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The Fiat Group
closes the year ahead of guidance, with 52 billion in
revenues, up more than 11% on 2005, and trading profit of
2 billion, double last years level, with all major sectors
posting year-over-year improvements. Net income reached
1.2 billion and provides the basis for the Boards
recommendation to pay 276 million aggregate dividends
across all share classes (first time since 2002). On a
comparable basis, net income was 1.4 billion higher than
2005. Net industrial debt at year-end was below 1.8
billion. Liquidity remained strong with nearly 8 billion
on hand. 2007 targets confirmed.
The Board of Directors of Fiat S.p.A. met today in Turin
under the chairmanship of Luca Cordero di Montezemolo to
approve the consolidated results of the Group for the fourth
quarter and full year 2006.
Group revenues of 51.8 billion rose 11.4%, driven in
the main by Fiat Auto which increased its top line 21.3% to
23.7 billion, and a 7.7% rise in sales of the truck sector
(Iveco) to 9.1 billion.
Continued success of recent models enabled Fiat Auto to
meet its full year 2 million unit volume target, its highest
sales level since 2001.
Agricultural and construction equipment (CNH) revenues
were up 3.1% (2.4% on a comparable currency basis).
Sales also grew in our Components & Production Systems
businesses: Fiat Powertrain Technologies up 11.0% (on a
comparable basis) and Magneti Marelli up 10.5%. Comau was
down by 18.6% on weak industry demand.
Trading profit at 1,951 million was nearly twice last
years level.
For the first time since 2000, Fiat Auto achieved a
positive full year trading result of 291 million (up 572
million on year 2005) ahead of its initial target of 200
million with
all quarters in the year positive
and ex-Brazil operations showing positive results in the
fourth quarter.
CNH trading profit was up at 737 million, 5.6% higher
than 2005, with trading margins of 7%.
Iveco trading profit rose 64% to 546 million (6% of
revenues) at the upper end of 2006 target levels.
Net income totalled 1,151 million, 1,041 million
excluding unusual items. Gains on disposals were partially
offset by unusual charges mainly related to restructuring at
CNH and Comau.
Net industrial debt came down to below 1.8 billion, on
the back of strong industrial cash flow generation.
Group signed 13 focused industrial and financial services
agreements with international partners.
An aggregate dividend distribution of 276 million will
be proposed to shareholders, including a cumulative 3 year
dividend on savings shares.
2007 targets are confirmed.
The Group
Fiat Group recorded revenues of 51.8 billion in 2006, up
11.4% from 2005. The improvement was largely attributable to
Fiat Auto and Iveco. Revenues in the Automobiles business
area rose by 20.2% to 25.6 billion, driven by higher sales
volumes at Fiat Auto, whose revenues rose by 21.3% to 23.7
billion. Ferrari revenues also increased by 12.3%. Iveco had
revenues of 9.1 billion, up 7.7% on higher volumes and
better pricing. CNH reported a 3.1% increase in revenues
(2.4% excluding the foreign exchange translation impact) to
10.5 billion. Higher volumes in construction equipment and
better pricing were partially offset by the decrease in
volume of agricultural equipment. Revenues at the Components
& Production Systems business area1 amounted to 12.4
billion in 2006, up 8.0% on a comparable scope of
operations. Revenues rose at Fiat
Powertrain Technologies (+11.0% on a comparable basis) and
Magneti Marelli (+10.5%). Teksid reported a 5.5% drop in
revenues due to the sale of part of our French operations
(+3.5% on a comparable basis). Comau revenues were down
18.6% reflecting a severe slowdown in industry-wide demand
for its services.
Q4 2006 revenues totalled 13.9 billion, up 5.5% from
13.1 billion in Q4 2005. In 2006 Trading profit amounted to
1,951 million (3.8% of revenues), nearly doubling the
1,000 million level recorded in 2005 (2.1% of revenues).
Significant improvements were achieved in the Automobiles
business area, particularly at Fiat Auto, which reported a
full year trading profit of 291 million, against a trading
loss of 281 million in 2005, and by Iveco, whose trading
profit rose from 332 million to 546 million. CNH posted
a 5.6% increase in trading profit, from 698 million to
737 million (excluding the difference in the one-time impact
from a reduction in health-care costs, the year-over-year
improvement would have been 97 million or 15.8%). The
Components & Production Systems business area reported
slightly lower trading profit ( 348 million versus 358
million in 2005) reflecting a sharp drop at Comau, currently
in a restructuring process, only partly offset by
improvements at Magneti Marelli, Fiat Powertrain
Technologies and Teksid. Excluding Comau, trading profit of
the Components & Production Systems business area increased
by 98 million, delivering a trading margin of 3.7%.
