Palazzo Chigi – February 19, 2007
Fiat Group:from turnaround to growth
Meeting with Italian Institutions and Trade Unions
2Palazzo Chigi – February 19, 2007
Average daily Group operating profit of > €5 mn per day in 2006 vs. loss ~€2mn per day in 2004
Extricated ourselves of one broad alliance
Signed 13 agreements reinforcing our strategic flexibility
Net industrial debt < €1.8 bn at end of 2006 vs. €9.4 bn at December 31, 2004
First positive ratings/outlook change since 1999
A healthier Fiat
The Fiat Group since 2004
3Palazzo Chigi – February 19, 2007
FY 2006 – Turnaround completed2006 Group Targets Met or Exceeded
Group trading profit ahead of guidance at €2 bn, 3.8% of sales (twice 2005 levels) on more than 11% revenue growth to ~€52 bn
Auto: ~2 mn cars sold (+17% YoY), its highest level since 2001; trading profit up €572mn to €291mn, first positive FY since 2000 Iveco: increase of 8% in revenues YoY, trading margin up from 3.9% to 6%CNH: revenues up 3% YoY, operating margin at 7%Good components performance (ex Comau)
Net income of €1.2bn, up €1.4bn ex unusual itemsNon-recurring gains of €607mn (~€460mn from JV with Crédit Agricole) partly offset by €497mn mainly relating to restructuring at CNH and Comau
Industrial cash flow of €1.4bn, better than targetNet industrial debt nearly halved to less than €1.8 bnLiquidity nearly €8bn
Strengthened network of targeted alliancesFirst dividend distribution (€276mn) proposed after 5 years2007 targets confirmed
4Palazzo Chigi – February 19, 2007
FY 2006 – Sectors
Fiat Auto CNH Iveco Components Elim.&Oth. Group
All three main Sectors at or above FY margin guidanceRestructuring at Comau
25,577
51,832
10,527
12,366
(5,774)
9,136
Fiat Auto 23,702; +21.3%Maserati 519; -2.6%Ferrari 1,447; +12.3%
+20.2%
+3.1%
+7.7%
+15.3%
+11.4%
Fiat Auto CNH Iveco Components Elim.&Oth. Group
Trading Profit by Sector (€mn)
441
1.951
737
348
(121)
546
Fiat Auto 291Maserati (33)Ferrari 183
Target ActualAuto ~1.0% 1.2%CNH 7.0%/7.5% 7.0%Iveco 5.5%/6% 6.0%Components * 3.5%/4.0% 2.8%
* Components 3.7%ex Comau
Net Revenues by Sector (€mn)
5Palazzo Chigi – February 19, 2007
(a) Assuming dividend pay-out at a rate of 25% of annual net income (~€2.0bn over 2007-10 period)
(b) Cash Flow from operations(c) Incl. Italenergia Bis: €1.8bn; Real estate: €0.2bn; GM
settlement net of assumed Powertrain debt: €1.1 bn
2004-2010 Group Financial Targets
2004 2008
Group TradingProfit/Margin
GroupNet Income
€3.4-3.6bnEPS €2.65/2.80
Group NetIndustrial
Debt (a)
~€5.0bn7.2%-7.8%
~€2bn
2009 2010
€4.3-4.5bn6.7%-7.3%
€3.4-3.6bn5.9%-6.5%
€2.5-2.7bn4.5%-5.1%
€1.6-1.8bnEPS €1.25/1.40
€2.4-2.6bnEPS €1.90/2.00
€2.9-3.1bnEPS €2.30/2.40
<€2bn Net cash ~€3.0bn
Net cash€0.7-1.0bn
2005 2006 2007
2005-10 CAGR 7.6% ~€67bn
GroupBreak-even
1.92:1 net debt to gross equity
€1.6bn net losses
Net income of €1.4bn due to unusual items
2% Trading margin
0.34:1 net debt to gross equity
Net income of ~€800mn
Trading profit~ €1.85 bn
Net industrial debt at ~€2.0bn
GroupRevenues
Net ind. cash flow of €3.4bn due to unusuals (c)
Cash Flow Gruppo (b)
Neg. cash flow before exceptionalssignificantly reduced
Net ind. Cash flow of ~ €1,2bn
~€47bn
6Palazzo Chigi – February 19, 2007
2007E Auto CNH Iveco FPT MagnetiMarelli
Elim.&Others
2010E
~54
~67
8
2.5
1
1.51 -1€bn
2007-2010 Plan – Revenue Growth by Business
7Palazzo Chigi – February 19, 2007
