FIAT and Capitalia, Banca Intesa, SanPaolo-IMI, and UniCredito signed an agreement today for the sale by FIAT to the Banks of 51% of Fidis Retail Italia ("FRI"), a FIAT Group company that provides consumer credits to retail customers with financing for automobile purchases in Europe. The agreed purchase price is about 370 million euros.

This transaction is part of the FIAT Group program defined in the framework agreement signed by Fiat and the Banks on May 27, 2002 to improve its financial situation. Following deconsolidation of FRI from the FIAT Group, it is expected that the Fiat Group consolidated gross debt will be reduced by approximately 6 billion euros. 

Following the agreements reached by FIAT and the Banks, FIAT has the right to repurchase the stake of FRI sold to the Banks by January 31, 2006.

The FRI Group will operate in 12 European countries, with a retail customer portfolio of about 10 billion euros, and approximately 1,200 employees. In 2002, approximately 30% of FIAT Auto Group sales were financed by FRI and its European subsidiaries. FRI will maintain unchanged its current relationship with the Fiat Auto commercial network, retaining responsibility for the management of contracts and relative contacts with end customers. Furthermore, FRI will benefit from its relationship with the Banks, which will facilitate its access to the financial markets.

The financing activities to dealers and suppliers are not covered by this sale agreement and will remain under the ownership and management of Fiat Auto. This transaction is subject to approval by the competent supervisory authorities. Merrill Lynch International was Fiat’s advisor for this transaction.

The agreement just concluded for the sale of Fidis provides further testimony to the trust and continuing cooperation that characterize the relationship between Fiat and the banks supporting us during this phase of its turnaround.

Thanks to this agreement, Fiat’s gross debt will be reduced by about 6 billion euros, taking into account both debt deconsolidation and the reimbursement of intercompany financing, which amounts to over 2 billion euros. As a result, the Group liquidity will improve significantly. 

This transaction, as well as the planned disposals of FiatAvio and Toro, which we are accelerating, will substantially strengthen our financial structure. We are also hard at work on our industrial processes to improve the profitability of our businesses.