Chrysler 2010 Annual Report Download - page 46

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Competition, particularly in pricing, has increased significantly in the Group’s industry sector in recent years.
In addition, partly as a result of the contraction in demand for automobiles, global production capacity for the
car industry significantly exceeds current demand. This overcapacity, combined with high levels of competition
and weakness of major economies, could intensify pricing pressures.
Should the Group be unable to adapt effectively to external market conditions, this could have an adverse
effect on its business prospects, earnings and/or financial position.
RISKS ASSOCIATED WITH THE ACTIVITIES OF FIAT GROUP POST DEMERGER BEING CONCENTRATED
IN THE AUTOMOBILES AND AUTOMOBILE COMPONENTS SECTOR
Pursuant to the Demerger, Fiat S.p.A. transferred its shareholdings in companies operating in the Agricultural
and Construction Equipment, and the Trucks and Commercial Vehicles sectors to Fiat Industrial S.p.A.,
together with the “Industrial & Marine” business line of FPT Powertrain Technologies. Consequently, Fiat
S.p.A.’s principal activities are the automobile and the automobile-related components & production systems
businesses, that include Fiat Group Automobiles, Ferrari, Maserati, Magneti Marelli, Teksid and Comau, in
addition to the “Passenger & Commercial Vehicles” business line of FPT Powertrain Technologies. By contrast
to the profile of Fiat Group prior to 31 December 2010, the future earnings of Fiat Group post Demerger will,
therefore, be determined by the financial performance of those businesses only.
In the Automobiles business, sales to end customers are cyclical and subject to changes in the general
condition of the economy, the readiness of end customers to buy and their ability to obtain financing and
the possible introduction of measures by governments to stimulate demand. The sector is also subject to
constant renewal of the product offering through frequent launches of new models. A negative trend in the
Automobiles business could have a material adverse impact on the business prospects, earnings and/or
financial position of the Fiat Group post Demerger.
RISKS ASSOCIATED WITH SELLING IN INTERNATIONAL MARKETS AND EXPOSURE TO CHANGES
IN LOCAL CONDITIONS
A significant portion of the Group’s existing activities are conducted and located outside of Italy and the Group
expects that revenues from sales outside Italy – and, more generally, outside of the European Union – will
account for an increasing portion of total revenues. The Group is subject to risks inherent to operating globally,
including those related to:
exposure to local economic and political conditions;
import and/or export restrictions;
multiple tax regimes, including regulations relating to transfer pricing and withholding and other taxes on
remittances and other payments to or from subsidiaries;
foreign investment and/or trade restrictions or requirements, foreign exchange controls and restrictions on
repatriation of funds; and/or
the introduction of more stringent laws and regulations.
Unfavorable developments in any one of these areas (which may vary from country to country) could have
a material adverse effect on the Group’s business prospects, earnings and/or financial position.