2006 Annual Report - Fiat SpA

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Innovation and Products After the introduction of numerous new models in 2005, signalling implementation of the strategy to modernise and improve Fiat Auto’s products, 2006 was marked by the introduction of new models that rounded out the lines of models offered by Fiat, Lancia, and Alfa Romeo. At Fiat, the number of Panda models (this is the top-selling segment A model in Europe) continued growing. The Panda Hydrogen was presented in February, as the prototype of an alternative fuel vehicle. In October, the model year and the typically sporty 100 HP version were presented. In March 2006, the diesel version of the Sedici was presented and in December this version propelled the SUV to the top of the rankings for the best-selling 4x4 in Italy. A preview presentation of the Fiat Linea was held in October. This model made its first official appearance at the Istanbul Motor Show in November. Produced by Tofas, it will go on sale in the first half of 2007. This car will enable the Fiat brand to establish a presence in the high-range C segment for sedans in Turkey and in the other countries where it will be sold. After the preview at the end of October, the Bravo was launched in Rome on January 31, 2007. This is the new model with which the Fiat brand intends to regain top positions in the medium-size segment, which is the most important in Europe. This car combines technology and beauty. Highly stylised, it was designed with great attention to safety and equipped with top-rated engines in terms of environmental friendliness and performance. Together with this new model, also the new trademark was presented. This trademark will appear on all new Fiat models, starting from the Bravo. Two special events that occurred in 2006 also merit mention. The first was the presentation of the new Mirafiori Motor Village at the end of May. This company-owned dealership was created in the Mirafiori premises, signalling the adoption of a new philosophy that will soon be exported outside Italy. The second event was the joint presentation with Ikea of the new interior designs of Fiat dealerships: a young, innovative, and functional style that combines simplicity of use for the customer and a consistent image at various dealerships. 64 Report on Operations Fiat Auto Alfa Romeo started selling the Alfa 159 Sportwagon in February 2006, joining the sedan introduced at the end of 2005. The Alfa Spider was voted “Cabrio of the Year 2006” at its Geneva Motor Show preview. This was followed by its presentation to the press in June. Sales of the Q2 versions of the 147 and the GT started in January 2007. This version has a two-wheel drive that offers greater stability and road hold, comparable to a four-wheel drive. Finally, the diesel version of the Alfa Spider is scheduled for launch in March 2007. At the end of November, Lancia celebrated the brand’s 100th anniversary. To mark the occasion, all Lancia models were also sold in a particularly rich and exclusive centenary version. The New Ypsilon was rolled out at the end of September, after being previewed at the beginning of September (on the occasion of the Venice International Film Festival). The new Delta was also previewed at that festival, in anticipation of its debut in 2008. There were major new product roll-outs at Fiat Light Commercial Vehicles as well. The New Ducato was introduced in May. It is destined to continue the success of a very popular model both inside and outside Italy. The New Scudo, which is produced at the Sevel Nord plant in Valenciennes, France, was introduced in November and started being sold in January 2007. Product development activities were focused principally on the completion of several minor changes for the Panda, Grande Punto, and Ypsilon, completion of development of the New Ducato, development of the Bravo, Croma FL, Fiat 500, Linea, and Minicargo, and the start of development on the new Alfa 147 and Delta HPE. Research and development was also carried out on components for future application, including engines and transmissions. Financial Services In 2006, the financial services companies of the Sector saw the establishment of the partnership between Fiat Auto and the Crédit Agricole group at the end of December. This agreement involved the creation of a 50-50 joint venture, named Fiat Auto Financial Services, for the management of financing activities in Europe offered to Fiat Auto dealerships, end customers who opt for instalment payment plans, as well as leasing and medium and long-term rental services. This alliance with a major European bank group will enable the financial companies of the Sector to guarantee the level of fund necessary for the development of services at primary conditions. It will also make it possible to revive integrated management