Chrysler 2004 Annual Report Download - page 33

31
Financial Review of the Fiat Group and Fiat S.p.A.
■Iveco closed fiscal 2004 with operating income of 357 million
euros, up sharply from the operating income of 81 million
euros reported in 2003. The Sector benefited from the
positive effect of higher volumes, repositioning of the product
range, and major savings on product costs.
■Magneti Marelli reported major growth in its operating
income, which rose from 32 million euros in 2003 to 116
million euros in 2004. This result also benefited from the
contribution made by the Electronic Systems business, which
was consolidated effective January 1, 2004 and generated
operating income of approximately 26 million euros. This
improvement, which totaled 58 million euros on a comparable
consolidation basis, was achieved through actions that made
it possible to render the cost structure more competitive and
absorb the pressure on sales prices.
■Teksid closed fiscal 2004 with operating income of 35 million
euros, compared with income of 12 million euros in 2003.
The improvement in the operating result is attributable to the
positive effect of higher volumes and efficiency gains realized
through streamlining of production structures, which largely
offset the increase in costs of raw materials and the negative
foreign exchange effect.
■Comau posted operating income of 32 million euros,
compared with income of 2 million euros in 2003. This
marked improvement was realized thanks to higher margins
on contract work, extensive streamlining of overhead costs,
and more efficient use of internal resources.
■Business Solutions reported operating income of 36 million
euros for 2004. The decrease from the 45 million euros in
operating income reported for 2003 is attributable to changes
in the scope of consolidation. On a comparable basis,
operating income would have shown an improvement of
11 million euros thanks to the positive effects of efficiencies
realized in all its operating areas.
■Itedi had operating income of 12 million euros in 2004. The
increase from the 10 million euros reported a year earlier
stemmed from higher advertising revenues, lower paper costs,
and continuation of the company-wide cost cutting program.
EBIT (Earnings Before Interest and Taxes)
Group EBIT was -833 million euros, compared with -319 million
euros in 2003 (equal to a loss of 434 million euros for Continuing
Operations alone). In 2003, the balance of net gains/losses
resulting from the disposal of activities (principally the Toro
Assicurazioni Group and FiatAvio) totaled 1,747 million euros,
while in 2004 the sales of Fiat Engineering, Midas, and Edison
shares and warrants generated net gains of 154 million euros.
The comparison with Continuing Operations net of these gains
thus shows an improvement of 1,194 million euros, including
736 million euros contributed by the operating result detailed
hereinabove. The reduction in provisions and expenses for
restructuring and lower extraordinary writedowns represent
the other principal causes of improvement.
The change in EBIT was influenced by the following items:
The balance of non-operating income and expenses in 2004
was -863 million euros, in contrast with a positive 359 million
euros for Continuing Operations in 2003 (positive balance of
347 million euros at the consolidated level in 2003). Net of the
foregoing gains, the 2004 figure would be 1,017 million euros,
compared with the corresponding amount (for Continuing
Operations) of -1,388 million euros in 2003 (1,400 million euros
at a consolidated level). The 2004 figure reflects the following
items:
■Restructuring expenses of 508 million euros (658 million euros
in 2003): these expenses are represented by the costs incurred
or determined according to plans for personnel laid off with
long-term unemployment benefits, severance incentives, and
writedown of property, plant and equipment and intangible
fixed assets aimed at production streamlining. Restructuring
expenses include expenses and provisions that refer mainly
to Fiat Auto (325 million euros), CNH (65 million euros), and
Magneti Marelli (45 million euros).
■A total of -35 million euros (215 million euros in 2003) in other
extraordinary writedowns of activities, due to a change in the
market outlook of certain businesses, particularly in regard to
the depreciation of property, plant, and equipment at Fiat
Auto.
■A total of 435 million euros (501 million euros) in extraordinary
provisions to reserves for future risks and charges, other
expenses and prior period expenses, net of other non-
operating income and prior period income, with approximately
246 million euros of this total being attributable to the process
of reorganization and streamlining of relationships with Group
suppliers.
■Prior-period tax charges of 39 million euros (26 million euros
in 2003).
In 2003, the costs were largely represented by the restructuring
expenses connected with industrial streamlining programs,
particularly at Fiat Auto, CNH, and Comau, and writedowns
of assets, especially fixed assets at Fiat Auto, made on the
basis of changed market prospects. Other expenses and
extraordinary provisions to various liabilities and risk reserves
also had an impact, such as those for flood damage at the
Termoli plant and the residual commitments stemming from
investments in the telecommunications sector.
Investment income totaled 8 million euros, against a net loss
of 79 million euros from Continuing Operations in 2003, which
reflected losses of 76 million euros in losses at the Leasys joint
venture, which were reduced to 20 million euros in 2004.