iveco Belgium N.V.
Iveco Nederland B.V.
Iveco España S.L.
Iveco France S.A.
Société Charolaise de Partic
Iveco España S.L.
Iveco España S.L.
Iveco España S.L.
S.A. Iveco Belgium N.V.
Iveco Nederland B.V.
Iveco (Schweiz) AG
Iveco (Schweiz) AG
Iveco S.p.A.
Iveco S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Auto Holdings B.V.
Fiat Powertrain Italia S.r.l.
Fiat Auto Holdings B.V.
Fiat Powertrain Italia S.r.l.
New Holland Kobelco Const
CNH Italia s.p.a.
CNH Global N.V.
New Holland Holding Limited
CNH Asian Holding Limited
CNH Baumaschinen GmbH
CNH America LLC
CNH Capital America LLC
Case Equipment Holdings L
CNH Asian Holding Limited
100,000
70,000
100,000
88,000
99,963
59,387
90,000
10,000
100,000
100,000
33,333
33,333
100,000
95,000
5,000
68,146
99,976
0.024
99,998
0.002
95,000
5,000
100,000
99,983
0.017
100,000
100,000
100,000
75,000
25,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
99,980
0.020
100,000
74,625
100,000
100,000
100,000
100,000
100,000
100,000
38,250
60,000
51,000
Appendix 2 - Fiat Group Companies
167
Nuremberg
Watford
Glostrup
Madrid
Haunconcourt
Weisweil
Sete Lagoas
Espoo
Vénissieux
Watford
Paradiso
Ulm
São Paulo
Watford
Saint-Priest-En-Jarez
Ulm
Ulm
Brescia
Arbon
Wilmington
Breda
Hamburg
Berlin
Voyenenga
Samandira-Kartal/Istanbul
Turin
Trappes
Watford
Warsaw
Vila Franca de Xira
Kloten
Wadewille
Mannheim-Neckarau
Arlov
Dandenong
Kiev
La Victoria
Koln
Vysoke Myto
Bratislava
Iveco Bayern GmbH
Iveco Contract Services Limited
Iveco Danmark A/S
Iveco España S.L.
Iveco Est Sas
Iveco Eurofire (Holding) GmbH
Iveco Fiat Brasil Ltda
Iveco Finland OY
Iveco France S.A.
Iveco Holdings Limited
Iveco International Trade Finance S.A.
Iveco Investitions GmbH
Iveco Latin America Ltda
Iveco Limited
Iveco L.V.I. S.a.s.
Iveco Magirus AG
Iveco Magirus Brandschutztechnik GmbH
Iveco Mezzi Speciali S.p.A.
Iveco Motorenforschung AG
Iveco Motors of North America Inc.
Iveco Nederland B.V.
Iveco Nord Nutzfahrzeuge GmbH
Iveco Nord-Ost Nutzfahrzeuge GmbH
Iveco Norge A.S.
Iveco Otomotiv Ticaret A.S.
Iveco Partecipazioni Finanziarie S.r.l.
Iveco Participations S.A.
Iveco Pension Trustee Ltd
Iveco Poland Ltd.
Iveco Portugal-Comercio de Veiculos Industriais S.A.
Iveco (Schweiz) AG
Iveco South Africa (Pty) Ltd.
Iveco Sud-West Nutzfahrzeuge GmbH
Iveco Sweden A.B.
Iveco Trucks Australia Limited
Iveco Ukraine Inc.
Iveco Venezuela C.A.
Iveco West Nutzfahrzeuge GmbH
Karosa A.S.
Karosa r.s.o.
Switzerland
South Africa
Germany
Sweden
Australia
Ukraine
Venezuela
Germany
Czech Republic
Slovack Republic
Portugal
Poland
U.S.A.
Netherlands
Germany
Germany
Norway
Turkey
Italy
France
United Kingdom
Italy
Switzerland
Germany
Brazil
United Kingdom
France
Germany
United Kingdom
Switzerland
Germany
Finland
France
Brazil
Germany
United Kingdom
Denmark
Spain
France
Germany
EUR
GBP
DKK
EUR
EUR
EUR
BRL
GBP
EUR
EUR
USD
EUR
EUR
EUR
NOK
TRY
EUR
EUR
GBP
9,000,000
15,000,750
1,533,900
600,000
47,492,260
55,961,760
2,495,691,000
1,662,000
1,065,559,000
200,000
CHF
ZAR
EUR
SEK
AUD
UAH
VEB
EUR
CZK
SKK
15,962,000 EUR
46,974,500 PLN
1
4,537,802
818,500
2,120,000
18,600,000
5,960,707
50,000,000
10,896,100
2
13,120,000 EUR
4,600,000 CHF
6,493,407 EUR
684,700,000
117,000,000
503,250
250,000,000
47,000,000 GBP
30,800,000 CHF
2,556,459 EUR
200,000 EUR
92,856,130 EUR
170,100,000 BRL
742,000
17,000,000
501,000
259,669,998
305,600
30,776,857
100.00
100.00
100.00
100.00
100.00
99.97
100.00
100.00
97.98
97.98
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Iveco Magirus AG
Iveco Partecipazioni Finanzi
Iveco S.p.A.
Iveco S.p.A.
Iveco France S.A.
Iveco Magirus AG
Iveco S.p.A.
Fiat Automoveis S.A. - FIAS
Iveco S.p.A.
Iveco Latin America Ltda
Iveco S.p.A.
Iveco España S.L.
Iveco S.p.A.
Iveco S.p.A.
Iveco Partecipazioni Finanzi
Iveco Magirus AG
Iveco S.p.A.
Iveco S.p.A.
Iveco Holdings Limited
Iveco France S.A.
Iveco S.p.A.
Fiat Netherlands Holding N.V
Iveco Eurofire (Holding) Gm
Iveco S.p.A.
Iveco Eurofire (Holding) Gm
Iveco S.p.A.
Iveco France S.A.
Iveco S.p.A.
Fiat Netherlands Holding N.V
Iveco Magirus AG
Iveco Magirus AG
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
Iveco Holdings Limited
Iveco Limited
Iveco S.p.A.
Fiat Polska Sp. z o.o.
Iveco S.p.A.
Astra Veicoli Industriali S.p.A
Iveco Nederland B.V.
Iveco S.p.A.
Iveco Magirus AG
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
Iveco Magirus AG
Iveco France S.A.
Karosa A.S.
100,000
100,000
100,000
100,000
100,000
90,032
9,968
50,000
48,576
1,424
100,000
50,326
49,674
100,000
100,000
99,020
0.980
100,000
100,000
100,000
53,660
46,340
99,764
0.236
100,000
60,000
40,000
100,000
100,000
100,000
100,000
100,000
99,995
100,000
100,000
50,000
50,000
99,989
0.011
99,997
0.001
100,000
100,000
100,000
100,000
100,000
99,968
100,000
100,000
97,978
100,000
Appendix 2 - Fiat Group Companies
168
United Kingdom
Italy
France
France
Spain
Italy
Germany
United Kingdom
France
Spain
France
Italy
Germany
Austria
Italy
U.S.A.
Russia
Poland
Oldham
Modena
Vénissieux
Trappes
Madrid
Turin
Heilbronn
Watford
La Garenne
Barcelona
Fécamp
Corbetta
Meiningen
Innsbruck
Venaria Reale
Farmington Hills
Rjiasan
Sosnowiec
Grasbrunn-Neukerferloh
Llinares del Valles
Saint Denis
Tolmezzo
Reutlingen
Jihlava
Cannock
Corbetta
Contagem
Mexico City
Mexico City
Tepotzotlan
Maua
Turin
Buenos Aires
Anhui
Santo Andre
Amsterdam
Buenos Aires
Seddon Atkinson Vehicles Ltd
Sicca S.p.A.
Société Charolaise de Participations S.A.
Société de Diffusion de Vehicules Industriels-SDVI S.A.S.
Transolver Service S.A.
Transolver Service S.p.A.
Transolver Services GmbH
Trucksure Services Ltd
Utilitaries & Véhicules Industriels Franciliens-UVIF SAS
Zona Franca Alari Sepauto S.A.
2 H Energy S.A.S.
Components
Magneti Marelli Holding S.p.A.
Automotive Lighting Brotterode GmbH
Automotive Lighting Holding GmbH in liquidation
Automotive Lighting Italia S.p.A.
Automotive Lighting LLC
Automotive Lighting o.o.o.
Automotive Lighting Polska Sp. z o.o.
Automotive Lighting Rear Lamps Deutschland GmbH
Automotive Lighting Rear Lamps Espana S.A.
Automotive Lighting Rear Lamps France S.A.
Automotive Lighting Rear Lamps Italia S.p.A.
Automotive Lighting Reutlingen GmbH
Automotive Lighting S.R.O.
Automotive Lighting UK Limited
Fiat CIEI S.p.A.
Iluminacao Automotiva Ltda
Industrial Yorka de Mexico S.A. de C.V.
Industrial Yorka de Tepotzotlan S.A. de C.V.
Industrias Magneti Marelli Mexico S.A. de C.V.
Kadron S/A
Magneti Marelli After Market S.p.A.
Magneti Marelli Argentina S.A.
Magneti Marelli Automotive Components (WUHU) Co. Ltd.
Magneti Marelli Cofap Companhia Fabricadora de Pecas
Magneti Marelli Components B.V.
Magneti Marelli Conjuntos de Escape S.A.
People's Rep.of China
Brazil
Netherlands
Argentina
Brazil
Italy
Argentina
Mexico
Mexico
Germany
Spain
France
Italy
Germany
Czech Republic
United Kingdom
Italy
Brazil
Mexico
France
Vitrolles
S.C.I. La Méditerranéenne
Austria
Spain
Italy
Belgium
Kainbach
Valencia
Trento
Zellik
Lohr-Magirus Feuerwehrtechnik GmbH
Mediterranea de Camiones S.L.
Officine Brennero S.p.A.
S.A. Iveco Belgium N.V.
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
CZK
GBP
EUR
BRL
MXN
EUR
EUR
EUR
EUR
USD
RUR
PLN
GBP
EUR
EUR
EUR
EUR
EUR
EUR
GBP
EUR
EUR
EUR
5,000,000
212,736,263
53,600,000
12,000
USD
BRL
EUR
ARS
2,622,229 BRL
15,349,500 EUR
700,000 ARS
50,000 MXN
50,000 MXN
25.565
9,153,693
1,011,536
10,000,000
1,330,000
927,637,000
15,387,348
624,000
26,533,428
50,000
254,324,998
7,270,000
11,952,191
2,000,000
25,001,000
36,875,663
83,500,000
41,700,000
5,300,000
2,370,000
7,022,400
610,000
1,989,000
750,000
900,000
1,067,500
520,560
2,000,000
248,000 EUR
1,271,775
48,080
7,120,000
6,000,000
99.99
99.63
99.99
99.99
99.69
99.99
99.99
99.99
99.99
98.99
99.99
99.98
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
51.87
100.00
100.00
95.00
100.00
100.00
100.00
Fiat S.p.A.
Automotive Lighting Reutling
Magneti Marelli Holding S.p.
Automotive Lighting Reutling
Magneti Marelli Holding U.S
Automotive Lighting Reutling
Automotive Lighting Reutling
Fiat Polska Sp. z o.o.
Automotive Lighting Rear La
Automotive Lighting Rear La
Automotive Lighting Rear La
Automotive Lighting Reutling
Magneti Marelli Holding S.p.
Automotive Lighting Reutling
Magneti Marelli Holding S.p.
Magneti Marelli Holding S.p.
Automotive Lighting Reutling
Yorka de Mexico S.r.l. de CV
Industrial Yorka de Tepotzot
Yorka de Mexico S.r.l. de CV
Industrial Yorka de Mexico S
Magneti Marelli Sistemas El
Servicios Administrativos Co
Magneti Marelli do Brasil Ind
Magneti Marelli Holding S.p.
Magneti Marelli Holding S.p.
Magneti Marelli France S.a.s
Magneti Marelli Powertrain S
Magneti Marelli Holding S.p.
Magneti Marelli Holding S.p.
Magneti Marelli Sistemi di S
Magneti Marelli Argentina S
Iveco Magirus Brandschutzt
Iveco España S.L.
Iveco S.p.A.
Iveco S.p.A.
Iveco Nederland B.V.
Iveco France S.A.
Société de Diffusion de Veh
Iveco Holdings Limited
Iveco S.p.A.
Iveco España S.L.
Iveco France S.A.
Iveco Partecipazioni Finanzi
Iveco Partecipazioni Finanzi
Iveco Partecipazioni Finanzi
Iveco Holdings Limited
Iveco France S.A.
Iveco España S.L.
Iveco Participations S.A.
99,991
100,000
100,000
100,000
100,000
100,000
99,997
0.003
99,000
100,000
99,992
100,000
100,000
100,000
100,000
100,000
100,000
98,000
2,000
99,000
1,000
99,998
0.002
100,000
99,999
95,000
5,000
100,000
99,634
100,000
95,000
5,000
95,000
100,000
100,000
99,983
0.017
50,000
50,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
51,867
100,000
99,966
100,000
100,000
Appendix 2 - Fiat Group Companies
169
Mexico
Italy
Canada
Mexico
France
Portugal
Canada
U.S.A.
Italy
Sosnowiec
Nanterre
Guangzhou
Wixom
Santpedor
Nanterre
Wilmington
Sosnowiec
Russelsheim
Shanghai
Corbetta
Sanford
Tepotzotlan
Corbetta
Corbetta
Johannesburg
Sosnowiec
Barcelona
Cannock
Osmangazi Bursa
Penang
Col. Chapultepec
Corbetta
Chihuahua
Contagem
Nanterre
El Marques Queretaro
Turin
Saint John
São Pedro
Ingrandes-sur-Vienne
Cacia
Saint John
Eaton Rapids
Verres
Magneti Marelli Exhaust Systems Polska Sp. z o.o.
Magneti Marelli France S.a.s.
Magneti Marelli Guangzhou Motor Vehicle Instruments Co. Limited
Magneti Marelli Holding U.S.A. Inc.
Magneti Marelli Iberica S.A.
Magneti Marelli Motopropulsion France SAS
Magneti Marelli North America Inc.
Magneti Marelli Poland S.A.
Magneti Marelli Powertrain GmbH
Magneti Marelli Powertrain (Shanghai) Co. Ltd.
Magneti Marelli Powertrain S.p.A.
Magneti Marelli Powertrain U.S.A. LLC
Magneti Marelli Sistemas Electronicos Mexico S.A.
Magneti Marelli Sistemi di Scarico S.p.A.
Magneti Marelli Sistemi Elettronici S.p.A.
Magneti Marelli South Africa (Proprietary) Limited
Magneti Marelli Suspension Systems Poland Sp. z o.o.
Magneti Marelli Tubos de Escape SL
Magneti Marelli U.K. Limited
Mako Elektrik Sanayi Ve Ticaret A.S.
Malaysian Automotive Lighting SDN. BHD
Servicios Administrativos Corp. IPASA S.A.
Sistemi Sospensioni S.p.A.
Tecnologia de Iluminacion Automotriz S.A. de C.V.
Tutela Lubrificantes S.A.
Ufima S.A.S.
Yorka de Mexico S.r.l. de CV
Metallurgical Products
Teksid S.p.A.
Accurcast Limited in liquidation
Compania Industrial Frontera S.A. de C.V.
Fonderie du Poitou Fonte S.A.S.
Funfrap-Fundicao Portuguesa S.A.
Jutras Die Casting Limited in liquidation
Magnesium Products of America Inc.
Magnesium Products of Italy S.r.l.
Italy
Mexico
Brazil
France
Spain
United Kingdom
Turkey
Malaysia
Mexico
Germany
People's Rep.of China
Italy
U.S.A.
Mexico
Italy
Italy
South Africa
Poland
People's Rep.of China
U.S.A.
Spain
France
U.S.A.
Poland
France
Poland
Germany
Brazil
Spain
Germany
Brazil
Brazil
Russelsheim
Hortolandia
Barcelona
Heilbronn
São Paulo
Amparo
Magneti Marelli Deutschland GmbH
Magneti Marelli do Brasil Industria e Comercio SA
Magneti Marelli Electronica SL
Magneti Marelli Elektronische Systeme GmbH
Magneti Marelli Eletronica Ltda
Magneti Marelli Escapamentos Ltda
Brazil
Hortolandia
Magneti Marelli Controle Motor Ltda.
EUR
BRL
EUR
EUR
BRL
BRL
EUR
MXN
BRL
EUR
EUR
GBP
TRY
MYR
MXN
EUR
USD
EUR
USD
MXN
EUR
EUR
ZAR
PLN
USD
USD
EUR
EUR
USD
PLN
145,817,739
39,684,600
50,000
26,958,464
13,697,550
24,490,715
43,454,000
13,962,000
EUR
CAD
MXN
EUR
EUR
CAD
USD
EUR
50,000 MXN
60,500,000
50,000
941.028
44,940
10,154,256
12,400,000
16,500,000,000,000
8,000,000
1,000
100,000
10,000,000
85,690,872
25,000,000
23,611,680
20,000,000
74,897,548
1,950,000
43,100,000
8,100,000
10
18,099,776
10,692,500
40,223,205
10,567,800
42,672,960 EUR
15,000,000 PLN
1,050,000
16,868,427
18,388,581
100,000
17,425,695
65,736,384
108,523,749 BRL
84.79
43.24
84.79
84.79
70.89
43.24
43.24
43.24
Fiat S.p.A.
Meridian Technologies Inc.
Teksid Hierro de Mexico S.A
Teksid S.p.A.
Fonderie du Poitou Fonte S.
Meridian Technologies Inc.
Meridian Technologies Inc.
Magnesium Products of Ame
99.99 Magneti Marelli Powertrain S
Fiat do Brasil S.A.
99.99 Magneti Marelli After Market
99.69 Magneti Marelli Holding S.p.
99.99 Magneti Marelli Iberica S.A.
99.99 Magneti Marelli Sistemi Elet
99.99 Magneti Marelli Sistemi Elet
99.99 Magneti Marelli Sistemi di S
Fiat do Brasil S.A.
99.99 Magneti Marelli Sistemi di S
Fiat Polska Sp. z o.o.
99.99 Magneti Marelli Sistemi Elet
Ufima S.A.S.
99.99 Magneti Marelli Sistemi Elet
99.99 Magneti Marelli Holding S.p.
99.99 Magneti Marelli Holding S.p.
99.99 Magneti Marelli France S.a.s
99.63 Magneti Marelli Cofap Comp
99.99 Magneti Marelli Holding S.p.
Fiat Polska Sp. z o.o.
99.99 Magneti Marelli Powertrain S
99.99 Magneti Marelli Powertrain S
99.99 Magneti Marelli Holding S.p.
99.99 Magneti Marelli Holding U.S
99.99 Magneti Marelli Sistemi Elet
99.99 Magneti Marelli Holding S.p.
99.99 Magneti Marelli Holding S.p.
99.99 Magneti Marelli Sistemi di S
99.99 Magneti Marelli Holding S.p.
Fiat Polska Sp. z o.o.
99.99 Magneti Marelli Iberica S.A.
99.99 Magneti Marelli Holding S.p.
94.99 Magneti Marelli Holding S.p.
79.99 Automotive Lighting Reutling
99.99 Magneti Marelli Sistemas El
Industrias Magneti Marelli M
99.99 Magneti Marelli Holding S.p.
99.99 Automotive Lighting LLC
99.99 Magneti Marelli Holding S.p.
99.94 Magneti Marelli Holding S.p.
Fiat Partecipazioni S.p.A.
99.99 Magneti Marelli Holding U.S
84,791
100,000
100,000
100,000
83,607
100,000
100,000
100,000
99,997
0.003
100,000
99,695
100,000
100,000
100,000
99,997
0.003
99,993
0.007
99,980
0.020
100,000
100,000
100,000
100,000
100,000
99,995
0.005
100,000
100,000
99,999
100,000
100,000
100,000
99,999
100,000
99,993
0.007
100,000
100,000
95,000
80,000
99,990
0.010
100,000
100,000
100,000
64,967
34,980
100,000
100,000
100,000
99,976
Appendix 2 - Fiat Group Companies
170
Heilbronn
Wilmington
Saint John
Saint John
Shanghai
Caudan
Toronto
Betim
Frontera
São Pedro
Wilmington
Skoczow
Grugliasco
Grand Rapids
Trappes
Buenos Aires
Zedelgem
Boblingen
Betim
Luton
Pune
Trollhattan
Southfield
New York
Tepotzotlan
Southfield
Tepotzotlan
Windsor
Tepotzotlan
Southfield
Tepotzotlan
Bielsko-Biala
Bihor
Moscow
Meridian Deutschland GmbH
Meridian Magnesium LLC in liquidation
Meridian Technologies Inc.
Meridian Technologies Japan Inc.
Shanghai Meridian Magnesium Products Company Limited
Société Bretonne de Fonderie et de Mécanique S.A.
Teksid Acquisition Inc.
Teksid do Brasil Ltda
Teksid Hierro De Mexico Arrendadora S.A. de C.V.
Teksid Hierro de Mexico S.A. de C.V.
Teksid Inc.
Teksid Iron Poland Sp. z o.o.
Production Systems
Comau S.p.A.
Autodie International, Inc.
Comau France S.A.
Comau Argentina S.A.
Comau Belgium N.V.
Comau Deutschland GmbH
Comau do Brasil Industria e Comercio Ltda.
Comau Estil Unl.
Comau India Private Limited
COMAU Ingest Sverige AB
Comau Pico Expatriate, Inc.
Comau Pico Holdings Corporation
Comau Pico Iaisa S.de R.L. de C.V.
Comau Pico Inc.
Comau Pico Mexico S.de R.L. de C.V.
Comau Pico of Canada Inc.
Comau Pico Pitex S.de R.L. C.V.
Comau Pico Resources, Inc.
Comau Pico Trebol S.de R.L. de C.V.
Comau Poland Sp. z o.o.
Comau Romania S.R.L.
Comau Russia OOO
Romenia
Russia
Poland
U.S.A.
Mexico
Canada
Mexico
U.S.A.
Mexico
U.S.A.
U.S.A.
Mexico
Sweden
United Kingdom
India
Germany
Brazil
Belgium
Italy
U.S.A.
France
Argentina
Mexico
U.S.A.
Poland
Canada
People's Rep.of China
France
Canada
Brazil
Mexico
Canada
Germany
U.S.A.
CAD
USD
EUR
CAD
BRL
MXN
EUR
USD
EUR
ARS
324,980 RON
4,770,225 RUR
2,100,000 PLN
1,000 USD
3,000 MXN
100 CAD
3,000 MXN
21.455 USD
3,000 MXN
1,000 USD
100 USD
3,000 MXN
5,000,000 SEK
46,108,100 USD
58,435,020 INR
1,330,000 EUR
29,312,653 BRL
175,000 EUR
140,000,000
1,000
18,112,592
25,680
418,874,300 MXN
100,000 USD
115,678,500 PLN
6,210
8,000,000
7,000,000
66,000,001
59,899,570
298,500
165,423,445 CAD
25,600 EUR
4.962 USD
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Fiat S.p.A.
Comau Pico Holdings Corpo
Comau S.p.A.
Comau S.p.A.
Comau do Brasil Industria e
Fiat Argentina S.A.
Comau S.p.A.
Comau France S.A.
Comau S.p.A.
Comau S.p.A.
Fiat do Brasil S.A.
Comau S.p.A.
Comau S.p.A.
Comau Deutschland GmbH
Comau S.p.A.
Ingest Facility S.p.A.
Comau Pico Holdings Corpo
Comau S.p.A.
Comau Pico Mexico S.de R.
Comau S.p.A.
Comau Pico Holdings Corpo
Comau S.p.A.
Comau Deutschland GmbH
Comau S.p.A.
Comau Pico Mexico S.de R.
Comau S.p.A.
Comau Pico Holdings Corpo
Comau Pico Mexico S.de R.
Comau S.p.A.
Comau S.p.A.
Fiat Polska Sp. z o.o.
Comau S.p.A.
Comau S.p.A.
Comau Deutschland GmbH
43.24 Meridian Technologies Inc.
43.24 Meridian Technologies Japa
Meridian Technologies Inc.
43.24 Teksid S.p.A.
Teksid Acquisition Inc.
43.24 Meridian Technologies Inc.
25.95 Meridian Technologies Inc.
84.79 Teksid S.p.A.
84.79 Teksid S.p.A.
84.79 Teksid S.p.A.
84.79 Teksid S.p.A.
Teksid Inc.
84.79 Teksid S.p.A.
84.79 Teksid S.p.A.
84.79 Teksid S.p.A.
Fiat Polska Sp. z o.o.
100,000
100,000
100,000
55,280
44,688
0.031
99,900
0.100
100,000
99,999
0.001
100,000
99,990
0.010
51,000
49,000
100,000
100,000
99,967
0.033
100,000
99,967
0.033
100,000
99,967
0.033
100,000
99,967
0.033
99,976
0.024
100,000
99,000
1,000
100,000
90,000
10,000
31,450
19,550
100,000
60,000
100,000
100,000
100,000
99,967
0.033
100,000
100,000
99,996
0.004
Appendix 2 - Fiat Group Companies
171
Turin
Turin
Nova Lima
Bielsko-Biala
PDL Services S.r.l.
Risk Management S.p.A.
Sadi Brasil Ltda.
Sadi Polska-Agencja Celna Sp. z o.o.
Turin
Madrid
Turin
Fiat Gesco S.p.A.
Fiat Iberica S.A.
Fiat Servizi per l`Industria S.c.p.a.
Turin
Levallois-Perret
Ulm
Watford
Turin
Zedelgem
Fiat GES.CO. Belgium N.V.
Ingest Facility S.p.A.
ITS GSA FiatGroup France S.A.S.
ITS-GSA Deutschland GmbH
ITS-GSA U.K. Limited
KeyG Consulting S.p.A.
