2006 Annual Report - Fiat SpA

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Net advances relating to work completed may be analysed as follows: 284 Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements Advances received from customers Advances paid to suppliers Net advances for work completed At At At At At At (in thousands of euros) December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2005 December 31, 2006 December 31,2005 Florence-Bologna line 3,774,803 3,398,254 3,642,387 3,273,419 132,416 124,835 Turin-Novara line 4,552,834 4,267,724 4,372,832 4,098,522 180,002 169,202 Novara-Milan line 1,218,035 664,444 1,172,562 639,092 45,473 25,352 Progress payments for work completed 9,545,672 8,330,422 9,187,781 8,011,033 357,891 319,389 Advances relate to amounts received as down payments from the customer T.A.V. S.p.A. at the commencement of the contracts, which are then recovered as the work progresses. The balance may be analysed as follows: Contractual advances Contractual advances received from customers paid to suppliers Net contractual advances (in thousands of euros) At December 31, 2006 At December 31, 2005 At December 31, 2006 At December 31, 2005 At December 31, 2006 At December 31, 2005 Florence-Bologna line 70,871 88,672 68,146 85,262 2,725 3,410 Turin-Novara line 3,486 36,320 3,358 36,440 128 (120) Novara-Milan line 135,034 201,248 129,981 193,470 5,053 7,778 Contractual advances 209,391 326,240 201,485 315,172 7,906 11,068 The company provided T.A.V. S.p.A. with bank sureties to secure these advances and for the proper performance of the work for a total of 1,877,521 thousand euros at December 31, 2006 (of which 695,243 thousand euros relating to the Bologna Florence line, 742,882 thousand euros to the Turin-Novara sub-line and 439,396 thousand euros to the Novara-Milan sub-line). On the other hand, as contractually provided for, CAV.E.T. provided Fiat S.p.A. with bank sureties totalling 669,582 thousand euros, while CAV.TO.MI provided bank sureties of 714,754 thousand euros for the Turin-Novara sub-line and 422,895 thousand euros for the Novara-Milan sub-line. No retentions were made in relation to the amounts due from T.A.V. S.p.A. since they have been replaced with a portion of the bank sureties mentioned above. Lastly, in line with the contractual terms and with the prior approval of the testing commission given to RFI – Rete Ferroviaria Italiana S.p.A., the Turin-Novara high speed line was opened to the public in February 2006. Moreover, the company signed an agreement with T.A.V. S.p.A. in December 2006 for the acknowledgment of the substantial completion of the work on the line. However, since all contractually required checks for the formal approval of the work were still underway at December 31, 2006 and, therefore, the bank sureties had not yet been released, this line has not been closed from an accounting standpoint. Tax payables and other payables The main components of these items are as follows. At December 31, 2006, intercompany payables for consolidated VAT of 160,957 thousand euros (117,028 thousand euros at December 31, 2005) relate to the VAT credits of Italian subsidiaries transferred to Fiat S.p.A. as part of the consolidated VAT procedure. At December 31, 2006, payables to Group companies in connection with the IRES tax consolidation amounted to 154,910 thousand euros (97,926 thousand euros at December 31, 2005) and represent the remuneration due for the tax losses contributed by the Italian subsidiaries to the national tax consolidation for 2006 and for the IRES tax credits of the Italian subsidiaries transferred to Fiat S.p.A. as part of the tax consolidation procedure. Tax payables and other payables are all due within one year and their carrying amount is deemed to approximate their fair value. 28. Guarantees granted, commitments and contingent liabilities Guarantees granted This item is made up as follows: (in thousands of euros) 2006 2005 Change Guarantees granted Sureties - on behalf of Group companies 569,288 797,457 (228,169) - on behalf of third parties 96,011 460,303 (364,292) Total sureties 665,299 1,257,760 (592,461) Other personal guarantees - on behalf of Group companies 6,748,140 7,059,768 (311,628) - on behalf of third parties 152,404 160,937 (8,533) Total other personal guarantees 6,900,544 7,220,705 (320,161) Total Guarantees granted 7,565,843 8,478,465 (912,622) Sureties At December 31, 2006, sureties amount to 665,299 thousand euros, a decrease of 592,461 thousand euros over December 31, 2005. This balance mostly relates to sureties granted on behalf of Group companies on Billets de Trésorerie issued (Fiat Finance and Trade Ltd. 165,115 thousand euros), medium- to long-term loans granted by banks (214,580 thousand euros) and the rental payments relating to buildings included in the property securitisation transactions carried out in previous years (189,593 thousand euros). Sureties granted on behalf of third parties mainly relate to the Sava savings bonds still outstanding (46,011 thousand euros, a decrease of 364,292 thousand euros over December 31, 2005). Other personal guarantees At December 31, 2006, other personal guarantees amount to 6,900,544 thousand euros, a decrease of 320,161 thousand euros over December 31, 2005. Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements 285