In Q4 2006, Group trading profit was 542 million, a 181
million or 50% improvement over Q4 2005. Operating income
for the year totalled 2,061 million, compared with 2,215
million in 2005. The 154 million decrease reflects higher
trading profit of 951 million and lower net unusual income
of 1,105 million (2005: 1,215 million, 2006: 110
million). In 2006 gains on disposals of investments were
607 million (mainly due to the Fiat Auto Financial Services
transaction, 463 million, and the sale of Banca Unione di
Credito, 80 million), while restructuring costs amounted
to 450 million (mainly relating to CNH and Comau) and
other unusual charges to 47 million. In 2005 unusual gains
were 2 billion (mostly due to 1.1 billion from the
General Motors settlement and gain of 878 million on the
sale of the investment in Italenergia Bis), while
restructuring charges and other unusual costs amounted to
824 million. Net financial expenses totalled 576 million
in 2006, down from 843 million in 2005. The decrease was
primarily attributable to a reduction in net industrial debt
mainly related to the conversion of the Mandatory
Convertible Facility, the completion of the Italenergia Bis
transaction in September 2005 , and positive industrial cash
flow.
Investment income was 156 million in 2006 as compared with
34 million in 2005 when the Group re-valued some of its
equity investments in China. Income before taxes totalled
1,641 million in 2006, compared with 2,264 million in
2005. Net of changes in unusual items (including the 858
million unusual financial income on the conversion of the
Mandatory Convertible Facility), income before taxes
improved by 1,340 million in 2006. Income taxes amounted
to 490 million in 2006 compared with 844 million in 2005
which included the taxes related to receipt of the GM
indemnity and 119 million in connection with prior years.
Net income before minority interest for the year was 1,151
million, compared with a 1,420 million in 2005. Excluding
the impact of net unusual items, the Group would have posted
a net loss of 376 million in 2005 and a net income of
1,041 million in 2006. Therefore, on a like for like basis,
net income improved by 1,417 million. Net industrial debt
decreased during the year by approximately 1.4 billion to
1.8 billion, reflecting positive business performance and
notwithstanding the re-acquisition of a 28.6% stake in
Ferrari for 893 million.
The ratio of net industrial debt
to equity at the end of 2006 was 0.18 (0.34 at the end of
2005). The Groups cash position at December 31, 2006 was
approximately 8.0 billion, ( 7.0 billion at the end of
2005) largely impacted by the over 3 billion deriving from
the closing of the joint venture between Fiat Auto and
Crιdit Agricole at the end of December 2006, partly offset
by the utilization of cash to reduce gross debt during the
year. The Group generated net industrial cash flow (change
in net industrial debt excluding capital contributions,
dividends paid and foreign exchange translation differences)
of approximately 1.4 billion, reflecting positive business
performance. Stockholders equity before minority interest
was 10.0 billion compared with 9.4 billion at December
31, 2005. In 2006, Fiat Groups industrial operations
capital expenditures (including capitalized development
costs) amounted approximately to 2.9 billion, a 0.2
billion increase against the prior year. In addition, the
Group expensed approximately 1.4 billion in research and
development costs, in line with 2005.
Dividends
On the basis of the Groups 2006 consolidated results and
our estimates of income available for distribution for Fiat
S.p.A., the Board of Directors intends to propose to the
Annual Shareholders Meeting the payment of a dividend for
approximately 276 million. The amount of such distribution
is in line with the announced dividend policy whereby in
2007-2010 the Group intends to distribute to its
shareholders approximately 25% of the Group consolidated net
income. The proposed dividend distribution will be as
follows:
0.155 per ordinary share, representing a total
distribution of approximately 169 million;
0.31 per preferred share, representing a total
distribution of approximately 32 million;
0.93 per saving share, representing a total distribution
of approximately 74 million, which includes the dividend
pertaining to 2006, equal to 0.31, and cumulative
dividends for the two preceding years, 2005 and 2004, as
required by the Companys By-laws.
This proposal is subject to the approval of the Fiat S.p.A.