Turin
Trappes
eSPIN S.p.A.
Fiat Finance et Services S.A.
Basildon
Bielsko-Biala
Ulm
Nova Lima
Bielsko-Biala
Business Solutions Deutschland FiatGroup GmbH
Business Solutions do Brasil Ltda
Business Solutions Polska Sp. z o.o.
Fiat U.K. Limited
Ingest Facility Polska Sp. z o.o.
Italy
Italy
Italy
Argentina
Turin
Turin
Turin
Buenos Aires
Italy
Italy
Brazil
Poland
Italy
France
Germany
United Kingdom
Italy
United Kingdom
Poland
Italy
Spain
Italy
Belgium
Italy
France
Germany
Brazil
Poland
South Africa
South Africa
South Africa
Spain
United Kingdom
People's Rep.of China
South Africa
Spain
U.S.A.
U.S.A.
Uitenhage
Uitenhage
Uitenhage
Madrid
Watford
Shanghai
Uitenhage
Urdùliz
Southfield
Plymouth
Comau SA Body Systems (Pty) Ltd.
Comau SA Press Tools and Parts (Pty) Ltd.
Comau SA Properties (Pty) Ltd.
Comau Service Systems S.L.
Comau Service U.K. Ltd
Comau (Shanghai) Automotive Equipment Co. Ltd.
Comau South Africa (Pty) Ltd.
Mecaner S.A.
Pico Europe, Inc.
Precision Pico Products Inc.
Services
Business Solutions S.p.A.
Building Services S.r.l.
Building Support S.r.l.
Business Solutions Argentina S.A.
EUR
EUR
EUR
ARS
ZAR
ZAR
ZAR
EUR
GBP
USD
ZAR
EUR
USD
USD
105,000
120,000
100,000
500,000
1,700,000
1,737,440
25,000
50,000
167.352
EUR
EUR
BRL
PLN
EUR
EUR
EUR
GBP
EUR
750,000 GBP
500,000 PLN
3,600,000 EUR
2,797,054 EUR
1,652,669 EUR
62,500 EUR
1,000,000 EUR
3,700,000 EUR
200,000 EUR
36,915,855 BRL
3,600,000 PLN
10,000,000
90,000
90,000
258.355
300
100
100
250,000
260,000
1,000,000
1,001,001
6,000,000
1,000
1,000
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
60.00
100.00
100.00
100.00
100.00
99.18
100.00
100.00
100.00
100.00
100.00
100.00
100.00
51.00
51.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Fiat S.p.A.
Ingest Facility S.p.A.
Building Services S.r.l.
Business Solutions do Brasi
Fiat Auto Argentina S.A.
Business Solutions S.p.A.
Business Solutions S.p.A.
Business Solutions S.p.A.
Fiat Polska Sp. z o.o.
Business Solutions S.p.A.
Business Solutions S.p.A.
Fiat Partecipazioni S.p.A.
Fiat U.K. Limited
Fiat Gesco S.p.A.
Business Solutions S.p.A.
Business Solutions S.p.A.
Fiat S.p.A.
Fiat Auto S.p.A.
Business Solutions S.p.A.
Iveco S.p.A.
Magneti Marelli Holding S.p.
CNH Italia s.p.a.
Fiat Partecipazioni S.p.A.
Teksid S.p.A.
Comau S.p.A.
C.R.F. Società Consortile pe
Editrice La Stampa S.p.A.
Fiat Gesco S.p.A.
Ingest Facility S.p.A.
Fiat Polska Sp. z o.o.
Business Solutions S.p.A.
Fiat Finance et Services S.A
Business Solutions Deutsch
Fiat U.K. Limited
Fiat Gesco S.p.A.
Business Solutions S.p.A.
Business Solutions S.p.A.
Business Solutions S.p.A.
Business Solutions do Brasi
Servizi e Attività Doganali pe
Comau South Africa (Pty) Lt
Comau SA Body Systems (P
Comau SA Body Systems (P
Comau S.p.A.
Comau S.p.A.
Comau S.p.A.
Comau S.p.A.
Comau S.p.A.
Comau S.p.A.
Comau Pico Holdings Corpo
100,000
51,000
100,000
99,992
0.008
100,000
100,000
99,986
0.014
100,000
99,997
0.001
99,960
0.040
100,000
100,000
36,468
33,532
7,500
6,000
4,000
3,000
3,000
2,000
1,500
1,500
1,500
100,000
99,800
0.200
100,000
100,000
100,000
100,000
52,800
7,200
100,000
100,000
100,000
99,800
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
Appendix 2 - Fiat Group Companies
172
Italy
Italy
Italy
Italy
France
Italy
Cayman Islands
Switzerland
Italy
Milan
Turin
Genoa
Turin
Paris
Milan
Grand Cayman
Lugano
Amaro
Orbassano
Turin
Pomigliano d'Arco
Zurich
Nova Lima
Paris
Turin
Ulm
Buenos Aires
Turin
Nova Lima
Trantor S.r.l.
Publishing and Communications
Itedi-Italiana Edizioni S.p.A.
BMI S.p.A.
Editrice La Stampa S.p.A.
La Stampa Europe SAS
Publikompass S.p.A.
Holding companies and Other companies
Banca Unione di Credito (Cayman) Ltd
BUC - Banca Unione di Credito
Centro Ricerche Plast-Optica S.p.A.
C.R.F. Società Consortile per Azioni
Deposito Avogadro S.r.l.
Elasis-Società Consortile per Azioni
Fahag Immobilien-und Finanz-Gesellschaft AG
Fast Buyer do Brasil Ltda
Fast Buyer France S.a.r.l.
Fast-Buyer S.p.A.
Fias Fiat Administration und Service GmbH
Fiat Argentina S.A.
Fiat Attività Immobiliari S.p.A.
Fiat do Brasil S.A.
Italy
Brazil
Argentina
France
Italy
Germany
Switzerland
Brazil
Italy
Italy
Italy
Italy
Brazil
Sestriere
Nova Lima
Sporting Club Sestrieres S.R.L.
Telexis do Brasil Ltda.
Italy
Italy
Turin
Sestriere
Servizi e Attività Doganali per l`Industria S.p.A.
Sestrieres S.p.A.
EUR
EUR
EUR
EUR
EUR
65,700,000 EUR
999.684 BRL
520.002 ARS
7,700 EUR
500,000 EUR
102.258 EUR
500,000 CHF
50,000 BRL
100,000 EUR
20,000,000 EUR
45,400,000 EUR
10,000,000 CHF
100,000,000 CHF
1,033,000 EUR
5,980,000
124,820
4,160,000
18,600,000
3,068,000
104,000 EUR
312,000 EUR
1,400 BRL
520,000 EUR
16,120,000 EUR
Fiat S.p.A.
Itedi-Italiana Edizioni S.p.A.
Itedi-Italiana Edizioni S.p.A.
Itedi-Italiana Edizioni S.p.A.
Itedi-Italiana Edizioni S.p.A.
100.00 BUC - Banca Unione di Cred
100.00 IHF-Internazionale Holding F
74.47 C.R.F. Società Consortile pe
Automotive Lighting Rear La
97.99 Fiat Auto S.p.A.
Iveco S.p.A.
Magneti Marelli Holding S.p.
Fiat Powertrain Italia S.r.l.
CNH Italia s.p.a.
Comau S.p.A.
Teksid S.p.A.
Fiat Partecipazioni S.p.A.
Ferrari S.p.A.
100.00 Fiat Partecipazioni S.p.A.
97.85 Fiat Auto S.p.A.
C.R.F. Società Consortile pe
CNH Italia s.p.a.
Fiat Powertrain Italia S.r.l.
Iveco S.p.A.
Comau S.p.A.
Magneti Marelli Holding S.p.
Fiat Partecipazioni S.p.A.
Ferrari S.p.A.
Isvor Fiat Società consortile
Fiat S.p.A.
100.00 IHF-Internazionale Holding F
100.00 Fast-Buyer S.p.A.
Fiat Automoveis S.A. - FIAS
100.00 Fast-Buyer S.p.A.
100.00 Fiat Partecipazioni S.p.A.
100.00 Iveco Magirus AG
Fiat Automobil AG
100.00 Fiat Partecipazioni S.p.A.
SGR-Sociedad para la Gest
100.00 Fiat Partecipazioni S.p.A.
100.00 Fiat Partecipazioni S.p.A.
100.00
58.00
100.00
100.00
100.00
Fiat Polska Sp. z o.o.
100.00 Business Solutions S.p.A.
100.00 Business Solutions S.p.A.
Fiat Partecipazioni S.p.A.
100.00 Sestrieres S.p.A.
100.00 Business Solutions do Brasi
Fiat do Brasil S.A.
100.00 Ingest Facility S.p.A.
100,000
100,000
51,000
24,500
35,000
20,000
15,000
10,000
5,000
5,000
5,000
4,000
1,000
100,000
51,000
27,933
6,800
5,000
3,300
1,500
1,500
1,450
1,100
0.250
0.167
100,000
99,998
0.002
100,000
100,000
80,000
20,000
99,990
0.010
100,000
99,932
100,000
58,004
100,000
100,000
100,000
0.200
100,000
70,000
30,000
100,000
99,929
0.071
100,000
Appendix 2 - Fiat Group Companies
173
Calgary
Luxembourg
Wilmington
Turin
Turin
Amsterdam
Turin
London
Warsaw
Fiat Finance Canada Ltd.
Fiat Finance Luxembourg S.A.
Fiat Finance North America Inc.
Fiat Ge.Va. S.p.A.
Fiat Information & Communication Services società consortile per azioni
Fiat Netherlands Holding N.V.
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni (U.K.) Limited
Fiat Polska Sp. z o.o.
Paradiso
New York
Turin
Luxembourg
Fiat Finance and Trade Ltd
Fiat Servizi S.A.
Fiat U.S.A. Inc.
Fiat-Revisione Interna S.c.r.l.
Nova Lima
Fiat Financas Brasil Ltda
Switzerland
U.S.A.
Italy
Italy
United Kingdom
Poland
Netherlands
Italy
Italy
U.S.A.
Canada
Luxembourg
Luxembourg
Brazil
100,000 CHF
16,830,000 USD
300,000 EUR
3,924,685,869 EUR
860,000 GBP
25,500,000 PLN
4,366,482,748 EUR
224,440,000 EUR
800,000 EUR
40,090,010 USD
10,099,885 CAD
100,000 USD
251,494,000 EUR
2,469,701 BRL
100.00
100.00
95.43
100.00
100.00
100.00
100.00
100.00
96.61
100.00
100.00
100.00
100.00
100.00
Fiat Gesco S.p.A.
Isvor Fiat Società consortile
Fiat Ge.Va. S.p.A.
Fiat do Brasil S.A.
Fiat Ge.Va. S.p.A.
Fiat Finance Canada Ltd.
Fiat Ge.Va. S.p.A.
Intermap (Nederland) B.V.
Fiat Netherlands Holding N.V
Fiat Ge.Va. S.p.A.
Fiat S.p.A.
Fiat S.p.A.
Fiat S.p.A.
CNH Italia s.p.a.
Fiat Auto S.p.A.
Iveco S.p.A.
Business Solutions S.p.A.
Comau S.p.A.
Ferrari S.p.A.
Itedi-Italiana Edizioni S.p.A.
Magneti Marelli Holding S.p.
Teksid S.p.A.
Fiat Partecipazioni S.p.A.
Fiat S.p.A.
Fiat Partecipazioni S.p.A.
Fiat S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Auto Poland S.A.
Automotive Lighting Polska
Magneti Marelli Exhaust Sys
Magneti Marelli Poland S.A.
Magneti Marelli Suspension
Teksid Iron Poland Sp. z o.o
Business Solutions Polska S
CNH Polska Sp. z o.o.
Comau Poland Sp. z o.o.
Fidis Faktoring Polska Sp. z
Fidis Finance Polska Sp. z o
Ingest Facility Polska Sp. z o
Sadi Polska-Agencja Celna
Sirio Polska Sp. z o.o.
Iveco Poland Ltd.
IHF-Internazionale Holding F
Fiat S.p.A.
Fiat Auto S.p.A.
Fiat S.p.A.
Fiat Partecipazioni S.p.A.
CNH Global N.V.
Iveco S.p.A.
Comau S.p.A.
0.061
0.007
99,994
0.006
99,993
0.007
100,000
99,000
1,000
60,526
39,474
100,000
51,000
10,000
10,000
10,000
3,000
3,000
3,000
3,000
3,000
3,000
1,000
60,563
39,437
100,000
100,000
99,904
0.029
0.010
0.010
0.010
0.010
0.010
0.002
0.002
0.002
0.002
0.002
0.002
0.002
0.002
0.001
100,000
100,000
20,000
14,000
11,667
10,000
10,000
5,000
Appendix 2 - Fiat Group Companies
174
Lugano
Amsterdam
Turin
Lugano
Lausanne
Turin
Turin
Lausanne
Turin
IHF-Internazionale Holding Fiat S.A.
Intermap (Nederland) B.V.
Isvor Fiat Società consortile di sviluppo e addestramento industriale per Azioni
Luganova S.A.
Neptunia Assicurazioni Marittime S.A.
New Business 7 S.p.A.
New Business 8 S.p.A.
Rimaco S.A.
SIRIO - Sicurezza Industriale Società consortile per azioni
Switzerland
Switzerland
Italy
Italy
Switzerland
Italy
Switzerland
Netherlands
Italy
3,000,000
10,000,000
11,899,524
1,437,210
350,000
120,000
CHF
CHF
EUR
EUR
CHF
EUR
100,000,000 CHF
200,000 EUR
300,000 EUR
100.00
100.00
100.00
100.00
100.00
88.54
100.00
100.00
97.61
Ferrari S.p.A.
Itedi-Italiana Edizioni S.p.A.
Magneti Marelli Holding S.p.
Teksid S.p.A.
Business Solutions S.p.A.
Fiat Powertrain Italia S.r.l.
Maserati S.p.A.
Fiat Ge.Va. S.p.A.
Fiat S.p.A.
Fiat Partecipazioni S.p.A.
Fiat S.p.A.
Fiat Auto S.p.A.
Iveco S.p.A.
CNH Italia s.p.a.
Magneti Marelli Holding S.p.
Comau S.p.A.
Business Solutions S.p.A.
Teksid S.p.A.
BUC - Banca Unione di Cred
Rimaco S.A.
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni S.p.A.
IHF-Internazionale Holding F
Fiat Partecipazioni S.p.A.
Fiat Auto S.p.A.
Iveco S.p.A.
Fiat Powertrain Italia S.r.l.
Magneti Marelli Powertrain S
Comau S.p.A.
Fiat S.p.A.
Ferrari S.p.A.
Teksid S.p.A.
Irisbus Italia S.p.A.
Fiat Gesco S.p.A.
Sistemi Sospensioni S.p.A.
C.R.F. Società Consortile pe
New Holland Kobelco Const
Fiat Servizi per l`Industria S
Fiat Ge.Va. S.p.A.
Isvor Fiat Società consortile
Magneti Marelli Sistemi Elet
Fidis S.p.A.
CNH Italia s.p.a.
Automotive Lighting Italia S.
Editrice La Stampa S.p.A.
Elasis-Società Consortile pe
Ingest Facility S.p.A.
Magneti Marelli Sistemi di S
Astra Veicoli Industriali S.p.A
Atlanet S.p.A.
Fiat Information & Communi
5,000
5,000
5,000
5,000
4,333
2,000
2,000
1,000
100,000
100,000
26,000
22,000
17,000
12,000
9,000
8,000
3,000
3,000
100,000
100,000
100,000
100,000
100,000
53,205
17,415
4,583
2,317
1,159
0.751
0.751
0.729
0.664
0.622
0.553
0.551
0.535
0.535
0.503
0.449
0.449
0.438
0.325
0.237
0.233
0.233
0.233
0.233
0.218
0.103
0.103
0.103
Appendix 2 - Fiat Group Companies
175
Sisport Fiat S.p.A.
Turin
Associated companies and their subsidiaries consolidated on a line-by line basis under IFRS
Automobiles
Società di Commercializzazione e Distribuzione Ricambi S.p.A.
Turin
SCDR Automotive Limited
Basildon
SCDR (Ireland) Limited
Dublin
SCDR (Switzerland) S.A.
Schlieren
Società di Distribuzione e Commercializzazione Ricambi - Hellas M.E.P.E.
Argyroupoli
Commercial Vehicles
Afin Leasing AG
Vienna
Afin Asigurari S.r.l.
Bucarest
Afin Bohemia
Prague
Afin Bulgaria EAD
Sofia
Afin Hungary Kereskedelmi KFT.
Budapest
Afin Insurance
Sofia
Afin Slovakia S.R.O.
Bratislava
AS Afin Baltica
Tallin
OOO Afin Vostok Limited Liability Company
Moscow
s.c. Afin Romania S.A.
Bucarest
UAB Afin Baltica (Lithuania)
Vilnius
Jointly-controlled entities accounted for using the proportional consolidation
Powertrain Technologies
Fiat-GM Powertrain Polska Sp. z o.o.
Bielsko-Biala
Jointly-controlled entities accounted for using the equity method
Automobiles
G.E.I.E. Gisevel
Paris
G.E.I.E.-Sevelind
Paris
Nan Jing Fiat Auto Co. Ltd.
Nanjing
Società Europea Veicoli Leggeri-Sevel S.p.A.
Atessa
Société Européenne de Véhicules Légers du Nord-Sevelnord Société Anonyme Paris
France
France
People's Rep.of China
Italy
France
Poland
Austria
Romenia
Czech Republic
Bulgaria
Hungary
Bulgaria
Slovack Republic
Estonia
Russia
Romenia
Lithuania
Italy
United Kingdom
Ireland
Switzerland
Greece
Italy
EUR
ROL
EUR
BGL
HUF
BGL
EUR
EEK
RUR
ROL
LTT
EUR
GBP
EUR
CHF
EUR
15,200
15,200
1,409,469,782
68,640,000
80,325,000
EUR
EUR
CNY
EUR
EUR
220,100,000 PLN
1,500,000
225,000,000
30,000
200,000
24,000,000
5,000
30,000
800,000
50,000,000
2,063,200,000
35,000
100,000
50,000
70,000
100,000
18,000
2,720,800 EUR
Iveco International Trade Fin
s.c. Afin Romania S.A.
Afin Leasing AG
Afin Leasing AG
Afin Leasing AG
Afin Bulgaria EAD
Afin Leasing AG
Afin Leasing AG
Afin Leasing AG
Afin Leasing AG
Afin Leasing AG
Fiat Auto S.p.A.
Società di Commercializzaz
Società di Commercializzaz
Società di Commercializzaz
Società di Commercializzaz
50.00
50.00
50.00
50.00
50.00
Fiat France
Fiat France
Fiat Auto S.p.A.
Fiat Auto S.p.A.
Fiat France
50.00 Fiat Auto Holdings B.V.
40.00
40.00
40.00
40.00
39.83
40.00
40.00
40.00
40.00
40.00
40.00
19.00
19.00
19.00
19.00
19.00
Savarent Società per Azioni
Servizi e Attività Doganali pe
Magneti Marelli Holding S.p.
Fiat Purchasing Italia S.r.l.
Fiat-Revisione Interna S.c.r.
Iveco Mezzi Speciali S.p.A.
Fiat Center Italia S.p.A.
Business Solutions S.p.A.
eSPIN S.p.A.
Fast-Buyer S.p.A.
Fiat Media Center S.p.A.
Fiat Powertrain Technologie
Itedi-Italiana Edizioni S.p.A.
Maserati S.p.A.
Orione-Consorzio Industriale
PDL Services S.r.l.
Risk Management S.p.A.
Sisport Fiat S.p.A.
Automotive Lighting Rear La
Easy Drive S.r.l.
Fiat Attività Immobiliari S.p.A
100.00 Fiat Partecipazioni S.p.A.
50,000
50,000
50,000
50,000
50,000
50,000
40,000
100,000
100,000
100,000
99,583
100,000
100,000
100,000
100,000
100,000
100,000
19,000
100,000
100,000
100,000
100,000
0.103
0.103
0.091
0.063
0.061
0.061
0.045
0.040
0.040
0.040
0.039
0.039
0.039
0.039
0.039
0.039
0.039
0.039
0.022
0.022
0.022
100,000
Appendix 2 - Fiat Group Companies
176
Argentina
Buenos Aires
Iveco Plan S.A. de Ahorro para fines determinados
U.S.A.
Thailand
Germany
Austria
Egypt
Egypt
Argentina
Thailand
Morocco
Poland
Orlando
Bangkok
Erfurt
Vienna
Giza
Giza
Buenos Aires
Bangkok
Casablanca
Bielsko-Biala
Italy
Spain
France
Colombia
Brazil
Nova Lima
Genoa
Madrid
Trappes
Santa Fe' de Bogota
People's Rep.of China
Zhenjiang-Jangsu
U.S.A.
Canada
U.S.A.
U.S.A.
U.S.A.
U.S.A.
Canada
U.S.A.
U.S.A.
Spain
Barcelona
Wilmington
Ottawa
Wilmington
Wilmington
Wilmington
Wilmington
Ottawa
Wilmington
Wilmington
France
People's Rep.of China
Italy
People's Rep.of China
Spain
Italy
Boulogne
Zhajiang
Rome
Nanjing
Madrid
Turin
Russia
Mexico
U.S.A.
India
Japan
São Pedro
Whitakers
Mumbai
Sapporo
Nizhnjy Novgorod
Turkey
Levent
Zao Nizhegorod Motors
Agricultural and Construction Equipment
Farmers New Holland Inc.
Medicine Hat New Holland Ltd.
Memphis New Holland Inc.
Northside New Holland Inc.
Ridgeview New Holland Inc.
St. Anthony New Holland, Inc.
St. Catharines New Holland Ltd.
Sunrise Tractor & Equipment Inc.
Tri-County New Holland Inc.
Commercial Vehicles
Altra S.p.A.
F. Pegaso S.A.
Financière Pegaso France S.A.
Iveco Colombia Ltda.
Tofas-Turk Otomobil Fabrikasi Tofas A.S.
Agricultural and Construction Equipment
CNH de Mexico SA de CV
Consolidated Diesel Company
L&T Case Equipment Limited
New Holland HFT Japan Inc.
Commercial Vehicles
GEIE V.IV.RE
Haveco Automotive Transmission Co. Ltd.
Iveco Fiat - Oto Melara Società consortile r.l.
Naveco Ltd.
Transolver Finance Establecimiento Financiero de Credito S.A.
V.IVE.RE Gruppo Europeo di Interesse Economico
Components
Gestamp Marelli Autochasis S.L.
Metallurgical Products
Hua Dong Teksid Automotive Foundry Co. Ltd.
Services
Global Value Soluçoes Ltda
Subsidiaries accounted for using the equity method
Automobiles
Alfa Romeo Inc.
Alfa Romeo Motors Ltd.
Auto Italia Erfurt GmbH in liquidation
F.A. Austria Commerz GmbH
Fiat Auto Egypt Industrial Company SAE
Fiat Auto Egypt S.A.E.
Fiat Auto S.A. de Ahorro para Fines Determinados
Fiat Auto Thailand Pvt. Ltd.
Italcar SA
Sirio Polska Sp. z o.o.
EUR
CNY
EUR
CNY
EUR
EUR
MXN
USD
INR
JPY
USD
THB
EUR
EUR
EGP
EGP
ARS
THB
MAD
PLN
EUR
EUR
EUR
COP
USD
CAD
USD
USD
USD
USD
CAD
USD
USD
153,000 ARS
516,400
993.045
260.832
2,870,909,000
650,000
951.283
487,600
250,000
440,000
300,000
327,700
875,000
400,000
24,660,000 RUR
3,000,000
160,000,000
2,985,000
37,000
50,000,000
5,000,000
24,535,149
276,000,000
4,000,000
1,350,000
2,000 BRL
306,688,237 CNY
2,000,000 EUR
0
200,010,000
40,000
2,527,000,000
9,315,500
0
165,276,000
100
240,100,000
240,000,000
500,000,000 TRY
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
CNH Global N.V.
CNH Engine Corporation
CNH America LLC
CNH Global N.V.
CNH America LLC
CNH Canada, Ltd.
CNH America LLC
CNH America LLC
CNH America LLC
CNH America LLC
CNH Canada, Ltd.
CNH America LLC
CNH America LLC
Irisbus Italia S.p.A.
Iveco España S.L.
Iveco España S.L.
Iveco Venezuela C.A.
Iveco Latin America Ltda
100.00 Iveco Argentina S.A.
Fiat Argentina S.A.
66.67
100.00
100.00
100.00
83.90
63.34
81.16
76.35
57.57
83.90
52.79
73.39
83.90
Fiat Auto S.p.A.
Fiat Auto S.p.A.
Fiat Automobil Vertriebs Gm
Fiat Auto (Suisse) S.A.
Fiat Auto S.p.A.
Fiat Auto Egypt Industrial Co
Fiat Auto Argentina S.A.
Fiat Auto S.p.A.
Inmap 2000 Espana S.L.
Fiat Auto Poland S.A.
Fiat Polska Sp. z o.o.
73.14 Fiat Auto S.p.A.
100.00
100.00
100.00
100.00
80.40
79.60
100.00
100.00
100.00
100.00
50.00 Business Solutions do Brasi
42.40 Teksid S.p.A.
50.00 Sistemi Sospensioni S.p.A.
50.00
33.33
50.00
50.00
50.00
50.00
41.95
41.95
41.95
41.95
37.86 Fiat Auto S.p.A.
66,670
100,000
100,000
99,974
0.026
99,600
0.400
100,000
75,500
96,739
91,000
68,614
100,000
62,923
87,474
100,000
100,000
99,999
100,000
100,000
80,400
99,000
100,000
100,000
100,000
99,963
0.037
73,139
50,000
50,000
50,000
50,000
33,333
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
37,856
73,127
ppendix 2 - Fiat Group Companies
177
India
Italy
Australia
Italy
Italy
Italy
Argentina
Italy
Spain
Portugal
Italy
Bardez-Goa
Grugliasco
Wingfield
Turin
Turin
Turin
Turin
Basildon
Beijing
Moscow
Turin
Buenos Aires
Rivoli
Alcalá De Henares
Alges
Turin
Holding companies and Other companies
Centro Studi sui Sistemi di Trasporto-CSST S.p.A.
