Chrysler 1999 Annual Report Download - page 40

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39
Report on Operations – Automobiles
FINANCIAL ACTIVITIES
During 1999, the Sector’s financing activities continue to
grow in the international markets. Financing provided to
end customers totaled 7,734 million euros, for a year-on-year
gain of 3.9%. This volume of business supported the sale
of 1,088,600 units (+8.7% over 1998 on a comparable basis),
equivalent to 37.4% of all vehicles sold by Fiat Auto (33%
in 1998).
In particular, financing was provided for 331,068 units in Italy,
for a share of 36.2% of sales, or 2.8 percentage points more
than in 1998. The vehicles financed in the rest of Europe
increased to 349,603, for a share of 40.8% of sales (3.4
percentage points more than in the previous fiscal year).
In network financing, business volumes reached 16,900 million
euros.
RESULTS FOR THE YEAR
Fiat Auto’s consolidated revenues amounted to 24,101 million
euros, or 758 million euros less (-3%) than in 1998, chiefly
as a result of lower sales in the Mercosur countries and
the devaluation of the Brazilian real.
The aggressive competition that has characterized the
European market showed no signs of abating. In Europe
and in Italy, the introduction of new products, the increase in
the number of components offered as standard equipment
and the growing use of promotions and incentives, while
stimulating demand, had the effect of compressing profit
margins. As a result, the Sector reported an operating loss
of 121 million euros, for a negative return on sales of 0.5%,
about the same as 1998.
In South America, the restructuring of the Brazilian operations
produced improved results despite continued weak demand.
In Argentina, the Sector is reacting to a challenging
environment by implementing similar restructuring programs,
but their beneficial effects have not yet filtered down fully to
the bottom line.
Fiat Auto responded to this difficult situation with aggressive
measures at every level of its organization. As a result, it was
able to reduce manufacturing costs and, thanks to the Nova
Project, cut overhead by 10% in 1999, with a further decrease
of 10% planned for the year 2000.
The higher return on sales earned during the last quarter of
the year reflects primarily the launch of two new models —
the Fiat Punto and Lancia Lybra — in September, as well as
the continuing success of the Alfa Romeo brand and the
beneficial effects of efficiency measures carried out throughout
the Sector. The Sector reported a net loss of 493 million
euros, compared with a loss of 258 million euros in 1998.
Higher net financial expenses and an increased tax burden
caused by lower deferred tax assets than in the previous
fiscal year account for the difference.
Cash flow totaled 855 million euros (1,146 million euros in
1998) after depreciation and amortization of 1,348 million
euros (1,404 million euros in 1998).
The loss reported for the fiscal year prevented Fiat Auto from
creating value in 1999.