2006 statutory unconsolidated financial statements, which
will be finalized by the Board on February 20, 2007.
Automobiles
As a result of the sharp rise in volumes in 2006, the
Automobiles business area achieved an increase in revenues
of 20.2% to 25.6 billion. In particular Fiat Auto (Fiat,
Alfa Romeo, Lancia and Fiat Light Commercial Vehicles) had
revenues of 23.7 billion, up 21.3% over 2005.
The growing success of new models had a positive impact on
trading performance throughout the year. In 2006, Fiats new
product portfolio of the Grande Punto and Panda was joined
by the Sedici and the new versions of the Panda, the Cross
and the 100 HP. Alfa Romeo introduced the 159 Sportwagon,
Brera, and Spider, followed in November by the Q2 versions
of the 147 and GT. Lancia introduced the Centenary versions
of Ypsilon and Thesis, followed in September by the New
Ypsilon.
Fiat Auto overall deliveries rose by approximately 280,000
units, to nearly 2 million units (1,980,300 units, cars and
commercial vehicles), an increase of 16.7% from 2005,
outperforming the overall automobile markets in which it
competes. Fiat Autos market shares also improved to 30.7%
in Italy (+2.7 percentage points) and to 7.6% in Western
Europe (+1.1 percentage point), where it posted the best
performance of the last four years. In Western Europe, with
a relatively flat demand, Fiat Auto deliveries increased by
17.2% (1,289,600 units delivered), posting the highest
growth rate among the leading car manufacturers. In Italy,
Fiat Auto deliveries rose by 17.5%, four times higher than
the growth in market demand (+3.7%). Volumes grew
significantly in all key European countries: +42.8% in Great
Britain and +10.9% in France, despite the market contraction
(Great Britain -4%, France -3%); +21.3% in Germany, five
times higher than the rise in demand (+4%). In Spain Fiat
Auto reported a slight decline (-1%), in line with market
performance. In Brazil, where market demand expanded by
13.1%, Fiat Auto deliveries rose by 15.0%, achieving a
market share of 25.3% (+0.9 percentage point). In Poland,
where demand remained weak, deliveries dropped by 2.3%,
while the Sectors market share remained substantially
unchanged from 2005, at 10.3%.
The performance of commercial vehicles also improved during
the year. This improvement was mainly attributable to the
highly acclaimed new Ducato, launched in late May 2006, and
the new Doblς. The success of the commercial vehicles range
should also benefit from the January 2007 launch of the new
Scudo, presented in November. A total of 323,500 commercial
vehicles were delivered (+13.4%), generating a significant
improvement for the Sectors market share in Italy, which
rose to 47.1% (+4.7 percentage points), and in Europe.
In 2006 Fiat Auto had a trading profit of 291 million
(1.2% of revenues), a sharp improvement from the loss of
281 million of 2005. The change is mainly attributable to
higher volume, a more favourable product mix due to the new
models, lower product costs thanks to purchasing
efficiencies, continuous containment of governance costs,
despite higher investments in marketing and network
development.
In Q4 2006 Fiat Auto had revenues of 6.4 billion, up 15%
over Q4 2005. Trading profit came in at 95 million, an
improvement of 74 million from Q4 2005. The increase in
deliveries (+11.3%) from Q4 2005 reflects the positive
impact of the new models launched. In Western Europe Fiat
Auto volumes rose by 4.2% and its market share grew to 7.6%
(+0.8 percentage point). Positive performances were reported
in all European countries, except for Spain. In Italy, Fiat
Auto achieved a market share of 30.9% (+1.9 percentage
point).
In 2006 Maserati had revenues of 519 million, with 5,734
units delivered to the sales network. Sales volumes
increased by 3% on a year-over-year basis, while revenues
decreased by 2.6% from 2005, which had benefited from the
success of the special MC12 series. The trading loss of
Maserati was 33 million, a sharp improvement (up 52
million) from the trading loss of 85 million in 2005, due
to efficiency gains. Maseratis revenues in Q4 2006 were
144 million, up 17.1% from Q4 2005. Trading loss was 1
million, an improvement from the 22 million trading loss
of Q4 2005. Sales of the new versions of the Quattroporte
Sport GT, GranSport MC Victory and GranSport Spider began in
2006, and new outlets were opened in China, Russia,
Australia and Sweden.