European Engine Alliance EEIG
Fiat (China) Business Co., Ltd.
Fiat Russia OOO
Isvor Dealernet S.r.l. in liquidation
SGR-Sociedad para la Gestion de Riesgos S.A.
Sistemi Ambientali S.p.A. in liquidation
Subsidiaries valued at cost
Automobiles
Fiat Auto Espana Marketing Instituto Agrupacion de Interes Economico
Fiat Auto Marketing Institute (Portugal) ACE
Nuove Iniziative Finanziarie 2 S.r.l.
Germany
United Kingdom
France
Australia
U.S.A.
U.S.A.
United Kingdom
Italy
Wiesbaden
Slough Berkshire
Levallois-Perret
St. Marys
Wilmington
Wilmington
Basildon
Turin
Teheran
Dover
Bolzano
Shanghai
Iran Magirus-Deutz
Irisbus North America Limited Liability Company
Iveco Defence Vehicles S.p.A.
Iveco Motors of China Limited
Iran
U.S.A.
Italy
People's Rep.of China
India
Mumbai
Powertrain India Pvt. Ltd. in liquidation
Maserati
Maserati Deutschland GmbH
Maserati GB Limited
Maserati West Europe societé par actions simplifiée
Agricultural and Construction Equipment
Case Credit Wholesale Pty. Limited
Fermec North America Inc.
International Harvester Company
J.I. Case Company Limited
Commercial Vehicles
Consorzio per la Formazione Commerciale Iveco-Coforma
Italy
People's Rep.of China
Russia
United Kingdom
Italy
Brazil
Russia
Congo (Dem. Rep. Congo
Santo Andre
Krasnig Oktjabr Kirz
Kinshasa
Components
Cofap Fabricadora de Pecas Ltda
Seima Italiana Auto Svet
Metallurgical Products
Teksid of India Private Limited Company in liquidation
Production Systems
Comau AGS S.p.A.
Comau Australia Pty. Ltd
Services
Atlanet S.p.A.
Cromos Consulenza e Formazione S.r.l. in liquidation
Matrix S.r.l. in liquidation
Iveco S.P.R.L.
AUD
USD
USD
GBP
180,000,000
20,000
100,000
300,000
IRR
USD
EUR
USD
51.646 EUR
347,750
5
1,000
2
500,000 EUR
20,000 GBP
37,000 EUR
101,000 INR
30.051 EUR
15,000 EUR
25,000 EUR
10,000 ARS
9,544,080 EUR
10,000 EUR
500,000 USD
18,509,050 RUR
0 GBP
520,000 EUR
2,000,000 EUR
13,000 EUR
30,000 EUR
1,000,000 EUR
765.589 AUD
403,713,830 INR
62,838,291 BRL
14,574,000 RUR
340,235,000 CDF
CNH Australia Pty Limited
CNH America LLC
CNH America LLC
Case United Kingdom Limite
59.76 Iveco S.p.A.
Isvor Fiat Società consortile
100.00 Iveco Magirus AG
100.00 Iveco France S.A.
100.00 Iveco S.p.A.
100.00 Iveco S.p.A.
83.90
83.90
83.90
83.90
100.00 Maserati S.p.A.
100.00 Maserati S.p.A.
100.00 Maserati S.p.A.
95.00 Fiat Auto España S.A.
80.00 Fiat Auto Portuguesa S.A.
100.00 Fiat Auto S.p.A.
Fidis S.p.A.
100.00 Fiat India Automobiles Priva
89.78 Fiat Auto S.p.A.
Iveco S.p.A.
C.R.F. Società Consortile pe
61.30 CNH U.K. Limited
Iveco S.p.A.
100.00 Fiat Partecipazioni S.p.A.
100.00 Fiat Partecipazioni S.p.A.
Fiat Attività Immobiliari S.p.A
98.09 Isvor Fiat Società consortile
Fiat Auto S.p.A.
99.96 Rimaco S.A.
99.79 Fiat Partecipazioni S.p.A.
100.00 Fiat Partecipazioni S.p.A.
76.00 Business Solutions S.p.A.
99.98 Business Solutions S.p.A.
Isvor Fiat Società consortile
100.00 Comau S.p.A.
100.00 Comau S.p.A.
84.79 Teksid S.p.A.
68.14 Magneti Marelli do Brasil Ind
99.99 Automotive Lighting Rear La
100.00 Iveco S.p.A.
Astra Veicoli Industriali S.p.A
50,000
10,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
99,995
100,000
95,000
80,000
99,000
1,000
100,000
49,000
30,000
11,000
33,333
33,333
100,000
80,000
20,000
80,000
20,000
99,960
99,785
100,000
76,000
99,000
1,000
100,000
100,000
100,000
68,350
100,000
99,992
0.008
Appendix 2 - Fiat Group Companies
178
Cairo
Nova Lima
Burlingame
New Delhi
Turin
Turin
Geneva
Turin
Turin
Turin
Turin
Turin
Turkey
United Kingdom
Bursa
Watford
Fiat Oriente S.A.E. in liquidation
Fides Corretagens de Securos Ltda
ISVOR DILTS Leadership Systems Inc. in liquidation
Isvor Fiat India Private Ltd. in liquidation
New Business 16 S.r.l.
New Business 17 S.r.l.
Norfinance & Associés S.A. in liquidation
Nuova Immobiliare Cinque S.r.l.
Nuova Immobiliare Quattro S.r.l.
Nuova Immobiliare Tre S.p.A.
Nuove Iniziative Finanziarie 4 S.r.l.
Orione-Consorzio Industriale per la Sicurezza e la Vigilanza
Italy
Turin
Egypt
Brazil
U.S.A.
India
Italy
Italy
Switzerland
Italy
Italy
Italy
Italy
Italy
Italy
Italy
United Kingdom
Italy
Italy
Turin
London
Turin
Turin
Turin
People's Rep.of China
United Kingdom
Italy
Italy
Shanghai
Telford
Rome
Modugno
Fiat Media Center S.p.A.
U.S.A.
Japan
India
People's Rep.of China
Romenia
Southfield
KohoKu-Ku-Yokohama
Pune
Hong Kong
Components
Automotive Lighting Japan K.K.
Magneti Marelli Automotive Components (India) Limited
Magneti Marelli Electronic Systems (Asia) Limited
Yorka Northamerica Corp.
Production Systems
Comau (Shanghai) International Trading Co. Ltd.
Comau U.K. Limited
Consorzio Fermag in liquidation
Synesis
Services
CONSORZIO SERMAGEST - Servizi Manutentivi Gestionali
Fiat Common Investment Fund Limited
Gestione Servizi Territoriali S.r.l.
Polaris Consorzio fra Imprese con Attività Esterna in liquidation
Publishing and Communications
To-dis S.r.l. a socio unico
Holding companies and Other companies
Fast Buyer Middle East A.S.
Fiat Gra.De EEIG
Brasov
M.R. Fire Fighting International S.A.
EUR
GBP
EUR
EUR
USD
GBP
EUR
EUR
50,000
365.525
1,000
1,750,000
50,000
50,000
4,600,000
50,000
50,000
120,000
50,000
26.605
EGP
BRL
USD
INR
EUR
EUR
CHF
EUR
EUR
EUR
EUR
EUR
219.756 EUR
95,000,000,000 TRY
0 GBP
10,000 EUR
15,000
2
90,000
3.099
200,000
2,500
144.608
20,000
10,000 USD
10,000,000 JPY
125,000,000 INR
10,000 HKD
35,000,000 RON
Ingest Facility S.p.A.
Fiat U.K. Limited
Ingest Facility S.p.A.
Matrix S.r.l. in liquidation
Comau S.p.A.
Comau S.p.A.
Comau S.p.A.
Comau S.p.A.
98.80 Fast-Buyer S.p.A.
96.12 Fiat Auto S.p.A.
CNH Global N.V.
Fiat Netherlands Holding N.V
Business Solutions S.p.A.
Fiat S.p.A.
Comau S.p.A.
C.R.F. Società Consortile pe
Magneti Marelli Holding S.p.
Teksid S.p.A.
71.43 Fiat Partecipazioni S.p.A.
Fiat S.p.A.
100.00 Fiat Partecipazioni S.p.A.
100.00 Rimaco S.A.
49.78 Isvor Fiat Società consortile
97.61 Isvor Fiat Società consortile
100.00 Fiat Partecipazioni S.p.A.
100.00 Fiat Partecipazioni S.p.A.
100.00 BUC - Banca Unione di Cred
100.00 Fiat Partecipazioni S.p.A.
100.00 Fiat Partecipazioni S.p.A.
100.00 Fiat Partecipazioni S.p.A.
100.00 Fiat Partecipazioni S.p.A.
94.87 Fiat S.p.A.
Editrice La Stampa S.p.A.
Fiat Auto S.p.A.
Fiat Partecipazioni S.p.A.
CNH Italia s.p.a.
Comau S.p.A.
100.00 Editrice La Stampa S.p.A.
60.00
100.00
60.00
86.65
100.00
100.00
68.00
75.00
99.99 Automotive Lighting Reutling
99.99 Magneti Marelli Components
99.99 Magneti Marelli Sistemi Elet
Magneti Marelli France S.a.s
99.99 Yorka de Mexico S.r.l. de CV
75.88 Iveco Magirus Brandschutzt
Brandschutztechnik Gorlitz G
Iveco Eurofire (Holding) Gm
98,800
46,000
23,000
23,000
2,000
2,000
1,000
1,000
1,000
1,000
68,253
3,175
100,000
99,998
51,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
81,198
1,980
1,980
1,980
0.990
0.990
100,000
60,000
100,000
60,000
86,673
100,000
100,000
68,000
75,000
100,000
100,000
99,990
0.010
100,000
74,000
1,000
1,000
Appendix 2 - Fiat Group Companies
179
Basingstoke
Miass
Luxembourg
Samandira-Kartal/Istanbul
Zaporozhye
Commercial Vehicles
Closed Joint Stock Company "AUTO-MS"
Iveco Finance Holdings Limited
Iveco Uralaz Ltd.
Machen-Iveco Holding S.A.
Otoyol Sanayi A.S.
Production Systems
Turin
Pakistan
Canada
France
Karachi
Ottawa
Puteaux
United Kingdom
Russia
Luxembourg
Turkey
Ukraine
Italy
Mexico
U.S.A.
Japan
U.S.A.
U.S.A.
United Kingdom
Turkey
U.S.A.
Turkey
People's Rep.of China
Shanghai
São Pedro
Wilmington
Tokyo
Wilmington
Wilmington
Basingstoke
Izmir
Wilmington
Ankara
Austria
Italy
Netherlands
Italy
Italy
Vienna
Turin
Amsterdam
Arese
Turin
CNH Servicios Comerciales, S.A. de C.V.
Employers Health Initiatives LLC
Kobelco Construction Machinery Co. Ltd.
LBX Company LLC
Megavolt L.P. L.L.L.P.
New Holland Finance Ltd
New Holland Trakmak Traktor A.S.
Rathell Farm Equipment Company Inc.
Turk Traktor Ve Ziraat Makineleri A.S.
Powertrain Technologies
Powertrain Industrial Services S.C.R.L. in liquidation
Associated companies accounted for using the equity method
Automobiles
Fidis Bank G.m.b.H.
Fidis Retail Italia S.p.A.
GM-Fiat Worldwide Purchasing B.V. in liquidation
IN ACTION S.r.l.
Targasys S.r.l.
Ferrari
Ferrari Maserati Cars International Trading (Shanghai) Co. Ltd.
Agricultural and Construction Equipment
Al-Ghazi Tractors Ltd
Challenger New Holland Ltd.
CNH Capital Europe S.a.S.
EUR
EUR
EUR
EUR
EUR
MXN
USD
JPY
USD
USD
GBP
TRY
USD
TRL
1,000
65,255,056
26,000,000
52,674,386
EUR
RUR
GBP
TRY
26,568,000 UAH
100,000 EUR
50,000,000
0
16,000,000,000
0
500,000
2,900,001
800,000,000,000
640,000
47,000,000,000,000
214,682,226 PKR
558,700 CAD
88,482,297 EUR
3,000,000 USD
4,740,000
672,076,000
300,000
336,000
4,322,040
Fiat Auto S.p.A.
Fiat Auto S.p.A.
Fiat Auto Holdings B.V.
Fidis S.p.A.
Fidis S.p.A.
CNH Global N.V.
CNH America LLC
CNH Global N.V.
Case LBX Holdings Inc.
CNH America LLC
CNH Global N.V.
CNH Global N.V.
CNH America LLC
CNH Global N.V.
49.00
33.33
30.00
27.00
Iveco Partecipazioni Finanzi
Iveco S.p.A.
Iveco S.p.A.
Iveco S.p.A.
38.62 Iveco S.p.A.
48.00 Fiat Powertrain Italia S.r.l.
FMA - Fabbrica Motori Auto
Fiat Automoveis S.A. - FIAS
Fiat Auto Holdings B.V.
Powertrain Mekanik Sanayi
41.11
41.95
16.78
41.95
33.56
41.11
31.46
36.30
31.46
36.22 CNH Global N.V.
25.59 CNH Canada, Ltd.
41.87 CNH Global N.V.
22.40 Ferrari S.p.A.
50.00
49.00
50.00
49.90
40.00
Fiat Gesco S.p.A.
Fiat Ge.Va. S.p.A.
Isvor Fiat Società consortile
Iveco S.p.A.
Magneti Marelli Holding S.p.
Sisport Fiat S.p.A.
49,000
33,330
30,000
27,000
38,618
24,000
20,000
2,000
1,000
1,000
49,000
50,000
20,000
50,000
40,000
49,000
37,500
43,266
37,500
43,169
30,499
49,900
40,000
50,000
49,000
50,000
49,900
40,000
0.990
0.990
0.990
0.990
0.990
0.990
Appendix 2 - Fiat Group Companies
180
Gonzalez Production Systems Inc.
G.P. Properties I L.L.C.
Services
Servizio Titoli S.p.A.
Publishing and Communications
Editalia S.r.l.
Editoriale Corriere Romagna S.r.l.
Edizioni Dost S.r.l.
Società Editrice Mercantile S.r.l.
Holding companies and Other companies
IPI S.p.A.
Livingstone Motor Assemblers Ltd.
Lombard Bank Malta PLC
Rizzoli Corriere della Sera MediaGroup S.p.A.
WorkNet S.p.A.
Associated companies valued at cost
Automobiles
Car City Club S.r.l.
Consorzio per la Reindustrializzazione Area di Arese S.r.l. in liquidation
Fabrication Automobiles de Tiaret SpA
Fidis Rent GmbH
N. Technology S.p.A.
Ferrari
Iniziativa Fiorano S.r.l.
Commercial Vehicles
CBC-Iveco Ltd.
Sotra S.A.
Trucks & Bus Company
Zastava-Kamioni D.O.O.
Components
Flexider S.p.A.
Mars Seal Private Limited
Matay Otomotiv Yan Sanay Ve Ticaret A.S.
M.I.P.-Master Imprese Politecnico
Metallurgical Products
S.A.S.-Società Assofond Servizi S.r.l.
Production Systems
Consorzio Generazione Forme-CO.GE.F.
Services
Multiservizi Reggio Calabria - Società per Azioni
S.I.MA.GEST2 Società Consortile a Responsabilità Limitata
Società Cooperativa Delta Più r.l. in liquidation
Publishing and Communications
Le Monde Europe S.A.
Le Monde Presse S.A.S.
Holding companies and Other companies
Agenzia Internazionalizzazione Imprese Torino S.r.l. in liquidation
Alcmena S.a.r.l.
Ascai Servizi S.r.l. in liquidation
Ciosa S.p.A. in liquidation
Concordia Finance S.A.
U.S.A.
U.S.A.
Italy
Italy
Italy
Italy
Italy
Italy
Zambia
Malta
Italy
Italy
Italy
Italy
Algeria
Germany
Italy
Italy
People's Rep.of China
Ivory Coast
Libya
Serbia
Italy
India
Turkey
Italy
Italy
Italy
Italy
Italy
Italy
France
France
Italy
Luxembourg
Italy
Italy
Luxembourg
Pontiac
Pontiac
Turin
Caserta
Forlì
Bologna
Genoa
Turin
Livingstone
Valletta
Milan
Milan
Turin
Arese
Wilaya de Tiaret
Frankfurt
Chivasso
Modena
Changzhou
Abidijan
Tajoura
Kragujevac
Turin
Mumbai
Istanbul
Milan
Trezzano sul Naviglio
San Mauro Torinese
Reggio di Calabria
Zola Predosa
Trieste
Paris
Paris
Turin
Luxembourg
Rome
Milan
Luxembourg
EUR
EUR
DZD
EUR
EUR
EUR
ZMK
MTL
EUR
EUR
EUR
EUR
EUR
EUR
EUR
INR
TRY
EUR
CNY
XAF
LYD
YUM
102,000
5,000,000
73.337
516
13,137,000
EUR
EUR
EUR
EUR
EUR
3,658,800 EUR
7,327,930 EUR
120,000 EUR
50,000 EUR
44.865 EUR
15.494 EUR
520,000 EUR
4,131,655
400,000
2,400,000,000,000
20.658
664,000,000
3,000,000,000
96,000,000
1,673,505,893
90,000 EUR
390,000
1,020,000
1,225,000,000
50,000
1,500,000
40,784,134
20,000,000
2,025,949
762,019,050
1,000,000
2,868,918
2,856,000
1,042,914
4,247,000
126,000 EUR
10,000 USD
10,000 USD
Savarent Società per Azioni
Fiat Auto S.p.A.
Fiat Auto S.p.A.
Fiat Handlerservice GmbH
Fiat Auto S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni S.p.A.
BUC - Banca Unione di Cred
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni S.p.A.
Editrice La Stampa S.p.A.
Editrice La Stampa S.p.A.
Editrice La Stampa S.p.A.
Editrice La Stampa S.p.A.
Magneti Marelli Holding S.p.
Magneti Marelli France S.a.s
Magneti Marelli Holding S.p.
Magneti Marelli Holding S.p.
Iveco S.p.A.
Iveco France S.A.
Iveco España S.L.
Iveco S.p.A.
35.00
20.00
25.35
25.00
29.46
Fiat Partecipazioni S.p.A.
BUC - Banca Unione di Cred
Isvor Fiat Società consortile
Fiat Partecipazioni S.p.A.
Fiat Netherlands Holding N.V
48.45 La Stampa Europe SAS
27.28 La Stampa Europe SAS
29.40 Gestione Servizi Territoriali S
30.00 Ingest Facility S.p.A.
34.96 Cromos Consulenza e Form
33.33 Comau S.p.A.
16.96 Teksid S.p.A.
25.00
24.00
28.00
50.00
50.00
39.80
25.00
33.68
18.67 Ferrari S.p.A.
33.00
30.00
36.57
49.00
20.00
10.00
20.00
26.53
9.90
35.00
45.00
40.00
40.00
40.00
27.24 Business Solutions S.p.A.
49.00 Comau Pico Holdings Corpo
49.00 Comau Pico Holdings Corpo
35,000
20,000
25,970
25,000
29,459
48,450
27,277
49,000
30,000
46,000
33,333
20,000
25,000
24,000
28,000
50,000
50,000
39,800
25,000
33,677
33,333
33,000
30,000
36,571
49,000
20,000
10,000
20,000
26,530
9,895
35,000
45,000
40,000
40,000
40,000
27,238
49,000
49,000
10,291
Appendix 2 - Fiat Group Companies
181
Italy
Italy
Italy
Lithuania
Italy
Italy
Poland
Italy
Italy
Italy
Luxembourg
Italy
Italy
Italy
Italy
Turin
Trento
Milan
Pikieliszki
Bolzano
Genoa
Bielsko-Biala
Siena
Naples
Milan
Luxembourg
Milan
Turin
Milan
Milan
QSF Qualità Servizi Formazione GEIE
Tecnologie per il Calcolo Numerico-Centro Superiore di Formazione S.c. a r.l.
Zetesis S.p.A.
Other companies valued at cost
Agricultural and Construction Equipment
Polagris S.A.
Commercial Vehicles
Consorzio Bolzano Energia
Consorzio Spike
Services
H.R.O. Polska Sp. z o.o.
Holding companies and Other companies
Consorzio Sorore
Consorzio Technapoli
Ercole Marelli & C. S.p.A. in liquidation
Euromedia Luxembourg One S.A.
Fin.Priv. S.r.l.
IRCC-Istituto per la Ricerca e la Cura del Cancro-Torino S.p.A.
Torino Zerocinque Investment S.p.A.
Torino Zerocinque Trading S.p.A.
Italy
Italy
Italy
Italy
Brazil
Italy
Italy
Switzerland
Netherlands
Italy
Naples
Pomigliano d'Arco
Naples
Turin
São Paulo
Milan
Florence
Paradiso
Amsterdam
Modena
Consorzio Prode
Consorzio Scire
Consorzio Scuola Superiore per l'Alta Formazione Universitaria Federico II
Expo 2000 - S.p.A.
FMA-Consultoria e Negocios Ltda
Giraglia Immobiliare S.p.A.
Immobiliare Novoli S.p.A.
Interfinanziaria S.A.
MB Venture Capital Fund I N.V.
Nuova Didactica S.c. a r.l.
Italy
Italy
Italy
Italy
Avellino
Aulla
Chivasso
Turin
CONFORM - Consorzio Formazione Manageriale
Consorzio Oto-BPD in liquidation
Consorzio Parco Industriale di Chivasso
Consorzio per lo Sviluppo delle Aziende Fornitrici in liquidation
EUR
EUR
EUR
EUR
BRL
EUR
EUR
CHF
EUR
EUR
EUR
EUR
EUR
EUR
9.296
1,626,855
9,633,000
44,887,500
20,000
15,500,000
2,755,000
2,425,000
EUR
EUR
EUR
USD
EUR
EUR
EUR
EUR
400,000 PLN
12,000 EUR
90,380 EUR
1,133,400 LTT
10.329 EUR
100,000 EUR
283,150 EUR
51.644
51.644
127,500
2,828,750
1
3,500,000
20,640,000
1,000,000
50,000
112,200
51,600
103.291
51,650
241.961
Isvor Fiat Società consortile
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni S.p.A.
CNH Italia s.p.a.
Fiat Auto S.p.A.
Iveco S.p.A.
Elasis-Società Consortile pe
Elasis-Società Consortile pe
Elasis-Società Consortile pe
Fiat Partecipazioni S.p.A.
Fiat do Brasil S.A.
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni S.p.A.
IHF-Internazionale Holding F
Fiat Partecipazioni S.p.A.
Ferrari S.p.A.
CNH Italia s.p.a.
Isvor Fiat Società consortile
C.R.F. Società Consortile pe
Fiat Partecipazioni S.p.A.
16.66
10.87
13.00
14.29
14.29
19.36
17.62
15.04
Fiat Partecipazioni S.p.A.
Elasis-Società Consortile pe
Fiat Partecipazioni S.p.A.
Fiat Netherlands Holding N.V
Fiat S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Partecipazioni S.p.A.
18.00 Business Solutions Polska S
16.67 Iveco S.p.A.
15.00 Iveco S.p.A.
9.27 CNH Polska Sp. z o.o.
24.40
24.50
40.00
48.93
48.93
19.57
24.50
50.00
28.24
40.00
33.33
45.00
19.46
34.16
50.00
23.10
30.30
16,663
11,110
13,000
14,286
14,285
19,355
17,620
15,040
18,000
16,667
15,000
11,054
35,000
50,000
23,100
10,672
10,672
10,672
50,000
50,000
20,000
24,498
50,000
28,240
40,000
33,330
45,000
16,364
12,273
25,000
25,000
40,000
Fiat S.p.A. – FINANCIAL STATEMENTS
at December 31, 2005
Fiat S.p.A.
Registered Office: Via Nizza 250, Turin, Italy
Paid-in capital: 6,377,257,130 euros
Entered in the Turin Company Register
Fiscal Code: 00469580013
182
FINANCIAL REVIEW OF FIAT S.p.A.
The following tables, described and commented on below, have been prepared from the company’s statutory
financial statements at December 31, 2005, to which reference should be made. Pursuant to the provisions of
the Italian civil code, the statutory financial statements at December 31, 2005 have been prepared on the basis
of the requirements set forth in Italian Legislative Decree no. 127 of April 9, 1991, as amended. Starting from
fiscal 2006, Fiat S.p.A. will prepare its statutory financial statements in accordance with International Financial
Reporting Standards (IFRS).
Operating Performance
The income statement of the Parent Company showed net income of 223 million euros for the year ended
December 31, 2005, against a loss of 949 million euros for the year ended December 31, 2004.
An analysis of this result is provided in the following table:
(in millions of euros)
Adjustments to financial assets
2005
(429)
Investment income
2004
(1,641)
8
683
(56)
(137)
Cost of personnel and services net of revenues
(142)
(119)
Net extraordinary income (expenses)
Income taxes
1,121
(279)
(13)
278
223
(949)
Net financial expenses
Net income/(loss)
Adjustments to financial assets, resulting in costs of 429 million euros, mainly reflected the operating
performance of subsidiaries during the fiscal year. In particular, they refer to the write-down in the equity
investments held in Fiat Partecipazioni S.p.A. (811 million euros, due to the loss at Fiat Auto), Teksid S.p.A. (53
million euros), Comau S.p.A. (42 million euros) and Business Solutions S.p.A. (52 million euros), net of
revaluations for the restoration of the carrying value of the equity investment in Fiat Netherlands Holding N.V.
