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

The economic and financial difficulties that affected many
industrial and service companies during the first half of 2003
caused a significant decrease in the demand for integrated
services by businesses in Italy. More importantly, IT spending
was flat for the first time in ten years and demand for temporary
staffing services stopped growing abruptly after five years of
expansion.
The Services Sector responded to these changes in market
conditions by focusing its efforts on broadening its captive
market and improving the effectiveness and efficiency of its
internal processes.
The performance of the Sector’s various areas of business in the
first half of 2003 is reviewed below:
❚ Human resources. WorkNet, a temporary staffing company,
continued the process of consolidating its operations
following the merger with Cronos in 2002.
Isvor Knowledge System, which provides personnel training
services to noncaptive customers, offset a drop in demand
from private companies by growing its public-sector business.
Human Resource Services, which provides personnel
management services, focused on making its operations more
efficient.
This Unit had aggregate revenues of 113 million euros (124
million euros in the first six months of 2002).
❚ Property, Engineering & Facility Management. In the general
contracting business, Fiat Engineering continued to expand
its presence in the market for large-scale civil engineering,
infrastructural and energy projects. Ingest Facility, which
handles regular and extraordinary maintenance for residential
and industrial buildings, used its competitive strength to sign
up several large captive and noncaptive customers.
During the first quarter of 2003, the Sector sold about 56% of
its investment in IPI, a company that specializes in managing
and developing real estate assets.
The Unit’s revenues totaled 277 million euros (296 million
euros in 2002).
❚ ICT – Information and Communication Technology.
GlobalValue, the joint venture with IBM, continued to supply
the IT needs of both Fiat Group companies and noncaptive
customers. In addition, GlobalValue responded to the
unfavorable market conditions mentioned above, and to the
negative impact that this development had on revenues and
margins, by preparing a restructuring plan that will improve its
competitiveness. eSPIN, which offers customers innovative
and easy-to-implement Internet and Web service solutions for
the online management of business processes, also launched
an in-depth restructuring process designed to create a hub of
specialized knowhow available to all Group companies.
The Unit had revenues of 338 million euros (368 million euros
in 2002).
❚ Administration and Procurement Services. This Unit was the
target of a special effort to improve internal processes and
increase the efficiency of the services provided to Fiat Group
companies. Administrative and backoffice services are
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Services — Business Solutions
becoming increasingly important management tools for
the Group, particularly in view of the laws recently enacted
in Italy and the United States with regard to the corporate
governance of large groups. Among the Unit’s individual
companies, Fiat Gesco has been busy reengineering some
of its most important processes, while Fast Buyer, which
serves as the Group’s centralized purchaser of raw and
auxiliary materials, continued to play a central role in the
effort to exploit the synergies that exist among the various
Sectors of the Fiat Group.
The Unit’s aggregate revenues totaled 169 million euros (167
million euros in the first half of 2002).
❚ Other activities. The Sector’s real estate management
activities generated revenues of 67 million euros.
Operating performance
The Sector had revenues of 943 million euros in the first half of
2003 (+2.3% compared with the same period last year), with Fiat
Group companies accounting for about 49% of the total. A
significant portion of the increase in noncaptive revenues was
due to the sale of Group real estate assets by Investimenti e
Gestioni.
Operating income fell to 17 million euros, or 21 million euros
less than in the first six months of 2002. The deconsolidation
of IPI (about 16 million euros) and lower proceeds from the sale
of real estate assets account for most of the decrease.