Fiat Annual Report 2010

ANNUAL REPORT
AT 31 DEcEmbER 2010
105th financial year
GENERAL MEETING Holders of ordinary shares are hereby given notice of the Ordinary General Meeting to be held at Centro Congressi Lingotto, 280 Via Nizza, Turin at 11 a.m. on 30 March 2011 (single call) to vote on the following Agenda 1. Motion for approval of the Statutory Financial Statements at 31 December 2010 and allocation of profit for the year 2. Authorization for the purchase and disposal of own shares 3. Appointment of Independent Auditors Participation and Representation at the General Meeting Holders of voting rights at close of business on the record date of 21 March 2011 for whom the Company has received the relevant communication from the authorized intermediary shall be entitled to participate in the general meeting. Anyone becoming a shareholder after 21 March 2011 will not be entitled to participate or vote at the meeting. Pursuant to law, those entitled to participate may be represented at the Meeting by written proxy. The proxy form provided on the Companys website (www.fiatspa.com: Investor Relations/Shareholder Info/ Shareholder Meetings) may be used for that purpose. Pursuant to Article 135-undecies of Legislative Decree 58/98, the Company has designated Aldo Milanese (common representative for holders of savings shares) as the representative upon whom holders of voting rights may, by 28 March 2011, confer proxy and instruct to vote on all or some of the motions on the agenda. The above representative must be delegated proxy in accordance with procedures and using the proxy form provided on the Company website indicated above. Details on how to communicate proxy delegations to the Company electronically (by email at deleghefiat@pecserviziotitoli.it) are also provided. The delegation is not valid for motions for which no voting instructions have been given. Other rights of Shareholders Shareholders may submit questions on agenda items, including prior to the meeting, in accordance with the procedures and deadline provided on the Companys website. Shareholders representing, jointly or individually, at least one-fortieth of share capital may, within 10 days of the publication of this notice, request additions to the agenda, indicating the additional items proposed. The procedures and deadlines for exercise of those rights are provided on the Companys website. Documentation Documentation relating to items on the agenda and the annual report on corporate governance is available at the Companys registered office, at Borsa Italiana S.p.A. and on the Companys website (www.fiatspa.com).
CONTENTS
CONTENTS
4 6 9 10 11 12 16 20 22 25 26 29 32 41 42 47 56 64 88 93 96 97 98 99 106 108 110 112 116 117 118 119 122 129 132 135 Board of Directors and Auditors Letter from the Chairman and the Chief Executive Officer The Group at a glance 2010 in summary Structure: Fiat & Fiat Industrial Fiat Group Brands Fiat Industrial Group Brands Fiat & Fiat Industrial Worldwide Operating Responsibly Report on Operations Highlights Shareholders Key events in 2010 Highlights by Sector Main risks and uncertainties to which Fiat S.p.A. and Fiat Group post Demerger are exposed Research and innovation Human resources Financial review Fiat Group Corporate governance Share-based incentive plans Transactions between Group companies and with related parties Subsequent events and outlook Operating performance: Continuing Operations Fiat Group Automobiles Maserati Ferrari Fiat Powertrain Components Metallurgical Products Production Systems Operating performance: Discontinued Operations Agricultural and Construction Equipment Trucks and Commercial Vehicles FPT Industrial Financial review Fiat S.p.A. Motion for approval of the Statutory Financial Statements and allocation of 2010 profit
137 138 139 140 142 143 144 145 146 147 269 298 299 301 302 302 303 304 305 306 307 308 309 370 371 373 379 389
Fiat Group Consolidated Financial Statements at 31 December 2010 Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Statement of Changes in Consolidated Equity Consolidated Income Statement pursuant to Consob Resolution No. 15519 of 27 July 2006 Consolidated Statement of Financial Position pursuant to Consob Resolution No. 15519 of 27 July 2006 Consolidated Statement of Cash Flows pursuant to Consob Resolution No. 15519 of 27 July 2006 Notes to the Consolidated Financial Statements Appendix I Fiat Companies at 31 December 2010 Appendix II Information required under Article 149-doudecies of the Regolamento Emittenti issued by Consob Attestation in respect of the Consolidated Financial Statements under Article 154-bis of Legislative Decree 58/98 Fiat S.p.A. Statutory Financial Statements at 31 December 2010 Income Statement Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity Income Statement pursuant to Consob Resolution No. 15519 of 27 July 2006 Statement of Financial Position pursuant to Consob Resolution No. 15519 of 27 July 2006 Statement of Cash Flows pursuant to Consob Resolution No. 15519 of 27 July 2006 Notes to the Statutory Financial Statements Appendix Information required under Article 149-doudecies of the Regolamento Emittenti issued by Consob Attestation in respect of the Statutory Financial Statements under Article 154-bis of Legislative Decree 58/98 Auditors Reports Reports of the Board of Statutory Auditors Agenda and related reports and motions
This document has been translated into English for the convenience of readers outside Italy. The original Italian document should be considered the authoritative version.
BOARD OF DIRECTORS AND AUDITORS
BOARD OF DIRECTORS AND AUDITORS

BOARD OF DIRECTORS Chairman John Elkann (1) (*) Chief Executive Officer Sergio Marchionne Directors Andrea Agnelli Carlo Barel di SantAlbano Roland Berger (3) Tiberto Brandolini dAdda Ren Carron Luca Cordero di Montezemolo (**) Luca Garavoglia (1) (3) Gian Maria Gros-Pietro (1) (2) Virgilio Marrone Vittorio Mincato (2) Pasquale Pistorio Ratan Tata Mario Zibetti (2) (3) Secretary of the Board Franzo Grande Stevens
(*) (**) (1) (2) (3) Appointed Chairman on 21 April 2010 Resigned as Chairman on 21 April 2010, but remains on the Board Member of the Nominating, Corporate Governance and Sustainability Committee Member of the Internal Control Committee Member of the Compensation Committee
BOARD OF STATUTORY AUDITORS Regular Auditors Riccardo Perotta Chairman Giuseppe Camosci Piero Locatelli Alternate Auditors Lucio Pasquini Fabrizio Mosca Stefano Orlando INDEPENDENT AUDITORS Deloitte & Touche S.p.A.
LETTER FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER
LETTER FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER

Dear Shareholders, 2010 got off to a difficult start, with the previous years problems and uncertainties still in evidence and many of our markets not showing signs of significant recovery from the crisis. The prospects became progressively more positive as the year unfolded and several of our trading regions exhibited a significant recovery, although most of them performed well below pre-crisis levels. Trading conditions improved for all of our businesses with the exception of Automobiles, where performance was impacted by the phasing out in many European countries of the eco-incentives that had underpinned demand in 2009, particularly in the smaller car segments. In this very uneven market environment, Fiat responded effectively and decisively. We continued to hold the line on costs with rigorous measures, while taking advantage of the economic recovery from the very early stages. This was made possible by the international reach of our industrial and commercial operations, which enabled us to minimize inefficiencies in some areas while delivering optimal performance in others. This, in essence, is the real strength of our Group today. A global and open attitude that doesnt shrink away from adversity, but rather responds to challenges with determination and leverages the opportunities that present themselves. As a result, we closed 2010 significantly ahead of the targets we had set for ourselves at the beginning of the year. Revenues were up more than 12% to 56 billion, trading profit doubled to 2.2 billion and the bottom line was once again positive at 600 million. Cash generation was strong, with net industrial debt totaling 2.4 billion, a reduction of 2.0 billion from the previous year driven by strong performance for all businesses and continued disciplined working capital management. Liquidity was strengthened to nearly 16 billion. These achievements were only made possible by the energy, commitment and dedication of the people at Fiat, who actively engaged in containing the impact of the crisis and seized every opportunity presented by the subsequent recovery. We thank all the men and women at Fiat around the world for what they contribute professionally and personally to the Groups growth and resilience. These results were achieved in a year which also saw the execution of a historic decision that has changed the shape of Fiat forever: the demerger of the Group, with effect from the 1st of January 2011, into two distinct entities Fiat and Fiat Industrial. Keeping together businesses that have common historical roots, but which, as a result of market developments over time, ended up having few economic or industrial characteristics in common is an outdated concept. Preserving it ran the risk of restricting the growth potential of these businesses. Given the enormity and speed of changes taking place in the market, we could no longer afford to look at these businesses in purely historic terms. Todays challenges are far greater and more complex, and a pattern-shifting, liberating strategic solution was necessary. From a financial and industrial perspective, this is the solution that guarantees each business the greatest potential for development. This decision responds to the imperative for growth, autonomy and efficiency. Fiat and Fiat Industrial now have significant freedom of movement, including the potential for pursuing opportunities to form alliances, unhindered by the burden of an unrelated business strategic limitations. Each group can now focus on its core business, with well-defined objectives that are not only clearly understandable to the market, but also allow these organizations to view themselves and develop their strategies in pure competitive terms against a well-defined cluster of competitors. Each has a well-defined operating profile, enabling it to fully demonstrate an intrinsic value that risked being only partially realized in their conglomerate form. This was a complex and ambitious transaction that has opened the door to a new future, a different and better future for our respective businesses. Before committing to this transaction, we also considered one of its most sensitive aspects, the notion that Fiat would lose its identity as a Group a group that has existed and operated as a single entity for more than a century. The truth of the matter is that an organizations identity is not in its name. Its identity comes from those who are part of it at a precise moment in time and for a precise objective. The better way to understand the value of this demerger is to consider the opportunities for personal growth that it offers our people. Throughout its history, Fiat has developed people of the highest calibre, not just in terms of their professional and technical abilities, but most importantly their competitive spirit and leadership abilities. These qualities are invaluable to the development of a company and have been fully preserved in the demerger process: they are the best guarantee for the future of Fiat and Fiat Industrial. The demerger also relied on a significant program that, although started in 2009, began taking visible form during 2010. We took several significant steps forward in our partnership with Chrysler which has brought Fiat the opportunity to become a full-line automaker, expand its geographic footprint and reach the critical mass necessary to achieve the required economies of scale to make it a long-term viable global carmaker. On the industrial side, the process to share platforms and engine technologies is moving ahead rapidly. On the commercial side, we have begun the reorganization and integration of commercial networks. As a first step, the Chrysler and Lancia distribution networks in Europe are being merged. And we unveiled the Fiat 500 at the Los Angeles Auto Show, marking the brands return to North America after an absence of 27 years.
At the beginning of 2011, our stake in Chrysler increased from 20% to 25% following achievement of the first of three Performance Events that will ultimately allow Fiat to achieve a 35% ownership of Chrysler Group. But apart from these technical and financial matters, one of the most valuable results of this alliance is occurring at the cultural level. Fiat and Chrysler are undertaking a cultural integration based on mutual respect and humility whose starting point is a spirit of equality and the willingness of each partner to learn from the other. Today we have an extraordinary group of people working alongside each other, listening, exchanging ideas, and expanding their horizons. Two cultures are merging. This is the true strength of our partnership and we believe the most precious part, whose value lies in the incredible human wealth created for our companies and the development of our people. With regard to near to medium targets, we have laid out a detailed development plan for Fiat and Fiat Industrial that was presented to the international financial community on 21 April 2010. The financial targets reflect our aspiration to deliver strong topline growth, together with robust improvements in profitability. We project the post-demerger Fiat will achieve 2011 revenues of 37 billion, growing to 64 billion by 2014. The steady improvement in trading profit and margins reflects our commitment to eliminating the handicaps that have been a drag on our business in Europe, optimizing synergies and transforming Fiat into a best-in-class competitor. For Fiat Industrial, the plan targets revenues of around 22 billion for 2011 and nearly 30 billion in 2014, representing an average annual growth rate of 8%. Trading profit will also increase significantly and is projected to reach 3.3 billion in 2014. To support the growth of the two groups and new product development, we plan to invest about 30 billion over the plan period, including almost 2 billion a year in research. For the auto business in particular, where the most significant portion of those investments will be made, the 5-year plan calls for renewal of our product portfolio with the launch of 34 new models and 17 major product interventions. Due to the prevailing weak market conditions, in 2010 we made the strategic decision to limit new product launches, scheduling them to recommence from the second half of 2011. The overall plan represents a significant commitment to invest in expanding our product offer and improving our competitive position in Europe. As we work to achieve these objectives, our decisions will be directed at balancing the need for industrial efficiency with the sense of social responsibility that has guided Fiat this far and become part of its DNA. We demonstrated this commitment to Italy when we presented a project that aims to make our production more competitive, while at the same time providing our people with a more certain future. We are also demonstrating that commitment elsewhere in the world, through development based on the very same values we applied in rebuilding Fiat: integrity, transparency and a responsible approach to business. These values have been recognized and appreciated internationally. In 2010, we were one of the few auto sector companies included in the prestigious Dow Jones Sustainability Index that is comprised of only those companies considered to be leaders in sustainability. We consider this an important achievement, not just for the image that it portrays, but because it provides concrete proof that there is a system of values that drive the delivery of our results. These values have made Fiat a solid organization where commitment and a sense of duty are the bedrock of what we do. These strong principles are firmly embedded in our organization and form an integral part of who we are as leaders, because we live them as individuals even more than as managers. We leave 2010 behind with a sense of accomplishment. The demerger and the strengthening of the alliance with Chrysler have indelibly and irreversibly changed Fiat. We have grown these businesses together for more than 100 years to the point where their togetherness had become a matter of custom and comfort. We have decided to break away from this comfort and tradition in order to set the stage for the next stage of development of our businesses. Fiat and Fiat Industrial start their new lives in 2011 with a renewed sense of purpose and direction. Financially strong and well equipped technologically and industrially, they are embarking on a project of international exploration, each distinct, but taking their respective know-how and experience around the world with a clear objective of becoming vibrant global competitors. We thank our shareholders for having been patient partners on this journey and for staying with us as Fiat and Fiat Industrial stakeholders in the next phase of our development. 18 February 2011
/s/ John Elkann John Elkann CHAIRMAN
/s/ Sergio Marchionne Sergio Marchionne CHIEF EXECUTIVE OFFICER
THE GROUP AT A GLANCE

10 2010 in summary 11 Structure: Fiat & Fiat Industrial 12 Fiat Group Brands 16 Fiat Industrial Group Brands 20 Fiat & Fiat Industrial Worldwide 22 Operating Responsibly
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2010 IN SUMMARY
2010 IN SUMMARY
2010 RESULTS ( billion) Revenues Trading Profit Net Profit Net Industrial Debt (**) Liquidity
(*) (**) Net of eliminations between Fiat and Fiat Industrial At 31 December 2010, Net industrial debt split between Fiat post Demerger and Fiat Industrial reflects the Net industrial debt attributable to the two groups on a stand-alone basis. The settlement of intercompany financial payables and receivables, outstanding at 31 December 2010 between Fiat post Demerger and Fiat Industrial occurred in January 2011. Had these transactions occurred before year end, this would have increased the Fiat reported post demerger cash (and conversely decreased the Fiat Industrial cash), with no effect on the above mentioned stand-alone reported Net industrial debt of the two groups at 31 December 2010.
Fiat Group pre Demerger

56.3 (*) 2.2 0.6 2.4 15.9 35.9 1.1 0.2 0.5 12.2 21.3 1.1 0.4 1.9 3.7
Revenues
( million)
Trading Profit
( million)
56,258 2010 50,102 2009 2008 0

(*)
2010 2009 59,564(*) 2008 50,000 60,000
2,204 1,058 3,362 0 1,000 2,000 3,000 4,000
10,000 20,000 30,000 40,000
Following adoption of the improvement to IAS 16 in 2009, revenues for 2008 were increased by 184 million
Debt ( million)
Profit/(Loss) ( million)
2010 2,442 2009 4,418 2008 5,949 0
14,932 2010 2009 17,954 2008 7,500 10,000 12,500 15,000 17,500 20,000 -1,000 -500 (848)
600
15,898
1,721
2,500 5,000
500
1,000
1,500
2,000
Fiat Group
Industrial Activities
STRUCTURE: FIAT & FIAT INDUSTRIAL
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STRUCTURE: FIAT & FIAT INDUSTRIAL
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FIAT GROUP BRANDS
FIAT GROUP BRANDS

Fiat is a global group whose activities are focused in the automobile sector. It designs, produces and sells cars for the mass market under the Fiat, Lancia, Alfa Romeo and Fiat Professional brands and luxury and performance cars under the Ferrari and Maserati brands. The Group also operates in the components sector through Magneti Marelli, Teksid and Fiat Powertrain and in the production systems sector through Comau. Fiats industrial capabilities, market positioning and strategic development programs make it one of the worlds most solid and competitive groups. Following the demerger, the Fiat Groups industrial and financial services activities are carried out through companies located in approximately 40 countries and it has commercial relationships with customers in approximately 140 countries. The Groups principal businesses are:
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AUTOMOBILES Fiat Practical, versatile and responsive made for consumers who are increasingly focused on environmental issues and technological innovation. The brand produces models that offer practical and affordable technology combined with unmistakable Italian design. In recent years, it has also placed a strong emphasis on the ecological profile of its products. As a result of its constant commitment to developing concrete solutions that are deployable now, Fiat has achieved the lowest average CO2 emissions among the top selling brands in Europe for more than 3 years running (source: JATO Dynamics). Alfa Romeo Sportiness, technology, comfort and elegance contribute to the distinctive design and personality that are Alfa Romeo. Celebrating its 100th anniversary in 2010, this historic Italian marque continues to embody the values recognized by generations of auto enthusiasts agility, spirit, and style, a style born from the unique balance between attractive proportions and advanced technology that offers optimum power, fuel consumption and ecological performance. Lancia Class, exclusivity and unmistakable Italian style are the hallmarks of Lancia. For more than 100 years, the brand has been producing models whose elegant originality complements their day-to-day versatility: models such as the compact Ypsilon, the Musa city limousine and the Delta, which blends style with a bold and innovative spirit. Abarth Relaunched in 2007, Abarth is today synonymous with spirited performance and sporting emotion. The Scorpion offers cars that are ultra-modern yet true to the brands traditional spirit, packed with technology and performance born for the racetrack. Models include the Abarth Punto Evo, the 500C and the limited edition Abarth 695 Tributo Ferrari released in 2010, as well as tuning kits and exclusive versions for racing enthusiasts. Fiat Professional Fiat Professionals relationship with its customers is a partnership between professionals. With its full range of light commercial vehicles, the brands mission is to support both small and large companies in growing their businesses. Customers seeking productivity, ease of use and fuel efficiency rely on the know-how and innovation of Fiat Professional their ally in meeting the challenges of the market. Maserati Models that are set apart by their styling, elegance and technological sophistication. Cars such as the Quattroporte, a sedan of unmistakable style that represents the ideal balance between luxury and performance; or the GranTurismo, the first 2-door, 4-seater modern coup that combines power and elegance, futuristic design with surprising practicality; or the GranCabrio, the brands first ever 4-seater cabriolet. Maseratis excellence is often the result of experience gained on the racetrack. Indeed, it has a long and glorious racing heritage that continues today with the MC12, winner of 14 FIA GT Championships since its debut in 2004, and the new GranTurismo MC Trofeo, which, as of 2010, now has its own mono-brand trophy.
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FIAT GROUP BRANDS
Ferrari The companys history officially began in 1947 when the first car emerged from the gates of no. 4 Via Abetone Inferiore in Maranello. That historic two-seater the 125 S went on to win the Rome Gran Prix in 1947 and rapidly evolved into a refined GT roadster. Ferrari has traveled a long way since then, but its mission has remained the same: to make unique sports cars that represent the finest in Italian auto design and craftsmanship, both on and off the track. The essence of excellence and sportiness, Ferrari needs no introduction. Numerous Formula1 titles (16 times winner of the Constructors championship and 15 times winner of the Drivers championship) are its calling card. And, of course, the impressive line-up of legendary GT models: cars that are unique for their design, technology and luxurious styling and that represent the best in Italian the world over. COMPONENTS AND PRODUCTION SYSTEMS Fiat Powertrain Fiat Powertrain specializes in the research, development, production and sale of engines and transmissions and is one of the largest players in its field globally. The company produces engines ranging in output from 60 to 235 hp and transmissions with torque from 143 to 400 Nm for application on passenger cars and light commercial vehicles. Its R&D capabilities and know-how in engineering and production processes ensure excellence in innovating and developing solutions. Magneti Marelli The company is an international leader in the design and production of leading-edge automotive systems and components: from lighting to engine control systems, from electronics to suspension systems, from exhaust systems to components for the aftermarket and motorsport. Through a process of continuous innovation, Magneti Marelli seeks to leverage its know-how and the Groups expertise in electronics to develop intelligent systems and solutions that contribute to the evolution of safe and environmentally-sustainable mobility, as well as enhancing the passenger experience. The company has been a major contributor to the enormous technological advances achieved in the automotive sector in recent years. Teksid Teksid is the largest producer of gray and nodular iron castings in the world and places significant emphasis on production quality to meet the specific and increasingly demanding needs of the automotive industry. The company produces engine blocks, cylinder heads, engine components, and parts for transmissions, gearboxes and suspensions. In addition, Teksid Aluminum is a world leader in production technologies for aluminum cylinder heads and engine components. Teksids competitive advantages include: 80 years of experience; a high level of automation; continuous upgrading of technology focused on improving quality standards; and close integration with the product development of its customers, which include the major global producers of cars, trucks, tractors and diesel engines. Comau Comau makes the machines that make machines: body welding and assembly robots; and machining and assembly for mechanical systems. Customers are delivered a turnkey solution that includes design, production, installation, production startup and follow-up maintenance. With 40 years of experience in industrial automation, Comau is a leader in the search for innovative technologies to continuously improve processes. Constant investment in R&D has enabled the company to position itself as an international full-service provider of engineering solutions to the automotive industry, as well as the aerospace, petrochemical, steel and foundry industries. Through its Ecomau solutions, Comau supports customers in the application of energy-saving production technologies through upgrades to existing plant and equipment and provision of new plant and equipment.
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FIAT INDUSTRIAL GROUP BRANDS

Fiat Industrials significant industrial base, extensive product range and global presence make it a leader in the global capital goods sector. Created through the demerger from Fiat S.p.A., the Group operates through businesses that are all major international players in their industry sectors: CNH-Case New Holland, Iveco and FPT Industrial. These three sectors design, produce and sell tractors, agricultural and construction equipment (CNH), trucks, commercial vehicles, buses, special vehicles (Iveco), in addition to engines and transmissions for those vehicles and engines for marine applications (FPT Industrial). The Group carries out its industrial and financial services activities through companies located in approximately 45 countries and has commercial relationships with customers in approximately 190 countries. It activities are divided into the following sectors:
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AGRICULTURAL AND CONSTRUCTION EQUIPMENT (CNH Case New Holland) From the very beginning, the sectors brands played a key role in the development of the agricultural and construction equipment industries in Europe and the United States. Today, CNH offers customers in these two segments the best technology available. Agricultural equipment is sold under the New Holland Agriculture and Case IH brands, as well as the Steyr brand in Europe. Construction equipment is sold under the New Holland Construction and Case Construction brands, as well as the Kobelco brand in North America. CNH not only provides customers products of the highest quality that are adaptable to their specific needs and guarantee the maximum in productivity, it also offers full service support (CNH Parts & Service) and a comprehensive range of financing solutions tailored to the customers profile (CNH Capital). The sectors brands are: Case IH Agriculture The Case IH Agriculture brand and red logo embody a tradition of leadership in the agricultural equipment market. The brand is synonymous with incomparable performance, low operating costs and reliability. The range of tractors, balers and combine harvesters reflects the heritage of leading agricultural equipment producers and brands such as Case, International Harvester and David Brown, to name but a few. Each brand has played an important role in the history and development of Case IH. Today, Case IH is recognized as a global provider of powerful, reliable and high productivity equipment, principally for large grain producers, and it boasts an organization of field personnel committed to providing high-quality professional services for optimized management of agricultural businesses. New Holland Agriculture Since 1895, New Holland has been providing solutions that improve farming efficiency and productivity through the use of accessible technology. In 2006, the Clean Energy Leader strategy was launched for the active promotion of renewable fuels, emissions reduction systems and sustainable agricultural technology. New Holland offers cash crop producers, livestock farmers, contractors, vineyards and groundcare professionals the largest choice of easy-to-operate tractors, harvesters and material handling equipment: more than 80 product lines and over 300 models. New Holland complements the widest agricultural equipment offering in the world with efficient Parts & Service support and a range of financial services tailored to the agricultural industry. A professional global dealer network also guarantees total assistance and expert advice. Maintaining close relationships with customers in every segment, New Holland is a reliable partner for every farmer. Steyr Steyr has been the leading producer of tractors in Austria for more than 60 years. Its distinctive red and white trademark, first used in 1967 with the launch of the Plus series, is today synonymous with high-quality, reliable products. Steyrs tractors are produced for the premium segment, in which it holds a significant share in Austria. It exports 60% of production and its principal export markets are Germany, Switzerland, France, Italy, Belgium, the Netherlands, Luxembourg, Scandinavia and Southern and Eastern Europe. Nineteen different tractor models are manufactured at the St. Valentin plant in Austria, where significant investment has been made recently. The Steyr Kompakt, 9000 MT, Profi series and CVT series, as well as the municipal and forestry range of products, testify to the companys ability to respond rapidly to the ever-changing demands of the market.
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New Holland Construction New Holland Construction is an undisputed leader in the global construction equipment market. The black and yellow markings symbolize the best in know-how and experience from Fiat Kobelco, Kobelco, O&K, New Holland and Fiat Allis. The blending of their individual strengths and successes gave birth to a brand with a rich heritage and a pioneer in the development of advanced and sophisticated earth-moving technology. In addition to a comprehensive range of products, New Holland Construction has dedicated significant resources and investment to creation of an extensive dealer network that operates with the following philosophy: listen to customers, take a personal approach to their problems and rapidly find a solution. Case Construction Since it was founded in Racine, Wisconsin (U.S.A.) more than 160 years ago, Case Construction has built a reputation as a premium manufacturer of a wide range of technologically-advanced products for the construction equipment industry. With more than 90 models carrying the Case name and colors, the brands product line-up boasts a solution to meet almost every requirement. Equipment such as skid steer loaders, mini excavators, backhoe loaders, crawler and wheel excavators, and wheel loaders have been designed to face extreme climate conditions and operate in high-risk situations. Over more than a century, Case has earned an enviable reputation as supplier to the armed forces and other specialist organizations around the world engaged in activities such as dismantling land mines and re-building communities devastated by natural disasters. Kobelco Kobelco manufactures and sells a full line of compact, mid-size and full-size excavators ranging from 1.9 to 88 tons. Particular attention is given to power and precision and every Kobelco excavator is designed and manufactured to exceed customer expectations. Kobelco excavators are sold through over 250 distribution outlets in North America and customers are supported by a network of experienced dealers and field service representatives. TRUCKS AND COMMERCIAL VEHICLES (Iveco) A range of light, medium and heavy vehicles for the transportation and distribution of goods that are cost effective to operate and minimize environmental impacts (Iveco). Commuter buses and touring coaches designed for optimum environmental performance (Iveco Irisbus). Quarry and mining equipment purpose-built to move heavy materials across any terrain with absolute reliability (Iveco Astra). Special vehicles that can be deployed rapidly and effectively for firefighting (Iveco Magirus), as well as civil defense and peace-keeping missions (Iveco Defence Vehicles). Iveco guarantees its customers the highest level of after-sales support worldwide and, through Iveco Capital, offers advanced financial services solutions for the purchase, lease or rental of its products. The Group operates through the following brands:
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Iveco Iveco is one of the world leaders in road transportation. It designs, manufactures and sells a wide range of light, medium and heavy commercial vehicles for on-road and off-road use. Alongside its main product offer, the company also offers after-sales and financing services, in addition to services related to used vehicles. From the beginning, the company has been committed to safe, efficient and ecological mobility. It is the only producer to offer ecological diesel and natural gas engines on its entire range of vehicles. Iveco was the first full-line truckmaker to invest significantly in natural gas technology, developing components and optimized configurations for use with CNG. From light segment vehicles (EcoDaily), to medium (Eurocargo) and heavy (Stralis), all products are equipped with engines that meet the Enhanced Environmentally-friendly Vehicle standard (EEV), the strictest emissions standard currently in effect in Europe. Iveco Irisbus Iveco Irisbus is one of the major European manufacturers in the passenger transport sector and is steadily expanding its activities globally, selling its products in more than 40 countries. This has been achieved through continuous investment in research and development and the use of cutting-edge manufacturing technologies. Iveco Irisbus offers a complete range of vehicles for transporting people: coaches for short and long-range touring, buses for urban and inter-city transport, and mini-buses. One of the features that sets Iveco Irisbus apart is its approach to testing which for years has been conducted in close collaboration with the operators of public transport on alternative fuels and new vehicle concepts, focusing in particular on environmental impact, passenger comfort and running costs. Iveco Astra Astra is synonymous with endurance and reliability the world over. Not even African roads or the most challenging desert conditions can stop Astra vehicles whose safety performance and productivity serve as a standard bearer for Italian technology around the world. The company, which was founded in 1946, has been part of the Iveco sector since 1986. It has behind it more than 60 years of experience designing and producing vehicles to carry out the most challenging tasks in extreme climate conditions. Astra builds vehicles that can enter the most inaccessible quarries and mines and move huge quantities of heavy material, such as rock or mud. The product range includes mining and construction vehicles, rigid and articulated dumptrucks, and special vehicles. The company is also strongly committed to reducing emissions levels for its vehicles and, on the production side, it seeks to optimize waste collection and use for the maximum recovery and recycling possible. Iveco Magirus For 140 years, Magirus has been making equipment to deal with the most serious emergencies: fires, floods, earthquakes and explosions. Its story begins in 1864, when the business was started up by Conrad Magirus, chief of the local fire brigade in Ulm (Germany), who invented the first ever firefighting ladder. With many commercial successes and recognitions received over the years, the company is today a major player globally in the firefighting and emergency equipment sector. Iveco Magirus actively collaborates with firefighters from Siberia to Africa, and from China to Japan. It is through a close relationship with those at the front line in emergency response that the best and most reliable technological solutions are developed. COMPONENTS FPT Industrial FPT Industrial is specialized in the design, production and sale of propulsion and transmission systems for on- and off-road trucks and commercial vehicles, as well as engines for marine application and power generation. With an extensive product portfolio (5 engine families ranging in output from 50 hp to 870 hp and transmissions with maximum torque from 300 to 400 Nm), and a strong emphasis on research and development, FPT Industrial is one of the worlds leading producers of powertrains for industrial application.
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FIAT & FIAT INDUSTRIAL WORLDWIDE
FIAT & FIAT INDUSTRIAL WORLDWIDE

From the very beginning, Fiat has always had a significant international dimension and today the Group boasts an extensive global presence. By employing a global vision but interacting at the local level, the two Groups are prepared to confront new challenges, to achieve the maximum in each market and to react rapidly to the needs of their millions of customers.
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ITALY
EUROPE
NORTH AMERICA
REVENUES BY DESTINATION EMPLOYEES PLANTS R&D CENTERS
27.3% 45.8% 44 30
11.7% 29.2% 16 13
33.0% 29 13
32.1% 25 21
3.1% 1.2% 6 3
24.4% 15.7% 11 13
17.9% 36.2%
MERCOSUR
REST OF WORLD
27.9% 18 5
17.3% 8 4
8.7% 6.4% 16 7
14.5% 6.1% 8 4
28.7% 12.8%
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OPERATING RESPONSIBLY
OPERATING RESPONSIBLY
Fiat Group has long been committed to promoting increasingly sustainable development, in the firm belief that growth only has value if it is achieved responsibly. Making social and environmental considerations part of its strategic processes has become an integral part of Fiats daily business.
This is not an arbitrary commitment, but rather is increasingly central to how the Group operates, with top management leading the way. The Group Executive Council (GEC) the decision-making body headed by the Chief Executive Officer of Fiat S.p.A. and made up of the CEOs of the operating sectors and the heads of certain functions defines the strategic approach, approves the guidelines and Sustainability Plan and is periodically informed on the Groups environmental and social performance. In addition, the Nominating, Corporate Governance and Sustainability Committee (a sub-committee of the Board of Directors) evaluates proposals relating to strategic guidelines on sustainability and reviews the annual Sustainability Report. Fiats commitment to environmentally and socially sustainable development was also recognized by leading sustainability rating agencies and international organizations. In 2010, Fiat S.p.A. was named as a sustainability leader for the second year running, maintaining its place in the Dow Jones Sustainability World and Dow Jones Sustainability Europe indexes, the most prestigious equity indexes that only admit companies that are best-in-class in terms of economic, environmental and social performance. Fiat received a score of 93/100 from SAM, specialists in sustainability investing, compared to an average of 70/100 for the pool of Automobiles sector companies analyzed. Other European companies specialized in Socially Responsible Investing (SRI) also acknowledged Fiats performance, with Sustainalytics recognizing it as the leading automobile company and Oekom Research awarding it a Prime rating. Fiat Group also participated in the review conducted by the Carbon Disclosure Project, achieving the highest score (among automobile companies included in the worlds 500 largest corporations by market capitalization) for the level of disclosure on issues linked to climate change and a B grade (on a scale from D-worst to A-best) for its climate change mitigation initiatives. Finally, Fiat Group took third place in the 2010 CSR Online Awards (established by strategic communications consultancy, Lundquist) for online communication in the area of corporate social responsibility. Although these are major achievements, they are not the final objective. Fiat is committed to maintaining high standards and constantly improving performance on several fronts: the environment and sustainable mobility; attention to the needs of individuals, both inside and outside the company; and ethical and transparent conduct.
ANDREA BORGARELLO
23
In relation to sustainable mobility, for example, after three years as leader, Fiat Automobiles was again confirmed as having the lowest average CO2 emissions of the top selling brands in Europe (source: Jato Dynamics, September 2010). To minimize its environmental footprint, the Group has expanded the action plan established in 2009, initially focused on reducing energy consumption and CO2 emissions, to include challenging new targets for the reduction of water consumption, waste generation and major harmful emissions by the end of 2014. On the social front, the Group continued to manage the effects of the difficult economic environment on employees with responsibility and transparency and further enhanced its human capital development program. The commitment to health and safety in the workplace also continued through targeted training and other initiatives. Programs in support of the social and economic development of local communities achieved significant results again in 2010, particularly in Brazil. A detailed description of the Groups environmental and social initiatives is provided in the Fiat Group Sustainability Report, also available in an interactive version on the Groups Sustainability website. A progress report on existing projects and new targets for continuous improvement in the Groups sustainability performance are outlined in the Sustainability Plan.
REPORT ON OPERATIONS
26 Highlights 29 Shareholders 32 Key events in 2010 41 Highlights by Sector 42 Main risks and uncertainties to which Fiat S.p.A. and Fiat Group post Demerger are exposed 47 Research and innovation 56 Human resources 64 Financial review Fiat Group 88 Corporate governance 93 Share-based incentive plans 96 Transactions between Group companies and with related parties 97 Subsequent events and outlook 98 Operating performance: Continuing Operations 99 106 108 110 112 116 117 119 122 129 Fiat Group Automobiles Maserati Ferrari Fiat Powertrain Components Metallurgical Products Production Systems Agricultural and Construction Equipment Trucks and Commercial Vehicles FPT Industrial
118 Operating performance: Discontinued Operations
132 Financial review Fiat S.p.A. 135 Motion for approval of the Statutory Financial Statements and allocation of 2010 profit
26
HIGHLIGHTS
HIGHLIGHTS
FIAT GROUP PRE DEMERGER
( million)
Net revenues Trading profit/(loss) Operating profit/(loss) Profit/(loss) before taxes Profit/(loss) for the year Attributable to: Owners of the parent Non-controlling interests Basic earnings/(loss) per ordinary share () Basic earnings/(loss) per preference share () Basic earnings/(loss) per savings share () Diluted earnings/(loss) per ordinary share () Diluted earnings/(loss) per preference share () Diluted earnings/(loss) per savings share () Investments in tangible and intangible assets of which: capitalized R&D costs R&D expenditure Total assets Net (debt)/cash of which: net industrial (debt)/cash Total equity Equity attributable to owners of the parent No. of employees at year end
2010 56,258 2,204 2,009 1,282 600 520 80 0.410 0.410 0.565 0.409 0.409 0.564 3,718 1,282 1,936 73,442 (14,932) (2,442) 12,461 11,544 199,924
2009 50,102 1,058 359 (367) (848) (838) (10) (0.677) (0.677) (0.677) (0.677) (0.677) (0.677) 3,386 1,046 1,692 67,235 (15,898) (4,418) 11,115 10,301 190,014
2008 59,564(*) 3,362 2,972 2,187 1,721 1,612 109 1.290 1.290 1.445 1.285 1.285 1.440 4,979(*) 1,216 1,986 61,772 (17,954) (5,949) 11,101 10,354 198,348
2007 58,529 3,233 3,152 2,773 2,054 1,953 101 1.537 1.537 1.692 1.526 1.526 1.681 3,985 932 1,741 60,136 (10,423) 355 11,279 10,606 185,227
(1) (1) (1) (1) (1) (1)
(2)
(*) Following adoption of the improvement to IAS 16 in 2009, revenues for 2008 were increased by 184 million and investments in tangible and intangible assets were reduced by 284 million (1) See Note 13 to the Consolidated Financial Statements for additional information on the calculation of basic and diluted earnings per share (2) Includes capitalized R&D and R&D charged directly to the income statement
27
CONTINUING AND DISCONTINUED OPERATIONS
( million)
Net revenues Trading profit/(loss) Operating profit/(loss) Profit/(loss) before taxes Profit/(loss) for the year Attributable to: Owners of the parent Non-controlling interests Basic earnings/(loss) per ordinary share () Basic earnings/(loss) per preference share () Basic earnings/(loss) per savings share () Diluted earnings/(loss) per ordinary share () Diluted earnings/(loss) per preference share () Diluted earnings/(loss) per savings share () Investments in tangible and intangible assets of which: capitalized R&D costs R&D expenditure Net industrial debt No. of employees at year end
Continuing Operations 35,880 1,112 992 706 222 179 43 0.130 0.217 0.239 0.130 0.217 0.238 2,864 886 1,284 (542) 137,801
2010 Discontinued Operations 21,342 1,092 1,017 576 378 341 37 0.273 0.273 0.319 0.272 0.272 0.318 854 396 652 (1,900) 62,123
Continuing Operations 32,684 736 378 103 (345) (374) 29 (0.302) (0.302) (0.302) (0.302) (0.302) (0.302) 2,684 748 1,154 (3,103) 128,771
2009 Discontinued Operations 17,968 322 (19) (470) (503) (464) (39) (0.375) (0.375) (0.375) (0.375) (0.375) (0.375) 702 298 538 (1,315) 61,243
(1) (1) (1) (1) (1) (1)
(2)
(1) See Note 13 to the Consolidated Financial Statements for additional information on the calculation of basic and diluted earnings per share (2) Includes capitalized R&D and R&D charged directly to the income statement
28
HIGHLIGHTS
SELECT DATA BY REGION Fiat Group pre Demerger

No. of companies 2010 2009 133 140 267 265 70 74 35 33 111 109 616 621 Employees 2009 80,434 45,826 11,157 42,397 10,200 190,014 Plants 2009 64 57 16 27 24 188 R&D Centers 2009 48 33 15 10 11 117
Italy Europe (excluding Italy) North America Mercosur Other regions TOTAL
2010 81,353 47,080 11,423 47,471 12,597 199,924
2010 60 54 17 26 24 181
2010 43 34 16 9 11 113
Revenues by geographic market ( million) 2010 2009 11,907 12,744 18,626 17,668 6,302 5,021 13,228 9,798 6,195 4,871 56,258 50,102
Continuing Operations
No. of companies 2010 112 147 21 27 71 378 2010 63,214 24,616 1,690 39,498 8,783 137,801 Employees 2009 61,758 22,940 1,410 35,915 6,748 128,771 2010 44 29 6 18 16 113 Plants 2009 48 32 5 19 16 120 2010 30 13 3 5 7 58 R&D Centers 2009 33 13 3 5 7 61
Revenues by geographic market ( million) 2010 2009 9,782 10,747 11,857 11,056 1,105 800 10,027 7,736 3,109 2,345 35,880 32,684
Discontinued Operations
No. of companies 2010 21 120 49 8 40 238 2010 18,139 22,464 9,733 7,973 3,814 62,123 Employees 2009 18,676 22,886 9,747 6,482 3,452 61,243 2010 16 25 11 8 8 68 Plants 2009 16 25 11 8 8 68 2010 13 21 13 4 4 55 R&D Centers 2009 15 20 12 5 4 56
Revenues by geographic market ( million) 2010 2009 2,491 2,250 6,871 6,687 5,200 4,226 3,684 2,274 3,096 2,531 21,342 17,968
SHAREHOLDERS
29
SHAREHOLDERS
FINANCIAL COMMUNICATION Fiats constant objective is to maintain and reinforce the trust of customers and investors through transparent and responsible management, thereby increasing its enterprise value on a sustainable basis. Fiat maintains constant dialog with individual shareholders, institutional investors and financial analysts through its Investor Relations function, which actively provides information to the market to consolidate and enhance confidence and the level of understanding of the Company and its business activities. Throughout the year, the Investor Relations team also communicates with the financial community through conference calls and public presentations held to present financial results or other events that require direct communication to the market, at the same using the website (www.fiatspa.com) to publish information presented or discussed on those occasions. Additionally, the IR program includes seminars, industry conferences and non-deal roadshows in major financial centers that provide the opportunity for direct contact with management. The most important event of 2010 was the Fiat Investor Day held at Lingotto on April 21st. On that occasion, the CEO and heads of the Groups principal businesses presented the 2010-2014 Business Plan to analysts, investors and other members of the financial community in attendance or linked in via webcast. Investor Relations activities intensified during the second half of the year, with management conducting two major non-deal roadshows in Milan, London, New York and Boston to present the market with more detailed information on operating performance and on business strategies and projections for the five year plan period, in addition to details of the demerger which, on 1 January 2011, resulted in the separation of the capital goods businesses and the creation of two autonomous groups: Fiat and Fiat Industrial. The Investor Relations section of Fiats corporate website (www.fiatspa.com) which underwent a major upgrade in terms of both graphic design and content at the beginning of 2011 provides financial information, corporate presentations, periodic publications, corporate announcements and real-time share information. Shareholders can also contact the company at the following:
For holders of Fiat shares: Toll-free number in Italy: 800-804027 E-mail: serviziotitoli@fiatspa.com investor.relations@fiatspa.com
For holders of ADRs: Toll-free number in the USA and Canada: 800 749 1873 Outside the USA and Canada: +1 (718) 921 8137 Website: www.adr.db.com
30
SHAREHOLDERS
FIAT ORDINARY SHARES 1/1/2009 TO 31/12/2010 PERFORMANCE RELATIVE TO FTSE ITALIA ALL SHARE AND EUROSTOXX INDEXES (REBASED TO 100: 01/01/2009) AND AVERAGE MONTHLY TRADING VOLUME (MILLIONS OF ORD. SHARES)
350 300 250 200 150 100 50 Jan- Feb- Mar- Apr- May- Jun09 09 09 09 09 09 Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun09 09 09 09 09 09 10 10 10 10 10 10 Jul- Aug- Sep- Oct- Nov- Dec10 10 10 10 10 10 50 150 100 250 200 millions of shares DJ EUROSTOXX AUTOMOTIVE FIAT
FTSE ITALIA ALL SHARE
Following the crisis and market uncertainties of the previous year, 2010 was a positive year for the equity markets, although performance varied significantly from market to market. In the United States, the year closed positively with the Dow Jones up around 11%: despite problems relating to public sector spending and the sustainability of the financial system, major American corporates recorded strong earnings. Performance was also strong in Asia and for emerging markets in general, although some Asian markets sustained losses for the year (Shanghai -14%, Tokyo -3%). Of the three major economic blocks, Europe underperformed once again, reflecting concerns over the sovereign debt issues of some smaller European states and the pace of its economic recovery relative to other regions. Also in Europe, there were major differences between markets: Frankfurt gained around 16% for the year, while doubledigit losses were recorded for the FTSE Italia (down around 13%) and the Madrid stock exchange (approx. 17% decline), and Paris closed the year down around 3%. During this period, Fiat shares gained 50.5% over the closing price for 2009 and outperformed the DJ Euro Stoxx Automotive index by 42.8%. MAJOR SHAREHOLDERS At the date of this Report, Fiat had a total of 1,092,247,485 ordinary shares outstanding and the following institutions held more than 2% of ordinary shares: ORDINARY SHARES: 1,092,247,485
Exor S.p.A. (*) Capital Research & Management Company BlackRock Investment Management (UK) Limited John Griffin (through Blue Ridge Capital) FMR LLC Other institutional investors EU Other institutional investors outside EU Other shareholders
(*) In addition to 3.5% of ordinary shares held by Fiat S.p.A. Other institutional investors outside EU
30.5% 5.2% 3.1% 2.4% 2.2% 20.6% 8.0% 24.5%
8.0%
Other institutional investors EU
Other shareholders
24.5%
20.6%
FMR LLC
2.2%
John Griffin (through Blue Ridge Capital)
2.4%
EARNINGS PER SHARE

(figures in )
2010 0.410 0.565 0.409 0.564
2009 (0.677) (0.677) (0.677) (0.677)
2008 1.290 1.445 1.285 1.440
2007 1.537 1.692 1.526 1.681

BlackRock Investment Management (UK) Limited
Exor S.p.A.
Basic earnings/(loss) per ordinary and preference share Basic earnings/(loss) per savings share Diluted earnings/(loss) per ordinary and preference share Diluted earnings/(loss) per savings share
30.5%
3.1%
Capital Research & Management Co.
5.2%
31
REFERENCE PRICE PER SHARE (*):

(figures in )
Ordinary shares Preference shares Savings shares

(Source: Reuters) (*) Equivalent to the closing auction price
30.12.10 15.430 11.170 11.090
31.12.09 10.250 6.000 6.295
31.12.08 4.590 2.440 3.035
28.12.07 17.695 14.640 14.655
29.12.06 14.468 12.119 13.880
MONTHLY MINIMUM AND MAXIMUM PRICE IN 2010

(figures in )
FIAT ORDINARY
18 16 14 12 10 8 6 4 01 02 03 04 05 06 07 08 09 10 11 12
FIAT SAVINGS
14 12 10 8 6 4 2 01 02 03 04 05 06 07 08 09 10 11 12
FIAT PREFERENCE
14 12 10 8 6 4 2 01 02 03 04 05 06 07 08 09 10 11 12
32
KEY EVENTS IN 2010
KEY EVENTS IN 2010