of the three lines of activity (dealership financing, retail auto financing and car rental), which is fundamental to winning the loyalty of Fiat Auto customers. In more detail, the transaction is broken down as follows: Fiat Auto, upon exercise of its call option, purchased from Synesis Finanziaria 51% of Fidis Retail Italia (a company controlling the Fiat Auto European retail financing activities) which then changed its corporate name into Fiat Auto Financial Services. FAFS acquired certain Fiat Auto subsidiaries active in the European long-term renting and Fiat Auto dealer financing. Fiat Auto sold to Sofinco, the wholly owned consumer credit subsidiary of Crédit Agricole, 50% of the share capital of FAFS. In the dealership financing segment, the Sector’s financial companies handled loans totalling approximately 12,400 million euros (9,810 million euros in 2005). When combined with other financing instruments available to provide financing support to the dealer network, these operations generated average financing of approximately 3,580 million euros (3,150 million euros in 2005). The increase in volumes reflects the increase in sales reported on most of the markets. In the supplier financing segment, a total of approximately 1,980 million euros in loans were handled (3,670 million euros in 2005), generating an average financing of 260 million euros in 2006 (560 million euros in 2005). This decrease was related to the company decision to reduce its commitment to that activity. In the renting business, Leasys, which operates in the company fleet segment, realised an operating turnaround in 2006, reaping the fruits of a major corporate reorganisation and restructuring. The company wrote over 33,000 new contracts, up significantly from 2005 due to the renewal of two major contracts with institutional customers. Savarent consolidated its role as captive company operating through the network of Fiat Auto dealerships. Its products are offered primarily to small and medium-sized businesses and individuals. In 2006 the company also wrote over 18,000 new contracts, up 20% from 2005. If the segment’s foreign companies are also counted, a total of 60,100 contracts were written, up 52% from 2005. The Sector’s proprietary car fleet totalled over 134,000 units at December 31, 2006, down 7% from 2005 as a result of the policy implemented to focus on a higher profitability of the business. Effective February 1, 2007, Fiat Auto changed its name to “Fiat Group Automobiles S.p.A.” Concurrently, four new companies were formed, 100% owned by Fiat Group Automobiles S.p.A.: “Fiat Automobiles S.p.A.,” “Alfa Romeo Automobiles S.p.A.,” “Lancia Automobiles S.p.A.,” and “Fiat Light Commercial Vehicles S.p.A.”. Their productive activities and personnel will remain part of Fiat Group Automobiles S.p.A. These changes are consistent with the new corporate culture of the Fiat Group. In particular, they reflect two strategic choices of how it approaches the business: on the one hand, the unity of the Group, and on the other hand, the specific characteristics of the operating sectors and individual brands. Report on Operations Fiat Auto 65
Maserati Operating Performance In 2006, Maserati reported a distinct improvement in company results. In the commercial area, the Quattroporte confirmed its position as the top-selling model made by the Company, with over 3,800 units sold. The new Executive GT and Sport GT versions contributed to this result. It also continued to achieve successes inside and outside Italy, having been honoured on 28 separate occasions since its introduction. In 2006, in order to improve commercial focus on its principal markets, Maserati affiliates became operational in France, Germany, the United Kingdom, and Switzerland. In the sports field, Maserati Corse won the FIA GT title in the driver and team categories, and won the Spa 24-hour race for the second year in a row. In 2006, the market segments covered by the Coupé and Spyder models on Maserati’s eight principal markets enjoyed an overall increase in demand of 14.5% and 5.3%, respectively. In the luxury sedan segment, the market expanded by 28.2%, thanks in part to the introduction of new models. Maserati delivered 5,734 cars to the dealer network, for a 3% increase from the 5,568 units delivered in 2005. Overall growth stemmed primarily from the significant increases realised with the Spyder and Coupé models, amounting to 27% and 12%, respectively. However, revenues were down slightly (-2.6%), since the previous year had benefited from sales of the special MC12 street version, which was no longer sold in 2006. In 2006, the United States confirmed its position as the most important market for Maserati. With 2,310 units sold, the Sector maintained the healthy level of volumes reached in 2005. Excellent results were achieved in other countries, particularly in France, with an increase of 20%, in the United Kingdom and Japan, both up 15%. On new markets like China and Russia, Sector deliveries grew respectively by 52% and 18%. At December 31, 2006, Maserati had orders for 819 units (+3.8% from 2005), including 717 Quattroporte. 