Chrysler 2009 Annual Report Download - page 43

REPORT ON
OPERATIONS
MAIN RISKS AND
UNCERTAINTIES
TO WHICH FIAT
S.P.A. AND
THE GROUP
ARE EXPOSED
42
MAIN RISKS AND UNCERTAINTIES
TO WHICH FIAT S.P.A.
AND THE GROUP ARE EXPOSED
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 credit, the cost of raw materials and the rate of unemployment -
which exist in the various countries in which it operates. During 2008, the global economy entered into a period of recession which continued to impact
heavily on the first half of 2009. Conditions eased in the second half of the year, due in part to significant measures put in place by major governments and
monetary authorities. The significant weakness in general economic conditions resulted in a sharp contraction in demand in the first half of 2009 in the
sectors and markets in which the Group operates compared with the prior year’s levels. This fall in volumes eased in the second half of the year, and the
automobiles business experienced a reversal in the trend, which was aided by government intervention to stimulate demand.
However, despite measures put in place by governments and monetary authorities, or as a consequence of changes in such measures which reduce
or eliminate their beneficial effects, should the current global economic weakness and consequent impact on demand for the Group’s products - and
for the automobile sector in particular - continue in the future, the activities, strategy and future prospects of the Group could be adversely affected with
consequent negative impacts on the Group’s earnings and financial position.
Additionally, even in the absence of an economic recession or deterioration of credit markets, any macro-economic event - such as increases in energy
prices, fluctuations in the price of commodities or other raw materials, adverse shifts in specific factors such as interest and currency rates, changes in
government policy (including environmental regulation), outbreak of an epidemic or a contraction in infrastructure spending - 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. Similar risks exist by virtue of the fact that the Fiat Group operates in industries which have historically been highly
cyclical and which tend to reflect the general performance of the economy, in certain cases even amplifying the effect.
RISKS ASSOCIATED WITH FINANCING REQUIREMENTS
The Fiat Group’s future performance will depend on, among other things, its ability to meet funding requirements related to debt repayments and planned
investments with operating cash flow, available liquidity, renewal or refinancing of existing bank loans and/or facilities and possible recourse to capital
markets or other sources of financing.
Although the Group has measures in place to ensure that adequate levels of working capital and liquidity are maintained, further declines in sales volumes
could have a negative impact on the cash-generating capacity of operating activities. The Group could, therefore, find itself in the position of needing
to seek additional financing and/or refinance existing debt, including in unfavourable market conditions with limited availability of funding and a general
increase in funding costs. Difficulty obtaining financing could have a material adverse effect on the Group’s activities and future prospects, as well as its
earnings and financial position.