Ferrari posted revenues of 1,447 million in 2006. The
12.3% increase from 2005 is largely attributable to the
success of the F430 and 599 GTB models. Revenues were also
boosted by sales in the Middle East and Far East markets.
Deliveries of homologated cars to the sale network during
the year totalled 5,650 units, up 5% from 2005, while not
homologated cars amounted to 188 units. Ferrari closed 2006
with a trading profit of 183 million, up from a profit of
157 million in 2005. The improvement reflected higher
sales volumes and efficiency gains, which were partially
offset by higher research and development expenses. During
the year, Ferrari introduced the 599 GTB, equipped with the
most innovative and technologically advanced content applied
by Ferrari to a two-seater, front engine car. In Q4 2006
Ferrari had revenues of 409 million, up 7.1% over Q4 2005
as a result of an improved product mix. Trading profit
totalled 81 million versus 83 million in Q4 2005, due to
a favourable product mix offset by higher research and
development expenses.
Agricultural and Construction Equipment
In 2006 CNH Case New Holland had revenues of 10.5
billion, an increase of 3.1% over 2005 (2.4% on a comparable
currency basis). Better pricing and higher volumes for
construction equipment were partly offset by a decrease in
deliveries of major agricultural equipment. In 2006, the
world agricultural equipment market expanded 9%, with
contrasting trends across regions: volumes Latin and North
American dropped slightly, while they were up slightly in
Western Europe and significantly in other markets (ROW). CNH
tractor shipments were down in North America and Rest of
World, flat in Western Europe, and up in Latin America.
Combine harvester volumes were down in all markets except
ROW The global construction equipment market expanded by 11%
from 2005, with growth in all markets except North America
which was stable. CNH unit shipments were up 3.4%, in all
markets except North America.
CNH trading profit for the year was 737 million, 39
million higher than the trading profit of 698 million
reported for 2005. Net of one time healthcare renegotiation
benefits ( 25 million in 2006 and 83 million in 2005) the
trading profit of CNH would have increased by 97 million
due to improvements in construction equipment volumes,
better pricing and production cost efficiency gains,
partially offset by reductions in volume of agricultural
equipment. CNH revenues in the fourth quarter of 2006
amounted to 2,547 million, a decrease of 1.4% from the
fourth quarter of last year (+2.3% on a currency equivalent
basis). Better pricing was partly offset by volume decreases
in tractors and combines and unfavourable mix for
agricultural and construction equipment segments. CNH closed
the fourth quarter of 2006 with a trading profit of 190
million, up 30 million from trading profit of 160
million in the fourth quarter of 2005.
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The Board of Directors of Fiat S.p.A. met today in
Turin under the chairmanship of Luca Cordero di
Montezemolo to approve the consolidated results of
the Group for the fourth quarter and full year 2006. |
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The Fiat Group closes the year ahead of guidance,
with 52 billion in revenues, up more than 11% on
2005, and trading profit of 2 billion, double last
years level, with all major sectors posting
year-over-year improvements. |
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In the Agricultural Business, during the year, Case IH
launched its new ATX700 large hoe drill and New Holland
launched in Latin America the new CR980 combine. In the
Construction Equipment Business, Case filled the gap in the
largest market segments with its new compact track loaders
and New Holland Construction introduced in North America the
backhoe loaders featuring enhanced lift performance
capabilities and controls.
Trucks and Commercial Vehicles
Iveco had revenues of 9.1 billion in 2006, up 7.7% over
2005. The improvement stemmed from an increase in sales
volumes and better pricing. During the year, Western
European market for commercial vehicles recorded positive
performances across all segments (+2.3%). In 2006, Iveco
delivered a total of 181,500 vehicles (including 17,600
units with buy back commitments), up 5.2% from 2005. In
Western Europe, deliveries totalled 135,100 vehicles, an
increase of 3.2% over 2005, mainly as a result of
particularly strong performances in Germany and Spain.
Conversely, deliveries were down in Italy and Great Britain.
Deliveries increased in Eastern Europe, Africa and the
Middle East, while they remained substantially stable in
Latin America.
Iveco sales benefited from the markets interest in the new
Daily, launched in late May. In 2006, Ivecos market share
in Western Europe remained substantially unchanged at 10.7%.
In particular, the light-range Daily confirmed its position
as the top seller in the 3.5 ton segment while, in the
medium segment, the Eurocargo remained co-leader with over
25% of the market.