JANUARY In France, prestigious weekly LArgus de lAutomobile names EcoDaily Utilitarie de lAnne 2010. American Society of Agricultural and Biological Engineers (ASABE) awards seven of the prestigious AE50 innovation awards to New Holland Agriculture and three to Case IH. Case IH adds Farmall A Series models to its Farmall tractor range. FEBRUARY FEBRUARY CNH brands unveil strategies to meet Tier 4 emissions standards. New Holland Agriculture wins six innovation awards at FIMA fair in Zaragoza (Spain) and two prestigious GOOD DESIGN awards in Chicago (USA). Inauguration of spare parts distribution center in Portland to serve more than 140 New Holland, Case IH, and Case Construction equipment dealers in Pacific Northwest (USA).
Fiat Group Automobiles SpA and Chrysler Group LLC take additional step towards integration of their distribution activities in Europe. From April 2010, FGA to commence commercial activity in support of sales and service activities for Chrysler, Jeep and Dodge brand products in several European countries.
JANUARY
Release of the new Fiat Dobl (both passenger and Cargo versions), a true family space vehicle offering best in category in safety, economy and environmental performance. Also launched, the 2010 model year Bravo with content and style enhancements.
Fiat SpA receives Sector Mover and Gold Class distinctions from SAM, the sustainability-focused investment group that evaluates the 2,500 largest quoted companies for entry in Dow Jones Sustainability indexes. In 2009, Fiat has best improvement in sustainability performance in Automobiles sector (SAM Sector Mover) scoring less than 5% below sector leader (SAM Gold Class).
MARCH
MARCH Following preliminary agreement signed in October 2009, CNH and OJSC KAMAZ finalize joint venture agreement for production of agricultural and construction equipment in the Russian Federation.
33
Presentation to Minister for Economic Development and trade unions of first step in plan announced in December 2009 to upgrade Groups auto manufacturing operations in Italy to meet future needs. The investment program includes comprehensive restructuring of the Giambattista Vico plant in Pomigliano dArco in preparation for production of the future Panda, due for commercial launch in second half of 2011. Fiat also presents Dobl Natural Power at Swiss show, with 1.4 16v CNG/ gasoline T-JET engine, confirming undisputed leadership in factory-installed powerplants using alternative fuels. Lancia debuts special series Delta in Geneva, with new look and features, together with limited edition Ypsilon ELLE. Maserati presents limited edition Quattroporte Sport GTS Awards Edition, produced in celebration of the many awards received from top international magazines since the models launch. In Geneva, Ferrari presents the HY-Kers, a hybrid GT employing eco-smart technologies developed in Formula 1 racing. Geneva is also venue for debut of the Ferrari California with Start&Stop.
MARCH
Presentation at Geneva Motor Show of the new 85 hp 2-cylinder TwinAir, which combines revolutionary MultiAir system with fluid-dynamic technology for optimized combustion. Also unveiled, the Alfa TCT (Twin Clutch Technology) designed for Alfa Romeo MiTo, a new innovative transmission incorporating 23 patented technologies.
MARCH
International debut of the Alfa Romeo Giulietta at the Geneva Motor Show.
MARCH For the 3rd consecutive year, JATO recognizes Fiat Automobiles for reduction of CO2 emissions, naming it top among 10 best-selling brands in Europe with lowest average CO2 emissions per vehicle sold in 2009: 127.8 g/km. CNH opens industrial facility in Sorocaba (Brazil). Case IH launches Austoft 4000 sugar cane harvester in Africa, India, South East Asia and China. Construction Equipment magazine names New Holland Constructions B Series loader backhoe one of Top 100 Products of 2009.
Also on show in Geneva, the Abarth Punto Evo with innovative 165 hp 16v MultiAir 1400, and the Abarth 500C, first convertible released since brands relaunch.
34
KEY EVENTS IN 2010
APRIL
On April 21st, John Elkann appointed Chairman of Fiat SpA by Board of Directors. Outgoing chairman, Luca Cordero di Montezemolo, continues as board member of Fiat and Chairman of Ferrari.
Case Construction receives awards from Construction Equipment magazine and Rental Equipment Register for joystick steering on E Series wheel loaders. Better Roads magazine names Case 650L crawler dozer one of Top 20 Rollouts of 2009. APRIL Also on April 21st, Fiat holds Investor Day in Turin. Group CEO, Sergio Marchionne, and members of Group Executive Council present financial community with 2010-2014 Business Plan.
APRIL
At Beijing Motor Show, Ferrari presents 599 GTO: the highest performance road car ever built by the Maranellobased automaker.
Fitch Ratings confirms BB+ rating with negative outlook for Fiat. Moodys Investors Service confirms Ba1 rating with negative outlook for Fiat and Ba3 rating with stable outlook for CNH Global NV. And Standard & Poors Ratings Services places Fiat SpAs BB+ long-term rating on CreditWatch with negative implications and CNH Global N.V.s BB+ long-term rating on CreditWatch with developing implications. At BAUMA 2010 in Munich, Iveco presents extensive line-up of vehicles for construction sector, including international debut of the Astra HHD8, a 50 ton vehicle with significant payload capacity built to handle even the most impenetrable terrain. In Hanover, Iveco inaugurates first Truck Station, an international initiative dedicated to heavy transport. These service points are equipped to respond to all needs of a transport operator in a single stop. At BAUMA, New Holland launches first three models in new range of wheeled excavators (the WE150, WE170 and WE190) and introduces smallest mini-excavator in range (the new E10SR). MAY Integration of distribution activities of Fiat Group Automobiles and Chrysler Group in Europe begins with reorganization and integration of Chrysler and Lancia brand sales networks. By 2014, the integrated network to consist of over 1,000 dealerships across Europe with new operating mandate.
35
On May 28th, meeting held with trade unions in Turin to discuss future of Giambattista Vico plant in Pomigliano dArco. All unions are represented, except FIOM, which announces unavailability to attend and a subsequent meeting is arranged. Two production milestones achieved: 5,000,000th vehicle produced at Melfi (Italy), since plant opening in 1993, and 500,000th Fiat 500 built at Tychy (Poland), just 31 months after cars commercial launch. At Agrishow in Brazil, Case IH launches the 8120, 7120, 2799 and 2688 Axial-Flow combines, the Magnum 335 tractor and the Maxxum tractor with extended axle. JUNE SAIC Magneti Marelli Powertrain Co. Ltd. (SMMP), joint venture between Magneti Marelli and Shanghai Automobile Gear Works (SAGW), inaugurates new plant in industrial district of Jiading (Shanghai). The JV established in 2009 was set up to produce hydraulic components for Magneti Marellis Freechoice automated manual transmission (or AMT). Award of Awards received by Iveco at ceremony held on national innovation day, attended by President of the Italian Republic. Iveco debuts the Eurocargo hybrid, mid-range vehicle equipped with parallel diesel/electric propulsion system and, in mass transit sector, the new Citelis bus with series diesel/electric hybrid engine. Case Construction celebrates production of 250,000th skid steer loader. Diesel Progress magazine honors Case Construction with Excellence in Equipment Engineering award in loader/backhoe category for the 590 Super M+ Series 3 loader/backhoe.
JUNE
Alfa Romeo celebrates 100th anniversary with 4 days of festivities involving City of Milan, Fiera Milano, Monza race circuit and Alfa Romeo Museum. Event attended by some 3,000 classic cars from 45 countries around the world.
JUNE
At Interschutz trade show in Hanover, dedicated to firefighting solutions, Iveco Magirus presents first-of-its-kind 60-meter ladder and new high-performance Dragon 2 specially designed for emergency response at airports.
JUNE
New 1.4 MultiAir turbo engine named Best New Engine 2010, highly prestigious category of Engine of the Year awarded by international panel of 65 trade journalists from 32 countries.
36
KEY EVENTS IN 2010
JULY JULY Fiat and trade unions CISL-FIM, UIL-UILM and FISMIC meet in Turin and agree to implement accord reached with FIM, UILM, FISMIC and UGL on production of future Panda at Pomigliano dArco. Fiat Board of Directors approves demerger of Trucks & Commercial Vehicles and Agricultural & Construction Equipment businesses plus related powertrain activities announced during presentation of 2010-2014 Business Plan on April 21st. Moodys Investor Service places Fiats ratings (Ba1/NP) under review for possible downgrade. Fiat launches 2011 model year Fiat Panda with option of two Euro 5 engines: 75 hp 1.3 16v MultiJet diesel, with DPF as standard, and 69 hp 1.2 8v gasoline. Launch of numbered, limited edition Abarth 695 Tributo Ferrari, fastest ever on-road version of the 500. Fiat Professional expands Fiat Scudo line-up with new top-of-the-range, Euro 5-compliant 165 hp 2.0 MultiJet. The 2011 model year Fiorino is also released. AUGUST First export sales (to Vietnam) of the Genlyon, the on-road heavy vehicle produced by joint venture between Iveco and SAIC. SEPTEMBER Shareholders of Fiat SpA approve plan and related resolutions for partial and proportional demerger of Fiat SpA to Fiat Industrial SpA.
Presentation of Fiat 500 and 500C equipped with new 85 hp 2-cylinder TwinAir engine developed for FGA by FPT Powertrain Technologies, which offers up to 30% reduction in CO2 emissions compared to other engines with equivalent performance.
Case IH launches next generation of more powerful and fuel-efficient Steiger and MAGNUM tractors in North America, along with range of new Puma 130-160 series models with Continuous Variable Transmission (CVT). All models equipped to meet Tier 4A emissions standards.
AUGUST
SEPTEMBER
For second consecutive year, Fiat SpA recognized as sustainability leader with inclusion in Dow Jones Sustainability World and Dow Jones Sustainability Europe indexes, receiving score of 93/100 compared to average of 70/100 for companies in Automobile sector evaluated by SAM, the investment group specialized in sustainability investing.
37
Presentation of 2011 model year Fiat Qubo, featuring numerous enhancements, and special edition Blackjack version of the 500. The 500 thousandth presented at Paris Motor Show (show car created to celebrate first 500,000 units of the Fiat 500 produced) along with the LPG Panda equipped with 69 hp 1.2 LPG/gasoline engine. Lancia presents the limited edition bifuel (LPG/gasoline) Ypsilon ELLE at the Paris Motor Show. Also unveiled, the Musa 5th Avenue with elegant trim and interior styling. Alfa Romeo also present with two versions of the Giulietta: one powered by 140 hp 2.0 JTDM turbo-diesel, which offers very low fuel consumption and emissions levels, and the other by 170 hp 1.4 MultiAir combined with innovative Alfa TCT (Twin Clutch Transmission), available from early 2011. At Paris Motor Show, Maserati presents GranTurismo MC Stradale, the fastest (300 km/h), lightest and most powerful model in its on-road range which incorporates Maseratis significant technological know-how acquired on the race track. Also in Paris, Ferrari presents the Ferrari SA Aperta: limited edition of 80 vehicles (already sold out).
SEPTEMBER
Fiat brand recognized as most ecological in Europe for the first six months of 2010: cars sold during period have lowest average CO2 emissions of top 10 selling brands: 123.5 g/km. Recognition comes from JATO, the worlds leading automotive research provider.
Also in Hanover, Iveco presents the EcoStralis, with enhanced powerplant, aerodynamics and electronics making it the most efficient, eco-performing vehicle in the heavy segment. At the same time, first of 10 EcoDaily Electrics delivered to major international freight and logistics operator.
SEPTEMBER
SEPTEMBER New Fiat Dobl Cargo named International Van of the Year 2011 at Hanover International Motor Show by panel of automotive journalists from 24 countries. Case launches four new N Series loader/backhoes in North America. New Holland celebrates production of 150,000th tractor at plant in India and announces doubling of production over next two years. New Holland launches the new T7, T8 and T9 tractors with Tier 4A-compliant Selective Catalytic Reduction (SCR) engines as well as the new Braud 9000L grape harvester. New Holland announces it will rely exclusively on SCR technology to meet Tier 4B emissions standards in effect from 2014.
Energy Independent Farm and NH2 Tractor: New Holland announces establishment of pilot Energy Independent Farm in Italy following the hydrogen-fueled NH2 tractors North American debut in August.
38
KEY EVENTS IN 2010
OCTOBER OCTOBER
FPT wins prestigious international Technobest 2010 award for innovative 2-cylinder TwinAir.
Fiat Group takes 3rd place at third edition of CSR Online Awards Italy 2010, with a score of 73.5/100 for its online communication on social responsibility. Compared with 2009, Fiat improves 19 points and jumps 5 places in ranking. In Brazil, Iveco presents the Vertis, a new medium-segment vehicle engineered in Brazil using a platform developed by Ivecos JV in China and other leading-edge technologies developed in Europe. NOVEMBER
NOVEMBER
New Holland wins Golden Tractor for Design 2011 at EIMA International 2010 for the T7.210 Auto Command.
Standard & Poors Rating Services assigns a preliminary BB+ long-term corporate credit rating to Fiat Industrial SpA with negative outlook. Magneti Marelli inaugurates new plant in Russia for production of automobile headlights and taillights. New facility is located near Ryazan (200 km south-east of Moscow) a strategic area for the automotive sector. New Holland celebrates 50th anniversary of launch of the first self-propelled forage harvester. The FR 9000 forage harvesters feature the IntelliFill system, winner of the 2010 EIMA Innovation Award, Italy, and of the Gold Medal at Agrosalon 2010, Russia. In meeting held at the Unione Industriale di Torino, Fiat CEO presents trade unions with plan to relaunch Mirafiori plant, which centers around establishment of joint venture between Chrysler and Fiat to bring new platform from the United States to Turin for production of large passenger cars and SUVs for the Jeep and Alfa Romeo brands. Agreement concluded with Opel for the supply (beginning December 2011) of vehicles based on Fiat Dobl platform. Vehicles to be produced at the Tofas plant in Bursa (Turkey) and sold at Vauxhall and Opel dealers in Europe and other markets outside NAFTA region beginning in January 2012.
NOVEMBER
The Giulietta receives Auto Europa 2011 award, selected from more than 40 finalists by UIGA (association of Italian automotive journalists).
39
Fiat returns to North American market with presentation of Fiat 500 at Los Angeles Auto Show. The car will be produced in Mexico and sold with new 1.4 MultiAir, innovative Blue&Me communication and entertainment system and seven airbags as standard. At 44th edition of the award presented by the Brazilian magazine Auto Esporte, the new Fiat Uno named Carro do Ano 2011 by jury of 13 automotive journalists from around Brazil. DECEMBER Company representatives and trade unions FIM, UILM, FISMIC and UGL sign agreement for relaunch of Mirafiori plant. Agreement is put to referendum in January 2011 and receives majority approval of workers. Case Construction launches range of four T Series Construction King loader backhoes in Europe. New Holland celebrates 60 years in Brazil. Foundation stone laid for new FGA plant in Pernambuco, Brazil. Total of BRL 3 billion to be invested with initial production capacity of 200,000 vehicles per year (plant will open in 2014). Fiat Industrial receives 4.2 billion in financing from group of leading banks for working capital requirements and general corporate purposes, including repayment to Fiat of intragroup loans subsequent to the effective date of the demerger. Deed of Demerger signed between Fiat S.p.A. and Fiat Industrial S.p.A. following receipt of necessary approvals from Borsa Italiana S.p.A. and Consob. Demerger takes effect on 1 January 2011 and from 3 January the ordinary, preference and savings shares of Fiat Industrial S.p.A. begin trading on the MTA.
DECEMBER
Ferrari presents the 458 Challenge, derived from the 458 Italia, that will be the protagonist of a new single-make trophy.
DECEMBER
Case IH announced winner of SIMA Innovation Awards (at SIMA to be held in February 2011) for new automatic vehicle-to-vehicle synchronization system and for worlds first continuously variable PTO transmission for tractors. New Holland Agriculture to be awarded the Silver Innovation medal for Crop ID system.
40
DATI ECONOMICI E PATRIMONIALI PER SETTORE DI ATTIVIT
HIGHLIGHTS BY SECTOR
41
HIGHLIGHTS BY SECTOR
( million)
Fiat Group Automobiles Maserati Ferrari Fiat Powertrain Components (Magneti Marelli) Metallurgical Products (Teksid) Production Systems (Comau) Other Businesses and Eliminations TOTAL CONTINUING OPERATIONS Agricultural and Construction Equipment (CNH) Trucks and Commercial Vehicles (Iveco) FPT Industrial Other Businesses and Eliminations TOTAL DISCONTINUED OPERATIONS Eliminations TOTAL FIAT GROUP
2010 27,860 586 1,919 4,211 5,402 776 1,023 (5,897) 35,880 11,906 8,307 2,415 (1,286) 21,342 (964) 56,258
Net revenues 2009 26,293 448 1,778 3,372 4,528 578 728 (5,041) 32,684 10,107 7,183 1,580 (902) 17,968 (550) 50,102
2010 607 24 303 140 98 17 (6) (71) 1,112 755 270 65 2 1,092 2,204
Trading profit/(loss) 2009 470 11 238 104 25 (12) (28) (72) 736 337 105 (131) 11 322 1,058 Capital expenditure (1) 2009 1,495 65 290 401 356 33 13 31 2,684 330 217 159 2 708 (6) 3,386
2010 515 24 302 172 73 17 (6) (105) 992 754 240 29 (6) 1,017 2,009
Operating profit/(loss) 2009 217 11 245 77 (40) (14) (32) (86) 378 251 (90) (191) 11 (19) 359 R&D expense (2) 2009 669 33 156 55 245 2 10 (16) 1,154 283 169 86 538 1,692
Total operating assets 2010 2009 17,027 16,157 382 368 1,667 1,608 3,419 3,234 3,395 3,258 581 517 697 567 (399) n.a. 26,769 n.a. 19,268 18,346 6,977 7,214 1,744 1,743 (404) n.a. 27,585 n.a. n.a. (985) n.a. 52,027 Number of employees 2009 54,038 723 2,835 11,408 31,628 6,194 11,708 10,237 128,771 28,466 24,917 7,858 2 61,243 190,014
( million)
Fiat Group Automobiles Maserati Ferrari Fiat Powertrain Components (Magneti Marelli) Metallurgical Products (Teksid) Production Systems (Comau) Other Businesses and Eliminations TOTAL CONTINUING OPERATIONS Agricultural and Construction Equipment (CNH) Trucks and Commercial Vehicles (Iveco) FPT Industrial Other Businesses and Eliminations TOTAL DISCONTINUED OPERATIONS Eliminations TOTAL FIAT GROUP
Total operating liabilities 2010 2009 14,796 13,520 350 317 1,141 1,022 1,826 1,783 2,045 1,954 293 261 513 406 2,287 n.a. 23,251 n.a. 15,376 14,049 5,902 5.942 1,198 938 (3,352) n.a. 19,124 n.a. n.a. (994) n.a. 39,198
2010 1,652 104 239 385 383 31 24 46 2,864 446 273 152 1 872 (18) 3,718
2010 722 62 148 80 292 2 12 (34) 1,284 346 214 92 652 1,936
2010 57,611 696 2,721 12,453 34,269 7,275 12,216 10,560 137,801 28,831 25,583 7,707 2 62,123 199,924
(1) Investments in tangible and intangible assets (net of vehicles sold under buy-back commitments and leased) (2) Includes capitalized R&D and R&D charged directly to the income statement
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MAIN RISKS AND UNCERTAINTIES TO WHICH FIAT S.P.A. AND FIAT GROUP POST DEMERGER ARE EXPOSED
Following is a brief description of risks and uncertainties that could potentially have a significant impact on the activities of Fiat Group post Demerger. Other risks and uncertainties, which are currently unforeseeable or considered to be unlikely, could also have a significant influence on the operating performance, financial position and future prospects of Fiat S.p.A. and Fiat Group post Demerger.
RISKS ASSOCIATED WITH GENERAL ECONOMIC CONDITIONS The Groups earnings and financial position are influenced by various macro-economic factors including increases or decreases in gross national product, the level of consumer and business confidence, changes in interest rates on consumer credit, the cost of raw materials and the rate of unemployment within the various countries in which it operates. For example, the global economic recession in 2008 and the first half of 2009 had a negative impact on the Groups earnings. Weak economic conditions resulted in a significant decline in demand for most of the Groups products. In 2010, demand levels for the automobiles business in Europe also reflected the absence of significant measures previously put in place by major governments and monetary authorities. In general, the sectors in which the Group operates have historically been subject to highly cyclical demand and tend to reflect the overall performance of the economy, in certain cases even amplifying the effects of economic trends. Given the difficulty in predicting the magnitude and duration of economic cycles, there can be no assurances as to future trends in the demand for or supply of products sold by the Group in any of the markets in which it operates. Moreover, certain major economies are still in recession or have recently suffered periods of low growth or economic stagnation. These conditions or the return to economic recession in markets that have recently recovered could ultimately affect the industrial development of many businesses, including those of the Group. There can be no certainty that measures taken by governments and monetary authorities will be successful in re-establishing the conditions necessary for sustainable economic growth. As such, uncertainty remains as to the global economic outlook and some national economies could experience extended periods of slow economic growth or recession. Additionally, even in the absence of slow growth or recession, other economic circumstances such as increases in energy prices, fluctuations in prices of raw materials or contractions in infrastructure spending could have negative consequences for the industries in which the Group operates and, together with the other factors referred to previously, could have a material adverse effect on the Groups business prospects, earnings and/or financial position.
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RISKS ASSOCIATED WITH FINANCING REQUIREMENTS The Groups future performance will depend on, among other things, its ability to finance debt repayment obligations and planned investments from operating cash flow, available liquidity, the renewal or refinancing of existing bank loans and/or facilities and possible recourse to capital markets or other sources of financing. Although the Group has measures in place to ensure that adequate levels of working capital and liquidity are maintained, any declines in sales volumes could have a negative impact on the cash-generating capacity of its operating activities. The Group could, therefore, find itself in the position of having to seek additional financing and/or refinance existing debt, including in unfavorable market conditions with limited availability of funding and a general increase in funding costs. Any difficulty in obtaining financing could have a material adverse effect on the Groups business prospects, earnings and/or financial position. RISKS ASSOCIATED WITH FIAT S.P.A.S CREDIT RATING The ability to access the capital markets or other forms of financing and the related costs are dependent, amongst other things, on the Groups credit ratings. Following downgrades by the major rating agencies in the first quarter of 2009, Fiat S.p.A. is currently rated below investment grade with ratings on its long-term debt of Ba1 (with negative outlook) from Moodys Investors Service, BB+ (with negative outlook) from Standard & Poors Ratings Services and BB+ (with negative outlook) from Fitch Ratings Ltd. On 23 April 2010, following Fiats announcement of the proposed Demerger, Standard & Poors placed Fiat S.p.A. on CreditWatch with negative implications. The CreditWatch status was confirmed on 1 October 2010 and the rating agency is currently reviewing the Companys status. On 21 July 2010, Moodys Investors Service placed Fiat S.p.A.s rating on review for possible downgrade. That review was completed on 9 February 2011 and Moodys confirmed a rating of Ba1 with negative outlook. On 22 April 2010, however, Fitch Ratings Ltd. confirmed its rating (BB+ with negative outlook) on Fiats long-term debt. Any further downgrades could increase the Groups cost of capital and potentially limit its access to sources of financing with a consequent material adverse effect on the Groups business prospects, earnings and/or financial position. RISKS ASSOCIATED WITH FLUCTUATIONS IN CURRENCY, INTEREST AND CREDIT RISK The Group, which operates in numerous markets worldwide, is naturally exposed to market risks stemming from fluctuations in currency and interest rates. The exposure to currency risk is mainly linked to the difference in geographic distribution between the Groups manufacturing activities and its commercial activities, resulting in cash flows from exports denominated in currencies that differ from those associated with production activities. The Group uses various forms of financing to cover funding requirements for its industrial activities and for financing customers and dealers. Moreover, liquidity for Industrial Activities was also principally invested in variable-rate or short-term financial instruments. The Financial Services companies operate a matching policy to offset the impact of differences in rates of interest on the financed portfolio and related liabilities. Nevertheless, changes in interest rates can result in increases or decreases in revenues, finance costs and margins. Consistent with its risk management policies, the Group seeks to manage risks associated with fluctuations in currency and interest rates through the use of financial hedging instruments. Despite such hedges being in place, sudden fluctuations in currency or interest rates could have an adverse effect on the Groups business prospects, earnings and/or financial position. The Groups Financial Services activities are also subject to the risk of insolvency of dealers and end customers, as well as unfavorable economic conditions in markets where these activities are carried out, which the Group seeks to mitigate through the credit approval policies applied to dealers and end customers.
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RISKS ASSOCIATED WITH THE POLICY OF TARGETED INDUSTRIAL ALLIANCES The Group has engaged in the past, and may engage in the future, in significant corporate transactions such as mergers, acquisitions, joint ventures and restructurings, the success of which is difficult to predict. In particular, although Fiat Group holds a 25% interest in Chrysler Group LLC and has signed agreements for the establishment of a global strategic alliance, there can be no assurance that this alliance will function as intended or produce the expected benefits. There can be no assurance that Fiat Group post Demerger will succeed in achieving the synergies, cost savings, expansions in its product offerings or other benefits expected from the strategic alliance with Chrysler Group LLC or any other transaction. The failure of any significant strategic alliance, joint venture or other similar transaction could have an adverse effect on the business prospects, earnings and/or financial position of Fiat Group post Demerger. RISKS ASSOCIATED WITH RELATIONSHIPS WITH EMPLOYEES AND SUPPLIERS In many countries where the Group operates, Group employees are protected by various laws and/or collective labor agreements that guarantee them, through local and national representatives, the right of consultation on specific matters, including downsizing or closure of production units and reductions in personnel. The laws and/or collective labor agreements applicable to the Group could impair its flexibility in reshaping and/or strategically repositioning its business activities. The Groups ability to reduce personnel or implement other permanent or temporary redundancy measures is subject to government approvals and the agreement of the labor unions. Industrial action by employees could have an adverse impact on the Groups business activities. Furthermore, the Group purchases raw materials and components from a large number of suppliers and relies on services and products provided by companies outside the Group. Some of these companies are highly unionized. Close collaboration between a manufacturer and its suppliers is common in the industries in which the Group operates and although this offers economic benefits in terms of cost reduction, it also means that the Group is reliant on its suppliers and is exposed to the possibility that difficulties, including those of a financial nature, experienced by those suppliers (whether caused by internal or external factors) could have a material adverse effect on the Groups business prospects, earnings and/or financial position. RISKS ASSOCIATED WITH MANAGEMENT The Groups success is largely dependent on the ability of its senior executives and other members of management to effectively manage the Group and individual areas of business. The loss of any senior executive, manager or other key employee without an adequate replacement or the inability to attract and retain new, qualified personnel could therefore have an adverse effect on the Groups business prospects, earnings and/or financial position. RISKS ASSOCIATED WITH THE HIGH LEVEL OF COMPETITION IN THE INDUSTRIES IN WHICH THE GROUP OPERATES Substantially all of the Groups revenues are generated in the automobile industry, which is highly competitive and encompasses the production and distribution of passenger cars and the related components and production systems. The Group faces competition from other international passenger car and light commercial vehicle manufacturers and distributors and related components suppliers in Europe and Latin America. These markets are highly competitive in terms of product quality, innovation, pricing, fuel economy, reliability, safety, customer service and financial services offered.
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Competition, particularly in pricing, has increased significantly in the Groups industry sector in recent years. In addition, partly as a result of the contraction in demand for automobiles, global production capacity for the car industry significantly exceeds current demand. This overcapacity, combined with high levels of competition and weakness of major economies, could intensify pricing pressures. Should the Group be unable to adapt effectively to external market conditions, this could have an adverse effect on its business prospects, earnings and/or financial position. RISKS ASSOCIATED WITH THE ACTIVITIES OF FIAT GROUP POST DEMERGER BEING CONCENTRATED IN THE AUTOMOBILES AND AUTOMOBILE COMPONENTS SECTOR Pursuant to the Demerger, Fiat S.p.A. transferred its shareholdings in companies operating in the Agricultural and Construction Equipment, and the Trucks and Commercial Vehicles sectors to Fiat Industrial S.p.A., together with the Industrial & Marine business line of FPT Powertrain Technologies. Consequently, Fiat S.p.A.s principal activities are the automobile and the automobile-related components & production systems businesses, that include Fiat Group Automobiles, Ferrari, Maserati, Magneti Marelli, Teksid and Comau, in addition to the Passenger & Commercial Vehicles business line of FPT Powertrain Technologies. By contrast to the profile of Fiat Group prior to 31 December 2010, the future earnings of Fiat Group post Demerger will, therefore, be determined by the financial performance of those businesses only. In the Automobiles business, sales to end customers are cyclical and subject to changes in the general condition of the economy, the readiness of end customers to buy and their ability to obtain financing and the possible introduction of measures by governments to stimulate demand. The sector is also subject to constant renewal of the product offering through frequent launches of new models. A negative trend in the Automobiles business could have a material adverse impact on the business prospects, earnings and/or financial position of the Fiat Group post Demerger. RISKS ASSOCIATED WITH SELLING IN INTERNATIONAL MARKETS AND EXPOSURE TO CHANGES IN LOCAL CONDITIONS A significant portion of the Groups existing activities are conducted and located outside of Italy and the Group expects that revenues from sales outside Italy and, more generally, outside of the European Union will account for an increasing portion of total revenues. The Group is subject to risks inherent to operating globally, including those related to: exposure to local economic and political conditions; import and/or export restrictions; multiple tax regimes, including regulations relating to transfer pricing and withholding and other taxes on remittances and other payments to or from subsidiaries; foreign investment and/or trade restrictions or requirements, foreign exchange controls and restrictions on repatriation of funds; and/or the introduction of more stringent laws and regulations. Unfavorable developments in any one of these areas (which may vary from country to country) could have a material adverse effect on the Groups business prospects, earnings and/or financial position.
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RISKS ASSOCIATED WITH ENVIRONMENTAL AND OTHER GOVERNMENT REGULATION The Groups products and activities are subject to numerous environmental laws and regulations (local, national and international) which are becoming increasingly stringent in many countries in which it operates (particularly in the European Union). Such regulations govern, among other things, products with requirements for emissions of polluting gases, reduced fuel consumption and safety becoming increasingly stricter and industrial plants with requirements for emissions, treatment of waste and water and prohibitions on soil contamination. To comply with such regulations, the Group employs considerable resources and expects it will continue to incur substantial costs in the future. In addition, government initiatives to stimulate consumer demand for products sold by the Group, such as changes in tax treatment or purchase incentives for new vehicles, can substantially influence the timing and level of revenues. The size and duration of such government measures is unpredictable and outside of the Groups control. Any adverse change in government policy relating to those measures could have a material adverse effect on the Groups business prospects, operating results and/or financial position. RISKS ASSOCIATED WITH THE ABILITY TO OFFER INNOVATIVE PRODUCTS The success of the Groups businesses depends on their ability to maintain or increase share in existing markets and/or to expand into new markets through the development of innovative, high-quality products that provide adequate profitability. In particular, the failure to develop and offer innovative products that compare favorably to those of the Groups principal competitors in terms of price, quality, functionality and features, or delays in bringing strategic new models to market, could result in reduced market share, having a material adverse effect on the Groups business prospects, earnings and/or financial position. RISKS ASSOCIATED WITH OPERATING IN EMERGING MARKETS The Group operates in a number of emerging markets, both directly (e.g., Brazil and Argentina) and through joint ventures and other cooperation agreements (e.g., Turkey, India, China and Russia). The Groups exposure to these countries has increased in recent years, as has the number and importance of such joint ventures and cooperation agreements. Economic and political developments in these markets, including economic crises or political instability, have had and could in future have a material adverse effect on the Groups business prospects, earnings and/or financial position.
RESEARCH AND INNOVATION
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Promoting sustainable mobility on multiple fronts, Fiat Groups research and innovation activities are conducted through Centro Ricerche Fiat (CRF) and Elasis. Following the demerger of activities from Fiat S.p.A., CRF remained within Fiat Group post Demerger. To guarantee continued support to Fiat Industrial, a number of researchers working on specific projects were transferred to Fiat Industrial and service agreements entered into in relation to the contribution to the research and development activities of individual sectors. Elasis, whose design and development activities were already coordinated at sector level, recently transferred its technical activities to the sectors. It retains responsibility for management of the Pomigliano research facility, which will continue to host resources and laboratories allocated to the sectors. Development activities are primarily carried out in collaboration with the sectors. In 2010, expenditure on Research & Development1 totaled approximately 1.9 billion, equivalent to 3.5% of net revenues for the Groups Industrial Activities. In total, R&D activities involve some 14,200 specialized personnel at 113 centers. CENTRO RICERCHE FIAT (CRF) Profile CRF was established in 1978 as the Groups center of expertise in innovation, research and development. Now an internationally recognized center of excellence, CRFs mission is to utilize innovation as a strategic lever for the Groups businesses through the development and transfer of innovative content that makes the Groups products both competitive and distinctive. In addition to its principal center in Orbassano (on the outskirts of Turin), CRF has three other centers located in Bari, Trento and Foggia, and Centro Ricerche Plast-Optica in Udine (which it has controlled since 2002), a facility focused on advanced research in plastics and optics for automotive lighting systems. In 2010, the Group Materials Labs was created with laboratories located in Turin, Venaria Reale and Bologna. In addition, following the merger of CSST S.p.A. into CRF, the Transport Systems Research Center unit was created with operations in Orbassano (near Turin) and Pomigliano DArco (near Naples). With 949 employees, CRF draws on a broad base of technical skills, as well as a series of state-of-the-art laboratories for testing powertrain systems and electromagnetic compatibility, conducting NVH analyses and driving simulations, and developing materials, production processes, opto-electronics and micro-technologies. CRF has achieved significant results over the years, as demonstrated by the 35 new patent applications filed in 2010, bringing the total number of patents it holds to approximately 3,200, plus a further 450 patents currently pending. At the international level, CRF had more than 41 projects approved in 2010 under the EUs Seventh Framework Program for 2007-2013, bringing the total of active projects under this Program to 114. Its status as a well-established European research center together with its recognized know-how and extensive
(1) Includes capitalized R&D expenditure and R&D charged directly to profit and loss for the year.
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presence throughout Italy have also led to its participation in many public-private partnerships (PPPs) set up to focus public and private research on areas of common interest and on industrial applications both in Italy and at the European level (Green Car Initiative, Factories of the Future). CRF has also developed a global network of more than 160 universities and research centers, and over 1,500 industrial partners around the world. This network strengthens the centers global innovation strategies and facilitates local implementation of specific projects, as well as ensuring creation of know-how and continuous monitoring to enhance competitiveness and further development in areas such as vehicles and vehicle components, energy, safe and ecological mobility, telematics, innovative materials and related technologies, mechatronics and optics, together with innovation in the area of engine technologies, alternative propulsion systems and transmissions (through the Powertrain Research and Technology unit). Further information is available at www.crf.it. Focus Particularly active in the field of mobility, CRF applies a systematic, 360 degree approach to the study of innovative solutions: the winning strategy is to be flexible in employing the best resources available to achieve mobility that is socially, environmentally and economically sustainable. Indeed, no single solution is relied upon, but rather a constant commitment to optimizing vehicles and engines, both through research into solutions that improve the efficiency of conventional engines (the TwinAir engine and Twin Clutch system were launched in 2010) and the use of alternative propulsion systems and fuels, as well as increasing energy efficiency, searching for new materials and increasing the percentage of end-of-life recycling. On the product front, key innovations include solutions for climate control systems that lower consumption and reduce the direct greenhouse effect (refrigerant gas emissions). CRF also has a series of projects related to auxiliary systems and, more generally, to vehicle energy recovery and management systems (electrical, thermal and hydraulic energy) aimed at improving efficiency and achieving new energy saving standards. Iveco Glider, the concept vehicle presented by Iveco in 2010 and developed in collaboration with CRF, represents a synthesis of the search for new solutions for sustainable mobility that brings together innovative concepts in energy efficiency, aerodynamics, ergonomics, infomobility and comfort. As with product-focused research, the objective for manufacturing processes is to design, build and adapt systems, processes or plants using energy saving criteria and low environmental impact technologies, based on an eco-efficient manufacturing model. CRFs activities are focused in the following areas. Powertrain Research and Technology The principal objective is the development and application of innovative technologies that improve powerplant performance, cut engine and vehicle emissions and improve fuel economy. Major achievements in 2010 include: After-treatment technologies for Euro 6 diesel engines. In 2014, new and much stricter emissions limits for passenger cars (Euro 6) will come into effect in Europe. Currently, in most diesel engines, nitrogen oxides (NOx) are treated during the combustion phase and the principal technology used is Exhaust Gas Recirculation (EGR). In the future, where the use of NOx after-treatment is necessary, the preferred technology for small and medium segment vehicles will be the NOx Storage Catalytic Converter (NSC). During normal operation of the engine, this catalyzer traps the NOx emissions and, when it has reached its storage capacity, it regenerates within a few seconds, releasing the NOx particles and reducing them to N2. This solution, which in 2010 underwent significant development and fine-tuning, has the two-fold advantage of being particularly cost effective and not requiring modifications to the exhaust configuration.
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Second generation MultiAir technology for gasoline engines. In 2010, production began on the two-cylinder TwinAir engine, which incorporates MultiAir technology. For the future, several areas of development have been identified for the second generation of MultiAir engines, such as: introduction of new valve activation methods and new combustion control strategies to further reduce consumption and emissions; integration of the MultiAir technology with direct fuel injection to improve the responsiveness of the cylinders and, consequently, reduce consumption. Also planned is the introduction of new software for calibration of MultiAir engines to reduce development times, in addition to advanced turbo-charging technologies that maximize synergies through integration with the MultiAir. Heavy Duty Cursor 8 engine fueled with pure bioethanol. Over the past ten years, the market for bioethanol-powered passenger cars in Brazil has grown significantly. Recently, interest has also expanded to industrial and off-road application as bioethanol produced from sugar cane in Brazil satisfies all the requirements to be considered a true fuel alternative (economic, from renewable sources, not in competition with the food supply chain, readily available, etc.). One of the most promising applications is the sugar cane harvester, an off-road vehicle that requires high engine performance. To meet that need, CRF took the well-proven Cursor 8 spark ignition CNG engine and modified the fuel system and compression ratio to adapt it for use with bioethanol, resulting in a prototype capable of achieving power output of 243 kW. This system is currently being mounted on the vehicle to conduct field tests, with a view to scale production of this engine, which will provide a 50% reduction in Well-to-Wheel impact and a 70% reduction in running costs compared to the conventional diesel version. Twin Clutch Transmission on the Alfa Romeo MiTo. The twin clutch transmission consists of two parallel gear sets, one for the odd gears and the other for the even gears, each with its own clutch. The distinctive feature of this system is that the gear shift takes place without disengaging the gears, providing continuous traction to the wheels. This makes the twin clutch transmission more comfortable and efficient than an automated manual transmission (AMT) and equivalent, or better, than a conventional automatic transmission with torque converter. The Twin Clutch technology developed by Fiat Group in recent years is based on dry clutch technology, which offers improved fuel consumption. The C635 Twin Clutch transmission (TCT) was introduced for the first time in 2010 on the Alfa Rome MiTo together with a 135 hp 1.4 Fire MultiAir and Start&Stop system. With this enhancement, the MiTo TCT achieved an official CO2 emissions level of 126g/ km, which is well below the manual version and unachievable with a conventional automatic transmission. Further development of CNG/hydrogen blends. The objective of the green corridor initiative, promoted by Autostrada del Brennero (operator of the A22 in Italy), is to study the distribution and use of renewable source fuels along the 650km stretch of freeway between Munich and Modena. CNG/hydrogen technology is of great interest to the A22 operator, because it will make investment in development of the hydrogen production and distribution infrastructure possible. The hydrogen used to produce this blend will come from surplus energy produced by a hydro-electric powerplant located along the route. During 2010, CRFs Trento facility, in close collaboration with FPT Research & Technologies, Iveco and Officine Brennero, successfully achieved the objectives of the project, including modification of the key components of the fuel storage and distribution system, and development and calibration of an engine to use a CNG/hydrogen blend. Also at the Trento facility, an info-telematic application based on the Blue&Me platform was developed which enables the vehicles position to be traced via GPS and data to be retrieved from the engine control unit. By registering the details of the CNG/hydrogen blend used to refuel, the application is also able to estimate the remaining fuel range and the benefits in terms of CO2 reduction. Following type approval and testing at the Trento facility, an Iveco Daily CNG/hydrogen prototype will be delivered to the A22 operator in 2011.
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Advanced Technology for Mobility and Safety The principal objective is to equip Fiat Group with the necessary technological know-how in secondary systems, electronics, telematics and preventive safety to improve mobility by making vehicles that are safer, more versatile and more eco-compatible. Major results achieved in 2010 include: Cooperative preventive safety systems. Safe, efficient and ecologically sustainable mobility is a priority for all European citizens. Full collaboration between vehicles and between vehicle and infrastructure would maximize results by providing complete information on vehicle position and movement and predicting driver intentions. The European Commission has therefore chosen to co-fund major R&D projects such as SAFESPOT (coordinated by CRF), CVIS and PRE-DRIVE C2X to study how wireless Vehicle-toVehicle and Vehicle-to-Infrastructure communication technologies can improve safety and efficiency for the mobility of the future. The current results of these projects were presented in 2010: the fundamental elements for collaborative mobility are now available and working prototypes of the principal applications have been developed. The next step will be large-scale testing in several member states to determine the interoperability of these solutions and proceed with standardization. At the Cooperative Mobility Showcase 2010 in Amsterdam, CRF presented the results of on-road testing of technological solutions developed under the SAFESPOT project and demonstrated the open, flexible platform developed through the CVIS project, which offers more than 25 applications for traffic efficiency and road safety. For the PRE-DRIVE C2X project, presented in September in Ulm (Germany), CRF used two demo vehicles to demonstrate a group of applications using vehicular communication in real traffic conditions. The results of this project will serve as the starting point for the integrated DRIVE C2X project, whose primary objective is to validate mobility applications based on cooperative systems through road tests at various locations throughout Europe. Driver Attention Support and Driver Style Evaluation. For trucks and commercial vehicles, driver behavior is fundamental to safety and reducing consumption. Using a video camera to monitor the extent to which the vehicle is staying within its lane, the system can evaluate the drivers level of distraction and fatigue/drowsiness. When appropriate, warning signals are activated to alert the driver, prompting him to pay greater attention or stop and rest. Driving style can be a significant factor is reducing the environmental impact of vehicles. Tests conducted on trucks and other heavy commercial vehicles have in fact shown that improper driving can increase consumption by 10% to 15%, depending on the type of mission. This fact, together with an analysis of data from systems already in use, such as Fiat eco:Drive, led to CRF and Iveco establishing a joint working group to develop a Professional Driving Style Evaluation system aimed at reducing consumption. This system consists of an on-board device that collects data in real time from the CAN network (the local network that connects the intelligent devices of different vehicles) and the GPS system, analyzes the data, transmits it to a remote center and provides feedback to the driver on the quality of his driving. This on-board device interfaces with a remote system that feeds the data received into a database, which is then processed using specific algorithms to evaluate driving style, mission, performance and problems with the vehicle. Development will continue in 2011, with the completion and refinement of several calculation modules, integration of the system in the vehicle architecture, development and finalization of the system, including extensive testing with end customers. Low environmental impact auxiliary systems. During the year, CRF continued testing innovative climate control and auxiliary systems that minimize environmental impacts and energy consumption, while at the same time increasing efficiency. To ensure a comfortable interior environment is maintained even when the main engine is switched off (Start&Stop) or a combustion engine is not being used (i.e., hybrid and electric vehicles), CRF has developed an innovative device powered by an electric compressor that functions as a heat pump. This system, which was developed on an Iveco Daily, uses a cycle inversion valve that allows the evaporator and condenser functions to be switched, enabling the generation of hot and cold air in the vehicle interior through a single exchanger. The obvious strong point of this system is the energy saving operation of the compressor, which can be controlled independently from the main engine. Over the next few years, this
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system will also be developed for application on hybrid vehicles. Beginning with new models produced from 1 January 2011, the new MAC directive issued by the European Union prohibits use of the refrigerant R134a for air-conditioning on cars. The use of HFO-1234yf, which has been chosen as a replacement refrigerant, will require modification of the entire system. HFO-1234yf is a fluid and has different properties to R134a, which is a gas, including a lower refrigerant capacity, requiring optimization of the air-conditioning unit, and is highly flammable, necessitating a review of all system components and evaluation of the impacts on the work environment and filling systems. Advanced vehicles, materials and processes A central objective is to improve the eco-sustainability of vehicles and manufacturing process through the development of economically sustainable solutions for products and processes. This objective is shared at European level through the Green Cars Initiative, in which CRF participates actively as a member of the Industrial Advisory Group. The most significant achievements in this area during 2010 include: Iveco Glider. This concept vehicle, presented by Iveco at the 2010 IAA International Motor Show in Hanover, is the fruit of a creative collaboration between Iveco and CRF. It is a new vehicle concept that offers high productivity and low environmental impact. The project focused on two key elements: energy efficiency and on-board comfort and functionality. In terms of energy efficiency, researchers developed a Kinetic Energy Recovery System (KERS), which enables the recovery of kinetic energy that would otherwise be dissipated as heat during braking, in addition to a thermodynamic system based on a Rankine cycle that recovers heat from the engine that would otherwise be dispersed through the exhaust and radiator. The Glider also generates renewable energy on-board using highly efficient and flexible solar panels that take up approximately 2 square meters on the roof of the cab and are capable of producing up to 2kW of energy. Finally, any excess electric energy not used by the auxiliary systems is stored in an Auxiliary Energy Unit for use as an energy source when the vehicle is stationary. Research into significantly reducing aerodynamic drag, the use of new on-board energy management systems and the adoption of heat exchangers and low rolling resistance tires also contributed to the dramatic reduction in consumption and emissions. With regard to on-board comfort and functionality, the Glider was designed around the drivers specific needs with the cabin containing the latest technological solutions in terms of ergonomics, infomobility, lighting, climate control and space management. Eco-compatible and recycled materials. In 2010, CRF further increased its commitment to solutions which address the environmental impacts (including CO2 emissions) from plastic components used in vehicles. Tests were carried out with biopolymer matrix compounds and recycled end-of-life materials reinforced with micronized natural fibers to enhance their structural characteristics, while also improving aesthetics. At the same time, CRF continued to monitor the percentage of recycled materials utilized in the Groups vehicles, increasing their use, particularly in non-aesthetic areas such as acoustic insulation. In 2010, analysis also continued into the impacts on the automotive sector of general environmental regulations, such as Classification Labelling & Packaging (CLP) and Registration Evaluation Authorisation and Restriction of Chemicals (REACH). For the second of these two regulations an investigation was conducted on Substances of Very High Concern (SVHCs) whose use may be restricted over the next few years. Alternatives are being tested for all SVHC materials currently used in the Groups vehicles. Finally, Life Cycle Assessments (LCAs) were conducted to evaluate the environmental impacts of the new fluid refrigerant HFO 1234yf throughout its entire lifecycle, comparing it with R134a and with CO2, and of phosphatization processes that could serve as alternatives to the current process based on nanocomposites derived from zirconium salts.
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Highly energy-efficient production processes. In 2010, CRF continued with the Green Factories project. During the year, numerous activities focused on improvements in the energy efficiency of manufacturing processes. The most important of these projects were conducted at Fiat Group Automobiles Cassino and Mirafiori plants and focused on development of kinetic energy recovery systems for industrial robots and testing of pilot installations of highly efficient lighting systems that provide increased light levels with reduced energy consumption. Measures to improve existing processes continued with the definition of a methodology to reduce energy consumed by mechanical processes. This area was also addressed by the FlexMech project, through the development of innovative down-sized, energy-saving actuators for application on machine tools. CRF also began development of methods and tools for the classification of industrial buildings by energy class to highlight their level of energy efficiency. In the area of environmental and economic sustainability, CRF participated in the Industrial Advisory Group of the European Factories of the Future initiative as team leader for development of a multi-year program on Sustainable Manufacturing, considered of primary strategic importance for the competitiveness of European manufacturing. Micro and nanotechnologies for plant safety. In the area of plant safety, Legislative Decree 81/2008 (health and safety in the workplace) introduced the obligation for employers to assess the risk of exposure to artificial optical radiation (AOR) for the first time in Italy. With more than a decade of experience in assessing display optics and new lighting sources, through its New Materials Scouting group, CRF was the first company to begin monitoring AOR levels at FGAs Mirafiori plant at the end of 2008 and is now the leader in optical radiation assessment, having conducted tests at more than 15 Fiat Group plants throughout Italy. This activity was necessary to comply with the legal obligation to assess the risk, but also contributed to a significant reduction in the risk of exposure to potentially hazardous sources in the factory and to improving the quality of the work environment.
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ELASIS Established in 1988, at the initiative of the Fiat Group, Elasis (a consortium company) is one of the principal private sector research centers in Europe. A leader in advanced engineering, it focuses on the development of human and technological potential in Italy and the Mediterranean region. The companys core activities are the research, development and testing of products and processes related to the businesses of its consortium members. Accordingly, its activities are focused in the following areas: automobiles, trucks, commercial vehicles, construction equipment, agricultural equipment, engines, components and production technologies. Elasis develops all phases of product and process engineering: from technical/economic feasibility studies to design, production, and analysis of the impact of finished systems on the environment and local communities. Elasis directly employs approximately 1,200 researchers and technicians, with an average age of just over 35, located at three separate facilities: Elasis R&D in Pomigliano dArco (near Naples), Elasis P&PD in Orbassano (Turin) and the Elasis Center (Lecce). In 2010, Elasis continued its strategy of extending the research/innovation value chain and promoting local development. This included working together in consortia with universities and private institutions on basic research and training, continuing its traditional research on mobility and related environmental impacts. In addition, Elasis has fostered development of the technological know-how of local SMEs, promoting collaboration on a wide variety of projects in partnership with the association of industrial companies in Naples (Unione degli Industriali), Confindustria Campania and chambers of commerce throughout southern Italy. Elasis plays a central role in the competitiveness of the industrial sector of the Region of Campania. As a center of technological excellence, it acts as a driver of development for the entire Region through the promotion of targeted research projects and industrial initiatives involving local partners, thereby supporting and spreading a culture of innovation and also improving the economic and social fabric of the local area. In 2010, Elasis and CRF received recognition for the level of excellence achieved with the National Award for Innovation from the Ministry for Public Administration and Innovation, instituted by the Prime Ministers Office, acting on the mandate of the President of the Republic, to reward the best in innovation and creativity from industry, universities, public entities and individuals and to foster a culture of innovation. As mentioned previously, Elasis recently transferred its technical activities to the sectors, which already coordinated design and development activities. It retains responsibility for management of the Pomigliano research facility, which will continue to host resources and laboratories allocated to the sectors. Further information is available at www.elasis.it. In 2010, the principal activities and achievements included: Innovative product and process methodologies. Elasis continued its work on new methodologies for product/process development aimed at supporting Fiat Group sectors in reducing time-to-market and improving the quality of their final product. During the year, Elasis worked to improve the realism of virtual models of the interiors and exteriors of new vehicles. In particular, realistic gap and flush simulations (dashboard and door panels) were developed for the new Lancia Ypsilon and the new Fiat Panda, with virtual squeak and rattle analysis also used for these models. In the area of manufacturing methodologies, in 2010 a publicly financed integrated logistics project was implemented, focusing on the ergonomics of manufacturing processes. This project, conducted in collaboration with the FGA plant in Cassino, the University of Cassino and CRF, resulted in the development
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of innovative methodologies for the ergonomic analysis of work stations, with interesting applications for motion capture instruments at manufacturing facilities. Simulations of logistics flows were also carried out in addition to applications of Augmented Reality aimed at the integrated management of problems linked to production lines, production line supply and work stations. Finally, new virtual analysis methodologies for simulating manufacturing processes were developed and refined (simulation of the riveting process, computer modeling of aesthetic defects for molded components, simulation of the cooling phase in the injection molding process). Vehicle research. During 2010, Elasis was involved in projects relating to the new Lancia Ypsilon, the new Fiat Panda and Ferraris 599 GTO and 458 Spider. In collaboration with FGA, Elasis worked on the new Lancia Ypsilon, contributing to development of the body, trim, electrical and electronic systems, engine systems and performance enhancements. Extensive use of the most advanced computer simulation technologies and virtual testing rather than physical prototypes enabled a significant reduction in time necessary to achieve design freeze. The vehicle will be produced at the Fiat Auto plant in Tychy, Poland. For development of the new Fiat Panda, Elasis was involved in all phases of the vehicles design, as well as physical and virtual testing. Elasis was also responsible for body integration, packaging and design checks of safety, functionality, reliability, assemblability, maintainability, aesthetics and cost. For Ferrari, Elasis was involved in completion of development of the 599 GTO, with activities including modification of the body and trim, development of solutions to lighten the vehicle using innovative materials (carbon, composites, etc.) and thickness optimization and support for Team Ferrari up to the production launch. In addition, Elasis was also involved in the development of the Ferrari 458 Spider. Aside from designing the body and internal/external trim, Elasis also worked on the bill of materials, structural calculations, packaging and virtual validation. Those activities led to creation of the first prototypes and then the issue of mathematical specifications for approval of the final tooling. Finally, the Center also participated in the development of two Maserati models, the M156 (the new Quattroporte) and the M157 (a new E-segment model). Elasis also continued its research and development in road safety in collaboration with FGA (Safety Center), under the European CASPER project (Child Advanced Safety Project for European Roads), to improve child restraint systems through the development and testing of innovative new devices. Electronic control systems. Development and updating of ECAx Methodologies for the design and simulation of electrical circuitry and wiring for Fiat Group and Chrysler also continued. A new design flow was used for the first time to design electrical circuits for the future Fiat Panda, the new L0 platform vehicles and the Maserati GranTurismo FL. The virtual design of the electrical system for the future Panda was also approved. The commercial tools chosen for the design process were adapted to the new design flow and simulation of the electrical system. For CNH, as part of the research project on model-based methodologies for development of embedded software systems for agricultural equipment, Elasis developed the master control software for two machines, the K42 Large Square Baler and the K49 Round Baler, and also contributed to development of the software for the new Universal Control Module (UCM) for tractors. These activities followed the model-based methodology previously developed for automobiles with functional and regression tests being conducted in the laboratory on tractors and balers using Hardware in the Loop simulators. The UCM was installed on new tractor models beginning in late 2010.
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Engines and transmissions. Engineering work related to the development activities of FPT Powertrain Technologies, included major projects such as the Twin Air and MultiAir engines, as well as the C635 TCT transmission (dual dry clutch). During 2010 development of the 85hp Turbo version of the TwinAir was completed with its first application on the Fiat 500 beginning in October. The Fire MultiAir was also applied on additional B/C segment models and work in the transmissions area focused on validation and application of the C635 TCT transmission on the Alfa MiTo with 135hp Fire MultiAir. This transmission is currently also being developed for application on both the gasoline and diesel versions of the Giulietta. ICT for product/process development. In 2010, Elasis enhanced its capabilities in virtual simulation of products and production processes through the use of new technologies, methodologies and IT instruments for modeling products, plants and vehicle performance features. During the year, Elasis made a significant contribution to initiatives linked to the Virtual Product Development programs of CNH, FPT Powertrain Technologies and Iveco: in particular, the analysis of processes and standardization of IT solutions centered around innovation and competitiveness. An example is the development of Technical Training methodologies based on digital mock-ups that improve the transfer of information to the service network, increasing both efficiency and the knowledge base. Finally, to ensure a high level of interactivity with the virtual environments, Elasis carried out research on the application of advanced visualization technologies, integrated with optical and inertial hardware. Use of such tools is fundamental to maximizing the effectiveness of Research and Innovation focused on ergonomic analysis for both drivers and factory workers.
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At 31 December 2010, the Group had 199,924 employees, an increase of 9,910 over the 190,014 figure at year-end 2009. The change was partially attributable to the positive difference between new hires (approx. 23,400) and departures (approx. 18,400) recorded for the year, with the increase relating primarily to workers hired in Latin America as a result of the growth in demand. A net increase of around 4,900 employees was attributable to changes in the scope of operations for the Group, consisting of: insourcing of materials handling activities in Italy, full consolidation of Fiat-GM Powertrain Polska Sp. z.o.o. (following acquisition of the JV partners 50% interest) and start-up of operations for Fiat Automobiles Serbia Doo Kragujevac, partially offset by a decrease attributable to the disposal, in France, of the Angoulme site of Automotive Lighting Rear Lamps France S.A.S. (a subsidiary of Magneti Marelli) and the termination, in Italy, of the lease of operations at the Colonnella plant (Province of Teramo) by ITCA Produzione S.p.A. (FGA), in addition to the disposal and insourcing transactions completed by Comaus Services business line in Brazil. ORGANIZATIONAL AND MANAGERIAL DEVELOPMENT During 2010, developments associated with the Chrysler alliance, creation of the Fiat Industrial Group (operational from 1 January 2011) and international expansion and development all brought changes to the Group, however, the overall organizational model was unchanged with a continued two-pronged focus on both business activities (sectors and brands) and key business processes. The IT system launched in 2009 was progressively rolled out to the Groups foreign companies alongside organizational changes to the personnel administration activities of Fiat Services. This enabled the Group to merge employee and organizational information into a single, global database and to standardize HR management practices and processes. The existence of Group-level roles for coordination of the principal corporate processes has led to organizational changes at sector level aimed at optimizing cost and investment synergies and at furthering development of methodologies and know-how, such as World Class Manufacturing, for example, which has introduced new productivity and quality solutions at the Groups plants. The Performance and Leadership Management process, which has been in place for managers and professionals for a number of years, continues to serve as the basis for personnel management decisions, together with the Talent Review process, which enables early identification of high-potential individuals and charting of their professional development. Training Investment in training in support of the Groups business activities and the professional development of employees totaled around 64.5 million for the year. More than 3 million hours of training were provided, including 31,055 hours of web-based distance learning for 14,609 users. During the year, the Groups training management model was streamlined to leverage synergies and ensure a standardized approach. The role of Training Manager was created within each sector to ensure the
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development of training solutions that meet specific training needs, in addition to the correct application of Group guidelines. Fiat Sepin continued to work with all sectors and provide support for cross-sector activities, such as management of training budgets, language services, online corporate training and targeted programs for the various professional families. Grants and Scholarships In 2010, Fiat continued the Grant and Scholarship Program for children of Group employees in Italy and abroad. A total of 600 grants and scholarships were awarded (168 in Italy) totaling approximately 1.1 million. Recipients were located in Italy, as well as France, Spain, Poland, Belgium, England, Brazil, China and North America: all countries where the Group has a significant presence. INDUSTRIAL RELATIONS During the year, a dialog was maintained with trade unions and employee representatives at company level to achieve consensus-based solutions for managing the impact on workers of measures taken to respond to market conditions which, while generally improving over the prior year, remain critical in Europe. Production stoppages implemented using temporary layoff benefit schemes, where available, or other measures based on collective agreements or company policy were lower overall than in 2009, as was the level of restructuring and reorganization. The need to increase production volumes to respond to improved conditions in some markets was primarily satisfied through the use of overtime and hiring of new employees, principally in Latin America. There was also intensive collective bargaining at various levels, resulting in major agreements being reached with trade unions on pay and employment conditions in most countries where Group companies operate. Social dialog At the European level, the Fiat Group European Works Council (EWC), a representative body for employees of Group companies located in the European Union, took part in information and consultation on the Groups activities, as provided under EU Directive 2009/38/EC, with particular reference to issues having a transnational impact. Established in 1997, the EWC is composed of 30 representatives and its membership reflects the geographic distribution of Group employees in Europe. On April 22nd, the day after Fiat Group presented its 2010-2014 Business Plan to the financial community, there was an extraordinary meeting of the EWC during which management provided a detailed plan for each sector, together with an explanation of the rationale behind the demerger announced the previous day. The Plan also highlighted Fiats strategy to prepare for the recovery. Concrete and detailed information was also provided on the Groups overall strategy and there was an opportunity for a mutually beneficial exchange of views. The annual plenary session (held in Turin on December 10th) was primarily dedicated to providing additional information and a status update on the demerger of the capital goods activities, in addition to the October 28th agreement on amendments to the existing EWC agreement made necessary by the demerger. That agreement signed by FIM, FIOM, UILM, including in the name and on behalf of the European Metalworkers Federation (EMF) and affiliated trade unions, and FISMIC, and adhered to by ANQUI, in the name and on behalf of the Fdration Europenne de lEncadrement de la Mtallurgie (FEDEM), and SNI Fiat France provides for the establishment, once the demerger takes effect, of separate European Works Councils for Fiat and Fiat Industrial consisting of 20 and 18 members, respectively, and each governed by a specific agreement based on the Fiat Group agreement established in 1996. During the course of the meeting, however, the representative from EMF took the position (speaking also on behalf of the members of the EWC) that the agreement was not valid, in
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particular the provisions relating to the Fiat Industrial EWC, stating that the Italian trade unions did not have the mandate to sign the agreement. Expressing surprise at this position, management stated that it considered the agreement fully valid, having negotiated in good faith with those whom it believed to be legitimate counterparties, and asked EMF to formalize its position taking into consideration the consequences of decisions made and reserved its right to undertake the appropriate review of the situation, with legal counsel if appropriate, once such formal communication is received. As of the date of the report, no such communication had yet been received. In contrast with the request of the Company, during the first half of February 2011, employee representatives from two Group companies outside Italy sent requests to Fiat Industrial to start negotiations for the establishment of an EWC. In Italy, dialog continued with the trade unions at both national and local level and focused primarily on management of low production volumes and the consequent under-utilization of production capacity. An important element laying the foundation for the social dialog going forward was the meeting between the Groups CEO and numerous representatives of the Italian trade unions following the Investor Day presentation on April 21st. With reference to the 2010-2014 Business Plan, the CEO reiterated that a pre-requisite for implementation of the Plan and, therefore, for launch of the associated program of investments would be full willingness and agreement to implement conditions for its success, including those that would ensure the governability of plants. Several meetings to discuss implementation of the Plan in Italy, included a meeting organized by the Minister for Labor and Social Policy in collaboration with the President of the Region of Piedmont attended by all national and sector trade union organizations which was held in Turin on 28 July 2010 to discuss FGAs industrial development strategy and the impact on jobs. During that meeting, the Group CEO confirmed the Plans scope and objectives and reiterated that, before proceeding, Fiat needed certainty, through specific agreements with the unions, as to normal operating conditions at plants and the ability to respond to the demands of the market with the speed and in the manner needed to be able to compete internationally. The first plant where negotiations relative to the Plan were conducted was the G.B. Vico plant in Pomigliano. Discussions focused on methods for proceeding with production of the future Panda (as announced by the Group CEO at Palazzo Chigi in Rome on 22 December 2009) and for creating the operating conditions necessary to initiate the 700 million investment program, by overcoming certain local issues whose continued existence could jeopardize the end result. On 15 June 2010, after 3 months of complex negotiations, an agreement was reached with FIM, UILM, FISMIC and UGL Metalmeccanici and approved by 63.3% of workers in a referendum held on June 22nd. That agreement, which received significant media coverage, was the subject of vigorous debate at local and national level and was interpreted variously by a wide range of commentators who, in many cases, for propaganda purposes have assigned value and meaning to clauses in the agreement that do not reflect their real content. On 29 December 2010, a specific national agreement was established with FIM, UILM, FISMIC and UGL Metalmeccanici (both national representatives and those for the Province of Naples), and the Association of Fiat Middle Managers, based on the preliminary agreement of June 15th. That collective labor agreement will apply to Societ Fabbrica Italia Pomigliano from 1 January 2011, which does not adhere to the Confindustria system and, therefore, does not apply the Confindustria agreements. With reference to the Mirafiori plant, discussions were held with government and trade unions on July 28th and again with trade unions on July 29th and October 5th. Negotiations to define conditions and operating methods necessary for implementation of the plan were initiated on November 26th in a meeting held at the Unione Industriale di Torino. During the meeting, the Group CEO presented a plan for the relaunch of the plant involving more than 1 billion of investment in the production of large SUVs for the Jeep and Alfa Romeo brands (on a platform developed in the United States), with estimated production volumes of 250,000-280,000 vehicles per year, that would enable full utilization of the existing workforce and potentially create new job opportunities. Negotiations were suspended on December 3rd, after it became clear to Fiat that the overall conditions necessary to reach agreement on relaunch of the Mirafiori plant did not exist.
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Talks then resumed at the request of the majority of trade unions and, on December 23rd, an agreement was signed at the Unione Industriale di Torino with FIM, UILM, FISMIC and UGL Metalmeccanici (both national representatives and those for the Province of Turin), and with the Association of Fiat Middle Managers. The agreement contains specific provisions to guarantee achievement of the necessary level of competitiveness in terms of capacity utilization, flexibility, productivity, and governability. Implementation of the agreement was subject to acceptance by a majority of workers and, in a referendum held on 13 and 14 January 2011, 54% of employees voted in favor. At Palazzo Chigi on 18 June 2009, Fiat announced to representatives of national and local government and the trade unions that it would cease auto production at the Termini Imerese plant in 2011. This was reconfirmed on 22 December 2009 during the presentation (at Palazzo Chigi) of the Groups 2010-2011 Plan for Italy. As no alternative industrial solutions for the site had been forthcoming, the Group stated its willingness to work with government and unions in supporting any viable proposals for conversion of the site put forward by the Region of Sicily, or other public or private sector entities. On 29 January 2010, the Ministry for Economic Development set up a round table with representatives from the national government, the Region of Sicily, trade unions, Confindustria Sicily and Fiat to explore solutions for a viable industrial alternative at Termini Imerese. Several subsequent meetings were held during the year, with regular updates provided by Invitalia (advisor to the Ministry for Economic Development tasked with producing a development plan identifying manufacturing and employment prospects in the area) on parties interested in submitting proposals for conversion of the industrial zone at Termini Imerese, as well as their preliminary plans. At the meeting held on December 21st at the Ministry for Economic Development, several proposals were presented that could potentially be developed in parallel and that, according to the Ministrys assessments, could generate employment for about 3,300 people in the area (compared to the approximate 1,600 people currently employed by Fiat Group), therefore preventing any negative social impacts. Fiat Group reconfirmed the position expressed on several previous occasions that it was willing to make the area at Termini Imerese available for new initiatives, on the condition that priority will be given to employing the Groups workers. At the Ministry for Economic Development, the working group established in 2009, in collaboration with the Region of Emilia Romagna, continued work to identify industrial solutions for CNH Italia S.p.A.s site at Imola and minimize the social impacts of the termination of production activities. Since the rationalization of manufacturing for CNHs Construction Equipment business in Italy was announced, over 230 employees have been relocated to other Group plants or found solutions outside the Group, while the remaining 220 will benefit from the exceptional temporary layoff benefit scheme (a mechanism made available under emergency legislation) until 30 April 2011. Management of production levels The business environment improved during 2010, particularly for the capital goods sector, which had been particularly hard hit by a collapse in demand in 2009. Recovery in the automobile sector was much more contained, reflecting a decline in volumes following the elimination of eco-incentives, which had sustained demand in 2009, particularly in Europe. In Italy, Group companies continued to make extensive use of temporary layoff benefit schemes in managing production levels, although with a reduction of approximately 20% over the previous year (on a comparable scope of operations) and higher than average reductions for all sectors except FGA, where the decrease was negligible, and Magneti Marelli, where there was a modest increase. For FGA, in particular, there was an increase in use of these schemes at plants dedicated to manufacture of passenger cars, but a significant decrease at the Sevel plant due to sharply higher production levels for light commercial vehicles. During the year, 13 plants, employing approximately 9,350 workers, reached the limit for ordinary benefits (52 weeks in any rolling 2-year period) and recourse was made to the extraordinary temporary layoff benefit scheme, which provides for a further 12 months coverage
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where a company crisis is due to sudden and unforeseeable events. Additionally, for some plants where this scheme had already been utilized in 2009, the need to continue production stoppages and the absence of the appropriate conditions for recourse to other mechanisms, made it necessary to activate the process for application of the exceptional temporary layoff benefit scheme (provided for under emergency social welfare legislation). At the end of December, approximately 7,500 workers were covered by this scheme at 8 plants operated by FGA, Magneti Marelli and CNH. Despite the continued challenging operating environment, the Group succeeded in converting 750 fixed-term contracts and over 200 apprenticeship contracts into unlimited term employment contracts. Outside Italy, recourse to production stoppages continued to be necessary in 2010, however, the use of Chmage partiel in France, Expediente de Regulacion de Empleo in Spain and Kurzarbeit in Germany fell approximately 40% over the prior year. Suspension of production, which took various forms, also involved plants of certain sectors in other countries, such as Poland, Belgium, the UK and the United States. In Brazil, although higher production levels in the first half led to the use of overtime and additional shifts, as well as a considerable increase in headcount, the growth in net new hires slowed in the second half of the year. In Poland, Fiat Group Automobiles had to resort to overtime during the first half, but production levels fell in the latter part of the year, also impacting the Groups suppliers, with production being suspended for several days. In 2010, all principal sectors took steps to restructure and/or reorganize their activities in Italy. In agreement with the unions, plans were initiated to reduce headcount by about 1,500 between 2010 and 2011. All employees concerned would become eligible for retirement during the period covered by mobilit (a government benefit scheme applicable to employees affected by collective redundancies for a duration of 3 years in northern Italy and 4 years in the south). The number of employees leaving the Group during the year under the plans agreed in 2010 and 2009 was about 1,000 and 400. In Spain, the Barcelona plant of Componentes Mecanicos S.A. (COMESA) announced that production would be discontinued as it was no longer economically sustainable due to the severe crisis in the trucks and commercial vehicles industry, for which Comesa produced components, and the impact of the decision of the partner (ZF Driveline Technology business) to withdraw from the company and transfer production to its other plants. On December 27th, a majority of workers voted in favor of the agreement signed between the company and trade unions relating to closure of the plant and redundancy packages for approximately 270 staff. Also in Spain, Iveco reached an agreement with unions concerning the reduction of at least 56 employees at its Valladolid plant. A similar agreement was signed for the Barcelona plant, providing for a reduction of at least 42 employees. The total headcount reduction of 116 employees was achieved through the departure of employees qualifying for early retirement, the departure of employees with less time in service accompanied by a commitment to rehire those employees (relevo) to replace personnel opting for early retirement, and through voluntary redundancies. In the United States, CNH initiated an incentivized voluntary redundancy scheme, pursuant to the agreement with the UAW, for employees wanting to retire. During the year, approximately 58 workers adhered to the scheme. No significant restructuring or reorganization initiatives were implemented in other countries during the year.
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World Class Manufacturing (WCM) At year-end 2010, the World Class Manufacturing program had been implemented at 130 plants (114 at year-end 2009), representing 95% of the manufacturing cost base for all Group plants worldwide. The number of projects proposed by plants rose to 38,000 from 22,000 at the end of 2009, with improvements in quality reflected in the increase in average savings per project. The number of plant audits increased approximately 20% year-over-year. Following the completion of specific external audits, 9 plants worldwide achieved WCM certification during the year (6 Bronze and 3 Silver). At 31 December 2010, a total of 200 supplier plants had implemented the WCM program. The program was also rolled out at Chrysler plants during the year, with a total of 3,200 man-days in training support from the central team, and 8,500 projects implemented. Collective bargaining Agreements reached in 2010 provided for pay increases or one-off payments to compensate employees for cost-of-living increases and were in line or slightly above official cost-of-living increases recorded for the period. In Italy, increases provided in the national collective labor agreement for metalworking sector employees (nonmanagement) which covers approximately 97% of Group employees in Italy were applied and adjustments established under the national collective labor agreement for managers of industrial companies, renewed in November 2009, were also implemented. With regard to company-level negotiations (covering almost all employees of the Groups metalworking sector companies), a memorandum was signed on 14 July 2010 with the trade unions FIM, FIOM, UILM, FISMIC and UGL Metalmeccanici confirming, for 2010 and 2011, the payment of a monthly performance bonus based on targets established in previous agreements (a gross annual amount of 1,343.03 for employees in categories 1-4) and also stipulating that the Groups 2009 results were below target and, therefore, conditions had not been met for payment of an additional bonus amount. As a result, the performance bonus was some 600 less than the average amount paid in 2009. In December, a one-off gross payment of 200 was also paid to workers of FMA in Pratola Serra based on the performance bonus agreement signed in July 2009 for plants achieving Silver level under the World Class Manufacturing program. Outside Italy, the principal company-level agreements established during 2010 included the annual negotiation in France, which resulted in salary increases of between 1% and 1.5%, depending on the company. In Germany, collective bargaining for renewal of the metalworkers contract, applied at most Group companies in Germany, was conducted at the individual state level. The agreements maintained current salary levels up to 31 March 2011, with a one-off gross payment of 320 relating to the period from May 2010 to March 2011, payable in two equivalent installments in May and December 2010. A 2.7% salary increase will then be applied from 1 April 2011. In Poland, company-wide pay negotiations, which did not result in any structural increases in 2009, resulted in average increases of about PLZ 300 gross per month and, except for a few companies, one-off bonuses averaging around PLZ 1,500 gross, payable in two or more installments and directly linked to achievement of production plans objectives. However, due to the worsening of market conditions and resulting impact on production, for most Group companies conditions for payment of all bonus installments were not met.
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In Brazil, most Group companies applied collective bargaining agreements in place with the local employers associations for each sector (e.g., FIEMG for companies in the Belo Horizonte, Betim, and Contagem areas). Others have stipulated company-level agreements with similar increases. Overall, increases under these collective agreements were higher than inflation, reflecting the countrys current economic growth, but were nevertheless in line with increases applied for the local industrial system as a whole. Variable annual bonuses were also paid on the basis of company results. Finally, at the Fiat Automobiles Serbia Doo plant in Kragujevac, a collective labor agreement was reached, with the union organization represented at the plant, covering both pay and employment conditions for the approximately 1,100 workers at the site. The level of labor unrest in Italy was higher than for 2009. The most significant labor action taken during the year consisted of: strikes called by several trade unions at the beginning of the year in protest against the Groups 2010-2011 Plan for Italy, presented in December 2009; strikes against the agreement signed on 15 June 2010 for the relaunch of the G.B. Vico plant in Pomigliano called by FIOM, which did not sign the agreement; and, strikes protesting against the non-payment of additional performance bonuses for 2009. There were also a few instances of minor labor action organized locally in relation to shifts, overtime and workloads. The overall level of labor unrest in countries outside Italy was once again negligible this year. However, general strikes were called between June and October in France to protest against government pension reforms with Group employees also taking part, albeit at significantly different levels for each company and a general strike was called in Spain at the end of September against the government budget (which also contained an increase in retirement age and labor reforms) in which a significant number of employees of Group companies took part.
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FINANCIAL REVIEW FIAT GROUP

INTRODUCTION Demerger of activities to Fiat Industrial During 2010, the Group initiated and completed a strategic project to separate the Agricultural and Construction Equipment (CNH sector) and Trucks and Commercial Vehicles (Iveco sector) activities, as well as the Industrial & Marine business line of FPT Powertrain Technologies (FPT Industrial sector), from the Automobile and Automobile-related Components and Production Systems activities, which include the sectors Fiat Group Automobiles, Maserati, Ferrari, Magneti Marelli, Teksid, Comau and the Passenger & Commercial Vehicles business line of FPT Powertrain Technologies (Fiat Powertrain sector). The separation of those businesses, in the form of their demerger from Fiat S.p.A. and transfer to Fiat Industrial S.p.A. (the Demerger a Scissione Parziale Proporzionale pursuant to Article 2506-bis of the Italian Civil Code), resulted in the creation of the Fiat Industrial Group (consisting of CNH, Iveco and FPT Industrial) on 1 January 2011. From the same date, Fiat Group post Demerger is comprised of Fiat Group Automobiles, Maserati, Ferrari, Fiat Powertrain, Magneti Marelli, Teksid and Comau. On 3 January 2011, Fiat Industrial S.p.A.s shares began trading on the Mercato Telematico Azionario managed by Borsa Italiana S.p.A. A description of the principal phases leading up to completion of the Demerger is provided in the Notes to the Consolidated Financial Statements. As the transaction took effect on 1 January 2011, the consolidated financial statements for the year ended 31 December 2010 relate to Fiat Group pre Demerger (hereinafter the Fiat Group). Moreover, in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as the Demerger became highly probable in December (when the above authorizations were obtained), all businesses to be transferred to the new Fiat Industrial Group are classified and presented as Discontinued Operations in these consolidated financial statements. That presentation has resulted in the following: For both 2010 and 2009 (the latter presented for comparative purposes), all revenues and costs relating to Discontinued Operations are reported in the Income Statement as Profit/(Loss) from Discontinued Operations. All current and non-current assets relating to Discontinued Operations at December 2010 have been reclassified in the Statement of Financial Position as Assets Held for Sale and Discontinued Operations. All liabilities (excluding equity) relating to Discontinued Operations at December 2010 have been reclassified in the Statement of Financial Position as Liabilities Held for Sale and Discontinued Operations. For both 2010 and 2009 (the latter presented for comparative purposes), all cash flows arising from Discontinued Operations have been presented in the Statement of Cash Flows as separate line items under cash flows from operating, investing and financing activities. In other words, the Fiat Group consolidated financial statements are based on the full consolidation of subsidiaries that are to remain within the scope of operations of Fiat Group post Demerger (i.e., Continuing Operations) and those that will be transferred to Fiat Industrial Group (i.e., Discontinued Operations), with separate presentation for each group of activities. For additional detail of items presented under Discontinued Operations in the Consolidated Statements of Income, Financial Position and Cash Flows, please refer to the section Asset and liabilities held for sale and Discontinued Operations. Additionally, as the Demerger is considered a business combination involving entities or businesses under common control, it is outside the scope of application of IFRS 3 and IFRIC 17. Accordingly, in the 2011 consolidated financial statements for Fiat S.p.A. post Demerger and Fiat Industrial S.p.A., the opening position for items in the statement of financial position will be equivalent to the carrying amounts reported in the consolidated financial statements of Fiat Group prior to the Demerger.
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Principal changes in the scope of consolidation in 2010 On 1 February 2010, the sale of Targa Rent S.r.l., a subsidiary of the Fiat Group Automobiles sector, was completed; this investment was already classified under assets held for sale at 31 December 2009. On 30 June 2010, the Fiat Group acquired the remaining 50% of the joint venture Fiat Powertrain Polska Sp. z.o.o. (ex Fiat-GM Powertrain Polska), thereby obtaining 100% control. The 50% interest acquired was consolidated on a line-by-line basis effective 1 January 2010. FINANCIAL REVIEW Operating Performance
2010 Fiat Group pre Demerger 56,258 47,738 4,742 1,431 (143) 2,204 15 176 (34) 2,009 (905) 178 190 (12) 1,282 682 600 2009 Fiat Group pre Demerger 50,102 43,261 4,296 1,398 (89) 1,058 4 312 (391) 359 (753) 27 18 9 (367) 481 (848)
( million)
Net revenues Cost of sales Selling, general and administrative Research and development Other income/(expense) TRADING PROFIT/(LOSS) Gains/(losses) on disposal of investments Restructuring costs Other unusual income/(expense) OPERATING PROFIT/(LOSS) Financial income/(expense) Result from investments: Share of profit/(loss) of investees accounted for using the equity method Other income/(expense) from investments PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) PROFIT/(LOSS) ATTRIBUTABLE TO: Owners of the parent Non-controlling interests
Continuing Discontinued Operations Operations 35,880 21,342 30,718 17,979 2,956 1,793 1,013 418 (81) (60) 1,112 1,092 12 3 118 58 (14) (20) 992 1,017 (400) (505) 114 64 120 70 (6) (6) 706 576 484 198 222 378
Continuing Discontinued Operations Operations 32,684 17,968 28,252 15,549 2,673 1,636 1,010 388 (13) (73) 736 322 3 1 168 144 (193) (198) 378 (19) (352) (401) 77 (50) 65 (47) 12 (3) 103 (470) 448 33 (345) (503)
179 43
341 37
520 80
(374) 29
(464) (39)
(838) (10)
The following review provides an analysis of net revenues and trading profit by individual business/sector. Other data relates to the Fiat Group as a whole, with a breakdown provided for Continuing Operations (Fiat post Demerger) and Discontinued Operations (Fiat Industrial). Net revenues Net revenues for 2010 totaled 56,258 million, a 12.3% increase over 2009, when overall trading conditions were particularly weak. Continuing Operations posted revenues of 35,880 million (+9.8%). The Automobiles business recorded 30,130 million (+6.3%): increased sales of light commercial vehicles, and by Ferrari and Maserati, in addition to positive currency effects, more than offset the decline in passenger cars for Fiat Group Automobiles, following the phase-out of eco-incentives in major European markets. Components and Production Systems achieved a 23.6% increase in revenues to 10,865 million on the back of higher demand. Discontinued Operations recorded revenues of 21,342 million, up 18.8% over 2009, with significant volume recoveries for all businesses.
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Revenues by business
( million)
Automobiles (Fiat Group Automobiles, Maserati, Ferrari) Components and Production Systems (Fiat Powertrain (1), Magneti Marelli, Teksid, Comau) Other Businesses (Publishing, Holding Companies and Other) Eliminations Total Continuing Operations Agricultural and Construction Equipment (CNH-Case New Holland) Trucks and Commercial Vehicles (Iveco) FPT Industrial (1) Eliminations and Other Total Discontinued Operations Eliminations between Continuing and Discontinued Operations Total Fiat Group
2010 30,130 10,865 1,159 (6,274) 35,880 11,906 8,307 2,415 (1,286) 21,342 (964) 56,258
2009 28,351 8,789 1,047 (5,503) 32,684 10,107 7,183 1,580 (902) 17,968 (550) 50,102
% change 6.3 23.6 10.7 9.8 17.8 15.6 52.8 18.8 12.3
(1) Fiat Powertrain comprises the activities of the Passenger & Commercial Vehicles business line of the former FPT Powertrain Technologies, while FPT Industrial comprises the activities of the Industrial & Marine business line
Following is a review of net revenues by business/sector: Continuing Operations Automobiles In 2010, the Automobiles businesses had revenues of 30,130 million, up 6.3% over 2009.
( million)
Fiat Group Automobiles Maserati Ferrari Eliminations Total
2010 27,860 586 1,919 (235) 30,130
2009 26,293 448 1,778 (168) 28,351
% change 6.0 30.8 7.9 6.3
Fiat Group Automobiles (FGA) posted revenues of 27,860 million for the year, representing a 6% increase over 2009 (+0.5% at constant exchange rates), with the impact of the decline in passenger car volumes (-8.2%) compensated for by the significant increase for light commercial vehicles (+27.1%). In total, FGA delivered 2,081,800 passengers cars and light commercial vehicles, down 3.2% over the prior year. For passenger cars only, FGA delivered 1,691,400 vehicles, an 8.2% decrease over 2009. In Europe, deliveries were down 15.1% to 963,000 vehicles, with the reduction also reflecting measures to realign dealer inventory levels to market demand. Deliveries in Italy (-16.3%) and Germany (-53.2%) were heavily impacted by the significant decline in demand for smaller and CNG/LPG vehicles, following the phase-out of eco-incentives. Deliveries were also down in the United Kingdom (-17.5%), but remained stable in France (+0.9%) and were up in Spain (+48.3%), against particularly low 2009 volumes. Notable results were achieved in several of the sectors smaller markets. In Europe, where the passenger vehicle market was down 4.9% over the prior year, Fiat Group Automobiles closed 2010 with a market share of 7.5% (-1.1 percentage points over 2009). In Italy, share was 30.1%, a decrease of 2.7 percentage points. Excluding the effect of the sharp reduction in demand for CNG/LPG vehicles (-25%), where FGA is market leader, share would have been in line with 2009. At 3.0% (-1.7 percentage points), share performance in Germany was impacted by the significant decline in demand (over 40%) in FGAs core market segments. Modest decreases in share were experienced in France (-0.3 percentage points to 4.0%) and the United Kingdom (-0.5 percentage points to 3.0%). By contrast, market share in Spain was up 0.5 percentage points to 3.0%.
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For light commercial vehicles, a total of 390,400 units were delivered, representing a 27.1% year-on-year increase. In Europe, Fiat Professional increased deliveries 19.7% to 183,300 units. In Italy, Fiat Professional achieved a 44.0% market share, gaining approximately 3 percentage points over 2009, while share in Europe was 12.8% (stable vs. 2009). In Brazil, Fiat Group Automobiles maintained its leadership position, delivering a total of 761,400 passenger cars and light commercial vehicles, representing a year-on-year increase of 1.6%. With the overall market growing 10.6%, FGA achieved a 22.8% share for the year (-1.7 percentage points). For 2010, Maserati reported 586 million in revenues, an increase of 30.8% over 2009, primarily attributable to excellent sales performance for the new GranCabrio. A total of 5,675 cars were delivered to the network during the year, an increase of 26.4%, with positive performance in the majority of Maseratis 59 national markets. For 2010, Ferrari reported 1,919 million in revenues, up 7.9% over 2009, mainly reflecting higher sales volumes driven by the new 458 Italia and 599 GTO, the continued success of the Ferrari California, as well as the positive contribution from the customization program. A total of 6,573 cars were delivered to the network during the year (+5.4% over 2009). Components and Production Systems The Components and Production Systems businesses reported revenues of 10,865 million, a 23.6% increase driven primarily by volume growth in all sectors.
( million)
Fiat Powertrain Components (Magneti Marelli) Metallurgical Products (Teksid) Production Systems (Comau) Eliminations Total
2010 4,211 5,402 776 1,023 (547) 10,865
2009 3,372 4,528 578 728 (417) 8,789
% change 24.9 19.3 34.3 40.5 23.6
For 2010, Fiat Powertrain (the Passenger and Commercial Vehicles business line of the former FPT Powertrain Technologies sector) reported 4,211 million in revenues, an increase of 24.9% over the previous year. This includes the effect of full consolidation of Fiat Powertrain Polska Sp. z.o.o. (formerly Fiat-GM Powertrain Polska) following acquisition of the JV partners 50% stake during the year. On a like-for-like basis, the increase in revenues was 11.1%. Sales to Fiat Group companies accounted for 87% of revenues (90% on a comparable scope of operations and 92% for 2009), with the remainder primarily consisting of diesel engines sold to external customers. A total of 2,347,000 engines (+2.5% on a like-for-like basis) and 2,233,000 transmissions (+1.1%) were sold during the year. Magneti Marelli reported 2010 revenues of 5,402 million, representing a 19.3% increase over 2009. For Europe overall, the increase reflected strong performance for light commercial vehicles and recovery in the medium-large passenger car segments, which were particularly hard hit in 2009. In Italy and Poland, revenues reflected the overall decline for A and B-segment cars following the elimination of government eco-incentives. The sector experienced strong performance in both China and Brazil and a significant recovery in the NAFTA region, where volume growth was primarily driven by new product launches. All business lines recorded an increase in production volumes. The Lighting business achieved significant growth linked to the recovery of its core European markets and volume increases in Asian markets and the NAFTA region. The Suspension Systems business also saw a strong recovery, with volume increases primarily concentrated in Brazil and the USA. Sales for Electronics Systems were up in China and Brazil, and the Engine Control business also benefited significantly from performance in those markets. Teksid reported revenues of 776 million for 2010, up 34.3% principally due to an increase over 2009 volumes, which were severely impacted by the market crisis. The Cast Iron business unit recorded a 21.8% increase in volumes, driven primarily by growth in components for heavy vehicles, with positive performance in the Mercosur and NAFTA regions, as well as in Europe. Volumes for the Aluminum business unit were up 15.3%. Comau had revenues of 1,023 million for 2010, with the 40.5% increase over 2009 principally attributable to operations in China, Latin America and North America.
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Other Businesses Other Businesses includes the contribution from the Groups publishing businesses, service companies and holding companies. For 2010, Other Businesses had revenues of 1,159 million, up 10.7% year-over-year. Discontinued Operations Agricultural and Construction Equipment CNH Case New Holland had revenues of 11,906 million for 2010, an increase of 17.8% over 2009 (+12% in US dollar terms) on the back of improving agricultural and construction equipment demand in the Americas and Rest of World markets. Net sales in the Agricultural equipment segment increased 14% for the year (+8% in USD) as a result of solid trading conditions in the Americas due to increasing agricultural commodity prices and good harvest conditions. Trading conditions in Europe were more difficult, largely due to poor harvest conditions in certain countries and tight credit markets. Full year 2010 net sales in the Construction equipment segment grew 46% (+39% in USD) as a result of significant market improvements in Latin America and Asia, and improved conditions in North America largely due to replacement of ageing fleets. In 2010, worldwide agricultural industry retail unit sales increased 8% compared to prior year with improvements in all regions except Western Europe. Global sales grew 8% for tractors and 2% for combines. CNH full year global market share for tractors was largely in line with prior year, maintaining position in Western Europe despite the industry decline and with a slight decrease in North America in under 40 hp and mid-sized utility tractors while transitioning to new and more competitive products. CNH improved its global market share for combines on strong performance in the Rest of World regions. Global construction equipment industry unit sales rose 47% in the year, off a low basis in 2009, with light equipment up 35% and heavy equipment up 59%. CNHs full year market share was in line with growth in demand across all segments and regions with the exception of Latin America, which was down due to local manufacturing capacity constraints for CNH in both the heavy and light segments. Capacity expansion plans have been initiated at two facilities to accommodate future market growth and in order to meet manufacturing localization targets. Trucks and Commercial Vehicles Iveco reported revenues of 8,307 million for the year, up 15.6% over 2009, primarily as a result of higher sales volumes, which reflect a general recovery in demand, although remaining at modest levels in Western Europe. Iveco delivered a total of 129,630 vehicles, an increase of 24.8% over 2009. Growth was recorded in all segments with light vehicles up 25.3%, medium up 51.3% and heavy up 27.6%. Total deliveries for 2010 were, however, still considerably below pre-crisis levels. In Western Europe, a total of 78,326 vehicles were delivered (+17.3%), with increases in France (+22.3%), Germany (+31.9%), Spain (+40.8%) and the UK (+36.9%), but year-on-year performance for Italy flat (-0.1%). The trend was positive in Eastern Europe, with deliveries up 41.6%, and very strong in Latin America, increasing 52.4%. Ivecos market share in Western Europe was 13.2% (down 0.4 percentage points vs. 2009). Share was substantially unchanged in the light segment (-0.1 percentage points), with negative relative performance in the UK (-1.4 percentage points) offsetting increases in Spain and Germany (+1.7 and +1.4 percentage points, respectively). Share in the medium segment was down 0.4 percentage points, despite improvements in Spain (+11.6 percentage points), France (+1.0 percentage point) and Germany (+1.1 percentage points). Share decreased 0.9 percentage points in the heavy segment, with negative performances in Spain (-8.1 percentage points) and Germany (-1.3 percentage points) partially compensated for by an increase in market share for Italy (+2.1 percentage points). FPT Industrial For 2010, FPT Industrial (the Industrial & Marine business line of the former FPT Powertrain Technologies sector) reported 2,415 million in revenues, representing an increase of 52.8% over the previous year driven by a strong increase in volumes. Sales to customers external to the Fiat Group as well as to joint ventures accounted for 32.3% (32.6% in 2009). A total of 423,000 engines (+58.1%) were sold, primarily to Iveco (34%), CNH (23%) and Sevel (25%), Fiat Group Automobiles JV for light commercial vehicles. In addition, 66,000 transmissions (+25.0%) and 139,000 axles (+32.1%) were also delivered.
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Trading profit/(loss) Fiat Group posted 2010 trading profit of 2,204 million (1,058 million for 2009). Trading profit for Continuing Operations was 1,112 million (trading margin: 3.1%), compared with 736 million for 2009 (trading margin: 2.3%), and Discontinued Operations reported a trading profit of 1,092 million (trading margin: 5.1%), up from 322 million for 2009 (trading margin: 1.8%). Overall, the improvements were driven by higher volumes, with the exception of passenger cars for FGA, better product mix and continued focus on costs and industrial efficiencies. Trading profit/(loss) by business
( million)
Automobiles (Fiat Group Automobiles, Maserati, Ferrari) Components and Production Systems (Fiat Powertrain (1), Magneti Marelli, Teksid, Comau) Other Businesses (Publishing, Holding Companies and Other) and Eliminations Total Continuing Operations Trading margin (%) Agricultural and Construction Equipment (CNH-Case New Holland) Trucks and Commercial Vehicles (Iveco) FPT Industrial (1) Eliminations and Other Total Discontinued Operations Trading margin (%) Total Fiat Group Trading margin (%)
2010 934 249 (71) 1,112 3.1 755 270 65 2 1,092 5.1 2,204 3.9
2009 719 89 (72) 736 2.3 337 105 (131) 11 322 1.8 1,058 2.1
Change 215 160 1 376
418 165 196 -9 770
1,146
(1) Fiat Powertrain comprises the activities of the Passenger & Commercial Vehicles business line of the former FPT Powertrain Technologies, while FPT Industrial comprises the activities of the Industrial & Marine business line
Following is a discussion of trading profit by business/sector: Continuing Operations Automobiles The Automobiles businesses reported trading profit of 934 million for 2010, up 215 million over the 719 million figure for 2009. All sectors contributed to the growth.
( million)
Fiat Group Automobiles Maserati Ferrari Total Trading margin (%)
2010 607 24 303 934 3.1
2009 470 11 238 719 2.5
Change 137 13 65 215
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Fiat Group Automobiles recorded a 607 million trading profit for 2010 (trading margin of 2.2%), compared to the 470 million figure for 2009 (1.8% margin). The improved trading performance was attributable to a better product/market mix, linked to the performance of light commercial vehicles and the Brazilian business, in addition to continued improvements from World Class Manufacturing and purchasing efficiencies. For 2010, Maserati had a trading profit of 24 million (trading margin: 4.1%). The sharp increase over the 11 million trading profit for 2009 (trading margin: 2.5%) was attributable to both higher sales volumes and continued optimization of operating costs. Ferrari closed 2010 with a trading profit of 303 million (trading margin: 15.8%), compared to 238 million for 2009 (trading margin: 13.4%). The increase was attributable to higher sales volumes, excellent results from the customization program and efficiency gains. Components and Production Systems In 2010, Components and Production Systems nearly tripled trading profit to 249 million (trading margin of 2.3%), up 160 million from 2009, driven primarily by higher volumes and improved product mix.
( million)
Fiat Powertrain Components (Magneti Marelli) Metallurgical Products (Teksid) Production Systems (Comau) Total Trading margin (%)
2010 140 98 17 (6) 249 2.3
2009 104 25 (12) (28) 89 1.0
Change 36 73 29 22 160
Fiat Powertrain closed 2010 with a trading profit of 140 million, compared to 104 million for 2009. This improvement was primarily attributable to a more favorable sales mix and increased purchasing and manufacturing efficiencies. Magneti Marelli reported trading profit of 98 million for 2010 compared with 25 million for 2009. The improvement in trading performance was driven by increased sales volumes, combined with cost containment actions and manufacturing efficiencies. However, the sector had to manage the unfavorable impact of supply issues resulting from an excess in market demand for electronic systems. Teksid closed the year with a trading profit of 17 million (trading loss of 12 million for 2009), reflecting the positive impact of volume increases. Comau reduced its trading loss to 6 million for 2010, compared with a trading loss of 28 million for 2009. The improvement was attributable to the increase in activity levels and cost containment actions. Other Businesses In 2010, Other Businesses reported a trading loss of 71 million, including eliminations and consolidation adjustments, compared to a 72 million loss for 2009.
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Discontinued Operations Agricultural and Construction Equipment CNH Case New Holland had a trading profit of 755 million (trading margin of 6.3%) for 2010, up 418 million from the 337 million (trading margin of 3.3%) for 2009, when performance was severely impacted by difficult trading conditions in the construction equipment segment. The improvement resulted from higher volumes, increased industrial utilization in the Americas, a favorable shift in product mix to higher powered tractor and combine segments, as well as better pricing and cost reductions from prior year restructuring initiatives. This positive performance was tempered by continued low demand levels for agricultural equipment in Western Europe, increased raw material prices and new product launch costs, primarily in the construction equipment sector during the fourth quarter. Trucks and Commercial Vehicles Iveco posted a trading profit of 270 million for the year (2009: 105 million), with a trading margin of 3.3% (2009: 1.5%). The improvement was primarily driven by higher sales volumes and production efficiencies. FPT Industrial FPT Industrial closed 2010 with a trading profit of 65 million. The improvement over the 131 million trading loss reported for 2009 was principally attributable to a significant increase in sales volumes. Operating profit/(loss) For 2010, Fiat Group recorded operating profit of 2,009 million (359 million in 2009), which included 195 million (699 million in 2009) in net unusual expenses, mainly due to restructuring costs (176 million), inclusive of related asset write-offs. Operating profit for Continuing Operations was 992 million (378 million for 2009): the increase reflected the improvement in trading profit (+376 million) and a reduction in net unusual expense (120 million for 2010 compared with a 358 million charge for 2009). Operating profit for Discontinued Operations was 1,017 million: the increase over the 19 million loss for 2009 was due to improved trading performance (+770 million) and a reduction in net unusual expense (75 million for 2010 compared with a 341 million charge for 2009). Net gains on the disposal of investments totaled 15 million (4 million in 2009), with 12 million attributable to Continuing Operations (3 million in 2009), including 10 million relating to the accounting impact of the acquisition of the remaining 50% in Fiat-GM Powertrain Polska. Discontinued Operations accounted for 3 million (1 million in 2009), primarily related to the gain on the disposal of the interest in the joint venture LBX Company LLC by the Agricultural and Construction Equipment sector. Restructuring costs for Fiat Group totaled 176 million (312 million in 2009). For Continuing Operations, restructuring costs of 118 million primarily related to Fiat Group Automobiles (90 million) and Magneti Marelli (26 million), compared to a total of 168 million for 2009, principally attributable to Magneti Marelli (62 million), Fiat Group Automobiles (54 million) and Fiat Powertrain (21 million). For Discontinued Operations, restructuring costs totaled 58 million and primarily related to FPT Industrial (33 million) and Iveco (19 million), compared to a total of 144 million in 2009, mainly related to CNH Case New Holland (87 million), FPT Industrial (35 million) and Iveco (22 million). Fiat Group reported other unusual expense of 34 million (391 million for 2009), 14 million of which was attributable to Continuing Operations, compared with 193 million for 2009 that included write-downs by the Automobiles business of certain investments in platforms and architectures related to the strategic realignment with Chrysler Group LLC, costs related to the acquisition of the interest in Chrysler Group LLC, in addition to other non-recurring expenses and impairment losses recognized as a consequence of the global economic crisis. For Discontinued Operations, other unusual income/(expense) was a negative 20 million (a negative 198 million in 2009, mainly attributable to Iveco for non-recurring expenses and impairment losses recognized as a consequence of the global economic crisis).
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Following is a summary of the principal components of operating profit, broken down by sector:
( million)
Fiat Group Automobiles Maserati Ferrari Fiat Powertrain Components (Magneti Marelli) Metallurgical Products (Teksid) Production Systems (Comau) Other Businesses and Eliminations Total Continuing Operations
2010 607 24 303 140 98 17 (6) (71) 1,112
profit/(loss) 2009 470 11 238 104 25 (12) (28) (72) 736
Trading
Gains/(losses) on the disposal of investments 2010 2009 2 10 1 (3) 1 1 3 12 3
Restructuring costs 2010 2009 90 54 (3) 21 26 62 4 5 5 22 118 168
Other unusual income/(expense) 2010 2009 (2) (199) (1) 5 19 (6) 2 (30) 5 (14) (193)
2010 515 24 302 172 73 17 (6) (105) 992
Operating profit/(loss) 2009 217 11 245 77 (40) (14) (32) (86) 378
Agricultural and Construction Equipment (CNH) 755 Trucks and Commercial Vehicles (Iveco) 270 FPT Industrial 65 Eliminations and Other 2 Total Discontinued Operations 1,092 Total Fiat Group 2,204
337 105 (131) 11 322 1,058
4 (1) 3 15
1 1 4
5 19 33 1 58 176
87 22 35 144 312
(11) (3) (6) (20) (34)
(173) (25) (198) (391)
754 240 29 (6) 1,017 2,009
251 (90) (191) 11 (19) 359
Profit/(loss) Net financial expense for 2010 totaled 905 million for the Group (753 million for 2009) with the increase primarily due to the cost of maintaining a higher level of liquidity. For Continuing Operations, net financial expense was 400 million (352 million for 2009) and included a 111 million gain in the mark-to-market value of two stock option-related equity swaps (a 117 million gain for 2009). For Discontinued Operations, net financial expense totaled 505 million (401 million for 2009). Investment income totaled 178 million, up from the 27 million figure for 2009 mainly due an increase in earnings for joint venture companies. For Continuing Operations, investment income totaled 114 million (77 million in 2009). For Discontinued Operations, investment income was 64 million (loss of 50 million in 2009). Fiat Group recorded profit before taxes of 1,282 million (loss before taxes of 367 million for 2009), 706 million of which related to Continuing Operations (profit before taxes of 103 million for 2009) and reflected the higher operating result (+614 million), as well as an increase in investment income (+37 million), partially offset by a 48 million increase in net financial expense. Discontinued Operations closed 2010 with a profit before taxes of 576 million, compared to a loss before taxes of 470 million for 2009. The increase reflects the higher operating result (+1,036 million) and an increase in investment income (+114 million), partially offset by a 104 million increase in net financial expense. Income taxes for 2010 for Fiat Group totaled 682 million (481 million for 2009), of which 90 million for IRAP (99 million for 2009) and 8 million for taxes relating to prior periods (24 million for 2009) with the remainder relating to the taxable income of companies operating outside Italy. For Continuing Operations, income taxes totaled 484 million (448 million for 2009) and for Discontinued Operations, they came to 198 million (33 million for 2009). For 2010, Fiat Group recorded a profit of 600 million (loss of 848 million for 2009), 222 million for Continuing Operations (loss of 345 million for 2009) and 378 million for Discontinued Operations (loss of 503 million for 2009). Profit attributable to owners of the parent for 2010 was 520 million (loss of 838 million for 2009), 179 million for Continuing Operations (loss of 374 million for 2009) and 341 million for Discontinued Operations (loss of 464 million for 2009).
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Statement of Cash Flows Following is a summary statement of cash flows which includes both Continuing and Discontinued Operations. A full statement of cash flows is provided in the section Consolidated Financial Statements. The comments primarily relate to cash from Continuing Operations, but certain pertinent information regarding cash from Discontinued Operations has also been provided.
( million)
A) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR (AS REPORTED) Cash and cash equivalents included under Assets held for sale B) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR C) CASH FROM/(USED IN) OPERATING ACTIVITIES D) CASH FROM/(USED IN) INVESTING ACTIVITIES E) CASH FROM/(USED IN) FINANCING ACTIVITIES Currency translation differences F) NET CHANGE IN CASH AND CASH EQUIVALENTS G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR of which: Cash and cash equivalents included under Assets held for sale H) CASH AND CASH EQUIVALENTS AT END OF THE YEAR (AS REPORTED)
(*) 2009 figures have been reclassified, as required by IFRS 5
2010 12,226 12,226 6,110 (3,953) 911 359 3,427 15,653 15,653
2009 (*) 3,683 3,683 4.601 (2,559) 6,281 220 8,543 12,226 12,226
For 2010, cash generated by operating activities was 6.1 billion, of which 2.5 billion related to Discontinued Operations. Of the approximately 3.6 billion in cash generated by Continuing Operations during the year, 2.6 billion was from income-related inflows (calculated as net profit plus amortization and depreciation, dividends, changes in provisions and various items related to sales with buy-back commitments and operating leases, net of gains/losses on disposals and other non-cash items) with approximately 1 billion resulting from a decrease in working capital (calculated on a comparable scope of operations and at constant exchange rates). For Discontinued Operations, in addition to the approximate 1.5 billion in income-related inflows, approximately 1 billion was generated from a decrease in working capital. Cash used in investing activities totaled nearly 4 billion. In addition to the approximately 0.5 billion used in investing activities relating to Discontinued Operations, cash used in investing activities for Continuing Operations totaled 3.5 billion and consisted of: Expenditure on tangible and intangible assets (including 886 million in capitalized development costs) totaled 2,864 million. Investments in subsidiaries and associates, totaling 283 million, mainly related to capitalization of the 50/50 joint venture GAC Fiat Automobiles Co. Ltd. (China), and the 50/50 joint venture Fiat India Automobiles Private Limited (India); the acquisition of 50% of Fiat-GM Powertrain Polska and 100% of TCA - Tecnologia em Componentes Automotivos SA (Pernambuco state, Brazil); and the exercise of a call option held by Fiat on 5% of the share capital of Ferrari, in relation to which a financial payable of an equivalent amount was recognized. Proceeds from the sale of non-current assets totaled 57 million and related to tangible and intangible assets. The 594 million increase in receivables from financing activities related to FGAs financial services companies outside Europe. Cash used in investing activities for Discontinued Operations totaled approximately 0.5 billion and primarily related to the approximately 0.9 billion in investments (including equity investments), less approximately 0.4 billion in cash generated through the decrease in receivables from financing activities. Cash from financing activities totaled approximately 0.9 billion. Continuing Operations used approximately 1.2 billion in cash: 1 billion for redemption of a bond at maturity and dividend payments of 239 million were only partly offset by cash from new borrowings. Discontinued Operations, on the other hand, generated approximately 2.1 billion. Cash inflows related to a USD 1.5 billion bond issued by Case New Holland Inc., an increase in asset-backed financing and a net increase in other financing, which were only partially offset by early repayment of a USD 500 million bond, by CNH, that was originally scheduled for repayment on 1 March 2014.
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Statement of Financial Position for Fiat Group pre Demerger at 31 December 2010 At 31 December 2010, total assets amounted to 73,442 million, increasing 6,207 million from the 67,235 million figure at 31 December 2009. Non-current assets totaled 27,331 million, an increase of 1,847 million over 31 December 2009. Currency translation differences accounted for 0.9 billion of the increase and related principally to property, plant and equipment (approximately 400 million) and intangible assets (approximately 260 million, primarily related to CNH goodwill). The rest of the increase was almost entirely attributable to investments and amortization/depreciation for the period, increased deferred tax assets, and increased investments and other financial assets. Current assets totaled 46,032 million, a 4,363 million increase of which approximately 2 billion was due to currency translation differences with the remainder primarily consisting of an increase in cash and cash equivalents. As a result of the Demerger, 34,786 million in assets and 29,920 million in liabilities were reclassified as Discontinued Operations. Working capital (net of items relating to vehicles sold under buy-back commitments and vehicles no longer subject to lease agreements that are held in inventory) was a negative 3,391 million, representing a 1,727 million decrease over the beginning of the period.
( million)
Inventory Trade receivables Trade payables Current taxes receivable/(payable) & Other current receivables/(payables) Working capital
(a)
Continuing Operations 3,806 2,259 (9,345) (a) (1,386) (4,666)
Discontinued Operations 3,739 1,791 (3,906) (349) 1,275
2010 Fiat Group pre Demerger 7,545 4,050 (13,251) (1,735) (3,391)
2009 Fiat Group pre Demerger 7,887 3,649 (12,295) (905) (1,664)
Change for Fiat Group pre Demerger -342 401 -956 -830 -1,727
Other current payables, included under current taxes receivable/(payable) & other current receivables/(payables), exclude the buy-back price payable to customers upon expiration of lease contracts and advanced payments from customers for vehicles sold under buy-back commitments, which is equal to the difference, at the contract date, between the initial sale price and the buy-back price. Recognition of such amounts is apportioned over the life of the contract
At 31 December 2010, trade receivables, other receivables and receivables from financing activities falling due after that date and sold without recourse and, therefore, eliminated from the statement of financial position pursuant to the derecognition requirements of IAS 39 totaled 4,624 million (4,611 million at 31 December 2009). This amount includes financial receivables, mostly relating to the sales network, of 2,376 million (2,530 million at 31 December 2009) sold to jointly-controlled financial services companies (FGA Capital group) and of 409 million (440 million at 31 December 2009) sold to associate financial services companies (Iveco Finance Holdings Limited). For 2010, working capital (calculated on a comparable scope of operations and at constant exchange rates) decreased by 2 billion due to the increase in trade payables, principally for CNH and Iveco, related to higher business volumes, further inventory reductions and an increase in Current Taxes Payable and Other Current Liabilities, primarily relating to the assessment of current taxation and the reimbursement of amounts receivable from the Italian government relating to eco-incentives. These items were only partially offset by increased trade receivables.
75
At 31 December 2010, consolidated net debt totaled 14,932 million, down 966 million over the 15,898 million figure at 31 December 2009. Excluding currency translation differences, net debt fell 1,790 million for the year, with cash generated from operating activities more than offsetting investment needs (principally capital expenditure for the period and portfolio increases for the financial services companies) and dividend payments. The split in net industrial debt between Continuing and Discontinued Operations, which takes into account the effects deriving from the demerger on 1 January 2011, is 2,753 million and 12,179 million, respectively.
( million)
Financial payables Asset-backed financing Other Financial payables of Discontinued Operations to Continuing Operations Financial payables of Continuing Operations to Discontinued Operations Current financial receivables from jointly-controlled financial services companies Financial receivables of Discontinued Operations from Continuing Operations Financial receivables of Continuing Operations from Discontinued Operations Financial payables, net of intersegment balances and current financial receivables from jointly-controlled financial services companies Other financial assets/(liabilities) Liquidity Current securities Cash and cash equivalents Net Debt Industrial Activities Financial Services
(*) Figures take into account the effects of the demerger which occurred on 1 January 2011 (1) Includes current financial receivables from the JV FGA Capital (2) Includes the positive and negative fair value of derivative financial instruments
(1)
Continuing Operations (*) (20,804) (533) (17,406) (2,865) 12 5,626 (15,166) 261 12,152 185 11,967 (2,753) (542) (2,211)
Discontinued Operations (*) (18,695) (8,321) (4,748) (5,626) 2,865 (15,830) (59) 3,710 24 3,686 (12,179) (1,900) (10,279)
31.12.2010 Fiat Group pre Demerger (31,008) (8,854) (22,154) 12 (30,996) 202 15,862 209 15,653 (14,932) (2,442) (12,490)
31.12.2009 Fiat Group pre Demerger (28,527) (7,086) (21,441)
14
(2)
(28,513) 172 12,443 217 12,226 (15,898) (4,418) (11,480)
Financial payables for Fiat Group pre Demerger increased 2,481 million during 2010, excluding currency translation differences, the difference was approximately 1.1 billion and related primarily to an increase in asset-backed financing. At the end of June 2010, Case New Holland Inc. completed the placement of a USD 1.5 billion bond, maturing in 2017, at 99.32% of par value and with a fixed coupon of 7.875%. In February 2010, a 1 billion bond was repaid at maturity and in July CNH prepaid a USD 500 million bond (original maturity: 1 March 2014). At 31 December 2010, liquidity (cash, cash equivalents and current securities) totaled 15.9 billion, an increase of 3.5 billion over the 12.4 billion figure at year-end 2009. Cash and cash equivalents included cash with a pre-determined use of 694 million (530 million at 31 December 2009), relating primarily to financial services companies and allocated to servicing securitization vehicles (included under asset-backed financing).
76
Industrial Activities and Financial Services: results for 2010 The following tables provide a breakdown of the consolidated statements of income, financial position and cash flows between Industrial Activities and Financial Services. For Financial Services, Continuing Operations include the retail and dealer finance, leasing and rental activities for Fiat Group Automobiles and Ferrari and Discontinued Operations include the financial services companies of CNH-Case New Holland and Iveco. For both Continuing and Discontinued Operations, Financial Services also includes entities accounted for under the equity method, which are, respectively, FGA Capital (the joint venture between Fiat Group Automobiles and Crdit Agricole) and Iveco Finance Holdings Limited (the joint venture between Iveco and Barclays). Basis of analysis The segmentation between Industrial Activities and Financial Services represents a sub-consolidation prepared on the basis of the core business activities carried out by each Group company. Investments held by companies belonging to one segment in companies included in another segment are accounted for using the equity method. To avoid a misleading presentation of net profit, the results of investments accounted for in this manner are classified in the income statement under Result from intersegment investments. The holding companies (Fiat S.p.A., Fiat Partecipazioni S.p.A. for Continuing Operations, and Fiat Industrial S.p.A. and Fiat Netherlands Holding N.V. for Discontinued Operations) are included under Industrial Activities. The sub-consolidation of Industrial Activities also includes companies that perform centralized treasury activities (i.e., raising funding in the market and financing Group companies). These activities do not, however, include offering financing to third parties. Operating Performance by Activity Fiat Group pre Demerger
( million)
Net revenues Cost of sales Selling, general and administrative Research and development Other income/(expense) TRADING PROFIT/(LOSS) Gains/(losses) on disposal of investments Restructuring costs Other unusual income/(expense) OPERATING PROFIT/(LOSS) Financial income/(expense) Result from investments (*) PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) Result from intersegment investments PROFIT/(LOSS)
(*)
Consolidated 56,258 47,738 4,742 1,431 (143) 2,204 15 176 (34) 2,009 (905) 178 1,282 682 600 600
Industrial Activities 54,969 46,798 4,572 1,431 (152) 2,016 15 176 (34) 1,821 (905) 117 1,033 610 423 177 600
2010 Financial Services 1,649 1,300 170 9 188 188 61 249 72 177 5 182
Consolidated 50,102 43,261 4,296 1,398 (89) 1,058 4 312 (391) 359 (753) 27 (367) 481 (848) (848)
Industrial Activities 48,917 42,404 4,133 1,398 (92) 890 4 310 (412) 172 (753) (6) (587) 435 (1,022) 174 (848)
2009 Financial Services 1,467 1,139 163 3 168 2 21 187 33 220 46 174 (16) 158
This item includes income from investments as well as impairment (losses)/reversals on non-intersegment investments accounted for under the equity method
77
Continuing Operations (Fiat Group post Demerger)