(376 million euros, due to the positive performance of the CNH and Iveco subsidiaries), Magneti Marelli Holding
S.p.A. (144 million euros) and other minor companies.
During 2004, these adjustments resulted in costs of 1,641 million euros, mainly as a result of the write-down of the
investment in Fiat Partecipazioni S.p.A. (1,624 million euros), which had been impacted by the negative
performance of the Automobiles Sector.
Investment income totalled 8 million euros and consisted of dividends paid by subsidiaries. In 2004 this item also
included income of 606 million euros that had its origin in the partial capital repayment by the IHF – Internazionale
Holding Fiat S.A. subsidiary.
Net financial expenses totalled 56 million euros, a decrease from the 137 million euros incurred in 2004, due to
lower interest expenses as a result of the extinguishment of the Mandatory Convertible Facility and to the
increased interest income earned as a result of the higher level of financial assets.
Cost of personnel and services net of revenues amounted to 142 million euros with respect to 119 million euros
in 2004.
In particular:
ƒ
Cost of personnel and services totalled 187 million euros and consisted of services costs (76 million
euros), personnel costs (42 million euros) and, for the remainder, of amortisation and other operating costs.
The 20 million euro decrease over the previous fiscal year stemmed for 11 million euros from lower
personnel costs and for 9 million euros from lower services costs, depreciation and amortisation and other
net costs. The average number of employees in 2005 was 133 (including 11 persons seconded to the
principal companies of the Group), against an average number of 151 employees in 2004 (including 12
persons seconded to those Group companies);
Fiat S.p.A. – Financial Statements at December 31, 2005 - Financial Review of Fiat S.p.A.
183
ƒ
Revenues totalled 45 million euros and consisted of royalties for the use of the Fiat trademark, calculated
as a percentage of the revenues generated by the Group companies that use it, and the services rendered
by executives at the main Group companies. The decrease of 43 million euros with respect to fiscal 2004 is
mainly due to lower charges for the use of the trademark.
Net extraordinary income amounted to 1,121 million euros and consisted of the net extraordinary gain on the
transaction regarding the termination of the Master Agreement with General Motors for an amount of 1,133
million euros, and costs for the restructuring of the Parent Company.
In 2004, net extraordinary expenses were connected with the implementation of the Parent Company’s
restructuring and reorganisation plan.
Income taxes totalled 279 million euros, an amount which includes the realisation of deferred tax assets of 277
million euros, initially recognised in the financial statements for the year ended December 31, 2004 in relation to
the settlement subsequently made with General Motors for the termination of the Master Agreement.
Balance Sheet
The following table provides highlights of the Parent Company’s balance sheet:
(in millions of euros)
Fixed assets
of which: equity investments
Working capital
Total net invested capital
Stockholders’ equity
At December 31, 2005
5,052
4,983
(314)
4,738
7,689
(2,951)
Net debt (Net liquid funds)
At December 31, 2004
5,342
5,249
99
5,441
4,466
975
Fixed assets refer mainly to equity investments in the principal Group companies, in which Fiat S.p.A. holds a
controlling interest.
The net decrease in fixed assets of 290 million euros with respect to December 31, 2004 is mainly due to the
decrease of 266 million euros in equity investments as a result of the adjustments to financial assets discussed
earlier net of the recapitalisations of the Teksid S.p.A., Comau S.p.A., Business Solutions S.p.A. and Itedi S.p.A.
subsidiaries carried out during the year (for a total amount of 165 million euros).
Working capital comprises inventories net of advances received, trade, tax and employee receivables/payables
and provisions, which in total result in a net liability of 342 million euros, together with treasury stock of 28 million
euros (represented by 4,331,708 ordinary shares). The 413 million euro decrease from December 31, 2004
stems from the reduction in receivables, mainly due to the previously mentioned realisation of deferred tax
assets (277 million euros) and the higher amount of receivables sold.
Stockholders’ equity at December 31, 2005 totalled 7,689 million euros. The increase of 3,223 million euros with
respect to December 31, 2004 is due to the capital increase of resolved by the Board of Directors on September
15, 2005 and subscribed by the financing banks to offset the Mandatory Convertible Facility (3 billion euros), and
net income for the year of 223 million euros.
Net liquid funds at December 31, 2005 totalled 2,951 million euros against net debt of 975 million euros at
December 31, 2004. These may be analysed as follows:
(in millions of euros)
Financial receivables and cash
Financial payables
Financial accruals and deferrals
Net debt (Net liquid funds)
At December 31, 2005
(3,059)
117
(9)
(2,951)
At December 31, 2004
(2,321)
3,169
127
975
Fiat S.p.A. – Financial Statements at December 31, 2005 - Financial Review of Fiat S.p.A.
184
Financial receivables include short-term financing granted to the subsidiary Fiat Ge.Va. S.p.A. falling due in
2006, and cash deposited in a current account with that company.
At December 31, 2004, financial payables consisted primarily of the 3 billion euro Mandatory Convertible Facility
granted by a pool of banks in 2002 and extinguished in September 2005 through the previously mentioned
subscription to a capital increase.
The reader is referred to the statement of cash flows at the end of the notes to the statutory financial statements of
Fiat S.p.A. for a more complete analysis of the items included in the income statement and balance sheet.
Fiat S.p.A. – Financial Statements at December 31, 2005 - Financial Review of Fiat S.p.A.
185
Transition to International Financial Reporting Standards (IFRS)
by Fiat S.p.A.
As a result of the implementation of European Regulation no. 1606 of July 19, 2002, the Fiat Group has adopted
International Financial Reporting Standards (IFRS) for the preparation of its consolidated financial statements with effect
from January 1, 2005. On the basis of Italian law implementing this regulation, the statutory financial statements of the
Parent Company Fiat S.p.A. will be prepared in accordance with these standards from fiscal 2006.
As a consequence, Fiat is currently making the transition to IFRS for its statutory financial statements and will report its
2006 first half results and prior year comparatives in accordance with IFRS.
This note describes the policies that Fiat has adopted in preparing its IFRS opening balance sheet at January 1, 2005, as
well as the main differences in relation to Italian GAAP used to prepare its statutory financial statements up until
December 31, 2005.
As part of this transition programme, an opening balance sheet of Fiat S.p.A. at January 1, 2005 will be prepared in
accordance with IFRS 1 – First-time Adoption of International Financial Reporting Standards, on the basis of the IFRS
applicable from January 1, 2006, as published at December 31, 2005. In particular, the amendments to IFRS 4 and
IAS 39 issued in 2005 and effective from January 1, 2006 will be applied, which regard the measurement and recognition
of financial guarantee contracts in the financial statements of the guarantor and the limitation in the use of the “fair value
option” to financial instruments satisfying specific conditions.
FIRST-TIME ADOPTION OF IFRS
General principle
In accordance with IFRS 1, the Parent Company Fiat S.p.A. is required to apply the accounting standards in force at the
reporting date for its first IFRS financial statements retrospectively to all periods presented, except for one permitted
exemption adopted by Fiat S.p.A. and described in the following paragraph.
The opening IFRS balance sheet at January 1, 2005 will therefore reflect the following differences with the statutory
balance sheet prepared at December 31, 2004 in accordance with Italian GAAP:
ƒ
all assets and liabilities qualifying for recognition under IFRS, including assets and liabilities that were not recognised
under Italian GAAP, will be recognised and measured in accordance with IFRS;
ƒ
all assets and liabilities recognised under Italian GAAP that do not qualify for recognition under IFRS will be
eliminated;
ƒ
certain balance sheet items will be reclassified in accordance with IFRS.
The impact of these adjustments will be recognised directly in opening equity at January 1, 2005, the date of transition to
IFRS.
In summary, the assets and liabilities to be included in the statutory financial statements of the Parent Company Fiat
S.p.A. prepared in accordance with IFRS will be recognised and measured in the same manner as that used to prepare
the financial statements drafted for inclusion in the Group’s consolidated financial statements, in accordance with
IFRS 1, with the exception of consolidation entries.
OPTIONAL EXEMPTION ADOPTED BY FIAT S.P.A.
Employee benefits: Fiat S.p.A. has elected to recognise all cumulative actuarial gains and losses that existed at January
1, 2005, but will use the corridor approach for those arising after that date.
Fiat S.p.A. – Financial Statements at December 31, 2005 - Transition to International Financial Reporting Standards (IFRS) by Fiat S.p.A.
186
DESCRIPTION OF THE MAIN DIFFERENCES BETWEEN ITALIAN GAAP AND IFRS
The following paragraphs provide a description of the main differences between Italian GAAP and IFRS that will have
effect on the statutory financial statements of Fiat S.p.A.
1. Write-off of deferred costs
Under Italian GAAP, Fiat S.p.A. defers and amortises certain costs (mainly start-up and expansion costs). IFRS require
these to be expensed when incurred.
In particular, costs incurred in connection with share capital increases which are deferred and amortised under Italian
GAAP are deducted directly from the proceeds of the increase and debited to stockholders’ equity under IFRS.
2. Valuation of investments in other companies not held as current assets
In the financial statements of Fiat S.p.A. prepared in accordance with Italian GAAP, equity investments included under
financial fixed assets (investments in subsidiaries and in other companies) are stated at historical cost, which is written
down in the event of an impairment loss; the impairment loss is reversed if in subsequent years the reasons for the writedown no longer apply.
Under IFRS, IAS 27 requires that investments in subsidiaries be either recorded at cost or at their fair value. If there are
reasons to believe that all or part of the cost cannot be recovered, the carrying amount must be reduced to the
recoverable amount of the investment in accordance with IAS 36. If this loss is subsequently reduced or is entirely
recovered, the carrying amount is increased back up to the newly estimated recoverable amount, which may not exceed
the amount that would have been determined if no impairment loss had been recorded. Any restoration of the carrying
amount is recorded immediately in the income statement.
On the basis of current analyses, the measurement of the carrying amount of subsidiaries using the cost method as stated
in IAS 27 is not expected to lead to the recognition of significant differences in the preparation of the IFRS opening
balance sheet.
In accordance with IAS 39, investments in other companies represented by available-for-sale financial assets, are
measured at their fair value, if this can be determined, and the gains and losses resulting from changes in the fair value
are recognised directly in stockholders’ equity until the financial assets are disposed of or determined to be impaired. At
that time, all gains and losses previously recognised in equity are included in the income statement for the period.
The investment held by Fiat S.p.A. in Mediobanca S.p.A. satisfies these requirements, with its fair value being determined
as its stock market quotation at the date of the financial statements. The adoption of IFRS on January 1, 2005 will
therefore lead to the recognition of the excess of the stock market price of the investment over its carrying value at that
date, with a net positive impact on stockholders’ equity.
3. Contract work in progress
As permittted under Italian GAAP, Fiat S.p.A. accounts for contract work in progress at its production cost. This refers in
particular to the execution of long-term agreements (contracts signed between Fiat and Treno Alta Velocità – T.A.V.
S.p.A.). As a result, revenue is recognised after delivery and when accepted by the customer on a final basis, that is,
income is recognised only when the contract is completed.
Amounts received from the customer during the performance of the contract are treated as financial advances and
accounted for as a liability under advances from customers, while any amounts paid to subcontractors are booked as
advances under inventories.
Under IFRS (IAS 11), when the outcome of a construction contract can be estimated reliably, revenue and expenses
regarding construction contracts must be accounted by reference to the percentage of work completed, in this way
recognising margins for the contract activity performed up to the balance sheet date. The terms and conditions regarding
the legal transfer of title are irrelevant to the reporting of these amounts in the financial statements. Thus, any advances
received are deducted from the value of inventories (contract work in progress and advances to suppliers).
Fiat S.p.A. – Financial Statements at December 31, 2005 - Transition to International Financial Reporting Standards (IFRS) by Fiat S.p.A.
187
Consequently, the adoption of IFRS will entail recognition of the margins earned on contracts, with a positive net impact
on stockholders’ equity at January 1, 2005.
4. Treasury stock
In accordance with Italian GAAP, Fiat S.p.A. accounts for treasury stock as an asset and records any related value
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 recorded in
stockholders’ equity rather than in the income statement.
5. Sale of receivables
Fiat S.p.A. sells a significant part of its trade and tax receivables through factoring transactions.
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), require a first loss guarantee of the seller up to a limited amount or imply a continuing
significant exposure to the cash flows from receivables sold.
Under Italian GAAP, all receivables sold through factoring transactions (both with and without recourse) have been
derecognised.
Under IFRS, IAS 39 permits the derecognition from assets 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 part of
those sold without recourse, will be reinstated in the IFRS balance sheet.
6. Employee benefits
Under IFRS, employee severance indemnities (TFR), which are accounted for pursuant to specific statutory rules under
Italian GAAP, are considered defined benefit obligations pursuant to IAS 19 – Employee Benefits. As a result, they are
recalculated using the “Projected Unit Credit Method” under IFRS.
Fiat S.p.A. also grants employees and former employees various forms of benefits (retirement incentives, compensation,
bonuses) under past or current supplemental company or individual agreements that are qualified as defined benefit
pension plans, just like other long-term benefits. Although these benefits are accrued in the statutory financial statements
in a manner that is consistent with Italian GAAP, under IFRS they will need to be accounted for in accordance with IAS 19.
For IFRS purposes, Fiat S.p.A. has elected to recognise all accumulated actuarial gains and losses at January 1, 2005,
and this will have a net positive impact on stockholders’ equity.
7. Stock options
No obligations or compensation expenses are recognised for share-based payment transactions under Italian GAAP.
In accordance with IFRS 2 – Share-based Payment, the full fair value amount of stock options at the grant date is reflected
in the income statement on a straight-line basis over the period from the grant date to the vesting date, with the offsetting
credit recognised directly in equity. Changes in fair value after the grant date have no impact on the initial measurement.
Fiat S.p.A. will apply the transitional provisions stated in IFRS 2 and therefore will apply this standard to all stock options
granted after November 7, 2002 and not yet vested at January 1, 2005, the effective date of IFRS 2. No compensation
expense is required to be recognised for stock options granted prior to November 7, 2002.
Fiat S.p.A. – Financial Statements at December 31, 2005 - Transition to International Financial Reporting Standards (IFRS) by Fiat S.p.A.
188
8. Recognition and measurement of financial receivables and financial debt
Financial receivables consist of short-term financing granted to the subsidiary Fiat Ge.Va. S.p.A., as well as cash
deposited on its cash management account. These receivables can be immediately converted into cash and are subject
to an insignificant risk of change in value. The transition to IFRS will not impact their amount.
Financial debt at January 1, 2005 principally reflected the Mandatory Convertible Facility. Under Italian GAAP, the gross
amount received is recognised. The various fees owed to the lending banks (for the organisation of the facility, for the
share subscription commitment, etc.) at different dates (at the beginning, over the years, and upon maturity) are charged
against income over the term of the facility (on a pro-rated basis).
Under IFRS, financial debt is recognised at the amounts received stated net of transaction costs and is subsequently
measured at its amortised cost using the effective interest method. Adoption of IFRS will thus entail recomputation of the
expenses charged to income for the various years affected, with a net positive effect on stockholders’ equity at January 1,
2005.
Furthermore, the Mandatory Convertible Facility agreement envisaged that the facility would either be reimbursed in cash
or converted into shares subscribed for by the lending banks and through subsequent rights offerings to the stockholders.
In the statutory financial statements of Fiat S.p.A. prepared in accordance with Italian GAAP, the conversion of the facility
led to an entry for the increase in capital stock and in additional paid-in capital at subscription price, with the counter entry
extinguishing the debt. In the statutory financial statements of Fiat S.p.A. prepared in accordance with IFRS, the increase
in capital and in additional paid-in capital is recorded in equity at its current value, in line with the accounting treatment in
the consolidated financial statements, with the difference between the subscription price of the new shares (10.28 euros
per share) and their current value at the time of subscription (7.337 euros per share) then recognised in the income
statement as unusual financial income (858 million euros net of expenses).
9. Recognition and measurement of derivatives
Fiat S.p.A. adopted IAS 39 - Financial Instruments: Recognition and Measurement on January 1, 2001 to the extent that it
is consistent and not in contrast with the general principles set forth in the Italian law governing financial statements. In
particular, taking into account the restrictions under Italian law, Fiat S.p.A. 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”). Those transactions which, according to Fiat S.p.A.’s policy for risk
management, are able to satisfy the conditions stated by the accounting principle for hedge accounting treatment, are
designated as hedging transactions; the others, although set up for the purpose of managing risk exposure (inasmuch as
speculative transactions are not permitted as a rule), are designated as trading transactions.
The main differences between Italian GAAP and IFRS may be summarised as follows:
ƒ
Financial instruments designated as “hedging instruments” - under Italian GAAP, the instrument is valued
symmetrically with the underlying hedged item. Therefore, where the hedged item has not been adjusted to fair value
in the financial statements, the hedging instrument has also not been adjusted. Similarly, where the hedged item has
not yet been recorded in the financial statements (hedging of future flows), the valuation of the hedging instrument at
fair value is deferred.
Under IFRS:
-
In the case of a fair value hedge, the gain or loss from remeasuring the hedging instrument at fair value is
recognised in the income statement and the gain or loss on the hedged item attributable to the hedged risk
adjusts the carrying amount of the hedged item and is recognised in the income statement. Consequently, no
impact arises on net income (except for the ineffective portion of the hedge, if any) or on stockholders’ equity,
while adjustments impact the carrying values of hedging instruments and hedged items.
-
In the case of a cash flow hedge (hedging of future flows), the portion of gain or loss on the hedging instrument
that is determined to be an effective hedge is recognised directly in equity; the ineffective portion of the gain or
Fiat S.p.A. – Financial Statements at December 31, 2005 - Transition to International Financial Reporting Standards (IFRS) by Fiat S.p.A.
189
loss is recognised in the income statement. Consequently, with reference to the effective portion, only a
difference in stockholders’ equity will arise between Italian GAAP and IFRS.
ƒ
Instruments designated as “non-hedging instruments” (except for foreign currency derivative instruments) - under
Italian GAAP, these instruments are valued at market value and the difference, if negative compared to the
contractual value, is recorded in the income statement, in accordance with the concept of prudence. Under IAS 39
any positive difference is also recorded. The accounting treatment adopted for foreign currency derivative instruments
under Italian GAAP is, however, in line with IAS 39.
Fiat S.p.A. – Financial Statements at December 31, 2005 - Transition to International Financial Reporting Standards (IFRS) by Fiat S.p.A.
190
Balance Sheet
ASSETS
December 31, 2005
(in euros)
FIXED ASSETS
Intangible fixed assets
Start-up and expansion costs
Concessions, licenses, trademarks and similar rights
Intangible assets in progress and advances
Other intangible fixed assets
Total
Property, plant and equipment
Land and buildings
Plant and machinery
Other assets
Total
Financial fixed assets
Investments in:
Subsidiaries
Other companies
Total investments
Other securities
Total
TOTAL FIXED ASSETS
CURRENT ASSETS
Inventories
Contract work in progress
Advances to suppliers
Total
Receivables
Trade receivables (*)
Receivables from subsidiaries
Tax receivables (**)
Deferred tax assets
Receivables from others (***)
Total
Financial assets not held as fixed assets
Treasury stock (total par value 21,658,540 euros)
Financial receivables:
From subsidiaries
Total
Cash
Bank and post office accounts
Cheques
Cash on hand
Total
TOTAL CURRENT ASSETS
ACCRUED INCOME AND PREPAID EXPENSES
TOTAL ASSETS
December 31, 2004
(in euros)
(note 1)
27,627,109
91,536
221,163
362,900
41,726,538
54,868
185,759
8,187,824
28,302,708
50,154,989
(note 2)
34,477,620
1,925,748
4,330,833
35,831,465
2,887,128
4,766,873
40,734,201
43,485,466
(note 3)
4,856,539,398
126,725,012
5,122,130,119
126,730,177
4,983,264,410
73,175
4,983,337,585
5,052,374,494
5,248,860,296
74,180
5,248,934,476
5,342,574,931
(note 4)
104,837,856
8,326,204,876
91,261,958
7,053,456,999
8,431,042,732
7,144,718,957
(note 5)
207,965,283
112,581,102
102,569,479
35,029,595
350,602,953
25,250,689
288,901,943
277,000,000
32,795,820
458,145,459
974,551,405
27,709,936
26,413,309
3,058,299,491
3,086,009,427
2,320,580,431
2,346,993,740
(note 6)
(note 7)
344,879
150,356
-
(note 8)
Receivables are to be considered as due within the subsequent fiscal year, except the following:
(*)
Amounts due within one year
Amounts due beyond one year
324,705
554
495,235
11,975,692,853
13,303,183
17,041,370,530
325,259
10,466,589,361
6,881,119
15,816,045,411
207,965,283
-
350,318,902
284,051
(**)
Amounts due within one year
Amounts due beyond one year
98,067,732
4,501,747
286,720,362
2,181,581
(***)
Amounts due within one year
Amounts due beyond one year
34,984,515
45,080
32,735,791
60,029
Fiat S.p.A. – Financial Statements at December 31, 2005
191
Balance Sheet
LIABILITIES AND STOCKHOLDERS’ EQUITY
STOCKHOLDERS’ EQUITY
Capital
Additional paid-in capital
Revaluation reserve under Law No. 413 of 12/30/91
Legal reserve
Treasury stock valuation reserve
Other reserves
Extraordinary reserve
December 31, 2004
(in euros)
6,377,257,130
1,540,856,410
22,590,857
446,561,762
27,709,936
4,918,113,540
22,590,857
446,561,762
26,413,309
(note 9)
334,634
Retained earnings/(losses)
Net income/(loss)
TOTAL STOCKHOLDERS’ EQUITY
RESERVES FOR RISKS AND CHARGES
Reserve for pensions and similar obligations
Other reserves
TOTAL RESERVES FOR RISKS AND CHARGES
December 31, 2005
(in euros)
1,631,261
334,634
(949,100,522)
223,019,671
7,689,229,878
1,631,261
(949,100,522)
4,466,210,207
21,666,308
31,037,811
52,704,119
19,273,212
29,738,650
49,011,862
11,995,621
11,616,488
8,656,661,821
380,335,441
222,848,288
2,749,639
1,717,427
22,606,627
9,286,919,243
3,060,245,135
7,336,405,933
501,654,329
222,730,082
234,360
8,986,970
2,797,294
26,484,115
11,159,538,218
(note 10)
RESERVE FOR EMPLOYEE SEVERANCE INDEMNITIES (note 11)
PAYABLES
Borrowings from banks
Advances
Trade payables
Payables to subsidiaries (*)
Payables to controlling company
Taxes payable
Social security payable
Other payables (**)
TOTAL PAYABLES
(note 12)
ACCRUED EXPENSES AND DEFERRED INCOME
(note 13)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
521,669
129,668,636
17,041,370,530
15,816,045,411
Payables are to be considered as due within the subsequent fiscal year, except the following:
(*)
Amounts due within one year
Amounts due beyond one year
220,225,807
2,622,481
222,730,082
-
(**)
Amounts due within one year
Amounts due beyond one year
8,976,923
13,629,704
13,491,702
12,992,413
Fiat S.p.A. – Financial Statements at December 31, 2005
192
Balance Sheet
MEMORANDUM ACCOUNTS (note 14)
December 31, 2005
(in euros)
GUARANTEES GRANTED
Unsecured guarantees
Suretyships on behalf of:
Subsidiaries
Others
797,456,604
460,303,341
December 31, 2004
(in euros)
672,385,005
1,116,275,497
1,257,759,945
Other unsecured guarantees on behalf of:
Subsidiaries
Others
7,100,923,987
119,781,615
1,788,660,502
9,596,883,852
171,364,028
7,220,705,602
9,768,247,880
8,478,465,547
11,556,908,382
Commitments related to supply contracts
Commitments related to derivative financial
instruments
Other commitments
10,906,319,695
10,261,146,601
70,240,610
90,397,500
6,972,168
9,296,224
TOTAL COMMITMENTS
10,983,532,473
10,360,840,325
19,461,998,020
21,917,748,707
TOTAL GUARANTEES GRANTED
COMMITMENTS
TOTAL MEMORANDUM ACCOUNTS
Fiat S.p.A. – Financial Statements at December 31, 2005
193
Income Statement
VALUE OF PRODUCTION
Revenues from sales and services
Change in contract work in progress
Other income and revenues
TOTAL VALUE OF PRODUCTION
(note 15)
COSTS OF PRODUCTION
Raw materials, supplies and merchandise
Services
Leases and rentals
Personnel
Wages and salaries
Social security contributions
Employee severance indemnities
Employee pensions and similar obligations
Other costs
(note 16)
2005
(in euros)
2004
(in euros)
20,169,500
13,575,898
11,702,535
45,447,933
59,775,406
16,859,476
11,851,617
88,486,499
406,725
76,217,668
987,596
423,376
109,849,162
949,056
22,992,468
7,222,924
4,087,033
3,590,586
3,812,121
29,980,662
9,873,787
4,088,328
2,189,912
6,745,987
41,705,132
Amortisation, depreciation and writedowns
Amortisation of intangible fixed assets
Depreciation of property, plant and equipment
Other operating costs
TOTAL COSTS OF PRODUCTION
DIFFERENCE BETWEEN THE
VALUE AND COSTS OF PRODUCTION
FINANCIAL INCOME AND EXPENSES
Investment income
Subsidiaries
Other companies
23,745,920
3,285,314
52,878,676
26,496,908
3,220,295
27,031,234
40,701,141
187,049,496
29,717,203
13,451,449
207,268,922
(141,601,563)
(118,782,423)
(note 17)
7,713,904
676,123,797
6,433,015
7,713,904
Other financial income
From securities held as fixed assets
other than equity investments
From securities held as current assets
other than equity investments
Other income
Subsidiaries
Others
682,556,812
2,072
2,467
85,750
-
101,199,017
11,415,199
112,614,216
63,019,390
9,955,470
72,974,860
112,702,038
Interest and other financial expenses
Subsidiaries
Others
Foreign exchange gains and losses
TOTAL FINANCIAL INCOME AND EXPENSES
2,941,624
165,735,025
72,977,327
17,686,797
192,535,010
168,676,649
(58,155)
(48,318,862)
Fiat S.p.A. – Financial Statements at December 31, 2005
210,221,807
283,349
545,595,681
194
Income Statement
2005
(in euros)
ADJUSTMENTS TO FINANCIAL ASSETS
Revaluations of:
Equity investments
Securities held as current assets other
than equity investments
2004
(in euros)
(note 18)
526,753,314
-
1,611,796
528,365,110
Writedowns
Equity investments
Securities among current assets other
than equity investments
957,542,000
EXTRAORDINARY INCOME AND EXPENSES
Income
Gains on disposals
Other income
1,639,152,526
-
TOTAL ADJUSTMENTS
-
1,631,261
957,542,000
1,640,783,787
(429,176,890)
(1,640,783,787)
(note 19)
615,204
1,135,073,884
28,000
1,551,187
1,135,689,088
Expenses
Losses on disposals
Other expenses
1,915,338
12,829,210
TOTAL EXTRAORDINARY INCOME AND EXPENSES
INCOME (LOSS) BEFORE TAXES
Income taxes, current and deferred tax assets and
liabilities
NET INCOME (LOSS)
1,579,187
428,922
14,721,837
14,744,548
1,120,944,540
15,150,759
(13,571,572)
501,847,225
(1,227,542,101)
278,827,554
223,019,671
(278,441,579)
(949,100,522)
(note 20)
Fiat S.p.A. – Financial Statements at December 31, 2005
195
Notes to the Financial Statements
ACCOUNTING PRINCIPLES AND METHODS
The statutory financial statements at December 31, 2005, which include the Balance Sheet, the Income Statement and the
Notes to the financial statements, have been prepared in compliance with the provisions of the Italian Civil Code and
provide the additional information required by CONSOB.
