Chrysler 2004 Annual Report Download - page 29

27
Financial Review of the Fiat Group and Fiat S.p.A.
FINANCIAL REVIEW OF THE FIAT GROUP
AND FIAT S.P.A.
INTRODUCTION
In order to facilitate the analysis of the results for 2004 and their
comparison with 2003, the most important transactions affecting
the scope of consolidation of the Group in 2004 as compared
with 2003 are illustrated below:
■Fiat Auto Holdings’ retail financing activities in Brazil were
sold to the Itaù banking group at the end of March 2003
and deconsolidated from the same 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 sale by Fiat to the Banks of a majority interest
(51%) of Fidis Retail Italia was concluded. At that time, Fidis
Retail Italia controlled part of 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, which was sold in 2004.
■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.
■In February 2004, 100% of the interest held in Fiat
Engineering S.p.A. was sold to Maire Investimenti S.p.A.
and the company was therefore deconsolidated as of the
beginning of the year. At the same time, Fiat Partecipazioni
S.p.A. subscribed to a capital increase at Maire Investimenti
S.p.A. and now owns 30% of the capital of this company. On
said 30% interest, both parties hold put and call options that
are exercisable within three years at a predetermined price.
■Effective January 1, 2004, Magneti Marelli consolidated
Magneti Marelli Electronic Systems on a line-by-line basis
following gradual acquisition of actual control over this
strategic supplier of Fiat Auto and other automotive groups.
In 2002 this business had been sold to the Mekfin Group,
which later sold it to the Ixfin Group. So that the company
would punctually respect the commitment it had made to
its customers and continue pursuing its growth strategies,
an agreement was initialed at the end of 2003 between the
Ixfin Group and the Fiat Group, on the basis of which Magneti
Marelli, pursuant to an agreement providing for an usufruct
on the company’s voting shares, started becoming
increasingly involved in the management of the Electronic
Systems activity in 2004. Finally, on July 28, 2004, the Fiat
Group decided to acquire full ownership thereof by exercising
a call option.
■In September, Magneti Marelli sold 100% of the Midas
business (automotive repair and maintenance services)
in Europe and Latin America to the Norauto Group. These
activities were deconsolidated as of September 30, 2004.
To allow a meaningful comparison with prior period data, the
figures for 2003 used in the analyses presented in the following
pages have been prepared on the basis of the “Continuing
Operations”, i.e. excluding data of companies that were sold
in 2003 (Toro Assicurazioni, FiatAvio, Fraikin, IPI, Fidis Retail Italia
and Fiat Auto’s retail financing activities in Brazil).
It should be noted that in 2003, Continuing Operations included
Fiat Engineering, that was deconsolidated effective January 1,
2004 and had reported revenues of 369 million euros and
operating income of 20 million euros in fiscal 2003. Conversely,
the Electronic Systems operations of Magneti Marelli mentioned
above reported revenues of 476 million euros and an operating
income of 26 million euros in 2004.
To provide clearer information on the Group’s operating
performance, the financial figures are illustrated and
commented in the chapter, “Financial Position and Operating
Results by Activity Segment” broken down according to
Industrial Activities and Financial Activities.
FINANCIAL REVIEW OF THE FIAT GROUP
In a highly competitive market, in 2004 the Group was able
to achieve its stated objective to attain operating breakeven.
Improvements were achieved in all Group Sectors, with the
exception of Fiat Auto whose loss was however reduced by
over 20%.
The net loss was lower than in 2003, when it had benefited
from net capital gains of about 1.7 billion euros mainly on the
disposal of activities.
At December 31, 2004, the Group’s liquidity amounted to 5.3
billion euros, compared with 7 billion euros at the beginning of
2004, despite a gross indebtedness, which fell by approximately
3.4 billion euros as the Group repaid bonds totaling
approximately 2.7 billion euros.
OPERATING PERFORMANCE
Highlights of the Group’s operating performance are illustrated
below. For a more detailed analysis, see the section “Operating
Performance – Sectors of Activity”.