Iveco had a trading profit of 546 million, equal to 6% of
revenues, a sharp improvement from 332 million in 2005 (+
64%) and at the upper end of target levels. The increase was
mainly attributable to higher sales volumes, better pricing,
and efficiency gains on materials, production and governance
costs resulting from the streamlining program undertaken in
2005. Revenues totalled 2.7 billion in Q4 2006, up 7.1%
from the same period in 2005, due to higher volumes and
better pricing. Trading profit was 157 millions, a 36.5%
increase from the same period in 2005.
Components and Production Systems
In 2006, revenues of Fiat Powertrain Technologies totalled
6.1 billion (on a comparable basis an increase of 11% from
2005). Part of the Sectors output was sold to other Group
Sectors, while sales to third parties and joint ventures
represented 26% of revenues. In 2006, revenues of the
Passenger & Commercial Vehicles product line totalled 3.4
billion, ( 2 billion in the May-December 2005 period). The
product line delivered 2,328,000 engines, approximately 22%
of which were diesel engines sold to third parties (General
Motors and Suzuki), and 1,695,000 transmissions, mainly to
Fiat Auto. The Industrial & Marine product line had revenues
of 2.7 billion in 2006 (+4.9% compared with 2005). 444,000
engines were delivered (increase of 1.9% from 2005), mainly
to Iveco (44%), CNH (19%) and Sevel (24%). In addition,
113,000 transmissions (-1.4%) and 262,000 axles (+9.3%) were
sold essentially to other Group Sectors.
In 2006, Fiat Powertrain Technologies had a trading profit
of 168 million, up from 109 million in 2005 which
included only eight months for Passenger & Commercial
Vehicles operations. Growth mainly stemmed from purchasing
and manufacturing efficiencies, which more than offset
higher raw material prices, mainly aluminium and oils. A
different scope of activities also positively contributed to
the improvement. In Q4 2006, Fiat Powertrain Technologies
had revenues of 1.6 billion (28% of which to third parties
and joint ventures), a 10.4% increase from Q4 2005. The
Passenger & Commercial Vehicles product line posted revenues
of 925 million (up 13.8%), and sold 598,000 engines
(+10.7%) and 437,000 transmissions (+10.6%). The Industrial
& Marine product line had revenues of 696 million (+5%
from Q4 2005) and sold 113,000 engines (+3%), 16,000
transmissions (+20.3%) and 65,000 axles (+9.8%).
In Q4 2006, Fiat Powertrain Technologies had a trading
profit of 50 million euros, nearly double the 27 million
posted in Q4 2005. In 2006, Magneti Marelli had revenues of
4.5 billion. The 10.5% increase from 2005 was attributable
to higher sales of Fiat, Lancia, and Alfa Romeo models and
an increase of new applications on car models of the Group
and of other car makers (telematics, hi-tech products of the
Lighting business unit, and Selespeed gears). Based on the
same scope of activities, revenues would have increased by
14.2%. Trading profit of Magneti Marelli in 2006 totalled
190 million, up 28 million over 2005. The improvement
stemmed from higher sales volume, streamlining of the cost
base and efficiency gains which more than offset price
pressures.
In Q4 2006, Magneti Marelli reported revenues of 1.1
billion. On a like-for-like basis, the increase was 9.0%.
Trading profit was 54 million, versus 49 million in Q4
2005. Teksid had revenues of 979 million, down 5.5% from
the previous year. The decrease reflects the disposal of
SBFM, a French company operating in the cast iron business.
On a comparable basis, revenues would have increased by
3.5%. In December 2006, an agreement was reached for the
sale of the interest held in Meridian Technologies Inc.
(Magnesium Business Unit).
Teksid closed 2006 with a trading profit of 56 million, an
increase over the 45 million reported in 2005. In Q4 2006,
Teksid had revenues of 236 million, down 10.3% compared
with the same period of 2005. Excluding the change in the
scope of operations, the decrease in revenues would have
been 2.9%, mainly as a result of lower volumes in the
Magnesium Business Unit. Trading profit was 11 million, in
line with Q4 2005 results.