These relate to: ■ guarantees of 6,748,140 thousand euros granted on behalf of Group companies, including: – 790,193 thousand euros for loans (Banco CNH Capital S.A. 603,861 thousand euros, CNH America LLC 38,656 thousand euros, Fiat Automoveis S.A. 112,203 thousand euros, Magneti Marelli Controle Motor Ltda. 2,753 thousand euros and Fiat Finance Canada Ltd. 32,720 thousand euros); – 5,188,361 thousand euros for bond issuances (Fiat Finance and Trade Ltd. 5,175,306 thousand euros and Fiat Finance Luxembourg S.A. 13,055 thousand euros); – 186,373 thousand euros for credit facilities (CNH Capital America LLC 113,895 thousand euros, Iveco France S.A. 30,000 thousand euros, Fiat Finance North America Inc. 30,354 thousand euros, Fiat Automoveis S.A. 1,466 thousand euros, Fiat India Private Limited 9,619 thousand euros, Comau India Private Limited 1,037 thousand euros); – 469,627 thousand euros for VAT receivables as part of the tax consolidation procedure, as required by the Ministerial Decree of December 13, 1979 as subsequently amended, and 113,586 thousand euros for other guarantees; ■ guarantees of 152,404 thousand euros granted on behalf of third parties (former Group companies, mainly on VAT receivables). In addition: ■ as part of an agreement signed on June 22, 2005 with a pool of national and international banks headed by Citibank International, Fiat S.p.A. has provided guarantees on the use of a new three-year credit facility of 1 billion euros granted to Fiat Finance S.p.A. and other Group companies. At December 31, 2006 the facility had not yet been used. In addition, Fiat S.p.A. has granted CNH Global N.V. and its subsidiaries a revolving credit facility of 1 billion dollars usable with the Group treasuries and expiring at the end of January 2007. This facility was not renewed on expiry by Fiat S.p.A. but by the Group’s treasury companies with whom it may be utilised until its expiry on 28 February 2008; ■ in 2005, in relation to the early collection by Fiat Partecipazioni S.p.A. of the residual consideration for the sale of the aviation business, Fiat S.p.A. is jointly and severally liable with Fiat Partecipazioni S.p.A. to the purchaser, Avio Holding S.p.A., should Fiat Partecipazioni S.p.A. fail to pay the compensation (following either an arbitral award or an out-of-court settlement) provided for by the sales agreement signed with the seller in 2003. Similarly, in connection with the sale of the controlling interest in the railway business, Fiat S.p.A. is liable to the purchaser, Alstom N.V., for any failure of the company that sold the business (now Fiat Partecipazioni S.p.A.) to comply with the contractual compensation obligations. Commitments Commitments total 4,648 thousand euros at year end, a decrease of 2,324 thousand euros over December 31, 2005. The balance represents the residual amount of the commitment undertaken by Fiat S.p.A. on its centenary, in a resolution adopted by stockholders in their meeting of June 22, 1998, to make a contribution to the costs of providing degree courses in Automotive Engineering and of renovating the related university building over a ten-year period. 286 Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements Teksid Fiat S.p.A. is subject to a put contract with Renault (in reference to the original investment of 33.5% in Teksid, now 15.2%). In particular, Renault would acquire the right to exercise a sale option to Fiat on its interest in Teksid, in the following cases: ■ in the event of nonfulfilment in the application of the protocol of the agreement and admission to receivership or any other redressment procedure; ■ in the event Renault’s investment in Teksid falls below 15% or Teksid decides to invest in a structural manner outside the foundry sector; ■ should Fiat be the object of the acquisition of control by another car manufacturer. The exercise price of the option is established as follows: ■ for 6.5% of the capital stock of Teksid, the initial investment price increased by a given interest rate; ■ for the remaining amount of capital stock of Teksid, the share of the accounting net equity at the exercise date. Contingent liabilities In connection with significant asset divestitures carried out in 2006 and in prior years, Fiat S.p.A. directly or indirectly through its subsidiaries provided indemnities to purchasers with the maximum amount of potential liability under these contracts generally capped at a percentage of the purchase price. These liabilities primarily relate to potential liabilities arising from contingent liabilities in existence at the time of the sale, as well as breach of representations and warranties provided in the contracts and, in certain instances, environmental or tax matters, generally for a limited period of time. At December 31, 2006, potential obligations with respect to these indemnities are approximately 810 million euros (approximately 750 million euros at December 31, 2005), net of provisions set aside by the single companies. Certain other indemnifications have been provided that do not limit potential payment; it is not possible to estimate a maximum amount of potential future payments that could result from claims made under these indemnities. Certain claims against Fiat S.p.A. for damages in relation to real estate properties sold in previous years are still pending. Given this fact and the specific conditions of the related proceedings, the possible outcome of this situation cannot be reasonably estimated and, therefore, the likelihood of any costs to be borne by the company cannot be determined. 29. Information on financial risks The manner in which Fiat S.p.A. measures and manages financial risks are consistent with Group policy. In particular, the categories of the major risks to which the company is exposed are set out in the following. Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements 287