( million)
Net revenues Cost of sales Selling, general and administrative Research and development Other income/(expense) TRADING PROFIT/(LOSS) Gains/(losses) on disposal of investments Restructuring costs Other unusual income/(expense) OPERATING PROFIT/(LOSS) Financial income/(expense) Result from investments (*) PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) FROM CONTINUING OPERATIONS Result from intersegment investments PROFIT/(LOSS) FROM CONTINUING OPERATIONS
Consolidated 35,880 30,718 2,956 1,013 (81) 1,112 12 118 (14) 992 (400) 114 706 484 222 222
Industrial Activities 35,676 30,604 2,922 1,013 (90) 1,047 12 118 (14) 927 (400) 41 568 460 108 114 222
2010 Financial Services 270 180 34 9 65 65 73 138 24 114 114
Consolidated 32,684 28,252 2,673 1,010 (13) 736 3 168 (193) 378 (352) 77 103 448 (345) (345)
Industrial Activities 32,531 28,168 2,643 1,010 (15) 695 3 169 (214) 315 (352) 25 (12) 439 (451) 106 (345)
2009 (**) Financial Services 190 121 30 2 41 (1) 21 63 52 115 9 106 106
Discontinued Operations (Fiat Industrial Group)

( million)
Net revenues Cost of sales Selling, general and administrative Research and development Other income/(expense) TRADING PROFIT/(LOSS) Gains/(losses) on disposal of investments Restructuring costs Other unusual income/(expense) OPERATING PROFIT/(LOSS) Financial income/(expense) Result from investments (*) PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS Result from intersegment investments PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS
Consolidated 21,342 17,979 1,793 418 (60) 1,092 3 58 (20) 1,017 (505) 64 576 198 378 378
Industrial Activities 20,235 17,131 1,657 418 (60) 969 3 58 (20) 894 (505) 76 465 150 315 63 378
2010 Financial Services 1,379 1,120 136 123 123 (12) 111 48 63 5 68
Consolidated 17,968 15,549 1,636 388 (73) 322 1 144 (198) (19) (401) (50) (470) 33 (503) (503)
Industrial Activities 16,916 14,756 1,503 388 (74) 195 1 141 (198) (143) (401) (31) (575) (4) (571) 68 (503)
2009 (**) Financial Services 1,280 1,021 133 1 127 3 124 (19) 105 37 68 (16) 52
(*) This item includes income from investments as well as impairment (losses)/reversals on non-intersegment investments accounted for under the equity method (**) 2009 figures have been reclassified, as required by IFRS 5
78
Industrial Activities For 2010, net revenues for Industrial Activities were approximately 55 billion, up 12.4% over the previous year, when market conditions were particularly weak. Industrial Activities for Fiat post Demerger reported revenues of 35.7 billion, representing a 9.7% increase over 2009. Revenues for the Automobiles business were up 6.1%, with favorable currency movements and LCV volumes more than offsetting the fall in passenger cars sales for FGA in Europe. Components and Production Systems achieved a 23.6% increase in revenues on the back of higher demand. Industrial Activities for Fiat Industrial benefited from significant volume recoveries for all businesses, with revenues up 19.6% to 20.2 billion. By business, CNH achieved a 19.1% year-on-year improvement (+13.3% in US dollar terms), Iveco was up 15.9% and FPT Industrial 52.8%. Industrial Activities reported a trading profit of 2,016 million, increasing 1,126 million over the 890 million figure for 2009. For Fiat post Demerger, trading profit improved by 352 million to 1,047 million and for Fiat Industrial trading profit was up 774 million over 2009 to 969 million. The general improvement was attributable to higher volumes (with the exception of passenger cars for FGA), a better product mix and continued focus on costs and industrial efficiencies. Operating profit for Industrial Activities came in at 1,821 million for 2010, compared with 172 million for 2009. The increase was due to higher trading profit (up 1,126 million) and a 523 million reduction in net unusual expenses. For Fiat post Demerger, operating profit was 927 million (up 612 million, 352 million of which was due to higher trading profit), whereas Fiat Industrial went from an operating loss of 143 million for 2009 to an operating profit of 894 million for 2010, principally driven by an improvement in trading profit. Financial Services Net revenues for Financial Services totaled 1,649 million, up 12.4% compared to 2009.
( million)
Fiat Group Automobiles Ferrari Total Continuing Operations Agricultural and Construction Equipment (CNH Case New Holland) Trucks and Commercial Vehicles (Iveco) Total Discontinued Operations Eliminations Total Fiat Group
2010 242 28 270 1,220 159 1,379 1,649
2009 168 22 190 1,129 151 1,280 (3) 1,467
% change 44.0 27.3 42.1 8.1 5.3 7.7 12.4
For Fiat post Demerger, revenues for financial services were up 42.1% to 270 million, primarily driven by the financial services activities of FGA, which achieved a 44% increase to 242 million, up from 168 million in 2009 (+38% on a comparable scope of operations and at constant exchange rates) predominantly due to the increase in business volumes outside Europe. For Fiat Industrial, financial services generated net revenues of 1,379 million (up 7.7% on 2009). By sector: Agricultural and Construction Equipment reported revenues of 1,220 million, up 8.1% over 2009 (+2.7% in US dollar terms), reflecting an increase in the portfolio attributable to higher sales volumes for both the agricultural and construction equipment segments, in addition to positive currency effects. Iveco had net revenues of 159 million, up 5.3% over the 151 million figure for 2009. That increase primarily reflected higher revenues from the resale of used vehicles.
79
Trading profit for financial services totaled 188 million in 2010, a 20 million improvement over 2009.
( million)
Fiat Group Automobiles Ferrari Total Continuing Operations Agricultural and Construction Equipment (CNH Case New Holland) Trucks and Commercial Vehicles (Iveco) Total Discontinued Operations Total Fiat Group
2010 56 9 65 155 (32) 123 188
2009 35 6 41 153 (26) 127 168
Change 21 3 24 2 -6 -4 20
Trading profit for the Financial Services businesses of Fiat post Demerger totaled 65 million compared with 41 million for the prior year. The increase was almost entirely attributable to Fiat Group Automobiles, which recorded a 21 million improvement to 56 million (+14 million on a comparable scope of operations and at constant exchange rates) due primarily to an increase in volumes financed and higher margins for all companies. For Fiat Industrial, the Financial Services businesses reported a trading profit of 123 million, substantially in line with 2009 (down 4 million). By sector: CNH-Case New Holland had a trading profit of 155 million which was in line with the 2009 level of 153 million. An increase in provisions for 2010 was more than offset by higher margins and containment of general and administrative costs, which were maintained at 2009 levels despite the growth in business volumes. Ivecos Financial Services businesses reported a trading loss of 32 million, compared with a 26 million loss for 2009. The deterioration was due to a general contraction in the size of the managed portfolio together with higher provisioning. Both of these factors applied to markets in Eastern Europe and the medium to long-term leasing business in Spain.
80
Statement of Financial Position by Activity

( million)
Intangible assets Property, plant and equipment Investments and other financial assets Leased assets Defined benefit plan assets Deferred tax assets Total non-current assets Inventory Trade receivables Receivables from financing activities Financial receivables from Discontinued Operations Current taxes receivable Other current assets Current financial assets: Current investments Current securities Other financial assets Cash and cash equivalents Total current assets Assets held for sale and Discontinued Operations Elimination of financial receivables and payables from/to Discontinued Operations TOTAL ASSETS Total assets adjusted for asset-backed financing transactions Equity Provisions: Employee benefits Other provisions Financial payables: Asset-backed financing Financial payables to Discontinued Operations Other Other financial liabilities Trade payables Current taxes payable Deferred tax liabilities Other current liabilities Liabilities held for sale and Discontinued Operations Elimination of financial receivables and payables from/to Discontinued Operations TOTAL EQUITY AND LIABILITIES Total equity and liabilities adjusted for asset-backed financing transactions
(1) of which 68 million relates to Assets held for sale by Continuing Operations
Consolidated 4,350 9,601 1,653 20 1,678 17,302 4,443 2,259 2,866 5,626 353 1,528 735 34 185 516 11,967 29,777 34,854(1) (8,491) 73,442 64,588 12,461 4,924 1,704 3,220 20,804 533 2,865 17,406 255 9,345 181 135 3,908 29,920 (8,491) 73,442 64,588
Industrial Activities 4,345 9,598 2,086 19 1,617 17,665 4,438 2,255 1,719 5,621 351 1,514 697 34 147 516 11,705 28,300 24,423(1) (8,483) 61,905 61,520 12,461 4,857 1,700 3,157 19,843 280 2,862 16,701 254 9,332 170 130 3,855 19,486 (8,483) 61,905 61,520
31.12.2010 Financial Services Consolidated 5 7,199 3 12,945 733 2,159 457 1 144 61 2,580 803 25,484 5 8,748 5 3,649 2,949 12,695 5 6 674 21 2,778 39 899 46 38 217 1 636 262 12,226 3,292 41,669 14,539 82 (8) 18,626 67,235 10,152 60,149 2,733 11,115 67 8,432 4 3,447 63 4,985 2,763 28,527 258 7,086 3 2,502 21,441 2 464 17 12,295 18 377 5 152 56 5,865 12,973 8 (8) 18,626 67,235 10,152 60,149
Industrial Activities 7,103 12,939 3,968 7 140 2,433 26,590 8,614 3,590 5,506 650 2,514 827 46 164 617 10,819 32,520 79 59,189 58,725 11,115 8,333 3,431 4,902 20,898 464 20,434 420 12,253 347 148 5,675 59,189 58,725
31.12.2009 Financial Services 96 6 944 450 4 147 1,647 134 121 13,368 24 296 76 53 23 1,407 15,426 10 17,083 10,428 2,756 99 16 83 13,812 6,655 7,157 48 108 32 4 216 8 17,083 10,428
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Assets and liabilities held for sale and Discontinued Operations by Activity At 31 December 2010, this item consisted of the following:
Total Discontinued Operations 3,567 3,856 737 492 166 1,211 10,029 3,898 1,791 10,908 2,865 552 934 112 24 88 3,686 24,746 11 34,786 4,275 2,017 2,258 18,695 8,321 5,626 4,748 147 3,906 503 52 2,342 29,920 Industrial Activities 3,466 3,852 2,076 22 161 1,115 10,692 3,801 1,763 1,841 2,541 414 724 70 70 2,500 13,654 9 24,355 4,241 2,001 2,240 8,659 105 4,291 4,263 126 3,890 371 48 2,151 19,486 Financial Services 101 4 227 470 5 96 903 97 113 11,501 324 140 231 42 24 18 1,186 13,634 2 14,539 34 16 18 12,470 8,216 1,335 2,919 21 102 132 4 210 12,973
( million)
Intangible assets Property, plant and equipment Investments and other financial assets Leased assets Defined benefit plan assets Deferred tax assets Total non-current assets Inventory Trade receivables Receivables from financing activities Financial receivables from Continuing Operations Current taxes receivable Other current assets Current financial assets: Current investments Current securities Other financial assets Cash and cash equivalents Total current assets Assets held for sale TOTAL ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Provisions: Employee benefits Other provisions Financial payables: Asset-backed financing Financial payables to Continuing Operations Other Other financial liabilities Trade payables Current taxes payable Deferred tax liabilities Other current liabilities TOTAL LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS
82
Net Debt by Activity (31 December 2010) Fiat Group pre Demerger
( million)
Financial payables: Asset-backed financing Other Current financial receivables from jointly-controlled financial services companies Intersegment financial receivables Financial payables net of intersegment and current financial receivables from jointly-controlled financial services companies Other financial assets Other financial liabilities Current securities Cash and cash equivalents Net Debt for Fiat Group pre Demerger
(a)
Consolidated (31,008) (8,854) (22,154) 12 (30,996) 604 (402) 209 15,653 (14,932)
Industrial Activities (21,678) (385) (21,293) 12 4,666 (17,000) 586 (380) 147 14,205 (2,442)
Financial Services (15,233) (8,474) (6,759) 1,237 (13,996) 19 (23) 62 1,448 (12,490)
(b) (b)
Continuing Operations (Fiat Group post Demerger)

( million)
Financial payables: Asset-backed financing Financial payables to Discontinued Operations Other Financial receivables from Discontinued Operations Current financial receivables from jointly-controlled financial services companies Intersegment financial receivables Financial payables net of intersegment and current financial receivables from jointly-controlled financial services companies Other financial assets Other financial liabilities Current securities Cash and cash equivalents Net Debt (Continuing Operations)
(a) Includes current financial receivables from the JV FGA Capital (b) Includes fair value of derivative financial instruments
(a)
Consolidated (20,804) (533) (2,865) (17,406) 5.626 12 (15,166) 516 (255) 185 11,967 (2,753)
Industrial Activities (19,843) (280) (2,862) (16,701) 5,621 12 1,554 (12,656) 516 (254) 147 11,705 (542)
Financial Services (2,763) (258) (3) (2,502) 5 248 (2,510) 1 (2) 38 262 (2,211)
(b) (b)
83
Discontinued Operations (Fiat Industrial Group)

( million)
Financial payables: Asset-backed financing Financial payables to Continuing Operations Other Financial receivables from Continuing Operations Intersegment financial receivables Financial payables net of intersegment and current financial receivables Other financial assets Other financial liabilities Current securities Cash and cash equivalents Net Debt (Discontinued Operations)
(*) Includes fair value of derivative financial instruments
(*) (*)
Consolidated (18,695) (8,321) (5,626) (4,748) 2,865 (15,830) 88 (147) 24 3,686 (12,179)
Industrial Activities (8,659) (105) (4,291) (4,263) 2,541 1,774 (4,344) 70 (126) 2,500 (1,900)
Financial Services (12,470) (8,216) (1,335) (2,919) 324 660 (11,486) 18 (21) 24 1,186 (10,279)
The above analysis of net debt by activity for both Continuing and Discontinued Operations provides an itemization of financial receivables and payables between Continuing and Discontinued Operations. As these items are intercompany, they have been eliminated from the net debt presentation for Fiat Group pre Demerger. Financial payables for Industrial Activities partially consist of funding raised by the central treasury to support the activities of the financial services companies (shown under intersegment financial receivables). Intersegment financial receivables for financial services companies, however, represent loans or advances to industrial companies for receivables sold to financial services companies that do not meet the derecognition requirements of IAS 39 as well as liquidity deposited temporarily with the central treasury. At year end, cash and cash equivalents included cash with a pre-determined use of 694 million (530 million at year-end 2009), primarily for the Financial Services companies and allocated to servicing securitization vehicles (included under asset-backed financing).
84
Change in Net Industrial Debt

2010
( million)
Net industrial (debt)/cash at the beginning of the year Effect of Demerger on the allocation of net debt Adjusted net industrial (debt)/cash at the beginning of the year Profit/(loss) Amortization and depreciation (net of vehicles sold under buy-back commitments or leased) Change in provisions for risks and charges and similar Cash from/(used in) operating activities during the year before change in working capital Change in working capital Cash from/(used in) operating activities during the year Investments in property, plant and equipment and intangible assets (net of vehicles sold under buy-back commitments or leased) Cash from/(used in) operating activities, net of capital expenditures Change in consolidation scope and other changes Net industrial cash flow Capital increases and dividends Currency translation differences Change in net industrial debt Net industrial (debt)/cash at the end of the year
Fiat Group pre Demerger (4,418) (4,418) 600 2,846 552 3,998 1,886 5,884 (3,712) 2,172 (76) 2,096 (238) 118 1,976 (2,442)
Continuing Discontinued Operations Operations (3,103) (1,315) 2,521 (2,521) (582) (3,836) 222 378 2,184 662 201 351 2,607 893 3,500 (2,859) 641 (172) 469 (545) 116 40 (542) 1,391 993 2,384 (871) 1,513 114 1,627 307 2 1,936 (1,900)
2009 Fiat Group pre Continuing Discontinued Demerger Operations Operations (5,949) (4,668) (1,281) (5,949) (4,668) (1,281) (848) (345) (503) 2,667 2,034 633 118 150 (32) 1,937 2,564 4,501 (3,382) 1,119 525 1,644 (20) (93) 1,531 (4,418) 1,839 1,676 3,515 (2,682) 833 492 1,325 235 5 1,565 (3,103) 98 888 986 (706) 280 39 319 (255) (98) (34) (1,315)
During 2010, net industrial debt for Fiat Group pre Demerger decreased 1,976 million to 2,442 million. Operating activities generated approximately 5.9 billion in cash for the year, of which approximately 4 billion from income-related cash inflows (net profit plus amortization and depreciation and changes in provisions for risks and charges and similar), and approximately 1.9 billion from the reduction in working capital that resulted primarily from a decrease in inventories and increase in trade payables associated with the increase in business volumes. These positive items more than offset capital expenditure (totaling 3,712 million) and dividend payments. Net industrial debt for Continuing Operations (excluding debt transferred pursuant to the Demerger) decreased 40 million during the year to 542 million. Cash from operating activities totaled 3.5 billion, of which 2.6 billion was attributable to income-related cash inflows and 0.9 billion to a decrease in working capital, more than offset cash used in investing activities (2.9 billion), capital increases for companies included under Discontinued Operations and dividend payments. During 2010, net industrial debt for Discontinued Operations, net of the debt transferred as a result of the Demerger, decreased 1.9 billion primarily due to the strong operating cash flow (approximately 2.4 billion) and capital increases (net of dividend distributions) totaling 0.3 billion, which were only partially offset by cash used in investing activities (0.9 billion). For the sake of completeness, and in keeping with the previous year, an annotated Statement of Cash Flow by Activity (Industrial and Financial Services) is provided below for Fiat Group pre Demerger.
85
Statement of Cash Flows for Fiat Group pre Demerger by Activity

2010
( million)
2009
A) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR (AS REPORTED) Cash and cash equivalents included under Assets held for sale B) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR C) CASH FROM/(USED IN) OPERATING ACTIVITIES DURING THE YEAR: Profit/(loss) Amortization and depreciation (net of vehicles sold under buy-back commitments or leased) (Gains)/losses on disposal of non-current assets and other non-cash items (a) Dividends received Change in provisions Change in deferred taxes Changes relating to buy-back commitments (b) Changes relating to operating leases (c) Change in working capital TOTAL D) CASH FROM/(USED IN) INVESTING ACTIVITIES: Investments in: Property, plant and equipment and intangible assets (net of vehicles sold under buy-back commitments or leased) Unconsolidated subsidiaries and other investments Proceeds from the sale of non-current assets (net of vehicles sold under buy-back commitments) Net change in receivables from financing activities Change in other current securities Other changes TOTAL E) CASH FROM/(USED IN) FINANCING ACTIVITIES: Net change in financial payables and other financial assets/liabilities Increase in share capital Dividends paid TOTAL Currency translation differences F) NET CHANGE IN CASH AND CASH EQUIVALENTS G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR of which: Cash and cash equivalents included under Assets held for sale H) CASH AND CASH EQUIVALENTS AT END OF THE YEAR (AS REPORTED)
Consolidated 12,226 12,226 600 2,851 266 94 405 (169) 44 26 1,993 6,110
Industrial Activities 10,819 10,819 600 2,846 (130) 419 413 (172) 36 (14) 1,886 5,884
Financial Services 1,407 1,407 182 5 214 5 (8) 3 8 40 107 556
Consolidated 3,683 3,683 (848) 2,673 343 53 96 (179) (58) (41) 2,562 4,601
Industrial Activities 2,604 2,604 (848) 2,667 8 183 171 (188) (59) 3 2,564 4,501
Financial Services 1,079 1,079 158 6 177 15 (75) 9 1 (44) (2) 245
(3,718) (288) 88 (259) 42 182 (3,953) 1,149 1 (239) 911 359 3.427 15,653 15,653
(3,712) (365) 87 (5) 43 1,580 (2,372) (103) 1 (239) (341) 215 3,386 14,205 14,205
(6) 1 (254) (1) (1,398) (1,658) 1,252 77 (330) 999 144 41 1,448 1,448
(3,386) (105) 108 882 (27) (31) (2,559) 6,295 13 (27) 6,281 220 8,543 12,226 12,226
(3,382) (105) 105 39 (30) 1,395 (1,978) 5,602 13 (33) 5,582 110 8,215 10,819 10,819
(4) 3 843 3 (1,426) (581) 693 (139) 554 110 328 1,407 1,407
(a) Includes the reversal of a 107 million gain (117 million loss for 2009) in the fair value of two stock-option related swaps on Fiat S.p.A. shares (b) Cash from vehicles sold under buy-back commitments for the periods reported above, net of amounts already recognized through the income statement, is included in a separate line item under operating activities which also includes the change in working capital, capital expenditures and depreciation (c) Cash from operating leases is stated in a separate line item, which also includes capital expenditures, depreciation, writedowns and change in inventory
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Industrial Activities For 2010, Industrial Activities generated cash and cash equivalents totaling 3,386 million. Operating activities generated cash of 5,884 million attributable to income-related cash inflows (net profit plus amortization and depreciation), net of gains/(losses) on disposal and other non-cash items, changes in provisions, deferred taxes, items relating to vehicles sold under buy-back commitments or leased, and dividends received, which generated a total of 3,998 million, and the decrease in working capital which, on a comparable scope of operations and at constant exchange rates, amounted to 1,886 million. Investing activities absorbed a total of 2,372 million in cash primarily related to investments in tangible and intangible assets and equity investments (4,077 million), which was only partly offset by the decrease in funding provided to the Groups financial services companies by central treasury companies (included under other changes). Financing activities used 341 million in cash, consisting primarily because of 239 million in dividend payments. Financial Services Cash and cash equivalents for Financial Services activities totaled 1,448 million at 31 December 2010 substantially in line (+41 million) with the figure for 31 December 2009. Changes in cash were attributable to: Operating activities, which generated 556 million in cash, principally from income-related cash inflows. Investing activities (including changes in financial receivables from/payables to industrial companies) absorbed 1,658 million in cash primarily due to a decrease in funding received from treasury companies (included under other changes); Financing activities that generated a total of 999 million: new borrowing and capital increases more than offset the amount of dividends distributed to industrial companies.
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CORPORATE GOVERNANCE
FOREWORD The Fiat Group adopted and adheres to the Corporate Governance Code for Italian Listed Companies issued in March 2006, with additions and amendments related to the specific characteristics of the Group. In accordance with legal and regulatory requirements, the Company prepares an Annual Report on Corporate Governance which provides a general description of the Groups corporate governance system together with information on its ownership structure and adherence to the provisions of the Corporate Governance Code, including key governance practices and the principal characteristics of the system of risk management and internal control over financial reporting. The Report, which is available in the Corporate Governance area of the Group website (www.fiatspa.com), is divided into four sections: the first contains a description of the governance structure; the second gives information on the ownership structure; the third provides an analysis of implementation of specific provisions of the Code and describes the principal characteristics of the system of risk management and internal control over financial reporting, in addition to the principal governance practices adopted; and, the fourth consists of summary tables and corporate governance related documents, as well as a side-by-side comparison showing the principles of the Code and how they have been implemented. This section provides a summary of aspects relevant to the Report on Operations. The Corporate Governance Code is available on the website of Borsa Italiana S.p.A. (www.borsaitaliana.it). DIRECTION AND COORDINATION Fiat S.p.A. is not subject to the direction and coordination of any other company or entity and is fully independent in the definition of its general strategic and operating guidelines. Pursuant to Article 2497-bis of the Civil Code, its Italian subsidiaries, with a few specific exceptions, have named Fiat S.p.A. as the entity which exercises direction and coordination over them. That activity consists in indicating the general strategic and operating guidelines of the Group and takes concrete form in the definition and updating of the internal control system, corporate governance model and corporate structure, the issue of a Code of Conduct which is adopted throughout the Group, and the establishment of general policies for the management of human and financial resources, purchasing of production materials, and marketing and communication. Furthermore, coordination of the Group includes specialized companies which provide centralized cash management, corporate and accounting, and internal audit services. Direction and coordination undertaken at Group level enables subsidiaries, which retain full management and operating autonomy, to realize economies of scale by availing themselves of professional and specialized services with improving levels of quality and to concentrate their resources on the management of their core business. BOARD OF DIRECTORS Pursuant to the By-laws, the Board of Directors may be composed of between nine and fifteen members. At the Annual General Meeting held on 27 March 2009, Shareholders elected fifteen Board members whose term of office expires on the date of the General Meeting held to approve the 2011 Financial Statements. Under Article 11 of the By-laws, Board members are appointed through a voting list system which ensures that minority shareholders can elect a director. The minimum equity interest required for submission of a list of candidates is established by Consob with reference to the Companys market capitalization for the last quarter of the final financial year of the mandate. Each list must indicate at least one candidate that satisfies the legal requirements of independence, in addition to the requirements of the corporate governance code adhered to by the Company. The voting list system was used for the election of the Board of Directors for the first time at the General Meeting of 27 March 2009. On that occasion, the Company invited shareholders who, individually or jointly with others, owned at least 1% of ordinary shares (as established by Consob with reference to Fiats average market capitalization for the fourth quarter of 2008) to submit, at least 15 days prior to the date of the Annual General Meeting, lists of candidates who satisfied the requirements of law and the Companys By-laws. EXOR S.p.A., holder of 30.45% of ordinary shares, was the only shareholder to submit a list of candidates and, therefore, all candidates on the list were elected.
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Under Article 16 of the By-laws, all directors with executive responsibilities are vested, separately and individually, with the power to represent the Company and under Article 12 the Vice Chairman, if appointed, shall act as Chairman if the latter is absent or unable to carry out his role. In application of this provision, the Board of Directors has, as in the past, adopted a model which delegates broad operating powers to the Chairman and the Chief Executive Officer by which they are authorized, separately and individually, to perform all ordinary and extraordinary acts that are consistent with the Companys purpose and not reserved by law for, or otherwise delegated or assumed by, the Board of Directors itself. In practice, the Chairman has the role of coordination and strategic direction for the activities of the Board of Directors, while the Chief Executive Officer is responsible for the operational management of the Group. From an operational perspective, the Chief Executive is supported by the Group Executive Council (GEC), a decision-making body led by the Chief Executive and composed of the heads of the operating sectors and certain central functions. In accordance with Consob Regulation 17221 of 12 March 2010, the Company has adopted, effective 1 January 2011, Procedures for Transactions with Related Parties (the Procedures) to ensure full transparency and substantial and procedural fairness in transactions with related parties, as defined under IAS 24. The Procedures define significant transactions that require the prior approval of the Board, subject to the binding opinion of the Internal Control Committee (which serves as the committee responsible for related-party transactions, except for matters relating to remuneration, for which the Compensation Committee is responsible), and that must be publicly disclosed in the form of an information document. Other transactions, except those falling within the residual category of minor transactions i.e., transactions less than 200,000 in value or, for transactions with legal entities having consolidated annual revenues in excess of 200 million only, transactions less than 10 million in value are defined as non-significant and may be entered into with the prior non-binding opinion of the abovementioned committee. The Procedures also establish exemptions, including transactions taking place in the ordinary course of business and entered into at standard or market terms, and transactions with or between subsidiaries and associates, provided that no other parties related to the Company have a significant interest. The task of implementing the Procedures and disseminating them to Group companies is assigned to the managers responsible for the Companys financial reporting, who must also ensure coordination with the administrative and accounting procedures required under Article 154-bis of Legislative Decree 58/98. With regard to significant transactions, the Guidelines for Significant Transactions and Transactions with Related Parties shall also continue to apply (subsequently renamed Guidelines for Significant Transactions), under which transactions having a significant impact on the Companys earnings and financial position are subject to the prior examination and approval of the Board. As such, the powers conferred on executive directors specifically exclude decisions relating to significant transactions that, in and of themselves, the company is required to disclose to the market in accordance with specific rules established by regulatory authorities. When the Company has the need to undertake a significant transaction, the executive directors are to provide the Board of Directors with a summary analysis of the strategic compatibility, economic feasibility and expected return for the Company a reasonable time in advance. Pursuant to Article 12 of the By-laws, after an opinion has been expressed by the Board of Statutory Auditors, the Board of Directors shall appoint the executive officer responsible for the Companys financial reporting. The Board may vest more than one individual with the relevant functions provided that those individuals perform such functions jointly and with joint responsibility. Only individuals who have acquired several years of experience in the accounting and financial affairs of large companies may be appointed. In execution of this provision of the By-laws, the Board of Directors appointed the heads of the Group Control and Treasury and Financial Services functions as jointly responsible for preparing the Companys financial reporting, vesting them with the relevant powers. At 31 December 2010, the Board of Directors was composed of three executive directors and twelve non-executive directors, who have not been delegated specific authorities or executive responsibilities at the Company or the Group, eight of whom (representing a majority) qualified as independent on the basis of the criteria approved by Shareholders on 27 March 2009, which were equivalent to those adopted previously. As required by law and the By-laws, two of the directors (Gian Maria Gros-Pietro and Mario Zibetti) also meet the requirements of independence as stipulated in Legislative Decree 58/98. The Chairman and Chief Executive Officer are executive directors. They also hold executive responsibilities at subsidiary companies: John Elkann is Chairman of Itedi S.p.A. and Sergio Marchionne, in addition to being Chairman of the principal subsidiaries, is also Chief Executive Officer of Fiat Group Automobiles S.p.A. Luca Cordero di Montezemolo also qualifies as an executive director by virtue of his position as Chairman of Ferrari S.p.A.
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An adequate number of independent directors is essential to protect the interests of shareholders, particularly minority shareholders, and third parties. For this reason, and believing it to be significantly in the Companys interests to maintain a high level of guarantees and protection against potential conflicts of interest, the Board of Directors proposed that for the elections held on 27 March 2009, Shareholders elect - in addition to the two independent directors required by law - an appropriate number of independent directors and confirm the criteria for determining independence adopted for previous elections. The independence of directors is assessed annually and is based on the absence or non-relevance, during the previous three years, of economic or shareholding relationships or other relationships, whether direct, indirect or on behalf of third parties, with the Company, its executive directors and executives with strategic responsibilities, its controlling companies or subsidiaries, or any other party related to the Company. The results of these assessments are published in the Annual Report on Corporate Governance. At the meeting held on 21 October 2010, the Board of Directors confirmed that Messrs. Roland Berger, Ren Carron, Luca Garavoglia, Gian Maria Gros-Pietro, Vittorio Mincato, Pasquale Pistorio, Ratan Tata and Mario Zibetti satisfied the requirements of independence. Some directors also hold positions at other listed companies or companies of significant interest. Excluding the positions held by executive directors within the Fiat Group mentioned above, the most significant are as follows: Andrea Agnelli: Chairman of Juventus FC S.p.A., General Partner of Giovanni Agnelli & C. S.a.p.A., Director of EXOR S.p.A. and Vita Societ Editoriale S.p.A.; Carlo Barel di SantAlbano: Chairman of Cushman & Wakefield, Director of EXOR S.p.A., Juventus FC S.p.A., EXOR S.A. and Vision Investment Management Ltd.; Roland Berger: Co-Chairman of Italy 1 Investment S.A., Vice Chairman of Wilhelm von Finck AG, Director of Telecom Italia S.p.A. and RCS MediaGroup S.p.A., Chairman of the Supervisory Board of Prime Office AG, 3W Power Holdings S.A. and WMP EuroCom AG, Member of the Supervisory Board of Schuler AG, Fresenius SE and Loyalty Partner Holdings S.A.; Tiberto Brandolini DAdda: Chairman of Sequana S.A. and EXOR S.A., General Partner of Giovanni Agnelli & C. S.a.p.A., Vice Chairman of EXOR S.p.A., Director of SGS S.A., Vittoria Assicurazioni S.p.A. and Vision Investment Management Ltd.; Ren Carron: Director of GDF-Suez S.A. and Vice Chairman of IPEMED (Institut de Prospective Economique du Monde Mditerranen); Luca Cordero di Montezemolo: Chairman of NTV Nuovo Trasporto Viaggiatori S.p.A., Director of Poltrona Frau S.p.A., Tods S.p.A., Pinault Printemps Redoute S.A., Member of the International Advisory Board of Citigroup Inc.; John Elkann: Chairman and General Partner of Giovanni Agnelli & C. S.a.p.A., Chairman and Chief Executive of EXOR S.p.A., Director of Fiat Industrial S.p.A., RCS MediaGroup S.p.A., Banca Leonardo Group S.p.A. and The Economist Group; Luca Garavoglia: Chairman of Davide Campari Milano S.p.A.; Gian Maria Gros-Pietro: Chairman of Credito Piemontese S.p.A., Director of Edison S.p.A., Credito Valtellinese S.p.A., Caltagirone S.p.A. and Italy 1 Investment S.A.; Sergio Marchionne: CEO of Chrysler Group LLC, Chairman of CNH Global N.V., Fiat Industrial S.p.A., Iveco S.p.A., SGS S.A., Director of EXOR S.p.A. and Philip Morris International Inc.; Virgilio Marrone: Director of Old Town S.A.; Vittorio Mincato: Director of Parmalat S.p.A. and Techno Holding S.p.A., Vice Chairman of Nordest Merchant S.p.A., Chairman of Casa Editrice Neri Pozza S.p.A.; Pasquale Pistorio: Honorary Chairman of S.T. Microelectronics N.V., Director of Atos Origin S.A. and Brembo S.p.A.; Ratan Tata: Chairman of The Indian Hotels Company Ltd., Director of Alcoa Inc., Antrix Corporation Ltd. and JaguarLandRover Ltd. (UK). Mr. Tata also serves as Chairman of the principal companies of the Tata Group; Mario Zibetti: Director of Ersel SIM S.p.A.
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COMMITTEES ESTABLISHED BY THE BOARD OF DIRECTORS The Board of Directors established the Internal Control Committee, the Nominating and Corporate Governance Committee, which in 2009 was also allocated responsibility for sustainability issues and renamed the Nominating, Corporate Governance and Sustainability Committee, with responsibility for, among other things, selecting and proposing nominees to serve as director, and the Compensation Committee, with an advisory role for matters relating to compensation. INTERNAL CONTROL SYSTEM The Board established the Guidelines for the Internal Control System, which came into effect on 1 January 2003, and constituted a revision of the procedures established in 1999, including adoption of changes to the Corporate Governance Code. Essential components of the Internal Control System are the Code of Conduct, adopted in 2002 to replace the Code of Ethics and revised in 2010, and the Compliance Program, adopted by the Board of Directors in implementation of regulations on the Liability of Legal Persons pursuant to Legislative Decree 231/2001, as amended. The Code of Conduct embodies the principles of business ethics to which the Company adheres and with which directors, statutory auditors, employees, consultants and partners are required to comply. The Compliance Program of Fiat S.p.A. pursuant to Legislative Decree 231/2001 and the Guidelines for Adoption and Update of Compliance Programs by the Groups Italian companies (the Guidelines) have been revised to reflect the latest legislative changes Law 99 of 23 July 2009, Law 94 of 15 July 2009 and Law 116 of 3 August 2009 which updated Legislative Decree 231/01 to include offences relating to: violation of intellectual property laws; organized crime; counterfeiting of currency, public credit instruments, duty stamps and distinguishing instruments or marks; offenses against industry and commerce; and inducement to withhold information or make false statements to judicial authorities. In particular, the sections of the Compliance Program of Fiat S.p.A. and the Guidelines dealing with involuntary manslaughter and negligence causing serious personal injury or permanent disability resulting from violation of safety and health laws have been revised and updated to comply with the provisions of Legislative Decree 81/08 (the Italian legislation on workplace safety), as amended by Legislative Decree 106/2009. The Compliance Program Supervisory Body is composed of the Compliance Officer, the Senior Counsel, and an external advisor. It has its own Internal Policies and Procedures and its activities are based on a specific Supervisory Program. This body meets at least once per quarter and reports to the Board of Directors (including through the Internal Control Committee) and the Board of Statutory Auditors. In application of the Compliance Program, the Code of Conduct, and the provisions of the Sarbanes-Oxley Act (to which the Company was subject while listed on the NYSE) on whistleblowing, the Whistleblowing Procedures were adopted on 1 January 2005 for management of reports and claims filed by individuals inside and outside the Company in relation to suspected or presumed violations of the code of conduct, fraud involving company assets or financial reporting, oppressive behavior towards employees or third parties, reports or claims regarding accounting, internal accounting controls and independent audits. The Procedure for the Engagement of Audit Firms governs the engagement, by Fiat S.p.A. and its subsidiaries, of independent auditors and companies or professional firms that maintain an ongoing relationship with the independent auditors (i.e., the network) to safeguard the independence of firms engaged to audit the financial statements. Fiat has put in place a system of risk management and internal control over financial reporting based on the model provided in the COSO Report, according to which the internal control system is defined as a set of rules, procedures and tools designed to provide reasonable assurance of the achievement of corporate objectives. In relation to the financial reporting process, those objectives are the reliability, accuracy, completeness and timeliness of the information itself. Risk management constitutes an integral part of the internal control system. The periodic evaluation of the system of internal control over financial reporting is designed to ensure the overall effectiveness of the components of the COSO Framework model (control environment, risk assessment, control activities, information and communication, monitoring) in achieving those objectives. As mentioned previously, the principal characteristics of the system of risk management and internal control over financial reporting are provided in the Annual Report on Corporate Governance. Documents and financial information regarding the Company are made public, including via the internet, in accordance with the provisions of the Disclosure Controls & Procedures adopted in the past to comply with the US regulation applicable at the time. With reference to the Conditions for the listing of shares of companies having control over companies incorporated and regulated under the laws of a non-EU member State, pursuant to Articles 36 and 39 of the Market Rules, the accounting systems in place at the Company and its subsidiaries, as discussed in the Annual Report on Corporate Governance, enable public disclosure of the accounts prepared by companies included in the scope of
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application of the Regulation and used in preparation of the consolidated financial statements and are adequate for the regular provision to management and the Parent Companys auditors of information necessary for preparation of the consolidated financial statements. In addition, there is an effective flow of information to the Parent Companys auditors, including regular information on the composition of corporate bodies within all subsidiary companies and the position held by each member. The Company is also is responsible for systematically maintaining and updating centralized records of formal documents related to the By-laws and delegation of powers to the members of corporate bodies. The requirements of Article 36 (a) (b) and (c) of the Market Rules issued by Consob have therefore been satisfied. During the year, no companies incorporated under the laws of a non-EU member State were acquired which, on an individual basis, are significant for the purposes of the aforementioned Regulation. BOARD OF STATUTORY AUDITORS As required under Article 17 of the By-laws, the Board of Statutory Auditors is comprised of three regular auditors and three alternates, all of whom must be entered in the Register of Auditors and have at least three years experience as a statutory account auditor. They may, within the legal limit, also hold other positions as director or regular auditor. Pursuant to Legislative Decree 58/98 and in accordance with Article 17 of the Companys By-laws, appropriately constituted minority groups have the right to appoint one regular auditor, to serve as Chairman, and one alternate auditor. In accordance with the By-laws, the minimum equity interest required for submission of a list of candidates is set at a percentage no lower than that required by law for the submission of lists of candidates for the appointment of the Companys Board of Directors. The lists presented, together with the documentation required by law and the Companys By-laws, must be deposited at the Companys registered office at least 25 days prior to the date of the meeting, while certifications of percentages held must, if not presented at the time the lists are filed, be provided at least 21 days prior to the date of the meeting. The Board of Statutory Auditors was elected by Shareholders on 27 March 2009 using the voting list system. The Board of Statutory Auditors is currently composed of: Riccardo Perotta, Chairman; Giuseppe Camosci and Piero Locatelli, regular auditors; and Lucio Pasquini, Fabrizio Mosca and Stefano Orlando, alternate auditors. The regular auditors Giuseppe Camosci and Piero Locatelli were elected from the list presented by the majority shareholder, EXOR S.p.A., while Riccardo Perotta, Chairman of the Board of Statutory Auditors, was elected from the minority list receiving the highest number of votes. The minimum shareholding required to submit a list of candidates was 1% of ordinary shares, as established by Consob with reference to Fiats average market capitalization for the fourth quarter of 2008. That percentage was subsequently reduced to 0.5%, as required by law, thereby enabling shareholders which together held 0.97% of ordinary shares (a complete list of those shareholders is provided in the Annual Report on Corporate Governance) to submit a minority list. Additional information provided to Shareholders on the candidates and lists presented are still available in the Investor Relations section of the Group website (www.fiatspa.com). The Board of Statutory Auditors current term of office expires on the date of the General Meeting of Shareholders called to approve the 2011 financial statements. Following is a list of the most significant positions held by the members of the Board of Statutory Auditors. As required by law, more complete information is provided in the Report of the Board of Statutory Auditors on the 2010 Financial Statements. Riccardo Perotta is Chairman of the Board of Statutory Auditors of Coface Assicurazioni S.p.A., Coface Factoring Italia S.p.A., Hyundai Motor Company Italy S.r.l., Jeckerson S.p.A., Meccano S.p.A., Metroweb S.p.A. and Value Partners S.p.A. and a regular auditor of Mediolanum S.p.A. and Prada S.p.A. and a director of Intesa Sanpaolo Private Banking S.p.A.; Giuseppe Camosci is Chairman of the Board of Statutory Auditors of Samsung Electronics Italia S.p.A. and Magneti Marelli S.p.A. and is a regular auditor of Trussardi S.p.A., Finos S.p.A., Fortis Lease S.p.A. and BNP Paribas Lease Group S.p.A.; Piero Locatelli is a regular auditor of Giovanni Agnelli & C. S.a.p.A. and Simon Fiduciaria S.p.A.
SHARE-BASED INCENTIVE PLANS
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Fiat S.p.A. has established share-based incentive plans for more than 900 Group employees, in Italy and abroad, whose activities and leadership have a significant impact on the Group. The incentive plans currently in place, approved by Fiat S.p.A. between 2004 and 2010, offer Fiat ordinary shares for purchase at a predetermined price (stock options) or grant Fiat ordinary shares (stock grants). Following the demerger of activities from Fiat S.p.A. to Fiat Industrial S.p.A., those plans were amended to ensure they fulfill the objectives for which they were adopted, even subsequent to the Demerger. Those entitled to stock options or stock grants will, therefore, receive one ordinary Fiat share and one ordinary Fiat Industrial share for each right they hold, with the option exercise price (for stock option plans) and the free grant of shares (for the stock grant plan) remaining unchanged. In addition, the subsidiary CNH Global N.V. has existing stock option and/or stock grant plans based on its ordinary shares, while the stock option plan established by Ferrari S.p.A. for its Chairman Luca Cordero di Montezemolo expired at the end of 2010. Prior to coming under the Groups control, other subsidiaries had approved cash-settled share-based payment plans referred to as Stock Appreciation Rights (SARs). Following is a description of the principal characteristics of the incentive plans based on Fiat S.p.A. shares. These plans were established to incentivize individuals in key positions toward the achievement of Company and Group performance targets and align those incentive plans to the long-term value created for shareholders. The level of commitment is further strengthened where, as has generally been the practice since 2004, vesting is subject to achievement of specific profitability targets during the reference period. At the same time, incentivizing management through instruments that reflect the Companys market value contributes to the alignment of their interests with those of shareholders, promoting their sense of identification with the Group and significantly enhancing retention. Plan beneficiaries are selected using objective criteria that take into account the impact of their role on business objectives. The number of options/shares actually granted is determined on the basis of individual leadership qualities. The stock option plans established by Fiat S.p.A. grant beneficiaries the option to purchase one Fiat ordinary share for each option exercised at a predetermined price. As stated above, under the amendments made pursuant to the Demerger, beneficiaries have the option to purchase one Fiat ordinary share and one Fiat Industrial ordinary share. The options are subject to a predetermined exercise period beginning from the vesting date until the plan expiry date. For all stock option plans, the exercise price is based on the average daily market price for the month prior to the grant date and may be subject to adjustment as a result of transactions affecting the Companys share capital, with any adjustment factor being determined by the AIAF. The exercise price is payable in cash at the moment of exercise. On 26 July 2004, the Board of Directors granted Sergio Marchionne, as a part of his variable compensation as Chief Executive Officer, options to purchase 10,670,000 Fiat S.p.A. ordinary shares at a price of 6.583 per share, exercisable from 1 June 2008 to 1 January 2011. In each of the first three years following the grant date, the CEO acquired the right to purchase, beginning 1 June 2008, a maximum of 2,370,000 shares annually. As of 1 June 2008, he also acquired the right to exercise, effective from that date, the remaining options on 3,560,000 shares as a result of predetermined performance objectives for the reference period having been met. At the Annual General Meeting on 27 March 2009, Shareholders approved a number of amendments proposed by the Board of Directors, which determined that it was significantly in the Groups interests to restore the retention capability of the Plan given the change in conditions in the real economy and financial markets and the particularly uncertain period being faced by the automotive sector globally. More specifically, a new vesting period was introduced, conditional solely on Mr. Marchionne remaining in office, which rendered the options unexercisable until 31 December 2010 and extended the exercise period through to 1 January 2016, with all other conditions of the plan remaining unchanged.
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On 3 November 2006, the Fiat S.p.A. Board of Directors approved (subject to the final approval of Shareholders at the General Meeting of 5 April 2007) an eight-year stock option plan, which provided certain managers of the Group and the Fiat S.p.A. Chief Executive Officer with the right to purchase a set number of Fiat S.p.A. ordinary shares at the fixed price of 13.37 per share. In particular, the 10,000,000 options granted to employees and the 5,000,000 options granted to the Chief Executive Officer had a vesting period of four years, with a quarter of the number vesting each year, were subject to achieving certain pre-determined profitability targets (Non-Market Conditions or NMC) in the reference period and were exercisable from the date on which the 2010 Financial statements are approved. The remaining 5,000,000 options granted to the Chief Executive Officer of Fiat S.p.A. also had a vesting period of four years with a quarter of the number vesting each year and are exercisable from November 2010. Exercise of the options was also subject to specific restrictions regarding the duration of the employment relationship or the continuation of the position held. The Board also exercised its powers under Article 2443 of the Civil Code to issue new shares, in service of the incentive plan, to employees of the Company and/or its subsidiaries up to 1% of share capital or a maximum of 50,000,000 (35,000,000 following the Demerger) in the form of 10,000,000 ordinary shares having a par value of 5.00 (3.50 following the Demerger) each, representing 0.78% of total share capital or 0.92% of ordinary share capital, at a price of 13.37 each. Execution of the capital increase is subject to the conditions of the Plan being satisfied. On the basis of amendments to the stock option plans introduced in relation to the Demerger, the vesting conditions of each stock plan, whether they consisted in the continuation of a professional relationship with the Fiat Group or the achievement of specific performance targets, expired on 31 December 2010. With specific reference to options granted under the 2006 Stock Option Plan, for which vesting was subject to the achievement of pre-established profitability targets, only the first tranche (i.e., 25%) of those rights vested as the profitability targets established in 2006 for the 3-year period 2008-2010 were not met. As a result, the remaining 75% did not vest. On 26 February 2008, the Board of Directors of Fiat S.p.A. approved an incentive plan, authorized by Shareholders on 31 March 2008, which allowed for the periodic granting of a maximum 4 million stock options and/or stock appreciation rights until the end of 2010. This plan was intended for managers hired or promoted subsequent to the stock option plan established on 3 November 2006, or who, in any event, warranted additional recognition, and it was structured similar to the 2006 plan in terms of profitability targets, vesting and exercise. On 23 July 2008, the Board of Directors, in execution of that plan, voted to grant 1,418,500 stock options at an exercise price of 10.24. The plan did not vest as the profitability targets established for the 3-year period 2008-2010 were not met. On 23 February 2009, the Board of Directors of Fiat S.p.A. approved an incentive plan, which was subsequently approved by Shareholders at the Annual General Meeting of 27 March 2009, based on the granting of rights that, subject to achievement of pre-determined performance targets (Non-Market Conditions or NMC) for 2009 and 2010 and continuation of a professional relationship with the Group, entitled the CEO of Fiat S.p.A. to receive a total of 2 million ordinary shares. Vesting was in a single tranche upon approval of the 2010 consolidated financial statements by the Board and the number of shares granted equivalent to 25% of the rights allocated for achievement of the 2009 targets and 100% of the rights allocated for achievement of the 2010 targets. The Group profitability targets for 2009 were reached. At the proposal of the Board, on 26 March 2010 Shareholders introduced a loyalty only component for an additional 2 million rights, the vesting of which was subject solely to continuation of a professional relationship with the Group at the date of approval of the 2011 financial statements. In addition, the original duration of the Plan was extended to the date of approval of the 2011 financial statements and the targets for 2010 and 2011 were reset. On 18 February 2011, the Board of Directors, having consulted the Compensation Committee, verified the vesting of 375,000 rights based on the achievement of the predetermined operating targets and, in light of the extraordinary transactions occurring during the year, also voted to make vesting of the remaining rights, which was dependent on the achievement of 2011 operating targets, subject only to the continuation of a professional relationship with the Group until the end of 2011. As stated previously, following the Demerger, the stock grant plan will entitle beneficiaries to receive one Fiat ordinary share and one Fiat Industrial ordinary share for every stock grant right held, with all other conditions of the plan remaining unchanged. The stock grant plan is to be serviced through shares bought on the market rather than through the issue of new shares. Detailed information on all Plans is also available in the notes to both the consolidated and parent company financial statements.
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SHARES HELD BY MEMBERS OF THE BOARDS OF DIRECTORS AND STATUTORY AUDITORS, GENERAL MANAGERS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES (ARTICLE 79 OF CONSOB RESOLUTION 11971 OF 14 MAY 1999)
Change in no. of shares held by No. of shares No. of shares No. of shares incoming No. of shares held at bought sold /(outgoing) held at 31.12.2009 in 2010 in 2010 managers 31.12.2010
Name
Shares held
Sergio Marchionne Luca Cordero di Montezemolo Gian Maria Gros-Pietro Executives with strategic responsibilities
Fiat Ordinary Fiat Ordinary Fiat Ordinary Fiat Ordinary Fiat Preference Fiat Savings CNH Ordinary
240,000 127,172 3,300 103,974 618 7,464
(10,685) (618) -
240,000 127,172 3,300 93,289 7,464
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TRANSACTIONS BETWEEN GROUP COMPANIES AND WITH RELATED PARTIES
TRANSACTIONS BETWEEN GROUP COMPANIES AND WITH RELATED PARTIES

During the period, there were no transactions, including intragroup, with related parties which qualified as unusual or atypical. Any related party transactions formed part of the normal business activities of companies in the Group. Such transactions are concluded at standard market terms for the nature of goods and/or services offered. Information on transactions with related parties, including specific disclosures required by the Consob Communication of 28 July 2006, is provided in Note 34 of the Consolidated Financial Statements and in Note 30 of Fiat S.p.A.s Financial Statements.
********** As part of the requirements of Legislative Decree 196/03 (the Italian data protection act), several activities to evaluate the system of data protection for information held by Group companies subject to this law, including specific audits, were performed. These activities confirmed that legislative requirements relating to the protection of personal data processed by Group companies had been substantially complied with, including preparation of the Security Planning Document.
SUBSEQUENT EVENTS AND OUTLOOK
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SUBSEQUENT EVENTS AND OUTLOOK
SUBSEQUENT EVENTS On January 10th, Fiat increased its stake in Chrysler Group LLC from 20% to 25% following achievement of the first of the three Performance Events (i.e., attainment of US regulatory approval and a commitment to produce an engine based on Fiats FIRE family in the USA) stipulated in the alliance agreement. On February 9th, Moodys Investors Service completed the review of Fiat S.p.A.s rating for possible for downgrade initiated on 21 July 2010. Fiat S.p.A.s long-term debt rating was affirmed at Ba1 and its short-term rating at Not Prime. The outlook is negative. On February 11th, Fiat Powertrain and Penske Corporation reached an agreement for the purchase, by Fiat Powertrain, of Penske Corporations 50% stake in VM Motori S.p.A. The agreement is subject to the customary clearance by the relevant competition authorities. VM Motori, headquartered in Cento (Italy), is a long-established company specialized in the design and manufacture of diesel engines based on proprietary technology. Pursuant to the agreement, VM Motori will be subject to the joint control of Fiat Powertrain and GM (which acquired a 50% interest in the company in September 2007). On February 15th, during a meeting at the Unione Industriale di Torino, Fiat presented a plan for the relaunch of activities at the Officine Automobilistiche Grugliasco (formerly Carrozzeria Bertone), which has been inactive for several years. The plan centers around a 500 million investment (to begin in the second half of 2011) for production of a new E-segment Maserati for international distribution. Start of production is planned for December 2012. OUTLOOK The 2011-14 Plan and financial targets set out in the presentation to the financial community in April 2010 are confirmed. In particular, the 2011 targets for Fiat Group post Demerger are as follows: Revenues of approximately 37 billion; Trading profit between 0.9 and 1.2 billion; Net profit at around 0.3 billion; Net industrial debt between 1.5 and 1.8 billion; Capex in the range of 4 to 4.5 billion. Capital expenditure programs are expected to increase substantially over the abnormally low levels of 2010 with a return to normalized levels of capital commitment across sectors. While working on achievement of their financial targets, Fiat will continue its strategy of targeted alliances to optimize capital commitments and reduce risks.
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OPERATING PERFORMANCE: CONTINUING OPERATIONS
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FIAT GROUP AUTOMOBILES

Fiat, Abarth, Alfa Romeo, Lancia and Fiat Professional
HIGHLIGHTS
( million)
2010 27,860 607 515 1,652 529 722 2,081,800 57,611
2009 26,293 470 217 1,495 446 669 2,150,700 54,038
Net revenues Trading profit/(loss) Operating profit/(loss) (*) Investments in tangible and intangible assets of which capitalized R&D costs Total R&D expenditure (**) Passenger cars and light commercial vehicles delivered (no. of units) No. of employees at year end
(*) Includes restructuring costs and other unusual income/(expense) (**) Includes capitalized R&D and R&D charged directly to the income statement
COMMERCIAL PERFORMANCE The European passenger car market (EU27+EFTA) experienced a decrease of 4.9% over 2009 levels to approximately 13.8 million vehicles. Demand in the first part of the year continued to be positively influenced by government incentive programs. However, beginning in the second quarter, registrations fell significantly with a year-on-year decline of approximately 11% for the second half. In Germany, the first European market to completely phase out incentives, demand was down 23.4% for the year. In Italy, the market declined 9.2%, with the fall off in demand being particularly pronounced in the second half (-22.7%). The decrease in France was more contained (-2.2%), as incentives were phased out progressively throughout the year. There was modest growth in the United Kingdom (+1.8%) and Spain (+3.1%) and in Brazil passenger car demand increased 6.9%, despite the phase out of incentives during the first part of the year. For 2010, Fiat Group Automobiles European market share was impacted by the decision to reschedule new product launches for the second half of 2011, in view of the contraction in market demand expected for the second half of 2010 and first half of 2011. In Europe, FGA closed 2010 with a market share of 7.5% (down 1.1 percentage points over 2009). In Italy, share was 30.1%, a decrease of 2.7 percentage points. Excluding the effect of the sharp reduction in demand for CNG/LPG vehicles (-25%), where FGA is market leader, share would have been in line with 2009. At 3.0% (-1.7 percentage points), share performance in Germany was impacted by the significant decline in demand (over 40%) in FGAs core market segments. Modest share decreases were experienced in France (-0.3 percentage points to 4.0%) and the United Kingdom (-0.5 percentage points to 3.0%). By contrast, market share in Spain was up 0.5 percentage points to 3.0%. Elsewhere in Europe, notable performance was achieved in the Netherlands, where FGAs eco-performing product range benefited from CO2 emissions-based incentives, resulting in a 44% increase in registrations and a 0.8 percentage point gain in market share to 6.4%.
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The Fiat brands market share decreased to 6.0% in Europe (-1.0 percentage point over 2009) and the Fiat Panda and Fiat 500 retained the top two positions in the A segment, with the latter achieving a net share gain of 2.5 percentage points. The Lancia brands European market share was 0.7% (-0.1 percentage points), while Alfa Romeo maintained registration levels steady (with a 0.8% share), despite the contraction in the market, due to the positive contribution of the new Giulietta in the second half. Demand in the European light commercial vehicle market was up 9.2% for the year, reflecting a partial recovery over the extremely low levels experienced in 2009. Increases were recorded in all major markets, with France up 10.7%, Italy 6.2%, Germany 14.0%, the UK 18.7% and Spain 9.5%. Growth in LCV demand was particularly significant in Brazil (+29.5% over 2009), driven by the strong performance of the domestic economy. In Italy, Fiat Professional achieved a 44.0% market share, gaining approximately 3 percentage points over 2009, primarily due to the brands expanded product offer. The success of the CNG-powered Fiorino in the first part of the year, the contribution of the new Dobl (Van of the Year 2011) for the full year and excellent performance for the Ducato all underpinned the brands continued strong competitive position in Europe, where it recorded a 12.8% share (stable vs. 2009). Passenger Car Market
(units in thousands)
2010 2,251.7 2,916.3 2,030.8 1,960.3 982.0 333.5 13,785.7 2,695.4
2009 2,302.4 3,807.2 1,995.0 2,159.5 952.8 320.3 14,499.1 2,520.2
% change -2.2 -23.4 1.8 -9.2 3.1 4.1 -4.9 6.9
France Germany UK Italy Spain Poland Europe (EU27+EFTA) Brazil
Sales Performance Passenger Cars and Light Commercial Vehicles

2010 120.9 107.8 66.4 625.6 37.3 34.7 172.8 1,165.5 761.4 154.9 2,081.8 140.5 2,222.3
2009 114.8 179.5 75.1 721.9 25.2 42.4 145.6 1,304.5 749.5 96.7 2,150.7 126.9 2,277.6
% change 5.3 -39.9 -11.5 -13.3 48.1 -18.3 18.7 -10.7 1.6 60.3 -3.2 10.6 -2.4
France Germany UK Italy Spain Poland Rest of Europe Europe (EU27+EFTA) Brazil Rest of World Total Sales Associate companies Grand Total
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During 2010, FGA delivered a total of 2,081,800 passenger cars and light commercial vehicles, down 3.2% over the prior year. In Europe, deliveries totaled 1,165,500 units (-10.7%). For passenger cars only, FGA delivered 1,691,400 vehicles, an 8.2% decrease over 2009. In Europe, deliveries were down 15.1% to 963,000 vehicles, with the reduction also reflecting measures to realign dealer inventory levels to market demand. Deliveries in Italy (-16.3%) and Germany (-53.2%) were heavily impacted by the significant decline in demand for smaller and CNG/LPG vehicles following the phase-out of eco-incentives. Deliveries were also down in the United Kingdom (-17.5%), but remained stable in France (+0.9%) and were up in Spain (+48.3%), against particularly low 2009 volumes. Notable results were achieved in several of the sectors smaller markets including the Netherlands (+59.3%), Belgium (+40.9%), Portugal (+35.1%) and Denmark (+78.7%). For 2010, deliveries also included some 13,500 Chrysler, Jeep and Dodge vehicles. The rollout of distribution of these brands through FGAs European network implemented gradually during the year is now complete. For light commercial vehicles, a total of 390,400 units were delivered, representing a 27.1% year-on-year increase. In Europe, where there was an overall recovery in the market, Fiat Professional increased deliveries 19.7% to 183,300 units, achieving double-digit growth in all major markets: Italy (+14.5%), France (+21.7%), Germany (+24.9%), the UK (+66.1%) and Spain (+46.9%). Outside the European Union, Fiat Group Automobiles strengthened its presence in markets where it is already well-established, such as Brazil, Argentina and Turkey, while pursuing development opportunities in other emerging markets in collaboration with local partners. In Brazil, Fiat Group Automobiles maintained its leadership position, delivering a total of 761,400 passenger cars and light commercial vehicles, representing a year-on-year increase of 1.6%. With the overall market growing 10.6%, FGA achieved a 22.8% share for the year (-1.7 percentage points). The Novo Uno enjoyed significant success, with some 110,000 units being delivered between launch in the second quarter and yearend. For light commercial vehicles, the Strada was once again the most sold model in the Brazilian market and, in December, the Ducato was no. 1 in its segment. In Argentina, overall market demand was up 28.8% (27% for passenger cars; 36% for light commercial vehicles) and FGA increased its share 0.3 percentage points to 10.4%. A total of 69,100 vehicles were delivered, representing a 44% increase over 2009. The Turkish market for passenger cars and light commercial vehicles grew significantly, with demand up 36.6% over the previous year. Through Tofas (a local joint venture in which FGA holds a 37.9% interest), FGAs performance was essentially in line with the market, with share down to 14.6% from 15.3% in 2009. Although share decreased in the light commercial vehicle segment, share for passenger cars was up one percentage point to 9.1%. STRATEGIC ALLIANCES At the end of November, FGA signed an agreement with Opel for the supply of a light commercial vehicle based on the Fiat Dobl. The vehicles will be produced at the Tofas plant in Bursa (Turkey) with sales beginning in January 2012 through Vauxhall and Opel dealers in Europe and in other markets outside the NAFTA region. Total supply is expected to exceed 250,000 units over the life of the model. Fiat and Chrysler Group LLC continued the process of integration and collaboration in all business areas as per the agreements signed in 2009 establishing the global strategic alliance. With regard to vehicle and spare parts distribution in Europe, in April FGA commenced commercial activities to support the sale and service of Chrysler, Jeep and Dodge branded products in several European markets and in May the two companies
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began reorganization of the dealer network for Chrysler and Lancia brand products, including integration of Chryslers European distributors into the Fiat organization. Preparatory activities were also initiated for the integration of importers during 2011 and activities to extend Chrysler Groups access to the Fiat distribution network in Latin America also continued. Finally, in Serbia where the sector operates through Fiat Automobiles Serbia Doo Kragujevac (held 66.7% by FGA and 33.3% by the Republic of Serbia) work started on refitting and renovation of the former Zastava plant, which will produce the replacement model for the Multipla and Idea. Government incentives to promote development of a supply network in the area around the plant were also finalized. INNOVATION AND PRODUCTS During the year, FGA was very active in renewal of its product portfolio and introducing particularly innovative technological solutions. With regard to the European market, in view of expected demand trends, new product launches were rescheduled for the second half of 2011 with the one major exception being Alfa Romeos introduction of the Giulietta. In 2010, the Fiat brand introduced several major product updates, including the 500 and 500C equipped with the 85 hp 2-cylinder TwinAir. Developed for FGA by Fiat Powertrain, this engine offers up to a 30% reduction in CO2 emissions with equivalent performance. Also unveiled was the Fiat 500C by Diesel, a convertible developed in collaboration between Fiat and the well-known fashion house, as well as the 500 thousandth show car created to celebrate the first 500,000 units of the Fiat 500 produced in Tychy (Poland) in just 31 months (from commercial launch to May 2010). Other product launches in 2010 included: the Dobl Natural Power equipped with 1.4 16v T-JET CNG/gasoline engine; the 2011 model year Fiat Qubo, featuring numerous enhancements; and new versions of the Fiat Bravo equipped with the Euro 5 140 hp 1.4 MultiAir Turbo and Start&Stop as standard. Fiat also expanded the Fiat Panda offering with the Panda Anniversary, a special edition released in celebration of the models 30th anniversary, and the 2011 model year Panda available with a choice of two Euro 5 engines: the 75 hp 1.3 16v MultiJet diesel (with DPF as standard), the 69 hp 1.2 8v gasoline, and the Panda with 69 hp 1.2 LPG/gasoline engine. Finally, at the end of November the new MyLife versions of the Punto were launched: a 77 hp 1.4 liter and a 69 hp 1.2 liter, both Euro 5 with Start&Stop as standard. Also of note was the launch of the Novo Uno in Brazil. Four versions of this model were presented in May, and the vehicle has enjoyed excellent sales volumes in addition to winning a number of awards, including the coveted Carro do Ano 2011. Fiat also made its return to the North American market in 2010 with the debut of the Fiat 500 at the Los Angeles Auto Show, where it was enthusiastically received with 500 vehicles sold in just 2 hours. In March 2010, for the third year running, JATO Dynamics (the worlds leading provider of business intelligence to the automotive industry) named Fiat as having the lowest CO2 emissions levels among Europes top 10 selling brands with an average 127.8 g/km per vehicle sold in 2009. The brand was also recognized as the most ecological in Europe again for the first half of 2010, with average CO2 emissions per vehicle sold coming in at just 123.5 g/km. Added to these were two other significant achievements for the Group and its models: the Fiat 500, with CO2 emissions of 116.0 g/km, was ranked best among the top 20 selling cars, and Fiat Group Automobiles retained its position as the leading group. For Abarth, product developments in 2010 included the release of the Abarth Punto Evo with 165 hp MultiAir and the Abarth 500C, the first convertible released by the brand since its relaunch. And in competitive racing, Abarth took first place in the 2010 European Rally Championship.
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For Alfa Romeo, 2010 was the year of the Giulietta, which was premiered at the Geneva Motor Show and was progressively rolled out to all the major markets from May. The Alfa Romeo Giulietta, released on the brands 100th anniversary, offers the maximum in performance and technology: from its engines, which represent the state-of-the-art in technology, performance and respect for the environment, to its new compact architecture complete with sophisticated suspension systems, active dual-pinion steering, high-quality materials and advanced production technologies. In September, two new versions of the Giulietta were also presented: one powered by a 140 hp 2.0 JTDM turbo-diesel, offering low fuel consumption and emissions levels, and the other by a 170 hp 1.4 MultiAir combined with the innovative automatic Alfa TCT (the latest generation dual dry clutch transmission), available from the beginning of 2011. The Giulietta was awarded 5 stars for safety by Euro NCAP (scoring 87/100) and the Unione Italiana Giornalisti dellAutomotive (UIGA) named the car Auto Europa 2011. During the year, Alfa Romeo also offered the Alfa TCT transmission on the MiTo and launched the new Blackline Collection of the MiTo, as well as the 2011 model year 159, with restyled interior and an expanded selection of options packages. In June, the brand celebrated its 100th anniversary with 4 days of celebrations that involved the City of Milan, Fiera Milano, the Monza race circuit and the Alfa Romeo museum. Attending the event were some 3,000 classic cars from 45 countries. In anticipation of the major new product launches scheduled for 2011, in 2010 Lancia enriched its existing product line-up with the presentation of the special series Hard Black Delta, featuring several style and content enhancements, a Delta equipped with a highly responsive Euro 5 MultiAir Turbo and Start&Stop as standard, the limited edition LPG/gasoline Ypsilon ELLE and the Musa 5th Avenue with elegant trim and interior styling. Fiat Professional completed the launch of the new Dobl Cargo both inside and outside of Europe, expanding the models range to offer two new versions: a 120 hp 1.4 liter Turbo Natural Power and a 90 hp 1.6 liter with MTA transmission. In September, the model was awarded International Van of the Year 2011 at the Hanover International Motor Show by a panel of automotive sector journalists from 24 countries. Fiat Professional also expanded the Fiat Scudo line-up to include the new Euro 5 165 hp 2.0 MultiJet and launched the 2011 model year Fiorino. There were major developments in the environmental arena during the year including introduction of the eco:Drive software for Natural Power (CNG/gasoline) vehicles, which utilizes the Blue&Me system to quantify the environmental and cost benefits of using CNG fuel. Also of note was the Fiat 500 EV project (in alliance with Chrysler Group). Following its debut at the Detroit Motor Show at the beginning of 2010, the prototype vehicle was also exhibited in the pavilion for electric vehicles at the Bologna Motor Show. This zero-emissions vehicle will be launched in the United States at the end of 2012. During the year, research and innovation activities focused on further improving leadership in time-to-market through the application of numerical simulation tools and methodologies to models currently in development. There were several important initiatives to increase proprietary know-how in specific aspects of ergonomics and Noise Vibration Harshness (NVH) with the objective of also acquiring leadership positions in these areas to complement the Groups recognized position in passive safety and CO2 emissions. Additionally, there was continued focus on standardization of vehicle systems and components aimed at reducing costs, improving quality and reducing the technical complexity of products, on the introduction of latest generation active safety systems (i.e., on the Alfa Romeo Giulietta) and on new configurations for sensors and climate management systems to improve detection of conditions in the vehicle interior. Also of note was the sharing of certain vehicle architectures with Chrysler Group. Initial activity relating to the principal mechanical elements of vehicles, such as the chassis and suspension systems, and certain components, including seating and on-board telematics, was extended during the course of the year to also include minor components and systems.
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SERVICES In 2010, actions were taken to improve customer response capabilities and contribute to the success of the sales and service networks. A customer satisfaction monitoring system was also completed. In the maintenance area, Technical Services carried out a comprehensive review of service standards and processes and updated procedures, roles, responsibilities and tools with a view to continuous improvement of the customer experience through competent, effective and up-to-date technical service. Product support services for dealers and service centers were upgraded and expanded, as well as being extended geographically to new markets outside of Europe. Technical documentation was also enhanced with new content and delivery platforms, and Owner and Maintenance manuals were produced in electronic format, enabling improved content access. In addition, IT support systems for the service network were upgraded and expanded. For warranty service, in Europe introduction of the new operating model in partnership with leading third party service providers continued and the expected cost benefits were achieved. The Customer Service Center at Arese represents one of the sectors most important customer relationship tools and serves customers, prospective customers and employees in 20 markets throughout Europe. In 2010, the number of contacts handled by the Center was up 29% over the prior year. Customer Mobility Support provides assistance to customers at the most critical moments when their cars are in for service or they need roadside service with rapid and effective support to ensure their mobility needs are met. During the year, a new customer mobility program was launched through the official dealer network, which contributed to a 7% increase in customer satisfaction. A similar program was developed for corporate-owned dealerships aimed at ensuring service excellence and improving profitability and very positive results were achieved in Italy. Within the Customer Service Center, Customer Relations (which handles customer complaints and information requests) registered improvements in its performance indexes, which were achieved through increased involvement of dealers, use of centrally-integrated IT systems and operating processes, and introduction of new communication and service platforms (e.g., mobile-based tools introduced through the Fiat Ciao Mobile Project). During 2010, Customer Relations was also involved with the Chrysler integration process and established the framework for alignment of operating procedures for the Chrysler, Jeep and Dodge brands. Fiat Group Automobiles offers financial services in Europe, Latin America and China. In Europe, this activity is managed by FGA Capital, a 50/50 joint venture with the Crdit Agricole group (accounted for under the equity method). FGA Capital supports the European sales activities of Fiat Group Automobiles through dealer financing, end-customer financing and medium and long-term rental. The collaboration with Crdit Agricole continued to perform effectively throughout 2010, meeting the sectors expectations and commercial needs. In 2010, these activities were extended to include support for Chryslers European distribution network and end customers. New loans to the dealer network totaled 16,676 million (16,963 million in 2009). Retail financing was provided on 427,429 vehicles, representing a financed value of 5,670 million and a penetration rate of 25.8% on sales of FGA brands (2009: 513,591 vehicles, financed value of 5,921 million and 29.3% penetration rate). There were new medium and long-term rental agreements on 40,447 vehicles, representing a financed value of 493 million and a penetration rate of 2.9% on sales of FGA brands (2009: 57,586 vehicle rentals, financed value of 793 million and 3.9% penetration rate).
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In Latin America and China, financial services are provided by Banco Fidis in Brazil, Fiat Credito Compania Financiera in Argentina and Fiat Automotive Finance in China. All these companies are subsidiaries of Fidis S.p.A. In Brazil, Banco Fidis achieved particularly strong growth. In 2010, financing support to the sector also covered the Chrysler distribution network and end customers in China, Argentina and Brazil. In Italy, Fidis S.p.A. (a wholly-owned subsidiary of Fiat Group Automobiles S.p.A.) manages a factoring portfolio and issues guarantees. During 2010, the company further reduced its supplier factoring activities, with managed receivables dropping to 271 million (430 million in 2009). With regard to short-term rental activities, FGA sold its entire interest in Targa Rent S.r.l. to third parties on 1 February 2010.
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MASERATI
HIGHLIGHTS
( million)
2010 586 24 24 104 60 62 5,675 696
2009 448 11 11 65 31 33 4,489 723
Net revenues Trading profit/(loss) Operating profit/(loss) (*) Investments in tangible and intangible assets of which capitalized R&D costs Total R&D expenditure (**) Vehicles delivered (no. of units) No. of employees at year end
OPERATING PERFORMANCE Despite continued weak economic conditions, Maserati reported a significant improvement in operating performance for the year, with deliveries, revenues and profit all up sharply over the previous year. Revenues increased 30.8% for the year and trading profit more than doubled to 24 million from 11 million in 2009. 2010 saw the successful introduction of the Maserati GranCabrio, with a total of 1,964 units being delivered since its launch in March. The GranTurismo also performed well and its status as the marques best-selling model was confirmed with 2,259 units being sold. And 1,452 units of Maseratis flagship model the much celebrated, award winning Quattroporte were delivered during the year. In motor sport, Maserati returned to the world of single-make championships with the first edition of the Maserati Trofeo. This championship, which features the GranTurismo MC Trofeo (the on-track version of the GranTurismo S), consists of a series of 8 races on major European circuits. Maserati had another double win in the FIA GT Championship, taking the 2010 Driver and Team titles with the legendary MC12. The company delivered 5,675 vehicles to the network, up 26.4% over the 4,489 units delivered in 2009, with increases recorded in the majority of its 59 markets. In the United States, its number one market, Maserati achieved a 45% increase over the prior year. Results were also excellent in the United Kingdom (+72%) and China (+128%), which has become Maseratis 4th largest market after the USA, Italy and the United Kingdom. Overall, the market for the Maserati range was up 17% in 2010. At year end, the order backlog stood at 743 units.
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INNOVATION AND PRODUCTS Maserati started off the year with the presentation of the GranCabrio to the US market at the Detroit Motor Show. At the Geneva Motor Show in March, it presented the Quattroporte Sport GTS Awards Edition, which was produced in celebration of the many international awards received by the model since its launch. 2010 also saw the release of the GranTurismo MC Stradale, the star of Maseratis on-road line-up, which made its world debut at the Paris Motor Show and its Italian debut at the Bologna Motor Show. The GranTurismo MC Stradale is the fastest (300 km/h), lightest and most powerful vehicle in the range and the automakers experience in competitive racing is reflected in the handling and aerodynamics of this top-of-the-range coup.
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FERRARI
HIGHLIGHTS
( million)
2010 1,919 303 302 239 102 148 6,573 2,721
2009 1,778 238 245 290 119 156 6,193 2,835
Net revenues Trading profit/(loss) Operating profit/(loss) (*) Investments in tangible and intangible assets of which capitalized R&D costs Total R&D expenditure (**) Type-approved vehicles delivered to the network (no. of units) No. of employees at year end
OPERATING PERFORMANCE Ferrari closed 2010 up significantly over the previous year. Although 2009 performance was not severely impacted by the crisis, Ferraris sales grew in 2010 and it even succeeded in beating its previous all-time record for deliveries to the network set in 2008, when market conditions were decidedly more favorable. This also translated into strong earnings, with revenues up 7.9% over 2009 and trading margin increasing to 15.8%. Those results reflected the continuous investment in product development, with several new models launched during the year. In addition to the continued success of the Ferrari California and the ramp-up in production and sales of the 458 Italia, 2010 also saw the release of two limited edition models: the 599 GTO, for which deliveries began during the year, and the Ferrari SA Aperta. Both models achieved immediate success. Team Ferrari returned to the top ranks of Formula 1, coming within reach of the Drivers Championship Title, which only eluded its grasp in the final race of an extremely close and hard-fought season. Across the Atlantic, however, Ferrari took the Constructors Title in the American Le Mans Series Championship. The company further developed the internet as its primary platform for communicating with customers and enthusiasts around the world. Following launch of the Japanese language version in January, the Chinese version went live in March 2010, providing Ferrari even closer contact with customers in these key markets. Expansion of the Ferrari Store network also continued, with new sales outlets opened in several countries, most notably in New York (Park Avenue), Johannesburg and Abu Dhabi, the largest in the world. These were accompanied by the opening of Ferrari Pit Stop in Nola (Italy), a new concept store dedicated exclusively to fans of Team Ferrari. The result from product licensing was also strong, as collaboration with the companys most important partners continued and in November Ferrari World Abu Dhabi was opened. This theme park, operated under license from Ferrari, offers visitors spectacular attractions, using the latest technology to tell the story and convey the unique emotion of Ferrari. A total of 6,461 type-approved cars were sold to end customers, a 3.4% increase over 2009 (+2.7% over a total 6,293 units sold for 2009, including non-type approved vehicles of which none were sold in 2010). This result was mainly due to the recovery in North America and excellent performance in emerging Asian markets, especially China, where the success of the 458 Italia and the California led to a sharp increase in demand.
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In North America, Ferraris number one market in terms of volumes (26% of the worldwide total), where 1,672 vehicles were sold to end customers (+14% over 2009), the sector achieved a return to pre-crisis levels, although the overall market has yet to recover. Market trends varied in Europe, with growth in demand in Eastern European markets and consolidation in Western Europe. A total of 3,056 units were sold, representing a slight decline over 2009 (-1.4%). Italy was the best performing Western European market, with 694 units delivered (+6%), compared with modest contractions in Germany (-4% to 617 units) and the UK (-3% to 468 units). For Eastern Europe, sales were up 82% in Russia and 5% in Romania. In the Middle East and Africa, Ferrari maintained 2009 sales levels, continuing the excellent results achieved in these markets in recent years, with a total of 476 units delivered to end customers (+1%). Sales growth in the Asia-Pacific region also continued, with a total of 1,151 vehicles delivered (+3% over 2009), driven by excellent performance in China, Australia and Singapore. In China, a key market for Ferrari, sales were up 24% to 256 units. Performance was also very strong in Hong Kong (+10% to 157 units), Australia (+19% to 137 units), Singapore (+150% to 50 units) and South Korea (+44% to 46 units). In Japan, Ferrari maintained its leadership with a 47% share of its segment, despite a decrease in vehicles sold (-18% to 411 units) reflecting difficult economic conditions. For 2010, a total of 6,573 type-approved cars were delivered to the network, an increase of 6.1% over the previous year (+5.4% over a total 6,235 deliveries for 2009, including non-type approved vehicles). INNOVATION AND PRODUCTS At the Geneva Motor Show in March, Ferrari presented the HY-Kers, a hybrid GT that benefits from eco-smart technologies developed in Formula 1 racing. Powered by two engines, one electric and the other a traditional V12, this car is a demonstration of the carmakers ability to combine eco-performance with pure driving pleasure. Geneva was also the venue for the debut of the Ferrari California with Start&Stop. April saw the presentation at the Beijing Motor Show of the Ferrari 599 GTO: the highest performance street version of a vehicle ever built by the maker from Maranello. Derived from the 599, this model was produced in a limited series of just 599 vehicles, all of which had been sold prior to the public unveiling. Powered by a 12-cylinder, 6-liter engine and boasting 670 horsepower, it can accelerate from 0 to 100 in 3.35 seconds with a top speed of 335 kilometers per hour. Ferrari was also present at the International Expo in Shanghai where millions of visitors had the opportunity to see the HY-Kers hybrid concept car. At the Paris Motor Show, Ferrari presented the Ferrari SA Aperta: a limited edition of 80 vehicles, which were all sold almost immediately. The car was produced in celebration of the eightieth anniversary of the historic body-maker, Pininfarina. The SA Aperta is a true roadster with a front-mounted V12 engine. Boasting 670 hp, the SA Aperta embodies the sporting spirit of the 599 and the very latest in Ferrari technology. Through Ferrari Financial Services, Ferrari also offers car financing to customers in several European countries (Germany, the United Kingdom, Switzerland, France, Belgium, Austria and Italy) and in the USA. In May 2010, the company also began offering financial services in Hungary. The new Dealer Finance business line, launched in December 2009, is currently active in the United States and through the European network in Germany, Switzerland, Belgium and the United Kingdom.
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FIAT POWERTRAIN
HIGHLIGHTS
( million)
2010 4,211 140 172 385 53 80 12,453
2009 3,372 104 77 401 36 55 11,408
Net revenues Trading profit/(loss) Operating profit/(loss) (*) Investments in tangible and intangible assets of which capitalized R&D costs Total R&D expenditure (**) No. of employees at year end
OPERATING PERFORMANCE Fiat Powertrain produces engines and transmissions for passenger cars and light commercial vehicles (the Passenger & Commercial Vehicles business line of the former FPT Powertrain Technologies). During 2010, it acquired the remaining 50% of Fiat Powertrain Polska Sp.z.o.o. (formerly Fiat-GM Powertrain Polska), which is now fully consolidated. Over the year, the sector experienced a stabilization in sales volumes, with declines resulting from the phase-out of eco-incentives in several major European markets offset by market growth in South America. Fiat Powertrain reported 4,211 million in revenues, an increase of 24.9% over 2009 (+11.1% on a like-for-like basis). Sales to customers external to the Fiat Group as well as to joint ventures accounted for 13% of total revenues (10% on a comparable scope of operations and 8% for 2009). A total of 2,347,000 engines (+2.5% on a like-for-like basis) and 2,233,000 transmissions (+1.1%) were sold during the year. Sales of diesel engines to external customers accounted for approximately 9% of total sales volumes (7% in 2009). At the beginning of October, the sector received the prestigious international Technobest 2010 award from Autobest magazine for its innovative 2-cylinder TwinAir engine (based on the selection of an independent panel of 15 trade journalists from 14 countries). The new 1.4 MultiAir Turbo was named Best New Engine 2010, one of the prestigious Engine of the Year categories awarded by an international panel of 65 trade journalists from 32 countries. The MultiAir technology was also recognized in the US, with Popular Science magazine naming it Best of Whats New for its innovative features. INNOVATION AND PRODUCTS During 2010, Fiat Powertrain continued to develop innovative powertrain systems (engines and transmissions combined) for Fiat Group Automobiles. For small gasoline engines, the principal focus was development of the new family of 2-cylinder engines, which led to the production launch and first application of the new 85 hp turbo-charged TwinAir that combines the revolutionary MultiAir system with fluid-dynamic technology for optimized combustion. Lighter and smaller
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than a 4-cylinder having the same performance characteristics, this new engine offers a significant reduction in CO2 emissions and its first application was on the Fiat 500 and Fiat 500C. The TwinAir family was further developed to include application of the turbo version on other A and B-segment models produced by Fiat Group Automobiles. Development also continued on a naturally-aspirated version, which will feature the second generation of the electro-hydraulic valve management system, the MultiAir II. A CNG turbo application is also being developed for the TwinAir family. The MultiAir II technology is also being developed for application on 16v Fire engines and will offer reduced CO2 emissions without compromising performance. Work also continued on the TwinAir and Fire engine families to further reduce consumption and emissions to meet the new Euro 5+ and Euro 6 standards. For the 8v Fire family, production began on the new Fire 1.0 Low Friction and 1.4 Evo2 Flexfuel in Latin America. Application of the Start&Stop system on all Fire family engines was completed and the new CNG/gasoline 1.4 16v Fire Turbo was launched on the new Dobl. Development of Euro 5 LPG versions of the 1.2 8v, 1.4 8v and 1.4 16v (naturally-aspirated and turbo) Fire engines was completed and production launch is scheduled for 2011. In March, the 1.8 235 hp direct injection turbo (the second engine in the B family) went into production for application on the Alfa Romeo Giulietta. Further enhancements were also made to this engine familys injection and combustion system to achieve Euro 6 emissions levels. For diesel engines, Fiat Powertrain began supplying Fiat Group Automobiles with a new version of the eco-efficient 85 hp 1.3 Small Diesel Engine. The use of a new high-efficiency turbo-compressor with the introduction of Injection Rate Shaping on the MultiJet II injection system, has enabled the Punto Evo to achieve CO2 emissions of 95 g/km in combined cycle. 2010 also saw the production launch of the new 140 hp 2.0 B Family engine with downspeeding technology, designed to offer reduced consumption and improved responsiveness at low RPMs for application on the Alfa Romeo Giulietta. The adoption of a high-efficiency turbo-compressor and new engine input reduction technology has enabled a 4% reduction in consumption in combined cycle. Work also continued on development of the 2.0 B Family engines with MultiJet II injection system, due to go into production in early 2011 on the Fiat Freemont (170 hp version) and the Fiat Ducato (115 hp version). In the area of transmission technology, one of the most significant developments during the year was application of the automatic dry dual clutch C635 TCT (Twin Clutch Technology) on the Alfa Romeo Giulietta. Already available on the Alfa MiTo, during 2011 it will also be launched on the Giulietta (170 hp 1.4 MultiAir and 170 hp 2.0 MultiJet) and a Chrysler passenger car. Numerous automated transmission applications were developed during 2010 including the robotized C514 MTA transmission for the Fiat 500 with TwinAir, which has brought CO2 emissions down to 92 g/km: the best performance achieved to date in the A segment.
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COMPONENTS
Magneti Marelli
HIGHLIGHTS
( million)
2010 5,402 98 73 383 138 292 34,269
2009 4,528 25 (40) 356 114 245 31,628
OPERATING PERFORMANCE During 2010, there was a global recovery in production volumes for passenger cars and light commercial vehicles. In Europe, Magneti Marelli benefited from growth in demand for light commercial vehicles and recovery in the medium-to-large passenger car segments, which had been particularly hard hit in 2009. By contrast, it was negatively impacted by the decline in the A and B segments following the phase-out of eco-incentives. Magneti Marelli closed 2010 with revenues up 19.3% over 2009. During the year, the sector concluded several major agreements for the development of innovative products in its core components activities. In collaboration with the Harman Group, Magneti Marelli will provide the next generation infotainment system for a major German client. The new system will combine Magneti Marellis open platform with the expertise of its partner in audio and high-end applications. Magneti Marelli and Accenture signed a five-year partnership agreement for the design and development of in-vehicle infotainment, telematics and embedded software projects. Accenture will contribute to developing and managing the digital entertainment and communication solutions and services. With the US company, ElectroJet, Magneti Marelli signed a partnership agreement for the production and sale of an engine control system that provides a simple and cost-effective solution for application of electronic fuel injection on 2 and 3-wheel vehicles. This agreement is targeted at the Asian market for 2-wheel vehicles, which offers attractive business potential for the sector. With regard to the development of production activities, in early June the joint venture established by Magneti Marelli and Shanghai Automobile Gear Works opened a new plant in Jiading (Shanghai) to produce hydraulic components for approximately 300,000 Magneti Marelli Freechoice automated transmissions annually. In addition, a new plant began production of suspension systems in the United States and another in Russia began production of lighting.
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Finally, in Brazil, Magneti Marelli received recognition for its commitment to sustainability as a result of its excellent performance in waste reduction (i.e., reduction in quantity and increase in percentage recycled). All business lines recorded year-over-year improvements. Highlights of the operating performance of individual business lines are provided below. LIGHTING Revenues totaled 1,586 million in 2010, an increase of approximately 30% over the prior year. The principal increase in volumes was linked to a recovery in the medium-to-large segments of the European automotive market and primarily impacted activities in Germany and the Czech Republic. Performance was also strong in the Asian markets and the NAFTA region. Innovation was centered around two key areas: reduced energy consumption, with the FINE-X (Future Integrated New Efficient Xenon) and economic low-intensity light projects; and design flexibility, with the adoption of LED technology also for headlights. Numerous production launches during the year included headlights and tail lights for the Alfa Romeo Giulietta, in addition to new platforms for Audi and Mercedes with headlights utilizing exclusively LED technology. Major new orders included: headlights and tail lights for Peugeot, Mercedes and Volkswagen-Audi models and for the new Fiat Panda, and headlights for BMW, Renault, Citron and Chrysler. ENGINE CONTROL Revenues for 2010 totaled 967 million, representing an increase of 14% over 2009, with growth concentrated in Brazil, China, India and the United States. Innovation focused on development of new generation control units, electric hybrid engines and a new range of direct injection fuel pumps. Development of the engine control unit for the Fiat 500 for the US market was completed, in addition to throttle bodies for GDI systems for Volkswagen and for BMW motorcycles. New products launched during the year included throttle bodies for Peugeot and Citron in Slovakia and Freechoice hydraulic components in China. Major orders received during the year included intake manifolds and throttle bodies for Chrysler in the United States, and the GDI pump and throttle body for PSA in Europe. SUSPENSION SYSTEMS Revenues totaled 583 million for the year, representing an 11% increase over the prior year. The largest rise was in Italy and was driven primarily by the increase in light commercial vehicle manufactured by the joint venture, Sevel. In Poland, sales for A and B-segment vehicles were down, but production of the Fiat 500 remained stable against 2009 levels. Performance in Brazil continued to be positive, driven by the strong product demand from FIASA. Innovation centered around development of low-weight technical solutions aimed at reducing CO2 emissions. New orders included the complete suspension for the new Fiat Panda and the front suspension for the new Lancia Ypsilon. SHOCK ABSORBERS Revenues for the business line were 394 million for 2010. The 40% increase over the previous year was mainly driven by performance in Brazil and the United States. The main innovation projects included: an inertial valve (a new valve for shock absorbers) and a full displacement piston valve suited for use in challenging terrain.
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During the year, production began in Brazil of new shock absorbers for the Novo Uno, Fiat Punto and Siena, as well as models produced by Volkswagen and General Motors. The main new orders related to the new Palio and an Opel model for the Brazilian market, together with orders for the new Fiat Panda and future Multipla in Europe. ELECTRONIC SYSTEMS Total revenues were 623 million in 2010, an increase of 24% over the previous year, mainly driven by growth in the Brazilian and Chinese markets, as well as new product launches in Slovakia. There was an increase in revenues from instrument panels (+16%), primarily attributable to higher volumes for external customers. Revenues from telematics rose significantly (+31%), due to the increase in volumes to Fiat and SAIC and launch of production of the e-call for PSA. Sales of products for vehicle interiors were also up. With regard to innovation, instrument panels were developed for the North American version of the 500, the new Panda and the new small family car from Volkswagen. Development of the first high-volume digital instrument panel for PSA was also completed. For vehicle interiors, components were developed for Fiat customers (the new Lancia Ypsilon, Ducato and Iveco Daily), as well as the interior control unit for the new Palio in Brazil. In the telematics area, development focused on a navigator for BMW and the hands-free module (HFM) for Chrysler. During 2010, production began on a new navigation system for the Alfa Romeo Giulietta that combines navigator, dual tuner radio-receiver and CD/MP3 player into a single device with Blue&Me interface capability. Major new orders acquired during the year included the instrument panel and interior control unit for the Chrysler C-evo platform, a digital instrument panel for a Renault electric vehicle, a radio-navigation platform for PSA and a new infotelematic system for BMW. EXHAUST SYSTEMS Revenues totaled 614 million for 2010, a 13% increase over the previous year. Sales were up for light commercial vehicles in Spain and Brazil, whereas volumes declined in Italy on the back of the contraction in passenger car demand. Innovation focused on reductions in CO2 emissions and emissions from diesel engines and development of a racing sound. In 2010, production began on exhaust systems for external customers in Spain and for the Euro 5 Iveco Daily, as well as the hot-end exhaust for the Alfa Romeo Giulietta in Italy. Major new orders included exhaust systems for the Euro 5 engines that equip a Mercedes light commercial vehicle and the first project for Chrysler. AFTERMARKET Revenues totaled 287 million for 2010, a 21% increase over the previous year. The main increases were in the Mercosur region and in Italy. Volumes were up for rotary motors and lighting, but declined for batteries, where market conditions were highly competitive. Significant events included the completion of commercial and collaboration agreements with major partners in the maintenance and assistance areas, in addition to a partnership with a major brand in Spain for exclusive distribution of batteries through Magneti Marellis sales network.
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PLASTIC COMPONENTS AND MODULES Revenues for the Plastic Components and Modules business line were 499 million, up 6% over the previous year. Italy experienced the greatest increase on the back of higher volumes for the Ducato and production launch of the Giulietta. Revenues were also higher in Brazil with production launch of the plastic fuel intake for the new Uno. For Poland, on the other hand, volumes were affected by a decline in A and B-segment vehicles which was partially compensated for by the strengthening of the Polish zloty. Product innovation included development and production of a new polyethylene fuel tank, which will reduce hydrocarbon emissions and limit evaporative emissions in the event of increased use of biofuels. First application of this technology will be on the new Lancia Ypsilon and the new Panda.
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METALLURGICAL PRODUCTS
Teksid
HIGHLIGHTS
( million)
2010 776 17 17 31 2 7,275
2009 578 (12) (14) 33 2 6,194
Net revenues Trading profit/(loss) Operating profit/(loss) (*) Investments in tangible and intangible assets Total R&D expenditure (**) No. of employees at year end
OPERATING PERFORMANCE Following the global economic crisis, which impacted demand levels in 2009, moderate increases were experienced during 2010 although in several areas demand remained below pre-crisis levels. The rates of increase in Teksids two principal business segments varied from market to market. In the passenger car and light commercial vehicle market, global production was up over 2009, with the NAFTA region recording a more significant overall increase than Europe. Production levels were also strong in Brazil. The heavy vehicle market was up sharply in all regions, with Europe registering a significant increase over the very low levels experienced in 2009. With the upturn in economic conditions, the sector achieved a notable improvement in profitability and revenues were up 34.3% for the year. The Cast Iron business unit recorded a 21.8% increase in volumes over 2009, with the most notable improvement in the heavy vehicle segment, particularly in Europe (+18.1%) and the NAFTA region (+47.2%), where the heavy segment is the sectors primary area of focus, and in Brazil (+19.9%). Revenues for the business unit were up 35.9%, driven by higher volumes as well as higher pricing to recover increases in raw material costs. Teksids Cast Iron business unit also operates in China through Hua Dong Teksid Automotive Foundry Co. Ltd., a joint venture with the SAIC group which is accounted for under the equity method. In 2010, the company recorded a 9.1% decrease in delivery volumes associated with a decline in exports to Italy. The Aluminum business unit posted a 15.3% increase in volumes and a 26.5% increase in revenues, principally driven by higher volumes and price increases to recover higher raw material costs.
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PRODUCTION SYSTEMS
Comau
HIGHLIGHTS
( million)
2010 1,023 (6) (6) 24 4 12 12,216
2009 728 (28) (32) 13 2 10 11,708
OPERATING PERFORMANCE During 2010, the sectors market underwent a recovery from the global financial and industrial crisis that began in the second half of 2008. In the western hemisphere, automakers increased capital expenditure levels in preparation for new model launches in 2011 and 2012. In North America, following the emergence of Chrysler and General Motors from bankruptcy in 2009, automakers began restructuring production facilities and launched projects geared to the development and release of new models. In Europe, the recovery was concentrated primarily in Germany, where new projects focused exclusively on new model launches. Overall industry capacity remained in excess of demand. In both Latin America and China, where decreases in investment levels had been more contained, there was a return to the strong growth trend experienced prior to the crisis. As a result, investment intensified and Services activities increased in Brazil and Argentina. New contract orders were up 80% for the year to 952 million. Overall, 29% of new orders were generated in Europe and 29% in North America, with the remaining 42% in Latin America and Asia. By customer, 22% of orders came from Fiat Group companies and 78% from other manufacturers. At 31 December 2010, the order backlog totaled 629 million, a 32% increase over the previous year. Services benefited from growth in Brazil and Argentina, where business levels were up 42% overall driven by positive market conditions and the acquisition of new contracts outside the automotive sector (i.e., petroleum and chemical).
OPERATING PERFORMANCE: DISCONTINUED OPERATIONS
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AGRICULTURAL AND CONSTRUCTION EQUIPMENT

