Chrysler 2008 Annual Report Download - page 317

The Group has adopted a series of policies and procedures whose purpose is to optimise the management of financial resources
and to reduce liquidity risk by:
centralising the management of collections and payments, where it may be economical in the context of the local civil, currency
and tax regulations of the countries in which the Group is present;
maintaining an adequate level of available liquidity;
diversifying the sources of funding and maintaining a continuous and active presence in the capital markets;
obtaining adequate credit lines; and
monitoring future liquidity based on business planning.
Management believes that the funding currently available, in addition to those funds that will be generated from operating and
funding activities, will enable the Group to satisfy the requirements of its investing activities and its working capital needs and to
fulfil its obligations to repay its debts at their maturity date.
Currency risk
At 31 December 2008, Fiat S.p.A. had no significant amounts receivable or payable or derivative financial instruments exposed to
currency risk.
Interest rate risk
Fiat S.p.A. satisfies its financial requirements through the Group’s centralised treasury management system.
In particular:
Non-current financial payables consist of fixed rate loans granted by Fiat Finance S.p.A. (as discussed in Note 21). The change in
the fair value of these loans resulting from a hypothetical, instantaneous and unfavourable change of 10% in market interest rates
would have been approximately €18 million (€58 million at 31 December 2007);
Current financial payables consist mainly of liabilities for advances received on the sale of receivables to banks and amounts
payable to Group companies (as discussed in Note 25). The cost of these items has been affected by changes in short-term interest
rates. For short-term or variable rate transactions, a hypothetical, immediate and adverse change of 10% in short-term interest
rates would have led to an increase in pre-tax net financial expense of approximately €2 million for the year (€3 million in 2007,
when the Company essentially had a net cash position).
Other risks relating to derivative financial instruments
As discussed in Note 8, Fiat S.p.A. holds certain derivative financial instruments whose value is linked to the trends in the price of
listed shares (equity swaps on Fiat shares). Although these transactions were entered into for hedging purposes, they do not
always qualify for hedge accounting under IFRS. As a result, fluctuations in their value could affect the company’s results. The
potential loss in fair value of derivative financial instruments held by the company at 31 December 2008, linked to changes in the
price of listed shares, which would arise in the case of a hypothetical, instantaneous and unfavourable change of 10% in the
underlying values, amounts to approximately €9 million (€37 million at 31 December 2007). The difference over the previous year is
attributable to the simulation being based on a different share price.
Fiat S.p.A. Statutory Financial Statements at 31 December 2008316