Chrysler 2001 Annual Report Download

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2001
THE FIAT GROUP IN
Consolidated
and Statutory
Financial Statements
REPORT
ON OPERATIONS

Table of contents

  • Page 1
    Consolidated and Statutory Financial Statements THE FIAT GROUP IN 2001 REPORT ON OPERATIONS

  • Page 2
    ... Equipment Commercial Vehicles Metallurgical Products Components Production Systems Aviation Publishing and Communications Insurance Services Ferrari and Maserati Corporate Governance Stock Option Plans Transactions among Group Companies and with Related Parties Motion for Allocation of the 2001 Net...

  • Page 3
    ...5.4% 2.0% 4.7% 4.4% 12.2% 14,122 13,700 3.4% 9.9% Statistical data by geographical region number Companies Employees Facilities R&D centers 1997 1998 1999 2000 2001 Italy Europe excluding Italy North America Mercosur Other regions Total 275 443 137 71 133 1,059 95,199 53,620 14,465 25,280...

  • Page 4
    ... Board of Directors after determining the number of its Members and of their fees; 4. Motion to amend Article 6 (Savings shares and common representative) and Article 15 (Meetings of the Board of Directors) of the Articles of Association; pertinent and related resolutions. Fiat S.p.A. Head Office...

  • Page 5
    ... Locatelli BOARD OF DIRECTORS Honorary Chairman Chairman Directors (3) Giovanni Agnelli Paolo Fresco Chief Executive Officer Paolo Cantarella.... (3) INDEPENDENT AUDITORS Arthur Andersen SpA (1) Secretary to the Board of Directors (2) Member of the Audit Committee (3) Member of the Compensation...

  • Page 6
    Report on OPERATIONS 4 Paolo Fresco Chairman of Fiat S.p.A. Paolo Cantarella Chief Executive Officer of Fiat S.p.A. Relazione sulla gestione - Relazione introduttiva

  • Page 7
    ... allows our employees to maximize their efforts. To achieve this goal, all Group Sectors have significantly stepped up the implementation of the Program Next to reengineer their core processes. This program, which affects product development, production, logistics, maintenance, procurement and order...

  • Page 8
    ...to renovate its product line. The introduction of this new model exemplifies the strategy of repositioning the Fiat brand at a higher level by offering cars with substantially more installed systems and more sophisticated technology. The Stilo has been well received in the European markets, where it...

  • Page 9
    ... with the appointment of the management teams that will run the four Business Units comprising the Sector. These units are: Fiat/Lancia/Light Commercial Vehicles, Alfa Romeo, International Development and Services. On the financial front: ❚ It approved a capital increase of more than one billion...

  • Page 10
    .... The costs incurred in connection with the vehicle inventory reduction program were offset completely by gains earned on the sale of the spare parts inventory to a new company owned jointly by DHL Worldwide Express, Fiat Auto and other financial partners. Another key factor in helping the Sector...

  • Page 11
    ... a financial services company focused exclusively on providing support to the sales network and to buyers of CNH products. At a closing held early in 2002, CNH and Kobelco, the world's fourth largest producer of hydraulic excavators, signed the final agreements needed to make their global alliance...

  • Page 12
    ... exchange rate, which could not be passed on fully to customers. FiatAvio began to feel the impact of weak demand for air travel and a reduction in the number of commercial space launches. Nevertheless, revenues (+9.7%) and operating income (reaching 186 million euros) improved further, for a return...

  • Page 13
    ...a series of workshops designed to promote the development of ideas and special projects. This program is representative of a process that the Group has been pursuing for some time to transform and update its corporate culture. This strategy is based on the belief that it is only our employees, their...

  • Page 14
    ... and mobility services linked to automotive products, insurance, corporate services and, starting in 2001, electric power and natural gas distribution. Currently, the companies of the Fiat Group are organized into ten operating Sectors that manufacture automotive products and provide services to...

  • Page 15
    ... services. Global Value will allow the two partners to exploit the considerable expertise they have acquired during their 50-year collaboration in developing information technology systems for manufacturing applications. Global Value provides IT services to Fiat Group companies and Italian customers...

  • Page 16
    ... is to train a new breed of engineers whose technical education is closely integrated with the teaching of sophisticated skills in the fields of management, organization, environmental studies, ergonomics and marketing. Architect Renzo Piano has designed a new home for this degree program and the...

