Chrysler 2013 Annual Report Download - page 40

39
Report on
Operations
24. The Group is subject to risks associated with exchange rate fluctuations, interest rate changes, credit risk and other
market risks
The Group operates in numerous markets worldwide and is exposed to market risks stemming from fluctuations in currency and interest
rates. The exposure to currency risk is mainly linked to the differences in geographic distribution of the Group’s manufacturing activities and
commercial activities, resulting in cash flows from sales being denominated in currencies different from those connected to purchases or
production activities.
The Group uses various forms of financing to cover funding requirements for its industrial activities and for financing customers and dealers.
Moreover, liquidity for industrial activities is also principally invested in variable-rate or short-term financial instruments. The Group’s financial
services businesses normally operate a matching policy to offset the impact of differences in rates of interest on the financed portfolio and
related liabilities. Nevertheless, changes in interest rates can affect revenues, finance costs and margins.
The Group seeks to manage risks associated with fluctuations in currency and interest rates through financial hedging instruments. Despite
such hedges being in place, fluctuations in currency or interest rates could have a material adverse effect on the Group’s financial condition
and results of operations.
The Group’s financial services activities are also subject to the risk of insolvency of dealers and end-customers, as well as unfavorable economic
conditions in markets where these activities are carried out. Despite the Group’s efforts to mitigate such risks through the credit approval
policies applied to dealers and end-customers, there can be no assurances that the Group will be able to successfully mitigate such risks,
particularly with respect to a general change in economic conditions.
25. The Group’s success largely depends on the ability of its current management team to operate and manage effectively
The Group’s success largely depends on the ability of its senior executives and other members of management to effectively manage the Group
and individual areas of the business. The loss of any senior executive, manager or other key employees without an adequate replacement or
the inability to attract, retain and incentivize senior executive managers, other key employees or new qualified personnel could therefore have
a material adverse effect on the Group’s business prospects, earnings and financial position.
26. The Group has significant outstanding indebtedness, which may limit its ability to obtain additional funding and limit its
financial and operating flexibility
The extent of the Group’s indebtedness could have important consequences on its operations and financial results, including:
the Group may not be able to secure additional funds for working capital, capital expenditures, debt service requirements or general
corporate purposes;
the Group may need to use a portion of its projected future cash flow from operations to pay principal and interest on its indebtedness, which
may reduce the amount of funds available to the Group for other purposes;
the Group may be more financially leveraged than some of its competitors, which could put it at a competitive disadvantage; and
the Group may not be able to adjust rapidly to changing market conditions, which may make it more vulnerable to a downturn in general
economic conditions or its business.
These risks may be exacerbated by volatility in the financial markets, particularly those resulting from perceived strains on the finances and
creditworthiness of several governments and financial institutions, particularly in the Eurozone.