As envisaged in Legislative Decree No. 127/1991 the Group has prepared consolidated financial statements.
The valuation criteria used, which are illustrated below, are consistent with those used in the past fiscal year and comply
with the provisions of Article 2426 of the Italian Civil Code.
In particular:
Balance Sheet
Intangible fixed assets
Start-up and expansion costs consist of costs incurred in connection with capital increases. They are capitalised on the
basis of their estimated useful life. They are amortised on a straight-line basis over five years.
Trademarks are recorded at a value that reflects only the costs incurred for their realisation and the administrative
procedure for their registration. To ensure a conservative valuation, this amount is amortised on a straight-line basis over
three years.
The other intangible fixed assets are represented by costs expected to benefit future periods and are amortised
systematically over the period to be benefited.
Property, plant and equipment
Property, plant and equipment is recorded at acquisition cost plus directly attributable charges. As indicated in a separate
schedule, the value of some of these assets includes the inflation adjustments required under the pertinent laws.
Improvement costs are added to the value of the assets in question only when they permanently increase their value or
useful life. Depreciation is computed on a straight-line basis at rates deemed adequate in view of the estimated useful life
of the assets. For assets acquired during the fiscal year, the annual depreciation is taken at half the regular rate. The cost
of maintenance and repairs is charged directly to income when incurred.
Financial fixed assets
Financial fixed assets include equity investments and other securities.
Equity investments are stated in the balance sheet at their historical cost and, more exactly, on the basis of the costs
incurred or, when business operations are transferred, at the values set forth in the respective contracts in accordance
with the appraisals required by law, determined by the LIFO method with annual adjustments. As shown in a separate
schedule, some of these assets have been adjusted for inflation, as required by the pertinent laws.
Equity investments in companies that show a permanent impairment in value are written down accordingly.
If in subsequent fiscal years the reasons for these adjustments are no longer valid, the writedowns are reversed. No
reversals are made for writedowns recognised prior to the effective date of Legislative Decree No. 127/1991.
Other securities include securities shown at their net purchase price, adjusted for the accrual of any premium or discount
earned or incurred upon issuance or purchase, because the securities, which are pledged to fund scholarship grants, are
not held for trading purposes.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
196
Inventories
Inventories include contract work in progress and advances to suppliers.
Work in progress relates to long-term contracts (contracts signed between Fiat and Treno Alta Velocità – T.A.V. S.p.A. in
connection with the High-Speed Railway Project, described in Note 4) and is valued on the basis of the respective
production cost.
Amounts received from the client company T.A.V. S.p.A. while work is in progress are treated as a form of financing and
are included among the liabilities under advances, while those paid to the subcontracting consortia are booked under
inventories – advances to suppliers.
Revenues are booked when the work is actually delivered and accepted by customers.
Treasury stock
Treasury stock is valued at the lower of its purchase cost (calculated using the LIFO method in annual instalments) and its
market value, or the option exercise price when the shares are to be used for stock options.
If in subsequent fiscal years the reasons for these adjustments are no longer valid, the writedowns are reversed.
A corresponding treasury stock reserve for the same amount is recorded in the balance sheet under stockholders’ equity.
This reserve cannot be used to cover losses.
Receivables and payables
Accounts receivable are shown at their estimated realisable value, which represents the difference between their face
value and the adjustments included in the allowance for doubtful accounts. The individual items are shown in the balance
sheet net of the respective allowances.
The amount of these allowances is determined in accordance with a prudent estimate of uncollectible amounts, based on
past experience, and reflects the risks associated with specific delinquent accounts.
Receivables and payables denominated in the currencies of countries not belonging to the EMU are expressed in euros at
the spot exchange rate on the closing date of the fiscal year, and the relative exchange losses and gains are posted to the
income statement.
Any net income arising is set aside, for the portion not used to cover any loss for the year, in a special reserve that cannot
be distributed until the gain is realised.
Accruals and deferrals
Accruals and deferrals are determined by the accrual method, in accordance with the general principle of assigning
revenues and expenses to the accounting period in which they are earned or incurred.
Reserves for risks and charges
Reserves for risks and charges are established to cover costs or liabilities the occurrence of which is probable or certain at
the end of the fiscal year, but which are indeterminable either as to amount or timing.
Reserve for employee severance indemnities
The reserve for employee severance indemnities represents the actual liability toward employees accrued as of the end of
the fiscal year and is adjusted each year in accordance with current laws and collective bargaining agreements.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
197
Memorandum Accounts
Suretyships and other unsecured guarantees
Suretyships and other unsecured guarantees granted on behalf of subsidiaries and others are posted under memorandum
accounts.
Suretyships granted against payment of the leases of subsidiaries are posted in the amount of the provided guarantee; the
suretyships for the Sava Notes are posted in the amount of the outstanding notes; the suretyships and other unsecured
guarantees granted for financings, bonds, credit lines, commercial paper and other financial instruments of subsidiaries
and others are posted for the reimbursement value of these notes at the balance sheet date.
The Other unsecured guarantees include the amount of the risk of withdrawal on sales of receivables with recourse.
Receivables sold with recourse are eliminated from the balance sheet; the risk of withdrawal is reported under
memorandum accounts and disclosed in the notes.
Suretyships granted by others for enterprise debts, in particular those granted by the Consortia participating in the HighSpeed Railway Project to guarantee the successful conclusion of work and the advances posted on the liability side of the
balance sheet under advances, are not reported under memorandum accounts but disclosed instead in the notes.
Commitments
The Group’s commitments are posted under memorandum accounts in their amount at the balance sheet date. In
particular, the supply commitments for the High-Speed Railway Project include the amount of supply commitments
envisaged in the original agreements made with Treno Alta Velocità – T.A.V. S.p.A., the amounts envisaged in
agreements for alterations during construction, and the respective monetary adjustments.
If the amount of a commitment cannot be quantified, the commitment is not posted under memorandum accounts but
disclosed instead in the notes.
Derivative financial instruments
Derivative financial instruments are recorded at inception in the memorandum accounts at their notional contract amount.
More specifically, derivative financial instruments classified as trading instruments insofar as they do not satisfy the
requirements for hedge accounting treatment, are valued at their market value and the differential, if negative compared to
the contractual value, is recorded in the income statement, under financial income and expenses, in accordance with the
principle of prudence. In contrast, for instruments that can be classified as hedging, the effects of the transaction are
posted to the income statement in such a way as to offset the effects of the hedged flows.
Income Statement
Dividends
Dividends are recorded in the year when declared by the paying companies.
Financial income and expenses
Financial income and expenses are recorded on an accrual basis.
Costs relating to the sale of receivables of any type (with and without recourse) and nature (trade, financial, other) are
charged to the income statement on an accrual basis.
Income taxes
Liability for corporate income taxes due for the fiscal year is determined in accordance with current legislation.
Deferred tax assets and liabilities are determined on the basis of the temporary differences that arise between asset and
liability items and the corresponding tax items.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
198
In particular, deferred tax assets are recognised only when it is reasonably certain that they will be recovered. Conversely,
deferred tax liabilities are not recognised if it is unlikely that the corresponding obligations will in fact arise.
For a three-year period starting in 2004, Fiat S.p.A. and almost all of its Italian subsidiaries have decided to participate in
the national tax consolidation program envisaged in Articles 117 and 129 of the Consolidated Law on Income Tax
(T.U.I.R.). Fiat S.p.A. functions as a consolidating company and determines a single taxable base for the group of
companies participating in the tax consolidation program, which thus benefits from the possibility of setting off taxable
income with tax losses on a single tax return.
Each company participating in the tax consolidation program contributes its taxable income or loss to the consolidating
company; Fiat S.p.A. posts a credit in its favour for the IRES (corporate income tax) to be paid. In contrast, for those
companies that contribute tax losses, Fiat S.p.A. posts a payable equal to the IRES on the portion of the loss that is
actually set off at the group level.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
199
ANALYSIS OF THE INDIVIDUAL ITEMS
Fixed assets
1 Intangible fixed assets
Start-up and expansion costs
At December 31, 2005, they totalled 27,627 thousand euros. They include costs incurred in connection with the capital
increases resolved in fiscal 2002, 2003 and 2005 and are amortised over a 5-year period.
The net decrease of 14,100 thousand euros since December 31, 2004 is the result of:
(in thousands of euros)
1,363
Capitalisation of costs connected with the capital increase resolved on September 15, 2005
Amortisation for the fiscal year
(15,463)
Net change
(14,100)
Concessions, licenses, trademarks and similar rights
This item, which amounted to 92 thousand euros at December 31, 2005, includes trademarks owned by the Company,
which are amortised over three years.
The net increase of 37 thousand euros compared with December 31, 2004 is the net effect of the following items:
(in thousands of euros)
Capitalisation of expenses for the realisation and registration of new trademarks
122
Amortisation for the fiscal year
(85)
Net change
37
Intangible assets in progress and advances
This item reflects the costs incurred in connection with ongoing administrative procedures required to register trademarks.
With respect to December 31, 2004 it showed a net increase of 36 thousand euros to 221 thousand euros at December 31,
2005.
Other intangible fixed assets
They totalled 363 thousand euros at December 31, 2005 and reflect leasehold improvement costs incurred following the
move of representative offices in Rome and Brussels. These costs are amortised according to the term of the leases.
The net decrease of 7,825 thousand euros with respect to December 31, 2004 is the result of:
(in thousands of euros)
373
Capitalisation of leasehold improvements
Amortisation for the fiscal year
(8,198)
Net change
(7,825)
At December 31, 2004 other intangible fixed assets represented the residual amount yet to be amortised of the
commissions and charges paid for organisation of the Mandatory Convertible Facility granted in 2002 by a pool of banks
arranged by Capitalia, Banca Intesa, Sanpaolo IMI, and Unicredit Banca that was extinguished on September 20, 2005.
They were amortised on a pro-rated basis according to the term of the facility.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
200
2 Property, plant and equipment
At December 31, 2005, property, plant and equipment totalled 40,734 thousand euros (43,485 thousand euros at December
31, 2004). These amounts are net of accumulated depreciation of 22,964 thousand euros at December 31, 2005 and
20,362 thousand euros at December 31, 2004.
The net decrease of 2,751 thousand euros is the effect of the following items:
(in thousands of euros)
1,221
New capital expenditures
(687)
Net disposals
Depreciation
(3,285)
Net change
(2,751)
Depreciation taken in 2005 was computed using the following rates:
Depreciation rates
Buildings
3%
Plant and machinery
10%
Furniture
12%
Equipment
20%
Vehicles
25%
3 Financial fixed assets
Equity investments
This item totalled 4,983,264 thousand euros at December 31, 2005, a net decrease of 265,596 thousand euros from
December 31, 2004. A breakdown of changes occurred during the year is provided in the following tables:
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
201
Increases/(decreases)
(in millions of euros)
Company name and registered office
% owned
by Fiat
S.p.A.
2004
Book
value
Revaluations
(Writedowns)
2005
Book
value
Fiat Partecipazioni S.p.A. – Turin
100.00
Fiat Netherlands Holding N.V. –
Amsterdam (Netherlands)
1,391
(811)
580
Ferrari S.p.A. – Modena
60.56
2,350
376
2,726
56.00
161
Magneti Marelli Holding S.p.A. – Corbetta
99.99
667
Teksid S.p.A. - Turin
84.79
97
32
(53)
76
100.00
83
100
(42)
141
Business Solutions S.p.A. - Turin
100.00
65
23
(52)
Itedi - Italiana Edizioni S.p.A. – Turin
100.00
16
10
Acquisitions
Capital increases
Capital
reimbursements
Disposals
Subsidiaries
Comau S.p.A. – Grugliasco
161
144
811
36
26
IHF - Internazionale Holding Fiat S.A. –
Lugano (Switzerland)
100.00
33
33
Fiat GE.VA. S.p.A. – Turin
100.00
222
222
Fiat Finance North America Inc. –
Wilmington (United States)
39.47
13
3
16
Fiat USA Inc. – New York (U.S.A.)
100.00
23
4
27
Other companies
ƒ
1
Total subsidiaries
5,122
1
165
-
(431)
4,856
Other companies
Mediobanca S.p.A. – Milan
Fin.Priv. S.r.l. – Milan
Consortium S.r.l. – Milan
ƒ
Total other companies
Grand total
1.77
93
93
14.28
14
14
2.76
20
20
127
-
-
-
127
5,249
165
-
(431)
4,983
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
202
In particular, changes include:
(in thousands of euros)
Capital increases
Subsidiaries:
Comau S.p.A.
100,000
32,193
Teksid S.p.A.
Business Solutions S.p.A.
23,000
Itedi – Italiana Edizioni S.p.A.
10,000
Total capital increases
165,193
(in thousands of euros)
Revaluations
Subsidiaries:
Fiat Netherlands Holding N.V.
376,100
Magneti Marelli Holding S.p.A.
144,221
Fiat U.S.A. Inc.
4,017
Fiat Finance North America Inc.
2,415
Total
526,753
Writedowns
Subsidiaries:
810,700
Fiat Partecipazioni S.p.A.
Teksid S.p.A.
52,986
Business Solutions S.p.A.
52,056
41,800
Comau S.p.A.
Total
957,542
Total revaluations/(writedowns)
(430,789)
The table at the end of these Notes to the Financial Statements contains a list of equity investments and the additional
information required under Article 2427 of the Italian Civil Code and the supplemental data recommended by CONSOB,
including changes in quantity and value of subsidiaries and associated companies and, for publicly traded companies, a
comparison between book value and market value.
The following illustrate the value adjustments to financial fixed assets:
-
The revaluation of the equity investment in Fiat Netherlands Holding N.V. reflects the partial restoration of its original
carrying value after the writedown recorded in fiscal 2003. This restoration in value was based on the positive
operating results reported during the year by its subsidiaries CNH and Iveco, their favourable operating outlook, and
the increase in value of CNH’s stockholders’ equity following recovery of the dollar in 2005, which is the functional
currency used to express most of CNH accounts.
-
In consideration of the positive performance of Magneti Marelli Holding S.p.A. and its subsidiaries since 2004, and the
favourable operating outlook, it was concluded that the reasons for the impairment writedown in 2003 no longer
existed. The original book value was consequently restored.
-
Revaluation of the equity investments in Fiat U.S.A. Inc. and Fiat Finance North America Inc. constitute a partial
restoration of their respective carrying values, which had been written down in 2003 and 2004, mainly due to the
devaluation of the dollar against the euro.
-
The impairment writedown of the equity investment in Fiat Partecipazioni S.p.A. originated from the losses recorded
during the fiscal year by some of its subsidiaries (principally Fiat Auto Holdings B.V. and its subsidiaries) net of the
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
203
positive effects deriving from the sale of the equity investment in Italenergia Bis to EDF and the higher value of the
stake held in Fiat Netherlands Holding N.V., which was determined on the basis of the above described criteria.
-
The impairment writedowns of the equity investments in Teksid S.p.A, Comau S.p.A., and Business Solutions S.p.A.
reflect permanent losses in value mainly determined in consideration of the negative operating performance during the
fiscal year.
It is stated pursuant to Article 2426, Section 3 of the Italian Civil Code, that the book value of the investment in Fiat
Netherlands Holding N.V. at December 31, 2005 was 127 million euros higher than the portion of the company’s
stockholders’ equity owned, determined after making the adjustments required by the accounting principles used to draft the
consolidated financial statements. In this context, it is recalled that on January 1, 2005 the Fiat Group adopted IFRS for the
preparation of its consolidated financial statements, pursuant to EU Regulation no. 1606 of July 19, 2002. Thus, the
consolidated financial reporting prepared according to these principles was used for the comparison required pursuant to
the abovementioned article of the Italian Civil Code.
The foregoing difference stems principally from the fact that the stockholders’ equity of the subsidiary CNH was negatively
impacted upon adoption of the new accounting standards. This was due to the immediate recognition of the actuarial losses
realised on employee benefit plans that had previously been deferred under the “corridor approach” (which was formerly
used to prepare the Fiat Group consolidated financial statements under the previous accounting standards). Therefore if
Italian GAAP had continued to be applied, this negative impact would not have been recognised, and consequently this
difference is not considered an impairment loss, also in view of the subsidiary’s positive earnings prospects.
All the other equity investments in subsidiaries had a carrying value at December 31, 2005 that was less than or equal to
the value of stockholders’ equity determined in accordance with the aforesaid principles.
Other securities
These consist of listed Italian government securities pledged to fund scholarship grants.
At December 31, 2005, they totalled 73 thousand euros (a value that is also in line with their quotations at December 30,
2005), compared with 74 thousand euros at December 31, 2004.
As regards fixed assets, the tables at the end of these Notes to the Financial Statements include the following:
▪
▪
the additional information on cost, upward adjustments, writedowns and amortisation and depreciation required under
Article 2427 of the Italian Civil Code; and
as required under Article 10 of Law No. 72 of March 19, 1983, details of the assets held at December 31, 2005 which
have been adjusted for inflation pursuant to the relevant laws.
Current assets
4 Inventories
This item consists of costs incurred in connection with the High-Speed Railway Project. Fiat, as general contractor, has
signed contracts with Treno Alta Velocità – T.A.V. S.p.A. (which, in turn, had received the order from F.S. S.p.A. - Italian
Railways) for the executive design and construction of two high-speed rail lines (Bologna-Florence and Turin-Milan; the
latter is split up in the Turin-Novara and Novara-Milan lines). At December 31, 2005, contract prices for the works were the
following: 4,297 million euros for the Bologna-Florence line, 4,547 million euros for the Turin-Novara line, and 2,062 million
euros for the Novara-Milan line. Fiat S.p.A. has entrusted the CAV.E.T. and CAV.TO.MI. consortia with the design and
execution of works, retaining responsibility for coordination and organisation, while project management was subcontracted.
The contract for the Turin-Novara and Novara-Milan lines was signed with the CAV.TO.MI. consortium on December 23,
2005.
Financing of the project is carried out by means of advances paid by T.A.V. S.p.A. to Fiat S.p.A., which then transfers to the
two consortia the net amounts after deducting its fee (about 3.6%).
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
204
The following items are included under Inventories:
▪
Contract work in progress
This item, which totalled 104,838 thousand euros at December 31, 2005 (91,262 thousand euros at December 31,
2004), includes cumulative costs for coordination, organisation, and project management work. It refers for 58,417
thousand euros (54,316 thousand euros at December 31, 2004) to the Florence-Bologna line, for 40,862 thousand
euros (35,124 thousand euros at December 31, 2004) to the Turin-Novara line and for 5,559 thousand euros to the
Novara-Milan line (1,822 thousand euros at December 31, 2004). The item presents an increase in contract work in
progress totalling 13,576 thousand euros with respect to the end of 2004.
▪
Advances to suppliers
Advances totalled 8,326,205 thousand euros (7,053,457 thousand euros at December 31, 2004) and include advances
paid to the Alta Velocità Emilia Toscana - CAV.E.T. (3,358,681 thousand euros) and Alta Velocità Torino-Milano CAV.TO.MI. Consortia (4,134,962 thousand euros for the Turin-Novara line and 832,562 thousand euros for the
Novara-Milan line). The portion of advances paid for work completion totalled 8,011,033 thousand euros as of
December 31, 2005. Of this amount, the Bologna-Florence line accounted for 3,273,419 thousand euros (2,835,931
thousand euros at December 31, 2004), the Turin-Novara line for 4,098,522 thousand euros (3,355,210 thousand
euros at December 31, 2004), and the Novara-Milan line for 639,092 thousand euros (221,882 thousand euros at
December 31, 2004).
This item shows an increase of 1,272,748 thousand euros from December 31, 2004, mainly as a result of the advances
paid to CAV.E.T. for 275,179 thousand euros, and to CAV.TO.MI. for 997,667 thousand euros (639,358 thousand
euros for the Turin-Novara line and 358,309 thousand euros for the Novara-Milan line).
As explained further on, the item Advances on the liabilities side of the balance sheet includes contractual advances
totalling 8,656,662 thousand euros paid by the client company Treno Alta Velocità – T.A.V. S.p.A.
Fiat S.p.A. provided T.A.V. S.p.A. with bank suretyships totalling 1,904,058 thousand euros (646,510 thousand euros for the
Bologna-Florence line, 788,545 thousand euros for the Turin-Novara line, and 469,003 thousand euros for the Novara-Milan
line) as a guarantee for contractual advances received and proper execution of work. Conversely, the CAV.E.T. consortium
provided Fiat S.p.A. with bank suretyships totalling 621,646 thousand euros, as envisaged by contract. The CAV.TO.MI.
consortium issued suretyships totalling 759,054 thousand euros for the Turin-Novara line and 450,975 thousand euros for
the Novara-Milan line.
5 Receivables
Receivables amounted to 458,146 thousand euros at December 31, 2005. A breakdown of the net decrease of 516,406
thousand euros from the figure at the end of 2004 is provided in the following table:
(in thousands of euros)
Trade receivables
12/31/05
12/31/04
Change
208,193
350,861
(142,668)
(228)
(258)
30
Total trade receivables
207,965
350,603
(142,638)
Subsidiaries
112,581
25,251
87,330
Due from Tax Authorities
102,570
288,902
(186,332)
(277,000)
Allowance for doubtful accounts
Deferred tax assets
Other (mainly factoring companies)
Total receivables
-
277,000
35,030
32,796
2,234
458,146
974,552
(516,406)
Compared with December 31, 2004, trade receivables decreased by 142,638 thousand euros. These receivables are
mainly the result of amounts owed by T.A.V. S.p.A. for works completed in 2005, net of receivables sold.
The liabilities include, under trade payables, the amounts owed to CAV.E.T. and CAV.TO.MI for the receivables to be
collected against completed work.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
205
Receivables from subsidiaries at December 31, 2005 primarily refer to the use of the trademark (6,574 thousand euros),
receivables for IRES calculated on the taxable income contributed by the Italian companies participating in the national tax
consolidation program (74,024 thousand euros) and receivables for IRES sold to Italian subsidiaries for having made tax
prepayments on their behalf (30,894 thousand euros). They show a net increase of 87,330 thousand euros with respect to
December 31, 2004.
At the end of 2005, tax credits totalled 102,570 thousand euros and included credits for consolidated Group VAT of 79,835
thousand euros (of which 54,695 thousand euros were carried forward and 25,140 thousand euros for interest on requested
tax refunds), 10,868 thousand euros for receivables for IRES transferred to Fiat S.p.A. by Italian Group companies that
participate in the national tax consolidation program for fiscal 2005, and other minor amounts for 11,867 thousand euros.
There was a net decrease in tax credits of 186,332 thousand euros with respect to December 31, 2004, resulting from:
(in thousands of euros)
(208,006)
Receivables for IRES sold in factoring
(30,894)
Receivables for IRES sold to Group companies
Receivables for IRES transferred in relation to the national tax consolidation program for fiscal 2005
10,868
Higher consolidated Group VAT receivables
33,859
7,841
Miscellaneous items
Net change
(186,332)
Deferred taxes consist of the balance of deferred tax assets net of deferred tax liabilities. Overall, the temporary differences
and relative theoretical tax effects, calculated on the basis of the IRES rate of 33% at December 31, 2005 and at December
31, 2004, can be broken down as follows:
(in thousands of euros)
12/31/2005
12/31/2004
- Writedowns of equity investments deductible in future fiscal years
391,907
632,944
- Taxed reserves for risks and charges and other minor differences
15,547
12,525
407,454
645,469
- Gains (sale of Ferrari S.p.A. stock) deferred for taxation in future fiscal years
(39,736)
(79,602)
Total theoretical benefit on temporary differences
367,718
565,867
Theoretical benefit on tax losses that can be carried forward
141,244
253,936
(508,962)
(542,803)
-
277,000
Deferred tax assets for temporary differences:
Total deferred tax assets
Deferred tax liabilities for:
Value adjustments for assets whose recoverability is not reasonably certain
Total deferred tax assets
Deferred tax assets of 277,000 thousand euros at December 31, 2004 were realised during fiscal 2005 following the
payment in February 2005 of the first instalment of the General Motors settlement in relation to the termination of the Master
Agreement.
