Chrysler 2009 Annual Report Download - page 226

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obtaining adequate credit lines; and
monitoring future liquidity on the basis of business planning.
Details as to the repayment structure of the Group’s financial assets and liabilities are provided in the Note 19 Current Receivables and in the Note 27 Debt.
Details of the repayment structure of derivatives financial instruments are provided in Note 21.
Management believes that the funds currently available, in addition to those funds that will be generated from operating and funding activities, will enable
the Group to satisfy its requirements resulting from its investing activities and its working capital needs and to fulfil its obligations to repay its debts at their
natural due date.
Currency risk
The Group is exposed to risk resulting from changes in exchange rates, which can affect its earnings and equity. In particular:
Where a Group company incurs costs in a currency different from that of its revenues, any change in exchange rates can affect the operating profit/(loss)
of that company. In 2009, the total trade flows exposed to currency risk amounted to the equivalent of 12% of the Group’s turnover (14% in 2008). The
principal exchange rates to which the Group is exposed are the following:
EUR/USD, relating to sales in dollars made by Italian companies (in particular Ferrari and Maserati) to the North American market and to other markets
in which the US dollar is the trading currency, and to the production and purchases of the Agricultural and Construction Equipment Sector in the Euro
area;
EUR/GBP, principally in relation to sales by Fiat Group Automobiles and Iveco on the UK market;
EUR/PLN, relating to local costs incurred in Poland regarding products sold in the Euro area;
USD/BRL and EUR/BRL, relating to Brazilian manufacturing operations and the related import and export flows.
The trading flows exposed to changes in these exchange rates amounted in 2009 to about 68% of the total currency risk from trading transactions.
Other significant exposures regard the exchange rates EUR/CHF, EUR/TRY, AUD/USD, GBP/USD, EUR/JPY, CZK/EUR and ARS/USD. None of these
exposures, taken individually, exceeded 5% of the Group’s total transaction exchange risk exposure in 2009. It is the Group’s policy to use derivative
financial instruments to hedge a certain percentage, on average between 55% and 85%, of the trading transaction exchange risk exposure forecast for
the coming 12 months (including such risk beyond that date where it is believed to be appropriate in relation to the characteristics of the business) and to
hedge completely the exposure resulting from firm commitments.
Group companies may find themselves with trade receivables or payables denominated in a currency different from the money of account of the company
itself. In addition, in a limited number of cases, it may be convenient from an economic point of view or it may be required under local market conditions,
for companies to obtain finance or use funds in a currency different from the money of account. Changes in exchange rates may result in exchange gains
or losses arising from these situations. It is the Group’s policy to hedge fully, whenever possible, the exposure resulting from receivables, payables and
securities denominated in foreign currencies different from the company’s money of account.
Certain of the Group’s subsidiaries are located in countries which are not members of the European monetary union, in particular the United States,
Canada, United Kingdom, Switzerland, Czech Republic, Brazil, Poland, Turkey, India, China, Argentina and South Africa. As the Group’s reference
currency is the Euro, the income statements of those countries are converted into Euros using the average exchange rate for the period, and while
revenues and margins are unchanged in local currency, changes in exchange rates may lead to effects on the converted balances of revenues, costs and
the result in Euros.
The assets and liabilities of consolidated companies whose money of account is different from the Euros may acquire converted values in Euros which
differ as a function of the variations in exchange rates. The effects of these changes are recognised directly in the item Gains/(Losses) on exchange
differences on translating foreign operations, included in Equity (see Note 24).
The Group monitors its principal exposure to conversion exchange risk, although there was no specific hedging in this respect at the balance sheet date.
There have been no substantial changes in 2009 in the nature or structure of exposure to currency risk or in the Group’s hedging policies.