Chrysler 2006 Annual Report Download - page 26

and operating autonomy, to realise economies of scale by
availing themselves of professional and specialised services
with improving levels of quality and to concentrate their
resources on the management of their core business.
Board of Directors
As envisaged in the By-laws, the number of members of
the Board of Directors ranges from nine to fifteen. The
Stockholders Meeting held on May 3, 2006 set the number
of members of the Board of Directors at fifteen and they shall
remain in office until the date of the Stockholders Meeting
that will be called to approve the 2008 financial statements.
As envisaged in Article 16 of the Company’s By-laws, the
representation of the Company is vested, severally, in all
executive directors, and as envisaged in Article 12, the Vice
Chairman, if appointed, shall act as Chairman if the latter is
absent or prevented from acting. As in the past, the Board
of Directors adopted a model for delegation of broad operating
powers to the Chairman and the Chief Executive Officer,
authorising them to severally perform all ordinary and
extraordinary acts that are consistent with the Company’s
purpose and not reserved by law or otherwise delegated
or reserved to the Board of Directors itself. In practice, the
Chairman exercises coordination and strategic guidance within
the activities of the Board of Directors, while the Chief
Executive Officer is in charge of the operating management
of the Group.
The Board defined the “Guidelines for Significant Transactions
and Transactions with Related Parties”, by which it reserved
the right to examine and approve in advance any transaction
of significance in the balance sheet, economic and financial
figures, including the most significant transactions with related
parties, and subject all transactions with related parties to
special criteria of substantial and procedural fairness.
Therefore, decisions regarding significant transactions are
excluded from the mandate granted to executive directors.
The term “significant transactions” refers to those transactions
that in and of themselves require the company to inform the
market thereof, in accordance with rules established by market
supervisory authorities.
When the Company needs to execute significant transactions,
the executive directors shall provide the Board of Directors
reasonably in advance with a summary analysis of the
Report on Operations Corporate Governance 49
Introduction
The Fiat Group adopted and abides by the new Corporate
Governance Code of Italian Listed Companies, issued in March
2006, supplemented and amended as necessary to ensure that
the corporate governance system it adopted is in line with the
rules imposed for listing on the NYSE, including the relevant
sections of the Sarbanes-Oxley Act, and the characteristics
of the Group.
In accordance with the regulatory requirements of Borsa
Italiana, the “Annual Report on Corporate Governance”
is prepared and made available on the occasion of the annual
stockholders meeting that approves the financial statements.
It is also available in the section “Investor Relations” on the
website www.fiatgroup.com, which also contains documents
regarding the Fiat Group corporate governance system.
In compliance with the guidelines issued by Assonime and
Emittenti Titoli S.p.A., this Report is composed of four sections:
the first containing a general description of the structure
of corporate governance, the second analysing in detail the
implementation of the provisions of the Corporate Governance
Code, the third highlighting certain of the more significant
aspects of the applicable United States law, and the fourth
containing summary tables and the corporate governance
documents of the Fiat Group. Highlights relevant to this
Report on Operations are illustrated below.
Direction and Coordination Activities
Fiat S.p.A. is not subject to direction and coordination activities
by companies or entities. The Italian companies that Fiat S.p.A.
directly and indirectly controls, with the exception of particular
cases, have identified Fiat S.p.A. itself as the entity that
performs direction and coordination activities, pursuant to
Article 2497 bis of the Italian Civil Code. This activity consists
in indicating the general strategic and operating guidelines of
the Group and takes concrete form in the definition and
updating of the corporate governance and internal control
model, issuance of a Code of Conduct adopted by the Group,
and elaboration of the general policies for the management
of human and financial resources, purchasing of factors of
production, and communication. Furthermore, coordination
of the Group envisages centralised management, through
dedicated companies, of cash management, corporate and
administrative, internal audit, and training services.
This allows the subsidiaries, which retain full management
Industrial Activities
In 2006, Industrial Activities generated cash and cash
equivalents totalling 1,194 million euros, and in particular:
■operating activities generated 3,995 million euros: income
cash flow (net income plus amortisation and depreciation),
net of Gains/losses and other non-cash items and including
changes in provisions, deferred taxes and items relating to
the management of sales with buy-back commitments, was
positive by 3,136 million euros, to which dividends for 180
million euros and the positive effect (679 million euros) of
the reduction in working capital should be added;
■investment activities absorbed a total of 442 million euros. The
liquidity generated:
–by the sale of non-current assets for 1,574 million euros
(principally the sale of 50% of FAFS to Crédit Agricole, the
sale of B.U.C. – Banca Unione di Credito, Atlanet S.p.A.,
Sestrieres S.p.A., and the interests held in Immobiliare
Novoli S.p.A., Machen Iveco Holding SA, and IPI S.p.A.);
–by reimbursement of financing disbursed by the centralised
cash management entity to the financial services companies
of Fiat Auto sold as part of the transaction with Crédit
Agricole for over 3 billion euros, including the Other changes
(net of greater net financial receivables from Group Financial
Services companies), in addition to collection of financial
receivables for 149 million euros (principally from associated
companies and sold companies), and the reduction in
securities held as current assets (65 million euros),
only partially offset requirements for investments during the
period, including those in investments, which include buy-back
of 29% of Ferrari and the disbursal for repurchase of 51% of
Fidis Retail Italia as part of the transaction with Crédit Agricole;
■financing activities absorbed 2,257 million euros in liquidity.
The funding requirements generated by the redemption of
bonds and the repayment of bank loans, in addition to lower
asset-backed financing, were only partly offset by the bonds
issued.
Report on Operations Financial Review of the Group48
Corporate Governance
Financial Services
The cash and cash equivalents of Financial Services at
December 31, 2006 totalled 1,030 million euros, 130 million
euros higher than at December 31, 2005.
The cash generated mainly derived from:
■operations during the year, which generated 734 million
euros in cash, principally in consequence of income cash flow
(net income plus amortisation and depreciation);
■investment activities, which absorbed 968 million euros in
liquidity. In 2006, the liquidity generated by a reduction in
current securities and the financing received from industrial
companies in support of activity almost entirely offset growth
in the investment portfolio. The liquidity absorbed during the
period is therefore mainly attributable to investments for the
period (mainly in vehicles that had been leased out under
operating leases), which amounted to 935 million euros;
■financing activities, which generated 435 million euros in
cash, mainly due to higher asset-backed financing connected
with portfolio growth.