in the First Half of 2004 99th Fiscal Year - FIAT SpA

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5 Overview a meeting held in Balocco at the end of July, the Group is continuing to pursue a clearly defined strategy, focused on the automotive operations, and it is showing steady improvement. Moreover, there is a strong possibility that all of the Group’s businesses can improve their operating performance, and we are doing our best to reach this goal, even though it has become necessary to revise the timings by which certain Sectors will attain their objectives. In view of the above, the Group reaffirms its goals of attaining operating breakeven in 2004 (compared with a loss of 714 million euros in 2003) and of substantially reducing negative cash flow. These objectives will be achieved mainly thanks to the contributions of CNH and Iveco, which have already made significant progress. As for Fiat Auto, it is expected to attain operating breakeven in 2006 and report further loss reductions in the interim. Turin, September 9, 2004 Luca Cordero di Montezemolo Chairman Sergio Marchionne Chief Executive Officer
INTRODUCTION In order to facilitate the analysis of the results for the first half of 2004 and their comparison with the corresponding period of 2003, the most important transactions affecting the scope of consolidation of the Group in the first half of 2004, as compared with the same period in 2003, are illustrated below: ❚ On May 2, 2003, the agreement to sell the Toro Assicurazioni Group to the DeAgostini Group was signed and its operations were deconsolidated from that date. ❚ On May 27, 2003, as part of the agreement signed by Fiat and Capitalia, Banca Intesa, Sanpaolo IMI and Unicredito on March 11, 2003, and following approval by the competent authorities, the sale by Fiat to the Banks of a majority interest (51%) of Fidis Retail Italia was concluded. At that time, Fidis Retail Italia controlled part of the European activities of Fiat Auto Holdings in the field of retail consumer financing for automobile purchases. The sale to Fidis Retail Italia of the equity investments in the other financial companies covered by the agreement was finalized in October 2003. ❚ In execution of the contract signed on July 1, 2003 and after having met the conditions precedent, the sale of the aerospace activities of FiatAvio S.p.A. to Avio Holding S.p.A., a company 70% owned by The Carlyle Group and 30% by Finmeccanica S.p.A., was finalized. Said activities were deconsolidated effective from the date of the agreement. ❚ In February 2004, 100% of the interest held in Fiat Engineering S.p.A. was sold to Maire Investimenti S.p.A. and the company was therefore deconsolidated as of the beginning of the year. At the same time, Fiat Partecipazioni S.p.A. subscribed to a capital increase at Maire Investimenti S.p.A. and now owns 30% of the capital of this company. On said 30% interest, both parties hold put and call options that are exercisable within three years at a predetermined price. ❚ Effective January 1, 2004, the Group consolidated Magneti Marelli Electronic Systems on a line-by-line basis following gradual acquisition of actual control over this strategic supplier of Fiat Auto and other automotive groups. In 2002 this business had been sold to the Mekfin Group, which in turn sold it to the Ixfin Group. So that the company would punctually respect the commitments it had made to its customers and continue pursuing its growth strategies, an agreement was initialed at the end of 2003 between the Ixfin Group and the Fiat Group, on the basis of which Magneti Marelli, pursuant to an agreement providing for an usufruct on the Company’s voting shares, started becoming increasingly involved in management of the Electronic 6 Operating Performance and Financial Position of the Fiat Group and Fiat S.p.A. in the First Half of 2004 Systems activity in 2004. Finally, on July 28, 2004 the Fiat Group decided to acquire full ownership thereof by exercising a call option. To allow a meaningful comparison with prior period data, the figures for the first half of 2003 used in the analyses presented in the following pages have been prepared on the basis of the so-called “continuing operations”, i.e. excluding data of companies that were sold in 2003 (the Toro Assicurazioni Group, FiatAvio, Fraikin, IPI, Fidis Retail Italia and Fiat Auto’s retail financing activities in Brazil). It should be noted that in the first half of 2003 the continuing operations included Fiat Engineering, that was deconsolidated effective January 1, 2004 and had reported revenues of 159 million euros and operating income of 7 million euros in said period. Figures for the first half of 2004 include 240 million euros in revenues generated by the Electronic Systems business unit as well as an operating income of 6 million euros. OPERATING PERFORMANCE AND FINANCIAL POSITION OF THE FIAT GROUP Operating Performance Highlights of the Group’s operating performance are illustrated below. For a more detailed analysis, see the section “Performance of the Operating Sectors”. Net revenues Fiat Group net revenues, including changes in contract work in progress, totaled 23,508 million euros in the first six months of 2004, compared with 24,774 million euros in the corresponding period of 2003. Comparison with continuing operations alone shows growth of 6.1% due to higher volumes of activity at the principal Sectors. This positive performance was partially offset, especially at CNH, by the negative impact caused by strengthening of the euro. Magneti Marelli consolidated the revenues of the Electronic Systems business unit for the first half of 2004 (240 million euros), while lower revenues were reported by Comau, partly in consequence of a revision in the scope of operations, and by Business Solutions, due to the sale of Fiat Engineering. Revenues broken down by Sector are illustrated below: ❚ Fiat Auto posted net revenues of 10,462 million euros in the first half of 2004, compared with 10,149 million euros in the first six months of 2003, including 9,780 million euros for
Page 1 and 2: Report of the Board of Directors on
Page 3 and 4: 2 Financial Highlights of the Fiat
Page 5: PERFORMANCE IN THE FIRST HALF OF 20
Page 9 and 10: thanks to buoyant demand. The most
Page 11 and 12: volumes, offsetting the negative im
Page 13 and 14: Intangible fixed assets Intangible
Page 15 and 16: Consolidated Statement of Cash Flow
Page 17 and 18: Operating Performance by Activity S
Page 19 and 20: Cash and cash equivalents collected
Page 21 and 22: As previously stated in the Report
Page 23 and 24: On July 9, Fiat redeemed a total of
Page 25 and 26: 24 Fiat Auto in the same period las
Page 27 and 28: During the first half of 2004, the
Page 29 and 30: The key development in the first ha
Page 31 and 32: Capital investments showed signs of
Page 33 and 34: The business services market did no
Page 36 and 37: Fiat Group — Consolidated Financi
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Page 40 and 41: 39 Fiat Group Consolidated Financia
Page 42 and 43: At June 30, 2004, the item investme
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Page 46 and 47: for the purpose of providing the Fi
Page 48 and 49: 47 Fiat Group Consolidated Financia
Page 50 and 51: Net revenues by destination (in mil
Page 52 and 53: Revaluations of equity investments
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(in millions of euros) 56 Fiat S.p.
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59 Annex
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Subsidiaries consolidated on a line
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Subsidiaries valued by the equity m
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Subsidiaries valued at cost ❚ Aut
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Subsidiaries valued at cost (contin
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Associated companies valued by the
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Associated companies valued at cost
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❚ Agricultural and Construction E
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Report of the Board of Directors on
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in the First Half of 2004 99th Fiscal Year - FIAT SpA

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