Fiat Group Purchasing...Fiat Group Purchasing System Direct materials Enhance supplier partnerships April 21, 2010 Fiat Investor Day 6 Direct materials –Enhance supplier partnerships

April 21, 2010 Fiat Investor Day 0

Gianni Coda

Fiat Group Purchasing


Distribution of direct materials supplier

Fiat Group Annual Purchase Value (APV)

Over 70% of direct materials spending involves suppliers shared by 2 or more Sectors

# of suppliers

60 200

80%

60%

40%

20%

APV

Indirect

materials, Services, Machinery &

Equipment

~ 10%

~ 50%

~ 15%

~ 25%€28bn

€42bn

€30bn

……

Direct materials

2010E(distribution constant through plan period)

19%

81%

25%

75%

18%

82%


Procurement principles

Raw materials

• Contractual agreements usually on 1-year rolling basis

• 50-80% of requirements covered (including sourcing for suppliers)

Sustainability program

• Fiat Group as vector of responsible behavior along entire supply chain

• Strong ethical principles in all areas of business

• Mutually beneficial collaboration with premier partners sharing our principles

Supply base

• In 2007-2008 reduction in weight of critical suppliers below 5% of APV (15% before ‘06)

• Economic crisis resulted in critical suppliers rising to almost 10% of APV in 2009

• Enhanced monitoring of potential risks and reinforcement of supplier pool


Looking back over 2007-09

Lingotto Plan targets (Nov 2006)

2007-09 as per Lingotto Plan

1.11.5

(0.4)

(0.9)

Gross savings Raw materials Net savings Volume impact Actual net savings

2.4

Gross savings 700 850 890 €2.4bn

Raw materials 400 270 240 €0.9bn

Net savings 300 580 650 €1.5bn

(€bn)

What we have accomplished

2007 20092008


Direct materials – Guidelines & actions

Leverage Fiat Group/Chrysler Group synergies

Continue focus on design-to-cost

Increase share from Best Cost Countries (BCC)

Enhance supplier partnerships


Expected gross savings of ~ €1.4bn over plan period

Focus on global and strategic suppliers

Long-term contracts

Streamlining of supplier base

Roll-out of World Class Manufacturing

methodology to supplier pool

Reinforcing supplier network through

Fiat Group Purchasing System

Direct materialsEnhance supplier partnerships


Direct materials – Enhance supplier partnershipsFocusing on global and strategic suppliers

Current status

Fiat Group glass commodity – 2010E APV ~ €250mn

with growing concentration in BCC

Supply base rationalization and optimization

<15 ~5

Number of suppliers

2006 2014E


Direct materials – Enhance supplier partnerships Supply base streamline

CNH Experience:

Reduction in number of minor suppliers

Set up grow/fix/exit strategy by commodity for new projects

Supply base rationalization and optimization

25%

DONE

Additional25%

within end

2012

Num

ber

of

suppliers

…

…

North AmericaLatin America Europe


Purchasing PerformanceManagement

Integration & coordination

between FGP & Sectors

FGP Information System, shared by Sectors worldwide, manages supplier relationships, sourcing process and master data

Master DataManagement

Supplier rating (Financial & Quality)

Supplier PortalAs the single point of

access and information exchange between suppliers and FGP

Sourcing Process Management

Across Sectors and worldwide purchasing

regions

Direct materials – Enhance supplier partnerships Fiat Group Purchasing System


Generate savings by increasing BCC-sourced APV, through

• Steady growth of BCC sourcing

• BCC supplier involvement for new product development

• Enhance range of BCC sourceable products, reducing untapped share

BCC sourcing offices established

• Shanghai since 2007

• India since 2008

Fully leverage Fiat Group/Chrysler Group integrated BCC sourcing offices

• Agreement already signed with Chrysler to cover Far East area (China & Korea offices)

• Integration of other offices ongoing (India, Europe)


Direct materials Best Cost Countries


Direct materials – Increase share from BCC APV Footprint

2009 APV from BCCLocal & import combined up to 48% or €11bn

BCC local

BCC import

Untapped

Unimportable

10%

38%

22%

30%10%

Increase of BCC imports by 4% or ~ €1bn to 14%

in 2014


Fully dedicated cross-functional teams

Platform and component standardization

Benchmark and teardown analysis

Supplier reward program

Direct materials Continue focus on design-to-cost



Savings per unit

Direct materials – Design-to-cost Examples

New architecture for airbag ECU

Crankshaft weight reduction for small

diesel engine

Simplified tow hook cross member

Universal joystick base module

€ 7

€ 54

€ 51

€ 3


Organizational alignment

Common strategies on major commodities and major suppliers

Price benchmarking

Architecture sharing

Expected savings of ~ €0.8bn over plan period

Savin

g o

pp

ortu

nit

ies

Shared

40%

60%

52% ON APV

Unique

65+% ON APV

…

Suppliers

Direct materials Fiat Group/Chrysler Group synergies

2010E combined APV ~ €40bn


Direct materialsFiat Group/Chrysler Group synergies

Price benchmarking: comparing components and system costs

Ongoing cost comparison has already yielded savings opportunities

GlassPaint systemsSeat systemsSuspension Steering systemsInstrument panel systemsExhaust systems

Electric/electronic systemsInfotainmentInterior trimWheels & tiresTransmission systemsSafety & security

Fiat Group buys better Chrysler buys better


Direct materialsFiat Group/Chrysler Group synergies – Saving examples

Incremental savings from negotiationSavings standalone basis=100

Halfshafts ESP control units

Paints Springs

100 100

100 100

156

150

113

166


2010E 2011E 2012E 2013E 2014E

Direct materials2010-14 targets

2.2%2.2%

2.2%

2.3% 2.3%

Gross savings 520 570 660 780 810 €3.3bn

Raw materials (220) (170) (160) (200) (200) €(0.9)bn

Net savings 300 400 500 580 610 €2.4bn

Gross saving

APV trend

€22bn€26bn

€30bn€34bn €36bn


Expected savings of ~ €0.5bn over plan period

Indirect Materials – Guidelines & actions

Cross-sector savings activities & best practice implementation to achieve global saving solutions

Fiat Group/Chrysler Group synergies through joint sourcing approach and global information sharing

BCC supplier development

• worldwide approach supported by local presence

• development of local suppliers, with focus on China, India & Serbia

2010E APV ~ €7.4bn

54%

46%

Services

Capital equipment &

indirect materials


ICT

• New global computer purchasing agreement (desktop, laptop & options)

• Merger of agreements with major software contractors

Machinery & equipment

• Bundling Capex sourcing for new initiatives (e.g. current activity on 5 new bodyshops, 3 Fiat Group & 2 Chrysler Group)

• Indirect materials: standardization (e.g. powertrain cutting tools: common suppliers and unified tools)

Indirect materialsFiat Group/Chrysler synergies – Examples


Conclusions

Establishment of joint Fiat Group/Chrysler Group Purchasing essential in reaching Group’s objectives

Expected savings over plan period

• €2.4bn (of which €0.8bn from joint Chrysler activities)

from direct materials

• €0.5bn (of which €0.3bn from joint Chrysler activities)

from indirect materials, services, machinery & equipment

€2.9bn

Documents

Fiat Group Purchasing...Fiat Group Purchasing System Direct materials Enhance supplier partnerships April 21, 2010 Fiat Investor Day 6 Direct materials –Enhance supplier partnerships