66 Report on Operations Maserati Highlights (in millions of euros) 2006 2005 Net revenues 519 533 Trading profit (33) (85) Operating result (*) (33) (85) Investments in tangible and intangible assets 82 20 - of which capitalised R&D costs 32 9 Total R&D expenses (**) 46 57 Cars delivered (number) 5,734 5,568 Employees at year-end (number) 649 606 (*) Including restructuring costs and unusual income (expenses). (**) Including R&D capitalised and charged to operations. Innovation and Products In 2006, major resources were dedicated to development of new models, which will flank the existing line following their introduction in 2007. The first of these is the new Quattroporte Automatica. Production of this model got underway in November, in view of its introduction at the Detroit Motor Show in January 2007. The MC Victory version was created for the Gransport line, which was introduced at the Geneva Motor Show in March 2006 and produced in a limited series. A limited edition of 12 cars derived from a racing model was also developed and put on sale. In order to support Maserati dealers throughout the United States, an agreement between Maserati and CNH Capital America LLC for the supply of a number of finance solutions designed exclusively for Maserati customers has become operational in November 2006. Ferrari Operating Performance Ferrari closed 2006 by confirming the extraordinary appeal of its products, not only on traditional markets but also on more recently developed ones. While maintaining its intrinsic cachet of exclusivity, in 2006 Ferrari increased end customer deliveries by 4.8% to keep pace with growing demand. Its principal objective was to reduce delivery wait time and meet the demands of those new markets that reported particularly interesting growth trends. This result was achieved with the F430, in both the berlinetta and spider versions, and the new 12 cylinder 599 GTB Fiorano. In 2006, sales of homologated cars to the dealer network totalled 5,650 units, up 5% from 2005. A total of 188 nonhomologated cars were sold in 2006, compared with 18 units in 2005. The United States remained the principal market, with 1,709 units delivered (+8%). A total of 3,045 units (+4.7%) were sold in Europe, including 669 in Italy (+1%). A total of 5,671 homologated cars were delivered to end customers, compared with 5,409 homologated cars in 2005, for an increase of 4.8%. The United States, Italy, the United Kingdom, and France made major contributions to the positive balance for fiscal 2006. New or developing markets also made a substantial contribution (Middle East +84%, Eastern Europe +30%, and Asia/Pacific +15%), spurring a major increase in volumes without compromising the exclusivity of the brand. A total of 121 cars, +95% from 2005, were sold in China thanks to a completely new commercial network. Highlights (in millions of euros) 2006 2005 Net revenues 1,447 1,289 Trading profit 183 157 Operating result (*) 183 157 Investments in tangible and intangible assets 142 142 - of which capitalised R&D costs 46 46 Total R&D expenses (**) 83 86 Homologated cars delivered to the network (number) 5,650 5,381 Employees at year-end (number) 2,870 2,809 (*) Including restructuring costs and unusual income (expenses). (**) Including R&D capitalised and charged to operations. Innovation and Products The excellent results for 2006 were achieved thanks to the performance of the F430, in both the berlinetta and spider versions. These models are characterised by innovations derived directly from Formula 1, such as the electronic differential and controls placed directly on the steering wheel. The 599 GTB Fiorano also made a major contribution to results. This model combines top performance and comfort without compromise, and offers the most innovative and technologically evolved content applied by Ferrari to a 2-seater forwardcentrally positioned engine car. It represents a new milestone in terms of sportiness, driving excitement, and design. Report on Operations Ferrari 67
Page 1 and 2: Annual Report Consolidated and Stat
Page 3 and 4: But it does move. Galileo Galilei
Page 5 and 6: Letter from the Chairman and the Ch
Page 7 and 8: The Fiat Group The Fiat Group perfo
Page 9 and 10: Stockholders Financial communicatio
Page 11 and 12: in 2003, and now the Panda Hydrogen
Page 13 and 14: The meeting with the EWC Selected C
Page 15 and 16: Revenues by Business Area (in milli
Page 17 and 18: The breakdown of trading profit by
Page 19 and 20: Investment income was 156 million e
Page 21 and 22: If working capital is restated to i