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Annual Report Consolidated and Stat
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But it does move. Galileo Galilei
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Letter from the Chairman and the Ch
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The Fiat Group The Fiat Group perfo
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Stockholders Financial communicatio
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in 2003, and now the Panda Hydrogen
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The meeting with the EWC Selected C
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Revenues by Business Area (in milli
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The breakdown of trading profit by
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Investment income was 156 million e
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If working capital is restated to i
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Financial Services Revenues (in mil
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Statement of Changes in Net Industr
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strategic consistency, economic fea
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The Board of Directors, at its meet
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There can be no motion without some
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Fiat Auto - Fiat, Alfa Romeo, Lanci
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Maserati Operating Performance In 2
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Trucks and Commercial Vehicles Ivec
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Fiat Powertrain Technologies Operat
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Metallurgical Products - Teksid Pro
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Motion for Approval of the Financia
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Consolidated Income Statement (*) (
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Statement of Changes in Stockholder
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partially from the market: the rema
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Measurement Investments in unconsol
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charges for risk provisions and wri
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Union market for the Fiat Auto and
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Composition and principal changes I
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Net financial expenses in 2006 (exc
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Year of expiry Total at December Be
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The net carrying amount of Intangib
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14. Property, plant and equipment I
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In 2005 Changes in accumulated depr
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esulting in a reduction of 1,213 mi
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Receivables from financing activiti
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(the residual debt of the Exchangea
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The reconciliation of the number of
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A summary of outstanding stock opti
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Under the CNH EIP, performance-base
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26. Provisions for employee benefit
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Changes in the present value of Pos
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■ Commercial risks - This provisi
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31, 2006 (872 million euros at Dece
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Fidis Retail Italia (FRI) All the r
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Other and Magneti Business elimina-
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Page 127 and 128: Provisions The company recognises p
Page 129 and 130: 4. Other operating income Other ope
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Page 135 and 136: 15. Other non-current assets At Dec
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Page 155 and 156: Deferred tax assets Reclassificatio
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Page 159 and 160: B. Employee benefits The employees
Page 161 and 162: Auditors’ Reports Auditors’ Rep
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Page 167 and 168: Motion for Approval of the Financia
Page 169 and 170: Motion to amend Articles 9, 11, 12,
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Page 173 and 174: Graphic design Atelier Roger Pfund,
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2006 Annual Report - Fiat SpA

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