Ten months ago the C.E.O. of Fiat Auto Giancarlo Boschetti announced the new business unit organisation structure. Not long ago, but enough to see our efforts start to take shape. 

During my first official meeting with you last June in my role as head of the Fiat / Lancia / LCV Business Unit, I presented a schedule of priorities to be tackled.
This concerned the product range, quality of sales, cost reductions and the commercial distribution system. In addition, a specific plan concerning Light Commercial Vehicles. 

Let's look back and comment on what we have achieved in the past ten months. We'll start with renewal of the range. We promised to launch two new Fiat and two new Lancia models on the market in 2002. And this we did. We announced that 2003 would see the launch of many new products, beginning with segments A and B. The ones we presented to you yesterday. These are particularly important cars as they mark a strong comeback - that is, with attractive, competitive new models - to market areas that have traditionally seen us at the forefront.

'Back to basics' is an expression we've often used when speaking of this comeback. We're regaining ground in what for us have always been areas of technical and design excellence. And we're doing this by exploiting our heritage and the history of our brands. 

We'll start with Fiat. What do people expect from a Fiat? They expect it to be practical, accessible, eye-catching, original, full of intelligent solutions that make life easier, but above all people expect it to be in step with the times: a car for today that responds to the needs of tomorrow. And the new Fiat Idea and Fiat Gingo are just this. 

Let's look at a few details. The Fiat Idea will be produced at Mirafiori. In 2004, the first full year of marketing, we expect sales in the range of 100,000 to 120,000 units.
It's the outcome of a total investment (research and development, design, engineering and plant) amounting to 430 million euros. The Fiat Gingo will be produced at Tychy in Poland. Our sales forecast for 2004 ranges from 180,000 to 200,000 units. Overall investment will amount to 560 million euros. In addition to these investments, 400 million euros have been spent by Fiat-GM Powertrain to develop the 1.3 Multijet 16-valve engine. 

Now let's look at Lancia. We've worked on brand fundamentals as regards Lancia too. Lancia means elegance and good taste. But also innovation. These two qualities are part of its DNA: they cannot be separated. Taken together they can be summarised in one concept: Italian class. As for the new Ypsilon, we've worked on all these fronts. Ypsilon offers customers advanced solutions - together with a highly refined array of colours, combinations and materials. It will be the symbol-car for the new Dolce Vita. 

The Lancia Y will be produced at Melfi. In 2004 we expect to sell 90,000/100,000 units. Overall investment has totalled 500 million euros. We've spoken about products. Three new ones in just one day - but naturally, this is not all. Let's move on to look at other points in the plan presented last June. 

First of all the quality of sales. Our objective was to change the channel mix - increasing the percentage of high margin sales. To achieve this we've made two moves: we've strengthened our sales structure for company fleets and we've focused dealer activity on retail sales, that is, sales to end-customers. And we're beginning to see results. In 2002 Italy achieved a 5 point improvement in the percentage of 'quality' sales (retail + fleet). And a similar improvement was seen in other major European markets. Based on this we think we can achieve our 2003 objective earlier than planned. Clearly, increasing sales margins alone is not enough to improve profitability: we have to work on efficiency too.

And so this means cost reductions. Implementation of an overall personnel reorganisation plan is currently underway. Let's look briefly at the objectives we set ourselves and the actions we have taken. We're working on all stages of the cycle to reduce product costs from standardisation of components to purchasing from logistics to manufacturing proper. Actual results for the first two months confirm we are fully in line with this objective. Let's look at other sales costs. 

These include distribution and warranty costs. We're redesigning the entire primary and secondary logistical flow. Consequently, we're renegotiating distribution costs with suppliers. We're also working on improving product quality. By doing so we can achieve two objectives: an increase in customer satisfaction and a reduction in warranty costs. In both cases the reduction is considerable and in line with our objectives. 

Another important, indeed, fundamental point is reducing overheads. A reduction that has meant adopting certain painful (yet necessary) measures that are proceeding according to plan and are in line with the cost-saving objectives we set for ourselves.

Lastly, I'd like to mention stock reduction. Our target was to reduce network stock to 1.3 months by the end of 2003. This objective, as you can see, has been reached one year ahead of schedule. 

At this point let's look at commercial distribution. As announced last June we're investing in network development: 400 million euros during the 2002-2005 plan period. Every market has prepared its own implementation plan starting from 50 strategic areas, which together represent 40% of the sales figure for Europe. And as a result we've reorganised our direct sales too - in all situations where we were present with our own structure. Starting February 1st, for instance, the five Italian branches have been reorganised to form one single company that, as far as customers and headquarters are concerned, will operate exactly as if it were a dealer. Similar actions are underway in other countries where there is a direct Fiat, Lancia and Light Commercial Vehicle presence.

The last point of our action plan concerned Light Commercial Vehicles. A specific relaunch policy was developed for this purpose by creating, as you know, a Business Unit focused on this market. The Light Commercial Vehicle sector has responded excellently: during 2002 our presence in the European market grew by 1.2%. At year-end we had strengthened our position among the market leaders - and we had a market share of 12.5%. We've spoken of progress made as regards our relaunch plan.

Now back to the present and the early sales results for 2003. As you know Fiat Auto sales in January marked a significant reversal of the trend seen in the previous quarter. Flooding that hit the Fiat-GM Powertrain plant in Termoli on January 25th caused a production shortfall last month of about 40,000 engines. Thanks to excellent cooperation by dealers to match stocks with customer requirements we have been able to limit losses in terms of deliveries and registrations. Now that production lines are again up and running we are gradually getting back to normal. In the meantime the order trend is growing and we have exceeded our forecast for the period. With the new product launches we obviously expect this positive trend will receive a further strong boost. In volume terms the renewal underway concerns about 40% of our range. On completion of our investment cycle the plan calls for the renewal of practically the entire range - more than 80% - by the end of 2005. From this standpoint the Simba and Marrakech models represent much more than a mere styling exercise. They're evidence that we're once more looking closely at product niches. Our concept cars - the above two and others that are in the pipeline - show that we'll be ready to take advantage of opportunities offered by the market. We're dedicating significant resources to product innovation, the brands and commercial distribution. In all these areas there has been no reduction in investments - indeed, in certain cases investments have exceeded past levels. This is evidence that our intention is not just to ride out an emergency but to look for results in the medium-long term. And thanks to this commitment we're winning back trust: of the market, our shareholders, our dealers and our people. 

We've presented an industrial plan that gains credibility as we progressively achieve our objectives. We've promised innovation and our products reach the market - attractive, courageous, on schedule. We've promised consistency and we're demonstrating it - holding to our principles, reappraising our know-how, exploiting our skills. 

All of this means we can gain back our strengths and move forward to conquer the market.