Chrysler 2011 Annual Report Download - page 45

44
Main Risks and
Uncertainties to
which Fiat S.p.A.
and its Subsidiaries
are Exposed
Report on
Operations
Main Risks and Uncertainties to which
Fiat S.p.A. and its Subsidiaries are
Exposed
Following is a brief description of main risks and uncertainties that could potentially have a significant impact on the
activities of Fiat S.p.A and its subsidiaries, that since June 2011 include Chrysler. Other risks and uncertainties, which are
currently unforeseeable or considered to be unlikely, could also have a significant influence on the operating performance,
financial position and future prospects of Fiat Group.
Risks associated with global financial markets and general economic conditions
The Group’s earnings and financial position may be influenced by various macroeconomic factors – including
increases or decreases in gross domestic product, the level of consumer and business confidence, changes
in interest rates on consumer and business credit, energy prices, the cost of commodities or other raw
materials and the rate of unemployment – within the various countries in which it operates.
For example, the global economic recession in 2008 and the first half of 2009 had a negative impact on the
Group’s earnings. Weak economic conditions resulted in a significant decline in demand for most of the
Group’s products. The current economic weakness in the eurozone, including Italy, cast serious uncertainty
on the possible evolution of the economic activity in this region in the foreseeable future. In Europe, despite
the measures taken by several governments, international and supranational organizations and monetary
authorities to provide financial assistance to euro area member states of the European Union in economic
difficulty and to face the possibility of default by certain European countries on their sovereign debt obligations,
concerns persist regarding the debt burden of certain eurozone countries and their ability to meet future
financial obligations, the overall stability of the euro and the suitability of the euro as a single currency (or, in
more extreme circumstances, the possible dissolution of the euro entirely), given the diverse economic and
political circumstances in individual member states of the eurozone. These potential developments could
adversely affect the businesses and operations of the Group.
Following the acquisition of control of Chrysler in 2011, nearly 45% of Group’s on-going revenues are
generated in the NAFTA region. Substantially all of Chrysler’s vehicles sales occur in North America (U.S. and
Canada). Although Chrysler is seeking to increase the proportion of its vehicle sales outside of North America
(directly or through Fiat), it anticipates that its results of operations will continue to depend substantially on
vehicle sales in the principal North American markets, particularly the U.S. Any significant deterioration in the
economic conditions in the U.S. and/or Canada may consequently adversely affect Fiat Group’s result of
operations, financial position and cash flows.
In general, the sector in which the Group operates have historically been subject to highly cyclical demand
and tend to reflect the overall performance of the economy, in certain cases even amplifying the effects of