CNH Case New Holland
HIGHLIGHTS
( million)
2010 11,906 755 754 446 200 346 28,831
2009 10,107 337 251 330 151 283 28,466
Net revenues Trading profit/(loss) Operating profit/(loss) (*) Investments in tangible and intangible assets (**) of which capitalized R&D costs Total R&D expenditure (***) No. of employees at year end
(*) Includes restructuring costs and other unusual income/(expense) (**) Net of vehicles leased out (***) Includes capitalized R&D and R&D charged directly to the income statement
COMMERCIAL PERFORMANCE In 2010, worldwide agricultural equipment industry retail unit sales increased 8% over the prior year with improvements in all regions except Western Europe, where demand remained below historical norms. Global demand was up 8% for tractors and 2% for combines. In North America, tractor sales increased 5% and combine sales were up 9% on the back of strong commodity prices and very solid farm income. In Latin America, tractor sales climbed 20% and combine sales jumped 29% on strong economic fundamentals and stability in government support for the agricultural sector. Western European markets declined for the year with tractor sales down 9% and combines falling 29%. There were signs of a recovery in demand in the fourth quarter with tractor sales increasing 12% over the same period in 2009. Rest of World markets reported a 13% growth in tractor sales and a 3% increase for combines. CNHs global market share for tractors was largely in line with the prior year. The sector maintained share in Western Europe, despite the decline for the industry overall, and experienced a slight decrease in North America for under 40 hp and mid-sized utility tractors as it transitioned to new, more competitive products. CNH improved global share of the combine market driven by strong performance in Rest of World markets. Global construction equipment industry unit sales rose 47% for the year, representing a recovery from the low base experienced in 2009. The market for light equipment was up 35% and the heavy segment rose 59%. In North America, demand improved 20% for light equipment and 14% for heavy equipment principally due to replacement of ageing fleets. In Western Europe, demand grew as the industry began to recover from the prior years low levels, and unit sales were up 23% for light equipment and 17% in the heavy segment. In Latin America, strong market performance was mainly driven by increased infrastructure spending, with sales growing 89% in the light equipment segment and 86% in heavy. In Rest of World markets, industry sales rose 50% for light equipment and 71% for heavy, driven by continued strong demand in the Asia-Pacific region, primarily in the heavy equipment segment in China.
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CNHs full year market share was in line with growth in demand across all segments and regions with the exception of Latin America, which was down due to local manufacturing capacity constraints for CNH for both light and heavy equipment. Plans to expand capacity were initiated at two facilities to accommodate future market growth and ensure targets for localization of production can be met. CNH and KAMAZ finalized a joint venture agreement for the production of agricultural and construction equipment in the Russian Federation. This followed a preliminary agreement signed in October 2009. Once fully operational, CNH-KAMAZ Industry will have an annual production capacity of 4,000 units. INNOVATION AND PRODUCTS In North America, Case IH Agriculture launched the next generation of more powerful and fuel-efficient Steiger and MAGNUM tractors, along with a new range Puma 130-160 series models with Continuous Variable Transmission (CVT). All models meet Tier 4A/Stage IIIB emission standards. In the US, the brand also released the new Farmall A series of tractors. In Brazil, Case IH launched new Axial-Flow combines, the Magnum 335 tractor and the Maxxum tractor with extended axle. Sale of the new Austoft 4000 sugar cane harvester was extended to Africa, India, Southeast Asia and China. New Holland Agriculture launched the new T7, T8 and T9 tractors with Tier 4A/Stage IIIB-compliant Selective Catalytic Reduction (SCR) engines, as well as the new Braud 9000L grape harvester. The brand also introduced the Blue Power T7070 Auto Command and T7060 Power Command tractors in Europe and North America. In Europe, the 6-cylinder, 116 to 140 hp, T6000 Elite light-weight tractor, featuring electronic power management with power boost, was also launched. And in North America, the hydrogen-fueled NH2 tractor made its debut. Case Construction launched four new N Series loader backhoes in North America and a range of four Construction King T Series tractor loader backhoes in Europe. Case Constructions 650L crawler dozer was named one of the Top 20 Rollouts of 2009 by Better Roads magazine. Trade press also presented Case Construction with an Excellence in Equipment Engineering award in the loader backhoe category for the 590 Super M+ Series 3 loader backhoe and recognition for the joystick steering in its Case E Series wheel loaders. New Holland Construction launched the first models in its new range of wheeled excavators (the WE150, WE170 and WE190) and introduced the smallest mini-excavator in its range (the new E10SR). US magazine Construction Equipment named the New Holland Construction B Series loader backhoe as one of the Top 100 Products of 2009. In the agricultural equipment segment, the CNH brands also received numerous awards and recognitions during 2010, including the AE50 awards from the American Society of Agricultural and Biological Engineers for commitment to innovation, 7 of which went to New Holland Agriculture and 3 to Case IH. At the Esposizione Internazionale delle Macchine Agricole in Italy, New Holland was awarded the Golden Tractor for Design 2011 for its T7.210 Auto Command and the award for innovation for the FR 9000 forage harvester with IntelliFill system, which also received a Gold Medal at Agrosalon 2010 in Russia. New Holland Agriculture was awarded six innovation awards at the International Agricultural Equipment Fair in Zaragoza, Spain, and two prestigious GOOD DESIGN awards in Chicago. SERVICES CNH Customer Care operates through Customer Service Centers located in its major geographical areas, which represent an important point of contact between CNH brands and their customers. During 2010, CNH focused on strengthening the service offer to customers in Latin America. In Brazil, CNH Customer Care launched a new toll-free service line at Expointer 2010 (one of the main trade shows in Brazil for the agricultural equipment sector) for Information Requests and Complaint Management.
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In Europe and North America, CNH continued in its commitment to supporting the sales network and responding to the service needs of end customers through specific programs for each brand aimed at strengthening the relationship with customers and ensuring rapid service response to minimize downtime and maximize productivity. Case IH continued to provide its Max ServiceSM program to customers in Europe and North America, offering, among other services, the 5 Star program which is specifically designed to give purchasers of a new model a preferred channel to contact the brand. New Holland Agriculture, with its Top Service program, extended the coverage of its Break Down Assistance program to new models of round balers, telehandlers, and T6000 tractors. Case Construction continued to operate its Customer Assistance program and, in Europe, New Holland Construction (through its Customer Service) leveraged the Lead Management program to increase its reach to potential new customers. CNH Technical Service continued to focus on strengthening the ability of dealers to provide high-quality technical support to customers. New electronic repair manuals (e-Tim, or Technical Information Manuals, rolled out in 2010 to dealers for CNH agricultural brands in North America and Europe) were made available to dealers online, providing technicians in the field with repair information in a simple-to-navigate user interface. Feedback has been very positive. Furthermore, new developments in diagnostic technology have enabled the expansion of Electronic Service Tools to include a dynamic data recorder that enables dealer technicians to more quickly diagnose product issues, reducing machine downtime and repair costs. CNH offers financial services in North America, Europe, Brazil and Australia through a comprehensive range of financial products such as dealer and end-customer financing, finance leases, operating leases, credit cards, equipment rental programs and insurance products. Differentiated financial services are offered for both the Agricultural Equipment and Construction Equipment businesses. In North America, the activity is carried out through wholly-owned financial services companies that support the sectors sales through dealer and end-customer financing, as well as medium-to-long term operating leases. CNH Capital also provides financial services to Maserati in the United States. In Europe, end-customer financing is primarily managed through CNH Capital Europe S.a.S., a joint venture with BNP Paribas Group (49.9% owned by CNH and accounted for under the equity method) that operates in Italy, France, Germany, Belgium, the Netherlands, Luxembourg, the UK and Austria. Vendor programs with banking partners also exist in France, Spain, Portugal, Denmark and Poland. Dealer and end-customer financing activities not managed by the joint venture with BNP Paribas are managed through captive financial services subsidiaries. In Brazil, Banco CNH Capital S.A., a captive financial services company, offers both dealer and end-customer financing. For end-customer financing, the company mainly serves as intermediary for funding provided by the Banco Nacional de Desenvolvimento Economico e Social (BNDES), a federally-owned company connected to the Brazilian Ministry of Development, Industry and Foreign Trade. Vendor programs offered jointly with banking partners are also in place. In Australia, CNH offers dealer and end-customer financing through a captive financial services company.
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TRUCKS AND COMMERCIAL VEHICLES

Iveco
HIGHLIGHTS
( million)
2010 8,307 270 240 273 138 214 25,583
2009 7,183 105 (90) 217 84 169 24,917
Net revenues Trading profit/(loss) Operating profit/(loss) (*) Investments in tangible and intangible assets (**) of which capitalized R&D costs Total R&D expenditure (***) No. of employees at year end (numero)
(*) Includes restructuring costs and other unusual income/(expense) (**) Net of vehicles sold under buy-back commitments and leased out (***) Includes capitalized R&D and R&D charged directly to the income statement
COMMERCIAL PERFORMANCE Following the sharp contraction experienced in 2009, demand in Western Europe for trucks and commercial vehicles (Gross Vehicle Weight or GVW 3.5 tons) increased 6.3% to 528,757 units, driven by a recovery in almost all major markets, except Italy (-3.2%), with Spain up 5.9%, the UK 9.2%, France 5.2% and Germany rising 15.7%. The light segment (GVW 3.5-6 tons) saw a 9.0% improvement over 2009, with significant gains in the UK (+14.9%), Germany (+11.1%) and France (+10.3%). Italy was down 2.3%. Demand in the medium segment (GVW 6.1-15.9 tons) contracted 1.5% over 2009. Declines in Spain (-8.9%), the UK (-17.1%), Italy (-11.0%) and France (-15.0%) were partially offset by the strong performance in Germany, which was up 18.4% over the prior year. For the heavy segment (GVW 16 tons), the market improved 3.5% year-over-year driven by a recovery in demand in the second half. Spain (+21.6%), Germany (+22.6%) and the UK (+5.0%) all ended the year up over 2009 levels, while Italy (-3.6%) and France (-1.8%) recorded declines. For Eastern Europe (GVW 3.5 tons), market demand totaled 55,749 units for 2010, increasing 13.5% year-over-year. The light and medium segments again registered a contraction for the full year, down 1.9% and 0.6% respectively, despite improved demand toward the end of the year. Only the heavy segment (GVW 16 tons) recorded a significant reversal in trend, improving 47.0% over the previous year as demand recovered in several key markets: Poland (+45.7%), Romania (+37.3%) and the Czech Republic (+37.6%). For buses, demand in Western Europe, totaling 32,288 units, was down 8.9% over 2009 on the back of declines in all segments: Citybus (-13.5%), Intercity & Coach (-6.0%), Minibus & Truck Derived (-7.2%). Demand for buses decreased in all Western European markets, with the exception of Italy, which was up 23.5% mainly due to sustained demand for urban vehicles.
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Ivecos market share in Western Europe (GVW 3.5 tons) was 13.2% (down 0.4 percentage points vs. 2009). Share in the light segment was substantially unchanged at 13.9% (-0.1 percentage points), with increases in Spain and Germany (+1.7 and +1.4 percentage points, respectively) offset by a decrease in the UK (-1.4 percentage points). Share in Italy remained stable (+0.2 percentage points). In the medium segment, share fell 0.4 percentage points to 23.8% despite increases in Spain (+11.6 percentage points) and Germany (+1.1 percentage points) primarily as a result of an unfavorable market mix. In the heavy segment, Ivecos share was 8.4%, representing a decline of 0.9 percentage points over 2009. Negative performances in Spain (-8.1 percentage points) and Germany (-1.3 percentage points) were partially compensated for by a gain in market share in Italy (+2.1 percentage points). In Eastern Europe, 2010 market share (GVW 3.5 tons) was 13.0% (down 2.2 percentage points vs. 2009), with declines of 3.1 percentage points and 1.4 percentage points in the heavy and medium segments, respectively, and a more contained decrease in the light segment (-0.6 percentage points). Iveco Irisbus market share of 18.6% in Western Europe was substantially in line with 2009. A decline in the Minibus & Truck Derived segment was offset by a gain in the Citybus segment and stable share performance in the Intercity & Coach segment. Commercial Vehicle Market (GVW 3.5 tons) >
2010 104.3 145.3 88.0 61.3 30.1 99.8 528.8
2009 99.1 125.6 80.5 63.4 28.4 100.4 497.4
% change 5.2 15.7 9.2 -3.2 5.9 -0.7 6.3
France Germany UK Italy Spain Rest of Western Europe Western Europe
Commercial Vehicle Market (GVW 3.5 tons) by product >

2010 154.7 48.5 325.6 528.8
2009 149.5 49.2 298.7 497.4
% change 3.5 -1.5 9.0 6.3
Heavy Medium Light Western Europe
In 2010, Iveco delivered a total of 129,630 vehicles, representing a 24.8% increase over the prior year. Growth was recorded in all segments with light vehicles up 25.3%, medium up 51.3% and heavy up 27.6%. Total deliveries for 2010 were, however, still considerably below pre-crisis levels. In Western Europe, 78,326 vehicles were delivered (+17.3%), with increases in France (+22.3%), Germany (+31.9%), Spain (+40.8%) and the UK (+36.9%). In Italy, year-on-year performance was flat (-0.1%). The trend was positive in Eastern Europe, where deliveries were up 41.6%, and very strong in Latin America, increasing 52.4%.
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Iveco delivered a total of 6,780 buses during the year, down 12.8% over 2009. In China, Naveco the 50/50 joint venture with Nanjing Automotive Corporation (controlled by the SAIC Group) sold 32,081 light vehicles in the Power Daily range (up 28.1% over 2009) and 66,566 medium vehicles in the Yuejin range (up 31.4% over 2009). In 2010, SAIC Iveco Hongyan Commercial Vehicles Co. Ltd. (33.5% owned by Iveco), sold 30,509 heavy commercial vehicles, representing a 55.7% increase over the previous year. Including LSVs (for agricultural use), the two joint ventures sold a total of 140,608 units, up from 106,695 in 2009 (+31.8%). Commercial Vehicle Sales by country
2010 18.3 14.7 5.1 21.7 7.4 11.1 78.3 11.5 39.8 129.6 98.6 30.5 258.7
2009 15.0 11.1 3.7 21.7 5.3 10.0 66.8 8.1 29.0 103.9 75.7 19.6 199.2
% change 22.3 31.9 36.9 -0.1 40.8 11.9 17.3 41.6 37.3 24.8 30.3 55.7 29.9
France Germany UK Italy Spain Rest of Western Europe Western Europe Eastern Europe Rest of the World Total Sales Naveco SAIC Iveco Hongyan Grand Total
Commercial Vehicle Sales by product

2010 28.2 18.1 71.9 6.8 4.6 129.6
2009 22.1 12.0 57.4 7.8 4.6 103.9
% change 27.6 51.3 25.3 -12.8 -0.2 24.8
Heavy Medium Light Buses Special vehicles (*) Total Sales

(*) Astra, defence, fire trucks
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Despite the continuation of the global crisis, Iveco demonstrated the resilience of its business, leveraging on the breadth of its product portfolio to achieve solid financial performance in the face of economic uncertainty. The sector continued its product development activities and worked to improve standards of service, including the introduction of structural changes for its distribution and service networks. Iveco strengthened its presence outside Europe through a globalization strategy focused on consolidating alliances in China and increasing activity in Latin America, as well as progressive expansion of its product offering and commercial presence in African and Middle Eastern markets. In China, there was a focus on expansion of the product range to drive growth in the domestic market, as well as supply to international markets. Meanwhile, Latin America has rapidly become one of Ivecos most important markets. With strong economic growth in the region, particularly in Brazil, Iveco had extremely positive commercial performance, improving both volumes and market share with a product offering that already matches its European catalog. There are plans to further expand the range with a new medium-segment vehicle based on a platform developed in China. INNOVATION AND PRODUCTS Innovation and sustainability are two concepts that Iveco considers inseparable and in 2010 the company continued to innovate, developing new methodologies and products that represent major elements in the sectors contribution to sustainable mobility. The companys innovation process is based on a series of well-defined targets that aim to ensure product development and design and production methodologies are oriented toward satisfying customers and the demands of sustainable mobility. Product innovation is centered around four strategic priorities: the environment, safety, productivity and performance. Process innovation, on the other hand, focuses on the following strategic areas: product development processes, virtual analysis, performance measurement and verification, and product-process integration. In 2010, Iveco continued in its research focus on innovative technological solutions to expand its range of eco-friendly, highly energy-efficient vehicles. Today the company offers an extensive and varied portfolio of eco-compatible products that respond to a wide range of specific customer needs. Aware of the fact that there is no single, unique solution to the demands of sustainable transport, Iveco continues to introduce highly-innovative product content that represents a realistic and pragmatic approach to sustainable mobility. Iveco continued development of its CNG range of vehicles, which have always represented an important part of its portfolio. In fact, it is the only manufacturer of trucks and commercial vehicles in the world today to offer such a comprehensive range of CNG vehicles that are fully compliant with the strict EU emissions standards to be introduced. During the year, Iveco continued road testing (in collaboration with major international customers) of hybrid diesel/electric vehicles. This represents yet another innovative technology in which Iveco has invested that provides the perfect balance between transportation needs (payload and performance) and respect for the environment. The tests were conducted with the Daily, both van and minibus versions, and the medium-segment Eurocargo, the first European vehicle of its type and size developed for urban use (with several units already sold in Spain). In the mass transit area, Iveco released new 12-meter and 18-meter versions of the Citelis city bus complete with a new generation hybrid propulsion system. Ivecos latest generation of hybrid technology offers up to 30% savings in fuel consumption in city driving conditions, and a consequent reduction in CO2 emissions, through the utilization of sophisticated control systems and functions that optimize the performance of propulsion systems.
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Ivecos research in alternative fuels and propulsion systems complements the continued development of its range of diesel vehicles which are already fully compliant with EEV limits for polluting emissions, currently the strictest in Europe. Iveco also supports the development of second-generation biofuels, such as Hydrotreated Vegetable Oil (HVO) and Biomass-to-Liquid (BtL), and conducted experiments and tests with these fuels during the year. In the medium and heavy segments in particular, product development was oriented toward continuous improvements in the quality, performance and environmental impact of vehicles. At BAUMA 2010, held in Munich in April, Iveco presented its extensive range of vehicles for the construction sector, which included the international debut of the Astra HHD8, a 50 ton vehicle with significant payload capacity built to handle even the most impenetrable terrain. In Hanover in June, the sector exhibited its range of special vehicles at Interschutz, a trade show dedicated to fire-fighting solutions, where Iveco Magirus presented a first-of-its-kind 60-meter ladder and the new high-performance Dragon 2 specially designed for emergency response at airports. During the same period, Iveco also presented the new Eurocargo Hybrid, a medium-segment vehicle equipped with parallel diesel/electric propulsion system, and Iveco Irisbus premiered the new hybrid Citelis city bus, with serial diesel/electric hybrid engine at Transports Publics 2010 in Paris. At the Hanover Motor Show (IAA) in September, Iveco presented the EcoStralis, the latest evolution of this heavy segment vehicle, whose enhanced powerplant, aerodynamics and electronics make it the most efficient, eco-performing vehicle in its class. Also on exhibit at the IAA was the Iveco Glider, a concept truck that proposes innovative productivity solutions for long-haul use, focusing on two principal aspects: energy efficiency and on-board comfort and functionality. Also at Hanover, Iveco presented the light segment EcoDaily equipped with the integrated Blue&Me TomTom infotainment system. In addition, the first of 10 EcoDaily Electrics was delivered to a major international freight and logistics operator. In Latin America, Iveco added to its product range with the presentation of the new medium-segment Vertis in Brazil in October. This vehicle was engineered in Brazil on a platform developed by Ivecos JV in China and incorporating state-of-the-art technology developed in Europe. Finally, sale of the Genlyon (the on-road heavy vehicle produced by the joint venture between Iveco and SAIC in Chongqing) began to the first export market, Vietnam. The renewed Iveco range attracted several awards again in 2010. One of the most prestigious was Utilitarie de lAnne 2010 awarded to the EcoDaily by the French weekly LArgus de lAutomobile. In China, the light segment Power Daily (produced by the joint venture Naveco) received special mention as Recommended Vehicle for Green Logistics by Green China Magazine and the China Green Logistics Development Promotion Alliance for optimum power coupled with low emissions and reduced consumption. Also, on national innovation day at a ceremony attended by the President of the Italian Republic, Iveco received the Award of Awards, established to promote and support the best in innovation and creativity from Italian companies, universities, public entities, organizations and individuals.
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SERVICES During the year, activity trends in the Customer Services area were mixed. In the first half, there were clear signs of recovery for maintenance activities (compared with particularly weak performance for the same period in 2009), driven by an increase in vehicle mileage in nearly all markets and regions. In the second half, although the overall trend continued upward, performance varied notably from market to market. With regards to spare parts, renewed reliability of supply meant that availability was progressively restored and service returned to pre-crisis levels. The three-year investment plan aimed at increasing flexibility of the logistics infrastructure and processes continued on course. A new automated system installed at the central warehouse in Turin during the year will increase the speed and reliability of spare parts withdrawal. The companys direct presence in Russia, established in 2008, has enabled it to respond rapidly to the recovery in the local market. In collaboration with the Chinese joint ventures, regular spare parts supply flows were set up to ensure service support for Iveco vehicles exported to other markets. The logistics infrastructure and processes will be further enhanced during 2011. In 2010, Technical Assistance activities focused on the VOR Log: a new system for monitoring vehicles being serviced across the network and minimizing vehicle downtime. Now operational throughout Western Europe, this system has been employed throughout the primary network and Customer Services organization to ensure maximum focus and responsiveness to customer support requests. Customer Services also worked on development of a plan to enhance the level of service provided throughout the Iveco network, addressing various aspects of the assistance process with the objective of achieving an overall improvement in customer perception of Iveco quality. The plan was presented and made operational at the beginning of 2011. Also during the year, new features were introduced to OneCall (the call management system supporting the technical assistance provided by the network), providing an improvement in the level of service and increased customer satisfaction. With the inauguration of its first Truck Station in Hanover, Iveco launched a new international initiative for heavy transport. Truck Station service points are equipped to respond to all of a transport operators needs in a single stop, with 24 hour-a-day assistance for both trucks and trailers. Iveco offers financial services in Europe and, through the financial services companies of Fiat Group Automobiles, in Latin America, Poland and China. Since 2005, activity in Western Europe has been managed by Iveco Finance Holdings Limited (IFHL), a joint venture with Barclays Group in which Iveco holds a 49% stake (accounted for under the equity method). This joint venture supports the sectors European sales through the provision of financing to dealers and end customers in France, Germany, Italy and the United Kingdom. In Spain, the activity is managed by Transolver Finance Establecimiento Financiero de Credito S.A., a 50/50 joint venture with the Santander Group (accounted for under the equity method) that offers both dealer and end-customer financing. Iveco also provides medium and long-term rental services in Spain through Transolver Service S.A., a wholly-owned subsidiary (fully consolidated).
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In Switzerland, Austria and Eastern Europe the activity is run by captive financial services companies (fully consolidated). In 2010, business was positively impacted by a modest economic recovery in Western Europe in the second half and recovery, albeit tentative, in Eastern European markets. The economic climate also had an impact on the number of new vehicles financed and on market penetration. For fully-consolidated subsidiaries only, 1,325 new vehicles were financed in 2010, up from 1,118 vehicles for 2009, despite a drop in penetration rate to 27.7% (39.0% in 2009). The total number of vehicles financed in 2010 increased to 3,072 (2,776 in 2009). Including the activities of Iveco Finance Holdings Ltd. and the Spanish joint venture, there was a 4% decrease in the number of new vehicles financed through the sectors Financial Services activities (13,871 in 2010, 14,458 in 2009), with an overall penetration rate of 20.4% (22.4% in 2009). However, total vehicles financed increased 2% (23,038 in 2010, 22,637 in 2009), mainly due to the increase for used vehicles.
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FPT INDUSTRIAL
HIGHLIGHTS
( million)
2010 2,415 65 29 152 58 92 7,707
2009 1,580 (131) (191) 159 63 86 7,858
(*) (**) Includes restructuring costs and other unusual income/(expense) Includes capitalized R&D and R&D charged directly to the income statement
OPERATING PERFORMANCE FPT Industrial produces powertrains for trucks and commercial vehicles, for agricultural and construction equipment, and for marine applications (the Industrial & Marine business line of the former FPT Powertrain Technologies). In 2010, the sector benefited from recoveries in demand in both the truck and commercial vehicles and the agricultural and construction equipment businesses. Revenues totaled 2,415 million for the year, a 52.8% increase over 2009. Sales to customers external to the Fiat Group and to joint ventures accounted for 32.3% of total revenues (32.6% in 2009). FPT Industrial sold 423,000 units, representing a 58.1% increase over 2009. Engine deliveries were mainly to Iveco (34%), CNH (23%) and Sevel (25%), the JV in light commercial vehicles. In addition, the sector sold 66,000 transmissions (+25.0%) and 139,000 axles (+32.1%). INNOVATION AND PRODUCTS The sector designs and manufactures engines for on-road vehicles and off-road industrial and agricultural applications. For Light Commercial Vehicles, FPT Industrial continued development of the F1 family of engines, bringing the F1A and F1C in line with the Euro 5 Light Duty standard. The new Euro 5 version of the F1A, for the Iveco Daily and Fiat Ducato, uses the MultiJet II injection system and has a power output ranging up to 150 hp. A new version with the Start&Stop system is also being developed. Under supply agreements with Daimler-Fuso, the Euro 5 F1C (power output ranging up to 205 hp) will also be supplied for application on a vehicle produced by Mitsubishi Fuso and during the year production began on variants of the F1C for the Japanese and US markets (the US version is compliant with the EPA10 Heavy Duty emissions standard). For off-road applications, development continued on the 3.4 liter F5C engine, with versions up to 55 kW that meet ECE Stage IIIB/EPA Tier 4B emissions limits and up to 86 kW that meet ECE Stage IIIB/EPA Tier 4A emissions limits. Scheduled for launch in the second half of 2011, this engine will use a Common Rail injection
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system, an exhaust gas recycling system (EGR) and after-treatment system consisting of an oxidizing catalyst with particulate filter or a particulate catalyst, depending on engine size. Development is aimed at agricultural and construction equipment applications for CNH, as well as applications specific to the agreement with Perkins Engine Company Limited. For medium and heavy vehicles, development continued on the NEF and Cursor diesel engines, bringing them in line with future Euro 6 emissions limits, and work was completed on development of the NEF 6.7 liter and Cursor 9, 10 and 13 engines for off-road applications with incorporation of Selective Catalytic Reduction (SCR) technology, bringing them in line with Stage IIIB/Tier 4A limits for engines with power output above 130 kW. Development was also initiated to adapt these engines to meet future Stage IV/Tier 4B limits for off-road applications. For CNH, new versions of the Cursor 9 engine with variable-geometry turbo-charger are being developed for Tier 4A off-road applications . Also in the pipeline is the new Cursor 11 engine for trucks, to be launched in the last quarter of 2012, which will be the first Cursor family engine for on-road application to adopt the Common Rail injection system. Also in 2010, development was completed on the new two-stage turbo-charged Cursor 13 for agricultural applications (with power output ranging up to 660 hp). This engine is equipped with a new generation Common Rail system with injection pressure up to 2,200 bars and SCR system for reduction of nitrogen oxide emissions. During the year, production began on the Cursor 9, 10 and 13 Tier 4A and the 6-cylinder NEF Tier 4A SCR engines for CNH, in addition to a Euro 5 6-cylinder NEF for Tata Daewoo. For marine applications, the latest evolution of the C90, the 650 hp Pleasure version, was presented at the Genoa International Boat Show in October 2010 (production launch is scheduled for March 2011). Also of note were the victories chalked in 2010 up by the powerboat RED FPT, fitted with four 600 hp FPT N67 turbo diesel engines, which won the U.I.M Marathon World Cup and the Harmsworth Trophy, the oldest motorboat trophy in the world, as well as the Cowes 100 (over a 100-mile course) and the CowesTorquayCowes (the 178-mile classic).
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FINANCIAL REVIEW FIAT S.P.A.

The following information is based on the 2010 financial statements prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Union, and with regulations implementing Article 9 of Legislative Decree 38/2005. OPERATING PERFORMANCE For 2010, the Parent Company reported net profit of 442 million, a 102 million increase over the prior year. Following is a summary of Fiat S.p.A.s income statement:
( million)
Income from investments Dividends Impairment (losses)/reversals on investments Gains/(losses) on disposals Personnel and operating costs, net of other income Financial income/(expense) PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) FOR THE YEAR
2010 584 428 156 (83) (93) 408 34 442
2009 402 1,260 (858) (42) (14) 346 (6) 340
Income from investments totaled 584 million and consisted of dividends received during the year and net impairment reversals on investments. This represents a 182 million increase over the prior year (402 million in 2009): Dividends of 428 million related to Fiat Finance S.p.A. (180 million), Magneti Marelli S.p.A. (100 million), Fiat Powertrain Technologies S.p.A. (80 million), Fiat Netherlands Holding N.V. (50 million) and Business Solutions S.p.A. (18 million). For 2009, a total 1,260 million in dividends were received from Fiat Group Automobiles S.p.A. (700 million) and Iveco S.p.A. (560 million); Net impairment reversals on investments of 156 million consisted of a partial reversal of impairment losses on Fiat Gestione Partecipazioni S.p.A. (formerly Iveco S.p.A.) in the amount of 260 million, less impairments recognized on the shareholdings in Fiat Powertrain Technologies S.p.A. (80 million), Teksid Aluminum S.r.l. (11 million), Comau S.p.A. (7 million) and Fiat Industrial S.p.A. (6 million). For 2009, net impairment losses on investments of 858 million related to the shareholdings in Iveco S.p.A. (560 million), Fiat Group Automobiles S.p.A. (200 million), Comau S.p.A. (51 million), Teksid Aluminum S.r.l. (31 million) and Fiat Partecipazioni S.p.A. (16 million). Personnel and operating costs, net of other income totaled 83 million, compared with 42 million for 2009. Specifically: Personnel and operating costs of 145 million, representing a 28 million increase over the prior year primarily attributable to non-recurring expenditures associated with the Demerger and higher non-cash costs related to stock options. For 2010, the Company had an average of 144 employees (152 for 2009). Other income of 62 million (75 million for 2009) related principally to services rendered, including by senior managers, to other Group companies, and changes in contract work in progress (contracts between Fiat S.p.A. and Treno Alta Velocit T.A.V. S.p.A., now Rete Ferroviaria Italiana S.p.A.), which are calculated on a percentage completion basis. The 13 million decrease over the previous year was primarily due to lower revenues from contracts with T.A.V. S.p.A. as activities near completion.
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Net financial expense totaled 93 million and consisted of 204 million in net financial charges, primarily for interest on financial debt, which was partially offset by a 111 million gain on the mark-to-market value of two stock-option related equity swaps on Fiat S.p.A. ordinary shares. For 2009, there was net financial expense of 14 million consisting of 131 million in financial charges that was largely offset by a 117 million gain on measurement of the above equity swaps. The 79 million increase over the previous year was due to higher interest payments following an increase in debt associated with the recapitalization of subsidiaries. There was a 34 million credit for income taxes for the year primarily attributable to the contribution of tax losses by Fiat S.p.A. to the tax consolidation for the Groups Italian companies. For 2009, income taxes totaled 6 million and consisted of IRAP (Italian regional income tax) amounts paid in relation to taxable income for 2008, net of the release of deferred tax provisions related to prior years. STATEMENT OF FINANCIAL POSITION Following is a summary of Fiat S.p.A.s statement of financial position:
( million)
Non-current assets of which: Investments Shareholdings to be demerged Working capital NET CAPITAL INVESTED EQUITY NET DEBT
31.12.2010 11,599 11,423 4,977 (101) 16,475 12,704 3,771
31.12.2009 14,049 13,991 (235) 13,814 12,487 1,327
Non-current assets consisted almost entirely of controlling interests in the principal Group companies. Investments decreased 2,568 million over 31 December 2009 as a result of the reclassification of 4,977 million to Shareholdings to be demerged less increases of 2,259 million relating to the recapitalization of subsidiaries, the incorporation and capitalization of shareholdings to be demerged and the net impairment reversals described above. Shareholdings to be demerged, totaling 4,977 million, represents the carrying amount of shareholdings transferred on 1 January 2011 from Fiat S.p.A. to Fiat Industrial S.p.A. pursuant to the Demerger, which consisted of the shareholdings in Fiat Netherlands Holding N.V., Iveco S.p.A., FPT Industrial S.p.A. and Fiat Industrial Finance S.p.A. Working capital was a negative 101 million and consisted of trade receivables/payables, other receivables/payables (from/to tax authorities, employees, etc.), inventoried contract work in progress net of advances, and provisions. The 134 million increase from 31 December 2009 was essentially due to an increase in net receivables/payables from/to subsidiaries for consolidated IRES and an increase in consolidated VAT receivable. Equity totaled 12,704 million at 31 December 2010, a net increase of 217 million over 31 December 2009 principally reflecting profit for the year (442 million), net of dividends distributed (237 million). A more detailed analysis of changes in equity is provided in Fiat S.p.A.s financial statements. Net debt at 31 December 2010 was 3,771 million, up 2,444 million over 31 December 2009 primarily due to the recapitalization of subsidiaries and the incorporation and capitalization of shareholdings to be demerged. Net debt consisted of the following:
( million)
Current financial assets, cash and cash equivalents Current financial liabilities Non-current financial liabilities Net debt to be demerged NET DEBT/(CASH)
31.12.2010 (312) 295 2,561 1,227 3,771
31.12.2009 (646) 157 1,816 1,327
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Current financial assets at 31 December 2010 consisted of cash balances held with the subsidiary Fiat Finance S.p.A. and other assets of 115 million, also receivable from Fiat Finance S.p.A., representing the fair value of the cited equity swaps on Fiat S.p.A. ordinary shares. Current financial liabilities at 31 December 2010 primarily consisted of a short-term loan provided at market rates by Fiat Finance S.p.A. and a 122 million liability relating to exercise of the call option on 5% of Ferrari S.p.A. shares. Non-current financial liabilities consisted almost entirely of loans from Fiat Finance S.p.A., at market rates of interest, which are repayable between 2011 and 2013. Net debt to be demerged consists of 1,440 million in loans from Fiat Finance S.p.A. (repayable in 2011 and 2012) net of current financial assets of 213 million representing current account balances held with Fiat Finance S.p.A. A more detailed analysis of cash flows is provided in Fiat S.p.A.s financial statements. RECONCILIATION BETWEEN EQUITY AND NET PROFIT OF THE PARENT COMPANY AND THE GROUP Pursuant to the Consob Communication of 28 July 2006, the following table provides a reconciliation between the net profit and equity of Fiat S.p.A. for the year ended 31 December 2010 and the comparable items on a consolidated basis (portion attributable to owners of Fiat S.p.A.):
Equity at 31.12.2010 12,704 (16,384) 16,995 (880) (891) 11,544 Net Profit 2010 442 (428) (156) 667 (5) 520 Equity at 31.12.2009 12,487 (13,969) 13,568 (880) (905) 10,301 Net Profit 2009 340 (1,260) 858 (784) 8 (838)
( million)
FINANCIAL STATEMENTS OF FIAT S.P.A. Elimination of carrying amount of interests in consolidated entities and related dividends Elimination of impairment losses (net of reversals) on consolidated entities Equity and profit/(loss) of consolidated entities Consolidation adjustments: Elimination of the gain on disposal of the Fiat brand and other adjustments Elimination of intercompany profit/loss on inventories and fixed assets, dividends paid between subsidiaries and other adjustments CONSOLIDATED FINANCIAL STATEMENTS (PORTION ATTRIBUTABLE TO OWNERS OF FIAT S.P.A.)
MOTION FOR APPROVAL OF THE STATUTORY FINANCIAL STATEMENTS AND ALLOCATION OF 2010 PROFIT
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Dear Shareholders, We hereby submit the Statutory Financial Statements for the year ended 31 December 2010 for your approval and propose that the profit for the year of 441,959,509 be allocated as follows: to the Legal Reserve, 22,097,975; to Shareholders, a dividend of: 0.09 per ordinary share, representing a total of approximately 98.3 million (94.8 million excluding own shares currently held); 0.31 per preference share, representing a total of approximately 32 million; 0.31 per savings share, representing a total of approximately 24.8 million; to Retained Profit, the remaining amount totaling approximately 264.8 million. Payment of the dividend will be from 21 April 2011, with detachment of the coupon on 18 April. The dividend will be payable on shares outstanding at the coupon detachment date.
18 February 2011 On behalf of the Board of Directors /s/ John Elkann John Elkann CHAIRMAN
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FIAT GROUP CONSOLIDATED FINANCIAL STATEMENTS

at 31 December 2010
138 139 140 142 143 144 145 146 147 269 298 Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Statement of Changes in Consolidated Equity Consolidated Income Statement pursuant to Consob Resolution No. 15519 of 27 July 2006 Consolidated Statement of Financial Position pursuant to Consob Resolution No. 15519 of 27 July 2006 Consolidated Statement of Cash Flows pursuant to Consob Resolution No. 15519 of 27 July 2006 Notes to the Consolidated Financial Statements Appendix I Fiat Companies Appendix II Information required under Article 149-duodecies of the Regolamento Emittenti issued by Consob Attestation in respect of the Consolidated Financial Statements under Article 154-bis of Legislative Decree 58/98
299
138
FIAT GROUP CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010
INCOME STATEMENT
CONSOLIDATED INCOME STATEMENT

( million)
(*)
Net revenues Cost of sales Selling, general and administrative costs Research and development costs Other income (expenses) TRADING PROFIT/(LOSS) Gains (losses) on the disposal of investments Restructuring costs Other unusual income (expenses) OPERATING PROFIT/(LOSS) Financial income (expenses) Result from investments: Share of the profit/(loss) of investees accounted for using the equity method Other income (expenses) from investments PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) FROM CONTINUING OPERATIONS Post tax profit/(loss) from Discontinued Operations PROFIT/(LOSS) PROFIT/(LOSS) ATTRIBUTABLE TO: Owners of the parent Non-controlling interests PROFIT/(LOSS) FROM CONTINUING OPERATION ATTRIBUTABLE TO: Owners of the parent Non-controlling interests
Note (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
(11) (A)
2010 35,880 30,718 2,956 1,013 (81) 1,112 12 118 (14) 992 (400) 114 120 (6) 706 484 222 378 600
2009 (**) 32,684 28,252 2,673 1,010 (13) 736 3 168 (193) 378 (352) 77 65 12 103 448 (345) (503) (848)
520 80
(838) (10)
179 43
(374) 29
(in )
BASIC EARNINGS/(LOSS) PER ORDINARY AND PREFERENCE SHARE BASIC EARNINGS/(LOSS) PER SAVINGS SHARE DILUTED EARNINGS/(LOSS) PER ORDINARY AND PREFERENCE SHARE DILUTED EARNINGS/(LOSS) PER SAVINGS SHARE
(*)
(13) (13) (13) (13)
0.410 0.565 0.409 0.564
(0.677) (0.677) (0.677) (0.677)
Pursuant to Consob Resolution No. 15519 of 27 July 2006, the effects of related party transactions on the consolidated income statement are presented in the specific Income Statement schedule provided in the following pages and are further described in Note 34. (**) In accordance with IFRS 5 the figures for 2009 have been reclassified. (A) Post tax profit/(loss) from Discontinued Operations is presented in the section Assets and Liabilities held for sale and Discontinued Operations.
STATEMENT OF COMPREhENSIvE INCOME
139
CONSOLIDATED STATEMENT OF COMPREhENSIvE INCOME

( million)
Note
PROFIT/(LOSS) (A) Gains/(Losses) on cash flow hedges Gains/(Losses) on fair value of available-for-sale financial assets Gains/(Losses) on exchange differences on translating foreign operations Share of other comprehensive income of entities accounted for using the equity method Income tax relating to components of Other comprehensive income TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX (B) TOTAL COMPREHENSIVE INCOME (A)+(B) TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent Non-controlling interests (23) (23) (23) (23) (23)
2010 600 171 (3) 769 100 3 1,040 1,640
2009 (848) 408 3 509 (47) (51) 822 (26)
1,503 137
(34) 8
140
STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(*)
( million)
Note (14) (15) (16)
At 31 December 2010 4,350 9,601 1,653 1,465 188 20 1,678 17,302 4,443 2,259 2,866 5,626 353 1,528 735 34 185 516 11,967 29,777 34,854 (8,491) 73,442 64,588
At 31 December 2009 7,199 12,945 2,159 1,884 275 457 144 2,580 25,484 8,748 3,649 12,695 674 2,778 899 46 217 636 12,226 41,669 82 67,235 60,149
ASSETS Intangible assets Property, plant and equipment Investments and other financial assets: Investments accounted for using the equity method Other investments and financial assets Leased assets Defined benefit plan assets Deferred tax assets Total Non-current assets Inventories Trade receivables Receivables from financing activities Financial receivables from Discontinued Operations Current tax receivables Other current assets Current financial assets: Current investments Current securities Other financial assets Cash and cash equivalents Total Current assets Assets held for sale and Discontinued Operations Elimination of financial receivables and debt due from/payable to Discontinued Operations TOTAL ASSETS Total assets adjusted for asset-backed financing transactions
(*)
(17) (11) (18) (19) (19) (19) (19)
(20) (21) (22) (A) (A)
Pursuant to Consob Resolution No. 15519 of 27 July 2006, the effects of related party transactions on the consolidated Statement of Financial Position are presented in the specific Statement of financial position schedule provided in the following pages and are further described in Note 34. (A) Assets held for sale and Discontinued Operations are presented in the section Assets and Liabilities held for sale and Discontinued Operations.
141

(CONTINUED)
( million)
Note (23)
At 31 December 2010 12,461 11,544 917 4,924 1,704 3,220 20,804 533 2,865 17,406 255 9,345 181 135 3,908 29,920 (8,491) 73,442 64,588
At 31 December 2009 11,115 10,301 814 8,432 3,447 4,985 28,527 7,086 21,441 464 12,295 377 152 5,865 8 67,235 60,149
EQUITY AND LIABILITIES Equity: Issued capital and reserves attributable to owners of the parent Non-controlling interests Provisions: Employee benefits Other provisions Debt: Asset-backed financing Debt payable to Discontinued Operations Other debt Other financial liabilities Trade payables Current tax payables Deferred tax liabilities Other current liabilities Liabilities held for sale and Discontinued Operations Elimination of financial receivables and debt due from/payable to Discontinued Operations TOTAL EQUITY AND LIABILITIES Total equity and liabilities adjusted for asset-backed financing transactions
(24) (25) (26)
(21) (27) (11) (28) (A) (A)
(A) Liabilities held for sale and Discontinued Operations are presented in the section Assets and Liabilities held for sale and Discontinued Operations.
142
STATEMENT OF CASh FLOWS
CONSOLIDATED STATEMENT OF CASh FLOWS

(*)
( million)
A) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR B) CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES DURING THE YEAR: Profit/(loss) from Continuing Operations Amortisation and depreciation (Gains) losses on disposal of: Property plant and equipment and intangible assets Investments Other non-cash items Dividends received Change in provisions Change in deferred taxes Change in items due to buy-back commitments Change in working capital Cash flows from (used in) the operating activities of Discontinued Operations TOTAL C) CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: Investments in: Property plant and equipment and intangible assets Investments in consolidated subsidiaries Other investments Proceeds from the sale of: Property plant and equipment and intangible assets Investments in consolidated subsidiaries Other investments Net change in receivables from financing activities Change in current securities Other changes Cash flows from (used in) the investing activities of Discontinued Operations TOTAL D) CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: New issuance of bonds Repayment of bonds Issuance of other medium-term borrowings Repayment of other medium-term borrowings Net change in other financial payables and other financial assets/liabilities Increase in share capital Dividends paid Cash flows from (used in) the financing activities of Discontinued Operations TOTAL Translation exchange differences E) TOTAL CHANGE IN CASH AND CASH EQUIVALENTS F) CASH AND CASH EQUIVALENTS AT END OF THE YEAR of which: Cash and cash equivalents included as Assets held for sale and Discontinued Operations G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR AS REPORTED
(*)
Note (22)
2010 12,226 222 2,186 (3) (12) 89 62 283 (199) 4 941 2,537 6,110 (2,864) (162) (121) 46 11 (594) 24 150 (443) (3,953) (1,195) 1,210 (1,016) 66 1 (239) 2,084 911 359 3,427 15,653 3,686 11,967
2009 (**) 3,683 (345) 2,036 (17) (8) 114 35 50 (56) (23) 1,530 1,285 4,601 (2,684) (3) (97) 77 16 3 (238) (44) 1 410 (2,559) 4,200 (168) 2,656 (608) (493) 13 (27) 708 6,281 220 8,543 12,226 12,226
(36)
(36) (A)
(A)
(A)
(22) (22)
Pursuant to Consob Resolution No. 15519 of 27 July 2006, the effects of related party transactions on the consolidated statement of cash flows are presented in the specific Statement of Cash Flows schedule provided in the following pages. (**) In accordance with IFRS 5 the figures for 2009 have been reclassified. (A) Cash flows from (used in) the operating activities, the investing activities and the financing activities of Discontinued Operations are presented in the section Assets and Liabilities held for sale and Discontinued Operations.
STATEMENT OF ChANGES IN CONSOLIDATED EQUITY
143
STATEMENT OF ChANGES IN CONSOLIDATED EQUITY

( million) Share capital Treasury shares Capital reserves Earning reserves Cash flow hedge reserve Cumulative translation adjustment reserve Available for sale financial assets reserve Cumulative share of OCI of entities consolidated under the equity method Noncontrolling interests Total
At 1 January 2009 Changes in equity for 2009 Capital increase Dividends accrued or distributed Increase in the reserve for share-based payments Total comprehensive income for the period Other changes At 31 December 2009 Changes in equity for 2010 Capital increase Dividends distributed Purchase and sale of shares in subsidiaries from/to non-controlling interests Increase in the reserve for share-based payments Total comprehensive income for the period Other changes At 31 december 2010
6,377
(657)
682
4,661
(568)
(103)
(1)
(37)
747
11,101
6,377
(657)
682
(25) (1) (838) 7 3,804
349 (219)
496 393
3 2
(44) (81)
13 (2) 8 48 814
13 (27) (1) (26) 55 11,115
6,377
(657)
(81) 601
(237) 17 520 41 4,145
174 (45)
718 1,111
(4) (2)
95 14
1 (2) (38) 137 5 917
1 (239) (119) 17 1,640 46 12,461
144
INCOME STATEMENT
PURSUANT TO CONSOB RESOLUTION NO. 15519 OF 27 JULY 2006
CONSOLIDATED INCOME STATEMENT

pursuant to Consob Resolution No. 15519 of 27 July 2006
( million)
Net revenues Cost of sales Selling, general and administrative costs Research and development costs Other income (expenses) TRADING PROFIT/(LOSS) Gains (losses) on the disposal of investments Restructuring costs Other unusual income (expenses) OPERATING PROFIT/(LOSS) Financial income (expenses) Result from investments: Share of the profit or loss of investees accounted for using the equity method Other income (expenses) from investments PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) FROM CONTINUING OPERATIONS Post tax profit/(loss) from Discontinued Operations PROFIT/(LOSS) PROFIT/(LOSS) ATTRIBUTABLE TO: Owners of the parent Non-controlling interests PROFIT/(LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO: Owners of the parent Non-controlling interests
Note (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
(11) (A)
Total 35,880 30,718 2,956 1,013 (81) 1,112 12 118 (14) 992 (400) 114 120 (6) 706 484 222 378 600
2010 of which Related parties (Note 34) 2,586 3,742 139 8 34 188 118 120 (2)
Total 32,684 28,252 2,673 1,010 (13) 736 3 168 (193) 378 (352) 77 65 12 103 448 (345) (503) (848)
2009 (*) of which Related parties (Note 34)) 1,811 2,977 111 29 205 74 65 9
520 80
(838) (10)
179 43
(374) 29
(*) In accordance with IFRS 5 the figures for 2009 have been reclassified. (A) Post tax profit/(loss) from Discontinued Operations is presented in the section Assets and Liabilities held for sale and Discontinued Operations.
145

( million)
Note (14) (15) (16) (17) (11) (18) (19) (19) (19) (19) (20) (21) (22) (A) (A)
At 31 December 2010 of which Related parties Total (Note 34) 4,350 9,601 1,653 1,465 188 20 1,678 17,302 4,443 2,259 2,866 5,626 353 1,528 735 34 185 516 11,967 29,777 34,854 (8,491) 73,442 12,461 11,544 917 4,924 1,704 3,220 20,804 533 2,865 17,406 255 9,345 181 135 3,908 29,920 (8,491) 73,442 1,557 1,465 92 28 459 129 5.626 76 65 -
At 31 December 2009 of which Related parties Total (Note 34) 7,199 12,945 2,159 1,884 275 457 144 2,580 25,484 8,748 3,649 12,695 674 2,778 899 46 217 636 12,226 41,669 82 67,235 11,115 10,301 814 8,432 3,447 4,985 28,527 7,086 21,441 464 12,295 377 152 5,865 8 67,235 1,979 1,884 95 10 595 120 65 52 52 651 59 -
ASSETS Intangible assets Property, plant and equipment Investments and other financial assets: Investments accounted for using the equity method Other investments and financial assets Leased assets Defined benefit plan assets Deferred tax assets Total Non-current assets Inventories Trade receivables Receivables from financing activities Financial receivables from Discontinued Operations Current tax receivables Other current assets Current financial assets: Current investments Current securities Other financial assets Cash and cash equivalents Total Current assets Assets held for sale and Discontinued Operations Elimination of financial receivables and debt due from/payable to Discontinued Operations TOTAL ASSETS EQUITY AND LIABILITIES Equity: Issued capital and reserves attributable to owners of the parent Non-controlling interests Provisions: Employee benefits Other provisions Debt: Asset-backed financing Debt payable to Discontinued Operations Other debt Other financial liabilities Trade payables Current tax payables Deferred tax liabilities Other current liabilities Liabilities held for sale and Discontinued Operations Elimination of financial receivables and debt due from/payable to Discontinued Operations TOTAL EQUITY AND LIABILITIES
(23)
(24) (25) (26)
(21) (27) (11) (28) (A) (A)
47 21 26 3,144 101 2.865 178 1,040 87 -
80 30 50 1,144 486 658 49 886 181 1 -
(A) Assets and Liabilities held for sale and Discontinued Operations are presented in the section Assets and Liabilities held for sale and Discontinued Operations.
146
STATEMENT OF CASh FLOWS

CONSOLIDATED STATEMENT OF CASh FLOWS

( million)
A) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR B) CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES DURING THE YEAR: Profit/(loss) from Continuing Operations Amortisation and depreciation (Gains) losses on disposal of: Property, plant and equipment and intangible assets Investments Other non-cash items Dividends received Change in provisions Change in deferred taxes Change in items due to buy-back commitments Change in working capital Cash flows from (used in) the operating activities of Discontinued Operations TOTAL C) CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: Investments in: Property, plant and equipment and intangible assets Investments in consolidated subsidiaries Other investments Proceeds from the sale of: Property, plant and equipment and intangible assets Investments in consolidated subsidiaries Other investments Net change in receivables from financing activities Change in current securities Other changes Cash flows from (used in) the investing activities of Discontinued Operations TOTAL D) CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: New issuance of bonds Repayment of bonds Issuance of other medium-term borrowings Repayment of other medium-term borrowings Net change in other financial payables and other financial assets/liabilities Increase in share capital Dividends paid Cash flows from (used in) the financing activities of Discontinued Operations TOTAL Translation exchange differences E) TOTAL CHANGE IN CASH AND CASH EQUIVALENTS F) CASH AND CASH EQUIVALENTS AT END OF THE YEAR of which: Cash and cash equivalents included as Assets held for sale and Discontinued Operations G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR AS REPORTED
Note (22)
Total 12,226 222 2,186 (3) (12) 89 62 283 (199) 4 941 2,537 6,110 (2,864) (162) (121) 46 11 (594) 24 150 (443) (3,953) (1,195) 1,210 (1,016) 66 1 (239) 2,084 911 359 3,427 15,653 3,686 11,967
2010 of which Related parties 17 62 (9) (9) 108
Total 3,683 (345) 2,036 (17) (8) 114 35 50 (56) (23) 1,530 1,285 4,601 (2,684) (3) (97) 77 16 3 (238) (44) 1 410 (2,559) 4,200 (168) 2,656 (608) (493) 13 (27) 708 6,281 220 8,543 12,226 12,226
2009 (*) of which Related parties 6 35 8 (172)
(36)
(36) (A)
(107)
(56) (71)
(A)
(66) (67)
71
(A)
(22) (22)
(*) In accordance with IFRS 5 the figures for 2009 have been reclassified. (A) Cash flows from (used in) the operating activities, the investing activities and the financing activities of Discontinued Operations are presented in the section Assets and Liabilities held for sale and Discontinued Operations.
NOTES
147
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS

PRINCIPAL ACTIvITIES Fiat S.p.A. is a corporation organised under the laws of the Republic of Italy. Fiat S.p.A. and its subsidiaries (the Group) operate in approximately 50 countries. Until 31 December 2010, the Group was involved principally in the manufacture and sale of automobiles, agricultural and construction equipment and commercial vehicles. It also manufactured other products and systems, principally engines, transmission systems, automotive-related components, metallurgical products and production systems. In addition, the Group has long been involved in certain other sectors, including publishing and communications, which represent a small portion of its activities. Following the partial and proportional demerger of Fiat S.p.A. to Fiat Industrial S.p.A. described below, from 1 January 2011 the Group will only engage in the manufacture and sale of automobiles, engines, transmission systems, automotive-related components, metallurgical products and production systems and publishing and communications. The Group has its head office in Turin, Italy. The consolidated financial statements are presented in euros, that is the currency of the primary economic environment in which the Group operates. FIAT DEMERGER AND DISCONTINUED OPERATIONS During 2010, the Group initiated and completed a strategic project to separate the Agricultural and Construction Equipment (CNH sector) and Trucks and Commercial Vehicles (Iveco sector) activities, as well as the Industrial & Marine business line of FPT Powertrain Technologies (FPT Industrial sector), from the Automobile and Automobile-related Components and Production Systems activities, which include the sectors Fiat Group Automobiles, Maserati, Ferrari, Magneti Marelli, Teksid, Comau and the Passenger & Commercial Vehicles business line of FPT Powertrain Technologies (Fiat Powertrain). The separation of those businesses, in the form of their demerger from Fiat S.p.A. and transfer to Fiat Industrial S.p.A. (the Demerger a Scissione Parziale Proporzionale pursuant to Article 2506-bis of the Italian Civil Code), resulted in the creation of the Fiat Industrial Group (consisting of CNH, Iveco and FPT Industrial) on 1 January 2011. From the same date, Fiat Group Post-Demerger is comprised of Fiat Group Automobiles, Maserati, Ferrari, Fiat Powertrain, Magneti Marelli, Teksid and Comau. The principal phases leading up to completion of the Demerger were as follows: On 21 April 2010, Fiat S.p.A. announced the intended Demerger. On 21 July 2010, the Board of Directors of Fiat S.p.A. approved the Demerger and drafted the Demerger Plan: the proposed transaction consists in the transfer by Fiat S.p.A. of a portion of its assets in particular, shareholdings in the Agricultural and Construction Equipment, Trucks and Commercial Vehicles and Industrial and Marine powertrain businesses and a net debt position with Fiat Finance S.p.A. (the Fiat Groups central treasury) to Fiat Industrial S.p.A. (a newly incorporated company). The Demerger also includes the transfer of the shareholding in Fiat Industrial Finance S.p.A., a company established to perform centralised treasury activities for the Fiat Industrial Group. The net assets to be transferred amounted to 3,750 million at 30 June 2010 (which served as the reference date for the preparation of the Demerger Plan). On 16 September 2010, the Shareholders of Fiat S.p.A. approved the Demerger Plan in an extraordinary general meeting, subject to admission of all three classes of shares in Fiat Industrial S.p.A. to listing on the Mercato Telematico Azionario (MTA) by Borsa Italiana and a decision from Consob, pursuant to Article 57(1)(d) of the Issuer Regulations, that the Information Document and subsequent updates pursuant to Article 57 is equivalent to a listing prospectus. Similarly, on 17 September 2010 the shareholders of Fiat Industrial S.p.A. approved the transaction in an extraordinary general meeting.
148
NOTES
Following receipt of the above authorisations in December 2010, the deed of Demerger was executed on 16 December 2010, with legal effect from 1 January 2011. As a result of the Demerger, on 1 January 2011 the net assets of Fiat S.p.A. were reduced by 3,750 million (including a 1,913 million reduction in share capital) and the net assets of Fiat Industrial S.p.A. were increased by an equivalent amount, corresponding to the value of net assets referred to above. Consequently, Shareholders received, for no consideration, one share in Fiat Industrial S.p.A. for each share of the same class already held in Fiat S.p.A. Since 3 January 2011, Fiat S.p.A. and Fiat Industrial S.p.A. have been quoted separately on the MTA and operate as independent listed companies, each with its own management and Board of Directors. As the transaction took effect on 1 January 2011, the consolidated financial statements for the year ended 31 December 2010 relate to Fiat Group Pre-Demerger (hereinafter the Fiat Group). Moreover, in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as the Demerger became highly probable in December (when the above authorisations were obtained), all businesses to be transferred to the new Fiat Industrial Group are classified and presented as Discontinued Operations in these consolidated financial statements. This presentation has resulted in the following: For both 2010 and 2009 (the latter presented for comparative purposes), all revenues and costs relating to Discontinued Operations are reported in the Income Statement as Profit/(Loss) from Discontinued Operations. All current and non-current assets relating to Discontinued Operations at December 2010 have been reclassified in the Statement of Financial Position as Assets Held for Sale and Discontinued Operations. All liabilities (excluding equity) relating to Discontinued Operations at December 2010 have been reclassified in the Statement of Financial Position as Liabilities Held for Sale and Discontinued Operations. For both 2010 and 2009 (the latter presented for comparative purposes), all cash flows arising from Discontinued Operations have been presented in the Statement of Cash Flows as separate line items under cash flows from operating, investing and financing activities. In other words, the Fiat Group consolidated financial statements are based on the full consolidation of subsidiaries that are to remain within the scope of operations of Fiat Group Post-Demerger (i.e. Continuing Operations) and those that will be transferred to Fiat Industrial Group (i.e., Discontinued Operations), with the separate presentation for each group of activities. For additional detail of items presented under Discontinued Operations in the Consolidated Statements of Income, Financial Position and Cash Flows, reference should be made to the section Assets and liabilities held for sale and Discontinued Operations. Furthermore, given the significance of the group of activities classified as Discontinued Operations, it was considered appropriate, for each individual line item, to provide the same level of information for Discontinued Operations as required by the accounting standards for Continuing Operations. Additionally, as the Demerger is considered a business combination involving entities or businesses under common control, it is outside the scope of application of IFRS 3 and IFRIC 17. Accordingly, in the 2011 consolidated financial statements for Fiat S.p.A. Post-Demerger and Fiat Industrial S.p.A., the opening position for items in the statement of financial position will be equivalent to the carrying amounts reported in the consolidated financial statements of Fiat Group prior to the Demerger.
149
SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The 2010 consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (the IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Union, and with the provisions implementing article 9 of Legislative Decree no. 38/2005. The designation IFRS also includes all valid International Accounting Standards (IAS), as well as all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly the Standing Interpretations Committee (SIC). The financial statements are prepared under the historical cost convention, modified as required for the valuation of certain financial instruments, as well as on the going concern assumption. In this respect, despite operating in a continuingly difficult economic and financial environment, the Groups assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist about its ability to continue as a going concern, in view also of the measures already undertaken by the Group to adapt to the changed levels of demand and the Groups industrial and financial flexibility. Format of the financial statements The Group presents an income statement using a classification based on the function of expenses (otherwise known as the cost of sales method), rather than based on their nature, as this is believed to provide information that is more relevant. The format selected is that used for managing the business and for management reporting purposes and is consistent with international practice in the automotive sector. In this income statement, in which the classification of expenses is based on their function, the Trading profit/(loss) is reported specifically as part of Operating profit/(loss) and separate from the income and expense resulting from the non-recurring operations of the business, such as Gains (losses) on the sale of investments, Restructuring costs and any Other income (expenses) defined as unusual and of a similar nature to these items. By doing this, it is believed that the Groups actual performance from normal trading operations may be measured in a better way, while disclosing specific details of unusual income and expenses. Consequently, the definition of unusual transaction adopted by the Group differs from that provided in the Consob Communication of 27 July, 2006, under which unusual and abnormal transactions are those which, because of their significance or importance, the nature of the parties involved, the object of the transaction or the methods of determining the transfer price or the timing of the event (close to the year end), may give rise to doubts regarding the accuracy/ completeness of the information in the financial statements, conflicts of interest, the safeguarding of an entitys assets or the protection of non-controlling interests. For the Statement of financial position, a mixed format has been selected to present current and non-current assets and liabilities, as permitted by IAS 1. In more detail, both companies carrying out industrial activities and those carrying out financial activities are consolidated in the Groups financial statements. The investment portfolios of financial services companies are included in current assets, as the investments will be realised in their normal operating cycle. Financial services companies, though, obtain funds only partially from the market: the remaining are obtained from Fiat S.p.A. through the Groups treasury companies (included in industrial companies), which lend funds both to industrial Group companies and to financial services companies as the need arises. This financial service structure within the Group means that any attempt to separate current and non-current debt in the consolidated Statement of financial position cannot be meaningful. Suitable disclosure of the due dates of liabilities is moreover provided in the notes. The Statement of Cash Flows is presented using the indirect method. In connection with the requirements of the Consob Resolution No. 15519 of 27 July 2006 as to the format of the financial statements, specific supplementary Income Statement, Statement of Financial Position and Statement of Cash Flows formats have been added for related party transactions so as not to compromise an overall reading of the statements.
150
NOTES
Basis of consolidation Subsidiaries Subsidiaries are enterprises controlled by the Group, as defined in IAS 27 Consolidated and Separate Financial Statements. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are combined in the consolidated financial statements from the date that control commences until the date that control ceases. Non-controlling interests in the net assets of consolidated subsidiaries and non-controlling interests in the profit or loss of consolidated subsidiaries are presented separately from the interests of the owners of the parent in the consolidated statement of financial position and income statement respectively. Losses applicable to non-controlling interests which exceed the minoritys interests in the subsidiarys equity are allocated against the non-controlling interests. Changes in the interests in a subsidiary which do not lead to the acquisition or loss of control are recognised directly in equity. Subsidiaries that are either dormant or generate a negligible volume of business, are not consolidated. Their impact on the Groups assets, liabilities, financial position and profit/(loss) attributable to the owners of the parent is immaterial. Jointly controlled entities Jointly controlled entities are enterprises over whose activities the Group has joint control, as defined in IAS 31 Interests in Joint Ventures. The consolidated financial statements include the Groups share of the earnings of jointly controlled entities using the equity method from the date that joint control commences until the date that joint control ceases. Associates Associates are enterprises over which the Group has significant influence, but not control or joint control, over the financial and operating policies, as defined in IAS 28 Investments in Associates. The consolidated financial statements include the Groups share of the earnings of associates using the equity method, from the date that significant influence commences until the date that significant influence ceases. When the Groups share of losses of an associate, if any, exceeds the carrying amount of the associate in the Groups balance sheet, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate. Investments in other companies Investments in other companies that are available-for-sale financial assets are measured at fair value, when this can be reliably determined. Gains or losses arising from changes in fair value are recognised directly in other comprehensive income until the assets are sold or are impaired, when the cumulative gains and losses previously recognised in equity are recognised in the income statement of the period. Investments in other companies for which fair value is not available are stated at cost less any impairment losses. Dividends received from these investments are included in Other income (expenses) from investments. Transactions eliminated on consolidation All significant intragroup balances and transactions and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealised gains and losses arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Groups interest in those entities.
151
Foreign currency transactions Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rate prevailing at that date. Exchange differences arising on the settlement of monetary items or on reporting monetary items at rates different from those at which they were initially recorded during the period or in previous financial statements, are recognised in the income statement. Consolidation of foreign entities All assets and liabilities of foreign consolidated companies with a functional currency other than the Euro are translated using the exchange rates in effect at the balance sheet date. Income and expenses are translated at the average exchange rate for the period. Translation differences resulting from the application of this method are classified as equity until the disposal of the investment. Average rates of exchange are used to translate the cash flows of foreign subsidiaries in preparing the consolidated statement of cash flows. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are recorded in the relevant functional currency of the foreign entity and are translated using the period end exchange rate. The principal exchange rates used in 2010 and 2009 to translate into Euros the financial statements prepared in currencies other than the Euro were as follows:
Average 2010 1.326 0.858 1.380 3.995 2.331 5.183 At 31 December 2010 1.336 0.861 1.250 3.975 2.218 5.303 Average 2009 1.395 0.891 1.510 4.328 2.767 5.201 At 31 December 2009 1.441 0.888 1.484 4.105 2.511 5.473
U.S. dollar Pound sterling Swiss franc Polish zloty Brazilian real Argentine peso
In the context of IFRS First-time Adoption, the cumulative translation difference arising from the consolidation of foreign operations outside the Euro zone was set at nil, as permitted by IFRS 1; gains or losses on subsequent disposal of any foreign operation only include accumulated translation differences arising after 1 January 2004. Business Combinations Business combinations are accounted for by applying the acquisition method. Under this method, the consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred and liabilities assumed by the Group and the equity interests issued in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at that date, except for the following which are measured in accordance with the relevant standard: deferred tax assets and liabilities; assets and liabilities relating to employee benefit arrangements; liabilities or equity instruments relating to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree; assets (or disposal groups) that are classified as held for sale.
152
NOTES
Goodwill is measured as the excess of the aggregate of the consideration transferred in the business combination, the amount of any non-controlling interest in the acquiree and the fair value of the acquirers previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirers previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interest is initially measured either at fair value or at the non-controlling interests proportionate share of the acquirees identifiable net assets. The selection of the measurement method is made on a transaction-by-transaction basis. Any contingent consideration arrangement in the business combination is measured at its acquisition-date fair value and included as part of the consideration transferred in the business combination in order to determine goodwill. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are recognised retrospectively, with corresponding adjustments to goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which may not exceed one year from the acquisition date) about facts and circumstances that existed as of the acquisition date. When a business combination is achieved in stages, the Groups previously held equity interest in the acquiree is remeasured at its acquisition-date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Changes in the equity interest in the acquiree that have been recognised in Other comprehensive income in prior reporting periods are reclassified to profit or loss as if the interest had been disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete in the consolidated financial statements. Those provisional amounts are adjusted during the measurement period to reflect new information obtained about facts and circumstances that existed at the acquisition date which, if known, would have affected the amounts recognised at that date. Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous version of IFRS 3. Intangible assets Goodwill Goodwill arising on business combinations is initially measured at cost as established at the acquisition date, as defined in the above paragraph. Goodwill is not amortised, but is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. On disposal of part or whole of a business which was previously acquired and which gave rise to the recognition of goodwill, the remaining amount of the related goodwill is included in the determination of the gain or loss on disposal. In the context of IFRS First-time Adoption, the Group elected not to apply IFRS 3 Business Combinations retrospectively to the business combinations that occurred before 1 January 2004; as a consequence, goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous Italian GAAP amounts, subject to impairment testing at that date.
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Development costs Development costs for vehicle project production (cars, trucks, buses, agricultural and construction equipment, related components, engines, and production systems) are recognised as an asset if and only if both of the following conditions are met: that development costs can be measured reliably and that technical feasibility of the product, volumes and pricing support the view that the development expenditure will generate future economic benefits. Capitalised development costs include all direct and indirect costs that may be directly attributed to the development process. Capitalised development costs are amortised on a systematic basis from the start of production of the related product over the products estimated average life, as follows:
N of years Cars 4 - 5 Trucks and Buses Agricultural and Construction Equipment Engines Components and Production Systems 8 5 8 - 10 3-5
All other development costs are expensed as incurred. Intangible assets with indefinite useful lives Intangible assets with indefinite useful lives consist principally of acquired trademarks which have no legal, contractual, competitive, economic, or other factors that limit their useful lives. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually or more frequently whenever there is an indication that the asset may be impaired. Other intangible assets Other purchased and internally-generated intangible assets are recognised as assets in accordance with IAS 38 Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the costs of the asset can be determined reliably. Such assets are measured at purchase or manufacturing cost and amortised on a straight-line basis over their estimated useful lives, if these assets have finite useful lives. Other intangible assets acquired as part of the acquisition of a business are capitalised separately from goodwill if their fair value can be measured reliably. Property, plant and equipment Cost Property, plant and equipment are stated at acquisition or production cost and are not revalued. Subsequent expenditures and the cost of replacing parts of an asset are capitalised only if they increase the future economic benefits embodied in that asset. All other expenditures are expensed as incurred. When such replacement costs are capitalised, the carrying amount of the parts that are replaced is recognised in the income statement. Property, plant and equipment also include vehicles sold with a buy-back commitment, which are recognised according to the method described in the paragraph Revenue recognition if the buy-back commitment originates from the Trucks and Commercial Vehicles sector.
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Assets held under finance leases, which provide the Group with substantially all the risks and rewards of ownership, are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the financial statement as a debt. The assets are depreciated by the method and at the rates indicated below. Leases where the lessor retains substantially all the risks and rewards of ownership of the assets are classified as operating leases. Operating lease expenditures are expensed on a straight-line basis over the lease terms. Depreciation Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Depreciation rates 2.5% - 10% 5% - 20% 15% - 25% 10% - 33%
Buildings Plant and machinery Industrial and commercial equipment Other assets
Land is not depreciated. Leased assets Leased assets include vehicles leased to retail customers by the Groups leasing companies under operating lease arrangements. They are stated at cost and depreciated at annual rates of between 20% and 33%. When such assets cease to be rented and become held for sale, the Group reclassifies their carrying amount to Inventories. Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets (as defined under IAS 23 Borrowing Costs), which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised and amortised over the useful life of the class of assets to which they refer. All other borrowing costs are expensed when incurred. Impairment of assets The Group reviews, at least annually, the recoverability of the carrying amount of intangible assets (including capitalised development costs) and property, plant and equipment, in order to determine whether there is any indication that those assets have suffered an impairment loss. If indications of impairment are present, the carrying amount of the asset is reduced to its recoverable amount. An intangible asset with an indefinite useful life is tested for impairment annually or more frequently, if there is an indication that the asset may be impaired. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount of an asset is the higher of fair value less disposal costs and its value in use. In assessing its value in use, the pre-tax estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised when the recoverable amount is lower than the carrying amount. Where an impairment loss for assets other
155
than goodwill subsequently no longer exists or has decreased, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but not in excess of the carrying amount that would have been recorded had no impairment loss been recognised. A reversal of an impairment loss is recognised in the income statement immediately. Financial instruments Presentation Financial instruments held by the Group are presented in the financial statements as described in the following paragraphs. Investments and other non-current financial assets comprise investments in unconsolidated companies and other non-current financial assets (held-to-maturity securities, non-current loans and receivables and other non-current available-for-sale financial assets). Current financial assets, as defined in IAS 39, include trade receivables, receivables from financing activities (retail financing, dealer financing, lease financing and other current loans to third parties), current securities and other current financial assets (which include derivative financial instruments stated at fair value as assets), as well as cash and cash equivalents. In particular, Cash and cash equivalents include cash at banks, units in liquidity funds and other money market securities that are readily convertible into cash and are subject to an insignificant risk of changes in value. Current securities include short-term or marketable securities which represent temporary investments of available funds and do not satisfy the requirements for being classified as cash equivalents; current securities include both available-for-sale and held for trading securities. Financial liabilities refer to debt, which includes asset-backed financing, and other financial liabilities (which include derivative financial instruments stated at fair value as liabilities), trade payables and other payables. Measurement Investments in unconsolidated companies classified as non-current financial assets are accounted for as described in the section Basis of consolidation. Non-current financial assets other than investments, as well as current financial assets and financial liabilities, are accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement. Current financial assets and held-to-maturity securities are recognised on the basis of the settlement date and, on initial recognition, are measured at acquisition cost, including transaction costs. Subsequent to initial recognition, available-for-sale and held for trading financial assets are measured at fair value. When market prices are not available, the fair value of available-for-sale financial assets is measured using appropriate valuation techniques e.g. discounted cash flow analysis based on market information available at the balance sheet date. Gains and losses on available-for-sale financial assets are recognised directly in other comprehensive income until the financial asset is disposed or is determined to be impaired; when the asset is disposed of, the cumulative gains or losses, including those previously recognised in other comprehensive income, are reclassified to the income statement for the period; when the asset is impaired, accumulated losses are recognised in the income statement. Gains and losses arising from changes in the fair value of held for trading financial instruments are included in the income statement for the period. Loans and receivables which are not held by the Group for trading (loans and receivables originating in the course of business), held-to-maturity securities and all financial assets for which published price quotations in an active market are not available and whose fair value cannot be determined reliably, are measured, to the extent that they have a fixed term, at amortised cost, using the effective interest method. When the financial assets do not have a fixed term, they are measured at acquisition cost.
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Receivables with maturities of over one year which bear no interest or an interest rate significantly lower than market rates are discounted using market rates. Assessments are made regularly as to whether there is any objective evidence that a financial asset or group of assets may be impaired. If any such evidence exists, an impairment loss is included in the income statement for the period. Except for derivative instruments, financial liabilities are measured at amortised cost using the effective interest method. Financial assets and liabilities hedged by derivative instruments are measured in accordance with hedge accounting principles applicable to fair value hedges: gains and losses arising from remeasurement at fair value, due to changes in the respective hedged risk, are recognised in the income statement and are offset by the effective portion of the loss or gain arising from remeasurement at fair value of the hedging instrument. Derivative financial instruments Derivative financial instruments are used for hedging purposes, in order to reduce currency, interest rate and market price risks. In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and documentation of the hedging relationship, the hedge is expected to be highly effective, its effectiveness can be reliably measured and it is highly effective throughout the financial reporting periods for which it is designated. All derivative financial instruments are measured in accordance with IAS 39 at fair value. When derivative financial instruments qualify for hedge accounting, the following accounting treatment applies: Fair value hedges Where a derivative financial instrument is designated as a hedge of the exposure to changes in fair value of a recognised asset or liability that is attributable to a particular risk and could affect the income statement, the gain or loss from remeasuring the hedging instrument at fair value is recognised in the income statement. The gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised in the income statement. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in future cash flows of a recognised asset or liability or a highly probable forecasted transaction and could affect the income statement, the effective portion of any gain or loss on the derivative financial instrument is recognised directly in other comprehensive income. The cumulative gain or loss is removed from other comprehensive income and recognised in the income statement at the same time as the economic effect arising from the hedged item affects income. The gain or loss associated with a hedge or part of a hedge that has become ineffective is recognised in the income statement immediately. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss realised to the point of termination remains in other comprehensive income and is recognised in the income statement at the same time as the underlying transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealised gain or loss held in other comprehensive income is recognised in the income statement immediately. Hedges of a net investment If a derivative financial instrument is designated as a hedging instrument for a net investment in a foreign operation, the effective portion of the gain or loss on the derivative financial instrument is recognised in other comprehensive income. The cumulative gain or loss is reclassified from other comprehensive income to profit or loss on the disposal of the foreign operation. If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative financial instruments are recognised immediately in the income statement.
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Sales of receivables The Group sells a significant part of its financial, trade and tax receivables through either securitisation programs or factoring transactions. A securitisation transaction entails the sale of a portfolio of receivables to a securitisation vehicle. This special purpose entity finances the purchase of the receivables by issuing asset-backed securities (i.e. securities whose repayment and interest flow depend upon the cash flow generated by the portfolio). Asset-backed securities are divided into classes according to their degree of seniority and rating: the most senior classes are placed with investors on the market; the junior class, whose repayment is subordinated to the senior classes, is normally subscribed for by the seller. The residual interest in the receivables retained by the seller is therefore limited to the junior securities it has subscribed for. In accordance with SIC 12 Consolidation Special Purpose Entities (SPE), all securitisation vehicles are included in the scope of consolidation, because the subscription of the junior asset-backed securities by the seller entails its control in substance over the SPE. Furthermore, factoring transactions may be with or without recourse to the seller; certain factoring agreements without recourse include deferred purchase price clauses (i.e. the payment of a minority portion of the purchase price is conditional upon the full collection of the receivables), require a first loss guarantee of the seller up to a limited amount or imply a continuing significant exposure to the receivables cash flow. These kinds of transactions do not meet IAS 39 requirements for asset derecognition, since the risks and rewards have not been substantially transferred. Consequently, all receivables sold through both securitisation and factoring transactions which do not meet IAS 39 derecognition requirements are recognised as such in the Group financial statements even though they have been legally sold; a corresponding financial liability is recorded in the consolidated statement of financial position as Asset-backed financing. Gains and losses relating to the sale of such assets are not recognised until the assets are removed from the Group statement of financial position. Inventories Inventories of raw materials, semi finished products and finished goods, (including assets leased out under operating leases and assets sold under a buy-back commitment that are held for sale) are stated at the lower of cost and net realisable value, cost being determined on a first in-first-out (FIFO) basis. The measurement of inventories includes the direct costs of materials, labour and indirect costs (variable and fixed). Provision is made for obsolete and slow-moving raw materials, finished goods, spare parts and other supplies based on their expected future use and realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs for sale and distribution. The measurement of construction contracts is based on the stage of completion determined as the proportion that cost incurred to the balance sheet date bears to the estimated total contract cost. These items are presented net of progress billings received from customers. Any losses on such contracts are fully recorded in the income statement when they become known. Assets and liabilities held for sale and Discontinued Operations Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amounts and fair value less costs to sell.
158
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Employee benefits Pension plans Employees of the Group participate in several defined benefit and/or defined contribution pension plans in accordance with local conditions and practices in the countries in which the Group operates. The Groups obligation to fund defined benefit pension plans and the annual cost recognised in the income statement are determined on an actuarial basis using the projected unit credit method. The portion of net cumulative actuarial gains and losses which exceeds the greater of 10% of the present value of the defined benefit obligation and 10% of the fair value of plan assets at the end of the previous year is amortised over the average remaining service lives of the employees (the corridor approach). In the context of IFRS First-time Adoption, the Group elected to recognise all cumulative actuarial gains and losses that existed at 1 January 2004, even though it had decided to use the corridor approach for subsequent actuarial gains and losses. The post-employment benefit obligation recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses, arising from the application of the corridor method and unrecognised past service cost, reduced by the fair value of plan assets. Any net asset resulting from this calculation is recognised at the lower of its amount and the total of any cumulative unrecognised net actuarial losses and past service cost, and the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. If changes are made to a plan that alter the benefits due for past service or if a new plan is introduced regarding past service then past service costs are recognised in the income statement on a straight-line basis over the average period remaining until the benefits become vested. If a change is made to a plan that significantly reduces the number of employees who are members of the plan or that alters the conditions of the plan such that employees will no longer be entitled to the same benefits for a significant part of their future service, or if such benefits will be reduced, the profit or loss arising from such changes is immediately recognised in the income statement. All other costs and income arising from the measurement of pension plan provisions are allocated to costs by function in the income statement, except for interest cost on unfunded defined benefit plans which is reported as part of Financial expenses. Costs arising from defined contribution plans are recognised as an expense in the income statement as incurred. Post-employment plans other than pensions The Group provides certain post-employment defined benefits, mainly health care plans. The method of accounting and the frequency of valuations are similar to those used for defined benefit pension plans. The scheme underlying the Employee leaving entitlements in Italy of the Italian Group companies (the TFR) was classified as a defined benefit plan until 31 December 2006. The legislation regarding this scheme and leading to this classification was amended by Law no. 296 of 27 December 2006 (the 2007 Finance Law) and subsequent decrees and regulations issued in the first part of 2007. In view of these changes, and with specific reference to those regarding companies with at least 50 employees, this scheme only continues to be classified as a defined benefit plan in the consolidated financial statements for those benefits accruing up to 31 December 2006 (and not yet settled by the balance sheet date), while after that date the scheme is classified as a defined contribution plan. Equity compensation plans The Group provides additional benefits to certain members of senior management and employees through equity compensation plans (stock option plans and stock grants). In accordance with IFRS 2 Share-based Payment, these plans represent a component of recipient remuneration. The compensation expense, corresponding to the fair value of the instruments at the grant date, is recognised in the income statement on a straight-line basis over the period from the grant date to the vesting date, with the offsetting credit recognised directly in equity. Any subsequent changes to fair value do not have any effect on the
159
initial measurement. In accordance with the transitional provisions of IFRS 2, the Group applied the Standard to all stock options granted after 7 November 2002 and not yet vested at 1 January 2005, the effective date of the Standard. Detailed information is provided in respect of all stock options granted on or prior to 7 November 2002. Provisions The Group records provisions when it has an obligation, legal or constructive, to a third party, when it is probable that an outflow of Group resources will be required to satisfy the obligation and when a reliable estimate of the amount can be made. Changes in estimates are reflected in the income statement in the period in which the change occurs. Treasury shares Treasury shares are presented as a deduction from equity. The original cost of treasury shares and the proceeds of any subsequent sale are presented as movements in equity. Revenue recognition Revenue is recognised if it is probable that the economic benefits associated with a transaction will flow to the Group and the revenue can be measured reliably. Revenues are stated net of discounts, allowances, settlement discounts and rebates, as well as costs for sales incentive programs, determined on the basis of historical costs, country by country, and charged against profit for the period in which the corresponding sales are recognised. The Groups sales incentive programs include the granting of retail financing at significant discount to market interest rates. The corresponding cost is recognised at the time of the initial sale. Revenues from the sale of products are recognised when the risks and rewards of ownership of the goods are transferred to the customer, the sales price is agreed or determinable and receipt of payment can be assumed: this corresponds generally to the date when the vehicles are made available to non-group dealers, or the delivery date in the case of direct sales. New vehicle sales with a buy-back commitment are not recognised at the time of delivery but are accounted for as operating leases when it is probable that the vehicle will be bought back. More specifically, vehicles sold with a buy-back commitment are accounted for as assets in Inventories if the sale originates from the Fiat Group Automobiles business (agreements with normally a short-term buy-back commitment); and are accounted for in Property, plant and equipment, if the sale originates from the Commercial Vehicles business (agreements with normally a long-term buy-back commitment). The difference between the carrying value (corresponding to the manufacturing cost) and the estimated resale value (net of refurbishing costs) at the end of the buy-back period is depreciated on a straight-line basis over the same period. The initial sale price received is recognised as an advance payment (liability). The difference between the initial sale price and the buy-back price is recognised as rental revenue on a straight-line basis over the term of the operating lease. Assets sold under a buy-back commitment that are initially recognised in Property, plant and equipment are reclassified to Inventories at the end of the agreement term if they are held for sale. The proceeds from the sale of such assets are recognised as Revenues. Revenues from services and from construction contracts are recognised by reference to the stage of completion. Revenues also include lease rentals and interest income from financial services companies. Cost of sales Cost of sales comprises the manufacturing cost of products and the acquisition cost of purchased merchandise which have been sold. It includes all directly attributable material and production costs and all production overheads. These include the depreciation of property, plant and equipment and the amortisation of intangible assets relating to production and write-downs of inventories. Cost of sales also includes freight and insurance costs relating to deliveries to dealers and agency fees in the case of direct sales.
160
NOTES
Cost of sales also includes provisions made to cover the estimated cost of product warranties at the time of sale to dealer networks or to the end customer. Revenues from the sale of extended warranties and maintenance contracts are recognised over the period during which the service is provided. Expenses which are directly attributable to the financial services businesses, including the interest expense related to the financing of financial services businesses as a whole and charges for risk provisions and write-downs, are reported in cost of sales. Research and development costs This item includes research costs, development costs not eligible for capitalisation and the amortisation of development costs recognised as assets in accordance with IAS 38 (see Notes 4 and 14). Government grants Government grants are recognised in the financial statements when there is reasonable assurance that the company concerned will comply with the conditions for receiving such grants and that the grants themselves will be received. Government grants are recognised as income over the periods necessary to match them with the related costs which they are intended to offset. The benefit of a government loan at a below-market rate of interest is treated as a government grant. The benefit of the belowmarket rate of interest is measured as the difference between the initial carrying amount of the loan (fair value plus transaction costs) and the proceeds received, and is accounted for in accordance with the policies already used for the recognition of government grants. Taxes Income taxes include all taxes based upon the taxable profits of the Group. Taxes on income are recognised in the income statement except to the extent that they relate to items directly charged or credited to other comprehensive income, in which case the related income tax effect is recognised in other comprehensive income. Provisions for income taxes that could arise on the distribution of a subsidiarys undistributed profits are only made where there is a current intention to distribute such profits. Other taxes not based on income, such as property taxes and capital taxes, are included in operating expenses. Deferred taxes are provided using the full liability method. They are calculated on all temporary differences between the tax base of an asset or liability and the carrying amounts in the consolidated financial statements, except for those arising from non tax-deductible goodwill and for those related to investments in subsidiaries where reversal will not take place in the foreseeable future. Deferred tax assets relating to the carry-forward of unused tax losses and tax credits, as well as those arising from temporary differences, are recognised to the extent that it is probable that future profits will be available against which they can be utilised. Current and deferred income tax assets and liabilities are offset when the income taxes are levied by the same taxation authority and where there is a legally enforceable right of offset. Deferred tax assets and liabilities are measured at the substantively enacted tax rates in the respective jurisdictions in which the Group operates that are expected to apply to taxable income in the periods in which temporary differences reverse or expire. Dividends Dividends payable by the Group are reported as a movement in equity in the period in which they are approved by Shareholders in their annual general meeting.
161
Earnings per share Basic earnings per share are calculated by dividing the profit/(loss) attributable to owners of the parent entity assignable to the various classes of shares by the weighted average number of shares outstanding during the year. For diluted earnings per share, the weighted average number of shares outstanding is adjusted assuming conversion of all dilutive potential shares. Use of estimates The preparation of financial statements and related disclosures that conform to IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of any changes are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In this respect the situation caused by the profound economic and financial crisis which began in 2008 has led to the need to make assumptions regarding future performance which are characterised by significant uncertainty; as a consequence, therefore, it cannot be excluded that results may arise during the next year which differ from estimates, and which therefore might require adjustments, even significant, to be made to the carrying amount of the items in question, which at the present moment can clearly neither be estimated nor predicted. The main items affected by these situations of uncertainty are the allowances for doubtful accounts receivable and inventories, non-current assets (tangible and intangible assets), the residual values of vehicles leased out under operating lease arrangements or sold with buy-back clauses, pension funds and other postemployment benefits, and deferred tax assets. The following are the critical judgements and the key assumptions concerning the future, that management has made in the process of applying the Group accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements or that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Allowance for doubtful accounts The allowance for doubtful accounts reflects managements estimate of losses inherent in the wholesale and retail credit portfolio. This allowance is based on the Groups estimate of the losses to be incurred, which derives from past experience with similar receivables, current and historical past due amounts, dealer termination rates, write-offs and collections, the careful monitoring of portfolio credit quality and current and projected economic and market conditions. Should the present economic and financial situation persist or even worsen, this could lead to a further deterioration in the financial situation of the Groups debtors compared to that already taken into consideration in calculating the allowances recognised in the financial statements. Allowance for obsolete and slow-moving inventory The allowance for obsolete and slow-moving inventory reflects managements estimate of the loss in value expected by the Group, and has been determined on the basis of past experience and historical and expected future trends in the used vehicle market. A worsening of the economic and financial situation could cause a further deterioration in conditions in the used vehicle market compared to that already taken into consideration in calculating the allowances recognised in the financial statements.
162
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Recoverability of non-current assets (including goodwill) Non-current assets include property, plant and equipment, intangible assets (including goodwill), investments and other financial assets. Management reviews the carrying value of non-current assets held and used and that of assets to be disposed of when events and circumstances warrant such a review. Management performs this review using estimates of future cash flows from the use or disposal of the asset and a suitable discount rate in order to calculate present value. If the carrying amount of a noncurrent asset is considered impaired, the Group records an impairment loss for the amount by which the carrying amount of the asset exceeds its estimated recoverable amount from use or disposal determined by reference to its most recent business forecasts. In view of the present economic and financial situation, the Fiat Group has the following considerations in respect of its future prospects: In the current situation, when preparing figures for the consolidated financial statements for the year ended 31 December 2010 and more specifically when carrying out impairment testing of tangible and intangible assets, the various sectors of the Group have taken into account their performance for 2011 as forecast in the budgets of the post-Demerger Fiat Group and the Fiat Industrial Group, with assumptions and results consistent with the statements made in the section Significant events subsequent to the year end and outlook. In addition, for subsequent years they have taken into account the forecasts and targets included in the Fiat Groups 2010-2014 Strategic Plan presented to the financial community on 21 April 2010. These forecasts did not indicate the need to recognise any significant impairment losses. In addition, should the assumptions underlying the forecast deteriorate further the following is noted: The Groups tangible assets and intangible assets with a finite useful life (which essentially regard development costs) relate to models or products having a high technological content in line with the latest environmental laws and regulations, which consequently renders them competitive in the present economic situation, especially in the more mature economies in which particular attention is placed on the eco-sustainability of those types of products. As a result, therefore, despite the fact that the automotive sector is one of the markets most affected by the crisis in the immediate term, it is considered highly probable that the life cycle of these products can be lengthened to extend over the period of time involved in a slower economic recovery, in this way allowing the Group to achieve sufficient earnings flows to cover the investments, albeit over a longer timescale. Around 61% of capitalised goodwill relates to the CNH business and around 27% to Ferrari. In the case of the goodwill relating to the CNH business (1,794 million at 31 December 2010), which has been classified as Discontinued Operations since it relates to businesses included in the Fiat Industrial Group, detailed analyses using various methodologies were carried out to test its recoverability; the underlying considerations are described in Note 14. As concerns Ferrari, the exclusivity of the business, its historical profitability and its future earnings prospects indicate that the carrying amount will continue to be recoverable, even in the event of economic and market conditions which remain difficult. Residual values of assets leased out under operating lease arrangements or sold with a buy-back commitment The Group reports assets rented to customers or leased to them under operating leases as tangible assets. Furthermore, new vehicle sales with a buy-back commitment are not recognised as sales at the time of delivery but are accounted for as operating leases if it is probable that the vehicle will be bought back. The Group recognises income from such operating leases on a straight-line basis over the term of the lease. Depreciation expense for assets subject to operating leases is recognised on a straight-line basis over the lease term in amounts necessary to reduce the cost of an assets to its estimated residual value at the end of the lease term. The estimated residual value of leased assets is calculated at the lease inception date on the basis of published industry information and historical experience. Realisation of the residual values is dependant on the Groups future ability to market the assets under the then-prevailing market conditions. The Group continually evaluates whether events and circumstances have occurred which impact the estimated residual values of the assets on operating leases. More specifically the Group recognised further write-downs in 2009, in addition to those usually made on the basis of historical trends in residual values, to take account of the sudden deterioration in the used vehicle market over the final part of 2008 and throughout the whole of 2009. The used vehicle market
163
was carefully monitored throughout 2010 to ensure that write-downs were properly determined. It cannot however be excluded that additional write-downs may be needed if market conditions should deteriorate even further. Sales allowances At the later time of sale or the time an incentive is announced to dealers, the Group records the estimated impact of sales allowances in the form of dealer and customer incentives as a reduction of revenue. There may be numerous types of incentives available at any particular time. The determination of sales allowances requires management estimates based on different factors. Product warranties The Group makes provisions for estimated expenses related to product warranties at the time products are sold. Management establishes these estimates based on historical information on the nature, frequency and average cost of warranty claims. The Group seeks to improve vehicle quality and minimise warranty expenses arising from claims. Pension and other post-retirement benefits Group companies sponsor pension and other post-retirement benefits in various countries. The Groups main defined benefit plans are to be found in the United Kingdom, Germany and Italy and, as far as the Discontinued Operations relating to the Fiat Industrial Group are concerned, also in the United States. Management uses several statistical and judgmental factors that attempt to anticipate future events in calculating the expense, the liability and the assets related to these plans. These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases and health care cost trend rates. In addition, the Groups actuarial consultants also use subjective factors such as withdrawal and mortality rates in making relevant estimates. Regarding the discount rate, in 2010 yields of high quality corporate bonds were not subject to the same level of volatility as in 2008. It cannot be excluded, though, that future significant changes in the yields of corporate bonds may lead to effects on liabilities and unrecognised actuarial gains and losses, taking into account however any simultaneous changes in the returns of plan assets where these may exist. Realisation of deferred tax assets At 31 December 2010, the Fiat Group had deferred tax assets and theoretical tax benefits arising from tax loss carryforwards of 7,767 million, of which 2,855 million is not recognised in the financial statements, and balances of 2,555 million and 685 million respectively relating to Discontinued Operations. The corresponding totals at 31 December 2009 were 7,784 million and 3,307 million, respectively. Management has recorded these valuation allowances to reduce deferred tax assets to the amount that it believes it is probable will be recovered. In making these adjustments, management has taken into consideration figures from budgets and forecasts consistent with those used for impairment testing and discussed in the preceding paragraph relating to the recoverable amount of non-current assets. Moreover, the adjustments that have been recognised are considered to be sufficient to protect against the risk of a further deterioration of the assumptions in these forecasts, taking account of the fact that the net deferred assets accordingly recognised relate to temporary differences and tax losses which, to a significant extent, may be recovered over a very long period, and are therefore consistent with a situation in which the time needed to exit from the crisis and for an economic recovery to occur extends beyond the term implicit in the above-mentioned estimates. Contingent liabilities The Group is the subject of legal proceedings and tax issues covering a range of matters, which are pending in various jurisdictions. Due to the uncertainty inherent in such matters, it is difficult to predict the final outcome of such matters. The cases and claims against the Group often raise difficult and complex factual and legal issues, which are subject to many uncertainties, including but not limited to the facts and circumstances of each particular case and claim, the jurisdiction and the differences in applicable law. In the normal course of business management consults with legal counsel and certain other experts on matters related to litigation and taxes. The Group accrues a liability when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably estimated. In the event an adverse outcome is possible or an estimate is not determinable, the matter is disclosed.
164
NOTES
Accounting principles, amendments and interpretations adopted from 1 January 2010 The Group adopted the following standards, amendments and interpretations from 1 January 2010. IFRS 3 (2008) Business Combinations In accordance with the transitional provision of the Standard the Group adopted IFRS 3 (revised in 2008) Business Combinations, prospectively, to business combinations for which the acquisition date is on or after 1 January 2010. The main changes to IFRS 3 concern the accounting treatment of step acquisition, the possibility of measuring the non-controlling interests in a partial acquisition either at either fair value or the non-controlling interests share of the fair value of the identifiable net assets of the acquiree, the recognition of acquisition-related costs as period expenses and the recognition at the acquisition date of any contingent consideration included in the arrangements. Step acquisitions of a subsidiary In the case of step acquisitions IFRS 3 (2008) states that a business combination occurs only in respect of the transaction that gives one entity control of another. At that time, the identifiable net assets of the acquiree are measured at fair value and any non-controlling interest is measured either at fair value or at the non-controlling interests proportionate share of the fair value of the acquirees identifiable net assets (a method already permitted under the previous version of IFRS 3). An equity interest previously held in the acquiree and accounted for under IAS 39 Financial Instruments: Recognition and Measurement, or under IAS 28 Investments in Associates, or under IAS 31 Interests in Joint Ventures is treated as if it were disposed of and acquired at fair value at the acquisition date. Accordingly, it is remeasured to its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. Moreover, any changes in the value of the equity interest that were previously recognised in Other comprehensive income are reclassified from equity to profit or loss as if they had been disposed of. Goodwill, or the gain from a bargain purchase, arising from the acquisition of control in a subsidiary is measured as the consideration transferred to obtain control, plus the amount of non-controlling interest (using either option), plus the fair value of previously held non-controlling equity interest, less the fair value of the identifiable net assets of the acquiree. Under the previous version of the standard controlling interests achieved in stages were dealt with as a series of separate transactions with goodwill recognised as the sum of the goodwill arising on these transactions. As described in the Scope of consolidation section below on 30 June 2010 the Fiat Group acquired the remaining 50% of the joint venture Fiat GM Powertrain Polska (an investment that had been accounted for in the Fiat Groups consolidated financial statements using proportionate consolidation), thereby obtaining 100% control. The Group accounted for this transaction as the step acquisition of a subsidiary. Acquisition-related costs Under IFRS 3 (2008) acquisition-related costs are recognised as an expense in the periods in which the costs are incurred. Under the previous version of the Standard, these costs were included in the acquisition cost of the net assets of the acquired entity. Applying this change to the acquisition of the remaining 50% interest in Fiat GM Powertrain Polska in 2010 led to the recognition of acquisition related costs whose amount is not significant. Recognition of contingent consideration Under IFRS 3 (2008) contingent consideration is recognised as part of the consideration transferred in exchange for the acquirees net assets, measured at its acquisition date fair value. Similarly, where the purchase agreement includes a right to the return of previously-transferred consideration if specified conditions are met, that right to return is classified as an asset by the acquirer. Subsequent changes in this fair value are recognised as adjustments to the original accounting for the acquisition if they from additional information obtained by the acquirer and occur within 12 months of the acquisition date. All other changes in the fair value of the contingent consideration are recognised in profit or loss. Under the previous version of the Standard contingent consideration was recognised at the acquisition date only if payment was probable and it could be measured reliably. Any subsequent adjustments to contingent consideration were recognised against goodwill. No effects arose from this change in accounting standard as far as the acquisition of the remaining 50% of the joint venture Fiat GM Powertrain Polska in 2010 is concerned.
165
The above changes in accounting principle had the following effects In the current year:
( million)
2010 (2) (4) (6)
Income statement Loss recognised for the adjustment to fair value of the previously held equity interest Other comprehensive income reclassified to the income statement Increase/(decrease) in profit/(loss) for the year as a result of applying the standard Other comprehensive income Increase/(Decrease) in profit/(loss) for the year as a result of applying the standard Other comprehensive income reclassified to the income statement Increase/(decrease) in other comprehensive income as a result of applying the standard
(in )
(6) 4 (2) 2010 (0.005) (0.005)
Basic earnings per share Increase/(decrease) in basic earnings per ordinary share as a result of applying the standard Increase/(decrease) in diluted earnings per ordinary share as a result of applying the standard
IAS 27 (2008) Consolidated and Separate Financial Statements The revisions to IAS 27 principally affect the accounting for transactions and events that result in a change in the Groups interest in its subsidiaries and the attribution of a subsidiarys losses to non-controlling interests. In accordance with the relevant transitional provisions, the Group adopted these changes to IAS 27 prospectively. The adoption of the revised standard has affected the accounting of certain increases and decreases in the Groups ownership interest in its subsidiaries. IAS 27 (2008) specifies that once control has been obtained, further transactions whereby the parent entity acquires additional equity interests from non-controlling interests, or disposes of equity interests without losing control are transactions with owners and therefore shall be accounted for as equity transactions. It follows that the carrying amounts of the controlling and non-controlling interests must be adjusted to reflect the changes in their relative interests in the subsidiary and any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent. There is no consequential adjustment to the carrying amount of goodwill and no gain or loss is recognised in profit or loss. Costs associated with these transactions are recognised in equity in accordance with IAS 32 paragraph 35. In prior years, in the absence of a specific principle or interpretation, if the Group purchased a non-controlling interest in a subsidiary that it already controlled it recognised any excess of the acquisition cost over the carrying amount of the assets and liabilities acquired as goodwill (the Parent entity extension method). If it disposed of a non-controlling interest without losing control, however, the Group recognised any difference between the carrying amount of assets and liabilities of the subsidiary and the consideration received in profit or loss. In 2010, following the adoption of the above change, the Group recognised a reduction of 81 million directly in equity in relation to the exercising of the 5% call option on Ferrari S.p.A., as well as in respect of a series of minor acquisitions and sales of noncontrolling interests in subsidiaries. The adoption of the new standard did not lead to the recognition of significant effects on Income statements or on basic and diluted earnings per share.
166
NOTES
Standards, amendments and interpretations effective from 1 January 2010 but not applicable to the Group The following amendments, improvements and interpretations have also been issued and are effective from 1 January 2010; these relate to matters that were not applicable to the Group at the date of these financial statements but which may affect the accounting for future transactions or arrangements: Improvement 2008 to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Amendments to IAS 28 Investments in Associates and to IAS 31 Interests in Joint Ventures consequential to the amendment to IAS 27. Improvements to IAS/IFRS (2009). Amendments to IFRS 2 Share based Payment: Group Cash-settled Share-based Payment Transactions. IFRIC 17 Distributions of Non-cash Assets to Owners. IFRIC 18 Transfers of Assets from Customers. Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged items Accounting principles, amendments and interpretations not yet applicable and not early adopted by the Group On 8 October 2009, the IASB issued an amendment to IAS 32 Financial Instruments: Presentation, Classification of Rights Issues in order to address the accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. Previously such rights issues were accounted for as derivative liabilities. However, provided certain conditions are met, the amendment requires such rights issues to be classified as equity regardless of the currency in which the exercise price is denominated. The amendment is effective retrospectively from 1 January 2011; when applied this amendment is not expected to lead to significant effects on the Groups financial statements. On 4 November 2009, the IASB issued a revised version of IAS 24 - Related Party Disclosures that simplifies the disclosure requirements for government-related entities and clarifies the definition of a related party. The revised standard is effective for annual periods beginning on or after 1 January 2011. Application of this amendment is not expected to have any significant effects on the measurement of items in the Groups financial statements. On 12 November 2009, the IASB issued a new standard IFRS 9 Financial Instruments that was amended on 28 October 2010. The new standard, having an effective date for mandatory adoption of 1 January 2013, represents the completion of the first part of a project to replace IAS 39 and introduces new requirements for the classification and measurement of financial assets and financial liabilities and for the derecognition of financial assets. The new standard uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments and the contractual cash flow characteristics of the financial assets. The most significant effect of the standard regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value attributable to changes in the credit risk of financial liabilities designated as at fair value through profit or loss. Under the new standard these changes are recognised in Other comprehensive income and are not subsequently reclassified to the Income statement. The new standard had not yet been endorsed by the European Union at the date of these financial statements. On 26 November 2009, the IASB issued a minor amendment to IFRIC 14 - Prepayments of a Minimum Funding Requirement. The amendment applies when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permits such an entity to treat the benefit of such an early payment as an asset. The amendment has an effective date for mandatory adoption of 1 January 2011. Application of this amendment is not expected to have any significant effects on the Groups financial statements.
167
On 26 November 2009, the IFRIC issued the interpretation IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments that provides guidance on how to account for the extinguishment of a financial liability by the issue of equity instruments. The interpretation clarifies that when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entitys shares or other equity instruments to settle the financial liability fully or partially, then the entitys equity instruments issued to a creditor are part of the consideration paid to extinguish the financial liability and are measured at their fair value. The difference between the carrying amount of the financial liability extinguished and the initial measurement amount of the equity instruments issued is included in profit or loss for the period. The interpretation has an effective date for mandatory adoption of 1 January 2011. Application of this interpretation is not expected to have any significant effects on the Groups financial statements. On 6 May 2010, the IASB issued a set of amendments to IFRSs (Improvements to IFRSs) that are applicable from 1 January 2011; set out below are those that will lead to changes in the presentation, recognition or measurement of financial statement items, excluding those that only regard changes in terminology or editorial changes having a limited accounting effect and those that affect standards or interpretations that are not applicable to the Fiat Group. IFRS 3 (2008) Business Combinations: this amendment clarifies that the components of non-controlling interests that do not entitle their holders to a proportionate share of the entitys net assets must be measured at fair value or as required by the applicable accounting standards. For example, therefore, stock options granted to employees must be measured in accordance with the requirements of IFRS 2 in the case of a business combination, while the equity portion of a convertible debt instrument must be measured in accordance with IAS 32. In addition, the Board goes into further detail on the question of share-based payment plans that are replaced as part of a business combination by adding specific guidance to clarify the accounting treatment. IFRS 7 Financial Instruments: Disclosures: this amendment emphasises the interaction between the qualitative and quantitative disclosures required by the standard concerning the nature and extent of risks arising from financial instruments. This should assist users of financial statements to link related disclosures and hence form an overall picture of the nature and extent of risks arising from financial statements. In addition, the disclosure requirement concerning financial assets that are past due or impaired but whose terms have been renegotiated, and that relating to the fair value of collateral have been eliminated. IAS 1 Presentation of Financial Statements: the amendment requires the reconciliation in the changes of each component of equity to be presented in the notes or in the primary statements. IAS 34 Interim Financial Reporting: by using a series of examples certain clarifications are provided concerning the additional disclosures that must be presented in interim financial reports. Application of this improvements is not expected to have any significant effects on the Groups financial statements. On 7 October 2010, the IASB issued amendments to IFRS 7 Financial Instruments: Disclosures. Entities are required to apply the amendments for annual periods beginning on or after 1 July 2011.The amendments will allow users of financial statements to improve their understanding of transfers of financial assets, including an understanding of the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of a transfer transaction is undertaken at the end of a reporting period. The amendments had not yet been endorsed by the European Union at the date of these financial statements. On 20 December 2010, the IASB issued amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards. The first amendment replaces references to a fixed date of 1 January 2004 with the date of transition to IFRSs. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. These amendments are effective from 1 July 2011. The amendments had not yet been endorsed by the European Union at the date of these financial statements.
168
NOTES
On 20 December 2010, the IASB issued amendments to IAS 12 Income Taxes that require an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. As a result of the amendments, SIC-21 Income Taxes Recovery of Revalued Non-Depreciable Assets no longer applies. These amendments are effective from 1 January 2012. The amendments had not yet been endorsed by the European Union at the date of these financial statements. RISK MANAGEMENT Credit risk The Groups credit concentration risk differs in relation to the activities carried out by the individual sectors and various sales markets in which the Group operates; in all cases, however, the risk is mitigated by the large number of counterparties and customers. Considered from a global point of view, however, there is a concentration of credit risk in trade receivables and receivables from financing activities, in particular dealer financing and finance leases in the European Union market for the Fiat Group Automobiles and Trucks and Commercial Vehicles sectors, in North America for the Agricultural and Construction Equipment sector, as well as in Latin America for all main sectors. Financial assets are recognised in the statement of financial position net of write-downs for the risk that counterparties may be unable to fulfil their contractual obligations, determined on the basis of the available information as to the creditworthiness of the customer and historical data. Liquidity risk The Group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time. The cash flows, funding requirements and liquidity of Group companies are monitored on a centralised basis, under the control of the Group Treasury. The aim of this centralised system is to optimise the efficiency and effectiveness of the management of the Groups capital resources. Additionally, as part of its activities the Group regularly carries out funding operations on the various financial markets which may take on different technical forms and which are aimed at ensuring that it has an adequate level of current and future liquidity. The continuation of a difficult economic situation in the markets in which the Group operates and the uncertainties that characterise the financial markets necessitate giving special attention to the management of liquidity risk. In that sense measures taken to generate financial resources through operations and to maintain an adequate level of available liquidity are an important factor in ensuring normal operating conditions and addressing strategic challenges over the next few years. The Group therefore plans to meet its requirements to settle liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans and making recourse to the bond market and other forms of funding. Interest rate risk and currency risk As a multinational group that has operations throughout the world, the Group is exposed to market risks from fluctuations in foreign currency exchange and interest rates. The exposure to foreign currency risk arises both in connection with the geographical distribution of the Groups industrial activities compared to the markets in which it sells its products, and in relation to the use of external borrowing denominated in foreign currencies.
169
The exposure to interest rate risk arises from the need to fund industrial and financial operating activities and the necessity to deploy surplus funds. Changes in market interest rates may have the effect of either increasing or decreasing the Groups net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions. The Group regularly assesses its exposure to interest rate and foreign currency risk and manages those risks through the use of derivative financial instruments in accordance with its established risk management policies. The Groups policy permits derivatives to be used only for managing the exposure to fluctuations in exchange and interest rates connected with future cash flows and assets and liabilities, and not for speculative purposes. The Group utilises derivative financial instruments designated as fair value hedges, mainly to hedge: the currency risk on financial instruments denominated in foreign currency; the interest rate risk on fixed rate loans and borrowings. The instruments used for these hedges are mainly currency swaps, forward contracts, interest rate swaps and combined interest rate and currency financial instruments. The Group uses derivative financial instruments as cash flow hedges for the purpose of pre-determining: the exchange rate at which forecasted transactions denominated in foreign currencies will be accounted for; the interest paid on borrowings, both to match the fixed interest received on loans (customer financing activity), and to achieve a pre-defined mix of floating versus fixed rate funding structured loans. The exchange rate exposure on forecasted commercial flows is hedged by currency swaps, forward contracts and currency options. Interest rate exposures are usually hedged by interest rate swaps and, in limited cases, by forward rate agreements. Counterparties to these agreements are major and diverse financial institutions. Information on the fair value of derivative financial instruments held at the balance sheet date is provided in Note 21. Additional qualitative information on the financial risks to which the Group is exposed is provided in Note 32. SCOPE OF CONSOLIDATION The consolidated financial statements of the Fiat Group at 31 December 2010 include Fiat S.p.A. and 418 consolidated subsidiaries in which Fiat S.p.A., directly or indirectly, has a majority of the voting rights, over which it exercises control, or from which it is able to derive benefit by virtue of its power to govern corporate financial and operating policies. One more subsidiary was consolidated at 31 December 2010 compared to 31 December 2009. Excluded from consolidation are 76 subsidiaries that are either dormant or generate a negligible volume of business: their proportion of the Groups assets, liabilities, financial position and earnings is immaterial. In particular, 50 of such subsidiaries are accounted for using the cost method, and represent in aggregate 0 percent of total Fiat Group revenues (Continuing Operations and Discontinued Operations), 0 percent of the Fiat Group equity and 0.21 percent of total Fiat Group assets.
170
NOTES
Interests in jointly controlled entities (65 companies, including 27 entities of the FGA Capital group, are accounted for using the equity method. Condensed financial information relating to the Groups pro-rata interest in the above entities is as follows:
At 31 December 2010
( million)
At 31 December 2009 Total 2,339 9,567 11,906 8,664 1,695
Non-current assets Current assets Total assets Debt Other liabilities
Continuing Operation 2,008 8,744 10,752 8,250 1,096
Discontinued Operation 357 748 1,105 144 567
Total 2,365 9,492 11,857 8,394 1,663
The combined balances of the Groups share in the principal income statement items of jointly controlled entities accounted for using the equity method are as follows:
2010
( million)
2009 Total 4,447 161 152 92 57
Net revenues Trading profit/(loss) Operating profit/(loss) Profit/(loss) before taxes Profit/(loss)
Continuing Operation 4,422 224 220 163 127
Discontinued Operation 1,256 71 72 61 45
Total 5,678 295 292 224 172
At 31 December 2010, 18 associates are accounted for using the equity method, while 29 associates, which in aggregate are of minor importance, are accounted for using the cost method. The main aggregate amounts related to the Groups interests in associates are as follows:
At 31 December 2010
( million)
At 31 December 2009 Total 2,512 2,125 2009 Total 539 (42)
Total assets Liabilities
Continuing Operation 451 312
Discontinued Operation 2,157 1,877
Total 2,608 2,189 2010
( million)
Net revenues Net profit/(loss)
Continuing Operation 246 (1)
Discontinued Operation 572 18
Total 818 17
171
The above figures for Continuing Operations do not include the key IFRS amounts for the associate Chrysler Group LLC (Chrysler), as given their importance they are disclosed separately below. These amounts relate to the first reporting period of the new Chrysler group (10 June to 31 December 2009) and the first nine months of 2010, since the IFRS figures for the twelve months ended 31 December 2010 were not available at the date of publication of these financial statements.
( million)
Total assets Total Liabilities

(*) Unaudited.
At 30 September 2010 (*) 28,117 28,621
At 31 December 2009 24,745 25,155
( million)

(*) Unaudited.
01/01-30/09/2010 (*) 23,713 13
10/06-31/12/2009 12,231 (1,062)
The main aggregate amounts related to the Group interests in associates measured at cost are as follows:
At 31 December 2010
( million)
At 31 December 2009 Total 108 78 2009 Total 73 2
Total assets Liabilities
Continuing Operation 82 68
Total 117 91 2010
( million)
Continuing Operation 58 -
Total 86 1
The following changes occurred concerning the scope of consolidation: On 1 February 2010, the sale of Targa Rent S.r.l., a subsidiary of the Fiat Group Automobiles sector, was completed; this investment was already classified as assets held for sale at 31 December 2009. The equally held joint venture GAC Fiat Automobiles Co. Ltd. was formed in the first quarter of 2010 to manufacture engines and cars for the Chinese market. In the second quarter of 2010 the CNH sector acquired 50% of LLC CNH KAMAZ Industry, an equally held joint venture set up to manufacture agricultural and construction machinery in the Russian Federation. In the second quarter of 2010 the Agricultural and Construction Equipment sector completed the sale of the investment in the joint venture LBX Company LLC. On 30 June 2010, the Fiat Group acquired the remaining 50% of the joint venture Fiat Powertrain Polska Sp. z.o.o. (ex Fiat GM Powertrain Polska), thereby obtaining 100% control. The 50% interest acquired was consolidated on a line-by-line basis effective 1 January 2010.
172
NOTES
Certain subsidiaries in the Components sector whose total assets and revenues are not material for the Group have been consolidated on a line-by-line basis during 2010. During the third quarter of 2010 the call option on the 5% of Ferrari S.p.A. share capital held by Mubadala Development Company PJSC was exercised. In the fourth quarter of 2010 the Fiat Group Automobiles sector acquired TCA Tecnologia en Componentes Automotivos SA, a company located in the Brazilian state of Pernambuco. During the fourth quarter of 2010 the Components sector incorporated the companies Magneti Marelli d.o.o. Kragujevac and Plastic Components and Modules Fuel Tanks S.p.A., both recognised at cost. ASSETS AND LIABILITIES hELD FOR SALE AND DISCONTINUED OPERATIONS This section provides details of the contents of the items relating to Discontinued Operations as reported in the Consolidated Income Statement, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flows. From a methodological standpoint it should be noted that with reference to the presentation required by IFRS 5, Discontinued Operations are included in the scope of consolidation of the Fiat Group at 31 December 2010 and accordingly the total balances relating to the whole Group have been determined by making the appropriate eliminations of transactions and balances between Continuing Operations and Discontinued Operations. More specifically the approach was as follows: the individual line items presented in the income statement under Profit/(loss) from Continuing Operations and the detail of individual items included in these notes under Profit/(loss) from Discontinued Operations are presented before the elimination of intragroup transactions between the two demerged operations, while Profit/(loss) for the year is stated after this elimination. The effects of the elimination of intragroup transactions on individual income statement items are described in the notes. at a statement of financial position level, the consolidation of both Continuing and Discontinued Operations implies, as discussed in the previous paragraph, the need to eliminate intragroup transactions between these two sets of operations so that the balances stated in Continuing Operations and in Discontinued Operations represent the assets and liabilities resulting from transactions with parties outside the Fiat Group taken as a whole. It follows that these balances may not be representative of the statement of financial position of the Fiat Group Post-Demerger and the Fiat Industrial Group. Given the size of the amounts involved and their planned evolution (the timely repayment by the Fiat Industrial Group after the Demerger of all of the net debt granted by the Fiat Group central treasury), it has been considered appropriate to include as an asset in the statement of financial position an item consisting of the financial receivables of Continuing Operations due from Discontinued Operations and as a liability an item consisting of the debt of Continuing Operations payable to Discontinued Operations; the corresponding debt and financial receivable balances relating to Discontinued Operations are included in the items Liabilities held for sale and Discontinued Operations and Assets held for sale and Discontinued Operations respectively: this method of representation allows the assets and liabilities of Continuing Operations and those of Discontinued Operations to be presented without taking into account the elimination of intragroup financial receivables and debt outstanding at 31 December 2010. The required elimination of these balances is made in a separate line added to assets and liabilities in order to present the total assets and total liabilities of the Fiat Group as a whole in a correct manner. all cash flows from Discontinued Operations are reported in the appropriate items for operating activities, investing activities and financing activities in the Statement of Cash Flows. These items refer exclusively to cash flows arising from transactions with parties outside the Fiat Group. It follows that the cash flows relating to Continuing Operations and those relating to Discontinued Operations may not be representative of those of the Fiat Group Post-Demerger and the Fiat Industrial Group.
173
Post-tax profit/(Loss) from Discontinued Operations Details of income statement items included in Discontinued Operations are as follows:
2010 of which Related parties (Note 34) 1,205 686 162 42 1 (121) 64 70 (6) 2009 of which Related parties (Note 34) 837 439 180 26 2 (135) (50) (47) (3)
( million)
Net revenues Cost of sales Selling, general and administrative costs Research and development costs Other income (expenses) TRADING PROFIT/(LOSS) Gains (losses) on the disposal of investments Restructuring costs Other unusual income (expenses) OPERATING PROFIT/(LOSS) Financial income (expenses) Result from investments: Share of the profit/(loss) of investees accounted for using the equity method Other income (expenses) from investments PROFIT/(LOSS) BEFORE TAXES Income taxes POST-TAX PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO: Owners of the parent Non-controlling interests
Note (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
(11)
Total 21,342 17,979 1,793 418 (60) 1,092 3 58 (20) 1,017 (505) 64 70 (6) 576 198 378
Total 17,968 15,549 1,636 388 (73) 322 1 144 (198) (19) (401) (50) (47) (3) (470) 33 (503)
341 37
(464) (39)
Details of the main items included in Discontinued Operations are provided in the notes referred to above. Details of the main items by segment are provided in note 30 Segment reporting. Assets and liabilities held for sale and Discontinued Operations This item may be analysed as follows at 31 December 2010:
( million)
Discontinued Operations Assets held-for-sale of the continuing Fiat Group Total Assets held-for-sale and Discontinued Operations Discontinued Operations Liabilities held-for-sale of the continuing Fiat Group Total Liabilities-held-for-sale and Discontinued Operations
At 31 December 2010 34,786 68 34,854 29,920 29,920
At 31 December 2009 82 82 8 8
174
NOTES
Assets and liabilities classified as Discontinued Operations at 31 December 2010 may be analysed as follows:
At 31 December 2010 of which Related parties Total (Note 34) 3,567 3,856 737 679 58 492 166 1,211 10,029 3,898 1,791 10,908 2,865 552 934 112 24 88 3,686 24,746 11 34,786 691 679 12 163 2,865 -
( million)
Note (14) (15) (16)
ASSETS Intangible assets Property, plant and equipment Investments and other financial assets: Investments accounted for using the equity method Other investments and financial assets Leased assets Defined benefit plan assets Deferred tax assets Total Non-current assets Inventories Trade receivables Receivables from financing activities Financial receivables from Continuing Operations Current tax receivables Other current assets Current financial assets: Current investments Current securities Other financial assets Cash and cash equivalents Total Current assets Assets held for sale TOTAL ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS LIABILITIES Provisions: Employee benefits Other provisions Debt: Asset-backed financing Debt payable to Continuing Operations Other debt Other financial liabilities Trade payables Current tax payables Deferred tax liabilities Other current liabilities Liabilities held for sale TOTAL LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS
(17) (11) (18) (19) (19) (19) (19)
(20) (21) (22)
(24) (25) (26)
(21) (27) (11) (28)
4,275 2,017 2,258 18,695 8,321 5,626 4,748 147 3,906 503 52 2,342 29,920
23 23 5,900 219 5,626 55 89 48 -
Details of the major balance sheet items forming part of Discontinued Operations are provided in the notes referred to above. Details of assets and liabilities by segment are disclosed in Note 30 Segment reporting.
175
Assets and liabilities held for sale at 31 December 2010 include certain buildings and factories of the Fiat Group Automobiles sector and the investment in a minor company in Brazil, which was classified as held for sale on acquisition. In addition to the above items, at 31 December 2009 Assets and liabilities held for sale also included certain buildings and factories of the Comau and Agricultural and Construction Equipment sectors, and the net assets of Targa Rent S.r.l., a minor subsidiary of the Fiat Group Automobiles sector that was sold during the first quarter of 2010. Cash flows from Discontinued Operations Details of cash flows from Discontinued Operations are as follows:
( million)
2010 378 665 192 32 122 30 40 26 1,052 2,537
2009 (503) 637 254 18 46 (123) (35) (41) 1,032 1,285
CASH FLOWS FROM (USED IN) THE OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS Post-tax profit/(loss) from Discontinued Operations Amortisation and depreciation (net of vehicles sold under buy-back commitments and leased assets) (Gains) losses on disposal of non-current assets and other non-cash items Dividends received Change in provisions Change in deferred taxes Change in items due to buy-back commitments Change in operating lease items Change in working capital TOTAL CASH FLOWS FROM (USED IN) THE INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS Investments in: Property plant and equipment and intangible assets (net of vehicles sold under buy-back commitments and leased assets) Investments in consolidated subsidiaries Proceeds from the sale of non-current assets (net of vehicles sold under buy-back commitments) Net change in receivables from financing activities Change in current securities Other changes TOTAL CASH FLOWS FROM (USED IN) THE FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS Net change in other financial payables and other financial assets/liabilities TOTAL
(854) (5) 31 335 18 32 (443)
(702) (5) 12 1,120 17 (32) 410
2,084 2,084
708 708
As discussed earlier concerning the assets and liabilities and cash flows of Discontinued Operations, the amounts stated in the preceding statements are not fully representative of the statement of financial position and statement of cash flows of the Fiat Industrial Group considered separately. Accordingly, for completeness of information, the carved out statement of financial position and statement of cash flows of the Fiat Industrial Group (meaning those representing the combined historical financial statements of the business forming the Fiat Industrial Group), as if it had not been part of the Fiat Group until 31 December 2010, are set out below: in other words, the amounts reported in these statements are reported before elimination of items resulting from transactions with the Continuing Operations of the Fiat Group. For the income statement on the other hand, the statement presented in the previous paragraph Post-tax profit/(loss) from Discontinued Operations is representative of the performance of the Fiat Industrial Group.
176
NOTES
Fiat Industrial Historical combined Statement of financial position

( million)
At 31 December 2010 3,567 3,856 737 492 166 1,211 10,029 3,898 1,839 10,908 2,865 618 955 112 24 88 3,686 24,881 11 34,921 26,600
At 31 December 2009 3,200 3,846 671 457 126 917 9,217 4,144 1,729 10,605 2,201 315 946 190 37 153 1,561 21,691 11 30,919 24,401
ASSETS Intangible assets Property, plant and equipment Investments and other financial assets Leased assets Defined benefit plan assets Deferred tax assets Total Non-current assets Inventories Trade receivables Receivables from financing activities Financial receivables from Fiat Group Post-Demerger Current tax receivables Other current assets Current financial assets: Current securities Other financial assets Cash and cash equivalents Total Current assets Assets held for sale TOTAL ASSETS Total assets adjusted for asset-backed financing transactions EQUITY AND LIABILITIES Equity: Issued capital and reserves attributable to owners of the parent Non-controlling interest Provisions: Employee benefits Other provisions Debt: Asset-backed financing Debt payable to Fiat Group Post-Demerger Other debt Other financial liabilities Trade payables Current tax payables Deferred tax liabilities Other current liabilities Liabilities held for sale TOTAL EQUITY AND LIABILITIES Total equity and liabilities adjusted for asset-backed financing transactions
4,744 3,987 757 4,275 2,017 2,258 18,695 8,321 5,626 4,748 147 4,077 508 52 2,423 34,921 26,600
5,791 5,073 718 3,958 1,905 2,053 15,008 6,518 4,948 3,542 227 3,220 262 62 2,391 30,919 24,401
177
Fiat Industrial Historical combined Statement of cash flows

( million)
A CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR B) CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES DURING THE YEAR: Profit/(loss) Amortisation and depreciation (net of vehicles sold under buy-back commitments and leased assets) (Gains) losses on disposal of non-current assets and other non-cash items Dividends received Change in provisions Change in deferred taxes Change in items due to buy-back commitments Change in operating lease items Change in working capital TOTAL C) CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: Investments in: Property plant and equipment and intangible assets (net of vehicles sold under buy-back commitments and leased assets) Other investments Proceeds from the sale of non-current assets Net change in receivables from financing activities Change in current securities Other changes TOTAL D) CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES New issuance of bonds Repayment of bonds Issuance of other medium-term borrowings Repayment of other medium-term borrowings Net change in other financial payables and other financial assets/liabilities Net change in financial payables to post-Demerger Fiat Group Increase in share capital Dividends paid TOTAL Translation exchange differences E) TOTAL CHANGE IN CASH AND CASH EQUIVALENTS F) CASH AND CASH EQUIVALENTS AT END OF THE YEAR
2010 1,561 378 665 192 32 122 30 40 26 1,070 2,555
2009 1,090 (503) 637 254 18 46 (123) (35) (41) 869 1,122
(872) (27) 42 335 18 76 (428) 1,132 (377) 832 (830) 1,281 (3,221) 1,156 (93) (120) 118 2,125 3,686
(708) (5) 12 1,120 17 (32) 404 717 (358) 522 (749) 623 (1,622) 312 (561) (1,116) 61 471 1,561
178
NOTES
COMPOSITION AND PRINCIPAL ChANGES 1. Net revenues Net revenues may be analysed as follows:
2010
( million)
2009 Continuing Operations 29,981 2,223 119 53 72 19 17 32,684 Discontinued Operations Eliminations 16,288 (311) 502 (229) 814 199 148 17 17,968 (15) 5 (550) Total 45,958 2,496 918 258 271 167 34 50,102
Sales of goods Rendering of services Interest income from customers and other financial income of financial services companies Contract revenues Rents on assets sold with a buy-back commitment Rents on operating leases Other Total Net revenues
Continuing Operations 32,752 2,163 186 708 45 1 25 35,880
Discontinued Operations Eliminations 19,728 (725) 486 (244) 781 3 181 149 14 21,342 (17) 22 (964)
Total 51,755 2,405 950 7332 226 150 39 56,258
2. Cost of sales Cost of sales comprises the following:

2010
( million)
2009 Continuing Operations 63 28,189 28,252 Discontinued Operations Eliminations 749 14,800 15,549 (8) (532) (540) Total 804 42,457 43,261
Continuing Operations 107 30,611 30,718
Discontinued Operations Eliminations 761 17,218 17,979 (5) (954) (959)
Total 863 46,875 47,738
Interest cost and other financial expenses from financial services companies Other costs of sales Total Cost of sales
3. Selling, general and administrative costs Selling costs included in Profit (loss) from Continuing Operations amount to 1,812 million in 2010 (1,666 million in 2009). Selling costs included in Profit (loss) from Discontinued Operations amount to 897 million in 2010 (838 million in 2009). This item comprises mainly marketing, advertising, and sales personnel costs. General and administrative costs included in the Profit (loss) from Continuing Operations amount to 1,144 million in 2010 (1,007 million in 2009) and comprise mainly expenses for administration which are not attributable to sales, production and research and development functions. The same item included in the Profit (loss) from Discontinued Operations amount to 896 million in 2010 (798 million in 2009). 4. Research and development costs In 2010, Research and development costs of 1,013 million (1,010 million in 2009) included in Profit (loss) from Continuing Operations comprise all the research and development costs not recognised as assets in the year, amounting to 398 million (406 million in 2009), the write-down of costs previously capitalised of 39 million (46 million in 2009), and the amortisation of capitalised development costs of 576 million (558 million in 2009). During 2010, the businesses in Continuing Operations incurred new expenditure for capitalised development costs of 886 million (748 million in 2009). In 2010, Research and development costs of 418 million (388 million in 2009) included in Profit (loss) from Discontinued Operations comprise all the research and development costs not recognised as assets in the year, amounting to 256 million (240 million in 2009), the write-down of costs previously capitalised of 3 million (1 million in 2009), and the amortisation of capitalised development costs of 159 million (147 million in 2009). During 2010, the businesses in Discontinued Operations incurred new expenditure for capitalised development costs of 396 million (298 million in 2009).
179
5. Other income (expenses) This item consists of income arising from trading operations which is not attributable to the sale of goods and services (such as royalties and other income from licences and know-how), net of miscellaneous operating costs which cannot be allocated to specific functional areas, such as indirect taxes and duties, and accruals for various provisions not attributable to other items of Cost of sales or Selling, general and administrative costs. Other income (expenses) included in profit/(loss) from Discontinued Operations for 2010 consists of income of approximately 30 million for the Agricultural and Construction equipment sector resulting from changes in the North American health care plans. 6. Gains (losses) on the disposal of investments Gains (losses) on the disposal of investments included in Profit (loss) from Continuing Operations in 2010 amount to a net gain of 12 million (a net gain of 3 million in 2009) and include 10 million arising from the acquisition of the remaining 50% of the joint venture Fiat GM Powertrain Polska. Gains (losses) on the disposal of investments included in Profit (loss) from Discontinued Operations in 2010 amount to a net gain of 3 million (a net gain of 1 million in 2009) and mainly consist of the gains realised from the Agricultural and Construction Equipment Sector on the sale of the investment in the joint venture LBX Company LLC. 7. Restructuring costs Restructuring costs included in Profit (loss) from Continuing Operations in 2010 amount to 118 million; this amount mainly relates to the sectors Fiat Group Automobiles (90 million) and Components (26 million). In 2009, restructuring costs included in Profit (loss) from Continuing Operations and amounting to 168 million mainly related to the sectors Magneti Marelli (62 million), Fiat Powertrain (21 million) and Fiat Group Automobiles (54 million). Restructuring costs included in Discontinued Operations in 2010 amount to 58 million; this mainly relates to the sectors FPT Industrial (33 million), Iveco (19 million) and Agricultural and Construction Equipment (5million). In 2009, in 2009 restructuring costs included in Discontinued Operations and amounting to 144 million mainly related to the sectors Agricultural and Construction equipment (87 million), FPT Industrial (35 million), and Iveco (22 million). 8. Other unusual income (expenses) Other unusual expenses included in Profit (loss) from Continuing Operations amount to 14 million in 2010. In 2009 the same item consisted of net expense of 193 million, which included the effects of write-downs of 104 million of certain investments in platforms and architectures made by the Automobiles business in relation to the strategic realignment with the Chrysler business, accessory costs of 41 million relating to the acquisition of the interest in Chrysler, other non-recurring charges and costs for the write-down of assets recognised by the Group as the result of the global economic crisis. Other unusual expenses included in Profit (loss) from Discontinued Operations amount to 20 million in 2010. In 2009 the same item consisted of net expense of 198 million, which included other asset write-downs recognised by the Group as a consequence of the global economic crisis (of which 173 million relating to the Iveco sector). 9. Financial income (expenses) In addition to the items included in the specific lines of the income statement, Net financial income (expenses) from Continuing Operations in 2010 also includes the Interest income from customers and other financial income of financial services companies included in Net revenues for 186 million (119 million in 2009) and Interest cost and other financial charges from financial services companies included in Cost of sales for 107 million (63 million in 2009). Net financial income (expenses) from Discontinued Operations in 2010 also includes the Interest income from customers and other financial income of financial services companies included in Net revenues for 781 million (814 million in 2009) and Interest cost and other financial charges from financial services companies included in Cost of sales for 761 million (749 million in 2009).
180
NOTES
A reconciliation to the income statement is provided at the foot of the following table.
2010
( million)
2009 Continuing Discontinued Operations Operations Eliminations 112 112 306 7 537 418 41 806 35 882 68 (35) (306) (341) (326) Total 153 918 7 1,078 160
Continuing Discontinued Operations Operations Eliminations 239 173 272 10 694 508 36 777 45 858 77 (45) (272) (317) (300)
Total 275 950 10 1,235 285
Financial income: Interest income and other financial income Interest income from customers and other financial income of financial services companies Interest income receivable from Continuing Operations Interest income receivables from Discontinued Operations Gains on disposal of securities Total Financial income of which: Financial income, excluding financial services companies (a) Interest cost and other financial expenses: Interest expense and other financial expenses Interest expense payable to Continuing Operations Interest expense payable to Discontinued Operations Write-downs of financial assets Losses on disposal of securities Interest costs on employee benefits Total Interest and other financial expenses Net income (expenses) from derivative financial instruments and exchange differences of which: Interest cost and other financial expenses, effects resulting from derivative financial instruments and exchange differences, excluding financial services companies (b) Net financial income (expenses) excluding financial services companies (a) (b)
1,049 45 57 12 50 1,213
658 260 253 75 1,246
(260) (45) (305)
1,707 310 12 125 2,154
876 35 5 12 68 996
561 299 189 92 1,141
(299) (35) (334)
1,437 194 12 160 1,803
198
(97)
101
163
(77)
86
908
582
(300)
1,190
770
469
(326)
913
(400)
(505)
(905)
(352)
(401)
(753)
Net financial expenses from Continuing Operations in 2010 (excluding financial services companies) totalled 400 million, and include net financial income of 111 million arising from the equity swaps on Fiat shares, relating to certain stock option plans (see Note 21 for further details). Net financial expense from Continuing Operations of 352 million in 2009 included net income of 117 million arising from the above mentioned equity swaps on Fiat shares. Net financial expenses from Discontinued Operations in 2010 (excluding financial services companies) totalled 505 million (financial expenses of 401 million in 2009). Interest income and other financial income may be analysed as follows:
2010
( million)
2009 Continuing Discontinued Operations Operations 47 15 9 1 55 26 112 41 Total 62 9 1 81 153
Interest income from banks Interest income from securities Commission income Other interest income and financial income Total Interest income and other financial income
Continuing Discontinued Operations Operations 125 9 7 1 106 27 239 36
Total 134 7 1 133 275
181
Interest cost and other financial expenses may be analysed as follows:

2010
( million)
2009 Continuing Discontinued Operations Operations 444 67 170 153 3 1 9 10 250 330 876 561 Total 511 323 4 19 580 1,437
Interest expenses on bonds Bank interest expenses Interest expenses on trade payables Commission expenses Other interest cost and financial expenses Total Interest cost and other financial expenses
Continuing Discontinued Operations Operations 668 146 126 179 3 4 7 8 245 321 1,049 658
Total 814 305 7 15 566 1,707
10. Result from investments In 2010 the net gain included in Profit (loss) from Continuing Operations, amounting to 114 million (77 million in 2009), includes the Groups share of 120 million (65 million in 2009) in the net profit or loss of the investees accounted for using the equity method, and a net loss of 6 million (a net gain of 12 million in 2009) consisting of impairment losses and reversals of impairment losses, accruals to the Investment provision and dividend income. In detail the item includes (amounts in million): Fiat Group Automobiles sector companies 131 (96 in 2009), other companies -17 (-19 in 2009). In 2010 the net gain included in Profit (loss) from Discontinued Operations, amounting to 64 million (a net loss of 50 million in 2009), includes the Groups share of 70 million (-47 million in 2009) in the net profit or loss of the investees accounted for using the equity method, and a net loss of 6 million (a net loss of 3 million in 2009) consisting of impairment losses and reversals of impairment losses, accruals to the Investment provision and dividend income. In detail the item includes (amounts in million): entities of Agricultural and Construction equipment sector companies 75 (-26 in 2009); entities of Trucks and Commercial Vehicles sector -11 (-24 in 2009). 11. Income taxes Income taxes recognised in the income statement consist of the following:
2010
( million)
2009 Continuing Discontinued Operations Operations 95 415 510 4 130 134 Total 99 545 644
Continuing Discontinued Operations Operations 71 558 629 19 181 200
Total 90 739 829
Current taxes: IRAP Other taxes Total Current taxes Deferred taxes for the period: IRAP Other taxes Total Deferred taxes Taxes relating to prior periods Total Income taxes
(21) (127) (148) 3 484
(7) (7) 5 198
(21) (134) (155) 8 682
(33) (28) (61) (1) 448
(126) (126) 25 33
(33) (154) (187) 24 481
Overall, the increase in the charge for current and deferred taxes in 2010 with respect to 2009 is due mainly to an increase in the taxable profits of non-Italian companies, partially offset by the recognition of deferred tax assets of a non-recurring nature. Taxes relating to prior periods include the cost arising from certain disputes with the tax authorities. The effective tax rate of the Fiat Group for 2010 (excluding current and deferred IRAP) was 48%. The effective tax rate for 2009 (excluding current and deferred IRAP) was not representative because tax expenses were incurred with respect to a consolidated book loss.
182
NOTES
The reconciliation between the tax charges recorded in the consolidated financial statements and the theoretical tax charge, calculated on the basis of the theoretical tax rate in effect in Italy, is the following:
( million)
Theoretical income taxes Tax effect of permanent differences Taxes relating to prior years Effect of difference between foreign tax rates and the theoretical Italian tax rate Effect of deferred tax assets not recognised in prior years Effect of deferred tax assets not recognised and write-off of deferred tax assets Use of tax losses for which no deferred tax assets were recognised Other differences Current and deferred income tax recognised in the financial statements, excluding IRAP IRAP (current and deferred) Current and deferred income tax recognised in the financial statements
2010 352 (8) 8 121 (61) 161 (17) 57 613 69 682
2009 (101) 56 24 45 426 (64) 29 415 66 481
Since the IRAP tax has a taxable basis that is different from income before taxes, it generates distortions between one year and another. Accordingly, in order to render the reconciliation between income taxes recognised and theoretical income taxes more meaningful, IRAP tax is not taken into consideration; theoretical income taxes are determined by applying only the tax rate in effect in Italy (IRES equal to 27.5% in 2010 and 2009) to profit/(loss) before taxes from Continuing and Discontinued operations, totalling 1,282 million. Permanent differences in the above reconciliations include the tax effect of non-taxable income of 140 million in 2010 (136 million in 2009) and of non-deductible costs of 132 million in 2010 (192 million in 2009). Reconciling items relating to deferred tax assets gave rise to total tax expense of 83 million in 2010 (total tax expense of 362 million in 2009), consisting of expense of 161 million resulting from the decision not to recognise assets deriving from temporary differences and tax losses arising during the year, partially offset by income deriving from the recognition of previously unrecognised deferred tax assets of 61 million and the effect of utilising tax losses of 17 million for which deferred tax assets had not been recognised in previous years. Other differences in the above reconciliation include unrecoverable withholding tax of 89 million (57 million in 2009). Net deferred tax assets at 31 December 2010 consist of deferred tax assets, net of deferred tax liabilities, which have been offset where possible by the individual consolidated companies. The net balance of Deferred tax assets and Deferred tax liabilities may be analysed as follows:
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 1,211 2,889 2,580 (52) (187) (152) 1,159 2,702 2,428
( million)
Deferred tax assets Deferred tax liabilities Total
Continuing Operations 1,678 (135) 1,543
The increase in net deferred tax assets, as analysed in the following table, is mainly due to: the recognition of deferred tax assets of 155 million, arising from temporary differences and tax losses that arose during the year, net of the effect of recognising or writing off deferred tax assets relating to prior years; the corresponding tax effect of items recorded directly in equity amounting to 3 million; positive exchange rate differences, change in the scope of consolidation and other changes amounting to 116 million.
183
Deferred tax assets, net of Deferred tax liabilities may be analysed by source as follows:
At 31 Recognised December in income 2009 statement 1,783 333 202 426 458 159 29 500 3,890 138 8 23 (49) 184 9 (53) 260 Changes in the Charged scope of to equity consolidation 8 8 (1) 1 14 14 Translation Reclassified differences to and other Discontinued changes Operations 90 6 16 35 2 7 156 (501) (118) (154) (379) (238) (13) (27) (267) (1.697) At 31 December 2010 1,509 229 88 33 404 157 17 194 2,631
( million)
Deferred tax assets arising from: Taxed provisions Inventories Taxed allowances for doubtful accounts Provision for employee benefits Intangible assets Write-downs of financial assets Measurement of derivative financial instruments Other Total Deferred tax assets Deferred tax liabilities arising from: Accelerated depreciation Deferred tax on gains on disposal Capital investment grants Provision for employee benefits Capitalisation of development costs Other Total Deferred tax liabilities Theoretical tax benefit arising from tax loss carryforwards Adjustments for assets whose recoverability is not probable Total Deferred tax assets, net of Deferred tax liabilities
(527) (2) (6) (22) (910) (582) (2,049) 3,894 (3,307) 2,428
22 (148) 2 28 30 (66) (541) 502 155
(5) (5) 3
(6) (3) (13) (22) 4 15 11
(28) (20) (20) (68) 82 (65) 105
273 6 197 235 711 (858) 685 (1.159)
(266) (150) (4) (16) (708) (355) (1,499) 2,581 (2,170) 1,543
The decision to recognise Deferred tax assets is taken for each company in the Group by assessing critically whether the conditions exist for the future recoverability of such assets on the basis of updated strategic plans, accompanied by the related tax plans. For this reason, the total theoretical future tax benefits arising from deductible temporary differences (2,631 million at 31 December 2010 and 3,890 million at 31 December 2009) and tax loss carryforwards (2,581 million at 31 December 2010 and 3,894 million at 31 December 2009) have been reduced by 2,170 million at 31 December 2010 and 3,307 million at 31 December 2009. In particular, at 31 December 2010 Deferred tax assets, net of Deferred tax liabilities, include tax benefits arising from unused tax losses of 1,012 million in Continuing Operations and 303 million in Discontinued Operations; at 31 December 2009 the corresponding item for the Fiat Group as a whole was 1,259 million. At 31 December 2010, further tax benefits arising from unused tax losses amounting to 1,569 million for Continuing Operations and 555 million for Discontinued Operations have not been recognised. At 31 December 2009 the corresponding item for the Fiat Group as a whole was 2,635 million. Deferred taxes have not been provided on the undistributed earnings of subsidiaries since the Fiat Group Post-Demerger and the Fiat Industrial Group is able to control the timing of the distribution of these reserves and it is probable that they will not be distributed in the foreseeable future.
184
NOTES
The totals of deductible and taxable temporary differences and accumulated tax losses at 31 December 2010, included in Continuing Operations, together with the amounts for which deferred tax assets have not been recognised, analysed by year of expiry, are as follows:
Total at 31 December 2010 Year of expiry Unlimited/ Beyond indetermi2014 nable
( million)
2011
2012
2013
2014
Temporary differences and tax losses relating to State taxation (IRES in the case of Italy): Deductible temporary differences Taxable temporary differences Tax losses Temporary differences and tax losses for which deferred tax assets have not been recognised Temporary differences and tax losses relating to State taxation Temporary differences and tax losses relating to local taxation (IRAP in the case of Italy): Deductible temporary differences Taxable temporary differences Tax losses Temporary differences and tax losses for which deferred tax assets have not been recognised Temporary differences and tax losses relating to local taxation
8,521 (4,785) 8,854 (7,354) 5,236
1,726 (1,533) 1,237 (839) 591
1,144 (637) 398 (616) 289
1,203 (566) 193 (281) 549
1,109 (412) 352 (519) 530
3,339 (1,637) 1,774 (2,074) 1,402
4,900 (3,025) 1,875
5,574 (3,687) 907 (1,012) 1,782
1,228 (805) 12 (75) 360
652 (616) 10 (8) 38
622 (609) 10 4 27
587 (364) 11 9 243
2,485 (1,293) 274 (343) 1,123
590 (599) (9)
The totals of deductible and taxable temporary differences and accumulated tax losses at 31 December 2010, included in Discontinued Operations, together with the amounts for which deferred tax assets have not been recognised, analysed by year of expiry, are as follows:
Total at 31 December 2010 Year of expiry Unlimited/ Beyond indetermi2014 nable
( million)
2011
2012
2013
2014
Temporary differences and tax losses relating to State taxation (IRES in the case of Italy): Deductible temporary differences Taxable temporary differences Tax losses Temporary differences and tax losses for which deferred tax assets have not been recognised Temporary differences and tax losses relating to State taxation Temporary differences and tax losses relating to local taxation (IRAP in the case of Italy): Deductible temporary differences Taxable temporary differences Tax losses Temporary differences and tax losses for which deferred tax assets have not been recognised Temporary differences and tax losses relating to local taxation
4,877 (2,046) 3,008 (2,336) 3,503
2,202 (130) 11 (972) 1,111
340 (471) 15 (30) (146)
341 (481) 20 (30) (150)
298 (413) 25 (23) (113)
1,696 (551) 488 (449) 1,184
2,449 (832) 1,617
1,150 (142) 135 (114) 1,029
269 (20) (11) 238
118 (17) (11) 90
116 (17) (11) 88
107 (17) (4) 86
540 (71) (65) 404
135 (12) 123
185
12. Other information by nature Profit/(loss) from Continuing Operations includes personnel costs of 4,767 million in 2010 (4,221 million in 2009). The Profit/(loss) from Discontinued Operations includes personnel costs of 2,867 million in 2010 (2,589 million in 2009). An analysis of the average number of employees by category is provided as follows:
2010 Continuing Discontinued Operations Operations 1,452 791 38,537 19,505 95,092 41,346 135,081 61,642 Total 2,243 58,042 136,438 196,723 Continuing Discontinued Operations Operations 1,476 857 37,808 19,997 88,016 42,497 127,300 63,351 2009 Total 2,333 57,805 130,513 190,651
Managers White-collar Blue-collar Average number of employees
13. Earnings/(loss) per share As explained in Note 23 below, Fiat S.p.A. share capital is represented by three different classes of shares (ordinary shares, preference shares and savings shares) which participate in dividends with different rights. Profit or loss for the period attributable to each class of share is determined in accordance with the shares contractual dividend rights. For this purpose in 2010 the Profit attributable to owners of the parent entity has been adjusted by the amount of the preference dividends attributable to savings shares declared in the period equal to 0.31 per share. In order to determine earnings per share, the amount obtained has been divided by the weighted average number of outstanding shares. In 2009 the loss attributable to the owners of the parent was equally allocated to all three classes of share. Payment of the proposed dividend is contingent upon approval by Shareholders in general meeting and has therefore not been recognised as a liability in the Group Consolidated financial statements at 31 December 2010. The following table shows the Profit or loss attributable to owners of the parent and the Profit or loss attributable to each class of share and the weighted average number of outstanding shares for the Group for the two years presented:
2010 Ordinary shares Profit/(loss) for the period attributable to owners of the parent Preferred dividends declared for the period Profit/(loss) equally attributable to all classes of shares Profit/(loss) attributable to each class of shares Weighted average number of shares outstanding Basic Earnings/(loss) per share million million million million thousand Preference shares Savings shares Total 520 57 463 520 1,236,884 Ordinary shares Preference shares Savings shares 2009 Total (838) (838) (838) 1,236,884
433 433 1,053,679 0.410
32 10 42 103,292 0.410
25 20 45 79,913 0.565
(714) (714) 1,053,679 (0.677)
(70) (70) 103,292 (0.677)
(54) (54) 79,913 (0.677)
186
NOTES
The following tables show the same amounts used in the determination of the earnings per share for Continuing Operations and Discontinued Operations. These figures have been calculated by taking into account the dividend rights established for Fiat S.p.A. and Fiat Industrial S.p.A. shares post-Demerger.
2010 Ordinary shares Profit/(loss) from Continuing Operations attributable to owners of the parent Preferred dividends attributable for the period Profit/(loss) equally attributable to ordinary and savings shares Profit/(loss) attributable to all classes of shares Profit/(loss) attributable to each class of shares Weighted average number of shares outstanding Basic Earnings/(loss) per share Continuing Operations Profit/(loss) from Discontinued Operations attributable to owners of the parent Preferred dividends attributable for the period Profit/(loss) equally attributable to all classes of shares Profit/(loss) attributable to each class of shares Weighted average number of shares outstanding Basic Earnings/(loss) per share Discontinued Operations million million million million million thousand Preference shares Savings shares Total 179 40 139 179 1,236,884 Ordinary shares Preference shares Savings shares 2009 Total (374) (374) (374) 1,236,884
137 137 1,053,679 0.130
23 23 103,292 0.217
17 2 19 79,913 0.239
(319) (319) 1,053,679 (0.302)
(31) (31) 103,292 (0.302)
(24) (24) 79,913 (0.302)
million million million million thousand
287 287 1,053,679 0.273
10 18 28 103,292 0.273
8 18 26 79,913 0.319
341 18 323 341 1,236,884
(397) (397) 1,053,679 (0.375)
(38) (38) 103,292 (0.375)
(29) (29) 79,913 (0.375)
(464) (464) (464) 1,236,884
For the purpose of calculating the diluted earnings per share for the two years presented, the number of ordinary shares considered is the average number of shares outstanding plus dilutive potential ordinary shares arising from shares that would be issued on the exercise of all stock option plans or other similar. In 2009, stock option and stock grant plans based on Fiat S.p.A. ordinary shares were not taken into consideration in the calculation of diluted earnings per share as they would have had an antidilutive effect. In 2010 no dilutive effects arose from the stock option plans granted by Fiat S.p.A. on its ordinary shares having an exercise price of over 10.25 per share (the average price of Fiat ordinary shares in 2010). Finally, for both years the theoretical effect that would arise if the stock options granted by the Groups subsidiaries on their equity instruments were to be exercised was not considered because it was antidilutive or nil.
187
The figures used to determine diluted earnings per shares for the Fiat Group are as follows:
2010 Ordinary shares Profit/(Loss) attributable to each class of shares Weighted average number of shares outstanding Number of shares deployable for stock option plans Number of shares considered in the diluted earnings per share Diluted Earnings/(loss) per share million thousand thousand thousand 433 1,053,679 5,936 1,059,615 0.409 Preference shares 42 103,292 103,292 0.409 Savings shares 45 79,913 79,913 0.564 Total 520 1,236,884 5,936 1,242,820 Ordinary shares (714) 1,053,679 1,053,679 (0.677) Preference shares (70) 103,292 103,292 (0.677) Savings shares (54) 79,913 79,913 (0.677) 2009 Total (838) 1,236,884 1,236,884
The figures used to determine diluted earnings per shares for the Continuing and Discontinued Operations are as follows:
2010 Ordinary shares Profit/(Loss) from Continuing Operations attributable to each class of shares Profit/(Loss) from Discontinued Operations attributable to each class of shares Weighted average number of shares outstanding Number of shares deployable for stock option plans Number of shares considered in the diluted earnings per share Diluted Earnings/(loss) per share Continuing Operations Diluted Earnings/(loss) per share Discontinued Operations million million thousand thousand thousand 137 287 1,053,679 5,936 1,059,615 0.130 0.272 Preference shares 23 28 103,292 103,292 0.217 0.272 Savings shares 19 26 79,913 79,913 0.238 0.318 Total 179 341 1,236,884 5,936 1,242,820 Ordinary shares (319) (397) 1,053,679 1,053,679 (0.302) (0.375) Preference shares (31) (38) 103,292 103,292 (0.302) (0.375) Savings shares (24) (29) 79,913 79,913 (0.302) (0.375) 2009 Total (374) (464) 1,236,884 1,236,884
14. Intangible assets In 2010 and 2009, changes in the gross carrying amount of Intangible assets were as follows:
At 31 December 2009 3,437 206 3,343 4,504 7,847 1,276 890 31 13,687 Changes in the scope of Additions Divestitures consolidation 357 925 1,282 78 86 12 1,458 (20) (8) (28) (3) (48) (79) 2 3 5 Translation Reclassified differences to and other Discontinued changes Operations 194 (2,359) 16 (219) 18 112 130 27 46 (7) 406 (582) (2,026) (2,608) (638) (423) (7) (6,254) At 31 December 2010 1,272 3 3,116 3,507 6,623 742 554 29 9,223
( million)
Goodwill Trademarks and other intangible assets with indefinite useful lives Development costs externally acquired Development costs internally generated Total Development costs Patents, concessions and licenses externally acquired Other intangible assets externally acquired Advances and intangible assets in progress externally acquired Total gross carrying amount of Intangible assets
188
NOTES
( million)
Goodwill Trademarks and other intangible assets with indefinite useful lives Development costs externally acquired Development costs internally generated Total Development costs Patents, concessions and licenses externally acquired Other intangible assets externally acquired Advances and intangible assets in progress externally acquired Total gross carrying amount of Intangible assets
At 31 December 2008 3,489 213 2,990 3,756 6,746 1,190 820 48 12,506
Changes in the scope of Additions Divestitures consolidation 307 739 1,046 68 69 7 1,190 (22) (40) (62) (11) (13) (86) (1) (2) (3)
Translation differences and other changes (52) (7) 68 49 117 33 16 (24) 83
Reclassified to Assets held for sale (3) (3)
At 31 December 2009 3,437 206 3,343 4,504 7,847 1,276 890 31 13,687
In 2010 and in 2009 changes in accumulated amortisation and impairment losses were as follows:
At 31 December 2009 661 41 2,001 2,253 4,254 917 595 20 6,488 Changes in the Impairment scope of losses Divestitures consolidation 10 32 42 6 4 52 (19) (5) (24) (3) (48) (75) 1 1 Translation Reclassified differences to and other Discontinued changes Operations 42 (511) 4 (45) 5 75 80 11 18 155 (309) (1,064) (1,373) (459) (299) (2,687) At 31 December 2010 192 1,989 1,725 3,714 585 358 24 4,873
( million)
Goodwill Trademarks and other intangible assets with indefinite useful lives Development costs externally acquired Development costs internally generated Total Development costs Patents, concessions and licenses externally acquired Other intangible assets externally acquired Advances and intangible assets in progress externally acquired Total accumulated amortisation and impairment of Intangible assets
Amortisation 301 434 735 118 86 939
( million)
Goodwill Trademarks and other intangible assets with indefinite useful lives Development costs externally acquired Development costs internally generated Total Development costs Patents, concessions and licenses externally acquired Other intangible assets externally acquired Advances and intangible assets in progress externally acquired Total accumulated amortisation and impairment of Intangible assets
At 31 December 2008 674 43 1,646 1,771 3,417 801 513 10 5,458
Amortisation 286 419 705 126 73 904
Changes in the Impairment scope of losses Divestitures consolidation 50 64 114 10 124 (32) (32) (7) (8) (47) (1) (2) (3)
Translation differences Reclassified and other to Assets changes held for sale (13) (2) 19 31 50 1 19 55 (3) (3)
At 31 December 2009 661 41 2,001 2,253 4,254 917 595 20 6,488
189
In 2010 and in 2009 changes in the net carrying amount of Intangible assets were as follows:
At 31 December 2009 2,776 165 1,342 2,251 3,593 359 295 11 7,199 Change in the Translation Reclassified scope of diff. to Divesticonsoliand other Discontinued tures dation changes Operations 152 (1,848) (1) (3) (4) (4) 1 3 4 12 13 37 50 16 28 (7) 251 (174) (273) (962) (1,235) (179) (124) (7) (3,567) At 31 December 2010 1,080 3 1,127 1,782 2,909 157 196 5 4,350
( million)
Goodwill Trademarks and other intangible assets with indefinite useful lives Development costs externally acquired Development costs internally generated Total Development costs
Additions 357 925 1,282 78 86 12 1,458
Amortisation (301) (434) (735) (118) (86) (939)
Impairment losses (10) (32) (42) (6) (4) (52)
Patents, concessions and licenses externally acquired Other intangible assets externally acquired Advances and intangible assets in progress externally acquired Total net carrying amount of Intangible assets
( million)
Goodwill Trademarks and other intangible assets with indefinite useful lives Development costs externally acquired Development costs internally generated Total Development costs
At 31 December 2008 2,815 170 1,344 1,985 3,329 389 307 38 7,048
Additions 307 739 1,046 68 69 7 1,190
Amortisation (286) (419) (705) (126) (73) (904)
Impairment losses (50) (64) (114) (10) (124)
Change in the scope of Divesticonsolitures dation (22) (8) (30) (4) (5) (39) -
Translation Reclassified diff. to Assets and other held changes for sale (39) (5) 49 18 67 32 (3) (24) 28 -
At 31 December 2009 2,776 165 1,342 2,251 3,593 359 295 11 7,199
Patents, concessions and licenses externally acquired Other intangible assets externally acquired Advances and intangible assets in progress externally acquired Total net carrying amount of Intangible assets
Foreign exchange gains of 258 million in 2010 principally reflect the appreciation of the US Dollar and the Brazilian Real against the Euro. Foreign exchange gains of 27 million in 2009 principally reflect the appreciation of the Brazilian Real against the Euro, partially offset by the depreciation of the US Dollar against the Euro. The above mentioned changes include the following items for 2010:
Continuing Operations Impairment Amortisations losses 576 39 67 50 6 4 693 49 Discontinued Operations Impairment Amortisations losses 159 3 51 36 246 3
( million)
Development costs Patents, concessions and licenses externally acquired Other intangible assets externally acquired Advances and intangible assets in progress externally acquired Total
Additions 886 58 60 6 1,010
Additions 396 20 26 6 448
190
NOTES
Goodwill, trademarks and intangible assets with indefinite useful lives Goodwill is allocated to the Groups cash-generating units (CGUs) identified as the Groups operating sectors. The following table presents the allocation of goodwill across the sectors:
( million)
Agricultural and Construction Equipment Ferrari Production Systems Components Trucks and Commercial Vehicles Metallurgical Products Fiat Group Automobiles Fiat Powertrain FPT Industrial Goodwill net carrying amount
Continuing Operations 786 135 121 18 18 2 1,080
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 1,794 1,794 1,662 786 786 135 125 121 118 52 52 56 18 18 18 10 2 1 2 2 1,848 2,928 2,776
At 31 December 2010 Trademarks and Other intangible assets with indefinite useful lives included in Discontinued Operations, attributable for 174 million to the Agricultural and Construction equipment sector, consisted of acquired trademarks and similar rights which have no legal, contractual, competitive or economic that limits their useful lives. For the purposes of impairment testing, these assets were attributed to the respective cash-generating units without the need for any recognition of impairment. Goodwill classified as Continuing Operations The vast majority of goodwill classified as Continuing Operations, representing approximately 85% of the total classified as Continuing Operations, is allocated to cash-generating units in the Ferrari and Production Systems sectors. The recoverable amount of the cash-generating units to which goodwill and other intangible assets with an indefinite useful life have been allocated is determined on the basis of their value in use, defined as the discounted value of the expected future operating cash flows at a rate of return that incorporates the risks associated with the particular cash-generating units as of the valuation date. The discounted cash flows approach is dependent on several critical management assumptions, including estimates of future sales growth, gross margins, operating costs, terminal value growth rates, capital expenditures, changes in working capital requirements and the weighted average cost of capital (discount rate). More in particular, for Ferrari, the cash generating unit corresponds to the sector as a whole, while in Comau goodwill has been allocated to the System, Pico and Service businesses. In those sectors, the cash-generating unit recoverable amount is determined on the basis of their value in use defined as the discounted value of the expected future operating cash flows resulting from the estimates included in the 2010-2014 strategic plan of the sector, extrapolated for later years on the basis of medium- to long-term growth rates depending on the detailed nature of the operations and the extent to which they are differentiated and on the forecasts made by the individual sector to which the cash-generating units belong. These cash flows are then discounted using rates that take account of current market assessments of the time value of money and the specific risks inherent in individual cash-generating units. The recoverable amount of the Ferrari and Comau cash-generating units and of the respective goodwill is the value in use and is determined on the basis of the following assumptions:
Terminal value growth rate 2% 2% 2010 Discount rate before taxes 8.3% 9.0% Terminal value growth rate 2% 0% 2009 Discount rate before taxes 10.4% 9.0%
Ferrari Production Systems
The recoverable amount of the cash generating unit to which the Ferrari sector goodwill relates is significantly higher than its carrying amount; in addition, the exclusivity of the business, its historical profitability and its future earnings prospects indicate that this carrying amount will continue to be recoverable, even in the event of economic and market conditions which remain difficult.
191
In the Comau sector, the sensitivity analysis was carried out on the residual goodwill, which is mainly allocated to the Pico cash-generating unit, but no matters arose to indicate that this may be significantly impaired. The results obtained for the other sectors and related sensitivity analyses also confirmed the absence of significant impairment losses. Goodwill classified as Discontinued Operations The vast majority of goodwill classified as Discontinued Operations, representing approximately 97% of the total classified as Discontinued Operations and amounting to 1,794 million, relates to the Agricultural and Construction Equipment sector, where the cash-generating units considered for the testing of the recoverability of the goodwill are generally the product lines of the sectors themselves. The recoverable amount of the cash-generating units to which goodwill and other intangible assets with an indefinite useful life have been allocated is determined on the basis of their value in use, defined as the discounted value of the expected future operating cash flows at a rate of return that incorporates the risks associated with the particular cash-generating units as of the valuation date. The discounted cash flows approach is dependent on several critical management assumptions, including estimates of future sales growth, gross margins, operating costs, terminal value growth rates, capital expenditures, changes in working capital requirements and the weighted average cost of capital (discount rate). More in particular, from 2006 to 2009, the Agricultural and Construction Equipment sector, managed its business at the brand level: Case IH and New Holland for Agricultural Equipment, Case and New Holland Construction for Construction Equipment; and Financial Services. In 2010, CNH began to manage its business at the Agricultural Equipment, Construction Equipment, and Financial Services level. The cash generating units to which goodwill has been allocated consist of the following product lines:
Amount allocated to goodwill at 31 December 2010 1,280 419 95 1,794
( million)
Agricultural equipment Construction equipment Financial Services Total
To determine the recoverable amount of these cash-generating units, the sector relied on discounted cash flows and, as a further method, on market multiples. In particular, the sector used the discounted cash flows approach as the primary approach for measuring the value in use of the Equipment Operations businesses, while used the total asset market multiples approach as the primary approach for measuring the fair value of the Financial Services reporting unit. Expected cash flows used under this method are developed in conjunction with the budgeting and forecasting process of the sector and represent the most likely amounts and timing of future cash flows based on the long range plan of CNH. The long range plan, which is updated annually and is reviewed by the senior management of CNH, includes, among other things, the expected benefits of planned manufacturing and product development actions as well as expectations regarding product pricing, market share and commodity costs, consistent with the assumptions reflected in the Fiat Groups 2010-2014 Strategic Plan. The sector uses eight years of expected cash flows as management believes that this period generally reflects the underlying market cycles for its businesses. The discount rates used in the discounted cash flows approach are an estimate of the rate of return that a market participant would expect of each cashgenerating unit. To select an appropriate rate for discounting the future earnings stream, a review was made of short-term interest rates and the yields of long-term corporate and government bonds, as well as the typical capital structure of companies in the industry. The discount rates used for each cashgenerating unit were suitably increased to take account of the risk inherent in the cash flow projections, as well as the risk level that would be perceived by a market participant. Considering the above mentioned factors, the following discount rates before taxes as of 31 December 2010 were selected by CNH:
Agricultural equipment Construction equipment 2010 17.0% 17.4% 2009 20.8% - 21.1% 19.2%
192
NOTES
A terminal value is included at the end of the projection period used in the discounted cash flow analyses in order to reflect the remaining value that each cash-generating unit is expected to generate. The terminal value represents the present value in the last year of the projection period of all subsequent cash flows into perpetuity. The terminal value growth rate is a key assumption used in determining the terminal value as it represents the annual growth of all subsequent cash flows into perpetuity. The terminal value growth rate selected in 2010 and 2009 for the Agricultural equipment cash-generating unit was 1% and that selected for the Construction equipment cash generating unit was 2%. The total asset market multiples were utilised in determining the fair value of the Financial Services reporting unit under the market approach. CNH used the market approach as the primary approach to measure the fair value of the Financial Services reporting unit as it derives value based primarily on the assets under management. The market approach measures fair value based on prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Under this approach, CNH makes use of market price data of corporations whose stock is actively traded in a public, free and open market, either on an exchange or over-the counter basis. Although it is clear that no two companies are entirely alike, the corporations selected as guideline companies must be engaged in the same or similar line of business or be subject to similar financial and business risks, including the opportunity for growth. Revenue and EBITDA market multiples were utilised in determining the fair value of the Equipment Operations cash generating units as a secondary approach to further supporting the discounted cash flow approach. Because the market approach does not evaluate the CNH cash generating units projected cash flows, sector management believes the market approach enables verification of the implied multiples derived from the discounted cash flows approach using market benchmarks. CNH management identified comparable companies by reviewing all publicly traded companies operating in the CNH lines of business. The comparable companies used were determined based on an evaluation of all relevant factors, including whether the companies were subject to similar financial and business risks. The fair values of each of the three cash-generating units calculated using the above methods in any case exceeded their carrying amounts and their values determined using the discounted cash flow method at 31 December 2010. The results obtained for the Trucks and Commercial Vehicles sector and related sensitivity analyses also confirmed the absence of significant impairment losses. Finally, the estimates and budget data to which the above mentioned parameters have been applied are those determined by management based on past performance and expectations of developments in the markets in which the Group operates. Estimating the recoverable amount of cash generating units requires discretion and the use of estimates by management. The Group cannot guarantee that there will be no goodwill impairment in future periods. Circumstances and events, which could potentially cause further impairment losses, are constantly monitored by the Fiat Industrial Group. Development costs The amortisation of development costs and impairment losses are reported in the income statement as Research and development costs. Development costs recognised as assets are attributed to cash generating units and are tested for impairment together with the related tangible fixed assets, using the discounted cash flow method for determining their recoverable amount.
193
15. Property, plant and equipment In 2010 and 2009, changes in the gross carrying amount of Property, plant and equipment were as follows:
At 31 December 2009 612 5,307 76 5,383 27,323 356 27,679 1,218 1,834 14 1,848 1,393 38,133 Change in the scope of Divestitures consolidation (4) (12) (1) (13) (551) (551) (139) (194) (1) (195) (14) (916) 14 14 180 180 9 9 7 210 Reclassified to Other Discontinued changes Operations (42) (210) 186 1 187 781 17 798 (262) 43 (5) 38 (1,011) (292) (1,952) (16) (1,968) (5,720) (49) (5,769) (1,167) (683) (6) (689) (194) (9,997) At 31 December 2010 372 3,803 60 3,863 23,738 432 24,170 1,284 3 1,287 961 30,653
( million)
Land Owned industrial buildings Industrial buildings leased under finance leases Total Industrial buildings Owned plant, machinery and equipment Plant, machinery and equipment leased under finance leases Total Plant, machinery and equipment Assets sold with a buy-back commitment Owned other tangible assets Other tangible assets leased under finance leases Total Other tangible assets Advances and tangible assets in progress Total gross carrying amount of Property, plant and equipment
Additions 2 99 99 1,098 107 1,205 344 223 1 224 730 2,604
Translation differences 14 161 161 627 1 628 6 52 52 50 911
( million)
Land Owned industrial buildings Industrial buildings leased under finance leases Total Industrial buildings Owned plant, machinery and equipment Plant, machinery and equipment leased under finance leases Total Plant, machinery and equipment Assets sold with a buy-back commitment Owned other tangible assets Other tangible assets leased under finance leases Total Other tangible assets Advances and tangible assets in progress Total gross carrying amount of Property, plant and equipment
At 31 December 2008 594 4,897 76 4,973 25,832 331 26,163 1,362 1,736 8 1,744 1,266 36,102
Additions 146 146 1,095 38 1,133 244 188 6 194 723 2,440
Change in the scope of Divestitures consolidation 5 (32) (1) (33) (676) (1) (677) (154) (169) (169) (9) (1,042) 19 8 27 4 (3) 1 33
Translation differences 9 146 146 676 676 12 43 43 84 970
Other changes 4 131 (7) 124 392 (9) 383 (246) 36 36 (671) (370)
Reclassified to Assets held for sale -
At 31 December 2009 612 5,307 76 5,383 27,323 356 27,679 1,218 1,834 14 1,848 1,393 38,133
194
NOTES
In 2010 and 2009, Changes in accumulated depreciation and impairment losses were as follows:
Change in Reclassified At 31 the scope to DisconAt 31 December Impairment of conso- Translation Other tinued December 2009 Depreciation losses Divestitures lidation differences changes Operations 2010 9 2 (2) 1 (1) (2) 7 2,561 17 2,578 20,813 120 20,933 308 1,339 5 1,344 16 25,188 182 2 184 1,548 44 1,592 131 135 1 136 2,043 59 59 73 73 26 3 3 4 167 (9) (1) (10) (542) (542) (76) (99) (99) (729) 7 7 92 92 (2) (2) 97 74 74 400 1 401 2 32 32 510 15 2 17 (8) 5 (3) (95) 1 1 (2) (83) (1,053) (7) (1,060) (4,226) (13) (4,239) (296) (541) (3) (544) (6,141) 1,836 13 1,849 18,150 157 18,307 868 3 871 18 21,052
( million)
Land Owned industrial buildings Industrial buildings leased under finance leases Total Industrial buildings Owned plant, machinery and equipment Plant, machinery and equipment leased under finance leases Total Plant, machinery and equipment Assets sold with a buy-back commitment Owned other tangible assets Other tangible assets leased under finance leases Total Other tangible assets Advances and tangible assets in progress Total accumulated depreciation and impairment of Property, plant and equipment
( million)
Land Owned industrial buildings Industrial buildings leased under finance leases Total Industrial buildings Owned plant, machinery and equipment Plant, machinery and equipment leased under finance leases Total Plant, machinery and equipment Assets sold with a buy-back commitment Owned other tangible assets Other tangible assets leased under finance leases Total Other tangible assets Advances and tangible assets in progress Total accumulated depreciation and impairment of Property, plant and equipment
Change in Reclassified At 31 the scope to Assets At 31 December Impairment of conso- Translation Other held December 2008 Depreciation losses Divestitures lidation differences changes for sale 2009 6 1 2 9 2,326 18 2,344 19,565 83 19,648 300 1,271 4 1,275 14 23,587 155 3 158 1,443 42 1,485 135 125 1 126 1,904 21 21 126 126 32 8 8 19 206 (22) (1) (23) (645) (1) (646) (81) (79) (79) (2) (831) (5) (5) (10) (2) (12) (3) (3) (20) 75 75 462 462 4 27 27 569 11 (3) 8 (128) (2) (130) (82) (10) (10) (15) (227) 2,561 17 2,578 20,813 120 20,933 308 1,339 5 1,344 16 25,188
195
In 2010 and 2009, changes in the net carrying amount of Property, plant and equipment were as follows:
At 31 December 2009 603 2,746 59 2,805 Change in the scope of consolidation 7 7 Reclassified to DisconOther tinued changes Operations (41) (208) 171 (1) 170 (899) (9) (908) At 31 December 2010 365 1,967 47 2,014
( million)
Land Owned industrial buildings Industrial buildings leased under finance leases Total Industrial buildings
Additions Depreciation 2 99 99 (182) (2) (184)
Impairment losses Divestitures (2) (2) (59) (59) (3) (3)
Translation differences 13 87 87
Owned plant, machinery and equipment Plant, machinery and equipment leased under finance leases Total Plant, machinery and equipment Assets sold with a buy-back commitment Owned other tangible assets Other tangible assets leased under finance leases Total Other tangible assets Advances and tangible assets in progress Total net carrying amount of Property, plant and equipment
6,510 236 6,746
1,098 107 1,205
(1,548) (44) (1,592)
(73) (73)
(9) (9)
88 88
227 227
789 12 801
(1,494) (36) (1,530)
5,588 275 5,863
910 495 9 504
344 223 1 224
(131) (135) (1) (136)
(26) (3) (3)
(63) (95) (1) (96)
11 11
4 20 20
(167) 42 (5) 37
(871) (142) (3) (145)
416 416
1,377 12,945
730 2,604
(2,043)
(4) (167)
(14) (187)
7 113
50 401
(1,009) (209)
(194) (3,856)
943 9,601
196
NOTES
( million)
Land Owned industrial buildings Industrial buildings leased under finance leases Total Industrial buildings
At 31 December 2008 588 2,571 58 2,629
Additions Depreciation 146 146 (155) (3) (158)
Impairment losses Divestitures (21) (21) (10) (10)
Change in the scope of consolidation 5 24 8 32
Translation differences 8 71 71
Reclassified Other to Assets changes held for sale 2 120 (4) 116 -
At 31 December 2009 603 2,746 59 2,805
Owned plant, machinery and equipment Plant, machinery and equipment leased under finance leases Total Plant, machinery and equipment Assets sold with a buy-back commitment Owned other tangible assets Other tangible assets leased under finance leases Total Other tangible assets Advances and tangible assets in progress Total net carrying amount of Property, plant and equipment
6,267 248 6,515
1,095 38 1,133
(1,443) (42) (1,485)
(126) (126)
(31) (31)
14 (1) 13
214 214
520 (7) 513
6,510 236 6,746
1,062 465 4 469
244 188 6 194
(135) (125) (1) (126)
(32) (8) (8)
(73) (90) (90)
3 3
8 16 16
(164) 46 46
910 495 9 504
1,252 12,515
723 2,440
(1,904)
(19) (206)
(7) (211)
53
84 401
(656) (143)
1,377 12,945
The above mentioned changes include for 2010, the following items:
Continuing Operations Impairment Depreciation losses 2 111 59 1,282 71 100 3 4 1,493 139 Discontinued Operations Impairment Depreciation losses 73 310 2 131 26 36 550 28
( million)
Land Industrial Buildings Plant, machinery and equipment Patents, concessions and licenses externally acquired Other tangible assets Advances and tangible assets in progress Total
Additions 1 70 1,054 199 530 1,854
Additions 1 29 151 344 25 200 750
At 31 December 2010, land and industrial buildings of the Group pledged as security for debt amounted to 137 million (135 million at 31 December 2009); plant and machinery pledged as security for debt and other commitments amounted to 318 million (244 million at 31 December 2009) and other assets pledged as security for debt and other commitments totalled 10 million (9 million at 31 December 2009); these relate to suppliers assets recognised in the consolidated financial statements in accordance with IFRIC 4, with the simultaneous recognition of a financial lease payable.
197
These amounts are classified as Continuing or Discontinued Operations as follows:

( million)
Land and industrial buildings of pledged as security for debt Plant and machinery pledged as security for debt and other commitments Other assets pledged as security for debt and other commitments Total
Continuing Operations 128 282 7 417
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 9 137 135 36 318 244 3 10 9 48 465 388
At 31 December 2010, the Group had contractual commitments for the purchase of property, plant and equipment amounting to 858 million (666 million at 31 December 2009), of which 697 million classified as Continuing Operations and 161 million classified as Discontinued Operations. Additions of 2,604 million in 2010 relate for 1,854 million to the Continuing Operations (in particular to sectors Fiat Group Automobiles, Fiat Powertrain, Components and Ferrari), and for 750 million to the Discontinued Operations (in particular to sectors Trucks and Commercial Vehicles and Agricultural and Construction Equipments). During 2010, the Group reviewed the recoverable amount of certain buildings, plant, machinery and industrial equipment in order to take into consideration restructuring plans drawn up for certain businesses. This assessment led to the recognition of impairment losses of 141 million (174 million in 2009). Such impairment losses relate to Continuing Operations for 139 million and in particular to the sectors Fiat Group Automobiles and Components with 73 million being recognised in Trading profit/(loss) and 66 million as Restructuring costs. Impairment losses relating to Discontinued Operations amounts to 2 million and were recognised by the Trucks and Commercial Vehicles sector in the Trading profit/(loss). With reference to Discontinued Operations, moreover, during 2010 the Trucks and Commercial Vehicles sector recognised impairment losses on Assets sold with a buy-back commitment for an amount of 26 million (32 million in 2009) in order to align their carrying amount to market value. These losses are fully recognised in Cost of sales in 2010 (recognised in Cost of sales for 24 million in and in Other unusual income (expenses) for 8 million in 2009). In 2010 the column Other changes includes the reclassification of the prior year balances for Advances and tangible assets in progress to the appropriate categories when the assets were effectively acquired and put into operation, as well as, for the Discontinued Operations, the reclassification to Inventories of Assets sold with a buy-back commitment and held-for-sale until the agreement expiry date amounting to 167 million in 2010 (165 million in 2009). In 2010, the column Change in the scope of consolidation, showing an overall increase of 113 million, mainly reflects the line-by-line consolidation of the Fiat Powertrain Polska Sp.z.o.o. which is included in Continuing Operations. In 2009, the column Change in the scope of consolidation, showing an overall increase of 53 million, mainly reflected the line-by-line consolidation of the entity Fiat Automobiles Serbia d.o.o. Kragujevac. In 2010 exchange gains of 401 million principally reflect the appreciation of the US Dollar, the Real and the Zloty against the Euro. In 2009 exchange gains of 401 million reflect the appreciation of the Real against the Euro, partially offset by the depreciation of the US Dollar and the Argentine Peso against the Euro.
198
NOTES
16. Investments and other financial assets

( million)
Investments accounted for using the equity method Investments at fair value with changes directly in other comprehensive income Investments at cost Total Investments Non-current financial receivables Other securities Total Investments and other financial assets
Continuing Operations 1,465 17 62 1,544 62 47 1,653
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 679 2,144 1,884 17 21 12 74 76 691 2,235 1,981 46 737 108 47 2,390 138 40 2,159
Investments Changes in Investments in 2010 and in 2009 are set out below:
At 31 December Revaluations/ 2009 (Write-downs) 69 (6) 1,431 176 441 11 40 (5) 1,981 176 Acquisitions and Capitalisations 34 98 132 Change in the scope of consolidation (5) (5) Translation differences 3 51 23 77 Disposals and other changes (11) (95) (12) (8) (126) Reclassified to Discontinued Operations (11) (338) (342) (691) At 31 December 2010 73 1,323 121 27 1,544
( million)
Investments in unconsolidated subsidiaries Investments in jointly controlled entities Investments in associates Investments in other companies Total Investments
Le variazioni intervenute nel 2009 erano state le seguenti:

At 31 Acquisitions December Revaluations/ and Capita2008 (Write-downs) lisations 57 1 11 1,377 67 51 512 (46) 1 38 (1) 1,984 21 63 Change in the scope of consolidation 2 2 Translation differences (12) (9) (21) Disposals and other changes (2) (52) (17) 3 (68) At 31 December 2009 69 1,431 441 40 1,981
( million)
Investments in unconsolidated subsidiaries Investments in jointly controlled entities Investments in associates Investments in other companies Total Investments
Revaluations and Write-downs consist of adjustments of 120 million in 2010 (65 million in 2009) which are included in Profit/(loss) from Continuing Operations and adjustments of 70 million in 2010 (-47 million in 2009) which are included in Profit/(loss) from Discontinued Operations representing the Groups share of the profit or loss for the year of investments accounted for using the equity method. In 2010 and in 2009 this item also includes impairment losses recognised during the period for investments accounted for using the cost method. The reduction of 5 million in the Change in the scope of consolidation, in 2010, reflects the line-by-line consolidation of certain minor subsidiaries. In 2009, the increase of 2 million in the same item included the effect of accounting for certain minor subsidiaries, previously consolidated on a line-by-line basis, using the equity method. In 2010 Acquisitions and Capitalisations amounted to 132 million (63 million in 2009), of which 34 million (48 million in 2009) relates to the capital increase made by the 50/50 jointly controlled entity Fiat India Automobiles Private Limited and 50 million relating to the capital increase made by the 50/50 jointly controlled entity GAC Fiat Automobiles Co. Ltd., both included in the Continuing Operations. The item also refers to the capitalisations of other, minor, companies.
199
In 2010 the column Disposals and other changes, showing a reduction of 126 million, consists of a decrease of 94 million as the result of the distribution of dividends by companies accounted for using the equity method, of which 26 million received by FGA Capital; the negative fair value adjustment of 4 million relating to the investment classified as available-for-sale; the positive changes of 5 million in the cash flow hedge reserve of Tofas-Turk Otomobil Fabrikasi Tofas A.S., of 3 million in the cash flow hedge reserve of FGA Capital and other minor decreases of 36 million. In 2009 Disposals and other changes, a reduction of 68 million, consisted of a decrease of 53 million as the result of the distribution of dividends by companies accounted for using the equity method; the positive fair value adjustment of 3 million relating to investment classified as available-for-sale and other minor decreases of 18 million. The item Investments in jointly controlled entities comprises the following:
% of interest Continuing Operations FGA Capital S.p.A. Tofas-Turk Otomobil Fabrikasi Tofas A.S. Socit Europenne de Vhicules Lgers du Nord-Sevelnord Socit Anonyme Societ Europea Veicoli Leggeri-Sevel S.p.A. GAC Fiat Automobiles Co. Ltd. Fiat India Automobiles Private Limited Naveco (Nanjing Iveco Motor Co.) Ltd. Turk Traktor Ve Ziraat Makineleri A.S. SAIC Iveco Commercial Vehicle Investment Company Limited New Holland HFT Japan Inc. LBX Company LLC CNH de Mexico SA de CV Transolver Finance Establecimiento Financiero de Credito S.A. Other Total Continuing Operations Discontinued Operations Naveco (Nanjing Iveco Motor Co.) Ltd. Turk Traktor Ve Ziraat Makineleri A.S. SAIC Iveco Commercial Vehicle Investment Company Limited New Holland HFT Japan Inc. CNH de Mexico SA de CV Transolver Finance Establecimiento Financiero de Credito S.A. Other Total Discontinued Operations Total Investments in jointly controlled entities At 31 December 2010 ( million) 700 304 99 95 50 42 33 1,323 At 31 December 2009 % of interest ( million) 50.0 37.9 50.0 50.0 50.0 50.0 37.5 50.0 50.0 50.0 50.0 50.0 643 241 95 105 21 137 49 43 23 16 16 8 34 1,431
50.0 37.9 50.0 50.0 50.0 50.0 -
50.0 37.5 50.0 50.0 50.0 50.0
150 79 45 33 21 5 5 338 1,661
1,431
200
NOTES
The item Investments in associates comprises the following:

% of interest Continuing Operations Rizzoli Corriere della Sera MediaGroup S.p.A. Iveco Finance Holdings Limited Kobelco Construction Machinery Co. Ltd. CNH Capital Europe S.a.S. Al-Ghazi Tractors Ltd. Other Total Continuing Operations Discontinued Operations Iveco Finance Holdings Limited Kobelco Construction Machinery Co. Ltd. CNH Capital Europe S.a.S. Al-Ghazi Tractors Ltd. Other Total Discontinued Operations Total Investments in associates At 31 December 2010 ( million) 101 20 121 At 31 December 2009 % of interest ( million) 10.1 49.0 20.0 49.9 43.2 108 127 88 63 17 38 441
10.1 -
49.0 20.0 49.9 43.2
115 124 66 22 15 342 463
441
Rizzoli Corriere della Sera MediaGroup S.p.A. is a listed company in which Fiat is one of the major shareholders, is represented on the Board of Directors and is a party to a shareholder agreement. As a result the company is classified as an associate. In order to account for this investment using the equity method, reference was made to its most recent published financial statements being its Interim Management Statements at 30 September 2010, as those to be issued for 2010 will be published subsequent to the publication of the consolidated financial statements of the Fiat Group. At 31 December 2010, the stock market quotation of Investments in listed jointly controlled entities and listed associates is as follows:
( million)
Tofas -Turk Otomobil Fabrikasi Tofas A.S. Rizzoli Corriere della Sera MediaGroup S.p.A. Turk Traktor Ve Ziraat Makineleri A.S. Al-Ghazi Tractors Ltd. Total Investments in listed jointly controlled entities and associates
Carrying value 304 101 79 22 506
Stock market quotation 728 79 227 37 1,071
At 31 December 2010, the item Investments whose carrying amount is measured at fair value with changes recognised directly in Other comprehensive income, includes the investment in Assicurazioni Generali S.p.A. of 3 million (3 million at 31 December 2009); the item includes also the investment of 14 million in Fin. Priv. S.r.l. (18 million at 31 December 2009). Investment in Chrysler The original investment in Chrysler continues to be carried at nil at 31 December 2010 as an investment in an associate accounted for using the equity method. Under paragraphs 29 and 30 of IAS 28, the Fiat Group is not required to recognise the share of any losses of the associate for as long as Chrysler remains an associate that is carried at nil in the financial statements as it has no obligation in respect of those losses. If Chrysler subsequently reports profits, the Fiat Group may only recognise these once its share of the profits equals the share of losses not recognised in prior periods.
201
In this respect during the second quarter of 2010 Chrysler published its consolidated financial statements for the period from 10 June 2009 (the date on which Chrysler commenced operations) to 31 December 2009, while its interim financial information for the first nine months of 2010 was published during the fourth quarter of 2010; both reports have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). The following tables reconcile the loss and members deficit as published by Chrysler and the corresponding balances prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the Fiat Group, for the above-mentioned periods:
01/0130/09/2010 (*)
( million)
Prepared in accordance with US GAAP Reconciling items on: Development costs VEBA Note and VEBA Trusts Contribution Pension funds and other post-retirement benefits Other minor adjustments Prepared in accordance with IFRS
(*) Unaudited.
Profit/(loss) (344) 358 (22) 21 13
At 30 September 2010 (*) Members Interest (2,816) 495 1,131 662 24 (504)
10/0631/12/2009 Profit/(loss) (2,614) 132 1,416 4 (1,062)
At 31 December 2009 Members Interest (2,936) 133 1,756 634 3 (410)
Main reconciling items refer to: Development costs: under US GAAP, all development costs are expensed as incurred. Under IFRS, development costs for vehicle project production are capitalised as intangible assets if the development costs can be measured reliably and the technical and economic feasibility of the product, volumes and pricing support the view that the development expenditure will generate future economic benefits. Capitalised development costs include direct and indirect costs that could be directly attributable to the development process, incurred by Chrysler starting from 10 June 2009. These costs are subsequently amortised on a straight-line basis over the production cycle. VEBA Note and VEBA Trusts Contribution: the reconciling item includes differences in the accounting treatment of the financial liability (VEBA Note) of Chrysler to the United Auto Workers Retiree Medical Benefits Trust (the VEBA Trust) that results from the settlement of the cumulative post-employment benefits due to certain retirees of the previous Chrysler (Old CarCo LLC, now in liquidation). The reconciling item also includes the different valuation of the VEBA Trusts contribution to Chrysler equity. Under US GAAP, the settlement of the other post employment benefit obligation was recognised on 1 January 2010, as those accounting principles do not recognise partial settlements. Under IFRS, a partial settlement of the other post employment benefits obligation was recognised on 10 June 2009. The reconciliation adjustment results from differences in fair value measurement of the VEBA note payable and equity consideration resulting from different settlement dates on which the valuation was performed. The effect on equity resulting from the different accounting treatment of the VEBA Note will reduce substantially over time, over the term of the Note, with a corresponding entry to profit or loss for the period. Pension funds and other post-retirement benefits: under US GAAP, Chrysler immediately recognises actuarial gains and losses for other post employment benefits plans which are short-term in nature and for which its obligation is capped. For uncapped plans, Chryslers US GAAP accounting policy is to utilise the 10% corridor approach. Unrealised actuarial gains and losses are recognised in accumulated other comprehensive loss, a separate component of equity. Under IFRS, the company also applies the corridor approach. However under IFRS, the cumulative actuarial gains and losses unrealised are not recognised in the balance sheet. Therefore, a reconciliation adjustment is reflected to reverse unrealised actuarial net losses from equity and decrease the provision. For completeness, it is noted that having reached one of the predetermined so called Performance Events envisaged in the Chrysler-Fiat strategic alliance agreements, on 10 January 2011 Fiat received without consideration an additional interest of 5% in Chrysler, and therefore its total holding in Chrysler is currently equal to 25%. Further details about the Fiat Groups rights relating to the investment in Chrysler may be found in Note 29. Non-current financial receivables At 31 December 2010, non-current financial receivables of 40 million (44 million at 31 December 2009) wholly classified as Discontinued Operations were pledged as security for loans.
202
NOTES
17. Leased assets Leased assets refers to Discontinued Operations. The sectors Trucks and Commercial Vehicles and the Agricultural and Construction Equipment lease out assets, mainly their own products, as part of their financial services businesses. This item changed as follows in 2010 and 2009:
At 31 December 2009 632 (175) 457 Translation differences 55 (13) 42 Disposals and other changes (304) 101 (203) Translation differences 3 3 Reclassified to Discontinued Operations (674) 182 (492) Disposals and other changes (264) 85 (179) At 31 December 2010 At 31 December 2009 632 (175) 457
( million)
Gross carrying amount Less: Depreciation and impairment Net carrying amount of Leased assets
Additions Depreciation 291 (95) 291 (95) At 31 December 2008 674 (169) 505
( million)
Gross carrying amount Less: Depreciation and impairment Net carrying amount of Leased assets
Additions Depreciation 219 (91) 219 (91)
At 31 December 2010 minimum lease payments from non-cancellable operating leases of Discontinued Operations amount to 216 million (178 million at 31 December 2009) and fall due as follows:
( million)
Within one year Between one and five years Beyond five years Total Minimum lease payments
At 31 December 2010 98 116 2 216
At 31 December 2009 83 94 1 178
At 31 December 2010, Discontinued Operations include assets amounting to 4 million which are leased out under operating leases and act as security for loans received. 18. Inventories
( million)
Raw materials, supplies and finished goods Gross amount due from customers for contract work Total Inventories
Continuing Operations 4,308 135 4,443
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 3,886 8,194 8,669 12 147 79 3,898 8,341 8,748
There were no inventories pledged as security at 31 December 2010 and 2009, either in Continuing or Discontinued Operations. At 31 December 2010, total Inventories amount to 8,341 million. Assets sold with a buy-back commitment by Continuing Operations (Fiat Group Automobiles sector) amount to 637 million at 31 December 2010 and assets which are no longer subject to operating lease arrangements or buy-back commitments and are held for sale by Discontinued Operations (Trucks and Commercial Vehicles and Agricultural and Construction Equipment sectors) amount to 159 million. Excluding these items totalling 796 million (861 million at 31 December 2009), and excluding the reclassification to Discontinued Operations, inventories decreased by 342 million in 2010. At 31 December 2010, Inventories include those measured at net realisable value (estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale) amounting to 2,698 million (2,958 million at 31 December 2009). This amount is attributable to Continuing Operations for 1,482 million and to Discontinued Operations for 1,216 million.
203
The amount of inventory write-downs recognised as an expense during 2010 is 489 million (664 million in 2009). In 2010 this amount is included in Continuing Operations for 432 million (549 million in 2009) and in Discontinued Operations for 57 million (115 million in 2009). Amounts recognised as income from the reversal of write-downs on items sold during the year were not significant. The majority of amount due from customers for contract work relates to the Production Systems sector and can be analysed as follows:
( million)
Aggregate amount of costs incurred and recognised profits (less recognised losses) to date Less: Progress billings Construction contracts, net of advances on contract work Gross amount due from customers for contract work as an asset Less: Gross amount due to customers for contract work as a liability included in Other current liabilities (Note 28) Construction contracts, net of advances on contract work
At 31 December 2010 1,233 (1,203) 30 135 (105) 30
At 31 December 2009 1,056 (1,058) (2) 79 (81) (2)
At 31 December 2010 and 2009, the amount of retentions by customers on contract work in progress was not significant. 19. Current receivables and Other current assets The composition of the caption is as follows:
( million)
Trade receivables Receivables from financing activities Current tax receivables Other current assets: Other current receivables Accrued income and prepaid expenses Total Other current assets Total Current receivables and Other current assets
Continuing Operations 2,259 2,866 353 1,410 118 1,528 7,006
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 1,791 4,050 3,649 10,908 13,774 12,695 552 905 674 776 158 934 14,185 2,186 276 2,462 21,191 2,529 249 2,778 19,796
The analysis by due date is as follows:

due between due within one and one year five years 2,209 2,080 243 1,200 5,732 50 764 28 197 1,039 At 31 December 2010 due beyond five years Total 22 82 13 117 2,259 2,866 353 1,410 6,888 due between due within one and one year five years 3,573 8,002 540 1,480 13,595 73 4,428 37 991 5,529 At 31 December 2009 due beyond five years Total 3 265 97 58 423 3,649 12,695 674 2,529 19,547
( million)
Continuing Operations Trade receivables Receivables from financing activities Current tax receivables Other current receivables Total Discontinued Operations Trade receivables Receivables from financing activities Current tax receivables Other current receivables Total Total Current receivables
1,771 6,664 539 479 9,453 15,185
20 4,044 10 279 4,353 5,392
200 3 18 221 338
1,791 10,908 552 776 14,027 20,915
13,595
5,529
423
19,547
204
NOTES
At 31 December 2010, Total Current receivables include receivables sold and financed through both securitisation and factoring transactions of 8,089 million (6,588 million at 31 December 2009) which do not meet IAS 39 derecognition requirements. These receivables are recognised as such in the Group financial statements even though they have been legally sold; a corresponding financial liability is recorded in the consolidated statement of financial position as Asset-backed financing (see Note 26). At 31 December 2010, this amount is included in Continuing Operations for 533 million and in Discontinued Operations for 7,556 million. Trade receivables Trade receivables amount to 4,050 million at 31 December 2010, of which 2,259 million classified as Continuing Operations and 1,791 million classified as Discontinued Operations. The total balance increased by 401 million over that at 31 December 2009. Excluding translation exchange differences there was an increase of 245 million, almost all relating to Continuing Operations and in particular to the increase in business volumes in the FGA sector in Brazil. Trade receivables are shown net of allowances for doubtful accounts of 465 million at 31 December 2010 (524 million at 31 December 2009), of which 290 million classified as Continuing Operations and 175 million as Discontinued Operations. Changes in these allowances, which are calculated on the basis of historical losses on receivables, were are as follows in 2010:
At 31 December 2009 524 Use and other changes (162) Change in the scope of consolidation 7 Reclassified to Discontinued Operations (175) At 31 December 2010 290
( million)
Allowances for doubtful accounts
Provision 96
The carrying amount of Trade receivables is considered in line with their fair value. At 31 December 2010, trade receivables of 8 million classified as Continuing Operations were pledged as security for loans obtained (14 million at 31 December 2009). Receivables from financing activities Receivables from financing activities include the following:
Continuing ( million) Operations Retail financing 731 Finance leases 243 Dealer financing 1,724 Supplier financing 48 Current financial receivables from jointly controlled financial services entities 12 Financial receivables from companies under joint control, associates and unconsolidated subsidiaries 49 Other 59 Total Receivables from financing activities 2,866 At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 6,219 6,950 6,239 812 1,055 1,110 3,857 5,581 5,108 48 102 12 14 49 55 20 79 67 10,908 13,774 12,695
Total Receivables from financing activities increased by 1,079 million over the period. Excluding translation exchange gains, arising mainly from the depreciation of the Euro against the US Dollar, the Australian Dollar, the Canadian Dollar and the Brazilian Real, and write-downs, the item increased by 259 million. There was an increase of 594 million attributable to Continuing Operations, mainly due to the rise in volumes financed in Brazil, while the receivables of Discontinued Operations decreased by 335 million, due amongst other things to the gradual settlement of the loans disbursed in Brazil which fell under the scope of debt relief programmes (see Note 32 in this respect). Receivables from jointly controlled financial services entities include financial receivables by the FGA Capital group.
205
Receivables from financing activities are shown net of an allowance for doubtful accounts determined on the basis of specific insolvency risks. At 31 December 2010, the allowance referring to Continuing Operations amounts to 102 million (450 million at 31 December 2009). Changes in the allowance accounts during the year are as follows:
At 31 December 2009 230 80 90 4 46 450 Use and other changes (91) 1 (27) (2) (2) (121) Reclassified to Discontinued At Operations 31 December 2010 (310) (94) (89) (493) 21 9 26 2 44 102
( million)
Provision 192 22 52 266
Allowance for receivables regarding: Retail financing Finance leases Dealer financing Supplier financing Other Total allowance on Receivables from financing activities
Finance lease receivables mainly relate to Discontinued Operations and refer to vehicles of the Trucks and Commercial Vehicles and Agricultural and Construction Equipment sectors leased out under finance lease arrangements. The interest rate implicit in the lease is determined at the commencement of the lease for the whole lease term. The average interest rate implicit in total finance lease receivables varies depending on prevailing market interest rates. The item may be analysed as follows stated gross of an allowance of 103 million at 31 December 2010 (80 million at 31 December 2009):
At 31 December 2010 due beyond five years Total 100 (20) 80 1,314 (156) 1,158 At 31 December 2009 due beyond five years Total 76 (12) 64 1,367 (177) 1,190
( million)
due between due within one and one year five years 540 (54) 486 674 (82) 592
due between due within one and one year five years 560 (61) 499 731 (104) 627
Receivables for future minimum lease payments Less: unrealised interest income Present value of future minimum lease payments
No contingent rents were recognised as finance leases during 2010 or 2009 and unguaranteed residual values at 31 December 2010 and 2009 are not significant. Receivables for dealer financing are typically generated by sales of vehicles and are generally managed under dealer network financing programs as a component of the portfolio of the financial services companies. These receivables are interest bearing, with the exception of an initial limited, non-interest bearing period. The contractual terms governing the relationships with the dealer networks vary from sector to sector and from country to country, although payment terms range from two to six months. The fair value of receivables from financing activities classified as Continuing Operations at 31 December 2010 amounts to approximately 2,869 million, and the fair value of receivables from financing activities classified as Discontinued Operations at 31 December 2010 amounts to approximately 11,090 million. At 31 December 2009 the overall fair value of Receivables from financing activities was 12,876 million. These fair values have been calculated using a discounted cash flow method based on the following discount rates, adjusted where necessary to take account of the specific insolvency risk of the underlying financial instrument.
(in %)
Interest rate for six months Interest rate for one year Interest rate for five years
EUR 1.23 1.51 2.56
USD 0.46 0.78 2.22
GBP 1.05 1.51 2.67
CAD 1.46 1.78 2.61
AUD 5.18 5.20 5.89
BRL 11.62 12.04 12.21
PLN 4.16 4.43 5.47
206
NOTES
Other current assets At 31 December 2010, Other current assets classified as Continuing Operations mainly consist of Other tax receivables for VAT and other indirect taxes of 765 million, Receivables from employees of 44 million and Accrued income and prepaid expenses of 118 million; Other current assets also included an amount of 88 million due from the tax authorities relating to eco-incentives in Italy; the Group will be able to recover this balance by offsetting it against future payments due to the tax authorities. At 31 December 2010, Other current assets classified as Discontinued Operations mainly consist of Other tax receivables for VAT and other indirect taxes of 474 million, Receivables from employees of 22 million and Accrued income and prepaid expenses of 158 million. At 31 December 2009, Other current assets mainly consisted of Other tax receivables for VAT and other indirect taxes of 1,595 million, Receivables from employees of 67 million and Accrued income and prepaid expenses of 249 million. At 31 December 2009, this item also included an amount of 593 million due from the tax authorities relating to eco-incentives in Italy. At the balance sheet date, the carrying amount of Other current assets is considered to be in line with fair value. 20. Current securities Current securities consist of short-term or marketable securities which represent temporary investments, but which do not satisfy all the requirements for being classified as cash equivalents. In particular:
Continuing Operations 38 147 185 At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 24 62 53 147 164 24 209 217
( million)
Current securities available-for-sale Current securities held for trading Total Current securities
21. Other financial assets and Other financial liabilities These items consist of derivative financial instruments measured at fair value at the balance sheet date. Specifically:
At 31 December 2010 Positive fair value Continuing Discontinued Operations Operations Total 226 15 241 9 9 235 15 250 Negative fair value Continuing Discontinued Operations Operations Total (7) (7) (11) (11) (18) (18) At 31 December 2009 Positive Negative fair value fair value Total 244 59 303 Total (51) (51)
( million)
Fair value hedges Interest rate risk - Interest rate swaps Interest rate and currency risk - Combined interest rate and currency swaps Total Fair value hedges Cash flow hedges Currency risks - Forward contracts, Currency swaps and Currency options Interest rate risk - Interest rate swaps Interest rate and currency risk - Combined interest rate and currency swaps Other derivatives Total Cash flow hedges Derivatives for trading Other financial assets/(liabilities)
81 56 5 2 144 131 516
48 4 52 27 88
129 60 5 2 196 158 604
(109) (78) (187) (61) (255)
(82) (9) (91) (45) (147)
(191) (87) (278) (106) (402)
140 59 31 6 236 97 636
(177) (101) (278) (135) (464)
207
The fair value of derivative financial instruments is determined by taking into consideration market parameters at the balance sheet date and using valuation techniques widely accepted in the financial business environment. In particular: the fair value of forward contracts and currency swaps is determined by taking the prevailing exchange rate and interest rates in the two currencies at the balance sheet date; the fair value of currency options is determined using valuation techniques based on the Black-Scholes model or binomial models and market parameters at the balance sheet date (in particular exchange rates, interest rates and volatility rates); the fair value of interest rate swaps and forward rate agreements is determined by using the discounted cash flow method; the fair value of derivative financial instruments acquired to hedge interest rate risk and currency risk is determined using the exchange rates prevailing at the balance sheet date and the discounted cash flow method; the fair value of equity swaps is determined using market prices at the balance sheet date; the fair value of derivatives hedging commodity price risk is determined by using the discounted cash flow method, taking the market parameters at the balance sheet date (and in particular the future price of the underlying and interest rates). The overall increase in Other financial assets, from 636 million at 31 December 2009 to 604 million at 31 December 2010 and in Other financial liabilities from 464 million at 31 December 2009 to 402 million at 31 December 2010 is mostly due to the reclassification to Discontinued Operations and to changes in exchange rates and interest rates during the year, and to a positive fair value arising from the equity swaps on Fiat S.p.A. ordinary shares (107 million euros). As this item consists principally of hedging instruments, the change in their value is compensated by the change in the value of the hedged item. Derivates for trading consist principally of the following types: derivatives (mostly currency based derivatives) acquired to hedge receivables and payables subject to currency risk and/or interest rate risk which are not formally designated as hedges at Group level; derivatives relating to Fiat shares (equity swaps) which are described further below; an embedded derivative in a bond issue in which the yield is determined as a function of trends in the inflation rate and related hedging derivative, which converts the exposure to floating rate. The total value of the embedded derivative is offset by the value of the hedging derivative. At 31 December 2010, the notional amount of outstanding derivative financial instruments is as follows:
( million)
Currency risk management Interest rate risk management Interest rate and currency risk management Other derivative financial instruments Total notional amount
Continuing Operations 8,183 9,407 1,005 230 18,825
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 4,378 12,561 9,189 3,133 12,540 13,368 1,005 933 2 232 244 7,513 26,338 23,734
At 31 December 2010, the notional amount of Other derivative instruments consists of: For 204 million (204 million at 31 December 2009) the notional amount of the two equity swaps, renewed in 2010 and expiring in 2011, arranged to hedge the risk of an increase in the Fiat share price above the exercise price of the stock options granted to the Chief Executive Officer in 2004 and 2006 (see Note 23). At 31 December 2010, the equity swaps have a total positive fair value of 115 million (a positive fair value of 8 million at 31 December 2009). Although these equity swaps were entered into for hedging purposes, they do not qualify for hedge accounting under IFRS and accordingly are defined as trading derivative financial instruments. Following the Demerger these equity swaps make reference to the performance of the stock market value of the basket of shares made up of the Fiat S.p.A. share and the Fiat Industrial S.p.A. share. For 14 million (14 million at 31 December 2009), the notional amount of the derivative embedded in a bond with a return linked to inflation rates, as well as the notional amount of the related hedging derivative, which converts the exposure to floating rate.
208
NOTES
For 12 million (23 million at 31 December 2009) relating to Continuing Operations and for 2 million (3 million at 31 December 2009) relating to Discontinued Operations the notional amount of derivatives linked to commodity prices hedging specific exposures arising from supply agreements. Under these agreements, there is a regular updating of the prices on the basis of trends in the quoted prices of the raw material. The following table provides an analysis by due date of outstanding derivatives financial instruments at 31 December 2010 based on their notional amounts:
At 31 December 2010 due beyond five years Total 1,388 1,005 14 2,407 8,183 9,407 1,005 230 18,825
( million)
within one year 7,444 4,593 216 12,253
due between one and five years 739 3,426 4,165
Continuing Operations Currency risk management Interest rate risk management Interest rate and currency risk management Other derivative financial instruments Total Continuing Operations Discontinued Operations Currency risk management Interest rate risk management Other derivative financial instruments Total Discontinued Operations Total notional amount
4,241 834 2 5,077 17,330
137 1,664 1,801 5,966
635 635 3,042
4,378 3,133 2 7,513 26,338
Cash flow hedges The effects arising on the income statement mainly refer to the management of the currency risk and, to a lesser extent, to the hedges relating to the debt of the Groups financial companies and Group treasury. The policy of the Group for managing currency risk normally requires that future cash flows from trading activities which will occur for accounting purposes within the following twelve months, and from orders acquired (or contracts in progress), whatever their due dates, be hedged. As a result, it is considered reasonable to suppose that the hedging effect arising from this and recorded in the cash flow hedge reserve will be recognised in income, mainly during the following year. The interest rate and currency derivatives treated as cash flow hedges were entered into by the North American treasury for the purpose of hedging the bond issued in Euros and maturing in 2017; the amount recorded in the cash flow hedge reserve will be recognised in income according to the timing of the flows of the underlying bond. Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows of a recognised asset or liability or a highly probable forecasted transaction and could affect the income statement, the effective portion of any gain or loss on the derivative financial instrument is recognised directly in equity. The cumulative gain or loss is removed from other comprehensive income and recognised in the income statement at the same time as the economic effect arising from the hedged item affects income. The gain or loss associated with a hedge or part of a hedge that has become ineffective is recognised in the Income statement immediately. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss realised to the point of termination remains in Other comprehensive income and is recognised at the same time as the related transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealised gain or loss held in other comprehensive income is recognised in the Income statement immediately.
209
In respect of derivative financial instruments arranged by Continuing Operations, in 2010 the Group transferred losses of 168 million (losses of 279 million in 2009) to income, net of the tax effect, previously recognised directly in other comprehensive income. In respect of derivative financial instruments arranged by Discontinued Operations, in 2010 the Group transferred losses of 93 million (losses of 31 million in 2009) to income, net of the tax effect, previously recognised directly in other comprehensive income. These items are reported in the following lines:
2010
( million)
2009 Continuing Operations (19) (328) 82 Discontinued Operations 4 (22) (11) Total (15) (350) 71 -
Continuing Discontinued Operations Operations (64) (83) (19) (5) (27) (29) (29) -
Total (91) (112) (48) (5)
Currency risk Increase (Decrease) in Net revenues Decrease (Increase) in Cost of sales Financial income (expenses) Result from investments Interest rate risk Decrease (Increase) in Cost of sales Result from investments Financial income (expenses) Commodities price risk Decrease (Increase) in Cost of sales Taxes income (expenses) Ineffectiveness - overhedges Total recognised in the income statement
(8) (7) (5)
(36) -
(44) (7) (5)
(6) 3 (17)
(10) -
(16) 3 (17)
5 37 (19) (168)
28 (93)
5 65 (19) (261)
(5) 3 8 (279)
8 (31)
(5) 11 8 (310)
The ineffectiveness of cash flow hedges was not material in 2010 or 2009. In 2010 there was an overall negative economic effect of 19 million (positive effect of 8 million in 2009) from hedges of assets and liabilities relating to Continuing Operations, which subsequently turned out to be in excess of the future flows being hedged (overhedges); this was mainly due to the loss of certain exposures to interest rate risk. The effect of hedges of assets and liabilities relating to Discontinued Operations which subsequently turned out to be in excess of the future flows being hedged (overhedges) was not material in 2010 or 2009.
210
NOTES
Fair value hedges The gains and losses arising from the valuation of interest rate and currency derivatives (mostly for managing currency risk) and interest rate derivatives (for managing the interest rate risk) recognised in accordance with fair value hedge accounting and the gains and losses arising from the respective hedged items are set out in the following table:
2010
( million)
2009 Continuing Operations 22 (22) Discontinued Operations Total 22 (22)
Continuing Discontinued Operations Operations (50) 50 -
Total (50) 50
Currency risk Net gains (losses) on qualifying hedges Fair value changes in hedged items Interest rate risk Net gains (losses) on qualifying hedges Fair value changes in hedged items Net gains (losses)
15 (15) -
11 (11) -
26 (26) -
(15) 17 2
(15) 17 2
For Continuing Operations the ineffective portion of transactions treated as fair value hedges in 2010 was not significant (gains of 2 million in 2009). For Discontinued Operations the ineffective portion of transactions treated as fair value hedges was not significant in either 2010 or 2009. 22. Cash and cash equivalents Cash and cash equivalents include:
( million)
Cash at banks Cash with a pre-determined use Money market securities Total Cash and cash equivalents
Continuing Operations 8,407 10 3,550 11,967
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 2,523 10,930 9,422 684 694 530 479 4,029 2,274 3,686 15,653 12,226
Amounts shown are readily convertible into cash and are subject to an insignificant risk of changes in value. The carrying amount of cash and cash equivalents is considered to be in line with their fair value at the balance sheet date. Cash with a pre-determined use mainly consists of amounts whose use is restricted to the repayment of the debt relating to securitisations classified as Asset-backed financing. The credit risk associated with Cash and cash equivalents is considered not significant, because it mainly relates to deposits spread across primary national and international financial institutions. 23. Equity Equity at 31 December 2010 exceeded that at 31 December 2009 by 1,346 million, mainly due to the profit for the year of 600 million, the increase in the cumulative translation adjustment reserve arising from exchange differences of 862 million resulting from the translation of the financial statements of subsidiaries denominated in currencies other than the Euro and changes of 182 million in the cash flow hedge reserve, partially offset by a dividend distribution of 239 million and the effect of 122 million resulting from the exercising of the call option on 5% of the share capital of Ferrari S.p.A. held by Mubadala Development Company PJSC.
211
Share capital The fully paid share capital of Fiat S.p.A. is as follows:
(number of shares)
Ordinary shares Preference shares Savings shares Total shares issued
At 31 December 2010 1,092,247,485 103,292,310 79,912,800 1,275,452,595
At 31 December 2009 1,092,247,485 103,292,310 79,912,800 1,275,452,595
There follows a description of the composition of the share capital of Fiat S.p.A. up to 31 December 2010 (i.e. immediately prior to the effective date of the Demerger). There were changes in the composition of share capital resulting from the Demerger, as described in the section below, Impacts of the Demerger on the Share Capital of Fiat S.p.A. Until 31 December 2010, all outstanding shares had a par value of 5.00 each, with rights and privileges varying by share class. However, each share (even after the Demerger) confers the right to share pro rata in any earnings allocated for distribution and any surplus assets remaining upon a winding-up, subject to the right of priority of preference and savings shares as described below. Each ordinary share confers the right to vote without any restrictions. Each preference share confers the right to vote only on matters which are reserved for extraordinary meetings of shareholders and on resolutions concerning procedures for general meetings. No voting rights are attached to savings shares. Until shareholder approval of the allocation of 2010 profit, the allocation of annual profit for Fiat S.p.A. will be as follows: to the legal reserve, 5% of net profit until the amount of such reserve is equivalent to one fifth of share capital; to savings shares, a dividend of up to 0.31 per share; further allocations to the legal reserve and allocations to the extraordinary reserve and/or retained earnings as may be resolved by shareholders; to preference shares, a dividend of up to 0.31 per share; to ordinary shares, a dividend of up to 0.155 per share; to savings shares and ordinary shares, in equal amounts, an additional dividend of up to 0.155 per share; to each ordinary, preference and savings share, in equal amounts, any remaining net profit, which shareholders may resolve to distribute. When the dividend paid to savings shares in any year amounts to less than 0.31, the difference must be added to the preferred dividend to which they are entitled in the following two years. In the event that the savings shares are delisted, any bearer shares must be converted into registered shares and have the right to a dividend increased by 0.175, rather than 0.155, compared to the dividend received by ordinary and preference shares. In the event that the ordinary shares are delisted, the higher dividend to which the savings shares are entitled compared to the dividend received by ordinary and preference shares is increased to 0.2 per share. In the event of winding-up, the Companys assets are allocated in order of priority to savings shares up to their par value, to preference shares up to their par value and to ordinary shares up to their par value; the remaining balance, if any, is allocated to shares of all three classes in an equal amount.
212
NOTES
Effects of the Demerger on the Share Capital of Fiat S.p.A. As a consequence of the Demerger, on 1 January 2011, the share capital of Fiat S.p.A. was reduced by 1,913,178,892.5 to 4,464,084,082.5. This took place through a reduction in par value, for all share classes, from 5.00 per share to 3.5 per share. The reduction in par value of Fiat S.p.A. shares arose from the issue of shares in Fiat Industrial S.p.A. for no consideration (at a par value of 1.5 each), equivalent in number to the Fiat S.p.A. shares outstanding in each class at the Demerger date. These newly issued shares were allotted to Fiat S.p.A. Shareholders, on the basis of one share for each share of the same class in Fiat S.p.A. already held, and have identical rights and privileges to the corresponding class of Fiat S.p.A. shares. As a result of the reduction in par value per share for all share classes pursuant to the Demerger, the distribution entitlement for each class of shares was adjusted on a pro rata basis so that the current dividend entitlement attached to each class of shares remains unchanged as a percentage of par value. Following approval of the allocation of 2010 profit, the allocation of annual profit for Fiat S.p.A. will be as follows: to the legal reserve, 5% of net profit until the amount of the reserve is equal to one-fifth of share capital; to savings shares, a dividend of up to 0.217 per share; further allocations to the legal reserve, allocations to the extraordinary reserve and/or to retained profit reserve as may be resolved by Shareholders; to preference shares, a dividend of up to 0.217 per share; to ordinary shares, a dividend of up to 0.1085 per share; to savings shares and ordinary shares, in equal amounts, an additional dividend of up to 0.1085 per share; to each ordinary, preference and savings share, in equal amounts, any remaining profit, which Shareholders may resolve to distribute. When the dividend paid to savings shares in any year amounts to less than 0.217, the difference shall be added to the preferred dividend to which they are entitled in the following two years. In the event that savings shares are delisted, any bearer shares shall be converted into registered shares with entitlement to a dividend that is 0.1225, rather than 0.1085, higher than the dividend paid on ordinary and preference shares. In the event that the ordinary shares are delisted, holders of savings shares shall be entitled to a dividend that is 0.140 higher than the dividend paid on ordinary and preference shares. In the event of a winding-up, the Companys assets shall be distributed in the following order of priority: repayment of savings shares up to their par value, repayment of preference shares up to their par value, repayment of ordinary shares up to their par value; any balance remaining, in an equal pro rata amount to shares of all three classes. Policies and processes for managing capital Italian laws and regulations regarding the share capital and reserves of a joint stock corporation establish the following: the minimum share capital is 120,000; any change in the amount of share capital must be approved in a general meeting by shareholders who may delegate powers to the Board of Directors to increase share capital up to a predetermined amount for a maximum period of five years; the general meeting of shareholders is also required to adopt suitable measures when share capital decreases by more than one third as the result of ascertained losses and to reduce share capital if by the end of the following year if such losses have not fallen by at least one third. If as the consequence of a loss of more than one third of capital this then falls below the legal minimum, shareholders in general meeting are required to approve a decrease and simultaneous increase of capital to an amount not less than this minimum or must change a companys legal form; as discussed previously the share in profits due to each class of share is determined by the bylaws of Fiat S.p.A.; an additional paid-in capital reserve is established if a company issues shares at a price exceeding their nominal value. This reserve may not be distributed until the legal reserve has reached one fifth of share capital;
213
a company may not purchase treasury shares for an amount exceeding the distributable profits and available reserves stated in its most recently approved financial statements. Any purchase must be approved by shareholders in general meeting and in no case may the nominal value of the shares acquired exceed one fifth of share capital. Additionally, in respect of the share capital of Fiat S.p.A., in a meeting on 3 November 2006 the Companys Board of Directors exercised its delegated powers pursuant to article 2443 of the Italian Civil Code to carry out an increase in share capital reserved for employees of the Company and/or its subsidiaries up to a maximum of 1% of share capital, being 50 million, by taking a decision to issue up to 10 million ordinary shares each of nominal value 5, corresponding to 0.78% of share capital and 0.92% of ordinary share capital, at a price of 13.37 each, to service the employee stock option plan described in the following paragraph. The execution of this increase in capital is subject to the requirement that the conditions of the plan are met. Following the Demerger and the corresponding reduction in the nominal value of each Fiat S.p.A. share from 5 to 3.5, share capital may in future increase by up to a maximum of 35 million. During 2010, the Group reconfirmed the policy under which it intends to distribute 25% consolidated net profit calculated on a 3-year rolling basis, with a minimum annual payout of 150 million. With the Demerger completed, on 27 January 2011, the Group confirmed that for the 2011 financial year, a year of transition, it is intended that the dividend policy will remain unchanged, with an expected distribution of 25% of consolidated profit for Fiat Post-Demerger and for Fiat Industrial, with a minimum payout of 50 million and 100 million, respectively. The Board of Directors of each group will formulate a dividend policy for subsequent financial periods by the end of 2011. For 2010, the Board of Directors is proposing to Shareholders at their annual general meeting to pay a total dividend of 155.1 million (151.6 million excluding the treasury shares owned by the Group at the date of publication of these consolidated financial statements). The dividend proposal may be summarised as follows: 0.09 per ordinary share; 0.31 per preference share; 0.31 per savings share. The objectives identified by the Group for managing capital are to create value for shareholders as a whole, safeguard business continuity and support the growth of the Group. As a result, the Group endeavours to maintain an adequate level of capital that at the same time enables it to obtain a satisfactory economic return for its shareholders and guarantee economic access to external sources of funds, including by means of achieving an adequate rating. The Group constantly monitors the evolution of the ratio between debt and equity and in particular the level of net debt and the generation of cash from its industrial activities. In order to reach these objectives the Group aims at a continuous improvement in the profitability of the business in which it operates. Further, in general, it may sell part of its assets to reduce the level of its debt, while the Board of Directors may make proposals to Shareholders in general meeting to reduce or increase share capital or, where permitted by law, to distribute reserves. In this context, the Group also makes purchases of treasury shares, without exceeding the limits authorised by Shareholders in general meeting, under the same logic of creating value, compatible with the objectives of achieving financial equilibrium and an improvement in its rating. In this respect capital means the value brought into Fiat S.p.A. by its shareholders (share capital plus the additional paid-in capital reserve less treasury shares, equal to 7,261 million at 31 December 2010, unchanged compared to 31 December 2009) and the value generated by the Group in terms of the results achieved in operations (retained earnings and other reserves, equal in total, before the result for the year, to 3,287 million at 31 December 2010 and 2,945 million at 31 December 2009, excluding gains and losses recognised directly in equity and non-controlling interests). *****
214
NOTES
The following table provides a reconciliation between the number of shares outstanding at 31 December 2008 and the number outstanding at 31 December 2010:
At 31 December 2008 1,092,247 (38,568) 1,053,679 103,292 103,292 79,913 79,913 1,275,452 (38,568) 1,236,884 (Purchases)/ Sales of treasury shares At 31 December 2009 1,092,247 (38,568) 1,053,679 103,292 103,292 79,913 79,913 1,275,452 (38,568) 1,236,884 (Purchases)/ Sales of treasury shares At 31 December 2010 1,092,247 (38,568) 1,053,679 103,292 103,292 79,913 79,913 1,275,452 (38,568) 1,236,884
(numero di azioni in migliaia) Ordinary shares issued Less: Treasury shares Ordinary shares outstanding Preference shares issued Less: Treasury shares Preference shares outstanding Savings shares issued Less: Treasury shares Savings shares outstanding Total Shares issued by Fiat S.p.A. Less: Treasury shares Total Fiat S.p.A. outstanding shares
Capital increase -
Capital increase -
Treasury Shares Treasury shares consist of 38,568,458 Fiat S.p.A. ordinary shares for an amount of 656.6 million (unchanged compared to 31 December 2009). These Treasury shares were purchased under an original authorisation for the purchase and disposal of treasury shares (the Programme) renewed by Shareholders in general meeting on 27 March 2009 and already granted by the general meeting on 31 March 2008. The authorisation provided for the purchase of a maximum number of shares, for all three classes combined, not to exceed 10% of share capital or a purchase value of 1.8 billion, inclusive of the already restricted reserves of 656.6 million. In order amongst other things to maintain the necessary operating flexibility over an adequate time period and given that their authorisation expired on 27 September 2010, on 26 March 2010 Shareholders in general meeting extended the term permitted for the purchase and disposal of treasury shares, including transactions carried out through subsidiary companies, by a further 18 months period, at the same time revoking the authorisation given by them in the general meeting of 27 March 2009 to the extent not exercised at that date. The authorisation provided for the purchase of a maximum number of shares, for all three classes combined, not to exceed 10% of share capital or a purchase value of 1.8 billion, inclusive of the 656.6 million in Fiat shares already held by the Company. At the extraordinary general meeting held on 16 September 2010, in consideration of the reduction in the par value of Fiat S.p.A. shares from 5 to 3.5 per share, Shareholders approved a reduction in the authorisation for the purchase of treasury shares to a maximum value of 1.2 billion. The condition that the total number of shares, in all three classes, may not exceed 10% of share capital and all other provisions approved by Shareholders on 26 March 2010 shall continue to apply. Reaffirming that the share buy-back programme has been placed on hold, the Board of Directors in consideration of the fact that the current authorisation expires on 26 September 2011 and to maintain the necessary operating flexibility for an adequate period, has decided to propose to shareholders at the Annual General Meeting that the authorisation for the purchase be renewed for a period of 18 months and for a maximum amount of shares for the three classes not to exceed the legally established percentage of share capital, or 1.2 billion including the existing reserve for treasury shares, that after the effects arising from the Demerger described below amounts to 289 million. Should the proposal be approved, the Company would, however, have no obligation to buyback shares. At 18 February 2011, the total number of ordinary shares purchased since the beginning of the programme was 37.27 million, for a total invested amount of 665 million.
215
Effects of the Demerger related to Treasury shares held by Fiat S.p.A. As a result of the Demerger, on 1 January 2011 Fiat S.p.A. was allotted 38,568,458 ordinary shares in Fiat Industrial S.p.A., corresponding to the number of Treasury shares held. The portion of the Treasury shares equity account attributable to the Fiat Industrial S.p.A. shares and amounting to approximately 368 million will therefore be reclassified as an asset, measured at its initial fair value. Any effects of initial measurement will be reflected directly in equity with no impact on 2011 profit or loss. As described below in the section Amendments to the stock option plans and stock grant plans of Fiat S.p.A. arising from the Demerger, 23,021,250 of these Fiat Industrial S.p.A. shares are intended to service the vested stock option plans and the stock grant plans. Capital reserves At 31 December 2010, capital reserves amounting to 601 million consist of the additional paid-in capital reserve representing part of the share premium paid by the subscribers of the capital increase made after the extinguishment of the Mandatory Convertible Facility on 20 September 2005; the remaining share premium of 859 million arising from this is included in retained earnings. This item also comprises a charge of 81 million arising from the purchase and sale (without the loss of control) of non-controlling interests in subsidiaries, recognised in equity from 1 January 2010 in accordance with IAS 27. Effects of the Demerger on the capital reserves of Fiat S.p.A. As a consequence of the Demerger, the additional paid-in capital reserve of Fiat S.p.A. will be reduced by 462 million to 220 million. Revenue reserves The main revenue reserves are as follows: the legal reserve of Fiat S.p.A. of 716 million at 31 December 2010 (700 million at 31 December 2009); retained earnings of 2,796 million at 31 December 2010 (retained earnings of 3,847 million at 31 December 2009); the income attributable to owners of the parent of 520 million at 31 December 2010 (loss of 838 million for the year ended 31 December 2009); the share-based payments reserve of 113 million at 31 December 2010 (95 million at 31 December 2009). Effects of the Demerger on the revenue reserves of Fiat S.p.A. As a consequence of the Demerger the legal reserve of Fiat S.p.A. will be reduced by 215 million to 501 million and the retained earnings of Fiat S.p.A. will be reduced by 1,160 million.
216
NOTES
Other comprehensive income Other comprehensive income may be analysed as follows:

