The Fiat Group in 1999 - Report on Operations - Fiat SpA

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represents a ga<strong>in</strong> of 2.3% over the previous year, reflect<strong>in</strong>g
the appreciation of the U.S. dollar versus the s<strong>in</strong>gle
European currency.
Stated <strong>in</strong> euros, sales were down about 5.5% on a
comparable consolidation basis. <strong>The</strong> decrease is due
ma<strong>in</strong>ly to lower unit sales, particularly <strong>in</strong> North America
where CNH was penalized by an unfavorable sales mix.
<strong>The</strong> contraction <strong>in</strong> sales of agricultural equipment was
offset <strong>in</strong> part by strong sales of construction equipment.
Had Case’s sales been consolidated for the full year on
a proforma basis, the Sector’s revenues would have
<strong>in</strong>creased to about 10,000 million euros.
❚ <strong>The</strong> other <strong>in</strong>dustrial Sectors had comb<strong>in</strong>ed revenues
of 9,173 million euros, compared with 7,551 million euros
<strong>in</strong> 1998. Changes <strong>in</strong> the scope of consolidation account
for most of this 21.5% <strong>in</strong>crease.
<strong>The</strong> best ga<strong>in</strong>s were recorded by Teksid, where revenues
rose to 1,682 million euros (+44.4%, but -5.2% on a
comparable consolidation basis); Magneti Marelli, which
posted revenues of 4,062 million euros (+7.1%, but
practically unchanged on a comparable basis); and
Comau/Pico, which reported revenues of 1,693 million
euros (+100.8%, but -5.5% on a comparable consolidation
basis).
<strong>The</strong> performance of the Service Sectors is reviewed below:
❚ Toro Assicurazioni wrote premiums total<strong>in</strong>g 3,922 million
euros, or 32.5% more than the 2,959 million euros reported
<strong>in</strong> 1998. Strong sales of life <strong>in</strong>surance accounted for most
of the <strong>in</strong>crease.
❚ Itedi had revenues of 413 million euros. <strong>The</strong> sale of Satiz,
a company provid<strong>in</strong>g publish<strong>in</strong>g activities, is the ma<strong>in</strong>
reason for this 5.5% decl<strong>in</strong>e.
Gross operat<strong>in</strong>g result
At 7,318 million euros, the gross operat<strong>in</strong>g result was about
the same as <strong>in</strong> the previous fiscal year (7,249 million euros),
but its relative amount to revenues decl<strong>in</strong>ed from 15.8% <strong>in</strong>
1998 to 15.2% <strong>in</strong> <strong>1999</strong>. For the Industrial Activities alone,
the gross operat<strong>in</strong>g result was equivalent to 16.9% of sales
<strong>in</strong> 1998 and 16.4% <strong>in</strong> <strong>1999</strong>, ma<strong>in</strong>ly as a result of extremely
keen price competition and the cont<strong>in</strong>u<strong>in</strong>g crisis <strong>in</strong> the
Mercosur countries.
Overhead
Overhead came to 5,084 million euros <strong>in</strong> <strong>1999</strong> (+1.1% over
1998), equivalent to 10.6% of revenues (11% <strong>in</strong> 1998).
<strong>The</strong> programs implemented under the Nova Project to
reeng<strong>in</strong>eer the <strong>Group</strong>’s bus<strong>in</strong>ess support activities and
simplify its organization were major factors <strong>in</strong> reduc<strong>in</strong>g the
ratio of overhead to revenues. Cost sav<strong>in</strong>gs exceeded 500
million euros (an 11.8% reduction), well ahead of the <strong>1999</strong> target.
Research and development outlays
Research and development outlays, which were charged
<strong>in</strong> full to <strong>in</strong>come, totaled 1,406 million euros, or 11.2% more
than <strong>in</strong> 1998. This <strong>in</strong>crease demonstrates the <strong>Group</strong>’s ongo<strong>in</strong>g
commitment to <strong>in</strong>novation and technological excellence.
Operat<strong>in</strong>g Income
Operat<strong>in</strong>g <strong>in</strong>come before extraord<strong>in</strong>ary, f<strong>in</strong>ancial and tax
components totaled 788 million euros <strong>in</strong> <strong>1999</strong>, or 42 million
euros more than <strong>in</strong> 1998. When measured separately from
the <strong>Group</strong>’s <strong>in</strong>surance operations, which are characterized by
a structurally negative operat<strong>in</strong>g performance, the return on
sales of the <strong>in</strong>dustrial activities was 1.9% (2.2% <strong>in</strong> 1998).
<strong>1999</strong> 1998
(<strong>in</strong> millions of euros) Revenues Revenues % change
Automobiles (<strong>Fiat</strong> Auto) 24,101 24,859 (3.0%)
Commercial Vehicles (Iveco) 7,387 6,649 11.1%
Agricultural and Construction Equipment (CNH Global) 5,246 5,127 2.3%
Metallurgical Products (Teksid) 1,682 1,165 44.4%
Components (Magneti Marelli) 4,062 3,793 7.1%
Production Systems (Comau/Pico) 1,693 843 100.8%
Aviation (<strong>Fiat</strong>Avio) 1,361 1,361 –
Roll<strong>in</strong>g Stock and Railway Systems (<strong>Fiat</strong> Ferroviaria) 375 389 (3.6%)
Publish<strong>in</strong>g and Communications (Itedi) 413 437 (5.5%)
Insurance (Toro Assicurazioni) 3,922 2,959 32.5%
Miscellaneous and elim<strong>in</strong>ations (2,119) (1,813) 16.9%
Total for the <strong>Group</strong> 48,123 45,769 5.1%