Chrysler 2005 Annual Report Download - page 22

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Report on Operations Financial Review of the Group
Financial Review of the Group
INTRODUCTION
Significant Transactions occurred in the Year
On February 13, 2005 the Boards of Directors of Fiat and General
Motors approved a contract pursuant to which General Motors
paid Fiat 1.56 billion euros to terminate the Master Agreement,
including cancellation of the put option, unwinding of all joint
ventures and return of GM’s 10% equity interest in Fiat Auto
Holdings B.V. to Fiat. Under the agreement, GM continues to
use some of Fiat’s diesel technology and acquired a 50% interest
in the Bielsko-Biala (Poland) plant which manufactures 1.3 liter
diesel engines.
On September 9, 2005 Fiat sold 24.6% of the share capital
of Italenergia Bis to EDF at a price of 1,147 million euros.
Concurrently the Citigroup financing of the same amount that
had been extended in September 2002 was reimbursed.
Pursuant to the delegation of authority granted bythe
Extraordinary Stockholders Meeting held on September 12, 2002,
the Board of Directors resolved on a capital increase to service
the MandatoryConvertible Facility that fell due on September 20,
2005, through the issuance of 291,828,718 ordinary shares at the
price of 10.28 euros each. Pursuant to the last section of article
2441 of the Italian Civil Code, the lending banks subscribed the
new shares on September 20, 2005 through a set-off against the
total debt of 3 billion euros owed to them.
The operating and financial impact of the above transactions is
described in this Financial Review of the Group and in the Notes
to the Financial Statements. Refer to these sections for additional
information.
Principal Transactions that affected the Scope of Consolidation
in 2005
In the first quarter of 2005, Magneti Marelli increased its
investment in the automotive lighting manufacturer Mako Elektrik
Sanayi Ve Ticaret A.S. by purchasing a further interest from the
Turkish group Koç, thereby acquiring control. As a result, this
company, previously accounted for by using the equity method,
is consolidated on a line by line basis from January 1, 2005.
A65% interest in the temporary employment agency WorkNet
was sold in the first quarter of 2005.
The operations that had previously been transferred to the Fiat-
GM Powertrain joint venture were consolidated in Fiat Powertrain
Technologies (Automobiles business area) as of May 2005. Fiat
regained full control of these operations upon termination of the
Master Agreement with General Motors, with the sole exception
of the Polish operations that continue to be jointly managed with
General Motors. The Powertrain operations of Iveco, CRF (Fiat
Research Centre) and Elasis will subsequently be transferred to
Fiat Powertrain Technologies. Significant data regarding these
businesses are included in the comments of the respective Sectors
they currentlybelong to.
On June 1, 2005, Iveco sold to Barclays Mercantile Business Finance
Limited a 51% stake of Iveco Finance Holdings Limited, which
comprised certain financial services companies of Iveco operating
in France, Germany, Italy, Switzerland and the United Kingdom.
As of that date, Iveco Finance Holdings was deconsolidated
and accounted for by using the equity method.
At the end of 2005, the Fiat Group acquired Enel’s share of
the Leasys joint venture, active in the hire and management of
company car fleets, thereby obtaining 100% control.The balance
sheet of this companywas consolidated on a line-by-line basis at
December 31, 2005 and its results are being consolidated from
January 1, 2006.
These changes in the scope of operations do not have a significant
overall impact on the comparability of the data for the two reference
periods. Nevertheless, analyses of both the Group as a whole and
the individual areas highlight the respective effects.
In April 2005 the ownership of Maserati was transferred from Ferrari
S.p.A. to Fiat Partecipazioni S.p.A. As a consequence, a new entity
is operational from April 1, 2005 which comprises the group of
companies producing and selling Maserati cars.To assure comparability
of the reported figures, fiscal 2004 data of the Maserati business have
been retrospectively separated from the Ferrari-Maserati business.