2007-2010 – Industrial Capex and R&D expenses
Industrial Capex and Capex/Depreciation ratio
2.9%2.7%
2.9%3.1% 3.1%
3.2%
0
500
1,000
1,500
2,000
2005A 2006A 2007E 2008E 2009E 2010E0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
€ mn
R&D expenses and R&D expenses/revenues ratio
Auto CNH Iveco Other Ratio
Industrial Capex and R&D spending for a total of €20bn (of which ~65% in Italy) during the plan period
€ mn
1.03 1.01
1.221.32
1.251.32
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2005A 2006A 2007E 2008E 2009E 2010E0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
8Palazzo Chigi – February 19, 2007
2007 Outlook– Important positive signals from the Sectors
Fiat Group Automobiles
Italy: 31.4% share equal to ~78K cars sold in January (+5.6% over 2006)
Europe:
8.8% share equal to ~108K cars in WE in January (+4.8% YoY)
Regained fifth place among continental car producers
Positive order intake• Growth of >20% vs. last year
• Fiat Bravo: 8K orders since commercial launch
Iveco
Order portfolio at January 31 at ~50K units (+50% vs. 2006)
CNH
Growing market share
In particular, 16.7% share for tractors and 23.4% share for combines in North American market (+3.3 percentage points and 8.5 percentage points, respectively, over 2006)
9Palazzo Chigi – February 19, 2007
Main Operating Sectors
10Palazzo Chigi – February 19, 2007
Iveco – ProfitabilityFY2006 competitive position
Light CV 3.5-6T1. DC 17.4%2. Iveco 17.1%
Medium CV1. DC 28.0%2. Iveco 25.4%
Heavy CV1. DC 20.5%6. Iveco 10.9%
Jan-Dec 06 WE Market Share
0
500
1,000
1,500
2,000
4 6 8 10 12 14
Op
era
tin
g r
esu
lt [€
mn]
ROS [%]
DAIMLER VOLVOPACCAR
SCANIA
MAN
11Palazzo Chigi – February 19, 2007
Iveco – 2007-10 Product Strategy
Two global platforms in place for light and medium/heavy truck ranges
Major program launches during the plan:
2007: renewal of Stralis/Trakker (heavy product range)
2008: renewal of Eurocargo (medium product range)
2009: launch of new basic medium truck family leveraging cooperation with Chinese partner Yuejin
Major programs requiring investment during the plan period for products to be launched post 2010
Development of new light commercial vehicle platform
Development of new medium/heavy line Euro 6 compliant
Global product platforms
12Palazzo Chigi – February 19, 2007
CNH – Underperforming the competition
* 2005 data, US GAAP
• Continue to improve market shares in Europe, USA and Latin America
• Grow rapidly in emerging markets with highest potential (e.g. India, China) also through targeted partnerships
• Bring Customer Service to best-in-class levels in both AG and CE
• Fully exploit brands potential, by diversifying offering to satisfy needs of a greater number of customers in different regions
Achieve “best-in-class” margin performance
0
1,000
2,000
3,000
4,000
0 2 4 6 8 10 12 14 16
Op
era
tin
g r
esu
lt (u
s$ m
ln)
ROS (%)
CATERPILLAR
JOHN DEERE
AGCO
13Palazzo Chigi – February 19, 2007
• New generation of diesel engines (Multijet 2)
• Reduced NOx emissions and new Diesel Particulate Filter (DPF)for diesel engines
• Higher power combined with lower displacement on gasoline engines to reduce consumption and improve driveability
• Electronic valve control (Multiair)
• Dual clutch transmission to improve comfort and efficiency
• Environmentally-friendly alternative fuels
• Focus on natural gas engines (cars and commercial vehicles)