Comau had revenues of 1,280 million in 2006, down 18.6%
from 2005. The change in revenues is mainly attributable to
the European Body-welding operations which were negatively
impacted by difficult trading conditions. Conversely,
service activities reported revenue increases, especially in
the Mercosur area. The low level of investments by car
manufacturers negatively impacted the Sectors order
intake in 2006 which totalled 1.2 billion (-16.0%). This
decline was only partially offset by higher orders for the
Service activities. The order backlog at the end of 2006
totalled 578 million, down 19.0% from the end of 2005. In
2006 Comau had a trading loss of 66 million, compared with
a trading profit of 42 million in 2005. Decreases were
reported by all business areas, except for the Service
activities in the Mercosur area and the Plastic Moulds
operations in Europe. A particularly sharp decline in
volumes and margins was reported by the Body-welding
operations in Europe. In Q4 2006 Comau had revenues of 340
million, down 29.5% year-over-year. Trading loss was 37
million, compared with a trading profit of 32 million in
Q4 2005. Starting from Q3 2006, the business has undergone
an intense reshaping and restructuring process in response
to the Sectors negative performance and declining order
backlog. Benefits associated with these efforts will be
partly visible in 2007, with the full impact reflecting in
margins by 2008. In 2006, the trading profit of the
Components & Production Systems business area as a whole was
348 million, equal to 2.8% of revenues (vs. 3.3% in 2005).
Other Businesses
Business Solutions had revenues of 668 million, down 11.2%
from 2005. The decrease stemmed mainly from the change in
the scope of consolidation, in particular the sale of
Atlanet (Telecommunication). Trading profit of Business
Solutions was 37 million in 2006, a 4 million
improvement on a comparable consolidation basis, reflecting
cost efficiency gains. In Q4 2006 revenues totalled 206
million, ( 193 million in Q4 2005) and trading profit was
12 million .
As of January 1, 2007, Business Solutions activities were
transferred to Fiat Services, a company which will provide
services exclusively to the Fiat Group (starting from 2007
Fiat Services will be included among Holding & Other
companies). The Business Solutions Sector will therefore
cease to exist.
Itedi had revenues of 401 million in 2006, up 1% from
2005, mainly due to higher advertising revenues at
Publikompass. In 2006 Itedi had a trading profit of 11
million, compared with 16 million in 2005. The decrease is
attributable to higher costs borne by Editrice La Stampa for
the launch of the new newspaper format, which took place on
November 19 2006, and higher paper costs. Revenues totalled
119 million in Q4 2006. The 7.2% increase over Q4 2005 was
mainly attributable to higher advertising revenues at
Publikompass. Trading profit in Q4 2006 was 8 million,
compared with 7 million in Q4 2005. The higher profit
margin at Publikompass offset higher costs incurred at
Editrice La Stampa. In 2006 the trading loss of all
remaining activities, including holding companies and the
impact of eliminations and consolidation adjustments,
decreased by 61 million, mainly due to the effect of the
reorganization and rationalization of non core activities
and central structures.
From turnaround to growth 2006 was an important year for the
future of the Fiat Group, marking the completion of an
intense restructuring phase on the basis of which the Group
is now poised to drive for growth and margin expansion over
the period 2007-10. The plan implemented over the previous
three years was based on a clean break with the past. Fiats
managerial structure was reshaped and strengthened, with the
creation of lean organizations across all businesses.
Sectors operations were reorganized with special attention
focused on strengthening the brands market position.
Efforts were directed to rationalizing processes and
recovering profitability in all Group business areas. All
set targets were achieved, and in many cases even exceeded.
The first breakthrough was made in 2005, when the Group
began turning a net profit again and the Auto sector posted
the first trading profit after 17 consecutive quarters of
losses. The improvements have continued in 2006, with Fiat
Auto posting the first full year of profits since 2000. The
restructuring efforts were accompanied by a major renewal of
its product line. This resulted in the introduction of 22
new models and facelifts in 2 years and enabled Fiat Auto to
achieve significant market share improvements both on the
domestic market and on the main European markets.
The other Sectors and especially Iveco and CNH also
underwent a phase of internal reorganization and
repositioning on the market. Together with the introduction
of new products, this generated a good level of top line
growth and significant margin expansion. The plan marked out
for the next four years is even more ambitious and
challenging. It is a plan geared towards growth.
Improved operating performance across all businesses,
accompanied by significant investments and growing
profitability in every business area, will consolidate
Fiats position as a major industrial group. Here again, the
targets set for each of the years up to 2010 are clear and
unambiguous. According to the plan, by 2010 the Group will
generate 67 billion in revenues and 5 billion in trading
profit, a figure never reached before by the Fiat Group. The
international agreements made in 2006 will help in this
phase of growth.
