in the First Half of 2003 98th Fiscal Year - FIAT SpA

EBIT (Earnings Before Interest and Taxes)
EBIT in the first half of 2003 was -146 million euros, reflecting
deterioration from the loss of -12 million euros reported for the
first six months of 2002, mainly in consequence of lower net
non-operating income, notwithstanding the reduced operating
loss and an increase in investment income.
Net loss from investments totaled 42 million euros, an
improvement compared with net loss from investments of 103
million euros that included writedowns taken to mark to market
the portfolio of listed securities held by the Group’s insurance
companies, which were sold at the beginning of May 2003.
Additional benefits were realized thanks to the improvement
in the results of certain associated companies.
In the first half of 2003, net non-operating income totaled 263
million euros, compared with net non-operating income of 517
million euros in the first six months of 2002. The principal items
of non-operating income were represented by the gain of 390
million euros, net of transaction costs, upon sale of Toro
Assicurazioni and the gains realized from disposal of the
Brazilian retail financing activities of Fiat Auto (107 million euros)
and IPI (15 million euros). These gains were partially offset by
the loss resulting from disposal of Fraikin, an estimate of the
damages stemming from the flooding at the Termoli plant in
excess of the amount expected to be indemnified by insurance,
and restructuring charges and provisions.
The high level of net non-operating income reported for the first
half of 2002 principally reflected the gains realized upon sale of
34% of Ferrari (671 million euros net of transaction costs), and
the gains resulting from disposal of the Aftermarket activity of
Magneti Marelli (26 million euros). Restructuring charges and
extraordinary provisions to reserves partially reduced the
positive effect of these transactions.
Net Result for the Period
In the first half of 2003, the Group had a loss before taxes of
570 million euros, compared with a loss of 528 million euros
in the same period of 2002. This worsening is attributable to
deterioration in EBIT, which was partially offset by lower net
financial expenses.
Net financial expenses totaled 424 million euros in the first half
of 2003, down from the 516 million euros in expenses reported
for the first half of 2002. The main reasons for this improvement
were a reduction in average indebtedness for the period and a
decrease in interest rates in Europe and the United States,
which offset the increase in corporate spread.
The consolidated net loss before minority interest for the first
half of 2003 was 737 million euros, compared with a loss of 803
million euros in the same period last year.
Group interest in net loss during the first half of 2003 amounted
to -708 million euros, reflecting deterioration from the loss of
10 Operating Performance and Financial Position of the Fiat Group and Fiat S.p.A.
in the First Half of 2003
-563 million euros reported in the same period last year. It
should be noted that, pursuant to the Accounting Principles
described in the Notes to the Consolidated Financial
Statements at December 31, 2002, the losses pertaining to
General Motors, the minority stockholder in Fiat Auto Holdings
B.V., were charged to the Group to the extent that they
exceeded the value of its share of the capital of the company.
Financial Position
The Group Balance Sheet at June 30, 2003 in statutory format
is shown in the following page.
This section provides the information necessary for analysis of
the principal balance sheet indicators used in previous periods,
such as working capital, net invested capital and net financial
position.
For a more complete analysis of the individual items of the
assets and liabilities, memorandum accounts, and other
commitments, please refer to the Notes to the First Half Report,
which illustrate the changes in the items of the statutory Balance
Sheet.
Intangible Fixed Assets
Intangible fixed assets totaled 4,198 million euros at June 30,
2003, compared with 5,200 million euros at December 31, 2002.
The decrease of 1,002 million euros is mainly due to
amortization charged during the period, changes in the scope
of consolidation, and the foreign exchange effect on items
denominated in dollars (in particular, the goodwill of CNH),
net of investments during the period.
Property, Plant and Equipment
Property, plant and equipment at June 30, 2003 totaled 10,407
million euros, compared with 12,106 million euros at December
31, 2002. The decrease of 1,699 million euros from the
beginning of the fiscal year principally refers to changes in the
scope of consolidation (-1.2 billion euros), depreciation of 922
million euros (1,087 million euros in the first half of 2002), and
the negative foreign exchange effect, which were only partially
offset by investments of 771 million euros made during the
period (1,157 million euros in the first half of 2002), including
long-term leasehold investments, which were reduced by 298
million euros, from 481 million euros in the first half of 2002 to
183 million euros in the first six months of 2003, mainly due to
the sale of Fraikin by Iveco.
At June 30, 2003, accumulated depreciation and writedowns
totaled 17,956 million euros, corresponding to 63% of gross
fixed assets, compared with approximately 60% at December
31, 2002.