THE FIAT GROUP IN

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ratio due to continuous increases in product content, partly
in consequence of the introduction of Euro3 regulations,
that was only partially recovered through pricing; higher
research and development costs (+94 million euros), and
higher spending on advertising (+64 million euros), also in
connection with the launch of the Stilo.
The operating income of the Sector was further penalized
by the costs incurred in connection with the structural
cutbacks in dealer network car inventory.
The Sector reacted to this unfavorable situation by
implementing cost recovery measures, with resort to
growing synergies generated by the industrial alliance with
General Motors, which amounted to 251 million euros and
exceeded expectations, and other product cost savings.
Further benefits in the amount of 300 million euros were
generated by the sale of spare parts inventories to the joint
venture set up by Fiat Auto, DHL Worldwide Express, and
other financial partners in order to streamline the spare
parts management process.
❚ CNH Global posted operating income of 209 million euros
(1.9% of sales) in 2001, against income of 45 million euros
in 2000 (0.4% of sales).
Improvements in the agricultural segment achieved through
the launch of new products and cost-cutting measures
allowed the Sector to absorb a lower level of profitability
deriving from lower sales of construction equipment and higher
marginal fixed costs. The latter were the result of production
cutbacks intended to reduce dealer network inventory.
In 2001, the development of synergies generated by the
integration of Case and New Holland continued, resulting
in savings of $278 million (about 300 million euros).
❚ Iveco reported operating income of 271 million euros (3.1%
of sales) in 2001, against 489 million euros in 2000 (5.7%
of sales). This decline stemmed from lower sales volumes
and lower income from disposals of real estate. In fact,
fiscal 2000 benefited from non-recurring income of 88 million
euros upon sale of industrial areas in Spain no longer used
by the Sector. The effect of price pressures was contained
by a commercial policy that favored profitability.
Operating income in the other Industrial Sectors totaled
187 million euros (compared with 386 million euros in 2000),
with an aggregate return on sales of 1.9%, down from the
3.8% of the previous year. It was influenced by the economic
downturn affecting carmakers, particularly in North America,
which worsened in the last months of the year.
In particular:
❚ Teksid reported operating income of 15 million euros (0.9%
of sales), against 101 million euros (5.4% of sales) in 2000.
This decrease stemmed from lower sales volumes, mainly in
North America, the unfavorable trend in the price/cost ratio,
and start-up costs of new activities, which were only
partially recovered through cost-cutting measures.
❚ Magneti Marelli reported an operating loss of 74 million
euros in 2001 (-1.8% of sales), against 55 million euros in
operating income in 2000. The Sector was penalized by
lower sales volumes and higher electronic component costs
due to inflation and exchange rates. The 41 million euro
decrease in operating income with respect to the previous
year reflects the change in the scope of consolidation and
lower non-recurring income, particularly from the disposal
of real estate.
❚ Comau reported operating income of 60 million euros
(2.7% of sales) in 2001, against 87 million euros (3.6% of
sales) in 2000. The Sector sustained a severe contraction
in the income generated by its North American activities due
to lower volumes and prices, which was partially recovered
through industrial cost-cutting and increased income from
service activities and non-recurring real estate gains.
❚ FiatAvio achieved a significant return on sales in 2001, with
operating income of 186 million euros (11.4% of sales), up
from fiscal 2000 (143 million euros, 9.6% of sales), thanks
to higher sales volumes, positive foreign exchange effects,
and industrial cost-cutting measures.
The performance of the other Sectors operating in the
Services area is reviewed below:
❚ Toro Assicurazioni closed fiscal 2001 with operating
income of 68 million euros, against an operating loss of
56 million euros reported in the previous year. The increase
in operating income was due to the gradual improvement
in the claims/premium ratio, which was in turn the result of
portfolio selection and restructuring, reductions in overhead
costs and increased income from sale of real estate
properties.
❚ Itedi closed fiscal 2001 with an operating loss of 2 million
euros (-0.6% of sales), down from the 10 million euros in
operating income reported in 2000, due to lower advertising
volumes and sharply higher prices for paper.
❚ Business Solutions reported operating income of 73 million
euros (4% of sales) for the year.