Fiat Auto entered into a number of alliances aimed at
strengthening its presence in two high growth markets,
Russia and India. In Russia, Fiat and Severstal Auto signed
three major agreements related to import and distribution in
Russia of Fiat-branded cars and commercial vehicles, as well
as to local assembly of certain Fiat models and for the
local manufacturing of Ducato. In India, Fiat and Tata
Motors closed an agreement on dealer network sharing and
established industrial joint-ventures to manufacture
passenger vehicles, engines and transmissions. The two
groups are also considering joint manufacturing of utility
vehicles in Argentina. In May Fiat Auto reached an agreement
with PSA-Peugeot Citroλn for the assembly at the Fiat Auto
Cordoba plant of a gearbox earmarked for the French partner.
A special mention goes to the partnership between Fiat Auto
and Crιdit Agricole, which resulted in the creation in
December 2006 of a 50/50 joint venture called Fiat Auto
Financial Services (FAFS). This company will handle all
retail auto financing, dealership financing, long term car
rental and fleet management activities in Europe. Iveco also
significantly accelerated its growth strategy, mainly
focused on the Chinese market, through the signing of a
joint-venture agreement with SAIC Motor Corporation Ltd and
with Chongqing Heavy Vehicle Group Co.Ltd in the heavy range
segment. In an effort to complete its strategy of having a
full range of commercial vehicles in China, Iveco also
signed an agreement with Nanjing Automotive Corporation (NAC)
for the acquisition of all commercial vehicle-related
businesses conducted by the Yuejin Motor Company. In
December, Iveco signed a letter of intent with Fiat
Powertrain Technologies and SAIC to establish a long-term
partnership for the production of engines for heavy and
medium vehicles.
Outlook for 2007
The Western European automobile market is expected to remain
stable in 2007, while demand in Brazil should show moderate
growth. In this context, the Groups Automobile Sector plans
to leverage the introduction of its new models (mainly Fiat
Bravo, Fiat Linea and Fiat 500) to continue to boost volume
and improve mix in the European markets. Meanwhile, our
Brazilian operations are expected to deliver a trading
performance in line with 2006.
Aggressive cost-cutting will continue in all non-essential
areas of the company. While streamlining governance costs we
will continue to invest in marketing and advertising, in
order to support our growth ambitions. The agricultural
tractor industry is expected to continue running at high
levels, while the combine industry should recover from the
recent declines on the back of pricing recovery in corn and
soybeans. The worldwide construction-equipment industry
should remain strong for both heavy and light equipment,
although the North American markets are expected to soften
for a year before resuming upward growth in 2008. In this
context, CNH expects to improve sales volumes thanks to new
products, improved pricing and market share gains. Higher
volumes, manufacturing efficiencies and other cost
reductions will be partially offset by continuing higher R&D
investments.
In Western Europe, the market for light, medium and heavy
commercial vehicles is expected to remain substantially
stable. In this environment, Iveco aims at increasing both
profitability and market share by a substantial commercial
repositioning, with price improvements coming from the
introduction of new Euro 4 and Euro 5 compliant vehicles.
For heavy trucks, Iveco will be leveraging the performances
of the new Stralis, especially in terms of fuel efficiency
and the improvement in the resale value of our vehicles.
To reach our targets, we will continue to push group-wide
purchasing synergies, increasing and accelerating
development of best-cost-country spending, strengthening
strategic partnerships with suppliers through long-term
contracts, and focusing on the implementation of our
world-class manufacturing initiative. As a result, the Group
confirms its targets for 2007: trading profit between 2.5
and 2.7 billion (4.5% to 5.1% trading margin) and net
income between 1.6 and 1.8 billion. By sector, full-year
2007 trading margin targets (trading profit as a percentage
of revenues) will range as follows: Autos, 2.6% to 3.4%; CNH,
8.9% to 9.7%; AND Iveco, 7.1% to 7.9%.
While working on the achievement of these objectives, the
Fiat Group will continue to implement its strategy of
targeted alliances, in order to reduce capital commitments,
and reduce the related risks. With year 2007 starts the
launch of an ambitious growth and profitability plan, which
by its completion in 2010 will have seen the rebuilding of
Fiat into a significant international industrial enterprise.
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