  • Page 17
    ...ITS STOCKHOLDERS Highlights per share Stock market capitalization at year end (in millions of euros) 1999 2000 2001 Financial Communications The Group pursues a policy of open communication with individual and institutional investors. In the course of the year, its investor relations program offers...

  • Page 18
    ...strategic objectives, particularly as they apply to Business Solutions. Major developments that occurred in this area include the creation of Global Value, a 50-50 joint venture of Business Solutions and IBM Italia that provides high value-added information technology services to corporate customers...

  • Page 19
    ... graduates hired in 2001, 120 were enrolled in the Fiat Gra.De program. "...leadership in the management of human resources ..." In order to help employees achieve the Group's objectives, managers are being asked to employ behaviors that by encouraging the sharing of knowledge, increasing employee...

  • Page 20
    ... middle managers and sets forth more effective rules for the operation of the Restricted Committee. On November 5 and 6, 2001, the Fiat Group European Works Council held its annual meeting in Turin under the new rules. "...restructuring programs ..." At the Sector level in Italy, the Group developed...

  • Page 21
    ... consulting services to private industry and public agencies. Large investments and important programs were devoted to introducing e-learning tools based on specially designed platforms, developing Web-based training products and further expanding the learning-point network to several Group Sectors...

  • Page 22
    ... work on diesel engines with a lower environmental impact for Iveco's lines of heavy, medium and light commercial vehicles. The unrelenting quest for solutions and products that are increasingly compatible with the environment has led to the development of new environmentally friendly design...

  • Page 23
    ... a plan to increase the use of methane gas as a fuel for motor vehicles in major Italian urban areas. ❚ Support for the Car Sharing Project in the City of Turin through the purchase of a 33% interest in the respective engineering and management company. Car Sharing is an alternative form of public...

  • Page 24
    ... car to run on hydrogen, received the 2001 "environmentally friendly innovation" award from Lega Ambiente, an Italian environmental group. ❚ Intellibus This is a modern online information system that manages fleets of vehicles. It collects and manages data remotely by 24 Fiat Research Center...

  • Page 25
    ... efforts of the Fiat Group's manufacturing units. In response to the growing use of information and communication technologies in developing mobility solutions (shorter travel times and increased safety) for the next generation of vehicles, Elasis has established a new research hub staffed with...

  • Page 26
    ... Satisfaction & Loyalty survey process, determine 15 to 20% of the total points that a Dealership can earn under the program. To assist the Dealerships in providing world-class customer support, CNH has introduced aftersales programs that benefit both the Dealer and the Customer: ❚ A new product...

  • Page 27
    ... upgraded its customer support services, ensuring that its products operate reliably, without breakdowns and cost effectively. It also developed powerful diagnostic systems for repair shops, including mobile units for roadside diagnostics. As part of its commitment to provide top-quality service...

  • Page 28
    ...decrease in revenues was less than the contraction in sales volumes, thanks to a higher average level of revenues per unit, the increasing contribution of financial and service activities, and the proceeds from sale of spare parts inventories to the joint venture with DHL Worldwide Express and other...

  • Page 29
    In Western Europe, Fiat Auto sold 1,456,000 automobiles and light commercial vehicles, down 13.7% from 2000. This decrease was partially attributable to the cutbacks in dealer network car inventory and the natural contraction in volumes due to phase-out of Bravo and Brava models in anticipation of ...

  • Page 30
    ...down slightly (-2% on 2000) on account of weakness in the advertising market. Business Solutions, the Services Sector that started operations at the beginning of the year, posted revenues of 1,805 million euros in 2001. The transfer of the activities of Fiat Engineering to the Sector compensated for...

  • Page 31
    ...in volumes and contraction of margins and, mainly at Fiat Auto, higher research and development and advertising outlays to support product innovation and brand promotion. The major commitment to realizing cost efficiencies only partially attenuated these negative trends. The operating performance of...

  • Page 32
    ... 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...

  • Page 33
    ... Group. Net financial expenses (1,025 million euros) remained stable with respect to the previous year, as lower interest rates in the US dollar area and higher financial income at the insurance companies were offset by higher corporate spread on the financial markets and higher debt service costs...

  • Page 34
    ... (*) Insurance Activities 12/31/2000 Consolidated Net inventories Trade receivables Trade payables Other receivables (payables), net Working capital Net property, plant, and equipment Other fixed assets Net deferred tax assets Reserves and allowances Net invested capital Net financial position...