At December 31, 2005 no deferred tax assets on temporary differences and losses carried forward were recognised as
there was no reasonable certainty regarding the terms and conditions for their recovery.
Miscellaneous items showed a net increase of 2,234 thousand euros, mainly due to a higher amount of receivables sold in
factoring, in expectation of liquidation at the end of the year.
Finally, in regard to the items on the financial statements that represent receivables, it is noted that:
- Amounts of receivables due from companies abroad are not significant.
- There are no receivables with a residual term of more than five years.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
206
6 Financial assets not held as fixed assets
Treasury stock
At December 31, 2005, treasury stock amounted to 27,710 thousand euros and included 4,331,708 ordinary shares, for a
total par value of 21,659 thousand euros. These shares are held to cover, on a generic basis, the commitments undertaken
in connection with stock option plans for employees. At December 31, 2005, the exercise prices of said stock options were
higher than the carrying value of the treasury stock.
The net increase of 1,297 thousand euros with respect to December 31, 2004 can be broken down as follows:
(in thousands of euros)
Disposals
(315)
Revaluation for partial restoration of value
1,612
Net change
1,297
The revaluation for partial restoration of value (mainly reflecting the writedown recorded in 2004) was made following the
increase in market value during 2005, within the limits allowed by the treasury stock valuation reserve recorded in
stockholders’ equity. On the basis of the market value at December 30, 2005, the value of treasury stock would be equal to
31,764 thousand euros.
Financial receivables
This item totalled 3,058,299 thousand euros at December 31, 2005, compared with 2,320,581 thousand euros at the end of
2004.
This item consists of a fixed rate (4.41%) loan of 2,700,000 thousand euros, due on January 16, 2006, provided to the
subsidiary Fiat Ge.Va. S.p.A, and liquidity left on deposit with this same company (358,299 thousand euros). The net
increase of 737,718 thousand euros with respect to December 31, 2004 is the result of cash flows for 2005 which benefited
from the receipt of 1,135 million euros from General Motors.
7 Cash
Bank and post office accounts
This item, which at the end of December 31, 2005 amounted to 345 thousand euros, showed an increase of 20 thousand
euros with respect to December 31, 2004.
Cheques
At December 31, 2005, cheques amounted to 150 thousand euros. At December 31, 2004 there were no cheques.
Cash on hand
There was no cash on hand at December 31, 2005.
8 Accrued income and prepaid expenses
Accrued income
At 10,560 thousand euros, accrued income showed an increase of 8,207 thousand euros from the amount at December 31,
2004. Of this amount, 9,592 thousand euros represent accrued interest on the loan granted to the subsidiary Fiat Ge.Va.
S.p.A.
Prepaid expenses
These totalled 2,743 thousand euros at December 31, 2005, for a net decrease of 1,785 thousand euros compared with
December 31, 2004, mainly connected with the fees contractually due to TOROC for sponsorship of the XX Winter Olympic
Games, applicable to fiscal 2006.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
207
9 Stockholders’ Equity
Capital stock
Fully paid-in capital amounted to 6,377,257,130 euros at December 31, 2005 and consisted of 1,275,451,426 shares as
follows:
ƒ 1,092,246,316 ordinary shares;
ƒ 103,292,310 preference shares;
ƒ 79,912,800 savings shares;
all with a par value of 5 euros each.
With reference to the capital stock, it should be mentioned that:
ƒ
On September 24, 2002 a pool of banks (see Note 12) extended a Mandatory Convertible Facility to Fiat S.p.A. for 3
billion euros due on September 20, 2005. According to the conditions of the facility agreement, the facility could be
reimbursed by means of conversion into ordinary Fiat shares, which the banks would be required to subscribe.
ƒ
On September 12, 2002, the Extraordinary Stockholders meeting authorised the Board of Directors, pursuant to
Article 2443 of the Italian Civil Code, to resolve a capital increase servicing the banks’ subscription commitment as
envisaged in the Mandatory Convertible Facility agreement.
ƒ
On September 20, 2005, the facility was converted in accordance with the agreement and by previous arrangement
amongst the parties. This involved offsetting the 3 billion euros in principal owed to the banks by having them
subscribe the rights offering resolved by the Board of Directors on September 15, 2005.
ƒ
As a result of this capital increase, for 1,459,143,590 euros (from 4,918,113,540 euros to 6,377,257,130 euros),
291,828,718 ordinary shares with a par value of 5 euros each were issued with the same characteristics as those
already outstanding (including dividend rights at January 1, 2005). These newly issued shares were reserved for
subscription pursuant to Article 2441, Section 7, of the Italian Civil Code to the subscribing banks at the price of 10.28
euros each, with 5.28 euros as a share premium. Pursuant to the facility agreement, the price of 10.28 euros per
newly issued share was determined as the average of 14.4409 euros (the stock market quotation of Fiat ordinary
stock at the facility date, which was subsequently adjusted) and the weighted average of official market prices for Fiat
ordinary stock during the six months preceding the due date of the facility.
ƒ
Pursuant to the first three sections of Article 2441 of the Italian Civil Code and Article 134, Section 1, Legislative
Decree no. 58/98 (Consolidated Law on Financial Intermediation), the banks subsequently offered these shares to
Fiat shareholders at the price of 10.28 euros per share, at the ratio of 149 new shares for every 500 shares owned in
any class.
With reference to the capital stock, for completeness of information it is noted that:
ƒ
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 “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 warrant holder may opt to subscribe to
the shares in exchange for the warrants.
ƒ
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.
ƒ
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.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
208
Additional paid-in capital
At December 31, 2005, additional paid-in capital amounted to 1,540,857 thousand euros, representing an increase of the
same amount with respect to December 31, 2004 as a result of the capital increase approved by the Board of Directors on
September 15, 2005 and previously commented on.
Legal reserve
The legal reserve totalled 446,562 thousand euros at December 31, 2005 and was unchanged with respect to December
31, 2004.
Treasury stock valuation reserve
The treasury stock valuation reserve totalled 27,710 thousand euros at December 31, 2005, reflecting a net increase of
1,297 thousand euros from December 31, 2004, following the revaluation for partial restoration of value and the reduction
recorded following the disposal of treasury shares during the year.
The value of this reserve at December 31, 2005 corresponded to the value approved by the Stockholders Meeting on May
11, 2004, in proportion to treasury stock still owned by the Company.
Other reserves
Extraordinary reserve
At December 31, 2005, the extraordinary reserve totalled 334 thousand euros, with a net decrease of 1,297 thousand euros
from the previous year reflecting the counter entries to the aforementioned increase in the treasury stock valuation reserve.
Losses carried forward
This item totalled 949,101 thousand euros at December 31, 2005. This is the exact amount of the change from the previous
year and reflects the net loss for fiscal 2004 that was carried forward following a resolution by the Stockholders Meeting on
June 23, 2005.
In the tables at the end of the Notes to the Financial Statements the following are illustrated:
ƒ
the tax treatment applicable to reserves and capital;
ƒ
the origin, possibility of use, and possibility of distribution of items posted under stockholders’ equity.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
209
The table below shows the changes that affected stockholders’ equity in 2003, 2004 and 2005:
(in millions of euros)
Capital
stock
Additional
paid-in
capital
Revaluation
reserve
under Law
No. 413 of
12/30/91
5,933.6 3,082.1
2,327.1
22.6
Total
Balance at December 31, 2002
Coverage of the loss for fiscal 2002 through recourse to
a portion of the additional paid-in capital
Utilisation of part of the reserve for purchase of treasury
shares with transfer to treasury stock valuation reserve
Transfer of part of treasury stock valuation reserve to
reserve for purchase of treasury shares following
writedown of treasury stock
Allocation to additional paid-in capital of the value of
unexercised option rights sold on the stock market
Capital increase from 3,082.1 million euros to 4,918.1
million euros through issue of ordinary shares as
resolved by the Board of Directors on June 26, 2003
Loss for the year
Balance at December 31, 2003
Coverage of the loss for fiscal 2003 through recourse to
the additional paid-in capital
Coverage of the loss for fiscal 2003 through recourse to
portion of the legal reserve
Coverage of the loss for fiscal 2003 through recourse to:
Extraordinary reserve
Reserve for purchase of treasury shares
Out-of-period income reserve under Article 55
of Presidential Decree No. 917 of 1986
Reserve for capital grants under Article 102 of
Presidential Decree No. 1523 of 1967
Reserve for capital grants under Regional Law No.
19/84
Coverage of the loss for fiscal 2003 through recourse to
retained earnings
Transfer of part of treasury stock valuation reserve to
extraordinary reserve following writedown of treasury
stock
Loss for the year
Balance at December 31, 2004
Capital increase from 4,918.1 million euros to 6,377.2
million euros through issue of ordinary shares as resolved
by the Board of Directors on September 15, 2005
2004 loss carried forward
Transfer of part of treasury stock valuation reserve to
extraordinary reserve following sale of treasury stock on
the stock exchange
Transfer of part of extraordinary reserve to treasury
stock valuation reserve following restoration of value of
treasury stock
Income for the year
Balance at December 31, 2005
(*) Broken down as follows:
Extraordinary reserve
Out-of-period income reserve under Article 55
of Presidential Decree No. 917 of 12/22/1986
-
Legal
reserve
Treasury stock
valuation
reserve
Other
reserves
(*)
Retained
earnings
/ losses
carried
forward
Net income
(loss) for the
fiscal year
659.3
20.4
1,111.6
763.1
(2,052.6)
(2,052.6)
2,052.6
-
12.8
(12.8)
-
(5.1)
5.1
28.1
1,103.9
4.5
1,836.0 1,836.0
(2,358.8)
5,415.3 4,918.1
-
4.5
279.0
22.6
659.3
763.1
(279.0)
(2,358.8)
(2,358.8)
279.0
-
(212.8)
212.8
-
(112.3)
(971.9)
(1.9)
112.3
971.9
1.9
-
(17.7)
17.7
-
(0.1)
0.1
-
(949.1)
4,466.2 4,918.1
3,000.0 1,459.1
-
-
22.6
446.5
763.1
-
(949.1)
(949.1)
(949.1)
949.1
0.3 (949.1)
223.0
223.0
(1.6)
1.6
26.5
1.6
1,540.9
-
223.0
7,689.2 6,377.2
(763.1)
1,540.9
22.6
446.5
(0.3)
0.3
1.6
(1.6)
27.8
December 31, 2005
December 31, 2004
December 31, 2003
0.3
1.6
112.3
-
-
1.9
17.7
Reserve for capital grants under Article 102
of Presidential Decree No. 1523 of 6/30/1967
-
-
Reserve for capital grants under Regional Law No. 19/84
-
-
0.1
Reserve for purchase of treasury shares
-
-
971.9
0.3
1.6
1,103.9
Total
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
210
10 Reserves for risks and charges
Reserve for pensions and similar obligations
This reserve amounted to 21,666 thousand euros at December 31, 2005 and covered severance indemnities and payments
and bonuses accrued vis-à-vis employees and retired employees as a result of supplemental collective or individual
agreements determined on the basis of actuarial computations.
The net increase of 2,393 thousand euros compared with the end of 2004, may be broken down as follows:
(in thousands of euros)
Provisions for the fiscal year charged to income
4,391
(1,998)
Utilisation for the fiscal year
Net change
2,393
Other reserves
This item amounted to 31,038 thousand euros at December 31, 2005 and consisted of contractual commissions (23,256
thousand euros) for the listing on the stock market of Ferrari S.p.A. shares which were sold to Mediobanca in 2002,
expenses for bonuses to be paid to employees for the achievement of objectives (3,620 thousand euros), expenses for the
retirement of personnel in consequence of corporate restructuring plans (4,115 thousand euros) and scholarships (47
thousand euros).
The net increase of 1,299 thousand euros with respect to December 31, 2004 resulted from the following:
(in thousands of euros)
Provision for the fiscal year charged to income
7,736
Utilisation for the fiscal year, mainly for bonuses granted to employees
(4,599)
Release to income of excess reserve
(1,838)
Net change
1,299
Fiat S.p.A. is still subject to pending lawsuits for damages mainly related to real estate properties that were sold in prior
fiscal years. Given the pending nature of these actions, as well as their specific conditions, no reasonable prediction can be
made as to their outcome and, as a consequence, the costs that the company might incur.
11 Reserves for employee severance indemnities
At December 31, 2005 this reserve totalled 11,996 thousand euros, a net increase of 380 thousand euros from the end of
2004.
A breakdown of the change is as follows:
(in thousands of euros)
Provision for the fiscal year charged to income
4,087
(3,891)
Utilisation for the fiscal year
Balance of personnel infragroup transfers and other changes
184
Net change
380
12 Debt
Borrowings from banks
There were no borrowings from banks at December 31, 2005, for a decrease of 3,060,245 thousand euros with respect to
December 31, 2004.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
211
The balance at December 31, 2004 was comprised of 3 billion euros for the Mandatory Convertible Facility granted
pursuant to the Framework Agreement of May 27, 2002 with Capitalia, Banca Intesa, SanPaolo IMI, and Unicredit Banca
(the “Lending Banks”) for the purpose of providing the Fiat Group with the financial support it needed to implement its
industrial plan. The facility was disbursed on September 24, 2002 by a pool of banks comprising the Lending Banks and
BNL, Monte dei Paschi di Siena, ABN Amro Bank, BNP Paribas, Banco di Sicilia, and Banca Toscana (the “Banks”). As
previously mentioned at Note 9, the facility was converted on September 20, 2005 through subscription by the Banks of a
rights offering, following the capital increase from 4,918,113,540 euros to 6,377,257,130 euros approved by the Board of
Directors on September 15, 2005. At December 31, 2004, borrowings from banks also included two years of commissions
(60,000 thousand euros) for the subscription commitment that were owed under the agreement to the Banks and paid in
2005.
Advances
Advances totalled 8,656,662 thousand euros and consisted of advances received from Treno Alta Velocità – T.A.V. S.p.A.
for the High-Speed Railway Project, as previously described at Note 4, Inventories. They refer mainly to work completion
and contractual advances. The Florence-Bologna line accounted for 3,486,925 thousand euros, the Turin-Novara line for
4,304,045 thousand euros and the Novara-Milan line for 865,692 thousand euros. Work completed as of December 31,
2005 amounted to 3,398,254 thousand euros, 4,267,725 thousand euros and 664,444 thousand euros, respectively.
The 1,320,256 thousand euro increase from December 31, 2004 is due to 283,006 thousand euros in advances received for
work completed on the Florence-Bologna line, 664,780 thousand euros in advances received for work completed on the
Turin-Novara line, and 372,470 thousand euros in advances for work completion on the Novara-Milan line.
T.A.V. S.p.A. has been provided with bank suretyships to secure these advances and proper execution of work for a total of
1,904,058 thousand euros, as described more exhaustively in Notes 4 and 14.
Trade payables
Trade payables stem from services received and amounts due to CAV.E.T. and CAV.TO.MI. for progress payments due for
work completed in the fourth quarter of 2005 and paid in the first quarter of 2006. They totalled 380,335 thousand euros at
December 31, 2005, a net decrease of 121,320 thousand euros compared with December 31, 2004, mainly due to the
amounts due to the CAV.TO.MI. Consortium for the Turin-Novara line.
Payables to subsidiaries
These stood at 222,848 thousand euros at December 31, 2005, showing a net increase of 118 thousand euros from a year
earlier.
A breakdown of this item is as follows:
(in thousands of euros)
Financial payables
Trade payables
Payables for consolidated IRES
Other payables
Total payables to subsidiaries
12/31/05
12/31/04
Change
117,028
101,746
15,282
(5,836)
4,847
10,683
100,548
71,816
28,732
425
38,485
(38,060)
222,848
222,730
118
Financial payables at December 31, 2005 included amounts payable to subsidiaries for their VAT credits, which they
transferred to Fiat S.p.A. under the consolidated VAT filing system.
Trade payables reflect the purchase of administrative and general services.
Payables for consolidated IRES refer for 73,591 thousand euros to amounts payable to Italian subsidiaries for IRES
calculated on the portion of the tax losses contributed by these companies as part of the national tax consolidation program
and offset with the taxable income contributed by other Italian subsidiaries during the year, and for 26,957 thousand euros
to advances and other IRES credits transferred to Fiat S.p.A. by the companies participating in this program. Of the latter
amount, 14,759 thousand euros were transferred in 2004 and 12,198 thousand euros in 2005.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
212
Payables to controlling company
There were no payables to the controlling company at December 31, 2005, with a decrease of 234 thousand euros with
respect to December 31, 2004.
Taxes payable
At December 31, 2005, taxes payable totalled 2,750 thousand euros, a net decrease of 6,237 thousand euros from the
figure at December 31, 2004. A breakdown is as follows:
(in thousands of euros)
12/31/05
12/31/04
Change
-
5,672
(5,672)
(565)
VAT payable
2,322
2,887
Miscellaneous items
428
428
-
Total taxes payable
2,750
8,987
(6,237)
Taxes withheld on payments to employees and independent contractors
Social security payable
This item totalled 1,717 thousand euros at December 31, 2005, a decrease of 1,080 thousand euros from December 31,
2004.
Other payables
At December 31, 2005, other payables amounted to 22,607 thousand euros, for a net year-on-year decrease of 3,877
thousand euros. A breakdown is provided below:
(in thousands of euros)
Former Chief Executive Officer for retirement incentives to be paid
in instalments over 20 years
Directors and employees for fees to be paid
Payables to employees who left the Company
Payables to stockholders of Toro Assicurazioni S.p.A., Magneti Marelli S.p.A.
and Comau S.p.A. for public offerings
Dividends payable
Miscellaneous payables
Total other payables
12/31/05
12/31/04
Change
5,807
6,191
6,063
10,187
(256)
(3,996)
8,432
7,472
960
864
247
869
315
(5)
(68)
1,066
1,578
(512)
22,607
26,484
(3,877)
Finally, in regard to payables posted in the balance sheet, it should be noted that:
- The amount of payables to foreign entities is not significant.
- Payables with a residual term of more than five year amount to 10,561 thousand euros.
13 Accrued expenses and deferred income
Accrued expenses
The balance of 503 thousand euros at December 31, 2005 is 129,147 thousand euros lower than the figure at December
31, 2004.
A breakdown of this item is provided below:
(in thousands of euros)
Interest on the Mandatory Convertible Facility
Commissions on the Mandatory Convertible Facility
Interest due to Intermap (Nederland) B.V.
Other
Total accrued expenses
12/31/05
12/31/04
Change
-
30,258
(30,258)
-
98,951
(98,951)
434
395
39
69
46
23
503
129,650
(129,147)
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
213
Deferred income
Deferred income amounted to 19 thousand euros at December 31, 2005, unchanged with respect to the figure reported at
December 31, 2004. Deferred income refers to income to be recognised in 2006.
14 Memorandum accounts
Guarantees granted
Unsecured guarantees
Suretyships
Suretyships totalled 1,257,760 thousand euros at December 31, 2005.
They include suretyships provided on behalf of FiatSava S.p.A. to secure a debenture issue (410,303 thousand euros) and
to secure Billets de Trésorerie issued by Group companies and third parties (totalling 314,000 thousand euros), bank loans
(344,359 thousand euros), and rental obligations for buildings in relation to real estate securitisation operations carried out
in previous years (189,098 thousand euros).
The net decrease of 530,900 thousand euros from December 31, 2004 is mainly due to lower guarantees provided to
secure Sava debentures (598,064 thousand euros) and rental obligations for buildings (218,834 thousand euros), partially
offset by higher guarantees for financings (171,998 thousand euros) and the issuance of Billets de Trésorerie (114,000
thousand euros).
Other unsecured guarantees
This item totalled 7,220,706 thousand euros at December 31, 2005.
It includes the following:
▪
7,100,924 thousand euros in guarantees provided on behalf of subsidiaries to secure loans (Banco CNH Capital S.A.
651,973 thousand euros, CNH America LLC 130,103 thousand euros, Fiat Automoveis S.A. 78,040 thousand euros,
Iveco Fiat Brasil Ltda 14,724 thousand euros, Magneti Marelli Controle Motor Ltda 3,248 thousand euros, Iveco Latin
America Ltda 2,178 thousand euros), bond issues (Fiat Finance and Trade Ltd 5,426,621 thousand euros, Fiat
Finance Canada Ltd. 100,000 thousand euros, Fiat Finance Luxembourg S.A. 14,571 thousand euros), credit lines
(CNH Capital America LLC 127,130 thousand euros, CNH Capital Canada Ltd. 39,738 thousand euros, New Holland
Credit Company LLC 32,920 thousand euros, CNH Capital Australia Pty Ltd 12,057 thousand euros, Fiat India Private
Limited 6,686 thousand euros, Comau India Private Limited 201 thousand euros, New Holland Tractors (India) Pty
Ltd. 73 thousand euros), VAT credits under the Group consolidation process (278,260 thousand euros), as provided
under Ministerial Decree of 12/13/79 as amended, and sundry guarantees (182,401 thousand euros);
▪
119,782 thousand euros in miscellaneous guarantees.
The net decrease of 2,547,542 thousand euros with respect to December 31, 2004 is due mainly to fewer guarantees on
behalf of subsidiaries following the reimbursement of bonds and the extinguishment of financings.
Although they are not included in memorandum accounts, mention is made of the following:
▪
At December 31, 2005, outstanding trade and other receivables sold without recourse and due after that date totalled
688 million euros (415 million euros in 2004 due after December 31, 2004). The turnover of discounting without
recourse totalled 1,537 million euros in 2005 (843 million euros in 2004). At December 31, 2005, there was no risk of
recourse against sold receivables as there were no receivables sold with recourse outstanding at that date.
▪
A new three-year credit line was granted to Fiat Ge.Va. S.p.A. and other Fiat Group subsidiaries as part of an
agreement signed on June 22, 2005 with a pool of Italian and international banks coordinated by Citibank
International. Under this agreement, Fiat S.p.A. guaranteed use of this credit line by its subsidiaries. At December
31, 2005 this credit line had not been used. It is also pointed out that Fiat S.p.A. granted its subsidiary CNH Global
N.V. and its subsidiaries a 1 billion dollar revolving credit line, due at the end of January 2007, which may be drawn
by Fiat Group cash management companies.
▪
In 2005, Fiat Partecipazioni S.p.A. collected the balance from the sale of Fiat Group interest in aviation activities
ahead of schedule. Consequently, Fiat S.p.A. assumed a joint obligation with Fiat Partecipazioni S.p.A. towards the
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
214
purchaser Avio Holding S.p.A. if Fiat Partecipazioni S.p.A. does not satisfy obligations to pay compensation (either in
consequence of an arbitration award or a settlement agreement) deriving from the sale agreement signed in 2003
with the seller. Likewise, on the occasion of the sale of the Fiat Group interest in rolling stock and railway systems
activities, Fiat S.p.A. assumed obligations to compensate Alstom N.V. if the seller (now Fiat Partecipazioni S.p.A.) of
railway activities defaulted on compensation obligations under the sale agreement. A review of these obligations
leads us to believe that there is no reasonable likelihood Fiat S.p.A. will incur direct costs for these commitments.
Commitments
Commitments related to supply contracts
This item totalled 10,906,320 thousand euros at December 31, 2005. Of this amount, 4,296,833 thousand euros represent
the commitment (corresponding to the contractual amounts) stemming from the agreement executed on May 7, 1996 and
the supplemental agreements signed by Fiat S.p.A. and Treno Alta Velocità – T.A.V. S.p.A. for the design and construction
of the Bologna-Florence high-speed rail line, 4,547,205 thousand euros for the commitment undertaken pursuant to the
agreement of February 14, 2002 and subsequent supplement agreements for the design and construction of the TurinNovara line, and 2,062,282 thousand euros for the commitment undertaken pursuant to the agreement of July 21, 2004 for
the design and construction of the Novara-Milan line. The increase of 645,173 thousand euros compared with December
31, 2004 includes agreements reached during 2005 regarding the Florence-Bologna line, specifically alterations (422,625
thousand euros), and monetary adjustments (49,495 thousand euros), agreements regarding the Turin-Novara line,
specifically relating to alterations (38,953 thousand euros) and monetary adjustments (52,343 thousand euros), and the
Novara-Milan line, specifically relating to alterations (53,659 thousand euros) and monetary adjustments (28,098 thousand
euros).
Fiat S.p.A. has subcontracted design and construction of the works to the CAV.E.T. and CAV.TO.MI. consortia.
Fiat S.p.A. provided T.A.V. S.p.A. with bank suretyships totalling 1,904,058 thousand euros as guarantee for contractual
advances received and proper execution of work. These guarantees are not recorded under memorandum accounts since
advances are included under Liabilities – Advances. Likewise, the CAV.E.T. and CAV.TO.MI consortia provided Fiat S.p.A.
with the contractually envisaged bank suretyships totalling 621,646 thousand euros and 1,210,029 thousand euros,
respectively.
Commitments for derivative financial instruments
These totalled 70,241 thousand euros at December 31, 2005, reflecting a decrease of 20,157 thousand euros with respect
to December 31, 2004.
The amount at December 31, 2005 represents the notional amount of the equity swap on Fiat shares made to hedge the
risk of an increase in the share price above the exercise price of the 10,670,000 stock options granted to Mr. Marchionne.
The risk of a significant increase in the Fiat share price above the exercise price for these options (6.583 euros) has been
covered through the aforementioned “Total Return Equity Swap” agreement with a reference price of 6.583 euros per share
and expiring on October 30, 2006. In accordance with accounting principles, the aforementioned Equity Swap, despite the
fact that it was entered into for hedging purposes, cannot be treated in hedge accounting and accordingly is defined as a
trading derivative financial instrument. It follows that, in accordance with the principle of prudence, if during the period of the
contract the Fiat shares perform positively, the positive fair value of the instrument is not recorded in the income statement;
if, instead, the performance is negative, the negative fair value of the instrument is recorded as a cost under financial
expenses. At December 31, 2005, the Equity Swap had a positive fair value of 8,002 thousand euros that was not therefore
recorded in the financial statements.
