Fiat Group: from turnaround to growth · Fiat Group: from turnaround to growth Meeting with Italian Institutions and Trade Unions. Palazzo Chigi – February 19, 2007 2 Average daily

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


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


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)


(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


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


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%


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)


Main Operating Sectors


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


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


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


• 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


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


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


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


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


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


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


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


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


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


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


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


Documents

Fiat Group: from turnaround to growth · Fiat Group: from turnaround to growth Meeting with Italian Institutions and Trade Unions. Palazzo Chigi – February 19, 2007 2 Average daily