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

Worldwide industry unit sales of tractors and combines in the
first half of the year were up 8% as compared to the first six
months of 2002. Through the first half of the year the industry
in North America has performed much better than the prior
year and increased by 17%. In Western Europe, the demand
for agricultural equipment decreased by 2% in the first half of
the year, compared to the same period in 2002. Latin America
and the rest of the world were up by 4% and 12%, respectively.
In the first half of the year, industry sales of construction
equipment were down by 1% in Western Europe, by 2% in
North America, by 17% in Latin America, but were up by 28%
in the rest of the world.
Unit sales of agricultural equipment in the first six months of
2003 were in line with those recorded in the first half of 2002
both worldwide and in Western Europe. The slowdown in North
America and Latin America offset an increase in sales in the rest
of the world.
Sales of agricultural equipment were substantially in line with
those recorded during the same period a year earlier, while
sales volumes of construction equipment decreased by 12%,
both in higher margin heavy equipment and in light equipment,
which declined more than the industry average.
During the first six months of 2003, CNH made significant
progress towards realizing the synergies created by the
integration of Case and New Holland. The restructuring plan
is on schedule and the synergies achieved are in line with the
stated objectives, including overhead and logistics costs
reduction, streamlining of the supplier base and reduction
of the number of manufacturing facilities.
CNH profit improvement initiatives realized during the first
half of 2003 amounted to US$59 million. Since the merger,
the company has achieved a total of US$606 million in profit
improvements.
While future savings will come from ongoing cost reduction
programs, growth will be realized from the development and
introduction of innovative new products with common
components. This strategy is expected to provide substantial
long-term savings in manufacturing, purchasing and logistics
and at the same time reduce complexity.
In the first six months of 2003 the Sector made huge efforts in
terms of product offering renewal and in terms of technological
innovations.
For the agricultural equipment side of the business, CNH
brands won in Europe a total of 9 awards, with the Advanced
CR combine getting 2 awards out of the nine. Case IH CVT
and the Steyr CVT tractors were also upgraded during the first
6 months, in Europe.
In North America, CNH won several awards in 2003, among
them with the New Holland CS combine, the Case IH AFX8010
Axial-Flow combine and the New Holland TG tractor Series.
In North America, both Case IH and New Holland took a big
step forward in expanding the hay tool product offering, with
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Agricultural and Construction Equipment — CNH Global
the introduction of 5 new models by each brand in the first 6
months of the year.
In Latin America, CNH introduced 3 models of the Brazilian
version of the MXM tractor.
For the construction side of the business, during the first half
of the year CNH launched a large number of new models at
the Intermat Fair in Paris. Of the 96 products exhibited at
Intermat across the individual brands that make up CNH, 42
were new products (7 under the Kobelco brand, 2 under the
O&K brand, 24 under the Fiat Kobelco brand, 1 introduced by
New Holland Construction and 8 by Case). Especially in North
America, the Case offering saw a massive expansion also as a
result of the introduction of new models which replaced the
previous H series and the first compact excavators.
Operating performance
In the first half of 2003, CNH reported revenues of 4,800 million
euros, a drop of -15.7% with respect to the first six months
of 2002 due to the negative foreign exchange effect. On
a comparable basis, revenues would have decreased by about
-5%, mainly due to lower sales of construction equipment.
For the first half of 2003, CNH reported results of operations
of 105 million euros, compared with 161 million euros in the
first half of 2002. The decrease was primarily due to higher
medical and pension costs for active employees and retirees,
and the negative foreign exchange effect caused by the
appreciation of the euro. Even though CNH sales of
construction equipment remained weak and the Sector’s
product mix was unfavorable, the result for the first six months
of 2003 held at the forecasted level, owing in part to the positive
contribution of the synergies achieved through the Company’s
restructuring initiatives.