Chrysler 2006 Annual Report Download - page 30

Finally, the name “Fiat Group Automobiles S.p.A.” highlights
the international vocation of this large industrial organisation.
The creation of four companies reflects the attention devoted
by the Group to positioning the brands on the market.
The Fiat, Alfa Romeo, Lancia, and Fiat Light Commercial
Vehicles brands each have a specific identity with defined,
recognised characteristics, and apply distinct commercial
and market policies.
Formation of these four new companies must be interpreted
in view of the growing distinctiveness of the brands, enhanced
value, and reinforcement of their competitive capacities.
■On February 14 2007, Fiat and Tata Motors signed
an agreement which calls for a Tata license to build a pick-up
vehicle bearing the Fiat nameplate at Fiat Group Automobiles’
plant in Córdoba, Argentina. The first vehicles will roll off the
Córdoba assembly lines during 2008. Annual production is
slated at around 20,000 units. Total planned investment in the
project is around US$80million. With the production of the
pick-up model, the Fiat complex in Córdoba will retake the
integral activity of all its productive units, to a great extent
reinitiated with the manufacture of Fiat engines and gearboxes
and the recent agreement to produce gearboxes for PSA
Peugeot Citröen. The pick-up, based on the new generation
Tata pick-up truck, will be sold in South and Central America
and selected European markets through Fiat Automobiles’
distribution and importer network. This will permit the Fiat
brand to aggressively enter the medium pick-up sector,thanks
to Tata Motors’ specific know-how.
■On February 14 2007, Iveco and Tata Motors announced the
signing of a Memorandum of Understanding (MoU) to analyse
the feasibility of cooperation, across markets, in the area of
Commercial Vehicles. The MoU encompasses a number of
potential developments in engineering, manufacturing,
sourcing and distribution of products, aggregates and
components. Shortly after the MoU signature, Iveco and Tata
Motors will set up a joint Steering Committee to determine the
feasibility of cooperation, both in the short and over the long
term. When found feasible, the two companies will enter into
definitive agreements in the course of the coming months.
■Ameeting was held on February 19, 2007 at the Italian Prime
Minister’s Office, with the participation of the Prime Minister,
the Ministers of Labour and Transport, and the Vice Minister
Significant Events Occurring since the End
of the Fiscal Year
The most significant transactions completed by the Fiat Group
during early 2007 are set out below:
■On January 26, Fitch Ratings announced that it upgraded
Fiat’s rating to “BB” from “BB-“, reaffirming the short-term
rating to “B” and maintaining the outlook “positive”. Standard
&Poor’s Ratings Services revised its outlook on Fiat rating to
“positive” from “stable”, affirming the ‘BB’ long-term and ‘B’
short-term corporate credit ratings. On February 12, Moody’s
Investors Service upgraded to Ba2 from Ba3 Fiat rating
maintaining the positive outlook. The short term rating remains
unchanged.
■On February 1, 2007 Fiat Auto changed name to “Fiat Group
Automobiles S.p.A.”.
Four new companies were formed at the same time, 100%
owned by Fiat Group Automobiles S.p.A.: “Fiat Automobiles
S.p.A.”, “Alfa Romeo Automobiles S.p.A.”, “Lancia
Automobiles S.p.A.”, and “Fiat Light Commercial Vehicles
S.p.A.”.
These changes are consistent with the new corporate culture
at the Fiat Group. In particular,they reflect two strategic
decisions as to how to approach the business. On the one
hand, the Group will exist as a unified whole, and on the other
hand, each company will be characterised by the specific
nature of the respective operating sectors and individual
brands.
Over the next few months, all Group activities will highlight
this aspect by pairing the “Fiat Group” mark with the sector
or brand trademark.
Inclusion of the word “Group” in the name reflects its
prominent role as a constituent part of the Fiat Group,
considering the contribution that Fiat Auto makes to Group
results and the realisation of major synergies with other
Group sectors.
The new name also identifies a key area of activity that has
recently undergone profound transformation, featuring
a newly streamlined structure that is more solid and compact
than before.