  • Page 35
    ... than at the end of 2000 due to the sharp contraction in working capital, the reduction in property, plant, and equipment, and the increase in reserves, partially offset by increases in equity investments, securities held by the insurance companies, and deferred tax assets. Changes in the scope of...

  • Page 36
    ... A breakdown of the net financial position, which shows a significant increase in long-term debt, is provided below: (in millions of euros) 12/31/2001 12/31/2000 Cash Marketable securities Financial receivables and leased assets Accrued financial income Deferred financial income 2,133 2,000 24...

  • Page 37
    ... to lower receivables from Tax Authorities and Group companies, partially compensated by the acquisition of 1,098,000 ordinary treasury shares to service the stock option plans. Stockholders' equity totaled 7,169 million euros at December 31, 2001, with an increase of 26 million euros over the end...

  • Page 38
    ... to use the Fiat trademark, computed as a percentage of the sales of the individual Group companies, and fees for services rendered by management personnel. The main component of net extraordinary income in 2000 was the gain realized on the sale of all Magneti Marelli S.p.A. shares to the subsidiary...

  • Page 39
    ... Stralis, a new heavy-range commercial vehicle. The most innovative part of the Stralis is its Active Space cab, which offers a better working environment, increased safety, improved on-board living conditions and a modular design. The new truck is available with an expanded range of engines, which...

  • Page 40
    ... of euros) Net invested capital 2001 (in millions of euros) 2000 (in millions of euros) Number of employees 2001 2000 Automobiles (Fiat Auto Holdings) Agricultural and Construction Equipment (CNH Global) Commercial Vehicles (Iveco) Metallurgical Products (Teksid) Components (Magneti Marelli...

  • Page 41
    Highlights by SECTOR OF ACTIVITY Report on Operations - Highlights by Sector of Activity

  • Page 42
    ... Motors. 42 Fiat built its first car in 1899. The Lingotto, the Company's first mass-production automobile factory, was inaugurated in Turin in 1923. It now houses the Group's headquarters. Other plants were later opened in Italy and the rest of the world. Fiat Auto's home market extends beyond...

  • Page 43
    ...dealer inventories. This program, which started during the first half of the year as part of the reengineering of the Sector's logistical and marketing organization, caused a reduction in the volumes Fiat Auto billed its dealers. The sales decline was also due to the expected reduction in unit sales...

  • Page 44
    ...'s core model line. GROWTH STRATEGIES During 2001, Fiat Auto continued to expand the global reach of its industrial and commercial operations. ❚ In India, the extraordinarily successful introduction of the Palio this past September enabled Fiat India to increase sales by 14%. ❚ In China, the...

  • Page 45
    ... dedicated product development, production, marketing, sales, quality and human resources organizations. This new structure will accelerate and streamline the decisionmaking process and focus the entire corporate system on maximizing customer satisfaction. Report on Operations - Fiat Auto Holdings

  • Page 46
    ...in Europe and Poland, the costs incurred to enhance the standard equipment of the Sector's vehicles without adequate price increases, and the charges associated with a reduction in the inventories held by dealers. The operating result was also adversely affected by a rise in research and development...

  • Page 47
    ... the creation of customized products and cutting-edge infomobility services. Fiat Auto worldwide Italy Rest of Europe Rest of the world Total Production facilities R&D centers Dealers 8 10 590 1 - 1,643 3 1 1,001 12 11 3,234 A belief in globalization is what drives Fiat Auto's growth strategy...

  • Page 48
    ... Equipment CNH Global Highlights (in millions of euros) 2001 1999 2000 Proforma 1999 Net revenues Operating income As a % of revenues Net income (loss) before minority interest Cash flow Capital expenditures Research and development Paolo Monferino, CNH Global's Chief Executive Officer. 10,777...

  • Page 49
    ... number of Case and New Holland product platforms will be reduced from more than 100 to about 60. In purchasing and logistics, significant efficiencies are expected to come from economies of scale, a strong rationalization of the company's supply base, a reduction in the overall number of parts and...

  • Page 50
    ..., begun in the first quarter of 2001, CNH Capital exited the commercial lending business, ended retail financing activities outside its own dealer networks and reorganized its European businesses to better support the company's customers and dealers. In 2001, the performance of the Sector's finance...

  • Page 51
    ... of related financial services in the world. The Sector is currently implementing a plan to integrate and streamline the industrial operations of New Holland and Case. Under this plan, a few facilities in North America and Europe will be closed and manufacture of the respective products transferred...