( million)
Gains/(losses) on cash flow hedging instruments arising during the year Gains/(losses) on cash flow hedging instruments reclassified to profit or loss Gains/(losses) on cash flow hedging instruments Gains/(losses) on the remeasurement of available-for-sale financial assets arising during the year Gains/(losses) on the remeasurement of available-for-sale financial assets reclassified to profit or loss Gains/(Losses) on the remeasurement of available-for-sale financial assets Exchange gains/(losses) on translating foreign operations arising during the year Exchange gains/(losses) on translating foreign operations reclassified to profit or loss Exchange gains/(losses) on translating foreign operations Share of Other comprehensive income of entities accounted for using the equity method arising during the year Share of Other comprehensive income of entities accounted for using the equity method reclassified to profit or loss Share of Other comprehensive income of entities accounted for using the equity method Tax effect of the other components of Other comprehensive income Total Other comprehensive income, net of tax
2010 (143) 314 171 (3) (3) 770 (1) 769 87 13 100 3 1,040
2009 76 332 408 3 3 510 (1) 509 (44) (3) (47) (51) 822
The tax effect relating to Other comprehensive income may be analysed as follows:
Pre-tax balance 171 (3) 769 100 1,037 Tax income (expense) 4 (1) 3 2010 Net balance 175 (4) 769 100 1,040 Pre-tax balance 408 3 509 (47) 873 Tax income (expense) (51) (51) 2009 Net balance 357 3 509 (47) 822
( million)
Gains/(losses) on cash flow hedging instruments Gains/(losses) on the remeasurement of available-for-sale financial assets Exchange gains/(losses) on translating foreign operations Share of Other comprehensive income of entities accounted for using the equity method Total Other comprehensive income
The increase in losses recognised directly in equity for the fair value adjustment of available-for-sale financial assets is due to a decrease in the fair value of the assets to which this relates. At 31 December 2010, Other comprehensive income attributable to Discontinued Operations may be analysed as follows:
( million)
Cash flow hedge reserve Cumulative translation adjustment Available-for-sale financial assets reserve Cumulative share of OCI of entities consolidated under the equity method Total Other comprehensive income attributable to Discontinued Operations
At 31 December 2010 (25) 335 31 341
217
Non-controlling interest The non-controlling interest of 917 million at 31 December 2010 (814 million at 31 December 2009) refers mainly to the following companies consolidated on a line-by-line basis:
At 31 December 2010 Italian companies: Ferrari S.p.A. Teksid S.p.A. Foreign companies: CNH Global N.V. 10.0 15.2 11.1 % held by non-controlling interest At 31 December 2009 15.0 15.2 10.7
The following schedule shows the effects on the Groups equity of changes in the Fiat Groups interest in its subsidiaries:
( million)
Profit/(loss) for the period Transfers from (to) non-controlling interest. Purchase of 5% of Ferrari S.p.A. New shares issued by CNH Global N.V. Other minor Net transfers from (to) non-controlling interest Total Profit/(loss) for the year and transfers from (to) non-controlling interest
2010 520 (73) (5) (3) (81) 439
2009 (838) (838)
Share-based compensation At 31 December 2010 and at 31 December 2009, the following share-based compensation plans relating to managers of Group companies or certain members of the Board of Directors of Fiat S.p.A. were in place. Stock option plans linked to Fiat S.p.A. ordinary shares The stock option plans approved by the Board of Directors of Fiat S.p.A. prior to 2002 had all fully expired at 31 December 2010. The contractual terms of plans which expired during the year are as follows:
Strike price () 12.699 10.397 Number of options granted 1,000,000 6,100,000 Vesting portion 100% 25% 25% 25% 25%
Plan Stock Options May 2002 (expired) Stock Options September 2002 (expired)
Beneficiaries Former Chairman of Fiat S.p.A. Managers
Grant date 14 May 2002 12 September 2002
Expiry date 1 January 2010 12 September 2010
Vesting date 1 January 2005 12 September 2003 12 September 2004 12 September 2005 12 September 2006
On 26 July 2004, the Board of Directors granted Sergio Marchionne, as a part of his variable compensation as Chief Executive Officer, options to purchase 10,670,000 Fiat S.p.A. ordinary shares at a price of 6.583 per share, exercisable from 1 June 2008 to 1 January 2011. In each of the first three years following the grant date, the CEO acquired the right to purchase, beginning 1 June 2008, a maximum of 2,370,000 shares annually. As of 1 June 2008, he also acquired the right to exercise, effective from that date, the remaining options on 3,560,000 shares as predetermined performance objectives for the reference period had been met. On 27 March 2009, Shareholders considered it to be a priority interest for the Group to adopt changes to the plan which would reinstate its retention capability and approved a new vesting period which depended solely on the requirement for the CEO to remain in office, deferring the exercise of these options until 1 January 2011 and extending the exercise period until 1 January 2016, with all the other conditions remaining unaltered.
218
NOTES
At 31 December 2010 the features of the stock option plan are as follows:
Date of amendment 27 March 2009 Strike price N of options () granted 6.583 10,670,000 Vesting portion 100%
Plan Stock Options July 2004 (modified)
Beneficiary Chief Executive Officer
Expiry date 1 January 2016
Vesting date 31 December 2010
On 3 November 2006 the Board of Directors of Fiat S.p.A. approved (subject to the subsequent approval of Shareholders in general meeting, which was given on 5 April 2007) an eight year stock option plan, which granted certain managers of the Group and the Chief Executive Officer of Fiat S.p.A. the right to purchase a specific number of Fiat S.p.A. ordinary shares at a fixed price of 13.37 each. More specifically, the 10,000,000 options granted to employees and the 5,000,000 options granted to the Chief Executive Officer had a vesting period of four years, with an equal number vesting each year, were subject to achieving certain predetermined profitability targets (Non-Market Conditions or NMC) in the reference period and may be exercised from the date on which the 2010 financial statements are approved. The remaining 5,000,000 options granted to the Chief Executive Officer of Fiat S.p.A. also had a vesting period of four years with an equal number vesting each year and may be exercised from November 2010. The ability to exercise the options is additionally subject to specific restrictions regarding the duration of the employment relationship or the continuation of the position held. The contractual terms of the 2006 plan are as follows:
Plan Stock Option November 2006 Beneficiary Chief Executive Officer Expiry date 3 November 2014 Strike price () 13.37 N of options granted 5,000,000 Vesting date November 2007 November 2008 November 2009 November 2010 1st Quarter 2008 (*) 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*) 1st Quarter 2008 (*) 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*) Vesting portion 25% 25% 25% 25% 25%*NMC 25%*NMC 25%*NMC 25%*NMC 25%*NMC 25%*NMC 25%*NMC 25%*NMC
Stock Option November 2006
Chief Executive Officer
3 November 2014
13.37
5,000,000
Stock Option November 2006
Managers
3 November 2014
13.37
10,000,000
(*) On approval of the prior years consolidated financial statements; subject to continuation of the professional relationship.
As explained in greater detail in the section Amendments to the stock option plans and stock grant plans of Fiat S.p.A. arising from the Demerger which follows, vesting conditions for each plan, whether they consisted in the continuation of a professional relationship with the Fiat Group or in the achievement of specific performance objectives, expired on 31 December 2010. With specific reference to options granted under the 2006 Stock Option Plan, for which vesting was subject to the achievement of pre-established profitability targets, only the first tranche (i.e. 25%) of those rights have vested as the profitability targets established in 2006 for the 3-year period 2008-2010 were not met. As a result, the remaining 75% did not vest. On 26 February 2008, the Board of Directors of Fiat S.p.A. passed an incentive plan which was subsequently approved by Shareholders in their annual general meeting on 31 March 2008, by which an overall maximum of 4 million financial instruments could be assigned on a periodic basis until 2010 in the form of stock options and/or stock appreciation rights. The plan had the aim of attracting and retaining managers in key roles who had been hired or promoted following the granting of the stock option plan of 3 November 2006 or who had assumed greater responsibilities since the granting of the 2006 plan, and has the features of that plan in terms of performance, vesting and exercise rights. Implementing the first grant under this program on 23 July 2008, the Board of Directors assigned 1,418,500 stock options having an exercise price of 10.24 and a vesting period of three years that was subject to achieving certain predetermined profitability targets (Non-Market Conditions or NMC) in the reference period and together with rights exercisable from the date on which the 2010 financial statements are approved. As these profitability targets had not been met at 31 December 2010, none of the rights granted to employees vested.
219
The contractual terms of the 2008 plan were as follows:

Plan Stock Option July 2008 (forfeited) Beneficiary Managers Expiry date 3 November 2014 Strike price () 10.24 N of options granted 1,418,500 Vesting date 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*) Vesting portion 18%*NMC 41%*NMC 41%*NMC
(*) On approval of the prior years consolidated financial statements; subject to continuation of the professional relationship.
A summary of the terms of the stock option plans outstanding at 31 December 2010 is as follows:
Options outstanding at 31 December 2010 2,101,250 2,101,250 Options outstanding at 31 December 2009 956,530 845,000 6,536,875 8,338,405 Managers compensation Average remaining contractual life (years) 3.8 Options outstanding at 31 December 2010 10,670,000 6,250,000 16,920,000 Compensation as member of the Board Options Average remaining outstanding at contractual life 31 December 2009 (years) 10,670,000 5.0 500,000 8,750,000 3.8 19,920,000
Exercise price () 6.583 10.24 10.397 12.699 13.370 Total
Changes during the year were as follows:

Managers compensation Average exercise price () 12.71 12.79 10.397 13.37 10.397 Compensation as member of the Board Average exercise Number of options price () 19,920,000 9.72 (2,500,000) 13.37 (500,000) 12.699 16,920,000 9.09 5,000,000 13.37 500,000 12.699
Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at 31 December 2010 Exercisable at 31 December 2010 Exercisable at 31 December 2009
Number of options 8,338,405 (5,447,155) (790,000) 2,101,250 845,000
The options forfeited during the year consist of unvested options regarding employees who have left the Group and options not vesting during the year due to the fact that certain non-market conditions were not reached for the November 2006 and July 2008 plans. The Group recognised a total nominal cost of 4.9 million in the 2010 income statement for plans outstanding at 31 December 2010 (net income of 7 million in 2009 following the revision of the probability that subsequent tranches will vest).
220
NOTES
Granting of ordinary shares of Fiat S.p.A. without payment On 23 February 2009, the Board of Directors of Fiat S.p.A. passed an incentive plan which was subsequently approved by Shareholders in their annual general meeting on 27 March 2009, based on the granting of rights which, subject to the achievement of predetermined performance targets (Non-Market Conditions or NMC) for 2009 and 2010 and the continuation of the professional relationship with the Group, provided for 2 million Fiat S.p.A. ordinary shares to be granted to the CEO of Fiat S.p.A. without payment. Under this plan the rights vested in a single tranche on the approval of the Groups 2010 consolidated financial statements by the Board of Directors and the number of shares granted is determined as 25% of the rights granted in the event of reaching the 2009 targets and 100% of the rights granted in the event of reaching the 2010 targets. The Groups predetermined profitability targets relating to 2009 were reached. On 26 March 2010 Shareholders in general meeting introduced a pure retention component of 2 million additional rights into the Plan on the proposal of the Board of Directors; the vesting of these rights is subject to the sole condition that the CEOs professional relationship with the Group continues until the approval of the 2011 Consolidated financial statements. Moreover, the term of the original plan was also extended until the approval of the 2011 Consolidated financial statements and the targets for 2010 and 2011 were redefined. At 31 December 2010, the contractual terms of the plan were therefore as follows:
Plan Stock Grant 2009 (revised) Beneficiary Chief Executive Officer Number of shares 4,000,000 Vesting date 1st Quarter 2010 (*) 1st Quarter 2011 (*) 1st Quarter 2012 (*) 1st Quarter 2012 (*) Vesting portion 500,000(**) 375,000*NMC(**) 1,125,000*NMC(**) 2,000,000(**)
(*) On approval of the prior years consolidated financial statements. (**) Subject to continuation of the position held until the approval of the 2011 financial statements.
On 18 February 2011, the Board of Directors, having consulted the Compensation Committee, verified the vesting of 375,000 rights based on the achievement of the predetermined operating targets and, in light of the extraordinary transactions occurring during the year, also voted to make vesting of the remaining rights, which was dependent on the achievement of 2011 operating targets, conditional only on the continuation of a professional relationship with the Group until the end of 2011. As required by IFRS 2 the Group calculated the total incremental fair value arising from this change to the plan, which amounted to 19 million. This incremental fair value is being recognised in the income statement over the residual vesting period of the plan together with the fair value already calculated at the grant date and determined in 2009. The incremental fair value was calculated on the basis of the price of the Fiat S.p.A. ordinary share at the date of the change, which was 9.75 per share. A total nominal cost of 12.4 million was recognised in the income statement for this plan in 2010 (6 million in 2009). Amendments to the stock option plans and stock grant plans of Fiat S.p.A. arising from the Demerger With regard to the above incentive plans and in consideration of the proposed Demerger, the Board of Directors, which met on 21 July 2010, confirmed the continuation of the share-based incentive plans the Group had in place, and voted to adopt, subject to the Demerger becoming effective and on the basis of the powers delegated to it by Shareholders, the appropriate amendments necessary to ensure that these plans fulfil the objectives for which they were adopted, even subsequent to the Demerger, while at the same time avoiding a revision of those plans that, even though fully legitimate, might appear to dilute the intended alignment of the interests of management with those of the Company and its shareholders. More specifically, applying the rules of the respective plans, the Board approved to realign the plans with respect to the shares underlying the stock options and stock grants in strict relation to the allotment ratio applicable for the Demerger and to allow employees leaving Fiat S.p.A. and joining Fiat Industrial S.p.A to retain their existing rights. Those entitled to stock options or stock grants will, therefore, receive one ordinary Fiat S.p.A. share and one ordinary Fiat Industrial S.p.A. share for each right they hold, with the option exercise price (for stock option plans) and the free granting of shares (for the stock grant plan) remaining unchanged. For the stock option plans, vesting conditions for each plan, whether these be the continuation of a professional relationship with the Group or the achievement of specific performance objectives, will expire on 31 December 2010, prior to the effective date of the Demerger.
221
Similarly, under the stock grant plan the participant will be entitled to receive free of charge one Fiat ordinary share and one Fiat Industrial ordinary share for each right held, subject to the original conditions of the continuation of a professional relationship with the Group and/or achievement of specific performance objectives for 2010 and 2011, consistent with the 2010-2014 Business Plan. The 2011 performance objectives will consist of the portion relating to the post-Demerger Fiat Group of the objectives originally established as part of the total objectives for the pre-Demerger Fiat Group. All stock option and stock grant plans, with the exception of the portion of the 2006 Plan relating to managers for which a capital increase was approved, will be serviced by the treasury shares held by Fiat S.p.A. and the ordinary shares of Fiat Industrial that will be allotted to Fiat S.p.A. without payment as a result of the Demerger. As the original conditions of the Plans allowed for amendments where there were extraordinary transactions impacting Fiat S.p.A.s share capital, a determination of the incremental fair value potentially resulting from such amendments is not required. Stock Option plans linked to CNH Global N.V. ordinary shares In the Agricultural and Construction equipment sector, CNH Global N.V. (CNH) has granted share-based compensation to directors officers and employees which are linked to shares and which have the following terms. The CNH Global N.V. Outside Directors Compensation Plan (CNH Directors Plan) This plan provides for the payment of the following to independent outside members of the CNH Global N.V. Board in the form of cash, and/or common shares of CNH, and/or options to purchase common shares of CNH: an annual retainer fee of 100,000 USD; an Audit Committee membership fee of 20,000 USD; a Corporate Governance and Compensation Committee membership fee of 15,000 USD; an Audit Committee chair fee of 35,000 USD; and a Corporate Governance and Compensation Committee chair fee of 25,000 USD (collectively, the Fees). Each quarter the independent outside directors elect the form of payment of of their Fees. If the elected form is common shares, the independent outside director will receive as many common shares as equal to the amount of Fees the director elects to forego, divided by the fair market value of a CNH Global N.V. common share. Common shares issued vest immediately upon grant, but cannot be sold for a period of six months. If the elected form is options, the outside director will receive as many options as the amount of Fees that the director elects to forego, multiplied by four and divided by the fair market value of a common share, such fair market value being equal to the average of the highest and lowest sale price of a CNH Global N.V. common share on the last trading day of the New York Stock Exchange preceding the start of each quarter. Stock options granted as a result of such an election vest immediately, but shares purchased under options cannot be sold for six months following the date of exercise. Stock options terminate upon the earlier of: (1) ten years after the grant date; or (2) six months after the date an individual ceases to be a director. The Corporate Governance and Compensation Committee has recommended and the Board of Directors of CNH has approved a proposed amendment to the CNH Directors Plan. Pursuant to the proposed amendment, all directors will be eligible to receive compensation under the CNH Directors Plan provided that the director is not receiving salary or other employment compensation for current employment services provided to CNH Global N.V or Fiat Industrial Group. The proposed amendment is subject to Shareholder approval at the next annual meeting (scheduled for 29 March 2011). Prior to 2007, CNH also issued automatic option awards, which vest after the third anniversary of the grant date. At 31 December 2010 and 2009, there were 693,914 and 700,058 common shares, respectively reserved for issuance under the CNH Directors Plan. Outside directors do not receive benefits upon termination of their service as directors.
222
NOTES
A summary of outstanding stock options under the CNH Directors Plan at 31 December 2010 and 2009 is as follows:
At 31 December 2010 Weighted Average remaining Options contractual life outstanding (in years) 29,076 6.7 44,188 6.4 11,162 7.1 6,414 6.9 90,840 At 31 December 2009 Weighted Average remaining Options contractual life outstanding (in years) 26,063 9.2 30,612 7.2 40,295 6.6 11,162 8.1 9,287 5.5 117,419
Exercise price (in USD) 10.22 - 16.00 16.01 - 26.00 26.01 - 40.00 40.01 - 56.00 56.01 - 66.54 Total
Changes during the year under the CNH Directors Plan are as follows:
Number of options 117,419 12,904 (36,610) (2,873) 90,840 90,840 2010 Average exercise price (in USD) 27.54 26.73 15.61 59.17 31.24 31.24 Number of options 92,508 29,661 (4,000) (750) 117,419 117,419 2009 Average exercise price (in USD) 31.01 15.51 9.23 77.05 27.54 27.54
Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at the end of the year Exercisable at the end of the year
The CNH Equity Incentive Plan (the CNH EIP) The plan provides for grants of various types of awards on specific performance targets for the sector linked to the IFRS results of CNH, to officers and employees of CNH and its subsidiaries. As of 31 December 2010, CNH has reserved 15,900,000 shares for the CNH EIP (15,900,000 shares at 31 December 2009). The plan envisages stock options and share incentives as described below. Stock option plan Prior to 2006, certain stock option grants were issued which vest rateably over four years from the grant date and expire after ten years. Additionally, certain performance-based options, which had an opportunity for accelerated vesting tied to the attainment of specified performance criteria were issued; however, the performance criteria were not achieved. In any event, vesting of these performance-based options occurred seven years from the grant date. All options granted prior to 2006 have a contract life of ten years. Except as noted below, the exercise prices of all options granted under the CNH EIP are equal to or greater than the fair market value of CNH Global N.V. common shares on the respective grant dates. During 2009 and 2001, CNH granted stock options with an exercise price less than the quoted market price of CNH common shares at the date of grant. The exercise price of these grants was based upon the average closing price of CNH common shares on the New York Stock Exchange for the thirty-day period preceding the date of grant. Beginning in 2006, CNH began to issue awards under plans providing performance-based stock options, performance-based shares, and cash. In April 2010, CNH granted approximately 1.5 million performance-based stock options (at target award levels) under the CNH EIP. One-third of the options vested in February 2011 following the approval of 2010 results by the Board of Directors which met in February 2011. The remaining options will vest equally on the first and second anniversary of the initial vesting date. As the CNHs 2010 results exceeded the target performance levels, it is expected that 2.9 million of these options will vest. Options granted under the CNH EIP in 2010 have a contractual life of five years from the initial vesting date.
223
The following table summarises outstanding stock options under the CNH EIP:
At 31 December 2010 Weighted Average remaining Average Contractual life Exercise Price (in years) (in USD) 4.0 13.66 1.2 21.20 4.4 33.00 2.9 49.33 At 31 December 2009 Number of options Outstanding 2,243,243 186,760 1,256,178 646,654 4,332,835 Average Exercise Price (in USD) 13.70 21.20 37.21 52.80
Exercise price (in USD) 13.58 - 19.99 20.00 - 29.99 30.00 - 39.99 40.00 - 68.85 Total
Number of options Outstanding 1,536,464 53,333 3,734,654 464,520 5,788,971
Changes during the period in all CNH stock option plans are as follows:
Number of shares 4,332,835 2,888,625 (324,494) (992,535) (115,460) 5,788,971 1,431,524 2010 Average exercise price (in USD) 26.67 31.69 31.91 20.69 68.85 29.07 36.40 Number of shares 2,718,109 4,144,800 (2,404,528) (8,136) (117,410) 4,332,835 1,488,840 2009 Average exercise price (in USD) 40.82 13.58 18.06 18.65 68.85 26.67 37.81
Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at the end of the year Exercisable at the end of the year
Performance Share Grants Under the CNH EIP, performance-based shares may also be granted to selected key employees and executive officers. CNH establishes the period and conditions of performance for each award. Performance-based shares vest upon the attainment of specified performance objectives. In September 2010, CNH granted approximately 2 million performance-based, non-vested share awards under the CNH EIP. These performance shares will vest in three equal instalments if specified targets are achieved on a cumulative basis during the three-, four- and five-year periods ending 31 December 2012, 2013 and 2014. The fair value of this award is US$34.74 per share. CNH granted performance-based, non-vested share awards under the Top Performance Plan (TPP) in 2006 through 2009. Vesting of the TPP performance shares was dependent on achievement of specified targets by 2010. In 2006 and 2007, CNH recognised expense for TPP awards based on an assumption that the specified performance targets would be achieved in 2009. In 2008, CNH determined achievement of these performance targets to be improbable and CNH reversed all previously recognised stock-based compensation expense for an amount of 7 million (US$11 million). Achievement of the performance targets did not occur in either 2009 or 2010 and these awards were forfeited. CNH did not recognise any stock-based compensation expense related to TPP awards in 2009 or 2010.
224
NOTES
The following table reflects performance-based share activity under the CNH EIP:
2010 Weighted average grant date fair value (in USD) 31.22 34.74 31.25 34.74 2009 Weighted average grant date fair value (in USD) 31.28 11.83 30.52 31.22
Non-vested at the beginning of the year Granted Forfeited Vested Non-vested at the end of the year
Number of shares 1,349,000 2,027,000 (1,359,000) 2,017,000
Number of shares 1,870,500 25,000 (546,500) 1,349,000
Restricted Share Grants In September 2010, CNH granted 302,000 restricted share awards to selected key employees under the CNH EIP. Restricted shares vest in three equal instalments over a three-year period ending 30 September 2013. The fair value of this award is US$34.74 The following table reflects restricted share activity under the CNH EIP:
2010 Weighted average grant date fair value (in USD) 34.56 34.74 32.35 34.62
Non-vested at the beginning of the year Granted Forfeited Vested Non-vested at the end of the year
Number of shares 326,000 (2,000) (8,000) 316,000
As of 31 December 2010, there were 4,992,271 CNH Global N.V. common shares (8,332,115 CNH Global N.V. common shares at 31 December 2009) available for issue under the CNH EIP. The Black-Scholes pricing model was used to calculate the fair value of stock options by the CNH Case New Holland sector. The weighted-average assumptions used under the Black-Scholes pricing model were as follows:
Directors Plan 5.00 66.9 0.6 2.0 2010 Equity Incentive Plan 3.73 74.1 0.5 1.9 Directors Plan 5.00 62.9 0.8 2.2 2009 Equity Incentive Plan 3.73 70.6 0.7 1.6
Option life (years) Price volatility of CNH Global N.V. shares (%) Expected dividend yield (%) Risk-free interest rate (%)
Based on this model, the weighted-average fair values of stock options awarded by CNH for the years ended 31 December 2010 and 2009 were as follows:
(in USD)
Directors Plan Equity incentive plan
2010 14.60 16.10
2009 8.03 9.03
The total cost recognised in the 2010 income statement for all share-based compensation linked to CNH Global N.V. ordinary shares amounts to 26 million (10 million in 2009).
225
Stock option plan linked to Ferrari S.p.A. ordinary shares Under this scheme, certain employees of Ferrari S.p.A. on the one hand and the Chairman and the Chief Executive Officer of the company at the time on the other had the option to acquire respectively 207,200 and 184,000 Ferrari S.p.A. ordinary shares at a price of 175 per share. Under the scheme the options could be exercised until 31 December 2010, wholly or partially, and in part were subject to the listing of the company. As the conditions for the plans to vest were not met, the stock option rights granted did not vest. Cash-settled share-based payments Various entities belonging to the former joint venture with General Motors reached agreements with certain employees in 2001, 2002, 2003 and 2004 over four cash-settled share-based payment schemes entitled Stock Appreciation Rights (SAR) plans. Under these plans, certain of the employees involved had the right to receive a payment corresponding to the increase in price between the grant date and the exercise date of Fiat S.p.A. ordinary shares. The 2001 and 2002 plans have already expired. In accordance with IFRS 2, the Group measures the liability arising from cash-settled share-based payment transactions at fair value at each reporting date and each settlement date; the changes in the fair value of these liabilities are recognised in the income statement for the period. With reference to the 70,644 rights outstanding at that date, the liability arising at 31 December 2010 was 0.7million (0.5 million at 31 December 2009). Moreover, 30,192 rights that were still outstanding at 31 December 2010 were no longer so at the date of these financial statements following the expiry of the 2003 plan. Finally, as a consequence of the Demerger, the residual Stock Appreciation Rights were converted to the right to receive a payment corresponding to the increase in price between the grant date and the exercise date of the sum of the prices of the Fiat S.p.A. and Fiat Industrial S.p.A. ordinary shares. 24. Provisions for employee benefits Group companies provide post-employment benefits for their active employees and for retirees, either directly or by contributing to independently administered funds. The way these benefits are provided varies according to the legal, fiscal and economic conditions of each country in which the Group operates, the benefits generally being based on the employees remuneration and years of service. Group companies provide post-employment benefits under defined contribution and/or defined benefit plans. In the case of defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual, or voluntary basis. Once the contributions have been paid, the Group has no further payment obligations. The entity recognise the contribution cost when the employee has rendered his service and includes this cost by function in Cost of sales, Selling, general and administrative costs and Research and development costs. In 2010 expenses of this nature included in Profit/(loss) from Continuing Operations totalled 937 million (984 million in 2009), while those included in Profit/(loss) from Discontinued Operations totalled 443 million (396 million in 2009). Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions made by an entity, and sometimes by its employees, into an entity, or fund, that is legally separate from the employer and from which the employee benefits are paid. Benefits are generally payable under these plans after the completion of employment. The plans are classified by the Group on the basis of the type of benefit provided as follows: Reserve for Employee leaving entitlements in Italy (TFR), Pension plans, Health care plans and Other. Reserve for Employee leaving entitlements in Italy (TFR) The TFR consists of the residual obligation for employee leaving entitlement which was required until 31 December 2006 under Italian legislation to be paid to employees of Italian companies with more than 50 employees when leaving the company, and accrued over the employees working life for other companies. This provision is settled to retiree employees and may be partially paid in advance if certain conditions are met. This is an unfunded defined benefit post-employment plan. Pension plans The item Pension plans consists principally of the obligations of Group companies operating in the United States (mainly to those in the CNH Case New Holland sector) and in the United Kingdom towards certain employees and former employees of the Group. Under these plans, a contribution is generally made to a separate fund (trust) which independently administers the plan assets. The Groups funding policy is to contribute amounts to the plan equal to the amounts required to satisfy the minimum funding requirements prescribed by the laws and regulations of each individual country. Prudently, the Group makes discretionary contributions in addition to the funding requirements. If these funds are overfunded, that is if they present a surplus compared to the requirements of law, the Group companies concerned could not be required to contribute to the plan in respect of a minimum performance requirement as long as the fund is in surplus.
226
NOTES
The investment strategy for these assets depends on the features of the plan and on the maturity of the obligations. Typically long-term plan benefit obligations are funded by investing mainly in equity securities, as they are expected to achieve long-term growth while exceeding inflation; short and mediumterm plan benefit obligations are funded by investing in fixed income securities, which are less volatile. In the United Kingdom the Group participates amongst others in a plan financed by various entities belonging to the Group, called the Fiat Group Pension Scheme. Under this plan, participating employers make contributions on behalf of their active employees (active), retirees, and employees who have left the Group but have not yet retired (deferred). Health care plans The item Health care plans comprise obligations for health care and life insurance plans granted to employees of the Group working in the United States and Canada (mostly relating to the CNH Case New Holland sector). These plans generally cover employees retiring on or after reaching the age of 55 who have had at least 10 years of service. CNH United States salaried and non-represented hourly and Canada employees hired after 1 January 2001 and 1 January 2002 respectively, are not eligible for health care and life insurance benefits under the CNH plans. Until 31 December 2006, these plans were fully unfunded; starting in 2007, the Group began making contributions on a voluntary basis to a separate and independently managed fund established to finance the North American health care plans. Other The item Other includes loyalty bonuses, which are due to employees who reach a specified seniority and are generally settled when an employee leaves the company; and for French entities, the Indemnit de depart la retraite, a plan similar to the Italian TFR. These schemes are unfunded. Provisions for employee benefits at 31 December 2010 and 2009 are as follows:
Continuing Operations 846 128 2 113 1,089 491 124 1,704 8 8 At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 208 475 859 131 1,673 285 59 2,017 166 166 1,054 603 861 244 2,762 776 183 3,721 174 174 1,086 611 844 242 2,783 504 160 3,447 132 132
( million)
Post-employment benefits: Employee leaving entitlements in Italy Pension Plans Health care plans Other Total Post-employment benefits Other provisions for employees Other long-term employee benefits Total Provision for employee benefits Defined benefit plan assets Total Defined benefits plan assets
The item Other provisions for employees consists of the best estimate at the balance sheet date of short-term employee benefits payable within twelve months of the end of the period in which the employees render the related service. The item Other long-term employee benefits consists of the obligation for those benefits generally payable during employment on reaching a certain level of seniority in the company or when a specified event occurs, and reflects the probability of payment and the length of time over which this will be made.
227
In 2010 and in 2009 changes in Other provisions for employees and in Other long-term employee benefits are as follows:
At 31 December 2009 504 160 664 Change in the scope of consolidation Utilisation and other changes (269) (1) (15) 6 (284) 5 Reclassified to Discontinued Operations (285) (59) (344) Change in the scope of consolidation and other changes (36) (36) At 31 December 2010 491 124 615
( million)
Other provisions for employees Other long-term employee benefits Total
Provision 542 32 574
( million)
Other provisions for employees Other long-term employee benefits Total
At 31 December 2008 329 169 498
Provision 363 11 374
Utilisation (152) (20) (172)
At 31 December 2009 504 160 664
Post-employment benefits and other long-term employee benefits are calculated on the basis of the following assumptions:
(in %)
Discount rate Future salary increase Inflation rate Weighted average, initial healthcare cost trend rate Weighted average, ultimate healthcare cost trend rate Expected return on plan assets
Italy 4.2 3.26 2 n/a n/a n/a
USA 5.2 n/a n/a 8 5 8
At 31 December 2010 UK Other 5.2 4.5 3.5 2.2 3.5 2.1 n/a n/a n/a n/a 7 n/a
Italy 5.02 4.02 2.00 n/a n/a n/a
USA 5.5 n/a n/a 9 5 8
At 31 December 2009 UK Other 5.75 5.5 3.5 3 3.5 2 n/a n/a n/a n/a 7 n/a
Assumed discount rates are used in measurements of pension and postretirement benefit obligations and interest cost components of net periodic cost. The Group selects its assumed discount rates based on the consideration of equivalent yields on high-quality fixed income investments at the measurement date. The assumed health care trend rate represents the rate at which health care costs are assumed to increase. Rates are determined based on the Agricultural and Construction Equipment sector specific experience, consultation with actuaries and outside consultants, and various trend factors including general and health care sector-specific inflation projections from the United States Department of Health and Human Services Health Care Financing Administration. The initial trend is a short-term assumption based on recent experience and prevailing market conditions. The ultimate trend is a long-term assumption of health care cost inflation based on general inflation, incremental medical inflation, technology, new medicine, government cost-shifting, utilisation changes, aging population, and a changing mix of medical services. The expected long-term rate of return on plan assets reflects managements expectations on long-term average rates of return on funds invested to provide for benefits included in the projected benefit obligations. The expected return is based on the outlook for inflation, fixed income returns, and equity returns, while also considering asset allocation and investment strategy, premiums for active management to the extent asset classes are actively managed and plan expenses. Return patterns and correlations, consensus return forecasts and other relevant financial factors are analysed to check for reasonability and appropriateness.
228
NOTES
The amounts recognised in the statement of financial position for Employee leaving entitlements in Italy and Pension plans at 31 December 2010 and 2009 are as follows:
Employee leaving entitlements in Italy At 31 December At 31 December 2010 2009
( million) Continuing Operations Discontinued Operations Total Total Continuing Operations
Pension Plans At 31 December At 31 December 2010 2009

Discontinued Operations Total Total
Present value of funded obligations Fair Value of plan assets Present value of unfunded obligations Unrecognised actuarial gains (losses) Unrecognised past service cost Unrecognised assets Net liability Amounts at year end: Liabilities Assets Net liability
811 35 846
198 10 208
1,009 45 1,054
1,001 85 1,086
419 (327) 92 103 (75) 120
1,752 (1,720) 32 633 (359) 3 309
2,171 (2,047) 124 736 (434) 3 429
1,876 (1,796) 80 692 (299) 6 479
846 846
208 208
1,054 1,054
1,086 1,086
128 (8) 120
475 (166) 309
603 (174) 429
611 (132) 479
The amounts recognised in the statement of financial position for Health-care plans and Other post-employment benefits at 31 December 2010 and 2009 are as follows:
Health care plans At 31 December At 31 December 2010 2009
( million) Continuing Operations Discontinued Operations Total Total Continuing Operations
At 31 December 2010
Discontinued Operations Total
Other At 31 December 2009

Total
Present value of funded obligations Fair Value of plan assets Present value of unfunded obligations Unrecognised actuarial gains (losses) Unrecognised past service cost Unrecognised assets Net liability Amounts at year end: Liabilities Assets Net liability
1 1 2
815 (56) 759 43 49 8 859
815 (56) 759 44 50 8 861
754 (46) 708 40 86 10 844
127 (11) (3) 113
151 (6) (14) 131
278 (17) (17) 244
258 (5) (11) 242
2 2
859 859
861 861
844 844
113 113
131 131
244 244
242 242
229
The amounts recognised in the income statement for defined benefit plans in 2010 are as follows:
Employee leaving entitlements in Italy
Profit/(loss) from Continuing Operations Profit/(loss) from Discontinued Operations
Pension Plans
Profit/(loss) from Continuing Operations Profit/(loss) from Discontinued Operations
Health care plans

Profit/(loss) from Continuing Operations Profit/(loss) from Discontinued Operations Profit/(loss) from Continuing Operations
Other
Profit/(loss) from Discontinued Operations
( million)
Current service cost Interest costs Expected return on plan assets Net actuarial losses (gains) recognised Past service costs Paragraph 58 adjustment Losses (gains) on curtailments and settlements Other (income) losses Total Costs (gains) Actual return on plan assets
26 26 n/a
6 6 n/a
10 25 (20) 3 (2) 16 22
17 120 (115) 27 3 1 53 150
n/a
7 44 (4) (2) (41) 4 6
7 5 1 13 n/a
8 6 (1) 1 (4) 10 n/a
Changes in the present value of Post-employment obligations are as follows:

Employee leaving entitlements in Italy 2010 2009 1,001 1,062 32 55 45 (17) (113) (102) 44 (2) 5 (198) 811 1,001 Pension Plans 2010 2009 2,568 2,267 27 23 145 142 3 4 181 255 128 36 (171) (161) 3 21 4 (2) 2 (2,385) 522 2,568 Health care plans 2010 2009 794 848 7 6 44 52 4 3 43 (36) 64 (23) (59) (51) (38) (10) 4 1 (858) 1 794 Other 2009 288 13 14 (2) (31) (19) (1) (2) (2) 258
( million)
Present value of obligation at the beginning of the year Current service cost Interest costs Contribution by plan participants Actuarial losses (gains) generated Exchange rate differences Benefits paid Past service cost Change in scope of consolidation (Gains) Losses on curtailments (Gains) Losses on settlements Other changes Reclassified to Discontinued Operations Present value of obligation at the end of the year
2010 258 15 11 13 1 (32) 7 4 4 (2) (1) (151) 127
The changes to the health care plans stated as past service cost in the obligation and in the composition of defined benefit plan expenses in 2010 mainly relate to the health care plans in North America for the Agricultural and Construction Equipment sector.
230
NOTES
Changes in the fair value of plan assets are as follows:

( million)
Fair value of plan assets at the beginning of the year Expected return on plan assets Actuarial gains (losses) generated Exchange rate differences Contribution by employer Contribution by plan participants Benefits paid Change in scope of consolidation (Gains) losses on settlements Other changes Reclassified to Discontinued Operations Fair value of plan assets at the end of the year
2010 1,796 135 37 108 102 3 (158) 20 4 (1,720) 327
Pension Plans 2009 1,554 113 122 40 113 4 (148) (2) 1,796
2010 46 4 2 4 55 4 (59) (56) -
Health care plans 2009 39 3 6 (2) 48 3 (51) 46
As discussed earlier, the Group, and in particular the companies of the CNH Case New Holland sector, began making contributions on a voluntary basis in 2007 to a separate and independently managed fund established to finance the North American health care plans. Plan assets for Post-employment benefits and Health-care benefits mainly consist of listed equity instruments and fixed income securities; plan assets do not include treasury shares of Fiat S.p.A. or properties occupied by Group companies. Plan assets may be summarised as follows:
Continuing Operations 44% 38% 1% 17% At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 40% 40% 37% 49% 47% 50% 1% 1% 1% 10% 12% 12%
Third party equity instruments Third party debt instruments Properties occupied by third parties Other assets
Assumed health care cost trend rates have a significant effect on the amount recognised in the 2010 profit (loss) from Discontinued Operations. A one percentage point change in assumed health care cost trend rates would have the following effects:
( million)
Effect on the aggregate of the service costs and interest cost Effect on defined benefit obligation
One percentage point increase 5 78
One percentage point decrease 4 66
231
The present value of the defined benefit obligations, the fair value of plan assets and the surplus or deficit of the plans at the end of 2010 and the four previous years are as follows:
At 31 December 2010
( million) Continuing Operations Discontinued Operations Total
At 31 December 2009
Total
At 31 December 2008
Total
At 31 December 2007
Total
At 31 December 2006
Total
Present value of obligation: Employee leaving entitlements in Italy Pension plans Health care plans Others Fair value of plan assets: Pension plans Health care plans Surplus (deficit) of the plan: Employee leaving entitlements in Italy Pension plans Health care plans Others
811 522 1 127
198 2,385 858 151
1,009 2,907 859 278
1,001 2,568 794 258
1,062 2,267 848 288
1,133 2,730 817 279
1,362 3,107 1,109 278
327 -
1,720 56
2,047 56
1,796 46
1,554 39
2,036 47
2,176 -
(811) (195) (1) (127)
(198) (665) (802) (151)
(1,009) (860) (803) (278)
(1,001) (772) (748) (258)
(1,062) (713) (809) (288)
(1,133) (694) (770) (279)
(1,362) (931) (1,109) (278)
The best estimate of expected contribution to pension and health care plan for 2011 is as follows:
( million)
Pension plans Health care plans Total expected contribution
Continuing Operations 4 4
Discontinued Operations 85 60 145
2011 Total 89 60 149
25. Other provisions Changes in Other provisions are as follows:

At 31 December 2009 1,479 359 50 3,097 4,985 Reclassified to Discontinued Operations (702) (93) (23) (1,440) (2,258) At 31 December 2010 970 202 26 2,022 3,220
( million)
Warranty provision Restructuring provision Investment provision Other risks Total Other provisions
Charge 1,316 115 3,718 5,149
Utilisation (1,100) (171) (3,253) (4,524)
Release to income (107) (12) (208) (327)
Other changes 84 4 (1) 108 195
The effect of discounting these provisions, 28 million in 2010, has been wholly included in Profit/(loss) from Continuing Operations; this has been included in Other changes together with exchange gains of 186 million.
232
NOTES
The warranty provision represents managements best estimate of commitments given by the Group for contractual, legal, or constructive obligations arising from product warranties given for a specified period of time which begins at the date of delivery to the customer. This estimate has been calculated considering past experience and specific contractual terms. This provision also includes managements best estimate of the costs that are expected to be incurred in connection with product defects that could result in a larger recall of vehicles. This provision for risks is developed through an assessment of reported damages or returns on a case-by-case basis. The restructuring provision classified as Continuing Operations at 31 December 2010 comprises the estimated amount of benefits payable to employees on termination in connection with restructuring plans amounting to 162 million, other costs for exiting activities amounting to 27 million and other costs totalling 13 million. The total balance relates to the restructuring programs of the following sectors (in million): Fiat Group Automobiles 88; Components 48; Fiat Powertrain 17; Production Systems 10; Metallurgical Products 7; other sectors 32. The restructuring provision classified as Discontinued Operations comprises at 31 December 2010 the estimated amount of benefits payable to employees on termination in connection with restructuring plans totalling 43 million, other costs for exiting activities amounting to 1 million and other costs totalling 49 million; the total balance at 31 December 2010 relates to restructuring programs of the sectors FPT Industrial (53 million), Agricultural and Construction Equipment (24 million) and Trucks and Commercial Vehicles (16 million). The restructuring provision at 31 December 2009 comprised the estimated amount of benefits payable to employees on termination in connection with restructuring plans amounting to 294 million, other costs for exiting activities amounting to 32 million and other costs totalling 33 million. Taken overall the balance related to the restructuring programs in the following sectors (in million): Fiat Group Automobiles 101, Components 73; Agricultural and Construction Equipment 50, FPT Powertrain Technologies 63, Trucks and Commercial Vehicles 17; Production Systems 15; Metallurgical Products 9; other sectors 31. The provision for other risks represents the amounts set aside by the individual companies of the Group principally in connection with contractual and commercial risks and disputes. The more significant balances of these provisions are as follows:
Continuing Operations 378 535 277 33 60 739 2,022 At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 637 1,015 829 252 787 743 431 708 677 38 71 71 60 53 82 821 724 1,440 3,462 3,097
( million)
Sales incentives Legal proceedings and other disputes Commercial risks Environmental risks Indemnities Other reserves for risk and charges Total Other risks
233
A description of these follows: Sales incentives - this provision relates to sales incentives that are offered on a contractual basis to the Groups dealer networks, primarily on the basis of that dealers will achieve a specific cumulative level of sales transactions during the calendar year. This provision is estimated based on the information available regarding the sales made by the dealers during the calendar year. The provision also includes sales incentives such as cash rebates announced by the Group and provided by dealers to customers, for which the dealers are reimbursed. The Group records this provision when it is probable that the incentive will be provided and the Groups inventory is sold to its dealers. The Group estimates this provision based on the expected use of these rebates with respect to the volume of vehicles that has been sold to the dealers. Legal proceedings and other disputes - this provision represents managements best estimate of the liability to be recognised by the Group with regard to: Legal proceedings arising in the ordinary course of business with dealers, customers, suppliers or regulators (such as contractual or patent disputes). Legal proceedings involving claims with active and former employees. Legal proceedings involving different tax authorities. None of these provisions is individually significant. Each Group company recognises a provision for legal proceedings when it is deemed probable that the proceedings will result in an outflow of resources. In determining their best estimate of the probable liability, each Group company evaluates their legal proceedings on a case-by-case basis to estimate the probable losses that typically arise from events of the type giving rise to the liability. Their estimate takes into account, as applicable, the views of legal counsel and other experts, the experience of the Group and others in similar situations and the Groups intentions with regard to further action in each proceeding. Fiats consolidated provision combines these individual provisions established by each of the Groups companies. Commercial risks - this provision includes the amount of obligations arising in connection with the sale of products and services such as maintenance contracts. An accrual is recorded when the expected costs to complete the services under these contracts exceed the revenues expected to be realised. Environmental risks - This provision represents managements best estimate of the Groups probable environmental obligations. Amounts included in the estimate comprise direct costs to be incurred by the Fiat Group pre-Demerger and the Fiat Industrial Group in connection with environmental obligations associated with current or formerly owned facilities and sites. This provision also includes costs related to claims on environmental matters. Indemnities - the provision for indemnities relates to contractual indemnities provided by the Group in connection with divestitures carried out in 2010 and prior years. These liabilities, that relate to Continuing Operations primarily arise from indemnities relating to contingent liabilities in existence at the time of the sale, as well as those covering any possible breach of the representations and warranties provided in the contract and, in certain instances, environmental or tax matters. These provisions were determined estimating the amount of the expected outflow of resources, taking into consideration the relevant level of probability of occurrence.
234
NOTES
26. Debt A breakdown of debt and an analysis by due date is as follows:

due between due within one and one year five years 498 2,728 3,430 172 1,001 7,331 7,829 29 5,200 3,068 75 228 8,571 8,600 At 31 December 2010 due beyond five years Total 6 1,091 159 254 1,504 1,510 533 9,019 6,657 247 1,483 17,406 17,939 due between due within one and one year five years 4,536 1,451 3,531 229 864 6,075 10,611 2,535 7,189 4,553 155 137 12,034 14,569 At 31 December 2009 due beyond five years Total 15 2,757 310 265 3,332 3,347 7,086 11,397 8,394 384 1,266 21,441 28,527
( million)
Continuing Operations Asset-backed financing Bonds Borrowings from banks Payables represented by securities Other Total Other debt Total Continuing Operations Discontinued Operations Asset-backed financing Bonds Borrowings from banks Payables represented by securities Other Total Other debt Total Discontinued Operations Total Debt
4,777 1,391 45 134 1,570 6,347 14,176
3,515 735 910 72 30 1,747 5,262 13,862
29 1,318 67 46 1,431 1,460 2,970
8,321 2,053 2,368 117 210 4,748 13,069 31,008
10,611
14,569
3,347
28,527
Asset-backed financing represents the amount of financing received through both securitisation and factoring transactions which do not meet IAS 39 derecognition requirements and is recognised as an asset in the statement of financial position under Receivables from financing activities (Note 19). At 31 December 2010, total Debt had increased by 2,481 million. Excluding exchange differences, which led to an increase in debt of approximately 1.4 billion, and excluding changes in the scope of consolidation, this increase amounted to 994 million. Debt included in Continuing Operations decreased by 1,086 million, mainly due to the repayment of maturing bonds, while debt included in Discontinued Operations rose by 2,080 million as the result of the issue of bonds of US$1.5 billion by Case New Holland Inc. and an increase in asset-backed financing, offset by the early repayment of the US$500 million bond. There was an increase of approximately 1,213 million in asset backed financing, excluding exchange differences. This increase relates almost exclusively to Discontinued Operations and amongst other things reflects improved market accessibility conditions for securitisations. The rise in Other debt includes amongst other things the recognition of debt of 122 million arising from exercising the call option on 5% of Ferrari share capital.
235
The major bond issues outstanding at 31 December 2010 and classified as Continuing Operations are as follows:
Face value of outstanding bonds (in million) 1,300 123 1,000 1,250 200 1,250 1,500 1,000 Outstanding amount ( million) 1,300 123 1,000 1,250 200 1,250 1,500 1,000 33 7,656 1,000 1,000 363 9,019
Currency Global Medium Term Notes: Fiat Finance and Trade Ltd S.A.(1) Fiat Finance and Trade Ltd S.A.(1) Fiat Finance and Trade Ltd S.A.(3) Fiat Finance and Trade Ltd S.A. (3) Fiat Finance and Trade Ltd S.A. (3) Fiat Finance and Trade Ltd S.A. (3) Fiat Finance and Trade Ltd S.A. (3) Fiat Finance North America Inc. (3) Others (4) Total Global Medium Term Notes Other bonds: Fiat Finance and Trade Ltd S.A. (3) Total Hedging effect and amortised cost valuation Total Bonds EUR EUR EUR EUR EUR EUR EUR EUR
Coupon 6.750% (2) 5.625% 9.000% 5.750% 7.625% 6.875% 5.625%
Maturity 25 May 2011 (2) 15 November 2011 30 July 2012 18 December 2012 15 September 2014 13 February 2015 12 June 2017
EUR
1,000
6.625%
15 February 2013
(1) Bonds listed on the Mercato Obbligazionario Telematico of the Italian stock exchange (EuroMot). In addition, the majority of the bonds issued by the Fiat Group are also listed on the Luxembourg stock exchange. (2) Fiat Step-Up Amortizing 2001-2011 bonds repayable at face value in five equal annual instalments each for 20% of the total issued (617 million) due beginning from the sixth year (7 November 2007) by reducing the face value of each bond outstanding by one-fifth. The last instalment will be repaid on 7 November 2011. The bonds pay coupon interest equal to: 4.40% in the first year (7 November 2002), 4.60% in the second year (7 November 2003), 4.80% in the third year (7 November 2004), 5.00% in the fourth year (7 November 2005), 5.20% in the fifth year (7 November 2006), 5.40% in the sixth year (7 November 2007), 5.90% in the seventh year (7 November 2008), 6.40% in the eighth year (7 November 2009), 6.90% in the ninth year (7 November 2010), 7.40% in the tenth year (7 November 2011). (3) Bond listed on the Irish Stock Exchange. (4) Bonds with amounts outstanding equal to or less than the equivalent of 50 million.
The decrease of 1,195 million in 2010 (excluding exchange rate differences) in Bonds classified as Continuing Operations is mainly due to: the repayment on maturity of a bond having a nominal value of 1,000 million issued by Fiat Finance and Trade Ltd S.A. in 2000 as part of the Global Medium Term Notes programme; the repayment on maturity of the fourth fixed annual instalment of approximately 123 million of the Fiat Step-up amortizing bond (issued under the Global Medium Term Notes Programme); the repayment of other bonds falling due in the amount of approximately 71 million. The bonds issued by the Group and classified as Continuing Operations are governed by different terms and conditions according to their type as follows: Global Medium Term Note (GMTN Programme): a maximum of 15 billion may be used under this Program, of which notes of approximately 7.7 billion have been issued to date; the Program is guaranteed by Fiat S.p.A. The issuers taking part in the program include, amongst others, Fiat Finance and Trade Ltd. S.A. for an amount outstanding of 6.7 billion and Fiat Finance North America Inc. with a bond having a nominal value of 1 billion. Other bonds: these refer to a bond issued by Fiat Finance and Trade Ltd. S.A. having a nominal value of 1 billion, issued at par, bearing fixed interest at 6.625% and repayable on 15 February 2013.
236
NOTES
The major bond issues outstanding at 31 December 2010 and classified as Discontinued Operations are the following:
Face value of outstanding bonds (in million) 1,000 254 1,500 Outstanding amount ( million) 748 190 1,123 2,061 (8) 2,053
Case New Holland Inc. CNH America LLC Case New Holland Inc. Total Other bonds Hedging effect and amortised cost valuation Total Bonds
Currency USD USD USD
Coupon 7.750% 7.250% 7.875%
Maturity 1 September 2013 15 January 2016 1 December 2017
The increase of 754 million in 2010 (excluding exchange rate differences) in Bonds classified as Discontinued Operations is mainly due to: the issue by Case New Holland Inc. of a bond having a nominal value of US$1,500 million, maturing in 2017 and paying a fixed coupon of 7.875%, at a price of 99.32% of its nominal value; the early repayment of a bond with nominal of USD 500 million (originally due in 2014) made by Case New Holland Inc. The bonds issued by the Group and classified as Discontinued Operations are governed by different terms and conditions according to their type; more specifically these are as follows, in addition to the above-mentioned Case New Holland Inc. bond issued in 2010: a bond issued by Case New Holland Inc., having a nominal value of US$1 billion at a price of 97.062%, falling due in 2013 and bearing fixed interest at a rate of 7.75%, payable semi-annually; bond issued by CNH America LLC for a total amount outstanding of 254 million of US dollars and repayable in 2016. The unaudited prospectuses and offering circulars, or their abstracts, relating to the principal bond issues included in Continuing Operations are available on the Groups website at www.fiatspa.com under Investor Relations Financial Reports, while the unaudited prospectuses and offering circulars, or their abstracts, relating to the principal bond issues included in Discontinued Operations are available on the Groups website at www.fiatindustrial.com under Investor Relations Financial Reports. Most of the bonds issued by the Group impose covenants on the issuer and, in certain cases, on Fiat S.p.A. as guarantor, which is standard international practice for similar bonds issued by companies in the same industry sector as the Group. Such covenants include: (i) negative pledge clauses which require that bonds benefit from any existing or future pledges of assets of the issuer and/or Fiat S.p.A. granted in connection with other bonds or debt securities having the same ranking; (ii) pari passu clauses, under which no obligations ranking senior to the bonds in question may be assumed; (iii) periodic disclosure obligations; (iv) for certain bond issues, cross-default clauses which require immediate repayment of the bonds under certain events of default on other financial instruments issued by the Group; and, (v) other clauses that are generally applicable to securities of a similar type. The Group intends to repay the issued bonds in cash at due date by utilising available liquid resources. In addition, the companies in the Group may from time to time buy back bonds on the market that have been issued by the Group, also for purposes of their cancellation. Such buy backs, if made, depend upon market conditions, the financial situation of the Group and other factors which could affect such decisions. Committed credit lines expiring after 12 months available to Continuing Operations and amounting to approximately 1.9 billion had been fully used at 31 December 2010. In respect of Discontinued Operations, in order to provide the Fiat Industrial Group with adequate funds, new syndicated committed credit facilities for a total of 4.2 billion were finalised during the year. These facilities were made available to Fiat Industrial Group treasuries in January 2011 once the Demerger had become effective.
237
More specifically these relate to: a three-year revolving credit facility of 2 billion; a one-year loan of 2.2 billion (extendable for a further year at the discretion of Fiat Industrial), which is intended to be repaid on the basis of new bond issues. In addition, the Fiat Industrial Group treasuries benefit from the transfer of bilateral bank credit facilities (previously available to Fiat Group treasuries) of over 1 billion. The annual interest rates and the nominal currencies of debt at 31 December 2010 are as follows:
less than 5% 5,682 690 391 332 143 139 63 20 7,460 from 5% to 7.5% 6,002 196 131 40 1 6,370 from 7.5% to 10% 2,500 250 12 2,762 from 10% to 12.5% 1,160 5 1 1,166 Interest rate greater than 12.5% 148 30 3 181
( million)
Total 14,184 2,444 522 332 183 152 63 35 24 17,939
Continuing Operations Euro Brazilian real US dollar Canadian dollar Chinese renminbi Polish zloty British pound Argentine peso Other Total Continuing Operations Discontinued Operations Euro US dollar Brazilian real Canadian dollar Australian dollar Chinese renminbi Polish zloty Argentine peso British pound Other Total Discontinued Operations Total Debt
1,855 4,891 193 1,127 22 13 2 79 8,182 15,642
24 408 723 803 86 57 2,101 8,471
3 1,871 176 1 2,051 4,813
5 683 18 10 716 1,882
3 16 19 200
1,882 7,175 1,778 1,127 825 99 57 34 2 90 13,069 31,008
Debt with annual nominal interest rates in excess of 12.5% relates principally to the companies operating in Argentina and Brazil. For further information on the management of interest rate and currency risk reference should be made to the previous section Risk Management and to Note 32. The fair value of Debt classified as Continuing Operations at 31 December 2010 amounts approximately to 18,391 million. The fair value of Debt classified as Discontinued Operations at 31 December 2010 amounted approximately to 13,197 million. The fair value of Debt at 31 December 2009 amounted approximately to 28,844 million. These amounts have been determined using the quoted market price of financial instruments, if available, or discounting the related future cash flows and using the interest rates stated in Note 19, suitably adjusted to take account of the Groups current creditworthiness.
238
NOTES
At 31 December 2010 the Group had outstanding financial lease agreements for certain property, plant and equipment whose overall net carrying amount totalling 322 million is included in Continuing Operations (Note 15). At 31 December 2010, the Group had outstanding financial lease agreements for certain Property, plant and equipment whose net carrying amount totalling 48 million is included in Discontinued Operations. At 31 December 2009, the Group had outstanding financial lease agreements for certain Property, plant and equipment whose net carrying amount was 304 million. At 31 December 2010, payables for finance leases included in Other debt and classified as Continuing Operations and as Discontinued Operations amount to 286 million and 45 million, respectively, and may be analysed as follows:
due between one and five years 113 (3) 110 Continuing Operations due beyond five years Total 129 290 (4) 129 286 due between one and five years 19 (1) 18 Discontinued Operations due beyond five years Total 20 47 (2) 20 45
( million)
Minimum future lease payments Interest expense Present value of minimum lease payments
due within one year 48 (1) 47
At 31 December 2009, Payables for finance leases included in Other debt amounted to 268 million and may be analysed as follows:
due between one ands five year 105 (2) 103 At 31 December 2009 due beyond five years Total 119 271 (3) 119 268
( million)
Minimum future lease payments Interest expense Present value of minimum lease payments
As discussed in Note 15, finance lease payables also relate to suppliers assets recognised in the consolidated financial statements in accordance with IFRIC 4. Debt secured by mortgages on assets of the Group and classified as Continuing Operations amounts to 324 million at 31 December 2010, of which 286 million due to creditors for the above mentioned assets acquired under finance leases. Debt secured by mortgages on assets of the Group and classified as Discontinued Operations amounts to 88 million at 31 December 2010, of which 45 million due to creditors for the above mentioned assets acquired under finance leases. At 31 December 2009, Debt secured by mortgages on assets of the Group and amounted to 358 million, of which 268 million due to creditors for assets acquired under finance leases. The total carrying amount of assets acting as security for loans amounts to 517 million at 31 December 2010 (446 million at 31 December 2009), of which 425 million classified as Continuing Operations and 92 million classified as Discontinued Operations. In addition, at 31 December 2010 the Groups assets include current receivables and cash with a pre-determined use to settle Asset-backed financing of 533 million included in Continuing Operations and of 8,321 million included in Discontinued Operations. At 31 December 2009, the total amount of such Asset-backed financing was 7,086 million.
239
Net financial position In compliance with Consob Regulation issued on 28 July 2006 and in conformity with the CESRs Recommendations for the consistent implementation of the European Commissions Regulation on Prospectuses issued on 10 February 2005, the Net financial position of the Group is as follows:
Continuing Operations
( million)
A. Cash and cash equivalents B. Current securities (securities held for trading) C. Liquidity (C) = (A+B) D. Receivables from financing activities (Current financial receivables) of which: From jointly controlled financial services entities E. Financial receivables from Discontinued/Continuing Operations F. Other financial assets G. Debt H. Other financial liabilities I. Net financial position (I) = (C+D+E+F-G-H)
11,967 185 12,152 2,866 12 5,626 516 20,804 255 101
At 31 December 2010 Discontinued Operations Fiat Group before Demerger of which ReTotal lated parties 3,686 15,653 24 209 3,710 15,862 10,908 2,865 88 18,695 147 (1,271) 13,774 12 604 31,008 402 (1,170) 129 12 553 (424)
At 31 December 2009 of which Related parties 651 651 120 14 52 1,144 49 (370)
Total 12,226 217 12,443 12,695 14 636 28,527 464 (3,217)
The item Receivables from financing activities includes the entire portfolio of the financial services entities, classified as current assets as they will be realised during the normal operating cycle of these companies. The following is a reconciliation between the Net financial position as presented in the above table and Net debt as presented in the Report on Operations:
Continuing Operations (2,753) 2,854 101 At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total (12,179) (14,932) (15,898) 10,908 (1,271) 13,762 (1,170) 12,681 (3,217)
( million)
Consolidated net debt as presented in the Report on Operations Less: Current financial receivables, excluding those due from jointly controlled financial services companies relating to Continuing Operations, amounting to 12 million at 31 December 2010 (14 million at 31 December 2009) Net financial position
Reference should be made to Notes 19, 20, 21 and 22 and the information provided in this Note for a further analysis of the items in the table.
240
NOTES
27. Trade payables An analysis by due date of trade payables is as follows:

