2006 Annual Report - Fiat SpA

■ Holding companies, Other companies and Eliminations
closed 2006 with a trading loss of 169 million euros. The
improvement of 61 million euros from 2005 was mainly due to
the effect of the reorganisation and rationalisation of non-core
activities and central structures.
Operating result
In 2006, operating result was positive by 2,061 million euros
compared with an operating income of 2,215 million euros in
2005. The 154 million euro decrease reflects lower net unusual
income of 1,105 million euros (110 million euros in 2006 and
1,215 million euros in 2005) versus an improvement in trading
profit of 951 million euros. In 2006, gains on disposal
of investments totalled 607 million euros and were in part
offset by restructuring charges of 450 million euros and other
unusual expenses of 47 million euros. In 2005, unusual items
included the gain from the termination of the Master
Agreement with General Motors of 1,134 million euros,
and the Italenergia Bis gain (878 million euros), net of
restructuring charges of 502 million euros and the balance
of other unusual income (expenses) which was negative
by 322 million euros.
Net gains on the disposal of investments, equal to 607 million
euros, included the gain of 463 million euros resulting from
the sale, within the framework of the agreement with Crédit
Agricole, of 50% of Fiat Auto Financial Services, the joint
venture that handles Fiat Auto’s main financing activities in
Europe, as well as the gains on the sale of B.U.C. – Banca
Unione di Credito (80 million euros), Immobiliare Novoli
S.p.A. (39 million euros), Machen Iveco Holding SA that
controlled 51% of Ashok Leyland Ltd (23 million euros),
Atlanet S.p.A. (22 million euros) the residual interest in IPI
S.p.A. (9 million euros), and the expected loss of 29 million
euros in connection with the sale of the stake held in Meridian
Technologies Inc., that comprises Teksid’s Magnesium
activities. Completion of the transaction is still subject to
closing of the financing to the purchaser by financial
institutions. The 905 million euros recorded in 2005 included
the gain (878 million euros) from the sale of the investment
32 Report on Operations Financial Review of the Group
in Italenergia Bis to Electricité de France and the gain realised
upon the sale of Palazzo Grassi S.p.A. (23 million euros).
Restructuring costs totalled 450 million euros and were
mainly attributable to Comau (179 million euros) in connection
with the redefinition and restructuring of the perimeter of the
Sector’s operations, CNH (145 million euros), Fiat Powertrain
Technologies (60 million euros), Magneti Marelli (16 million
euros), Business Solutions (12 million euros).
In the previous year, these costs, totalling 502 million euros,
stemmed mainly from restructuring of the Sector’s central
organisation and several operations outside Italy of most
Group Sectors. The most significant amounts were
attributable to Fiat Auto (162 million euros) also as a result
of restructuring of the Fiat-GM Powertrain activities (the joint
venture unwound at the beginning of May 2005), Iveco (99
million euros), CNH (87 million euros), Comau (46 million
euros), and Magneti Marelli (33 million euros).
Other unusual income (expenses) was negative by 47 million
euros, of which 26 million euros attributable to the
impairment of the goodwill of certain European companies
of Comau, resulting from the reshaping and restructuring
of the perimeter of the Sector’s operations undertaken during
the second half of the year and 17 million euros due to the
reorganisation and rationalisation of relationships with
Group suppliers.
In 2005 this item was positive by 812 million euros and
included the following: gain from the termination of the
Master Agreement with General Motors for 1,134 million euros
(net of accessory costs); a gain of 117 million euros realised
upon final disposal of the real estate properties that had been
securitised in 1998; expenses of 187 million euros related to
the reorganisation and rationalisation of both Group suppliers
(started in 2004) and Fiat Auto dealers; Fiat Auto expenses
of 141 million euros associated with platform rationalisation
and production relocation; 71 million euros in expenses for
the indemnity recognised to Global Value for the unwinding
of the joint venture with IBM; indemnities paid to
counterparties to settle contractual guarantees granted on
the sale of businesses in previous years totalling 30 million
euros and other minor items.
The 2005 operating result of Holding companies and Other
companies included the gain of 878 million euros resulting
from the disposal of the investment in Italenergia Bis and,
under other unusual income, an amount of 1,134 million
euros (net of ancillary costs) related to the General Motors
settlement.
Net result
Net financial expenses totalled 576 million euros in 2006, an
improvement of 267 million euros from the 843 million euros
of 2005. The positive change is mainly attributable to the lower
level of net industrial debt of the Group, in particular the
elimination of the charges on the Mandatory Convertible
The following table illustrates the components of operating
result broken down by Sector:
Gains/Losses
on the disposal Other unusual
Trading profit of investments Restructuring costs income (expenses) Operating result
(in millions of euros) 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
Fiat Auto 291 (281) 461 – 9 162 (16) (375) 727 (818)
Maserati (33) (85) – – – – – – (33) (85)
Ferrari 183 157 – – – – – – 183 157
Agricultural and Construction
Equipment (CNH-Case New Holland) 737 698 – – 145 87 – – 592 611
Trucks and Commercial
Vehicles (Iveco) 546 332 25 (10) 6 99 – (11) 565 212
Fiat Powertrain Technologies 168 109 – – 60 20 (6) (8) 102 81
Components (Magneti Marelli) 190 162 – – 16 33 1 (2) 175 127
Metallurgical Products (Teksid) 56 45 (29) 5 4 14 3 (9) 26 27
Production Systems (Comau) (66) 42 (1) (1) 179 46 (26) (3) (272) (8)
Services (Business Solutions) 37 35 3 9 12 22 – (15) 28 7
Publishing and
Communications (Itedi) 11 16 1 – – 2 – (1) 12 13
Holdings companies, Other
companies and Eliminations (169) (230) 147 902 19 17 (3) 1,236 (44) 1,891
Total for the Group 1,951 1,000 607 905 450 502 (47) 812 2,061 2,215
Facility and on the financing connected with the Italenergia Bis
transaction, which were reimbursed in September 2005, as well
as higher financial income of 56 million euros arising from the
equity swap agreements on Fiat shares which had been
entered into to cover stock option plans. The financial
component of costs for pension plans and other employee
benefits totalled 166 million euros in 2006 (146 million euros
in 2005).
Fiscal 2005 had benefited from unusual financial income
of 858 million euros resulting from the capital increase
of September 20, 2005 with the simultaneous conversion
of the Mandatory Convertible Facility. The income represents
the difference between the subscription price of the shares
and their stock market price at the date of subscription.
Report on Operations Financial Review of the Group 33