• Introduction of Tri-Fuel (gasoline, natural gas, ethanol)
• Hydrogen blends – Natural gas for special urban fleets
• Diesel–Hybrid commercial vehicles for urban use
Fiat Powertrain Technologies – Introduction of breakthrough technologies
14Palazzo Chigi – February 19, 2007
Fiat Group Automobiles – What we have done so far
Created a flat and dynamic management structureCreated 4 companies to strengthen each brand identity, which is increasingly put at the centre of the organization
understanding the customer needs before the cars hit the street
Reduced manufacturing complexitywithout closing a single plant
Obsessed with the proper execution of model launchesand the optimization of product lifecycles
Started tackling our distribution issuesbuilding the right network for each brand
Sold ~2 million cars in 2006 (~17% more than last year)without recourse to the brand-damaging promotions of yesterdayachieving market share increases for 17 consecutive months in Italy and 15 consecutive months in WE
Trading profit of €291 million in 2006Established 9 targeted industrial alliances in 2006
to share development/risks and speed-up deployment
15Palazzo Chigi – February 19, 2007
Fiat Group Automobiles – International Growth
Access to Markets
Technical
Products
SharingKnow-how
Access to synergies
Turkey
Russia
India
China
Argentina
Iran
ALLIANCES
Sourcing
Manufacturing
Flexibility, non-exclusivity, best partner for each project
16Palazzo Chigi – February 19, 2007
Fiat Group Automobiles – Alliance map
Synergies
Tofas (Turkey)
Nanjing Fiat Auto Co. Ltd (China)
• 1.3 Multijet• Gas engines and transmissions
Sharingknow-how
Access to Markets
Fiat LCV/MPV
B and D Architectures
Minicargo
Fiat 500Technical
1 ton pick-up
Fiat SediciProducts
LCV/MPV powertrains
• 1.3 Multijet• 1.9 JTD Multijet
• 1.3 Multijet• Fire gas engine
Gas engines
Product
dev
elopm
ent
Pow
ertr
ain
Sourcing
Manufacturing
B and Darchitecturecomponents
Fiat Sedici
Sevel Nord, Sevel V.d.S.
• Fiat Grande Punto & Fiat Linea (India)• 1 ton pick-up (Argentina)
License and distribution agreements :
India
Russia
Serbia
Iran
Vietnam
PIDF
MEKONGFiat 500 Minicargo
PWT and architecturecomponents
PWTcomponents
17Palazzo Chigi – February 19, 2007
Fiat Group Automobiles –2007-2010 product range plan23 new models and 23 facelifts
2007 2008 2009 2010
Bravo
500
New Scudo
New models
FL = Facelift
MY = Model Year
Panda MY
Future Panda
Bravo FL
Punto FL
B Compact
B Compact (2° body)
Grande Punto MYGrande Punto FL
Idea MY
Bravo Station Wagon
500 MY
Multipla MY
Linea
Croma FL Croma MY
500 Cabrio
C X-Over
Future Doblò Panorama
Minicargo Panorama
Delta HPE Future YpsilonYpsilon Momo Sport
Musa FLPhedra MY Niche model
Junior C X-OverFuture C Segment
169
159 Berlina FL
159 Sportwagon FL
Spider FL
Brera FL
Future Doblò CargoMinicargo
Pick-up 1T
500 Abarth
Sedici FL
Linea FL
8C Competizione
Ducato 4X4
Grande Punto Abarth
159 Crosswagon / MY
18Palazzo Chigi – February 19, 2007
1.41.7
2.02.2
2.4
0.1
0.1
0.2
0.2
0.3
0.2
0.2
0.2
0.3
0.3
0.4
0.4
0.4
0.5
0.5
2006A 2007E 2008E 2009E 2010E
Fiat Lancia Alfa Romeo Lcv
2.1Consolidated 2.0
~2.4Consolidated 2.2
~2.8Consolidated 2.4
~3.2 Consolidated 2.6
~3.5Consolidated
2.8
Millions of units
Fiat Group AutomobilesWorldwide Registrations by Brand
19Palazzo Chigi – February 19, 2007
Fiat Group Automobiles – 2007-08 Production at Italian Plants
