Chrysler 2003 Annual Report Download - page 21

20 Report on Operations
INTRODUCTION
The Industrial and Financial Relaunch Plan based on refocusing
the Fiat Group on automotive industrial activities was approved
in June 2003.
Significant measures were taken to restore balance to the
financial structure of the Group, among which are the capital
increase carried out in July 2003 at Fiat S.p.A., subscription of
which generated an influx of new stockholders’ equity of
1,836 million euros, and the sale of activities not considered
strategic.
Consistently with this strategy, the most important transactions
modifying the scope of consolidation are reviewed below:
❚In the first quarter of 2003, Iveco sold the activities of Fraikin
to Eurazeo. The operations of Fraikin, which specializes in the
long-term vehicle leasing business, were deconsolidated as
of the beginning of 2003.
❚In the first quarter of 2003, Business Solutions sold
approximately 56% of IPI S.p.A. to the Zunino Group. IPI
S.p.A., which was deconsolidated as of January 1, 2003,
operates in the field of large property improvement,
management, and sales.
❚Fiat Auto Holdings’ retail financing activities in Brazil were
sold to the Itaù banking group at the end of March 2003
and deconsolidated from that date.
❚The agreement to sell the Toro Assicurazioni Group to
the DeAgostini Group was signed on May 2, 2003 and the
relevant operations were deconsolidated as of the same date.
❚On May 27, 2003, as part of the agreement signed by Fiat
and Capitalia, Banca Intesa, Sanpaolo IMI and Unicredito on
March 11, 2003, and following approval by the competent
authorities, the first part of the transaction for the sale by Fiat
to the Banks of a majority interest (51%) of Fidis Retail Italia
was concluded. Fidis Retail Italia is the company that controls
the European activities of Fiat Auto Holdings in the field of
retail consumer financing for automobile purchases.
The sale to Fidis Retail Italia of the equity investments in
the other financial companies covered by the agreement
was finalized in October 2003, with the sole exception of
the company active in the United Kingdom.
❚In execution of the contract signed on July 1, 2003 and
after having met the conditions precedent, the sale of the
aerospace activities of FiatAvio S.p.A. to Avio Holding S.p.A.,
a company 70% owned by The Carlyle Group and 30% by
Finmeccanica S.p.A., was finalized. Said activities were
deconsolidated effective from the date of the agreement.
Please note that Iveco has valued the activities of Naveco, the
50-50 joint venture with the Yueijin Group, according to the
equity method since January 1, 2003. This investment was
previously consolidated using the proportional method.
To provide clearer information on the Group’s operating
performance, the financial figures are illustrated and
commented in the following chapter, “Financial Position
and Operating Results by Activity Segment” broken
down according to Industrial Activities, Financial Activities,
and Discontinuing Operations.
FINANCIAL POSITION AND OPERATING RESULTS
OF THE FIAT GROUP
Operating Performance
Although it continued to operate in a difficult environment
characterized by market stagnation and appreciation of the
euro, the Group improved its own economic indicators in line
with the targets set in the Relaunch Plan. Losses decreased
significantly, particularly in terms of the performance of
continuing operations – those activities that are destined to
remain within the scope of consolidation. The results achieved
by the Group reflected the major cost savings deriving from the
measures envisaged in the Relaunch Plan and the gains realized
upon disposal of activities, although it had to face the negative
effect of restructuring expenses and writedowns, as well as other
non-operating expenses and provisions.
Highlights of Group operating performance are illustrated
below. For a more detailed analysis, see the section
“Operating Performance – Sectors of Activity”.
Net Revenues
Fiat Group net revenues, including changes in contract work
in progress, totaled 47,271 million euros, reflecting a 15.1%
decrease from the previous year, largely due to the disposal
of activities. If continuing operations alone are considered –
excluding the revenues of businesses sold in 2003 from the
values for both fiscal years – the reduction would have been
7.3%. The negative foreign exchange effect caused by
appreciation of the euro against other currencies and
contraction in the volumes of Fiat Auto were the principal
causes of this change.
Revenues broken down by Sector are illustrated below:
❚Fiat Auto reported revenues of 20,010 million euros for 2003,
9.6% less than the 22,147 million euros reported in 2002 due
to the contraction in sales volumes and disposal of retail
financing activities (decrease of approximately 8% on a
comparable basis). Fiat Auto sold a total of approximately
1,700,000 automobiles and light commercial vehicles, down
8.8% from 2002.
In Western Europe, where 1,179,000 units were sold, the
decrease was 9.4% with respect to the previous year. The
main causes for this downturn were persistent softness on
its principal markets, growing competitive pressures, and
anticipation leading up to the introduction of new products.
The new models came onto the market only at the end of
2003 and thus the benefits deriving from their sale were
only marginal. On the major Western European markets,
decreases were reported in France (-16.3%) and in Italy
(-11.5%), in contrast with the positive performance of
sales in Great Britain and especially Spain (+14.8%).
Analysis of the Financial Position and Operating Results
of the Fiat Group and Fiat S.p.A