Chrysler 2010 Annual Report Download - page 45

44 REPORT ON
OPERATIONS
MAIN RISKS AND
UNCERTAINTIES
TO WHICH FIAT
S.P.A. AND FIAT
GROUP POST
DEMERGER
ARE EXPOSED
RISKS ASSOCIATED WITH THE POLICY OF TARGETED INDUSTRIAL ALLIANCES
The Group has engaged in the past, and may engage in the future, in significant corporate transactions such
as mergers, acquisitions, joint ventures and restructurings, the success of which is difficult to predict. In
particular, although Fiat Group holds a 25% interest in Chrysler Group LLC and has signed agreements for
the establishment of a global strategic alliance, there can be no assurance that this alliance will function as
intended or produce the expected benefits.
There can be no assurance that Fiat Group post Demerger will succeed in achieving the synergies, cost
savings, expansions in its product offerings or other benefits expected from the strategic alliance with Chrysler
Group LLC or any other transaction.
The failure of any significant strategic alliance, joint venture or other similar transaction could have an adverse
effect on the business prospects, earnings and/or financial position of Fiat Group post Demerger.
RISKS ASSOCIATED WITH RELATIONSHIPS WITH EMPLOYEES AND SUPPLIERS
In many countries where the Group operates, Group employees are protected by various laws and/or collective
labor agreements that guarantee them, through local and national representatives, the right of consultation
on specific matters, including downsizing or closure of production units and reductions in personnel. The
laws and/or collective labor agreements applicable to the Group could impair its flexibility in reshaping and/or
strategically repositioning its business activities. The Group’s ability to reduce personnel or implement other
permanent or temporary redundancy measures is subject to government approvals and the agreement of the
labor unions. Industrial action by employees could have an adverse impact on the Group’s business activities.
Furthermore, the Group purchases raw materials and components from a large number of suppliers and
relies on services and products provided by companies outside the Group. Some of these companies are
highly unionized. Close collaboration between a manufacturer and its suppliers is common in the industries in
which the Group operates and although this offers economic benefits in terms of cost reduction, it also means
that the Group is reliant on its suppliers and is exposed to the possibility that difficulties, including those of a
financial nature, experienced by those suppliers (whether caused by internal or external factors) could have a
material adverse effect on the Group’s business prospects, earnings and/or financial position.
RISKS ASSOCIATED WITH MANAGEMENT
The Group’s success is largely dependent on the ability of its senior executives and other members of
management to effectively manage the Group and individual areas of business. The loss of any senior
executive, manager or other key employee without an adequate replacement or the inability to attract and
retain new, qualified personnel could therefore have an adverse effect on the Group’s business prospects,
earnings and/or financial position.
RISKS ASSOCIATED WITH THE HIGH LEVEL OF COMPETITION IN THE INDUSTRIES IN WHICH
THE GROUP OPERATES
Substantially all of the Group’s revenues are generated in the automobile industry, which is highly competitive
and encompasses the production and distribution of passenger cars and the related components and
production systems. The Group faces competition from other international passenger car and light commercial
vehicle manufacturers and distributors and related components suppliers in Europe and Latin America. These
markets are highly competitive in terms of product quality, innovation, pricing, fuel economy, reliability, safety,
customer service and financial services offered.