Page 23 and 24: Financial Services Revenues (in mil
Page 25 and 26: Statement of Changes in Net Industr
Page 27 and 28: strategic consistency, economic fea
Page 29 and 30: The Board of Directors, at its meet
Page 31 and 32: There can be no motion without some
Page 33: Fiat Auto - Fiat, Alfa Romeo, Lanci
Page 37 and 38: Trucks and Commercial Vehicles Ivec
Page 39 and 40: Fiat Powertrain Technologies Operat
Page 41 and 42: Metallurgical Products - Teksid Pro
Page 43 and 44: Motion for Approval of the Financia
Page 45 and 46: Consolidated Income Statement (*) (
Page 47 and 48: Statement of Changes in Stockholder
Page 49 and 50: partially from the market: the rema
Page 51 and 52: Measurement Investments in unconsol
Page 53 and 54: charges for risk provisions and wri
Page 55 and 56: Union market for the Fiat Auto and
Page 57 and 58: Composition and principal changes I
Page 59 and 60: Net financial expenses in 2006 (exc
Page 61 and 62: Year of expiry Total at December Be
Page 63 and 64: The net carrying amount of Intangib
Page 65 and 66: 14. Property, plant and equipment I
Page 67 and 68: In 2005 Changes in accumulated depr
Page 69 and 70: esulting in a reduction of 1,213 mi
Page 71 and 72: Receivables from financing activiti
Page 73 and 74: (the residual debt of the Exchangea
Page 75 and 76: The reconciliation of the number of
Page 77 and 78: A summary of outstanding stock opti
Page 79 and 80: Under the CNH EIP, performance-base
Page 81 and 82: 26. Provisions for employee benefit
Page 83 and 84: 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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Credit risk The maximum credit risk
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The increase over the prior year re
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■ Current trade receivables of 78
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The book value at the disposal date
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198 Appendix The Companies of the F
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Subsidiaries consolidated on a line
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% of Group % of consoli- Interest %
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Subsidiaries accounted for using th
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234 Financial Review of Fiat S.p.A.
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(*) (*) Income Statement Balance Sh
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Income Statement pursuant to Consob
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When an impairment loss on assets s
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Provisions The company recognises p
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4. Other operating income Other ope
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Net income from derivative financia
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12. Property, plant and equipment T
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15. Other non-current assets At Dec
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Regarding changes in 2005, the Mand
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A summary of outstanding stock opti
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The amounts recognised in the Incom
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The item Payables to Group companie
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These relate to: ■ guarantees of
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Counterparty Other Current Other No
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32. Significant non-recurring trans
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Fees paid to Members of the Board o
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Financial statement format Fiat S.p
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Deferred tax assets Reclassificatio
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Reconciliation of net profit (loss)
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B. Employee benefits The employees
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Auditors’ Reports Auditors’ Rep
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Reports of the Board of Statutory A
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that numerous transactions involvin
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Motion for Approval of the Financia
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Motion to amend Articles 9, 11, 12,
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Stockholders Meeting and will be ef
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Graphic design Atelier Roger Pfund,
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2006 Annual Report - Fiat SpA

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