Chrysler 2008 Annual Report Download - page 22

Risks associated with general economic conditions
The Group’s earnings and financial position are influenced by
various macro-economic factors – including increases or
decreases in gross national product, the level of consumer and
business confidence, changes in interest rates on consumer
loans, the cost of raw materials and the rate of unemployment
– existing in the various countries in which it operates. During
2008, and particularly in the last quarter, the financial markets
were affected by high levels of volatility with significant
impacts on many financial institutions and, more generally, on
the overall performance of the economy. The significant and
widespread deterioration of trading conditions has been
compounded by a severe tightening of credit in all major
markets, both at the consumer and corporate level, and has
begun to create a shortage of liquidity which will ultimately
impact the industrial development of most businesses,
including and especially those of the Group.
A weakening in the general condition of the economy and in
the industries in which the Group operates combined with a
progressive deterioration of financial markets and a
contraction in consumers’ available income have driven,
particularly since the third quarter of 2008, a significant decline
in demand in the Group’s key markets.
There can be no certainty that measures taken by governments
and financial authorities in response to this situation will
succeed in re-establishing the conditions necessary to
overcome this situation in a reasonable time. Therefore,
uncertainty remains as to the period of time necessary to
restore normal trading conditions and many countries are
aware that their economies could undergo a severe and
protracted recession.
Should the current weakness and uncertainty continue for a
sufficiently long period, the Group’s business, strategy and
future prospects could be negatively affected with consequent
negative impacts on its earnings and financial position.
Risks associated with the Group’s results
The Fiat Group principally operates in industries which have
historically been highly cyclical, such as the manufacture and
distribution of automobiles, agricultural and construction
equipment and commercial vehicles, in addition to
components for those products. The Fiat Group also provides
financial services, primarily through joint ventures with leading
international banking groups.
It should also be noted that it is difficult to predict the
magnitude and duration of the various economic cycles and
the cyclical nature of those industries in which the Fiat Group
operates tends to reflect the general performance of the
economy and, in certain cases, even amplifying the effect.
Therefore, any macro-economic event - such as a significant
downturn in a key market, volatility in financial markets and
the consequent deterioration of capital markets, increases in
energy prices, fluctuations in the price of commodities or other
raw materials, adverse shifts in sector-specific factors such as
interest and currency rates, government policies (including
environmental regulation), potentially having negative
consequences for the industries in which the Group operates -
could have a material adverse effect on the Group’s activities
and future prospects, as well as its earnings and financial
position. The profitability of the Group’s activities also involves
risks relating to changes in interest and inflation rates and the
creditworthiness of counterparties, as well as general
economic conditions in countries where it conducts those
activities.
Risks associated with financing requirements
Changes in the Group’s financial position are dependent on
numerous factors, including, in particular, the achievement of
targets established as well as the general condition of the
economy, the financial markets and the industries in which the
Group operates that, moreover, require significant levels of
investment. The Fiat Group expects to be able to meet funding
Report on Operations Main Risks and Uncertainties to which Fiat S.p.A. and the Group are exposed 21
Main Risks and Uncertainties
to which Fiat S.p.A. and the Group
are exposed