  • Page 52
    ... invested capital Michel De Lambert, Iveco's Chief Executive Officer. (*) 8,650 271 3.1 (123) 287 718 215 1,979 35,340 348 8,611 489 5.7 147 569 656 227 2,207 35,852 306 7,387 311 4.2 180 433 359 215 2,359 36,217 61 Research and development Number of employees (*) Vehicles under long-term leases...

  • Page 53
    ... China, Naveco, a 50-50 joint venture with the Yueijin Group, produced and sold about 13,100 vehicles. The main reasons for the decline of 25% from the number of units sold in 2000 are an increase in local competition and order postponements caused by the upcoming introduction of a new light vehicle...

  • Page 54
    FINANCIAL ACTIVITIES AND SERVICES The finance companies of the Transolver Finance Group, which provide financing and leasing services to support the sales of Iveco products, enjoyed strong growth in 2001. In 2001, Transolver Finance signed about 34,400 contracts to finance sales of new commercial ...

  • Page 55
    ... 2000. 55 Revenues by business unit Iveco worldwide Light commercial vehicles Medium commercial vehicles Heavy commercial vehicles Busses/Special vehicles Engines Services Italy Rest of Europe Rest of the world Total 9% 26% 11% 15% 12% 27% Production facilities R&D centers Dealers 11 16 73 24...

  • Page 56
    ...% in 2001. In order to quickly bring its costs in line with current sales volumes, Teksid is implementing incisive contingency plans to reduce production and has launched a reengineering program that aims primarily at streamlining its Cast-Iron operations and business support services. RESULTS FOR...

  • Page 57
    ... technology products. Teksid's presence in the international markets has grown at a rapid pace during the last 10 years, in response to the need to serve customers from facilities close to their locations throughout the world. The most significant increases in production capacity occurred in Europe...

  • Page 58
    ... Rest of Europe Rest of the world OPERATING PERFORMANCE In 2001, consistent with a strategy that calls for an increased focus on its core businesses, the Sector launched a restructuring plan that will help it enhance the value of its different operations and maximize the benefits of any strategic...

  • Page 59
    ... Eletronic systems Aftermarket Fiat Group Other carmakers Magneti Marelli's strategy is based on three key guidelines: innovating, focusing on businesses that supply complete systems with a high technology content, and lengthening the value chain by developing innovative services. International...

  • Page 60
    ... Research and development Net invested capital Piero Maritano, Comau's Chief Executive Officer. 2,218 60 2.7 (36) 27 38 22 378 17,243 2,440 87 3.6 6 63 36 20 486 17,636 1,693 43 2.5 (8) 30 26 20 485 16,943 Number of employees 60 Fiat started regular and organized production of machine tools...

  • Page 61
    ... closely with its customers from the design phase through every step of the manufacturing process: from engineering to production, assembly and maintenance services. Comau's global presence enables it to guarantee full-service support for its customers anywhere in the world. Report on Operations...

  • Page 62
    Aviation FiatAvio Highlights (in millions of euros) 2001 2000 1999 Net revenues Operating income as a % of revenues Net income before minority interest Cash flow Capital expenditures Research and development Net invested capital Saverio Strati, FiatAvio's Chief Executive Officer. 1,636 186 11.4 ...

  • Page 63
    ..., due in part to a favorable dollar/euro exchange rate and the positive impact of programs implemented to improve efficiency and reduce operating costs. Depreciation and amortization totaled 89 million euros (90 million euros in 2000). Research and development expenditures increased to 132 million...

  • Page 64
    ... the newspaper readership base (contests for students) and increase reader loyalty (bonus coupon programs). At the same time, it reduced the number of promotions of publishing-related products packaged with the newspaper. The magazine Specchio, which has been distributed free of charge with La...

  • Page 65
    ... incurred to upgrade the Sector's rotary presses, and those belonging to contract printers, to handle an increase in the newspaper's number of pages and the introduction of color. These charges were offset in part by cuts in marketing costs, gains on the sale of real estate assets and reductions in...

  • Page 66
    ...the insurance business. Premiums by geographical region of destination Employees by geographical region 0 50 100% Italy Abroad OPERATING PERFORMANCE In 2001, the Italian insurance market expanded at a slower rate than in previous years. Difficult conditions in the financial markets and the start...

  • Page 67
    ... the insurance operations benefited from a marked improvement in the claims-to-premiums ratio. This improvement was made possible by programs implemented in recent years to weed out and rebalance the underwriting portfolio and by a decline in the rate of claims in the Italian market that started at...