At the same time, it also indicates the synergies linking
the automotive business, which has already generated major
benefits in terms of operating efficiency, resource
management, and cost cuts.
The agricultural tractor industry is expected to continue
running at high levels, while the combine industry should
recover from the recent declines on the back of pricing
recovery in corn and soybeans. The worldwide construction-
equipment industry should remain strong for both heavy and
light equipment, although the North American markets are
expected to soften for a year before resuming upward growth
in 2008. In this context, CNH expects to improve sales volumes
thanks to new products, improved pricing and market share
gains. Higher volumes, manufacturing efficiencies and other
cost reductions will be partially offset by continuing higher
R&D investments.
In Western Europe, the market for light, medium and heavy
commercial vehicles is expected to remain substantially stable.
In this environment, Iveco aims at increasing both profitability
and market share by a substantial commercial repositioning,
with price improvements coming from the introduction of new
Euro 4 and Euro 5 compliant vehicles. For heavy trucks, Iveco
will be leveraging the performances of the New Stralis,
especially in terms of fuel efficiency and the improvement
in the resale value of our vehicles.
In order to achieve set targets, the Fiat Group will continue
to push inter-Sector purchasing synergies, increasing and
accelerating development of best-cost-country spending,
strengthening strategic partnerships with suppliers through
long-term contracts, and focusing on the implementation
of the world-class manufacturing initiative.
As a result, the Group confirms its targets for 2007: trading
profit between 2.5 billion euros and 2.7 billion euros (4.5%
to 5.1% trading margin) and net income between 1.6 billion
euros and 1.8 billion euros.
By sector, full-year 2007 trading margin targets (trading profit
as a percentage of revenues) will range as follows:
■Autos, 2.6% to 3.4%;
■CNH, 8.9% to 9.7%;
■Iveco, 7.1% to 7.9%.
While working on the achievement of these objectives, the
Fiat Group will continue to implement its strategy of targeted
alliances, in order to reduce capital commitments, and reduce
the related risks.
Report on Operations Significant Events Occurring since the End of the Fiscal Year and Business Outlook 57
for Economic Development, as well as national labour
federation and industry representatives. The Chief Executive
Officer Sergio Marchionne illustrated the Group’s development
plans for 2007-2010, with special attention being devoted to
the situation in Italy. The meeting concluded with the signing
of a transcript in which the Italian Government affirmed its
willingness to support the Company’s development plans.
In particular, this would involve close assessment of initiatives
taken in support of investments and research, and recognise
the existence of conditions for granting the Fiat Group a quota
for “mobilità lunga” (long-term mobility benefit to bridge
the period prior to retirement). This amount was defined
in the December 18, 2006 labour agreement, which envisages
that a maximum of 2,000 Group employees will be laid off.
The meeting transcript also envisages setting up a roundtable
with the participation of local institutions to examine the
measures necessary to overcome logistical and economic
restraints at the Termini Imerese plant in Sicily, so that
production of a model can be allocated to it starting from 2009.
Furthermore, the obligations imposed by the “Personal Data
Protection Code” (Legislative Decree No. 196/2003) were
satisfied in compliance with the provisions of the “Technical
Regulation of Minimum Security Measures” (Appendix B
of the Code). Consequently, the Fiat S.p.A. Security Planning
Document was updated by the addition of the Plan for
additional measures reinforcing security levels in order
to combat the evolution of emerging risk factors.
Business Outlook
The Western European automobile market is expected
to remain stable in 2007, while demand in Brazil should
show moderate growth.
In this context, the Group’s Automobile Sector plans
to leverage the introduction of its new models (mainly
Fiat Bravo, Fiat Linea and Fiat 500) to continue to boost
volume and improve mix in the European markets. Meanwhile,
the Sector’s Brazilian operations are expected to deliver
atrading performance in line with 2006. The Company will
continue to implement its strategy of aggressive cost-cutting
in all non-essential areas and, while streamlining governance
costs, it will continue to invest in marketing and advertising,
in order to support its growth ambitions.
Report on Operations Significant Events Occurring since the End of the Fiscal Year and Business Outlook56
Significant Events Occurring
since the End of the Fiscal Year
and Business Outlook