At December 31, 2004, commitments for derivate financial instruments amounted to 90,398 thousand euros and referred to
the Equity Swap on Fiat shares for 65,830 thousand euros and for 24,568 thousand euros to Forward Rate Agreements
made to cover the risks connected with changes in the rate of the Mandatory Convertible Facility.
Other commitments
This item totalled 6,972 thousand euros at December 31, 2005, with respect to 9,296 thousand euros at December 31,
2004, and represents the residuary amount of the commitment, undertaken by Fiat on the occasion of its centennial under a
resolution adopted by the Stockholders Meeting on June 22, 1998, to defer, over a ten-year period, the costs incurred to
provide courses for a Degree in Automotive Engineering and pay for the renovation of the respective building. The decrease
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
215
of 2,324 thousand euros from December 31, 2004 reflects the outlays incurred in the year for the management of degree
courses.
A summary is presented below of the rights still in place at December 31, 2005 arising from the purchase, during 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 sales contract sets out the following principal elements:
ƒ
Mediobanca agreed to coordinate and lead the consortium as the sole Global Coordinator, if placement takes place by
June 30, 2006.
ƒ
Mediobanca cannot sell its Ferrari shares to another automobile manufacturer as long as the Fiat Group maintains a
51% controlling interest in Ferrari. Barring certain specific assumptions, the Fiat Group cannot 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.
ƒ
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
(listed Italian government securities) yield plus 4%.
ƒ
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.
ƒ
If agreed by the parties, Fiat may share in any gain realised by Mediobanca and the other members of the consortium
in the event of an IPO.
As part of the sale of Piemongest S.p.A. to Iupiter S.r.l., Fiat S.p.A. guaranteed performance of the residual obligations.
With reference to the stake held by Renault in Teksid S.p.A., it should be noted that Fiat S.p.A. and Renault have agreed
that said stake may be resold to Fiat S.p.A. should there be a material change in the conditions upon which the original
agreement was based.
15 Value of production
Service revenues
Service revenues, which amounted to 20,170 thousand euros in 2005, are the result of transactions with Group companies.
They mainly refer to amounts due from Fiat Auto S.p.A. for the use of the Fiat trademark and to services rendered by
management personnel of Fiat S.p.A. at the main Group companies.
The decrease over 2004 is due to lower bills for the license to use the trademark.
Change in contract work in progress
This item represents mainly costs incurred during the fiscal year for project management, coordination, and organisation in
connection with the High-Speed Railway Project and capitalised as part of inventories.
Totalling 13,576 thousand euros in 2005, or 3,283 thousand euros less than in 2004, it mainly consists of services provided
by suppliers outside the Group (12,995 thousand euros).
Other income and revenues
Other income and revenues amounted to 11,702 thousand euros in 2005 and include 2,262 thousand euros in rental
income from buildings owned by Fiat S.p.A. and leased to Group companies, 6,454 thousand euros in fees paid by
miscellaneous companies for services performed by employees or coordinated and continuing collaborators of Fiat S.p.A. in
the capacity of Directors, 476 thousand euros in miscellaneous income and expense reimbursements, and 2,510 thousand
euros in prior period income, largely represented by bonuses to employees that were accrued in an amount that was
greater than what had actually been paid. This item shows a decrease of 150 thousand euros from 2004.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
216
16 Costs of production
Raw materials, supplies and merchandise
This item totalled 407 thousand euros in 2005, against 423 thousand euros in 2004.
It consists mainly of the cost of research publications, office supplies and printed forms.
Services
Service costs amounted to 76,218 thousand euros in 2005, a decrease of 33,631 thousand euros compared with 2004 due
to lower expenses for professional services and consulting related to projects of interest to the Group in the administrative
and financial areas, which were completed or are in the process of being completed, as well as lower expenses for facilities
management services.
Amounts paid to Group companies for services provided totalled 32,670 thousand euros and include support and
administrative and financial consulting services (4,493 thousand euros to Fiat Gesco S.p.A., 656 thousand euros to Fiat
Ge.Va. S.p.A., and 168 thousand euros to KeyG Consulting S.p.A.); external relations services (1,815 thousand euros to
Fiat I&CS S.c.p.A.); office management and maintenance (7,178 thousand euros to Ingest Facility S.p.A.); personnel
management and other services (5,170 thousand euros to Fiat Se.p.In. S.c.p.A.); information technology services (223
thousand euros to PDL Service S.r.l. and 1,023 thousand euros to eSPIN S.p.A.); security services (2,924 thousand euros
to Consorzio Orione and 1,089 thousand euros to Consorzio Sirio), and internal audit activities (5,038 thousand euros to
Fiat-Revisione Interna S.c.r.l.).
Expenses for services provided by others totalled 43,548 thousand euros and include professional services, studies and
consulting in the technical field (TAV), legal, administrative, and financial advice for 23,277 thousand euros, sponsorship
and advertising expenses of 6,259 thousand euros, information services for 2,870 thousand euros, and insurance and other
overhead expenses.
Leases and rentals
Leases and rentals totalled 987 thousand euros in 2005, or 38 thousand euros more than in 2004.
Personnel
This item amounted to 41,705 thousand euros in 2005 and includes provisions to the Reserve for pensions and similar
obligations and to “other” reserves for bonuses and severance incentives as well as bonuses for the achievement of
objectives. This item shows a decrease of 11,174 thousand euros with respect to 2004 mainly due to lower wage and salary
and social security contributions and lower provisions set aside for employee bonuses. The Company’s average number of
staff decreased from 151 employees in 2004 (83 managers, 63 clerical staff, and 5 blue collar workers) to 133 employees in
2005 (63 managers, 65 clerical staff and 5 blue collar workers).
During 2005, 11 managers were seconded to the Group’s main subsidiaries (12 in 2004), which were billed for the
respective costs.
Amortisation and depreciation
This item totalled 27,031 thousand euros in 2005 and refers for 23,746 thousand euros to the amortisation of intangible
fixed assets and for 3,285 thousand euros to the depreciation of property, plant and equipment. The 2,686 thousand euro
decrease with respect to 2004 is mainly due to the lower depreciation rate, with respect to 2004, connected to commissions
and costs for organisation of the Mandatory Convertible Facility, which was extinguished in 2005.
Other operating costs
These costs totalled 40,701 thousand euros in 2005. The increase over 2004 is mainly due to the indemnity paid for the
unwinding of the agreements with IBM and to contributions made to Group companies for initiatives to enhance the image
of the Group.
The item includes fees paid to the Directors, Statutory Auditors and External Auditors. Directors’ fees included
compensation awarded by the Stockholders Meeting as well as fees set by the Board of Directors for Directors vested with
particular offices.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
217
17 Financial income and expenses
Investment income
Income from investments came to 7,714 thousand euros in 2005, a decrease of 674,843 thousand euros compared with
2004.
A breakdown is as follows:
(in thousands of euros)
2005
2004
-
70,000
-
606,124
-
676,124
Subsidiaries
Dividends distributed by:
Fiat Ge.Va. S.p.A.
Reimbursements of capital (portion in excess of the reduction of the book value)
IHF-Internazionale Holding Fiat S.A.
Total subsidiaries
Other companies
Dividends distributed by:
6,777
Mediobanca S.p.A.
5,647
937
Fin. Priv. S.r.l.
786
Total other companies
7,714
6,433
Total investment income
7,714
682,557
Other financial income
From securities held as fixed assets other than equity investments
This item consists of interest earned on securities pledged to fund scholarship grants.
Income from these securities totalled 2 thousand euros in 2005, in line with 2004.
Securities among current assets other than equity investments
This item amounted to 86 thousand euros in 2005, with an increase of the same amount with respect to December 31,
2004.
It refers to the gain realised during the year upon sale of treasury stock on the stock market.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
218
Other income
Other income came to 112,614 thousand euros in 2005, an increase of 39,639 thousand euros compared with 2004.
A breakdown is as follows:
(in thousands of euros)
2005
2004
Subsidiaries
Interest earned from:
89,255
Fiat Ge.Va. S.p.A.
48,968
-
Other companies
335
89,255
Total
49,303
Fees for suretyships and unsecured guarantees provided on behalf of the following
Group companies:
2,005
2,299
Fiat France S.A.
581
396
Fiat Partecipazioni S.p.A.
529
711
Banco CNH Capital S.A.
424
297
F.M.A. – Fabbrica Motori Automobilistici S.r.l.
116
-
Fiat Auto S.p.A.
113
204
Ingest Facility S.p.A.
53
201
New Holland Credit Company LLC
21
212
Fiat Finance and Trade Ltd
Fiat Finance Luxembourg S.A.
4
249
Fiat Auto Financial Services Limited
-
333
551
Other companies
561
4,397
Total
5,463
Income from derivative financial instruments
Intermap (Nederland) B.V.
Fiat Ge.Va. S.p.A.
6,830
5,010
-
2,617
6,830
Total
Other income
Total subsidiaries
7,627
717
626
101,199
63,019
Others
Interest earned on bank deposits
Interest earned on amounts receivable from the Tax Authorities
Other interest income
79
1
9,464
6,847
36
330
Fees for suretyships provided:
FiatSava S.p.A.
Other companies
Total
Total others
Total other income
1,762
2,681
74
97
1,836
2,778
11,415
9,956
112,614
72,975
Interest and other financial expenses
Interest and other financial expenses amounted to 168,677 thousand euros in 2005, or 41,545 thousand euros less than in
2004.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
219
A breakdown is provided below:
(in thousands of euros)
2005
2004
Subsidiaries
Interest and other financial expenses paid to:
-
Fiat Ge.Va. S.p.A.
8,327
2,557
Intermap (Nederland) B.V.
Total
2,379
2,557
10,706
5
151
Fees paid to:
Fiat Ge.Va. S.p.A.
Interest from derivative financial instruments:
380
6,830
2,942
17,687
Others
Interest paid on the Mandatory Convertible Facility
97,288
109,511
Fees paid on the Mandatory Convertible Facility
56,062
70,200
Interest expenses and charges for the sale of receivables
11,695
11,763
Intermap (Nederland) B.V.
Total subsidiaries
690
1,061
Total others
165,735
192,535
Total interest and other financial expenses
168,677
210,222
Other charges
Foreign exchange gains and losses
Net foreign exchange losses totalled 58 thousand euros in 2005, with a net decrease of 341 thousand euros from 2004.
The item includes a net loss of 1 thousand euros that has not yet been realised, deriving from the adjustment of receivables
and payables denominated in foreign currency at the spot exchange rates on the closing date of the fiscal year.
18 Adjustments to financial assets
Revaluations of equity investments
This item totalled 526,753 thousand euros in 2005 for a change of the same amount with respect to 2004. It includes partial
restoration of the original book value of the investments held in Fiat Netherlands Holding N.V. (376,100 thousand euros),
Magneti Marelli Holding S.p.A. (144,221 thousand euros), Fiat Finance North America Inc. (2,415 thousand euros) and Fiat
U.S.A. Inc. (4,017 thousand euros) which are discussed at Note 3.
Revaluations of securities among current assets other than equity investments
This item amounted to 1,612 thousand euros in 2005, for a change of the same amount with respect to 2004. It reflects the
partial restoration of value of treasury stock, which are discussed at Note 6.
Writedowns of equity investments
In 2005 this item totalled 957,542 thousand euros, for a decrease of 681,611 thousand euros with respect to 2004. It refers
to the writedowns of the equity investments held in Fiat Partecipazioni S.p.A. (810,700 thousand euros), Teksid S.p.A.
(52,986 thousand euros), Comau S.p.A. (41,800 thousand euros) and Business Solutions S.p.A. (52,056 thousand euros),
which are discussed at Note 3.
In 2004 writedowns included Fiat Partecipazioni S.p.A. (1,623,973 thousand euros), Isvor Fiat S.c.p.A. (9,547 thousand
euros), Fiat Finance North America Inc. (3,976 thousand euros), and Fiat USA Inc. (1,657 thousand euros).
Writedowns of securities included as current assets which do not represent equity investments
This item amounted to 1,631 thousand euros in 2004 and consists of the writedown of treasury stock.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
220
19 Extraordinary income and expenses
Extraordinary income
Extraordinary income totalled 1,135,689 thousand euros in 2005 and consisted mainly of the extraordinary income of
1,135,000 thousand euros received under the settlement for termination of the Master Agreement with General Motors. It
also included the adjustment to the sale price of the investment held in the Istituto Europeo di Oncologia S.r.l., which was
sold at the end of 2004, and sundry items.
In 2004, it mainly consisted of lower tax expenses with respect to those determined in previous years.
Extraordinary expenses
In 2005 extraordinary expenses totalled 14,745 thousand euros and consisted of expenses connected to the transaction
with General Motors (legal expenses and other expenses for 1,890 thousand euros), incentives and expenses for the
retirement of personnel in consequence of corporate restructuring plans (10,939 thousand euros) and the adjustment of the
sale price of the investment held in the Istituto per la Ricerca e Cura del Cancro S.p.A. sold at the end of the prior fiscal
year.
In 2004 these mainly referred to incentives and expenses for the retirement of personnel in consequence of corporate
restructuring plans (14,704 thousand euros) and losses on the disposal of investments.
20 Income taxes, current and deferred tax assets and liabilities
Income taxes totalled 278,828 thousand euros in 2005 and include:
▪
▪
current income taxes (IRES) for 1,828 thousand euros, payable on the income generated by some subsidiaries outside
Italy (Article 167 T.U.I.R.) and on the national tax consolidation program (balance of taxes filed for fiscal 2004, net of a
benefit for fiscal 2005, for tax losses used to offset taxable income contributed by other subsidiaries); and
deferred taxes of 277,000 thousand euros stemming from realisation of deferred tax assets reported in the financial
statements at December 31, 2004.
On the other hand, in 2004 there was a net tax credit of 278,442 thousand euros, mainly due to the recognition of deferred
tax assets of 277,000 thousand euros, as previously discussed at Note 5.
In 2005, taxes represented 55.6% of income before taxes, and the difference with respect to the theoretical IRES rate of
33% is due mainly to the negative effect (28.2%) of impairment adjustments to financial assets (net writedowns of equity
investments) carried out in the fiscal year that are not tax deductible, partially balanced by the positive effect (-5.6%) of tax
losses carried forward and temporary differences that arose in previous years but, on a prudential basis, have not been
accounted for as deferred tax assets.
In 2004, taxes represented 22.7% of income before taxes, and the difference with respect to the theoretical IRES rate of
33% was due mainly to the negative effect of writedowns of equity investments carried out in the fiscal year that are not tax
deductible, but partially balanced by the positive effect of deferred tax assets posted in consequence of temporary
differences that arose in previous years and tax losses carried forward.
Finally, taxable income for IRAP was negative in 2005 as in 2004.
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
221
ANALYSIS OF FIXED ASSETS AND SUPPLEMENTAL INFORMATION
Cost of fixed assets
Gross value at beginning of fiscal year
Increases
Decreases
Gross value at the end of fiscal year
Disposals, sales and
contributions
(in thousands of euros)
Historical
Upward
cost
adjustments
ReclassifiTotal
cations
Purchases
Reclassifi-
Historical
Upward
Historical
Upward
cations
cost
adjustments
cost
adjustments
Total
Intangible fixed assets
Start-up and expansion costs:
Cost of capital increase to
3,082.13 million euros
(Board Resolution of 12/10/01)
19,224
19,224
19,224
19,224
Cost of capital increase to
4,918.11 million euros
(Board Resolution of 06/26/03)
56,729
56,729
56,729
56,729
Cost of capital increase to
6,377.26 million euros
(Board Resolution of 09/15/05)
Concessions, licenses, trademarks
and similar rights
Intangible assets in progress and
advances
Other Intangible fixed assets
Expenses connected with the
Mandatory Convertible Facility
Leasehold improvements
Property, plant and equipment
Land and buildings
Plant and machinery
Other fixed assets
75,953
75,953
-
1,363
1,363
897
897
28
94
185
185
65
33,628
110,663
33,628
- 110,663
28
373
1,895
-
30
1,191
1,221
45,945
10,057
7,743
63,745
-
102
102
46,047
10,057
7,743
63,847
Gross value at beginning of fiscal year
-
(28)
(28)
-
(in thousands of euros)
Financial fixed
assets
Investments in:
Subsidiaries
Other companies
12,555,793
12,682,523
Other securities:
Debt securities
38,576
126,730
12,594,369
Capital
increases, Reclassifipurchases
cations
165,193
5
Historical
cost
38,576
-
12,721,099
165,193
74
61
74
61
(9,615)
-
-
-
1,363
77,316
1,003
1,003
(1)
221
221
(17)
-
33,628
373
112,541
33.628
373
- 112,541
-
45,945
10,087
7,564
63,596
(1,370)
(1,370)
102
102
46,047
10,087
7,564
63,698
Decreases
Gross value at the end of fiscal year
Reclassifications
Historical
Upward
cost adjustments
Disposals
Sales
Historical
cost
Upward
adjustments
(9,615)
5
1,363
77,316
(16)
12,711,376
126,730
74
74
Total
-
Increases
Permanent
losses in
value
Historical
Upward
cost adjustments
-
-
38,576 12,749,952
(5)
126,725
126,725
-
(5)
12,838,101
38,576 12,876,677
-
-
(62)
(62)
Total
73
73
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
73
-
73
222
Upward adjustments of fixed assets
Classes of assets
Upward adjustments
included in gross value at
(in thousands of euros)
beginning of period
Deductions
for divested
Upward adjustments
included in gross value at
assets
end of period
Increases
Property, plant and equipment
Land and buildings
102
Plant and machinery
102
-
-
102
-
-
102
38,576
-
-
38,576
Financial fixed assets
Investments in:
Subsidiaries
Depreciation and amortisation of fixed assets
year
Increases due
to additions during
the
fiscal year
Cost of capital increase to 3,082.13 million
euros (Board Resolution of 12/10/2001)
11,534
3,845
15,379
Cost of capital increase to 4,918.11 million
euros (Board Resolution of 06/26/2003)
22,692
11,346
34,038
34,226
272
15,463
-
842
85
(16)
25,440
8,188
-
10
60,508
23,746
Classes of assets
Amortisation and
depreciation
at beginning of fiscal
(in thousands of euros)
Decreases due
to disposals
during the
Reclassifi-
Amortisation and
depreciation
at end of
fiscal year
cations
fiscal year
Intangible fixed assets
Start-up and expansion costs
Cost of capital increase to 6,377.26 million
euros (Board Resolution of 09/15/2005)
Concessions, licenses, trademarks and similar rights
272
49,689
-
911
Other Intangible fixed assets
Expenses connected with the
Mandatory Convertible Facility
Leasehold improvements
33,628
10
(16)
-
84,238
Property, plant and equipment
Land and buildings
10,216
1,354
Plant and machinery
7,170
991
11,570
Other fixed assets
2,976
940
(683)
20,362
3,285
(683)
8,161
3,233
-
22,964
Writedowns of financial fixed assets
Classes of assets
(in thousands of euros)
Financial fixed assets
Investments in:
Subsidiaries
Other companies
Writedowns at
beginning of
Increases due to
additions during
fiscal year
the fiscal year
7,472,239
7,472,239
957,542
957,542
Decreases due to
Disposals during
the fiscal year
-
Permanent losses
in value
Reversals of
writedowns
(9,615)
(526,753)
(9,615)
(526,753)
Writedowns
at end of
fiscal year
7,893,413
7,893,413
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
223
Art. 10, Law No. 72 of March 19, 1983 – Analysis of assets adjusted for inflation as of December 31, 2005
Classes of assets
(in euros)
Historical cost
Upward adjustments permitted by Law
not subject to
upward adjustments
subject to upward
adjustments
No. 74 of 2/11/52 No. 72 of 3/19/83 No. 413 of 12/30/91
45,791,125
10,086,397
7,564,021
63,441,543
154,566
19,385
154,566
19,385
Property, plant and equipment
Land and buildings
Plant and machinery
Other fixed assets
Classes of assets
(in euros)
Financial fixed
assets
Investments in:
Subsidiaries
Other companies
Historical cost
not subject to subject to upward
adjustments
upward adjustments
12,683,475,444
126,725,012
12,810,200,456
82,785
-
102,170
102,170
82,785
Upward adjustments permitted by Law
Valuation reserves
Upward adjustments
included in book value at
end of period
No. 74 of 2/11/52 No. 576 of 12/2/75 No. 72 of 3/19/83
27,900,031 (7,893,412,506)
41,933
2,123,212
36,411,284
27,900,031 (7,893,412,506)
41,933
2,123,212
36,411,284
Upward adjustments
included in book value
at end of period
38,576,429
38,576,429
Fiat S.p.A. - Financial Statements at December 31, 2005 – Notes to the Financial Statements
224
List of investments in subsidiaries and associated companies required under Art. 2427, Section 5, of the Italian Civil Code and additional information specified
in the Consob communication of February 23, 1994
•
Subsidiaries
included in financial fixed assets
Company and registered office
Capital
(in euros)
Result for
the last fiscal year
(in euros)
Stockholders' equity
(in euros)
% owned by
Fiat S.p.A.
Number of shares
Total book value
(in euros)
3,924,685,869
(1,779,119,739)
1,168,392,316
100.00
3,924,685,869
1,391,492,082
3,924,685,869
(862,234,014)
306,158,302
100.00
3,924,685,869
580,792,082
4,366,482,748
157,044,140
3,850,560,371
60.56
57,488,376
2,349,582,656
4,366,482,748
207,060,528
4,255,797,815
60.56
57,488,376
2,725,682,656
Fiat Partecipazioni S.p.A. – Turin
At 12/31/04
•
Writedown to reflect loss in value
At 12/31/05
(810,700,000)
Fiat Netherlands Holding N.V. – Amsterdam (Netherlands)
At 12/31/04
•
Revaluation for restoration of book value
At 12/31/05
376,100,000
+39.44 ind.
Ferrari S.p.A. – Modena
At 12/31/04
20,000,000
41,251,883
165,843,199
56.00
4,480,000
160,675,480
At 12/31/05
20,000,000
52,962,628
218,805,827
56.00
4,480,000
160,675,480
254,324,998
(14,516,304)
612,474,172
99.99
254,301,607
666,932,086
100.00
250,500,601
656,936,752
100.00
250,500,601
799,002,413
99.39
3,801,006
9,995,334
99.39
3,801,006
12,150,987
Magneti Marelli Holding S.p.A. – Corbetta
At 12/31/04
Ordinary shares
At 12/31/04
Revaluation for restoration of book value
142,065,661
At 12/31/05
Preference shares
At 12/31/04
Revaluation for restoration of book value
2,155,653
At 12/31/05
At 12/31/05
254,324,998
(64,320,893)
548,153,279
99.99
254,301,607
811,153,400
239,600,000
(17,608,985)
113,624,939
80.48
192,834,000
96,644,200
Teksid S.p.A. – Turin
At 12/31/04
•
Cancellation of shares upon reduction
of capital to cover losses
(101,386,790)
•
Capital stock increase
•
Writedown to reflect loss in value
32,192,800
At 12/31/05
32,192,800
(52,986,000)
145,817,739
(43,497,815)
102,319,924
84.79
123,640,010
140,000,000
(10,895,549)
112,186,408
100.00
140,000,000
75,851,000
Comau S.p.A. – Grugliasco
At 12/31/04
•
Capital contribution
•
Writedown to reflect loss in value
82,413,200
100,000,000
At 12/31/05
(41,800,000)
140,000,000
(55,231,582)
156,954,825
100.00
140,000,000
140,613,200
10,000,000
(5,278,785)
13,338,609
100.00
10,000,000
65,360,200
Business Solutions S.p.A. – Turin
At 12/31/04
•
Capital contribution
•
Writedown to reflect loss in value
23,000,000
At 12/31/05
(52,056,000)
10,000,000
(31,547,213)
4,791,396
100.00
10,000,000
36,304,200
5,980,000
(1,265,986)
28,434,950
100.00
5,980,000
15,899,105
5,980,000
1,919,935
40,354,885
100.00
5,980,000
25,899,105
100.00
100,000
33,444,877
100.00
100,000
33,444,877
Itedi - Italiana Edizioni S.p.A. – Turin
At 12/31/04
•
Capital contribution
10,000,000
At 12/31/05
IHF - Internazionale Holding
Fiat S.A. – Lugano (Switzerland)
At 12/31/04
64,808,814
181,021,006
245,906,014
CHF
100,000,000
279,315,412
379,432,980
64,304,546
109,326,187
353,318,843
CHF
100,000,000
170,013,153
549,446,133
At 12/31/05
Fiat Ge.Va. S.p.A. – Turin
At 12/31/04
224,440,000
47,711,134
291,082,964
100.00
224,440,000
222,262,897
At 12/31/05
224,440,000
21,035,715
312,118,679
100.00
224,440,000
222,262,897
29,432,501
57,785
33,291,985
39.47
150
13,142,000
40,090,010
78,709
45,347,013
33,983,225
971,635
39,411,080
39.47
150
15,557,000
40,090,010
1,146,238
46,493,251
Fiat Finance North America Inc. – Wilmington
(United States)
At 12/31/04
USD
•
Revaluation for restoration of book value
At 12/31/05
USD
2,415,000
+60.53 ind.
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
225
List of investments (continued)
Company and registered office
Capital
(in euros)
Result for
the last fiscal year
(in euros)
Stockholders' equity
(in euros)
% owned by
Fiat S.p.A.
