Chrysler 2004 Annual Report Download - page 9

7
Overview
We successfully tackled the issue of our relationship with
General Motors. As I am sure you are aware, we faced difficult
negotiations, since we started from positions that were far apart
and had to resolve many financial and industrial problems
related to the alliance between our two companies.
Our position has always been that the put option had a
monetary value. The outcome of the negotiations proved that
we were right, and Fiat’s rights were recognized. We were able
to terminate the Master Agreement and dissolve the joint
ventures. More importantly, we regained the freedom to
develop new growth strategies for our Automobile operations.
* * *
Fiat Auto made significant progress in 2004, slashing its
operating loss by more then 20%, but it still has a lot of work
to do before it can regain its full strength.
This is the main issue that we face. Accordingly, the Group
must concentrate its efforts on the Automobile Sector in order
to accelerate the process of change that Fiat Auto is already
pursuing. For this reason, in February 2005, the Chief Executive
Officer of Fiat SpA took on the CEO job at Fiat Auto as well.
The time has come to focus on the key aspects of the car-
making business: products, sales network and customer service.
With this in mind, in 2005 Fiat Auto will improve its sales
network, continue to cut nonessential costs, increase
manufacturing efficiency and work to reposition its brands and
strengthen their identity.
Our efforts in pursuit of these objectives will be aided by
the introduction of four new models and the creation of an Alfa
Romeo-Maserati sports car unit, which will help create
synergies that will benefit both brands. In addition, we will
be able to rely on stronger and steadier leadership.
We can expect no help from the market, as demand will
show little or no improvement. Nevertheless, Fiat Auto will
significantly reduce its operating loss, compared with a ratio
of 4.1% on revenues in 2004.
The other Sectors, all of which performed better than
anticipated in 2004, are expected to make further progress
in 2005. More specifically, CNH should report gains both in
revenues and profits, while Iveco, which will be faced with flat
market demand, should be able to slightly increase its revenues
and further expand its profit margins.
As a Group, we will focus on areas that can be leveraged
to bring improvements. They include product renewal for all
Sectors and R&D programs. In 2004, the Group had already
invested about 4% of net revenues in research and
development.
A move in this direction was the establishment of Fiat
Powertrain Technologies, a new industrial unit that will integrate
all of the Group innovation capabilities and expertise in the
area of engines and transmissions.
We will also continue to devote the utmost attention to the
development of our people, the Company’s most important
asset, and we will seek to establish a direct and transparent
relationship between Fiat and civil society.
An example of this commitment is the release of the Fiat
Group’s first Sustainability Report, which is being published
together with the 2004 Annual Report. The Sustainability Report
provides all stakeholders with the tools they need to evaluate
the performance of our business operations in 2004, not only
in terms of their operating results, but also with respect to their
environmental and social impact.
In 2004, the consolidated financial statements have been
prepared in accordance with Italian accounting principles for
the last time. Starting with the first quarter of 2005, these
principles will be replaced by IAS/IFRS standards. The 2004
Report also contains a summary of the main differences
between the accounting principles which will have an impact
in preparing the Group Consolidated Financial Statements.
* * *
We still have a great deal of work ahead before the Group
can fully regain its forward momentum. Therefore, we must
accelerate change as much as possible. Management’s task
is to pursue this objective by pushing for effective execution
and demanding quick achievement of the desired results.
We have the necessary financial and human resources.
Thanks to the agreement with General Motors, we have also
regained the strategic freedom that we need. We can now
become a competitive automotive Group again, and we will
make a decisive step in this direction in 2005. In the months
ahead, we will continue to work on restoring the Company’s
health, and we expect to deliver a further improvement in
operating income and achieve a positive bottom line, owing
to the contribution of nonrecurring items.
Turin, March 24, 2005
Luca Cordero di Montezemolo
Chairman
Sergio Marchionne
Chief Executive Officer