Chrysler 2006 Annual Report Download - page 5

Letter from the Chairman and the Chief Executive Officer 7Letter from the Chairman and the Chief Executive Officer6
2006 has been an important year for the Fiat Group. It marked
the end of the turnaround phase and the beginning of a new,
exciting phase of growth. The plan implemented over the past
three years has made a clean break with the past. Fiat’s
management structure has been reshaped and strengthened,
with the creation of lean, efficient and agile organizations in
all of our businesses. Special attention has been given to
strengthening our brands’ market positioning and proximity
to the client. All of this was combined with significant efforts
directed at rationalizing processes and achieving higher levels
of efficiency in all Group business areas.
We have laid the basis for building the Group’s future in
industrial, financial and commercial terms.
The first significant breakthrough was made in 2005, with
the Group posting a net profit for the first time since 2001.
The improvements continued throughout 2006, with the Auto
Sector reporting its first full-year trading profit since 2000.
The other Sectors, especially Iveco and CNH, also generated
a good level of top line growth and significant margin
expansion.
The Group’s results in 2006 will allow us to distribute a
dividend to our stockholders for the first time in five years.
Restructuring efforts were accompanied by major new and
upgrading product program in every area of activity.In the
Auto Sector alone, this has meant rolling out 22 new models
and restylings in just two years, which has enabled us to gain
significant market share both in Italy and in major European
countries.
Our future also sees Fiat as a much more international group,
and significant steps in this direction were taken as evidenced
by the number of international agreements reached during the
year.
The Automobiles Sector focused on reinforcing its presence
in two high-growth markets, Russia and India, by entering into
commercial and industrial agreements with Severstal Auto and
Tata Motors. Iveco significantly accelerated its growth
strategy in China by reaching agreements with SAIC,
Chongqing Heavy Vehicle Group, and Nanjing Motor Company.
At the financial level, the Group steadily reduced its net
industrial debt, which fell below 1.8 billion euros at the
end of 2006 due to a strong industrial cash flow generation.
The Group’s cash position remains high, at almost 8 billion
euros at December 31, 2006.
All of these factors have contributed to restoring confidence
in Fiat.
This is confirmed by the improvement in its debt ratings, its
ability to attract a large number of institutional international
investors when it issues debt securities, and its steadily rising
stock market price.
The results we present on these pages are the fruit of an intense
and rigorous commitment. But more than anything else, they
reflect the new mentality prevailing at Fiat today, at all levels
and in every area of activity.
Delivering on our promises is a key value for us. We
demonstrated this by achieving and, in many cases, exceeding
all the targets proposed to the markets three years ago.
Promoting on the basis of merit, making individuals
accountable, and giving them a wide margin of operating
freedom are some of the key drivers that are beginning to bring
about a significant, structural cultural change in the company.
Embracing and cherishing competition and looking at the future
as an opportunity to be seized and exploited has become our
philosophy.
These changes were made possible as a result of a
redefinition of the concept of leadership and its significance
in the management of our businesses, which has enabled Fiat to
reinforce its market positions, greatly accelerate product
development timeframes and make a leap in quality.
The men and women who now work in our Group – and who
have done a hard job these years to restore the pride and
credibility of Fiat – are the best guarantee for the future
of our company.
Letter from the Chairman
and the Chief Executive Officer
We want to express our most sincere thanks to all of them
for the results achieved.
The plan marked out for the next four years is even more
ambitious and challenging. It is a plan geared towards growth.
Improved operating performance across all businesses,
accompanied by significant investments, and growing
profitability in every business area will consolidate Fiat’s
position as a major international industrial group.
Here again, the targets set for each of the years up to 2010
are clear and rigorous.
In 2007, these targets envisage that the Group turn a trading
profit of between 2.5 and 2.7 billion euros and realize net
income of between 1.6 and 1.8 billion euros.
The trading margin target for the Automobiles Business Area,
which faces the challenge of a fairly stable market in Europe
and a slowly expanding one in Brazil, has been set at 2.6-3.4%.
This is almost double the figure for 2006. That result will be
supported by the start of sales of new models, especially Fiat
Bravo, Fiat Linea, and Fiat 500, and actions to streamline
governance costs.
For the other principal activities, the aim is to realize
significant trading margins: 9+% for CNH and 7+% for Iveco.
We are committed to building a great Company.
This is why we will keep the pressure up and continue to
demand maximum effort from all the men and women at Fiat.
We will continue to cut costs in non-essential areas.
We will flank our continuously developing technologies with an
improved commercial organization and more efficient services.
Wewill continue investing in product and process innovation,
devoting special attention to quality standards.
We will be ready to seize any positive opportunities that
should arise to stimulate our growth even more, through
targeted cooperation with significant partners.
The Fiat of today has the will, capacity, and solid foundation
for setting out on a significant path of development, while
holding on firmly to those values of honesty, integrity, and
accountability that have sustained us thus far.
This is our commitment and, at the same time, our new
promise.
Turin, February 20, 2007
Luca Cordero di Montezemolo
Chairman
Sergio Marchionne
Chief Executive Officer