Number of shares
Total book value
(in euros)
12,355,921
207,961
23,240,568
100.00
1,000
23,240,726
16,830,000
283,264
31,655,978
14,266,339
421,594
27,255,517
100.00
1,000
27,257,726
16,830,000
497,355
32,153,333
Fiat U.S.A. Inc. – New York (United States)
At 12/31/04
USD
•
Revaluation for restoration of book value
At 12/31/05
USD
4,017,000
Elasis Società Consortile per Azioni – Pomigliano d’Arco
At 12/31/04
20,000,000
44,342
20,104,768
0.17
33,334
29,974
At 12/31/05
20,000,000
29,905
20,134,672
0.17
33,334
29,974
408,000
430,000
408.000
430,000
6,977
5,165
6,977
5,165
+99.83 ind.
Fiat Information & Communication
Services società consortile per azioni - Turin
At 12/31/04
800,000
23,846
928,622
51.00
At 12/31/05
800,000
26,635
955,257
51.00
p.v.
+49.00
ind.
Fiat Media Center S.p.A. – Turin
At 12/31/04
•
-
Transfer from other companies
At 12/31/05
219,757
1,210
220,967
3.17
-
+68.25 ind.
Fiat-Revisione Interna S.c.r.l. – Turin
At 12/31/04
300,000
26,438
333,308
14.00 p.v.
42.000
42,962
At 12/31/05
300,000
55,930
389,238
14.00 p.v.
42.000
42,962
1,404,000
515,803
+86.00 ind.
Fiat Servizi per l’Industria S.c.p.A. – Turin
At 12/31/04
•
3,850,000
238,346
1,652,669
36.47
1,652,669
349,291
2,001,960
36.47
cancellation of shares upon reduction
of capital to cover losses
At 12/31/05
(801,312)
602,688
515,803
+63.53 ind.
Isvor Fiat Società consortile di sviluppo
e addestramento Industriale per Azioni – Turin
At 12/31/04
300,000
(9,139,001)
539,946
26.00
78,000
-
At 12/31/05
300,000
175,142
715,087
26.00
78,000
-
+74.00 ind.
Orione - Consorzio Industriale per
la Sicurezza e la Vigilanza – Turin
At 12/31/04
26,342
(479,932)
(453,590)
82.01
21,108
At 12/31/05
26,605
60,906
87,511
81.20
21,108
+13.86 ind.
Sirio - Sicurezza Industriale Società
consortile per azioni – Turin
At 12/31/04
56,364
49,478
119,216
1.59
At 12/31/05
120,000
14,974
197,826
0.75
764
901
764
+88.50 ind.
• Total subsidiaries
4,856,539,398
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
226
List of investments in other companies and additional information specified in the Consob communication of February 23, 1994
•
Other companies included in financial fixed assets
% owned by
Fiat S.p.A.
Number
of shares
Total book value
(in euros)
At 12/31/04
1.80
14,118,350
92,840,388
At 12/31/05
1.77
14,118,350
92,840,388
°)
227,108,261
Company and registered office
Mediobanca S.p.A. – Milan
Fin.Priv. S.r.l. – Milan
At 12/31/04
14.29
14,354,662
At 12/31/05
14.29
14,354,662
At 12/31/04
2.62
19,529,683
At 12/31/05
2.76
19,529,683
Consortium S.r.l. – Milan
Consorzio Fiat Media Center – Turin
At 12/31/04
•
1.85
5,165
Transfer to subsidiaries
At 12/31/05
(5,165)
-
-
-
Consorzio Lingotto – Turin
At 12/31/04
5.40
At 12/31/05
5.40
•
Total other companies
279
279
126,725,012
°) Based on market prices on December 30, 2005.
% owned by Fiat S.p.A.
The indirect percentage held in the ordinary capital of subsidiaries is also indicated.
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
227
Treasury stock at December 31, 2005
% owned by
Fiat S.p.A.
Number
of shares
per share
(in euros)
Book value
total
(in euros)
per share
(in euros)
Par value
total
(in euros)
0.45
4,384,019
6.025
26,413,308
5.00
21,920,095
(52,311)
6.025
(315,169)
4,331,708
6.397
27,709,936
°) 31.764.415
5.00
21,658,540
Ordinary shares
At 12/31/04
•
•
Sale
Revaluation for partial restoration of book value
At 12/31/05
1,611,797
0.34
°) Based on market prices on December 30, 2005
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
228
Tax status on equity reserves and other reserves – Presidential Decree No. 917 of December 22, 1986
Description
Total amount of
Total amount of
equity reserves and
equity reserves and
other reserves which
other reserves which
would be included
would not be included
in the Company's
Total amount
in the stockholders'
taxable income in the
of other earnings
taxable income in the
event of distribution
reserves
event of distribution
Total
(in euros)
(in euros)
(in euros)
(in euros)
1,540,854,410
1,540,854,410
61,370,583
446,561,762
Additional paid-in capital
Revaluation reserve under Law No. 413 of Dec. 30, 1991
22,590,857
Legal reserve
352,292,766
Treasury stock valuation reserve
22,590,857
32,898,413
27,709,936
27,709,936
Other reserves
Extraordinary reserve
334,634
374,883,623
60,942,983
334,634
1,602,224,993
2,038,051,599
In accordance with specific resolutions of the Stockholders Meeting, the following reserves were transferred to capital stock:
• Reserve under Art. 34 of Law No. 576 of 12/2/75
453,070,328
• Revaluation reserve under Law No. 576 of 12/2/75
97,675,103
• Revaluation reserve under Law No. 72 of 3/19/83
266,350,533
which in the event of distribution would be included in the
Company's taxable income, and:
• Revaluation reserve under Law No. 74 of 2/11/52
• Extraordinary reserve
20,052,596
953,046
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
229
Origin, possibility of use, and possibility of distribution of Stockholders' equity reserves
Summary of the applications
made during the last three years (**)
Available
At 12/31/05
Nature/description
Capital stock
(in euros)
Possibility
of use
For coverage
share
of losses
For other reasons
(in euros)
(in euros)
(in euros)
6,377,257,130
Capital reserves:
Additional paid-in capital
B
1,540,856,410
2,331,583,228
Legal reserve
1,540,856,410
61,370,583
B
-
29,241,925
Revalutation reserve under Law No.413 of Dec.30, 1991
22,590,857
A,B,C
385,191,179
B
27,709,936
-
22,590,857
Earnings reserves:
Legal reserve
Treasury stock valuation reserve
Extraordinary reserve
Total
334,634
8,415,310,729
Portion that cannot be distributed (*)
Residual portion that can be distributed
A,B,C
334,634
1,563,781,901
183,536,323
112,253,586
1,611,796
2,656,615,062
1,611,796
1,563,781,901
-
Legend:
A: For capital increases
B: For coverage of losses
C: For distribution to stockholders
(*) Pursuant to Article 2431 of the Italian Civil Code, additional paid-in capital may not be distributed until the legal reserve equals at least one-fifth of the capital stock.
The other available reserves (revaluation reserve and extraordinary reserve) may not be distributed because 27,627 thousand euros in start-up and expansion costs
have not yet been amortised (Article 2426, Section 5 of the Italian Civil Code).
(**) For uses of reserves no longer existing at December 31, 2005, reference is made to the schedule of changes in stockholders’ equity (note 9).
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
230
Statement of cash flows
(in thousands of euros)
A. Initial short-term financial assets
2005
2004
2,218,915
1,303,578
223,019
(949,101)
27,031
29,717
B. Cash flow - operating activities
Income (loss) for the fiscal year
Depreciation and amortisation
Losses (gains) on disposals of fixed assets
-
595
Income from reimbursement of principal IHF - Internazionale Holding Fiat S.p.A.
-
(606,124)
430,789
1,639,153
4,072
(8,466)
Writedowns (revaluations) of equity investments
Net change in reserve for employee severance indemnities and other reserves
Changes in capital stock
265,562
31,415
950,473
137,189
(165,193)
(253,964)
C. Cash flow - investing activities
Investments in fixed assets
Equity investments
Other fixed assets
Selling price, or redemption value, of long-term investments
(3,116)
(2,711)
688
1,254,823
(167,621)
998,148
D. Cash flow - financing activities
Contributions by stockholders (*)
-
-
Repayment of borrowings (*)
-
(250,000)
Change in payables due to banks
E. Net cash flow for the period
(B+C+D)
F. Final short-term financial assets
(A+E)
(60,000)
30,000
(60,000)
(220,000)
722,852
915,337
2,941,767
2,218,915
(*) The capital increase subscribed by the lending banks to offset the Mandatory Convertible Facility (3 billion euros) was not indicated
because it did not give rise to any cash flow.
N.B. Short-term financial assets include financial receivables from subsidiaries and cash, net of payables
to subsidiaries for the VAT receivable transferred to Fiat.
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
231
Fees paid to Directors, Statutory Auditors and General Managers (in thousands of euros) (Article 78 of Consob
Regulation No. 11971/99)
Term
Compensation
Non-cash
Bonuses and
for office held
benefits (**)
other incentives
551.2
4.3
Expiration (*)
First name and last name
Office held in 2005
of office
Other
fees
IN OFFICE:
Luca Cordero
Chairman
1/1-12/31
2006
di Montezemolo
John Elkann
6,484.0
1)
Vice Chairman
1/1-12/31
2006
550.0
2)
17.1
3)
Sergio Marchionne
Chief Executive Officer
1/1-12/31
2006
2,000.0
Andrea Agnelli
Director
1/1-12/31
2006
77.0
Angelo Benessia
Director
1/1-12/31
2006
98.0
Tiberto Brandolini d'Adda
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
Hermann-Josef Lamberti
Director
1/1-12/31
2006
71.0
Virgilio Marrone
Director
06/23-12/31
2006
41.3
Vittorio Mincato
Director
06/23-12/31
2006
47.3
4,648.0
351.9
4)
5)
6)
Pasquale Pistorio
Director
1/1-12/31
2006
92.0
Daniel John Winteler
Director
1/1-12/31
2006
92.0
7)
Mario Zibetti
Director
Cesare Ferrero
Chairman of the Board
06/23-12/31
2006
53.3
3.3
8)
1/1-12/31
2006
63.0
of Statutory Auditors
Giuseppe Camosci
Statutory Auditor
1/1-12/31
2006
42.0
Giorgio Ferrino
Statutory Auditor
1/1-12/31
2006
42.0
30.0
9)
(*)Year in which the Stockholders Meeting is convened for approval of the Annual Report, coinciding with expiration of the term of office.
(**)They include the use of means of transport for personal purposes.
1) The gross annual compensation for the office of Chairman amounts to 500,000 euros.
2) Compensation for the office held in the subsidiary Ferrari inclusive of the variable portion of his compensation. Starting from the fourth year of office, the Chairman and Chief
Executive Officer of Ferrari will accrue the right to receive the following severance package: a sum payable over 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 euros. The relevant accrual posted by Ferrari in 2005 amounted to 1.37 million
euros. In addition, the Chairman and Chief Executive Officer of Ferrari was granted options for the purchase of 184,000 Ferrari shares at the price of 175 euros 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 euros.
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 euros) and Buc (9.6 thousand euros) but does not include compensation for the office
held in Fiat Auto (500 thousand euros), which he does not receive but is channelled to Fiat S.p.A. In 2005, the Company posted an accrual of 800.6 thousand euros for the Chief
Executive Officer’s severance package.
6) Compensation channelled to IFI S.p.A.
7) Compensation channelled to IFIL Investments 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.
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
232
Stock Options granted to Directors and General Managers (Article 78 of Consob Regulation No. 11971/99)
Options
Grantee
First and
Office held
last name
at the date of
Options granted
Options exercised
expired in
Options held
beginning of the year
during the year
during the year
the year
at the end of the year
Average
Number
Number
Average
exercise market price at
of
of
exercise
period
options
options
price
(mm/yy)
Number
Average
Exercise
Number
Average
of
exercise
period
of
exercise
options
price
(mm/yy)
options
price
2,250,000
20.614
07/01-01/10
2,250,000
20.614
07/01-01/10
10,670,000
6.583
06/08-01/11 *
10,670,000
6.583
06/08-01/11
the grant
Paolo
Options held at the
Exercise Numbe
period
of
(mm/yy) options
Average
price
exercise date
Exercise
Chairman
Fresco
Sergio
Chief Executive
Marchionne
Officer
* 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.
Turin, February 28, 2006
The Board of Directors
By:
Luca Cordero di Montezemolo
Chairman
Fiat S.p.A. – Financial Statements at December 31, 2005 - Notes to the Financial Statements
233
234
235
REPORT OF THE BOARD OF STATUTORY AUDITORS PURSUANT TO
ARTICLE 41 OF LEGISLATIVE DECREE NO. 127/1991
Dear Stockholders:
The consolidated financial statements of Fiat S.p.A. at December 31, 2005, including the
Balance Sheet, Income Statement and respective Notes, which are being submitted for
your consideration, show a net income for the Group of 1,331 million euros. They were
provided to us within the statutory terms, together with the Report on Operations, and were
prepared in accordance with the International Financial Reporting Standards (IFRS)
adopted by the European Union.
The controls carried out by Deloitte & Touche S.p.A., which is responsible for the audit,
have shown that the amounts included in the financial statements are consistent with the
accounting records of the Parent Company and its Subsidiaries, adjusted as necessary to
make them compliant with IFRS, and with the official information provided by said
subsidiaries.
These results and information were communicated by the Subsidiaries to the Parent
Company for use in the preparation of the consolidated financial statements. They were
examined by the external auditors during their audit of the consolidated financial
statements. As far as accounting records are concerned, they were reviewed by the
bodies and/or individuals responsible for monitoring each individual company as required
under the pertinent legal systems. Consequently, as allowed under Article 41, Section 3 of
Legislative Decree No. 127 of April 9, 1991, the Board of Statutory Auditors did not review
these results and information and the consolidated financial statements, except for the
items discussed below.
The determination of the scope of consolidation, the selection of the standards used to
consolidate subsidiaries and the procedures used for that purpose comply with the
requirements of IFRS. Therefore, the structure of the consolidated financial statements is
technically correct and overall consistent with the pertinent legislation. In particular, it also
includes an appendix specifically dedicated to the transition to International Financial
Reporting Standards. The Report on Operations presents fairly the results, balance sheet
and financial position, as well as the operations in 2005 and the events that have occurred
since the end of the fiscal year, for the complex of companies subject of the consolidation
process. Based on our examination, this report is consistent with the consolidated financial
statements.
Turin, April 6, 2006
The Statutory Auditors
Cesare Ferrero
Giuseppe Camosci
Giorgio Ferrino
236
REPORT OF THE BOARD OF STATUTORY AUDITORS PURSUANT TO
ARTICLE 153 OF LEGISLATIVE DECREE No. 58/1998, AND ARTICLE 2429,
SECTION 2, OF THE ITALIAN CIVIL CODE
Dear Stockholders:
Article 153 of Legislative Decree No. 58 of February 24, 1998 envisages that the Board of
Statutory Auditors report to the Stockholders Meeting, convened to approve the statutory
financial statements, the results of its oversight activity, indicating any omissions or
improper transactions it discovered, and empowers it to put forth motions regarding the
financial statements, their approval and other matters under its jurisdiction.
This Report is provided in accordance with the abovementioned provision and pursuant to
Article 2429, Section 2, of the Italian Civil Code. During the past fiscal year, we performed
the duties incumbent upon us under Article 149 of Legislative Decree No. 58 of February
24, 1998, and are able to report specific information on the subjects listed below.
We attended the meetings of the Board of Directors, where we received detailed
information on the Company’s business and on the main operating, financial and asset
transactions carried out or in the process of being carried out by the Company and/or its
subsidiaries. In this regard, we determined and ascertained that all pending or completed
transactions complied with all pertinent provisions of the law and the Articles of
Association, were not in conflict with any resolution adopted by the Stockholders Meeting
or produced no conflicts of interest, and were consistent with the principles of sound
management.
The Company’s organization is adequate, based on the size of the Company. As part of
our work, we met with the heads of the various Company Functions and with
representatives of the External Auditors, from whom we obtained comprehensive
information indicating that the Company was complying with the principles of fair and
sound management.
The Board of Directors established an Internal Control Committee and a Nominating and
Compensation Committee. During the 2005 fiscal year, a Strategic Committee was
established.
The system of internal control, which has been created at the Group level, is constantly
being upgraded and is operational at the Parent Company and its subsidiaries.
We express a favorable opinion on the Company’s system of internal control, and on its
ability to check the proper implementation of the internal operating and administrative
procedures adopted to ensure that the Company is managed correctly and efficiently,
while at the same time identifying, preventing and minimizing financial and operating risks
and the danger of fraud. The Board of Statutory Auditors was present at all Internal Control
Committee meetings.
Based on our determinations and on the information garnered in previous fiscal years, we
further believe that the Company’s administrative and accounting system is adequate for
the purpose of presenting fairly the results of operations.
The guidelines provided by Fiat S.p.A. to its subsidiaries pursuant to Article 114, Section 2,
of Legislative Decree No. 58/98 also appear to be adequate.
237
The Board of Directors provided us with the Report on Operations for the first half of 2005
within the statutory deadline and published it in accordance with the formalities required by
the Consob. It also complied with statutory requirements as regards quarterly reports. With
regard to Consob communications, insofar as they apply to our task, we can confirm the
following:
- In its Report on Operations, the Board of Directors provided exhaustive and complete
information on the degree of implementation of the systems and procedures needed for
the adoption of international accounting standards, which have become mandatory as
from the current fiscal year.
- As required by the Consolidated Law on Financial Intermediation (Legislative Decree
No. 58/98), the Board of Statutory Auditors has been informed on a constant basis on
matters falling under its jurisdiction.
- The checks and audits of the Company conducted by us on a periodic basis revealed
no atypical or unusual transactions.
- With regard to intra-Group transactions, the Board of Directors mentions in its Report
on Operations that numerous transactions involving the delivery of goods and the
provision of services took place between the Company, other Group companies and/or
related parties. The Report on Operations further states that these transactions were
executed on terms that were competitive with those available in the marketplace for
goods or services of similar quality.
- The External Auditors’ report neither contains objections nor does it draw attention to
any particular event or set forth relevant qualifications or suggestions.
- In 2005, the Board of Directors met 9 times. We were present at all of these meetings.
The Board of Statutory Auditors met 23 times. The External Auditors attended five of
these meetings.
- The Board of Statutory Auditors received four complaints under Article 2408 of the
Italian Civil Code, which are reviewed below. At this point, is not aware of any other
memoranda that would require it to take action.
- during the year, we issued the opinions that the Board of Statutory Auditors was obliged
to provide by law, and we granted our approval for recognition of 1,363,730 euros in
start-up and expansion costs under assets on the balance sheet, in accordance with
Article 2426, paragraph 5 of the Italian Civil Code;
- in compliance with the amended Article 149, paragraph 1, letter c) bis of Legislative
Decree no. 58 of February 24, 1998, we acknowledge that the Directors affirm in their
Annual Report on Corporate Governance that:
“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 for listing on
the NYSE, including the relevant sections of the Sarbanes-Oxley Act, and the
characteristics of the Group.”
We confirmed that the Group actually complies with the Corporate Governance Code
and that its various aspects were discussed in the Annual Report on Corporate
Governance submitted to you by the Board of Directors. Reference is made to that
report for more complete information in this regard.
238
We have received a communication from Deloitte & Touche S.p.A. stating that Fiat S.p.A.
retained its services to perform, in addition to auditing the statutory and consolidated
financial statements, limited auditing of the consolidated first half report, agreed
procedures for auditing of the quarterly reports, and auditing of the Form 20-F
consolidated financial statements, the engagements listed below for which the respective
fees are indicated:
ƒ Studies and analyses of the accounting procedures and disclosures to be made in
the Group’s 2004 consolidated financial statements in regard to material, nonrecurring transactions carried out by Fiat S.p.A. or its subsidiaries in the reference
fiscal year, for a fee of 37,500 euros;
ƒ Additional auditing work concerning the consolidated balance sheet at January 1,
2004 prepared by the Group in accordance with international accounting standards
as a result of changes in the relevant regulatory framework following the
enactment of EU Regulation No. 1606 of July 19, 2002, for a fee of 167,000 euros;
ƒ Studies and analyses on the accounting treatment in Form 20-F for fiscal 2004 of
significant, non-recurring transactions carried out by Fiat S.p.A. or subsidiaries in
the reference year, for a fee of 401,800 euros.
ƒ Preliminary planning activity for auditing of the Fiat Group’s internal control over
financial reporting envisaged in Section 404 of the Sarbanes-Oxley Act, for a fee of
840,000 euros.
ƒ Additional auditing activity of financial transactions (“comfort letters”), and the
activity performed on the Prospectus for the offering to Fiat stockholders of option
rights to purchase ordinary shares subscribed by the banks on September 20,
2005, for a fee of 167,500 euros.
ƒ Analysis of the compliance of Sections II and III of the Fiat Group accounting
manual for reporting and the consolidated financial statements, drafted in
accordance with international financial reporting standards, for a fee of 18,000
euros.
ƒ Subscription of the tax returns and Forms 770, for a fee of 5,000 euros.
ƒ Auditing of the final statement of costs approved by the joint committee founded by
Fiat S.p.A. and the Turin Polytechnic University for the establishment of university
degree courses in automotive engineering, for a fee of 5,500 euros;
Complaints Pursuant to Article 2408 of the Italian Civil Code
On July 27, 2005, September 14, 2005, December 16, 2005 and January 30, 2006,
respectively, Marco Bava, a Fiat stockholder, filed four complaints pursuant to Article
2408 of the Italian Civil Code. These complaints, which, in each case, were filed shortly
before meetings of the Company’s Board of Directors, were addressed to the Chairman
of the Board of Statutory Auditors of Fiat S.p.A, with copy to the Boards of Directors of
Fiat S.p.A. and Fiat Auto S.p.A., and the External Auditors Deloitte & Touche S.p.A. In
brief (the actual complaints consist of 6 typewritten pages), the complainant largely
criticizes the manner in which Fiat S.p.A. is being managed, alleging that it is
jeopardizing the Company’s ability to function as a going concern and that it will lead to
its liquidation, and asks the Board of Statutory Auditors to determine whether such
239
practices are consistent with sound management principles. Specifically, in the
complaints dated September 14, 2005 and January 30, 2006, with regard to the Fiat
Group, the complainant:
a)
asks who appraised the Mirafiori areas sold to Public Entities;
b)
affirms that “the accounts improve because the valuation principles eliminate the
industrial costs for industrial restructuring, which as such should be included as
ordinary costs for Fiat over the last decade.”
After studying in detail the allegations put forth by the complainant and reviewing
the complaints both individually and as a whole, we concluded that the portions of
the complaints that contain general criticisms of the Company’s management
practices do not identify improper acts, such as those specifically referred to in
Article 2408 of the Italian Civil Code. Earlier in this report, we already discussed the
soundness of the Company’s management decisions, insofar as they apply to
those areas that fall under our jurisdiction pursuant to Article 149, Section 1, of
Legislative Decree No. 58 of February 24, 1998.
These matters are not reprehensible but instead involve requests for information. In
response, we can affirm that:
ƒ in regard to point a) hereinabove, the northwest area of the Mirafiori plant was sold
by the indirect subsidiary Fiat Auto S.p.A. to Torino Nuova Economia S.p.A.,
pursuant to an agreement under the hand and seal of the notary public Ganelli on
December 23, 2005, Notary’s Register no. 5462, at a price of 60,000,000 euros for
a total area of 300,393 square meters. The value of the sold lots was appraised by
Prof. Riccardo Ruscelli (Turin Polytechnic University), who was retained by the
Public Entities, and by REAG S.p.A., a company belonging to the American
Appraisal Group, which was retained by Fiat Auto S.p.A.;
ƒ in regard to point b), the complainant does not identify improper acts, but asks the
Board of Statutory Auditors to seek such acts by auditing the allocation of
restructuring costs affecting the entire group, and thus the consolidated financial
statements, which are subject to audit by the external auditors pursuant to Article
41 no. 3 of Legislative Decree no. 127 of April 9, 1991. To complete our
investigation, we contacted Deloitte & Touche S.p.A., which had been informed of
the requests after receiving the complaint itself. This firm informed us:
–
“In the consolidated financial statements of Fiat at December 31, 2004, which were
drafted in compliance with Group accounting principles that conformed with the
requirements of Legislative Decree no. 127 of April 9, 1991, interpreted and
supplemented by the accounting principles issued by the National boards of “Dottori
Commercialisti e dei Ragionieri” and, where there were none and not at variance, by
those laid down by the International Accounting Standards Board (IASB), the
valuation principle applied for accounting of reserves for current restructuring was
described in the notes to the consolidated financial statements in the section
“Principles of Consolidation and Significant Accounting Policies,” at the subsection
“Reserves for risks and charges and employee severance indemnities.” The notes to
the consolidated financial statements specifically showed how the costs to carry out
corporate reorganization and restructuring plans were “provided in the year the
240
company formally decided to commence such plans and the relative costs could be
reasonably estimated.”
–
In the Fiat Group consolidated financial statements at December 31, 2005, which
were prepared in compliance with the International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board and approved by the
European Union, the valuation principle applied to restructuring costs is described in
the section entitled “Significant Accounting Policies,” at the subsection “Provisions.”
The notes to the consolidated financial statements specifically state that “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.”
Based on the audits we performed in those areas that fall under our jurisdiction pursuant to
Article 149 of Legislative Decree No. 58 of February 24, 1998 and the information received
from the External Auditors, we have verified that the statutory financial statements, which
show a net income of 223,019,671 euros, compared with a net loss of 949,100,522 euros
in the previous fiscal year, have been prepared and presented in accordance with the
applicable provisions of law.
Therefore, we recommend that you approve them as they have been submitted to you,
together with the motion put forward by the Board to allocate the net income of
223,019,671 euros to partially cover the losses carried forward.
We take this opportunity to thank you for your confidence and to inform you that our term
of office has expired.
Turin, April 6, 2006
The Statutory Auditors
Cesare Ferrero
Giuseppe Camosci
Giorgio Ferrino
241
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