Chrysler 2013 Annual Report Download - page 37

36 Report on Operations Main Risks and Uncertainties to which Fiat S.p.A.
and its Subsidiaries are Exposed
supply capacity limitations, or trade regulation. These external factors may make it more difficult to reduce costs as planned, and the Group
may sustain larger than expected production expenses, materially affecting its business and results of operations. Furthermore, reducing costs
may prove difficult due to the need to introduce new and improved products in order to meet consumer expectations.
15. Product recalls may result in direct costs and loss of vehicle sales that could have material adverse effects on Group’s
business
From time to time, the Group has been required to recall vehicles to address performance, compliance or safety-related issues. The costs
the Group incurs to recall vehicles typically include the cost of replacement parts and labor to remove and replace the problem parts, and
may substantially depend on the nature of the remedy and the number of vehicles affected. Product recalls may also harm the Group’s
reputation and may cause consumers to question the safety or reliability of its products. Any costs incurred, or lost vehicle sales, resulting from
product recalls could materially adversely affect the Group’s financial condition or results of operations. Moreover, if the Group faces consumer
complaints, or receives information from vehicle rating services that calls into question the safety or reliability of one of its vehicles and the
Group does not issue a recall, or if the Group does not do so on a timely basis, its reputation may also be harmed and the Group may lose
future vehicle sales.
16. Failure to maintain adequate financial and management processes and controls could lead to errors in the financial reporting,
which could harm the Group’s business reputation
The Group continuously monitors and evaluates changes in its internal controls over financial reporting. In support of a drive toward common
global systems, the Group is extending the current finance, procurement, and capital project and investment management systems to
new areas of operations. As appropriate, the Group continues to modify the design and documentation of internal control processes and
procedures relating to the new systems to simplify and automate many of its previous processes. The Group’s management believes that the
implementation of this system will continue to improve and enhance internal controls over financial reporting. Failure to maintain adequate
financial and management processes and controls could lead to errors in the Group’s financial reporting.
17. The Group is subject to risks relating to international markets and exposure to changes in local conditions
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 the repatriation of funds. In
particular, current regulations limit the Group ability to access and transfer liquidity out of Venezuela to meet demands in other countries
and also subject the Group to increased risk of devaluation or other foreign exchange losses. In December 2010 and February 2013, the
Venezuelan government announced devaluations of the official Venezuelan Bolivar (VEF)-USD exchange rate, which resulted in devaluation
of the Group VEF denominated balances; 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 financial condition and results of operations.