Chrysler 2001 Annual Report Download - page 7
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Overview
Report on Operations – Overview
Dear Stockholders:
2001 was a difficult year for the Fiat Group. Overall, its
operating and financial performance was unsatisfactory, with
results falling short of expectations both for operating income,
which was sharply lower than in 2000, and cash flow generation.
A DIFFICULT YEAR
The Group’s performance, which during the first half of 2001 had
been consistent with profitability and debt reduction objectives
for the year, was severely affected by a rapid deterioration of
the international economic environment during the second
half. This deterioration became even more pronounced following
the terrorist attacks on the United States. The Group responded
to the erosion in consumer and business confidence and the
resulting drop in unit sales in virtually all segments of the
automotive industry with aggressive marketing programs
designed to stimulate demand and counter similar initiatives
launched by its competitors.
After September 11, the situation was exacerbated by a virtual
halt in negotiations on the divestiture of non-core assets,
which are being sold off as a means of reducing Group debt.
It is important to note, however, that the failure to achieve
profitability targets in 2001 was due for the most part to
the negative performance of Fiat Auto and the components
businesses of Teksid and Magneti Marelli. The other industrial
Sectors were able to overcome challenging market conditions
and hold profitability at satisfactory levels — this was the case
for Iveco and Comau — or even improve on them, as did
CNH, FiatAvio and Ferrari.
These developments have not caused us to falter in our
commitment, and we remain fully confident that, economic
conditions notwithstanding, we will be able to build a solid
and lasting foundation for the creation of shareholder value
through customer satisfaction and competitive excellence.
The growing synergies that are being realized as a result of the
refocusing efforts of recent years are a product of this vision. The
industrial alliance with General Motors has produced far greater
benefits than originally anticipated, with savings of 251 million
euros in 2001 and a cumulative total of 272 million euros. The
future will bring new synergies and even greater benefits, as
Fiat Auto and General Motors continue to pursue new projects,
such as their two joint centers for the design and development
of common components and systems: one in Sweden, which
became operational in 2001, and the other in Turin, which
opened its doors at the beginning of 2002.
The integration of New Holland and Case has produced
major efficiency gains for CNH, with savings of $278 million
in 2001 (approximately 300 million euros) and a cumulative
total of $433 million (approximately 480 million euros) since
the merger. The ultimate target of $600 million (approximately
670 million euros) in savings will probably be reached ahead
of schedule.
If we are to provide an increasingly effective response to the
needs of our customers, we must create a leaner, more nimble
organization that 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 management, is expected to produce total savings
of 1.5 billion euros by 2004.
We continued to seek growth opportunities in new markets
in 2001, maintaining sufficient tactical flexibility to respond
promptly to changes in local economic conditions.