Chrysler 2004 Annual Report Download - page 32

REPORT ON
OPERATIONS
01
30
Operating Result
In 2004, the Group achieved its target of operating balance
by posting a positive operating result of 22 million euros, in
contrast with a loss of 510 million euros in fiscal 2003. This
improvement was even more marked (+736 million euros) when
compared with Continuing Operations in 2003, which reported
an operating loss of 714 million euros. This target was achieved
thanks to the strong growth in operating income at many
Sectors, including Iveco, CNH, and Marelli, which contributed
the most, and the lower operating loss at Fiat Auto.
During 2004, research and development costs, which are
posted directly to the statement of operations and thus
included in the operating result, totaled 1,810 million euros.
This value is 86 million euros higher than the costs for Continuing
Operations in 2003, in confirmation of the strategy to renew its
product range and its commitment to innovation.
Research costs increased at Fiat Auto, largely on account of the
introduction of the New Ducato and Punto models, at Magneti
Marelli, partly on account of the consolidation of the Electronic
Systems business, and by Ferrari-Maserati. Lower research and
development costs were reported by CNH, due to the negative
foreign exchange effect; when expressed in dollars, they
showed a slight increase.
The operating result broken down by Sector is illustrated below:
■Fiat Auto reduced its operating loss from 1,094 million euros
for Continuing Operations in 2003 to -840 million euros in
2004. Thus, on a comparable consolidation basis, the loss
decreased by 254 million euros. The improvement was due
to the increase in volumes and improved mix, obtained thanks
in large part to the new models. The effect of prices and
especially the measures taken to reduce costs were partially
set off by a 51 million euro increase in research and
development costs.
■Ferrari –Maserati closed fiscal 2004 with operating income
of 6 million euros, recovering in the last quarter from the
operating losses sustained in the first nine months of the year.
Nevertheless, the Sector did not reach the level achieved a
year earlier (operating income of 32 million euros) since the
favorable effect of new models on volumes and sales mix
and product cost efficiency gains were offset by the negative
foreign exchange effect and higher research and
development costs.
■CNH operating income rose to 407 million euros, up 178
million euros from the 229 million euros recorded a year
earlier. Significantly higher unit sales and a more favorable
product and price mix, coupled with the savings generated by
the programs implemented to streamline the manufacturing
organization, more than offset a rise in raw material costs and
the unfavorable impact of the appreciation of the euro. The
biggest increases were achieved in the Americas, where the
Sector posted positive results in all market segments in which
it operates.
2004 2003 Change with
respect to the
Continuing Continuing
(in millions of euros) Consolidated Operations Consolidated Operations
Automobiles (Fiat Auto) (840) (1,094) (979) 254
Ferrari – Maserati 632 32 (26)
Agricultural and Construction Equipment (CNH) 407 229 229 178
Commercial Vehicles (Iveco) 357 81 81 276
Components (Magneti Marelli) 116 32 32 84
Metallurgical Products (Teksid) 35 12 12 23
Production Systems (Comau) 32 2230
Services (Business Solutions) 36 45 45 (9)
Publishing and Communications (Itedi) 12 10 10 2
Aviation (FiatAvio) (*) ––53 –
Insurance (Toro Assicurazioni) (**) ––44 –
Holdings, Miscellaneous and Eliminations (139) (63) (71) (76)
Total 22 (714) (510) 736
(*) Operating Result for the Aviation Sector is shown until the date of its sale (July 1, 2003).
(**) Operating Result for the Insurance Sector is shown until the date of its sale (May 2, 2003).