• Punto / Grande Punto • Idea / Musa / Multipla• Production of “high-range” cars (Thesis / 166)• New model: Junior (2008)
Mirafiori
• Grande PuntoMelfi
• YpsilonTerminiImerese
• New DucatoSevel
Val di Sangro
• Stilo MW• Croma• Bravo• New model: Delta HPE (2008)
Cassino
• 147• GT• 159 family
Pomigliano
20Palazzo Chigi – February 19, 2007
Fiat Group AutomobilesTermini Imerese plant
Termini Imerese plant has competitive disadvantages with respectto the other Fiat Group Automobiles plants. In particular:
High logistics costsLack of a supplier base in the areaLimited production capacity
Extra-costs stemming from current non-competitive environment are approx € 1,000 / car
Overcoming this situation means implementing an industrialisation plan of Termini Imerese site. This issue must be jointly tackled by:
CompanyTrade UnionsLocal Institutions National Institutions
21Palazzo Chigi – February 19, 2007
The role of the Fiat Group and repercussions of the plan on the Italian economic system
The Fiat Group plays a key role in our economy2006 Group revenues contributed approx. 5.5% of total revenues from industrial companies with more than 250 employeesGroup R&D expenses in 2006 represented approx. 23% of total expenses by private industry sector
The 2007-10 plan will have a significant impact on the Italian economic system
Group revenues vis-à-vis third parties produced in Italy will represent 1.9% of GDP*
in 2010 (1.6% in 2006)Group revenues: ~€33 bn in 2010 (approx. 50% of total revenues) from ~€24 bn in 2006 (45% of the total)Automobiles Sector revenues: ~ €20 bn in 2010 (62% of total revenues) from ~€14 bn in 2006 (58% of the total)2010 expected production in Italian plants will reach 1.6 million units, up ~50% from ~1.1 in 2006
Implementation of the industrial plan at the Sicilian site could entailHigher incidence on GDPProduction up to a max of 200,000 vehicles with positive impact on employment
* Source: Global Insight estimate
22Palazzo Chigi – February 19, 2007
Fiat Group’s contribution to trade activities of the Italian System
45%29%
55%71%
Net revenues byorigin
Net revenues bydestination
2006(percentage composition)
~27%~50%
~73%~50%
Net revenues byorigin
Net revenues bydestination
Delta export~ €15 bn
Italy Delta export~ €9 bn
2010 estimate(percentage composition)
Restof theWorld
Italy
Restof theWorld
23Palazzo Chigi – February 19, 2007
Employment in Italy
During year 2006
Hired ~4,000 employees (3,991 of which 2,729 blue collars, 1,193 white collars and 69 managers)
Of which 60% with fixed-term contract (2,403 of which 2,200 blue collars)
More than 1,100 fixed-term contracts converted into open-term contracts
24Palazzo Chigi – February 19, 2007
Conclusions
The Fiat Group has overcome the crisis
The 2007-2010 plan is ambitious and aims at positioning the Group among best-in-class players worldwide, but we first need to …
solve remaining employment issues with recourse to “mobilità lunga”(long-term mobility benefit to bridge the period prior to retirement)ensure that plants reach competitive levels enabling them to achieve the plan’s production targetsovercome logistic and financial restraints in order to lay the basis for the allocation of a car model to Termini Imerese from 2009
The Institutions have to identify the conditions and modalities necessary for financing the initiative in the Sicilian site
25Palazzo Chigi – February 19, 2007