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

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World automotive production declined in the first half of 2003, although performance differed across countries and geographic areas. In this environment, weak demand from carmakers had an adverse impact on output volumes of components manufacturers. The Sector reacted to the fall in sales by taking action to boost efficiency and contain material costs, thus laying the foundations for a return to profitability in the short term. These positive developments form the basis for the Group’s Relaunch Plan, which involves all business lines in the Components Sector in initiatives both to improve business processes and to develop new products and markets for the Sector’s growth. The planned steps will enable Magneti Marelli to bring its operating performance into line with that of its leading competitors. Despite the difficult market climate, the Sector booked a number of major orders in the powertrain area from its main customers (Fiat/GM, PSA and Ford). The Suspensions area also gained two important orders, one from GM Opel and the other from Suzuki. In the Lighting area, production of new systems and applications for Fiat, BMW, GM, VW-Audi, Ford and PSA started in the first six months of 2003. 25 Components — Magneti Marelli Operating performance In the first half of 2003 the Sector posted net revenues of 1,611 million euros, a decline of 1.9% with respect to the year-earlier period on a comparable consolidation basis (the entry of Midas and the disposal of the replacement parts operations, for a total reduction of 18 million euros) and adjusting for exchange rate variations (which lowered revenues by 122 million euros). However, the significant efficiency gains and cuts in the cost of materials more than offset the adverse impact of contracting sales volumes: operating income came to 3 million euros, compared with an operating loss of 19 million euros on a comparable basis the previous year.
The general economic slowdown continued in early 2003, with the Sector’s reference market still uncertain and continuing to contract, often owing to the postponement rather than cancellation of the large carmakers’ capital investment plans. A number of emerging markets, such as Russia and China, were exceptions, offering investment opportunities starting from this year. Market developments continued to display a highly cyclical pattern. Moreover, new investment is no longer directed at expanding production capacity but rather at rationalizing existing resources with a view to increasing the use of modular and flexible production plants and raising capacity utilization. Carmakers also continued the process of shifting non-core services and manufacturing operations to leading outside suppliers. New orders for contract work totaled 607 million euros in the first half of 2003, a decrease of 37% on the corresponding period of the previous year. The geographic breakdown of orders is as follows: 70% in Europe (Italy 30%, Germany 16%, France 14% and others 10%), 25% in the NAFTA countries and the remaining 5% in Brazil and new markets (India). At 30 June 2003 the backlog of orders for contract work, net of the portion already produced, came to 1,009 million euros, a decline of 42% on a year earlier and 17% on end-2002. The fall reflects the sharp decline in the NAFTA area’s share of the order portfolio (as progress on contracts outpaced new orders and the dollar depreciated against the euro). Highlights in the first half of the year include: ❚ the acquisition of the remaining 49% of the French company Renault Automation Comau (which later changed its name to Comau Systèmes France). This company operates primarily in the Engineering and Mechanical Systems segments. The purchase, which was envisaged in the original agreements with Renault, will enable Comau to increase rapidly the productive, commercial and organizational integration of its operations in France; ❚ the establishment of Comau Russia to acquire orders for contract business with the local affiliates of a number of leading European carmakers. 26 Production Systems — Comau Operating performance Revenues came to 1,082 million euros in the first half of 2003, an increase of about 9% on the year-earlier period. The result reflects the increase in contract work at Comau Pico in the NAFTA area (up 40% despite the decline of the dollar against the euro), which was partially offset by the slight fall (3%) in contract work at Comau Systems in certain European countries. Revenues at Comau Service were virtually unchanged on those for the previous year. Overall, the growth in contract work in the NAFTA countries in the first half of this year with respect to the first six months of last year was due to the strong order portfolio at the end of 2002 and the base effect of the comparison with the first half of 2002, which was still sharply affected by the crisis in 2001. The consolidated results for the first half of 2003 show an operating loss of 7 million euros, which is slightly higher than the loss of 5 million euros reported in the same period of 2002, as a consequence of the weaker performance of contract work at Comau Systems (lower sales and narrower margins), which offset the improved results at Comau Pico (which increased sales, although the beneficial impact was attenuated by the depreciation of the dollar).
Page 1 and 2: Report of the Board of Directors on
Page 3 and 4: 2 Financial Highlights of the Fiat
Page 5 and 6: KEY DEVELOPMENTS Despite the weakne
Page 7 and 8: INTRODUCTION In order to facilitate
Page 9 and 10: posted in the first half of 2002, m
Page 11 and 12: EBIT (Earnings Before Interest and
Page 13 and 14: Reserves At June 30, 2003, the rese
Page 15 and 16: statement of operations is illustra
Page 17 and 18: Toro Assicurazioni (35 million euro
Page 19 and 20: In July 2003, Fiat S.p.A. and Avio
Page 21 and 22: leading operator of call centers. T
Page 23 and 24: During the first half of 2003, the
Page 25: The key development in the first ha
Page 29 and 30: The difficulties encountered in the
Page 31 and 32: Based on preliminary estimates, sal
Page 34 and 35: Fiat Group — Consolidated Financi
Page 36 and 37: (in millions of euros) 35 Fiat Grou
Page 38 and 39: ACCOUNTING PRINCIPLES AND METHODS T
Page 40 and 41: December 31, 2002), Naveco Ltd. 113
Page 42 and 43: Other securities at June 30, 2003 i
Page 44 and 45: euros, change in the scope of conso
Page 46 and 47: The decrease of 13,592 million euro
Page 48 and 49: Other financial income (in millions
Page 50: 18 Income taxes for the period Inco
Page 53 and 54: (in millions of euros) 52 Fiat S.p.
Page 56 and 57: 55 Annex
Page 58 and 59: Subsidiaries consolidated on a line
Page 74 and 75: 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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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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Other companies valued at cost ❚
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Significant investments sold effect
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Report of the Board of Directors on
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in the First Half of 2003 98th Fiscal Year - FIAT SpA

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