  • Page 68
    ... maintenance of offices and industrial sites (Ingest Facility S.p.A.). Ingest Facility and Jonhson Controls, a U.S. group with a global leadership position in facility management, formed a joint venture that will aggressively target large customers in the international market. Fiat Engineering...

  • Page 69
    ...40% 42% 16% 58% Human Resources Property, Engineering & Facility Management Administration Services I.C.T. - Information and Communication Technology Procurement and Diversified Services Fiat Group Other carmakers The mission of Business Solutions is to offer customers both inside and outside the...

  • Page 70
    .... Ferrari S.p.A. - car sales by geographical region Maserati S.p.A. - car sales by geographical region 0 50 100% Italy United States Rest of Europe Rest of the world OPERATING PERFORMANCE The manufacturing and marketing operations of the Ferrari/Maserati Group had a record year in 2001. The same...

  • Page 71
    ... 893 million euros reported in 2000. Operating income totaled 62 million euros (+35% compared with 2000), reflecting strong sales and favorable foreign exchange rates. Depreciation and amortization increased to 76 million euros, up from 64 million euros in 2000. Research and development outlays were...

  • Page 72
    .... STOCKHOLDERS OF THE COMPANY Fiat's stockholder base includes about 300,000 holders of ordinary and preference shares and a large number of owners of savings shares. Italian and foreign institutional investors own a significant percentage of Fiat's capital stock. As of today, shareholders...

  • Page 73
    ... a portion of the compensation payable to the Chief Executive Officer is variable. In both cases, as explained in a special schedule included in the Notes to the Financial Statements, the variable compensation is based on the average market price of Fiat Report on Operations - Corporate Governance

  • Page 74
    ... are represented. HANDLING OF CONFIDENTIAL INFORMATION The Board of Directors promoted the adoption of an internal procedure for handling confidential information. This procedure was published as a part of a special organizational announcement from the Chief Executive Officer. It lists the different...

  • Page 75
    ... Chief Executive Officer options to purchase ordinary Fiat shares. Detailed information on these transactions is provided in the notes to the financial statements. The table below summarizes the data for the options outstanding at December 31, 2001: 75 2000 Number of shares Average exercise price...

  • Page 76
    ... Editrice La Stampa S.p.A., Property and Car Retailing - Pro.Ca.R. Deutschland GmbH, International Metropolitan Automotive Promotion - France - S.A., Fiat Motor Sales Ltd. and other Group companies), and payment obligations under financial leases (Teksid Aluminum Components Inc., Fraikin Location...

  • Page 77
    ...though his spouse. Fiat ordinary Fiat savings Fiat ordinary Fiat ordinary Fiat preference Fiat ordinary Fiat ordinary Fiat ordinary (1) (1) 312 662 300 2,750 440 1,000 1 - 1,000 312 662 300 2,750 440 1,000 1 1,000 Report on Operations - Transactions among Group Companies and with Related Parties

  • Page 78
    ... In euros The Board of Directors submits to the Stockholders' Meeting for approval the financial statements for the 2001 fiscal year and proposes...and a limited tax credit of 0.103 euros. The dividend payable to each savings share carries a regular and therefore unrestricted tax credit of 0.311 euros...

  • Page 79
    Principal FIAT GROUP Companies Report on Operations - Principal Fiat Group Companies

  • Page 80
    ... Sevel Nord S.A. France (*) (*) CNH Global N.V. Netherlands Case New Holland Italia S.p.A. Italy Fiat Hitachi Excavators S.p.A. Italy Case Canada Corporation Canada Case Corporation United States Case Corporation Pty Ltd Australia Case Germany GmbH Germany Case Harvesting Systems GmbH Germany CNH...

  • Page 81
    ... Mexico Progressive Tools & Industries Company United States Renault Automation Comau S.A. France Transolver Finance S.p.A Italy Transolver Service S.p.A. Italy Fraikin Société Anonyme France Iveco Finance Ltd Great Britain Transolver Finance S.A. France Transolver Operational Services Limited...

  • Page 82
    ...Brazil Fiat France S.A. France Fiat Iberica S.A. Spain Fiat Netherlands Holding N.V. Netherlands OTHER SERVICE COMPANIES (*) Business Solutions S.p.A. Italy Easy Drive S.r.l. a S.U. Italy eSPIN S.p.A. Italy Fast-Buyer S.p.A. Italy Fiat Engineering S.p.A. Italy Fiat Gesco S.p.A. Italy Global Value...