Due between one and five years 6 4 10 At 31 December 2010 Due beyond five years Total 1 9,345 1 3,906 2 13,251 Due between one and five years 13 13 At 31 December 2009 Due beyond five years Total 1 12,295 1 12,295
( million)
Trade payables classified as Continuing Operations Trade payables classified as Discontinued Operations Trade payables
Due within one year 9,338 3,901 13,239
Due within one year 12,281 12,281
The carrying amount of Trade payables is considered in line with their fair value at the balance sheet date. 28. Other current liabilities An analysis of Other current liabilities is as follows:
( million)
Advances on buy-back agreements Indirect tax payables Accrued expenses and deferred income Payables to personnel Social security payables Amounts due to customers for contract work (Note 18) Other Total Other current liabilities
Continuing Operations 822 1,063 806 269 280 105 563 3,908
At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 1,010 1,832 1.885 309 1,372 1.082 340 1,146 1.078 190 459 468 159 439 423 105 81 334 897 848 2,342 6,250 5.865
An analysis of Other current liabilities (excluding Accrued expenses and deferred income) by due date is as follows:
due between due within one and one year five years 2,544 1,361 3,905 545 618 1,163 At 31 December 2010 due beyond five years Total 13 23 36 3,102 2,002 5,104 due between due within one and one year five years 3,859 3,859 891 891 At 31 December 2009 due beyond five years Total 37 37 4,787 4,787
( million)
Other current liabilities (excluding Accrued expenses and deferred income) classified as Continuing Operations Other current liabilities (excluding Accrued expenses and deferred income) classified as Discontinued Operations Total Other current liabilities (excluding Accrued expenses and deferred income)
The item Advances on buy-back agreements refers to agreements entered into by the Group during the year or which still remain effective at the balance sheet date. With respect to Continuing Operations, 822 million relates to assets included in Inventories, while with respect to Discontinued Operations 1,010 million relates to assets included in Property, plant and equipment. The item Advances on buy-back agreements represents the following: at the date of the sale, the price received for the product is recognised as an advance in liabilities; subsequently, since the difference between the original sales price and the repurchase price is recognised in the income statement as operating lease instalments on a straight-line basis over the lease term, the balance represents the remaining lease instalments yet to be recognised in income plus the repurchase price. The carrying amount of Other current liabilities is considered in line with their fair value.
241
29. Guarantees granted, commitments and contingent liabilities Guarantees granted With respect to Continuing Operations at 31 December 2010 the Group had provided guarantees on the debt or commitments of third parties or jointly controlled and associated entities totalling 51 million; the corresponding amount at 31 December 2010 relating to Discontinued Operations was 655 million. At 31 December 2009, the Fiat Group had provided guarantees for an amount of 593 million. Other commitments and important contractual rights The Group has important commitments and rights deriving from outstanding agreements, summarised in the following. Teksid Fiat S.p.A. is subject to a put contract with Renault in reference to the original investment of 33.5% in Teksid, now 15.2%. In particular, Renault would acquire the right to exercise a sale option to Fiat on its interest in Teksid, in the following cases: in the event of non-fulfilment in the application of the protocol of the agreement and admission to receivership or any other redressement procedure; in the event Renaults investment in Teksid falls below 15% or Teksid decides to invest in a structural manner outside the foundry sector; should Fiat be the object of the acquisition of control by another car manufacturer. The exercise price of the option is established as follows: for the original 6.5% of the share capital of Teksid, the initial investment price as increased by a given interest rate; for the remaining amount of share capital of Teksid, the share of the accounting net equity at the exercise date. Chrysler With specific reference to the Fiat call options under the Chrysler-Fiat strategic alliance Agreements, Fiat, holding 20% of Chrysler at the date of the closing of the Alliance agreements, had the right - conditioned upon the achievement of three separate Performance Events - to receive without consideration up to a further 15% interest in Chrysler. These rights are valued at zero in the consolidated statement of financial position at 31 December 2010, consistently with the accounting for the original 20% investment in Chrysler. In particular, the first Performance Event occurs when Chrysler receives regulatory approval for an engine based on the Fiat FIRE family for manufacture in U.S. and Chrysler commits to production. Chrysler received the required governmental approvals and achieved this Performance Event on 10 January 2011 by delivering to U.S. Treasury a letter in which it irrevocably committed to begin production of the FIRE engine in the U.S. Fiat currently holds 25% of Chrysler. The second Performance Event will occur when Chrysler records aggregate revenues of US$1.5 billion or more outside NAFTA and enters into one or more franchise agreements regarding the distribution in the Latin America region of Chrysler products. Finally, Fiat will receive the third tranche of 5% interest in Chrysler when Chrysler receives regulatory approval for a vehicle based on Fiat platform or vehicle technology with at least 40 combined miles per gallon and commits to commercial assembly in the U.S. In addition to these rights, for any Performance Event that has not occurred by January 2013, Fiat may acquire the associated 5% equity tranches through a primary call option (the Alternative Call Option). Fiat also has a second primary call option (the Incremental Equity Call Option) to acquire up to a further 16% of Chryslers equity, subject to a limit on Fiats ownership at 49.9% prior to full repayment of the U.S. Treasury and Canadian government loans. Fiat may exercise these two call options from January 2013 to June 2016. The Incremental Equity Call Option may not be exercised until the Chrysler aggregate principal of the two loans falls below approximately $4 billion. Fiat may exercise the Alternative Call Option or the Incremental Equity Call Option prior to 1 January 2013 if the loans granted by the U.S. Treasury and the Government of Canada have been repaid and any other related commitment terminated. Fiat also holds two secondary call options to purchase a portion of the membership interest held by the VEBA Trust, and the entirety of the membership interest held by the U.S. Treasury at exercise prices determined in a manner consistent with those described below.
242
NOTES
The consideration to be paid for the exercise of these options is determined on the basis of a defined market-based EBITDA multiple (average multiple of reference automakers, not to exceed the then Fiat multiple), applied to Chrysler reported Modified EBITDA for the most recent four quarters, less Net Industrial Debt. In the event that at the time of exercise Chrysler is a listed company, such consideration will be based on a volume-weighted average price per share of Chrysler common stock. The Incremental Equity Call Option is recognised in the Consolidated statement of financial position on a fair value basis at zero, as the exercise price is not fixed but rather will be based on market values of underlying assets at exercise. Iveco Finance Holdings Limited Since 2005, Financial Services activities for Iveco in Western Europe have been managed by Iveco Finance Holdings Limited (IFHL), the joint venture with Barclays Group in which Iveco holds a 49% stake and Barclays a 51% stake. This joint venture provides support for the sectors European sales activities through dealer and end customer financing in France, Germany, Italy and the United Kingdom, and Barclays provides funding up to a maximum of 3.5 billion. The agreements relating to this joint venture contain provisions that are standard for such contracts in relation to management of the company, covenants and default clauses. Under the agreements signed in 2010, the parties stipulated that the joint venture would terminate on 31 May 2012. As is usual for contracts of this type, on that date Iveco will acquire from Barclays Group, and Barclays Group will sell, the interest it holds in that joint venture for a consideration based on the book value of equity. In addition, Iveco is responsible for ensuring repayment of any funding provided to the joint venture by Barclays which is outstanding at that date (which could take place through replacement funding from one or more new lenders or other mechanism). Iveco is evaluating strategic options in relation to this joint venture, including the potential selection of new partners. Sales of receivables The Group has discounted receivables and bills without recourse having due dates after 31 December 2010 and classified as Continuing Operations amounting to 3,524 million, which refer to trade receivables and other receivables for 2,761 million and receivables from financing for 763 million. These amounts include receivables, mainly from the sales network, sold to jointly-controlled financial services companies (FGA Capital) for 2,376 million. With respect to Discontinued Operations, the Group has discounted receivables and bills without recourse having due dates after 31 December 2010 amounting to 1,100 million, of which trade receivables and other receivables for 882 million and receivables from financing for 218 million. These amounts include receivables, mainly from the sales network, sold to associated financial service companies (Iveco Finance Holdings Limited, controlled by Barclays) for 390 million. At 31 December 2009, the Fiat Group had discounted receivables and bills without recourse having due dates after that date for a total of 4,611 million. Of this, 3,679 million related to trade receivables and other receivables and 932 million related to receivables from financing. These amounts included receivables, mainly from the sales network, sold to jointly-controlled financial services companies (FGA Capital) for 2,530 million and receivables, mainly from the sales network, sold to associated financial service companies (Iveco Finance Holdings, controlled by Barclays) for 440 million. Operating lease contracts The Group has entered operating lease contracts for the right to use industrial buildings and equipment with an average term of 10-20 years and 3-5 years, respectively. At 31 December 2010 the total future minimum lease payments under non-cancellable lease contracts are as follows:
due between due within one and ( million) one year five years Future minimum lease payments under operating lease agreements 34 91 Continuing Operations due beyond five years Total 99 224 due between due within one and one year five years 41 71 Discontinued Operations due beyond five years Total 46 158
The total future minimum lease payments under non-cancellable lease contracts at 31 December 2009 were as follows:
due between due within one and one year five years 77 171 At 31 December 2009 due beyond five years Total 154 402
( million)
Future minimum lease payments under operating lease agreements
243
During 2010, the Group has recorded costs for lease payments of 48 million in Profit/(loss) from Continuing Operations, and of 45 million in Profit/(loss) from Discontinued Operations. During 2009, the Group recorded costs for lease payments of 107 million. Contingent liabilities As a global company with a diverse business portfolio, the Group is exposed to numerous legal risks, particularly in the areas of product liability, competition and antitrust law, environmental risks and tax matters. The outcome of any current or future proceedings cannot be predicted with certainty. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers compensation payments and could affect the Groups financial position and results. At 31 December 2010, contingent liabilities estimated by the Group in connection with Continuing Operations amount to approximately 131 million (approximately 111 million at 31 December 2009), for which no provisions have been recognised since an outflow of resources is not considered to be probable. Furthermore, contingent assets and expected reimbursement in connection with these contingent liabilities for approximately 17 million (20 million at 31 December 2009) have been estimated but not recognised. With respect to Discontinued Operations, at 31 December 2010 contingent liabilities estimated by the Group amount to approximately 36 million for which no provisions have been recognised since an outflow of resources is not considered to be probable. Instead, when it is probable that an outflow of resources embodying economic benefits will be required to settle obligations and this amount can be reliably estimated, the Group recognises specific provisions for this purpose. Furthermore, in connection with significant asset divestitures carried out in prior years, the Group provided indemnities to purchasers with the maximum amount of potential liability under these contracts generally capped at a percentage of the purchase price. These liabilities, all relating to Continuing Operations, refer principally to potential liabilities arising from possible breaches of representations and warranties provided in the contracts and, in certain instances, environmental or tax matters, generally for a limited period of time. At 31 December 2010, potential obligations with respect to these indemnities were approximately 859 million (approximately 879 million at 31 December 2009). Against these obligations, provisions of 60 million (52 million 31 December 2009) have been made which are classified as Other provisions. The Group has provided certain other indemnifications that do not limit potential payment; it is not possible to estimate a maximum amount of potential future payments that could result from claims made under these indemnities. The question relating to the participation of certain Fiat Group companies, belonging to the CNH and Iveco sectors, in the Oil-for-Food program was concluded in 2008 through two settlement agreements signed with the SEC and US Department of Justice (DOJ). The Fiat Group closed the matter with these authorities by executing a settlement agreement in 2008. This settlement agreement with the DOJ requires the Fiat Group (and, after the Demerger, the Fiat Industrial Group) to satisfy certain obligations such as continuing its cooperating with the DOJ and maintaining an adequate Foreign Corrupt Practices Act prevention program. Since January 2011, Iveco is subject to an investigation being conducted by the European Commission into certain business practices of the leading manufacturers of commercial vehicles in the European Union in relation to possible anti-competitive behaviour. The investigation covers several Member States of the European Union. The Group is cooperating fully with the European Commission and, since the investigation is at a very preliminary stage, it is not possible to assess the effects that the investigation may have on the Group, if any. 30. Segment reporting The operating segments through which the Group carries out its activities are based on the internal reporting used by the Groups Chief Executive Officer to make strategic decisions. As a result of the Demerger, described earlier, segment reporting disclosures are set out for Continuing Operations and then separately for Discontinued Operations in order to reflect the Groups new organisational structure. In addition, following the inclusion of the Industrial & Marine operations of the FPT Powertrain Technologies sector in Discontinued Operations, starting from these financial statements this sector is no longer reported as a whole, in accordance with IFRS 8 - Operating Segments, while the Fiat Powertrain sector, which includes the Passengers & Commercial Vehicles line of business, and the FPT Industrial sector, which includes the Industrial & Marine line of business, are presented separately in Continuing Operations and Discontinued Operations, respectively. The reporting used in the preparation of this Note, which reflects the Groups current organisational structure, is broken down by the various products and services offered by the Group and prepared in accordance with the accounting policies described under Significant Accounting Policies above.
244
NOTES
The individual operating segments included in Continuing Operations earn revenues from their ordinary production and sales activities as follows: Fiat Group Automobiles earns its revenues from the production and sale of passenger cars and light commercial vehicles, in addition to the provision of financial services associated with the sale of those vehicles in markets outside the European Union. Financial services activities within the European Union are, however, carried out through the 50/50 joint venture FGA Capital set up with the Crdit Agricole group. The Maserati segment earns its revenues from the production and sale of Maserati-brand luxury sport cars. The Ferrari segment earns its revenues from the production and sale of Ferrari-brand luxury sport cars, from managing its Formula 1 team and from providing financial services offered in conjunction with its vehicle sales. The Fiat Powertrain segment earns its revenues from the production and sale of engines and transmissions for passenger and commercial vehicles, and from the Centro Ricerche Fiat activities. The Components segment (Magneti Marelli) earns its revenues from the production and sale of lighting components, engine control units, suspensions, shock absorbers, electronic systems, and exhaust systems and from activities in the plastic moulding components and in the after market. The Metallurgical Products segment (Teksid) earns its revenues from the production and sale of cast iron components for engines, transmissions and suspension systems, and aluminium cylinder heads. The Production System segment (Comau) earns its revenues from the design and production of industrial automation systems and related products for the automotive sector. The individual operating segments included in Discontinued Operations earn revenues from their ordinary production and sales activities as follows: The Agricultural and Construction Equipment segment (CNH-Case New Holland) is active globally in the design, production and sale of agricultural and construction equipment. This segment also provides financial services to its end customers and dealers directly and indirectly in certain European countries through a joint ventures with the BNP Paribas Group. The Trucks and Commercial Vehicles segment (Iveco) earns its revenues from the production and sale, predominantly in Europe, of trucks and commercial vehicles, buses and special use vehicles. The segment also offers financial services directly to its customers and dealers in Eastern Europe, while in Western Europe these offered through Iveco Finance Holdings Limited, which is owned 51% by the Barclays Group and 49% by Iveco. The FPT Industrial segment earns its revenues from the industrial and marine powertrain activities. The Group assesses performance of its operating segments on the basis of the Trading profit/(loss), Operating profit/(loss) and Result from investments earned by those segments. Revenues for each reported segment are those directly generated by or attributable to the segment as the result of its usual business activities and include revenues from transactions with third parties as well as those derived from transactions with other segments, recognised at normal market prices. For those operating segments which also provide financial services activities, revenues include interest income and other financial income deriving from those activities. Segment expenses represent expenses deriving from each segments business activities both with third parties and other operating segments or which may otherwise be directly attributable to it. Expenses deriving from business activities with other segments are recognised at normal market prices. For those operating segments which also carry out financial services activities, expenses include interest expense and other financial expense deriving from those activities. The measure used to assess profit and loss for each operating segment is the Operating profit/(loss). Trading profit/(loss) is reported as a specific part of the Operating profit/(loss) to separate the income and expense that is non-recurring in the ordinary operations of the business, such as gains and losses from the disposals of investments or restructuring costs from profit or loss attributable to the Segments. Financial income and expense and taxes not deriving from operating activities are recognised centrally and reported under Unallocated items and adjustments. All profit and loss items are recognised in accordance with the same accounting principles used in the preparation of the Groups consolidated financial statements.
245
Details of the income statement by operating segment for the years ended 31 December 2010 and 2009 are as follows:
Fiat Group Automobiles Fiat Powertrain Magneti Marelli Other Unallocated Operating items & Segments adjustments FIAT Group
( million)
Maserati
Ferrari
Teksid
Comau
2010 Segment revenues Revenues from transactions with other operating segments Revenues from external customers Trading profit/(loss) Unusual income/(expense) Operating profit/(loss) Financial income/(expense) Interest in profit/(loss) of joint ventures and associates accounted for by using the equity method Other profit/(loss) from investments Result from investments Profit/(loss) before taxes Income taxes Profit/(loss) from Continuing Operations Amortisation and depreciation Goodwill impairment Non-cash items other than depreciation and amortisation Reversal of impairment losses on Intangible assets and Property, plant and equipment
27,860 (238) 27,622 607 (92) 515
586 (72) 514 24 24
1,919 (65) 1,854 303 (1) 302
4,211 (3,627) 584 140 32 172
5,402 (2,079) 3.323 98 (25) 73
776 (204) 572 17 17
1,023 (280) 743 (6) (6)
1,159 (491) 668 (85) (34) (119)
(7,056) 7.056 14 14 (400) 2 2 484
35,880 35,880 1,112 (120) 992 (400) 120 (6) 114 706 484 222
134 (3) 131
(11) (11)
(3) (2) (5)
1 1
(3) (1) (4)
(1,197) (1,702) -
(81) (40) -
(251) (52) -
(259) (83) -
(293) (137) -
(28) (17) -
(13) (16) Other Unallocated Operating items & Segments adjustments
( million)
Fiat Group Automobiles
Maserati
Ferrari
Fiat Powertrain
Magneti Marelli
Teksid
Comau
FIAT Group
2009 Segment revenues Revenues from transactions with other operating segments Revenues from external customers Trading profit/(loss) Unusual income/(expense) Operating profit/(loss) Financial income/(expense) Interest in profit/(loss) of joint ventures and associates accounted for by using the equity method Other profit/(loss) from investments Result from investments Profit/(loss) before taxes Income taxes Profit/(loss) from Continuing Operations Amortisation and depreciation Goodwill impairment Non-cash items other than depreciation and amortisation Reversal of impairment losses on Intangible assets and Property, plant and equipment
26,293 (203) 26,090 470 (253) 217
448 (48) 400 11 11
1,778 (46) 1,732 238 7 245
3,372 (3,077) 295 104 (27) 77
4,528 (1,874) 2.654 25 (65) (40)
578 (173) 405 (12) (2) (14)
728 (247) 481 (28) (4) (32)
1,047 (420) 627 (90) (11) (101)
(6,088) 6,088 18 (3) 15 (352) 2 2 448
32,684 32,684 736 (358) 378 (352) 65 12 77 103 448 (345)
88 8 96
(24) (24)
(2) (1) (3)
3 3
1 1
(3) 5 2
(1,224) (1,543) -
(59) (36) -
(194) (43) -
(195) (87) 6
(263) (126) 2
(25) (26) -
(15) (20) -
246
NOTES
Details of the income statement by operating segment for Discontinued Operations for the years ended 31 December 2010 and 2009, based on the rules used for operating segments forming part of Continuing Operations, are as follows:
2010
( million) CNH Iveco FPT Industrial Other Unallocated Operating items & Segments adjustments Total CNH Other Unallocated FPT Operating items & Iveco Industrial Segments adjustments
2009
Total
Segment revenues Revenues from transactions with other operating segments Revenues from external customers Trading profit/(loss) Unusual income/(expense) Operating profit/(loss) Financial income/(expense) Interest in profit/(loss) of joint ventures and associates accounted for by the equity method Other profit/(loss) from investments Result from investments Profit/(loss) before taxes Income taxes Profit/(loss) from Discontinued Operations Amortisation and depreciation Goodwill impairment Non-cash items other than depreciation and amortisation Reversal of impairment losses on Intangible assets and Property, plant and equipment
11,906 (12) 11,894 755 (1) 754
8,307 (107) 8,200 270 (30) 240
2,415 (1,561) 854 65 (36) 29
394 394 (2) (6) (8)
(1,680) 21,342 1,680 - 21,342 4 1,092 (2) (75) 2 1,017 (505) (505) 198 70 (6) 64 576 198 378
10,107 (22) 10,085 337 (86) 251
7,183 (78) 7,105 105 (195) (90)
1,580 (1,034) 546 (131) (60) (191)
211 21 232 8 8
(1,113) 1,113 3 3 (401) 33
17,968 17,968 322 (341) (19) (401) (47) (3) (50) (470) 33 (503)
75 75
(5) (6) (11)
(26) (26)
(21) (3) (24)
(365) (2,466) -
(382) (676) -
(147) (99) -
(325) (2,279) -
(380) (618) -
(157) (65) -
Segment assets are those assets employed by each segment in carrying out its usual activities or those which may be reasonably allocated to it on the basis of its usual activities, including the value of investments in joint ventures and associates. Segment liabilities are those liabilities arising directly from each segments usual activities or which may be reasonably allocated to it on the basis of its usual activities. The Groups treasury and tax activities are managed centrally and, therefore, are not allocated to the individual segments as they are not directly related to operating activities. These assets and liabilities are not included in the assets and liabilities attributed to the segments, but are instead reported under Unallocated items and adjustments. In particular, treasury assets include amounts receivable from financing activities, other non-current receivables, securities and other financial assets, and cash and cash equivalents of the Groups industrial entities. Treasury liabilities, on the other hand, include debt and other financial liabilities of the Groups industrial entities, net of current financial receivables from jointly-controlled financial services entities. As the segment Profit/(loss) includes the Interest income and other financial income and Interest expense and other financial expense of the financial services entities, the operating assets of Fiat Group Automobiles, Ferrari, CNH Case New Holland and Iveco also include the financial assets (predominantly the loan portfolio) of their financial services companies. Similarly, liabilities for those segments include the debt of the financial services companies. Therefore, the unallocated Group debt represents the debt of industrial entities only.
247
The reported segment assets and liabilities are recognised in accordance with the same accounting principles used in preparation of the Groups consolidated financial statements.
Fiat Group Automobiles Fiat Powertrain Magneti Marelli Other Unallocated Operating items & Segments adjustments FIAT Group
( million)
Maserati
Ferrari
Teksid
Comau
At 31 December 2010 Segment assets Tax assets Receivables from financing activities, Non-current Other receivables and Securities of industrial companies Cash and cash equivalents, Current securities and Other financial assets of industrial companies Total Treasury assets Total unallocated assets Total Assets included in Discontinued Operations Total Assets Segment operating assets include: Investments in associates and joint-ventures accounted for by using the equity method Increases in non-current assets other than financial instruments, deferred tax assets and post-employment benefit assets Segment liabilities Tax liabilities Treasury liabilities Total unallocated liabilities Total Liabilities included in Discontinued Operations Total Liabilities
17,027
382
1,667
3,419
3,395
581
697
17,102
(17,501) 2.031 273 12,380 12,653 14,684
26,769 2,031 273 12,380 12,653 14,684 31,989 73,442
1,248 1,764 14,796
104 350
239 1,141
55 444 1,826
9 399 2,045
28 36 293
24 513 1,162 1,125 514 12,922 13,436 23,251 514 12,922 13,436 24,294 60,981
248
NOTES
( million)
Fiat Group Automobiles
Maserati
Ferrari
Fiat Powertrain
Magneti Marelli
Teksid
Comau
CNH
Iveco
Other Unallocated FPT Operating items & Industrial Segments adjustments
FIAT Group
At 31 December 2009 Segment assets Tax assets Receivables from financing activities, Non-current Other receivables and Securities of industrial companies Cash and cash equivalents, Current securities and Other financial assets of industrial companies Total Treasury assets Total unallocated assets Total Assets Segment operating assets include: Investments in associates and joint-ventures accounted for by using the equity method Increases in non-current assets other than financial instruments, deferred tax assets and post-employment benefit assets Segment liabilities Tax liabilities Treasury liabilities Total unallocated liabilities Total Liabilities
16,157
368
1,608
3,234
3,258
517
567
18,346
7,214
1,743
17,950
(18,935) 3,254 340 11,614 11,954 15,208
52,027 3,254 340 11,614 11,954 15,208 67,235
1,078 1,516 13,520
65 317
290 1,022
41 428 1,783
9 362 1,954
25 33 261
13 406
284 335 14,049
324 464 5,942
11 162 938 1,171 (2,165) 890 16,032 16,922 39,198 890 16,032 16,922 56,120
249
For Assets and Liabilities included in Discontinued Operations, details of segment assets and liabilities, based on the rules used for continuing segments, are as follows:
FPT Industrial 1,744 Other Unallocated Operating items & Segments adjustments 5,855 (6,259) 1,763 71 2,570 2,641 4,404
( million)
CNH 19,268
Iveco 6,977
Total 27,585 1,763 71 2,570 2,641 4,404 31,989
At 31 December 2010 Segment assets Tax assets Receivables from financing activities, Non-current Other receivables and Securities of industrial companies Cash and cash equivalents, Current securities and Other financial assets of industrial companies Total Treasury assets Total unallocated assets Total Assets included in Discontinued Operations Segment operating assets include: Investments in associates and joint-ventures accounted for by the equity method Increases in non-current assets other than financial instruments, deferred tax assets and post-employment benefit assets Segment liabilities Tax liabilities Treasury liabilities Total unallocated liabilities Total Liabilities included in Discontinued Operations
358 447 15,376
320 635 5,902
126 1,198 11 (3,363) 19,124 700 4,470 5,170 24,294
The figures relating to the segments transferred to the Fiat Industrial Group from 1 January 2010 are presented as if these segments still belong to the Fiat Group; there is no intention to describe the operations of these segments from the standpoint of the new Fiat Industrial Group or to present the Groups operations as if the Demerger had not occurred. 31. Information by geographical area The Groups parent company has its registered office in Italy. In 2010, revenues earned from external customers may be analysed as follows:
2010
( million)
2009 Continuing Operations 10,747 21,937 32,684 Discontinued Operations Eliminations 2,250 (253) 15,718 (297) 17,968 (550) Total 12,744 37,358 50,102
Italy Rest of the world Total revenues from external customers
Continuing Operations 9,782 26,098 35,880
Discontinued Operations Eliminations 2,491 (366) 18,851 (598) 21,342 (964)
Total 11,907 44,351 56,258
250
NOTES
The following is an analysis of revenues earned from external customers in the Rest of the World:
2010
( million)
2009 Continuing Operations 7,285 762 2,119 2,977 1,236 711 902 1,284 411 4,250 21,937 Discontinued Operations Eliminations 1,736 (196) 3,816 (5) 1,936 (25) 1,173 (12) 575 (4) 643 (12) 97 284 (1) 307 (4) 5,151 (38) 15,718 (297) Total 8,825 4,573 4,030 4,138 1,807 1,342 999 1,567 714 9,363 37,358
Brazil United States France Germany UK Spain Turkey Poland China Other Total revenues from external customers in RoW
Continuing Operations 9,246 1,057 2,244 2,739 1,261 1,021 1,247 1,057 602 5,624 26,098
Discontinued Operations Eliminations 3,104 (454) 4,359 (3) 1,806 (32) 1,190 (32) 602 (6) 697 (12) 199 307 (1) 415 (4) 6,172 (54) 18,851 (598)
Total 11,896 5,413 4,018 3,897 1,857 1,706 1,446 1,363 1,013 11,742 44,351
Total non-current Assets, excluding financial assets, deferred tax assets, defined benefit assets and rights arising under insurance contracts located in Italy and classified as Continuing and Discontinued Operations totalled 11,272 million at 31 December 2010; the corresponding item classified as Discontinued Operations at 31 December 2010 amounts to 1,782 million. At 31 December 2009, the total amount of non-current Assets (as defined above) located in Italy was 11,419 million. The total of such assets located in the Rest of the World and classified as Continuing Operations totalled 6,005 million at 31 December 2010; the corresponding item classified as Discontinued Operations at 31 December 2010 amounts to 6,824 million. At 31 December 2009, for the Fiat Group overall, the total amount of non-current Assets situated in the Rest of the World was 11,163 million. Non-current assets located in the Rest of the World may be analysed as follows:
Continuing Operations 257 2,412 1,612 331 157 90 180 966 6,005 At 31 December 2010 At 31 December 2009 Discontinued Operations Total Total 3,035 3,292 2,986 436 2,848 2,307 45 1,657 1,288 619 950 918 493 650 669 482 572 581 304 484 383 1,410 2,376 2,031 6,824 12,829 11,163
( million)
United States Brazil Poland France Germany Spain China Other Total non current assets in RoW
In 2010 and 2009, no single external customer of the Group accounted for 10 percent or more of consolidated revenues. 32. Information on financial risks The Group is exposed to the following financial risks connected with its operations: credit risk, regarding its normal business relations with customers and dealers, and its financing activities; liquidity risk, with particular reference to the availability of funds and access to the credit market and to financial instruments in general; market risk (principally relating to exchange rates, interest rates), since the Group operates at an international level in different currencies and uses financial instruments which generate interest. The Group is also exposed to the risk of changes in the price of certain listed shares.
251
As described in the section Risk management, the Group constantly monitors the financial risks to which it is exposed, in order to detect those risks in advance and take the necessary actions to mitigate them. The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon the Group. The quantitative data reported in the following do not have any predictive value, in particular the sensitivity analysis on market risks does not reflect the complexity of the market or the reaction which may result from any changes that are assumed to take place. Credit risk The maximum credit risk to which the Group is theoretically exposed at 31 December 2010 is represented by the carrying amounts stated for financial assets in the statement of financial position and the nominal value of the guarantees provided on liabilities or commitments to third parties as discussed in Note 29. Dealers and final customers are subject to specific assessments of their creditworthiness under a detailed scoring system; in addition to carrying out this screening process, the Group also obtains financial and non-financial guarantees for risks arising from credit granted for the sale of cars, commercial vehicles and agricultural and construction equipment. These guarantees are further strengthened where possible by reserve of title clauses on financed vehicle sales to the sales network and on vehicles assigned under finance leasing agreements. Balances which are objectively uncollectible either in part or for the whole amount are written down on a specific basis if they are individually significant. The amount of the write-down takes into account an estimate of the recoverable cash flows and the date of receipt, the costs of recovery and the fair value of any guarantees received. Impairment losses are recognised for receivables which are not written down on a specific basis, determined on the basis of historical experience and statistical information. Receivables for financing activities classified as Continuing Operations and amounting to 2,866 million at 31 December 2010 contain balances totalling 5 million, which have been written down on an individual basis. Of the remainder, balances totalling 42 million are past due by up to one month, while balances totalling 92 million are past due by more than one month. Receivables for financing activities classified as Discontinued Operations and amounting to 10,908 million at 31 December 2010 contain balances totalling 63 million which have been written down on an individual basis. Of the remainder, balances totalling 237 million are past due by up to one month, while balances totalling 734 million are past due by more than one month. In the case of instalment payments, even if only one instalment is overdue, the whole amount of the receivable is classified as such. At 31 December 2009 balances of 60 million had been written down on an individual basis out of Receivables for financing activities of the Fiat Group totalling 12,695 million. Of the remainder, balances totalling 426 million were past due by up to one month, while balances totalling 918 million were past due by more than one month. Trade receivables and Other receivables classified as Continuing Operations and amounting to 3,669 million at 31 December 2010 contain balances totalling 41 million which have been written down on an individual basis. Of the remainder, balances totalling 164 million are past due by up to one month, while balances totalling 341 million are past due by more than one month. Trade receivables and Other receivables classified as Discontinued Operations and amounting to 2,567 million at 31 December 2010 contain balances totalling 49 million which have been written down on an individual basis. Of the remainder, balances totalling 147 million are past due by up to one month, while balances totalling 185 million are past due by more than one month. At 31 December 2009 balances totalling 67 million had been written down on an individual basis out of Trade receivables and Other receivables of the Fiat Group totalling 6,178 million. Of the remainder, balances totalling 280 million were past due by up to one month, while balances totalling 568 million were past due by more than one month. The significant decrease in the past due component in receivables from financing activities is partially attributable to the gradual collection of loans granted by Banco CNH Capital S.A. as part of the development/subsidised loans programme for agriculture of the Brazilian development agency managed through Banco Nacional de Desenvolvimento Economico e Social (BNDES). These receivables fell under the scope of the general debt relief programmes that were implemented from time to time by the Brazilian government between 2005 and 2008 to support an agricultural industry going through a difficult period. With the rescheduling programmes now at an end, the company has taken all the measures necessary to collect instalments falling due, adjusting the level of its loan allowances in relation to the extent to which the overdue balances are being repaid. Total rescheduled outstanding loans issued by Banco CNH Capital amount to approximately 1.2 billion Reais (approximately 0.5 billion) at 31 December 2010, representing a decrease of approximately 0.8 billion Reais over 31 December 2009; Banco CNH Capital had a net overdue balance with its customers of approximately 0.9 billion Reais (approximately 0.4 billion), representing a decrease of approximately 0.2 billion Reais over 31 December 2009. Although the continual reschedulings of the recent past have contributed to an increase in the uncertainty as to the timing and means by which customers will make repayment, the amounts provided are considered sufficient to cover the residual credit risk. In the meantime, the BNDES has continued its financial support for the company and the subsidised loan programmes.
252
NOTES
Liquidity risk Liquidity risk arises if the Group is unable to obtain the funds needed to carry out its operations under economic conditions. The two main factors that determine the Groups liquidity situation are on the one hand the funds generated by or used in operating and investing activities and on the other the debt lending period and its renewal features or the liquidity of the funds employed and market terms and conditions. As described in the Risk management section, the Group has adopted a series of policies and procedures whose purpose is to optimise the management of funds and to reduce the liquidity risk, as follows: centralising the management of receipts and payments, where it may be economical in the context of the local civil, currency and fiscal regulations of the countries in which the Group is present; maintaining an adequate level of available liquidity; diversifying the means by which funds are obtained and maintaining a continuous and active presence on the capital markets; obtaining adequate credit lines; and monitoring future liquidity on the basis of business planning. Details as to the repayment structure of the Groups financial assets and liabilities are provided in Note 19 Current Receivables and in Note 26 Debt. Details of the repayment structure of derivative financial instruments are provided in Note 21. Management believes that the funds currently available, in addition to those funds that will be generated from operating and financing activities, will enable the Fiat Group Post Demerger and the Fiat Industrial Group to satisfy the requirements resulting from their investing activities and their working capital needs and to fulfil their obligations to repay their debts at their natural due date. Currency risk The Group is exposed to risk resulting from changes in exchange rates, which can affect its earnings and equity. In particular: Where a Group company incurs costs in a currency different from that of its revenues, any change in exchange rates can affect the operating profit/(loss) of that company. In 2010, the total trade flows exposed to currency risk amounted to the equivalent of 12% of the Groups turnover from Continuing Operations, and to the equivalent of 15% of the Groups turnover from Discontinued Operations. The principal exchange rates to which the businesses in Continuing Operations are exposed are the following: EUR/USD, relating to sales in dollars made by Italian companies (in particular Ferrari and Maserati) to the North American market and to other markets in which the US dollar is the trading currency; EUR/GBP, EUR/CHF, in relation to sales on the UK and Swiss markets; EUR/PLN, EUR/TRY, relating to manufacturing costs incurred in Poland and Turkey for products sold in the Euro area; USD/BRL and EUR/BRL, relating to Brazilian manufacturing operations and the related import and export flows. Taken overall trade flows exposed to changes in these exchange rates in 2010 made up approximately 84% of the exposure to currency risk from trade transactions. The principal exchange rates to which Discontinued Operations are exposed are as follows: EUR/USD, in relation to the production/purchases of the CNH Case New Holland sector in the Euro area and to sales in dollars made by Iveco; EUR/GBP, predominately in relation to sales made by Iveco on the UK market and purchases made by the CNH sector in the Euro area; USD/BRL and EUR/BRL, in relation to production in Brazil and the respective import/export flows; USD/AUD, mainly in relation to sales made by the CNH sector in Australia; USD/GBP, in relation to the production/purchases of the CNH sector in the UK.
253
Taken overall trade flows exposed to changes in these exchange rates in 2010 made up approximately 69% of the exposure to currency risk from trade transactions. It is the Groups policy to use derivative financial instruments to hedge a certain percentage, on average between 55% and 85%, of the forecast trading transaction exchange risk exposure for the coming 12 months (including such risk beyond that date where it is believed to be appropriate in relation to the characteristics of the business) and to hedge completely the exposure resulting from firm commitments. Group companies may find themselves with trade receivables or payables denominated in a currency different from the money of account of the company itself. In addition, in a limited number of cases, it may be convenient from an economic point of view, or it may be required under local market conditions, for companies to obtain finance or use funds in a currency different from the money of account. Changes in exchange rates may result in exchange gains or losses arising from these situations. It is the Groups policy to hedge fully, whenever possible, the exposure resulting from receivables, payables and securities denominated in foreign currencies different from the companys money of account. Certain of the Groups subsidiaries are located in countries which are not members of the European monetary union, in particular the United States, Canada, the United Kingdom, Switzerland, the Czech Republic, Brazil, Poland, Turkey, India, China, Argentina and South Africa. As the Groups reference currency is the Euro, the income statements of those countries are converted into Euros using the average exchange rate for the period, and while revenues and margins are unchanged in local currency, changes in exchange rates may lead to effects on the converted balances of revenues, costs and the result in Euros. The assets and liabilities of consolidated companies whose money of account is different from the Euros may acquire converted values in Euros which differ as a function of the fluctuation in exchange rates. The effects of these changes are recognised directly in the item Cumulative Translation Adjustments reserve, included in Other Comprehensive income (see Note 23). The Group monitors its principal exposure to conversion exchange risk, although there was no specific hedging in this respect at the balance sheet date. There have been no substantial changes in 2010 in the nature or structure of exposure to currency risk or in the Groups hedging policies. Sensitivity analysis The potential loss in fair value of derivative financial instruments held for currency risk management (currency swaps/forwards, currency options, interest rate and currency swaps) at 31 December 2010 resulting from a hypothetical, unfavourable and instantaneous change of 10% in the exchange rates of the leading foreign currencies with the Euro would have been approximately 457 million for Continuing Operations and approximately 157 million for Discontinued Operations. For the Group as a whole, the potential loss in fair value of derivative financial instruments held for currency risk management at 31 December 2009 resulting from a hypothetical, unfavourable and instantaneous change of 10% in the exchange rates of the leading foreign currencies with the Euro would have been approximately 544 million. Receivables, payables and future trade flows whose hedging transactions have been analysed were not considered in this analysis. It is reasonable to assume that changes in exchange rates will produce the opposite effect, of an equal or greater amount, on the underlying transactions that have been hedged. Interest rate risk The manufacturing companies and treasuries of the Group make use of external funds obtained in the form of financing and invest in monetary and financial market instruments. In addition, Group companies make sales of receivables resulting from their trading activities on a continuing basis. Changes in market interest rates can affect the cost of the various forms of financing, including the sale of receivables, or the return on investments, and the employment of funds, causing an impact on the level of net financial expenses incurred by the Group. In addition, the financial services companies provide loans (mainly to customers and dealers), financing themselves using various forms of direct debt or asset-backed financing (e.g. securitisation of receivables). Where the characteristics of the variability of the interest rate applied to loans granted differ from those of the variability of the cost of the financing obtained, changes in the current level of interest rates can affect the operating profit/(loss) of those companies and the Group as a whole. In order to manage these risks, the Group uses interest rate derivative financial instruments, mainly interest rate swaps and forward rate agreements, with the object of mitigating, under economically acceptable conditions, the potential variability of interest rates on net profit/(loss).
254
NOTES
Sensitivity analysis In assessing the potential impact of changes in interest rates, the Group separates out fixed rate financial instruments (for which the impact is assessed in terms of fair value) from floating rate financial instruments (for which the impact is assessed in terms of cash flows). The fixed rate financial instruments used by the Group consist principally of part of the portfolio of the financial services companies (basically customer financing and financial leases) and part of debt (including subsidised loans and bonds). With respect to Continuing Operations, the potential loss in fair value of fixed rate financial instruments (including the effect of interest rate derivative financial instruments) held at 31 December 2010, resulting from a hypothetical, unfavourable and instantaneous change of 10% in market interest rates, would have been approximately 49 million. With respect to Discontinued Operations, the potential loss in fair value of fixed rate financial instruments (including the effect of interest rate derivative financial instruments) held at 31 December 2010, resulting from a hypothetical, unfavourable and instantaneous change of 10% in market interest rates, would have been approximately 22 million. For the Fiat Group as a whole, the potential loss in fair value of fixed rate financial instruments (including the effect of interest rate derivative financial instruments) held at 31 December 2009 resulting from a hypothetical, unfavourable and instantaneous change of 10% in market interest rates would have been approximately 70 million. Floating rate financial instruments consist principally of cash and cash equivalents, loans provided by the financial services companies to the sales network and part of debt. The effect of the sale of receivables is also considered in the sensitivity analysis as well as the effect of hedging derivative instruments. With respect to Continuing Operations, a hypothetical, unfavourable and instantaneous change of 10% in short-term interest rates at 31 December 2010, applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivative financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately 3 million. With respect to Discontinued Operations, a hypothetical, unfavourable and instantaneous change of 10% in short-term interest rates at 31 December 2010, applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivative financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately 9 million. With respect to the Fiat Group as a whole, a hypothetical, unfavourable and instantaneous change of 10% in short-term interest rates at 31 December 2009, applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivative financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately 11 million. This analysis is based on the assumption that there is a general and instantaneous change of 10% in interest rates across homogeneous categories. A homogeneous category is defined on the basis of the currency in which the financial assets and liabilities are denominated. Other risks on derivative financial instruments As described in Note 21, the Group holds derivative financial instruments included in Continuing Operations, whose value is linked to the price of listed shares (predominately equity swaps on Fiat shares and after the Demerger, on a basket of Fiat S.p.A. and Fiat Industrial shares). Although theses transactions were entered into for hedging purposes, they do not qualify for hedge accounting under IFRS. As a consequence, the variability of the underlying values could have an effect on the Groups net profit/(loss). In addition the Group has entered derivative contracts linked to commodity prices to hedge specific exposures on supply contracts. Sensitivity analysis With respect to Continuing Operations in the event of a hypothetical, unfavourable, and instantaneous change of 10% in the underlying values, the potential loss in fair value of outstanding derivative financial instruments at 31 December 2010 linked to the Fiat share price would have been approximately 32 million (21 million at 31 December 2009). The increase over the previous year is due to the different price of the share at the end of the year (which is used as a basis for the simulation). With respect to Continuing Operations, in the event of a hypothetical, unfavourable and instantaneous change of 10% in the underlying raw materials prices, the potential loss in fair value of outstanding derivative financial instruments at 31 December 2010 linked to commodity prices would have been approximately 1 million. With respect to Discontinued Operations, in the event of a hypothetical, unfavourable, and instantaneous change of 10% in the underlying raw materials prices, the potential loss in fair value of outstanding derivative financial instruments at 31 December 2010 linked to commodity prices would not have been significant. For the Fiat Group as a whole, in the event of a hypothetical, unfavourable and instantaneous change of 10% in the underlying raw materials prices, the potential loss in fair value of outstanding derivative financial instruments at 31 December 2009 linked to commodity prices would have been approximately 3 million.
255
33. Fair value hierarchy IFRS 7 requires financial instruments recognised in the statement of financial position at fair value to be classified on the basis of a hierarchy that reflects the significance of the inputs used in determining fair value. The following levels are used in this hierarchy: Level 1 quoted prices in active markets for the assets or liabilities being measured; Level 2 inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) on the market; Level 3 inputs that are not based on observable market data. The following table provides an analysis under this hierarchy of the financial assets and liabilities classified as Continuing Operations at 31 December 2010 and measured at fair value.
( million)
Note (16) (16) (20)
Level 1 17 27 38 34 147 263 -
Level 2 516 516 (255) (255)
Level 3 12 12 -
Total 17 39 38 34 147 516 791 (255) (255)
Assets at fair value with changes directly in Other comprehensive income: Investments at fair value with changes directly in equity Other non-current securities Current securities available-for-sale Financial assets at fair value held-for-trading: Current investments Current securities held for trading Other financial assets Total Assets Other financial liabilities Total Liabilities
(20) (21) (21)
In 2010, there were no transfers from Level 1 to Level 2 or vice versa. With reference to Continuing Operations, the following table provides changes in Level 3 in 2010:
( million)
Balances at 31 December 2009 (Gains) and losses recognised in profit or loss Increases/(Decreases) Balances at 31 December 2010
Other non-current securities 27 (15) 12
In 2010, there were no transfers from Level 3 to other levels or vice versa.
256
NOTES
The following table provides an analysis under this hierarchy of financial assets and liabilities classified as Discontinued Operations at 31 December 2010 and measured at fair value.
( million)
Note (16) (16) (20)
Level 1 1 24 25 -
Level 2 88 88 (143) (143)
Level 3 (4) (4)
Total 1 24 88 113 (147) (147)
Assets at fair value with changes directly in Other comprehensive income: Investments at fair value with changes directly in equity Other Non current securities Current securities available for sale Financial assets at fair value held for trading: Current investments Current securities held for trading Other financial assets Total Assets Other financial liabilities Total Liabilities
(20) (21) (21)
In 2010 there were no transfers from Level 1 to Level 2 or vice versa. With reference to Discontinued Operations, the following table provides changes in Level 3 in 2010:
( million)
Balances at 31 December 2009 (Gains) and losses recognised in profit or loss Increases/(Decreases) Balances at 31 December 2010
Other financial asset/(liabilities) (18) 17 (3) (4)
In 2010 there were no transfers from Level 3 to other levels or vice versa. 34. Related party transactions The Group engages in transactions with unconsolidated subsidiaries, jointly controlled entities, associated companies and other related parties on commercial terms that are normal in the respective markets, considering the features of the goods or services involved. These transactions are set out in the following paragraphs with a distinction made between those relating to assets and liabilities forming part of Continuing Operations and those relating to assets and liabilities forming part of Discontinued Operations. Continuing Operations With respect to Profit/(loss) from Continuing Operations, the effects of such transactions on the consolidated income statements for 2010 and 2009 are as follows:
Unconsolidated Subsidiaries 19 71 17 Jointly controlled Associated entities companies 1,730 244 2,995 231 20 37 of which: with related parties Other Total Effect related related on Total parties parties (%) 1 2,586 7.2% 83 3,742 12.2% 63 139 4.7%
( million)
Net revenues Cost of sales Selling, general and administrative costs
Total 2010 35,880 30,718 2,956
257
( million)
Total 2009 32,684 28,252 2,673
Unconsolidated Subsidiaries 16 31 19
Jointly controlled Associated entities companies 1,327 86 2,669 7 24 15
of which: with related parties Other Total Effect related related on Total parties parties (%) 1 1,811 5.5% 65 2,977 10.5% 50 111 4.2%
With respect to Continuing Operations, the effects on the consolidated statement of financial position at 31 December 2010 and 2009 are as follows:
At 31 UnconsoDecember lidated 2010 Subsidiaries 188 49 4,443 2,259 35 2,866 45 5,626 1,528 6 735 11,967 533 17,406 32 2,865 255 9,345 20 3,908 6 Jointly controlled Associated entities companies 39 4 1 27 325 98 63 17 34 36 92 146 798 190 53 19 of which: with related parties Other Total Effect related related on Total parties parties (%) 92 48.9% 28 0.6% 459 20.3% 129 4.5% 5,626 100% 76 5.0% 101 18.9% 178 1.0% 2,865 100% 32 1,040 11.1% 9 87 2.2%
( million)
Other investments and non-current financial assets Inventories Trade receivables Current receivables from financing activities Financial receivables from Discontinued Operations Other current assets Current financial assets Cash and cash equivalents Asset-backed financing Other debt Debt payable to Discontinued Operations Other financial liabilities Trade payables Other current liabilities
Discontinued Operations 1 4 5,626 9 2,865 -
( million)
Other investments and non current financial assets Inventories Trade receivables Current receivables from financing activities Other current assets Current financial assets Cash and cash equivalents Asset-backed financing Other debt Other financial liabilities Trade payables Other current liabilities
At 31 UnconsoDecember lidated 2009 Subsidiaries 275 39 8,748 3,649 33 12,695 51 2,778 6 899 12,226 7,086 21,441 40 464 12,295 25 5,865 4
Jointly controlled entities 39 469 62 36 96 209 793 166
Associated companies 17 10 93 2 1 216 38 39 4
of which: with related parties Other Total Effect related related on Total parties parties (%) 95 34.5% 10 0.1% 595 16.3% 5 120 0.9% 22 65 2.3% 52 52 5.8% 651 651 5.3% 174 486 6.9% 371 658 3.1% 49 49 10.6% 29 886 7.2% 7 181 3.1%
258
NOTES
Transactions with jointly controlled entities These transactions affected revenues, cost of sales, trade receivables and payables, current receivables from financing activities, asset backed-financing, and other financial payables. The effects arising on the financial statements are set out as follows. Net revenues: transactions consist principally of sales of motor vehicles, production systems and components, including engines and gearboxes, and the provision of services, to the following companies:
( million)
Tofas-Turk Otomobil Fabrikasi Tofas A.S., for the sale of motor vehicles Societ Europea Veicoli Leggeri-Sevel S.p.A., for the sale of engines, other components and production systems FGA Capital for the sale of motor vehicles Fiat India Automobiles Limited, for the provision of services, recharges of research costs and the sale of materials Socit Europenne de Vhicules Lgers du Nord-Sevelnord Socit Anonyme, for the sale of engines and other components and production systems Other Total Net revenues from jointly controlled entities
2010 1,152 362 101 73 32 10 1,730
2009 835 252 83 113 30 14 1,327
Cost of sales: transactions have taken place principally with the following companies:
( million)
Societ Europea Veicoli Leggeri-Sevel S.p.A., for the purchase of motor vehicles Tofas-Turk Otomobil Fabrikasi Tofas A.S., for the purchase of motor vehicles Socit Europenne de Vhicules Lgers du Nord-Sevelnord Socit Anonyme, for the purchase of motor vehicles FGA Capital, for charges on the sale of receivables and the purchase of motor vehicles Fiat India Automobiles Limited, for the purchase of engines Other Total Cost of sales for purchases from jointly controlled entities
2010 1,318 1,230 329 72 34 12 2,995
2009 1,106 991 427 106 22 17 2,669
Trade receivables: these relate to receivables resulting from the revenues discussed above and those arising from the Groups trade relationships with FGA Capital, which mostly regard the sales of vehicles leased out by FGA Capital in turn under operating or financial lease arrangements. In particular:
( million)
Fiat India Automobiles Limited FGA Capital Tofas-Turk Otomobil Fabrikasi Tofas A.S. Societ Europea Veicoli Leggeri-Sevel S.p.A. Socit Europenne de Vhicules Lgers du Nord-Sevelnord Socit Anonyme Other Total Current trade receivables due from jointly controlled entities
At 31 December 2010 104 96 90 28 1 6 325
At 31 December 2009 170 83 83 47 2 84 469
259
Trade payables: these relate to payables resulting from the costs discussed above and those arising from the Groups trade relationships with FGA Capital. In particular:
( million)
Societ Europea Veicoli Leggeri-Sevel S.p.A. Tofas-Turk Otomobil Fabrikasi Tofas A.S. FGA Capital Socit Europenne de Vhicules Lgers du Nord-Sevelnord Socit Anonyme Other Total Trade payables due to jointly controlled entities
At 31 December 2010 466 220 52 51 9 798
At 31 December 2009 290 250 80 113 60 793
Current receivables from financing activities: this item, amounting to 63 million at 31 December 2010 (62 million at 31 December 2009), mainly relates to receivables of the Group financial services companies due from jointly controlled entities. Other current assets: this item, amounting to 34 million at 31 December 2010 (36 million at 31 December 2009), relates mostly to other receivables of 26 million due from FGA Capital at 31 December 2010 (31 million at 31 December 2009). Asset-backed financing: this item, amounting to 92 million at 31 December 2010 (96 million at 31 December 2009), relates to amounts due to FGA Capital for sales of receivables which do not qualify as sales under IAS 39. Other financial payables: this item, amounting to 146 million at 31 December 2010 (209 million at 31 December 2009), includes 144 million of other payables of a financial nature due to FGA Capital (96 million at 31 December 2009). Transactions with associated companies These transactions mainly affected revenues, trade receivables and asset backed-financing and other financial payables. The effects arising on the financial statements are set out as follows. Net Revenues: transactions consist principally of sales of motor vehicles and components, including engines and gearboxes, production systems, and the provision of services, to the following companies:
( million)
Chrysler, for the sale of components and production systems To-dis S.r.l. for the sale of publishing products and other Total Net Revenues from associated companies
2010 195 49 244
2009 31 55 86
Cost of sales: transactions consist principally of the purchase of vehicles by the following companies:
( million)
Chrysler, for the purchase of vehicles Others Total cost of sales from associated companies
2010 226 5 231
2009 7 7
260
NOTES
Trade receivables: this item, amounting to 98 million at 31 December 2010 (93 million at 31 December 2009), relates to receivables arising from the revenues discussed above. Asset-backed financing: at 31 December 2009, this item also included amounts due to Iveco Finance Holding Limited for sales of receivables which do not qualify as sales under IAS 39, classified as Discontinued Operations at 31 December 2010. Trade payables: this item, amounting to 190 million at 31 December 2010 (39 million at 31 December 2009), relates to the cost of sales discussed above. Transactions with Discontinued Operations These amounts arise from transactions between companies classified as Continuing Operations and companies classified as Discontinued Operations, and from the asset and liability balances of companies classified as Continuing Operations which relate to unconsolidated companies classified as Discontinued Operations. The effects of individual transactions on financial statement items are as follows: Net Revenues: transactions consist principally of the sales of components, including engine blocks, and production systems, and the provision of professional services by Fiat Group companies remaining within Continuing Operations, to the following companies:
( million)
FPT Industrial, for the sale of engine blocks Entities of the Iveco sector for the sale of components and production systems and professional services Entities of the CNH sector, for the sale of components and production systems and professional services Total Net Revenues from Discontinued Operations
2010 65 395 132 592
2009 270 111 381
Cost of sales: transactions were principally carried up with the following companies:
( million)
Entities of the Iveco sector, for the purchase of commercial vehicles Others Total Cost of Sales from Discontinued Operations
2010 283 79 362
2009 196 9 205
Receivables from financing activities due from Discontinued Operations: these relate mainly to financing provided by the central treasury companies of the Fiat Group to remain within Fiat Group Post-Demerger (Fiat Finance S.p.A. Fiat Finance and Trade Ltd SA, Fiat Finance Canada Ltd and Fiat Finance North America Inc.) to the companies transferred to Fiat Industrial Group. Debt payable to Discontinued Operations: this consists mainly of cash held on deposit with Fiat Groups central treasury companies to remain within Fiat group Post- Demerger by the companies transferred to the Fiat Industrial Group. Transactions with other related parties The principal transaction in this category relates to an amount of 83 million (65 million in 2009) classified in Cost of sales; included in this balance is the purchase of steel from the Corus group, which is part of the Tata group, for an amount of 59 million (41 million in 2009). In 2010 the amount includes the purchase of goods of 19 million (18 million in 2009) for the high range and deluxe upholstery of the Groups automobiles from Poltrona Frau S.p.A., a company listed on the Italian Stock Exchange in which the Chairman of the Board of Directors of Fiat S.p.A. at the time, Luca Cordero di Montezemolo, holds an indirect investment. The Selling, general and administrative costs include the emoluments to Directors, Statutory Auditors and Key Management. In the statement of financial position at 31 December 2009, this item also included deposits, financial payables and the fair value of derivative financial instruments arising from transactions with companies of the Crdit Agricole Group, which was no longer a related party in 2010.
261
Discontinued Operations With respect to Profit/(loss) from Discontinued Operations, the effects of such transactions on the consolidated income statements for 2010 and 2009 are as follows:
Unconsolidated Subsidiaries Jointly controlled Associated entities companies 249 238 187 154 of which: with related parties Other Total Effect related related on Total parties parties (%) 1,205 5.6% 3 686 3.8% 7 162 9.0% of which: with related parties Other Total Effect related related on Total parties parties (%) 837 4.7% 3 439 2.8% 13 180 11.0%
( million)
Total 2010 21,342 17,979 1,793
Continuing Operations 718 342 155
( million)
Total 2009 17,968 15,549 1,636
Unconsolidated Subsidiaries -
Jointly controlled Associated entities companies 191 202 156 118 -
Continuing Operations 444 162 167
With reference to Discontinued Operations, the effects on the consolidated statement of financial position at 31 December 2010 are as follows:
At 31 UnconsoDecember lidated 2010 Subsidiaries 58 1 1,791 3 10,908 2,865 552 112 3,686 8,321 4,748 5,626 147 3,906 1 503 2,342 Jointly controlled Associated entities companies 11 78 63 219 1 49 38 39 48 of which: with related parties Other Total Effect related related on Total parties parties (%) 12 20.7% 163 9.1% 2,865 100% 219 2.6% 55 1.2% 5,626 100% 1 89 2.3% 48 2.0%
( million)
Other investments and non-current financial assets Trade receivables Current receivables from financing activities Financial receivables from Continuing Operations Current tax receivables Other current assets Current financial assets Cash and cash equivalents Asset-backed financing Debt payable to Continuing Operations Other debt Other financial liabilities Trade payables Current tax payables
Continuing Operations 19 2,865 5 5,626 10 -
262
NOTES
Transactions with jointly controlled entities These transactions affected revenues, cost of sales, trade receivables and payables. The effects arising on the financial statements are set out as follows. Net revenues: the transactions consist principally of sales of commercial vehicles, and agricultural and construction machinery, and the provision of services, to the following companies:
( million)
Iveco Oto Melara Societ consortile, for the sale of vehicles and special transport CNH de Mexico SA de CV, for the sale of agricultural and construction equipment Turk Traktor Ve Ziraat Makineleri A.S., for the sale of agricultural and construction equipment SAIC IVECO Commercial Vehicle Investment Company Limited for technical services New Holland HFT Japan Inc., for the sale of agricultural and construction equipment Other Total Net revenues from jointly controlled entities
2010 123 46 26 23 14 17 249
2009 97 36 19 2 23 14 191
Cost of sales: transactions have taken place principally with the following companies:
( million)
Turk Traktor Ve Ziraat Makineleri A.S., for the purchase of agricultural equipment Other Total Cost of sales for purchases from jointly controlled entities
2010 169 18 187
2009 137 19 156
Trade receivables: these relate to receivables arising from the revenues discussed. In particular:
( million)
Iveco Oto Melara Societ consortile Other Total Current trade receivables due from jointly controlled entities
At 31 December 2010 52 26 78
Trade payables: these relate to payables arising from the costs discussed above. In particular:
( million)
Turk Traktor Ve Ziraat Makineleri A.S. Other Total Trade payables due to jointly controlled entities
At 31 December 2010 28 10 38
263
Transactions with associated companies These transactions mainly affected revenues, trade receivables and asset backed-financing. The effects arising on the financial statements are set out as follows. Net Revenues: transactions consist principally of sales of motor vehicles and components, including engines and gearboxes, production systems, and the provision of services, to the following companies:
( million)
Iveco Finance Holdings Ltd. (a subsidiary of the Barclays group), for the sale of industrial vehicles leased out by the associate Other Total Net Revenues from associated companies
2010 126 112 238
2009 74 128 202
Trade receivables: this item, amounting to 63 million at 31 December 2010, relates to receivables arising from the revenues discussed above. Asset-backed financing: this item, amounting to 219 million at 31 December 2010, relates to amounts due to Iveco Finance Holding Limited for sales of receivables which do not qualify as sales under IAS 39. Other financial payables: this item, amounting to 49 million at 31 December 2010, consists mainly of other payables of a financial nature due to Iveco Finance Holdings Limited. Transactions with Continuing Operations These amounts arise from transactions between companies classified as Discontinued Operations and companies classified as Continuing Operations, and from the asset and liability balances of companies classified as Discontinued Operations which relate to unconsolidated companies classified as Continuing Operations. The effects of individual transactions on financial statement items are as follows: Revenues: transactions consists principally in the sale of commercial vehicles produced by Iveco:
( million)
Fiat Group Automobiles, for the sale of light commercial vehicles Other Total Revenues from continuing operations
2010 699 19 718
2009 408 36 444
Cost of sales: transactions arise principally in the purchase of components, including engine blocks and production systems:
( million)
Fiat Group Automobiles, for the purchase of vehicles Teksid S.p.A., for the purchase of engine blocks Entities of the Components sector, for the purchase of components Other Total Cost of sales from Continuing Operations
2010 143 86 46 67 342
2009 23 61 25 53 162
Receivables from financing activities due from Continued Operations: these consists mainly of cash held on deposit by companies to be transferred to the Fiat Industrial Group, with Fiat Groups central treasury companies remaining within Fiat group Post- Demerger. Debt payable to Continuing Operations: this relates mainly to financing provided by Fiat Groups central treasury companies (Fiat Finance S.p.A. Fiat Finance and Trade Ltd Sa, Fiat Finance Canada Ltd and Fiat Finance North America Inc.) remaining within Fiat Group Post-Demerger to the companies transferred to Fiat Industrial Group.
264
NOTES
Transactions with other related parties The principal transaction in this category arising from Selling, general and administrative costs and consists of sponsorship costs of 7 million incurred in 2010 (13 million in 2009) arising from the to contract signed with Juventus Football Club S.p.A. in 2007 and regarding the second part of the 2009-2010 football season. Emoluments to Directors, Statutory Auditors and Key Management The fees of the Director and Statutory Auditors of Fiat S.p.A. for carrying out their respective functions, including those in other consolidated companies, are as follows:
( million)
Directors (a) Statutory auditors Total Emoluments
2010 32,896 260 33,156
2009 21,732 206 21,938
(a) This amount includes for both 2010 and 2009 the notional compensation cost arising from stock options and stock grants awarded to the Chief Executive Officer.
The aggregate expense incurred in 2010 and accrued at year end for the compensation of Executives with strategic responsibilities of the Group amounts to approximately 25 million. This amount is inclusive of the following: the amount contributed by the Group to State and employer defined contribution pension funds of approximately 1 million; the amount contributed by the Group to a special defined benefit plan for certain senior Executives amounting to 0.4 million. 35. Acquisitions and Disposals of subsidiaries Acquisitions In 2010, the Group acquired the following subsidiaries: In the second quarter of 2010, the Fiat Group acquired the remaining 50% of the joint venture Fiat Powertrain Polska Sp. z. o.o. (ex Fiat GM Powertrain Polska), thereby obtaining 100% control. The 50% interest acquired was consolidated on a line-by-line basis effective 1 January 2010, leading to the recognition of a gain amounting to 10 million. The IFRS book values of Fiat GM Powertrain Polskas assets and liabilities at the acquisition date and immediately after the acquisition were as follows:
( million)
Non-current assets Current assets Total assets Liabilities Contingent liabilities
IFRS book value at the acquisition date 115 157 272 100 -
IFRS book value immediately after the acquisition 115 157 272 100 -
265
The consideration paid for this acquisition and the related net cash outflows were as follows:
( million)
Total sales of consolidated subsidiaries 128 (93) 35
Consideration paid: Consideration due Deferred consideration, net Total Consideration paid Net cash outflows on acquisition: Consideration paid Cash and cash equivalents acquired Total Net cash outflows on acquisition
35 (24) 11
Certain subsidiaries in the Components sector whose total assets and revenues are not material for the Group were consolidated on a line-by-line basis in 2010. In addition, in 2010 the Group acquired non-controlling interests in companies in which it already held control, leading to the recognition of the following cash outflows:
( million)
Ferrari S.p.A. following the exercise of the call option New Holland Kobelko Construction Machinery S.p.A. BMI (Itedi) Total
Purchased non-controlling interest 5% 6.919% 30%
Purchased on acquisition 2 2
In 2009, the Group acquired the following subsidiaries: In the fourth quarter of 2009, Fiat Group Automobiles acquired the assets and liabilities of the Bertone group; the assets and liabilities acquired are not significant for the Group. In the fourth quarter of 2009, Fiat Group Automobiles sector acquired an investment of 100% in a minor company in Brazil that has been classified as held for sale. Disposals In 2010 the Group disposed of the following businesses: On 1 February 2010 the sale of Targa Rent S.r.l., a subsidiary of the Fiat Group Automobiles sector, was completed; this investment was already classified as assets held for sale at 31 December 2009. The book value at the disposal date of the net assets sold may be summarised as follows:
( million)
Non-current assets Cash and cash equivalents Other current assets Total assets Debt Other liabilities Total liabilities
Total disposals of investments in consolidated subsidiaries 4 3 7 6 6
266
NOTES
The consideration received for this sales and the related net cash inflows were as follows:
( million)
Total disposal of Investments in consolidated subsidiaries 1 1
Consideration received: Consideration due Deferred sales proceeds, net Total Consideration received Net cash inflows on disposals: Consideration received Cash and cash equivalents disposed of Total Net cash inflows on disposals Total Net cash inflows generated
1 (4) (3) (3)
For the sake of completeness details of the consideration received in 2010 for the sales of other investments and the related net cash inflows are provided as follows:
( million)
Total disposal of Investments in jointly controlled entities, associates and other companies 36 (3) 33 33
Consideration received: Consideration due Deferred sales proceeds, net Total Consideration received Total Net cash inflows on disposals
In 2009 the Group disposed of the following businesses: Certain minor investments of the Comau sector were sold. The Ferrari sector sold certain minor investments as part of a reorganisation. On 30 January 2009 the Components sector sold its investment in the subsidiary Ergom France S.a.S. The consideration received for these sales of consolidated subsidiaries and the related net cash inflows are as follows:
( million)
Total disposal of Investments in consolidated subsidiaries 25 (4) 21
Consideration received: Consideration due Deferred sales proceeds, net Total Consideration received Net cash inflows on disposals: Consideration received Cash and cash equivalents disposed of Total Net cash inflows on disposals Total Net cash inflows generated
21 (5) 16 16
267
36. Explanatory notes to the Statement of Cash Flows The Statement of cash flows sets out changes in cash and cash equivalents during the year. As required by IAS 7 Statement of Cash Flows, cash flows are separated into operating, investing and financing activities. The effects of changes in exchange rates on cash and cash equivalents are shown separately under the line item Translation exchange differences. Cash flows from (used in) operating activities derive mainly from the Groups main revenue producing activities. The cash flows generated by the sale of vehicles under buy-back commitments, net of the amounts included in Profit/(loss) for the year, are included under operating activities in a single line item which includes changes in working capital, capital expenditures, depreciation and impairment losses. This item also includes gains and losses arising from the sales of vehicles transferred under buy-back commitments that occur before the end of the agreement term without repossession of the vehicle. With respect to Continuing Operations, Other non-cash items of 89 million in 2010 (114 million in 2009) include 134 million for the reversal of impairment losses on assets recognised during the year (reversal of previously recognised impairment losses of 232 million in 2009). This item also includes a 107 million gain in the mark-to-market value of two stock option-related equity swaps on Fiat shares (a 117 million gain in 2009). With respect to Discontinued Operations, (Gains) losses on disposal of tangible and intangible assets and other non-cash items of 192 million in 2010 (254 million in 2009) include 194 million for the reversal of impairment losses on assets recognised during the year (reversal of previously recognised impairment losses of 241 million in 2009). Overall, Cash flows for income tax payments net of refunds in 2010 amount to 724 million (445 million in 2009). Overall, interest of 1,727 million was paid and interest of 1,248 million was received in 2010 (interest of 1,363 million was paid in 2009 and interest of 1,051 million was received in 2009). Cash flows from (used in) investing activities represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Only expenditures resulting in an asset recognised in the balance sheet are classified as investing activities in the Statement of cash flows. The consideration paid and received for the acquisition and disposal of subsidiaries is discussed in Note 35. Finally, on 10 June 2009 the Group acquired an initial 20% interest in Chrysler without the payment of cash: this transaction was therefore not included in the statement of cash flows for 2009, other than for the effects arising from the payment of the transaction costs arising from the acquisition (legal expenses, financial fees, etc.). 37. Non-recurring transactions and transactions resulting from unusual and/or abnormal operations The Group did not perform any significant non-recurring transactions or transactions resulting from unusual and/or abnormal operations in 2010 as such are defined by the Consob Communication of 28 July 2006.
268
NOTES
38. Subsequent events On 10 January, Fiat increased its stake in Chrysler Group LLC from 20% to 25% following achievement of the first of the three Performance Events (i.e., attainment of US regulatory approval and a commitment to produce an engine based on Fiats FIRE family in the USA) stipulated in the alliance agreement. On 9 February, Moodys Investors Service completed the review of Fiat S.p.A.s rating for possible for downgrade initiated on 21 July 2010. Fiat S.p.A.s long-term debt rating was affirmed at Ba1 and its short-term rating at Not Prime. The outlook is negative. On 11 February, Fiat Powertrain and Penske Corporation reached an agreement for the purchase, by Fiat Powertrain, of Penske Corporations 50% stake in VM Motori S.p.A. The agreement is subject to the customary clearance by the relevant competition authorities. VM Motori, headquartered in Cento (Italy), is a long-established company specialized in the design and manufacture of diesel engines based on proprietary technology. Pursuant to the agreement, VM Motori will be subject to the joint control of Fiat Powertrain and GM (which acquired a 50% interest in the company in September 2007). On 15 February, In a meeting held at the Unione Industriale di Torino, Fiat presented trade unions with a plan for relaunch of activities at the Officine Automobilistiche Grugliasco (formerly Carrozzeria Bertone), which has been inactive for several years. The plan centers around a 500 million investment (to begin in the second half of 2011) for production of a new E-segment Maserati for international distribution. Start of production is planned for December 2012.
18 February 2011 On behalf of the Board of Directors /s/ John Elkann John Elkann ChAIRMAN
269
APPENDIX I FIAT COMPANIES AT 31 DECEMBER 2010

In accordance with Article 126 of Consob Regulation 11971 of 14 May 1999, as subsequently amended, a complete list of Group companies and significant investments at 31 December 2010 is provided on the following pages. Companies in the list are grouped according to type of control, method of consolidation, their allocation to the group of Continuing or Discontinued Operations and classification by operating segment (pursuant to IFRS 8). For each company, the following information is provided: name, location of registered office, country and share capital stated in original currency). Additionally, the percentage consolidated and the percentage interest held directly by Fiat S.p.A. or its subsidiary is also shown. The column on the far right shows the percentage of voting rights exercisable at an ordinary general meeting, where such percentage differs from the percentage of shares held.
270
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010
APPENDIX I FIAT COMPANIES
% of Group consoliName Registered Office Country Share capital Currency dation Interest held by % interest held
% of voting rights
CONTROLLING COMPANY
Parent Company Fiat S.p.A. Turin Italy 6,377,262,975 EUR -----
CONTINUING OPERATIONS
SUBSIDIARIES CONSOLIDATED ON A LINE-BY-LINE BASIS
Fiat Group Automobiles Fiat Group Automobiles S.p.A. Abarth & C. S.p.A. Alfa Romeo Automobiles S.p.A. Alfa Romeo U.S.A. S.p.A. Banco Fidis S.A. Customer Services Centre S.r.l. Easy Drive S.r.l. FGA Investimenti S.p.A. FGA Officine Automobilistiche Grugliasco S.p.A. FGA Versicherungsservice GmbH Fiat Auto Argentina S.A. (business Fiat Group Automobiles) Fiat Auto Poland S.A. Fiat Auto S.A. de Ahorro para Fines Determinados Fiat Auto Var S.r.l. Fiat Automobil Vertriebs GmbH Fiat Automobiles S.p.A. FIAT AUTOMOBILES SERBIA DOO KRAGUJEVAC Fiat Automotive Finance Co. Ltd. Fiat Automoveis S.A. - FIASA (business Fiat Group Automobiles) Fiat Center (Suisse) S.A. Fiat Center Italia S.p.A. Fiat CR Spol. S.R.O. Fiat Credito Compania Financiera S.A. Turin Turin Turin Turin Betim Turin Turin Turin Turin Heilbronn Italy Italy Italy Italy Brazil Italy Italy Italy Italy Germany 745,031,979 1,500,000 120,000 120,000 337,261,783 2,500,000 10,400 2,000,000 500,000 26,000 EUR EUR EUR EUR BRL EUR EUR EUR EUR EUR 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Fiat S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fidis S.p.A. Fiat Automoveis S.A. - FIASA Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Center Italia S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles Germany AG Rimaco S.A. Fiat Automoveis S.A. - FIASA Fiat Group Automobiles S.p.A. Fiat Auto Argentina S.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles Germany AG Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fidis S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles Switzerland S.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fidis S.p.A. 100.000 100.000 100.000 100.000 75.000 25.000 100.000 99.000 1.000 100.000 100.000 51.000 49.000 100.000 100.000 100.000 100.000 100.000 100.000 66.672 100.000 100.000 100.000 100.000 100.000 100.000
Buenos Aires Bielsko-Biala Buenos Aires Turin Frankfurt Turin Kragujevac Shanghai Betim Meyrin Turin Prague Buenos Aires
Argentina Poland Argentina Italy Germany Italy Serbia People's Rep.of China Brazil Switzerland Italy Czech Republic Argentina
476,464,366 660,334,600 109,535,149 7,370,000 8,700,000 120,000 300,000,000 500,000,000 1,069,492,850 13,000,000 2,000,000 1,000,000 223,129,357
ARS PLN ARS EUR EUR EUR EUR CNY BRL CHF EUR CZK ARS
100.00 100.00 100.00 100.00 100.00 100.00 66.67 100.00 100.00 100.00 100.00 100.00 100.00
271
SUBSIDIARIES CONSOLIDATED ON A LINE-BY-LINE BASIS (continued)

% of Group consoliName Registered Office Country Share capital Currency dation Interest held by % interest held % of voting rights
Fiat Finance Netherlands B.V. Fiat France Fiat Group Automobiles Austria GmbH Fiat Group Automobiles Belgium S.A. Fiat Group Automobiles Denmark A/S Fiat Group Automobiles Germany AG Fiat Group Automobiles Hellas S.A. Fiat Group Automobiles Ireland Ltd. Fiat Group Automobiles Japan K.K. Fiat Group Automobiles Maroc S.A. Fiat Group Automobiles Netherlands B.V. Fiat Group Automobiles Portugal, S.A. Fiat Group Automobiles South Africa (Proprietary) Ltd Fiat Group Automobiles Spain S.A. Fiat Group Automobiles Sweden AB Fiat Group Automobiles Switzerland S.A. Fiat Group Automobiles UK Ltd Fiat Magyarorszag Kereskedelmi KFT. FIAT NORTH AMERICA LLC Fiat Professional S.p.A. Fiat Real Estate Germany GmbH Fiat SR Spol. SR.O. Fidis S.p.A. i-FAST Automotive Logistics S.r.l. i-FAST Container Logistics S.p.A. International Metropolitan Automotive Promotion (France) S.A. Italian Automotive Center S.A. Italian Motor Village Ltd. Italian Motor Village S.A. Italian Motor Village, S.L. Lancia Automobiles S.p.A. Mecaner S.A.
Amsterdam Trappes Vienna Auderghem Glostrup Frankfurt Argyroupoli Dublin Minatu-Ku. Tokyo Casablanca Lijnden Alges Johannesburg Alcal De Henares Kista Schlieren Slough Berkshire Budapest Wilmington Turin Frankfurt Bratislava Turin Turin Turin Trappes Auderghem Slough Berkshire Alges Alcal De Henares Turin Urdliz
Netherlands France Austria Belgium Denmark Germany Greece Ireland Japan Morocco Netherlands Portugal South Africa Spain Sweden Switzerland United Kingdom Hungary U.S.A. Italy Germany Slovack Republic Italy Italy Italy France Belgium United Kingdom Portugal Spain Italy Spain
690,000,000 235,480,520 37,000 26,100,000 55,000,000 82,650,000 62,033,499 5,078,952 420,000,000 1,000,000 5,672,250 1,000,000 640 8,079,280 10,000,000 21,400,000 44,600,000 150,000,000 0 120,000 25,000 33,194 250,000,000 1,250,000 2,500,000 2,977,680 13,500,000 1,500,000 50,000 1,454,420 120,000 3,000,000
EUR EUR EUR EUR DKK EUR EUR EUR JPY MAD EUR EUR ZAR EUR SEK CHF GBP HUF USD EUR EUR EUR EUR EUR EUR EUR EUR GBP EUR EUR EUR EUR
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 99.95 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Fiat Group Automobiles S.p.A. Fiat Finance Netherlands B.V. Fiat Finance Netherlands B.V. FGA Investimenti S.p.A. Fiat Finance Netherlands B.V. Fiat Group Automobiles Switzerland S.A. Fiat Finance Netherlands B.V. Fiat Finance Netherlands B.V. Fiat Group Automobiles Switzerland S.A. Fiat Finance Netherlands B.V. Fiat Finance Netherlands B.V. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Finance Netherlands B.V. Fiat Group Automobiles S.p.A. Fiat Finance Netherlands B.V. Fiat Group Automobiles Switzerland S.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Finance Netherlands B.V. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Automobil Vertriebs GmbH Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A. Fiat France Fiat Group Automobiles Belgium S.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles UK Ltd Fiat Group Automobiles Portugal, S.A. Fiat Group Automobiles Spain S.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles S.p.A.
100.000 100.000 98.000 2.000 99.998 0.002 100.000 99.000 1.000 100.000 100.000 100.000 99.950 100.000 100.000 100.000 99.998 0.002 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 99.997 99.988 0.012 100.000 100.000 100.000 100.000 100.000
272

Sata-Societ Automobilistica Tecnologie Avanzate S.p.A. SCDR (Ireland) Limited
Melfi Dublin
Italy Ireland
276,640,000 70,000
EUR EUR
100.00 100.00
Fiat Group Automobiles S.p.A. Societ di Commercializzazione e Distribuzione Ricambi S.p.A. in liquidation Societ di Commercializzazione e Distribuzione Ricambi S.p.A. in liquidation Societ di Commercializzazione e Distribuzione Ricambi S.p.A. in liquidation
100.000
100.000
SCDR (Switzerland) S.A. in liquidation
Schlieren
Switzerland
100,000
CHF
100.00
100.000
SCDR Automotive Limited
Slough Berkshire
United Kingdom
50,000
GBP
100.00
100.000
Societ di Commercializzazione e Distribuzione Ricambi S.p.A. in liquidation Maserati Maserati S.p.A. Maserati (Suisse) S.A. Maserati Deutschland GmbH Maserati GB Limited Maserati Japan KK Maserati North America Inc. Maserati West Europe societ par actions simplifie Ferrari Ferrari S.p.A. 410 Park Display Inc. Ferrari Central / East Europe GmbH Ferrari Financial Services AG Ferrari Financial Services S.p.A. Ferrari Financial Services, Inc. Ferrari GE.D. S.p.A. Ferrari Japan KK Ferrari Management Consulting (Shanghai) CO., LTD Ferrari Maserati Cars International Trading (Shanghai) Co. Ltd. Ferrari Maserati Cars Sales and Services (Shanghai) CO.,LTD Ferrari N.America Inc.
Turin
Italy
100,000
EUR
100.00
Fiat Group Automobiles S.p.A.
100.000
Modena Schlieren Wiesbaden Slough Berkshire Tokyo Englewood Cliffs Paris
Italy Switzerland Germany United Kingdom Japan U.S.A. France
40,000,000 250,000 500,000 20,000 18,000,000 1,000 37,000
EUR CHF EUR GBP JPY USD EUR
100.00 100.00 100.00 100.00 100.00 100.00 100.00
Fiat S.p.A. Maserati S.p.A. Maserati S.p.A. Maserati S.p.A. Maserati S.p.A. Maserati S.p.A. Maserati S.p.A.
100.000 100.000 100.000 100.000 100.000 100.000 100.000
Modena New York Wiesbaden Munich Modena Wilmington Modena Tokyo Shanghai Shanghai Shanghai Englewood Cliffs
Italy U.S.A. Germany Germany Italy U.S.A. Italy Japan People's Rep.of China Peoples Rep.of China Peoples Rep.of China U.S.A.
20,260,000 100 1,000,000 1,777,600 5,100,000 1,000 11,570,000 160,050,000 2,100,000 3,000,000 2,500,000 200,000
EUR USD EUR EUR EUR USD EUR JPY USD USD USD USD
(*) 90.00 90.00 90.00 81.00 81.00 81.00 90.00 90.00 90.00 53.10 90.00 90.00
Fiat S.p.A. Ferrari N.America Inc. Ferrari S.p.A. Ferrari Financial Services S.p.A. Ferrari S.p.A. Ferrari Financial Services S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A.
85.000 100.000 100.000 100.000 90.000 100.000 100.000 100.000 100.000 59.000 100.000 100.000
(*) Includes impact of exercise of call option on 5% of Ferrari S.p.A. shares
273

Ferrari North Europe Limited Ferrari South West Europe S.A.R.L. Mugello Circuit S.p.A.
Slough Berkshire Levallois-Perret Scarperia
United Kingdom France Switzerland Italy
50,000 172,000 1,000,000 10,000,000
GBP EUR CHF EUR
90.00 90.00 90.00 90.00
Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari GE.D. S.p.A.
100.000 100.000 100.000 90.000 10.000
GSA-Gestions Sportives Automobiles S.A. Meyrin
Fiat Powertrain Fiat Powertrain Technologies SpA Fiat Auto Argentina S.A. (business Fiat Powertrain) Fiat Automoveis S.A. - FIASA (business Fiat Powertrain) Fiat Powertrain Polska Sp. z o.o. Fiat Powertrain Technologies (Shanghai) R&D Co. Ltd. Fiat Powertrain Technologies Poland Sp. z o.o. FMA - Fabbrica Motori Automobilistici S.r.l. FPT Powertrain Technologies do Brasil Industria e Comrcio de Motores Ltda Components Magneti Marelli S.p.A. Automotive Lighting Brotterode GmbH Automotive Lighting Italia S.p.A. Automotive Lighting LLC Automotive Lighting o.o.o. Automotive Lighting Polska Sp. z o.o. Automotive Lighting Rear Lamps France S.a.s. Automotive Lighting Rear Lamps Mexico S. de r.l. de C.V. Automotive Lighting Reutlingen GmbH Automotive Lighting S.R.O. Automotive Lighting UK Limited Ergom do Brasil Ltda Ergom Soffiaggio S.r.l. Fiat CIEI S.p.A. in liquidation Corbetta Brotterode Venaria Reale Farmington Hills Rjiasan Sosnowiec Saint Julien du Sault Italy Germany Italy U.S.A. Russia Poland France 254,325,965 7,270,000 12,000,000 25,001,000 36,875,663 83,500,000 1,524,768 50,000 1,330,000 927,637,000 40,387,348 6,402,500 45,900 220,211 EUR EUR EUR USD RUB PLN EUR MXN EUR CZK GBP BRL EUR EUR 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.99 84.99 99.99 Fiat S.p.A. Automotive Lighting Reutlingen GmbH Automotive Lighting Reutlingen GmbH Magneti Marelli Holding U.S.A. Inc. Automotive Lighting Reutlingen GmbH Automotive Lighting Reutlingen GmbH Automotive Lighting Italia S.p.A. Magneti Marelli Holding U.S.A. Inc. Magneti Marelli S.p.A. Automotive Lighting Reutlingen GmbH Magneti Marelli S.p.A. Plastic Components and Modules Automotive S.p.A. Plastic Components and Modules Automotive S.p.A. Magneti Marelli S.p.A. 99.990 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 85.000 100.000 Turin Buenos Aires Betim Bielsko-Biala Shanghai Bielsko-Biala Pratola Serra Campo Largo Italy Argentina Brazil Poland People's Rep.of China Poland Italy Brazil 525,000,000 476,464,366 1,069,492,850 220,100,000 10,000,000 100,000,000 150,000,000 197,792,500 EUR ARS BRL PLN EUR PLN EUR BRL 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Fiat S.p.A. Fiat Automoveis S.A. - FIASA Fiat Group Automobiles S.p.A. Fiat Powertrain Technologies SpA Fiat Powertrain Technologies SpA Fiat Powertrain Technologies SpA Fiat Powertrain Technologies SpA Fiat Automoveis S.A. - FIASA 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
El Marques Queretaro Mexico Reutlingen Jihlava Chadwell Heath Itauna Leno Corbetta Germany Czech Republic United Kingdom Brazil Italy Italy
274

Industrial Yorka de Mexico S.A. de C.V.
Mexico City
Mexico
50,000
MXN
99.99
Automotive Lighting Rear Lamps Mexico S. de r.l. de C.V. Industrial Yorka de Tepotzotlan S.A. de C.V. Automotive Lighting Rear Lamps Mexico S. de r.l. de C.V. Industrial Yorka de Mexico S.A. de C.V. Magneti Marelli Sistemas Electronicos Mexico S.A. Servicios Administrativos Corp. IPASA S.A. Plastic Components and Modules Automotive S.p.A. Magneti Marelli S.p.A. Magneti Marelli After Market Parts and Services S.p.A. Magneti Marelli S.p.A. Magneti Marelli Iberica S.A. Magneti Marelli After Market Parts and Services S.p.A. Magneti Marelli S.p.A. Magneti Marelli France S.a.s. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli After Market Parts and Services S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli Argentina S.A. Magneti Marelli S.p.A. Magneti Marelli Iberica S.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Ufima S.A.S. Magneti Marelli S.p.A.
98.000 2.000 99.000 1.000 99.998 0.002 100.000
Industrial Yorka de Tepotzotlan S.A. de C.V.
Mexico City
Mexico
50,000
MXN
99.99
Industrias Magneti Marelli Mexico S.A. de C.V. Tepotzotlan
Mexico
50,000
MXN
99.99
Industrie Plastica S.p.A. Magneti Marelli After Market Parts and Services S.p.A. Magneti Marelli Aftermarket GmbH Magneti Marelli Aftermarket S.a.s. Magneti Marelli Aftermarket SL Magneti Marelli Aftermarket Sp. z o.o. Magneti Marelli Argentina S.A. Magneti Marelli Automotive Components (WUHU) Co. Ltd. Magneti Marelli Automotive Electronics (Guangzhou) Co. Limited Magneti Marelli Cofap Autopecas Ltda Magneti Marelli Cofap Companhia Fabricadora de Pecas Magneti Marelli Conjuntos de Escape S.A. Magneti Marelli do Brasil Industria e Comercio SA Magneti Marelli Espana S.A. Magneti Marelli Exhaust Systems Polska Sp. z o.o. Magneti Marelli France S.a.s. Magneti Marelli GmbH
Grugliasco
Italy
1,000,000
EUR
99.99
Corbetta Heilbronn Trappes Llinares del Valles Katowice Buenos Aires
Italy Germany France Spain Poland Argentina
7,000,000 100,000 782,208 2,194,726 2,000,000 700,000
EUR EUR EUR EUR PLN ARS
99.99 99.99 99.99 99.99 99.99 99.99
100.000 100.000 100.000 100.000 100.000 95.000 5.000 100.000 100.000 100.000 99.643 95.000 5.000 99.872 100.000 100.000 99.999 0.001 100.000 99.990 99.966
Wuhu Guangzhou So Paulo
People's Rep.of China People's Rep.of China Brazil
32,000,000 16,100,000 7,554,539
USD USD BRL
99.99 99.99 99.99
Santo Andre Buenos Aires
Brazil Argentina
177,725,564 7,480,071
BRL ARS
99.63 99.99
Hortolandia Llinares del Valles Sosnowiec Nanterre Russelsheim
Brazil Spain Poland France Germany
40,568,427 781,101 15,000,000 42,672,960 200,000
BRL EUR PLN EUR EUR
99.86 99.99 99.99 99.99 99.99
275

Magneti Marelli Hellas A.E. in liquidation Athens Magneti Marelli Holding U.S.A. Inc. Magneti Marelli Iberica S.A. Magneti Marelli India Private Ltd Magneti Marelli Japan K.K. Magneti Marelli North America Inc. Magneti Marelli Powertrain (Shanghai) Co. Ltd. Magneti Marelli Powertrain India Private Limited Magneti Marelli Powertrain U.S.A. LLC Magneti Marelli Repuestos S.A. Wixom Santpedor New Delhi
Greece U.S.A. Spain India France U.S.A.
587,000 10 24,499,771 20,000,000 60,000,000 884,058 40,223,205
EUR USD EUR INR JPY EUR USD
99.99 99.99 99.99 99.99 99.99 99.99 99.63
Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli Cofap Companhia Fabricadora de Pecas Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli Holding U.S.A. Inc. Magneti Marelli S.p.A. Magneti Marelli After Market Parts and Services S.p.A. Magneti Marelli Cofap Autopecas Ltda Magneti Marelli S.p.A. Automotive Lighting Reutlingen GmbH Magneti Marelli S.p.A. Servicios Administrativos Corp. IPASA S.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli Holding U.S.A. Inc. Magneti Marelli S.p.A. Powertrain Mekanik Sanayi ve Ticaret Anonim Sirketi Automotive Lighting Reutlingen GmbH Plastic Components and Modules Holding S.p.A. Magneti Marelli S.p.A. Plastic Components and Modules Automotive S.p.A. Plastic Components and Modules Poland S.A.
100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 51.000 100.000 100.000 100.000 52.000 48.000 66.111 33.889 99.998 0.002 100.000 100.000 100.000 100.000 100.000 51.000 96.665 80.000 100.000 100.000 100.000 100.000
KohoKu-Ku-Yokohama Japan Wilmington
Magneti Marelli Motopropulsion France SAS Argentan
Shanghai New Delhi Sanford Buenos Aires
People's Rep.of China India Slovack Republic U.S.A. United Kingdom Argentina
17,500,000 450,000,000 7,000,000 25,000,000 10,000 2,012,000
USD INR EUR USD GBP ARS
99.99 51.00 99.99 99.99 99.99 99.99
Magneti Marelli Powertrain Slovakia s.r.o. Bratislava Magneti Marelli Racing Ltd in liquidation Basildon
Magneti Marelli Sistemas Automotivos Industria e Comercio Ltda Magneti Marelli Sistemas Electronicos Mexico S.A. Magneti Marelli Slovakia s.r.o. Magneti Marelli South Africa (Proprietary) Limited Magneti Marelli Suspension Systems Bielsko Sp. z.o.o. Magneti Marelli Suspension Systems Poland Sp. z o.o. in liquidation Magneti Marelli Suspensions USA LLC Magneti Marelli Um Electronic Systems Private Limited Mako Elektrik Sanayi Ve Ticaret A.S.
Contagem Tepotzotlan Bratislava Johannesburg Bielsko-Biala Sosnowiec Farmington Hills New Delhi Osmangazi Bursa
Brazil Mexico Slovack Republic South Africa Poland Poland U.S.A. India Turkey Malaysia Italy Italy Poland Poland
206,834,874 50,000 30,006,639 1,950,000 70,050,000 4,310,000 1,300,000 260,000,000 16,500,000 6,000,000 10,000,000 10,000,000 21,000,000 29,281,500
BRL MXN EUR ZAR PLN PLN USD INR TRY MYR EUR EUR PLN PLN
99.99 99.99 99.99 99.99 99.99 99.99 99.99 51.00 96.65 79.99 99.99 99.99 99.99 99.99
Malaysian Automotive Lighting SDN. BHD Bayan Lepas Plastic Components and Modules Automotive S.p.A. Plastic Components and Modules Poland S.A. Grugliasco
Plastic Components and Modules Holding S.p.A. Grugliasco Sosnowiec
Plastic Components Fuel Systems Poland Sp. z o.o. Sosnowiec
276

Plastiform A.S.
Bursa
Turkey
715,000
TRY
99.99
Plastic Components and Modules Automotive S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Iveco Arac Sanayi VE Ticaret A.S. Mako Elektrik Sanayi Ve Ticaret A.S. Plastiform A.S. Sistemi Comandi Meccanici Otomotiv Sanayi Ve Ticaret A.S. Magneti Marelli Sistemas Electronicos Mexico S.A. Industrias Magneti Marelli Mexico S.A. de C.V. Magneti Marelli S.p.A. Plastic Components and Modules Holding S.p.A. Plastic Components and Modules Automotive S.p.A. Plastic Components and Modules Automotive S.p.A. Plastic Components and Modules Holding S.p.A. Automotive Lighting LLC Magneti Marelli S.p.A. Fiat Partecipazioni S.p.A.
97.000 3.000 99.800 0.050 0.050 0.050 0.050 99.990 0.010 100.000 95.000 5.000 95.000 5.000 100.000 65.020 34.980
Powertrain Mekanik Sanayi ve Ticaret Anonim Sirketi
Bursa
Turkey
50,000
TRY
99.99
Servicios Administrativos Corp. IPASA S.A. Sistemi Sospensioni S.p.A. SNIARICERCHE S.P.A. in liquidation
Col. Chapultepec
Mexico
1,000
MXN
99.99
Corbetta Pisticci
Italy Italy
37,622,179 880,000
EUR EUR
99.99 99.99
TEA S.r.l.
Grugliasco
Italy
516,000
EUR
99.99
Tecnologia de Iluminacion Automotriz S.A. de C.V. Ufima S.A.S.
Chihuahua Nanterre
Mexico France
50,000 44,940
MXN EUR
99.99 99.99
Metallurgical Products Teksid S.p.A. Fonderie du Poitou Fonte S.A.S. Funfrap-Fundicao Portuguesa S.A. Teksid Aluminum S.r.l. Teksid do Brasil Ltda Teksid Hierro De Mexico Arrendadora S.A. de C.V. Teksid Hierro de Mexico S.A. de C.V. Teksid Inc. Teksid Iron Poland Sp. z o.o. Production Systems Comau S.p.A. Grugliasco Italy 48,013,959 EUR 100.00 Fiat S.p.A. 100.000 Turin Italy Mexico Portugal Italy Brazil Mexico Mexico U.S.A. Poland 71,403,261 50,000 26,958,464 13,697,550 5,000,000 148,874,686 497,690,000 418,874,300 100,000 115,678,500 EUR MXN EUR EUR EUR BRL MXN MXN USD PLN 84.79 84.79 84.79 70.89 100.00 84.79 84.79 84.79 84.79 84.79 Fiat S.p.A. Teksid Hierro de Mexico S.A. de C.V. Teksid S.p.A. Teksid S.p.A. Fiat S.p.A. Teksid S.p.A. Teksid S.p.A. Teksid S.p.A. Teksid S.p.A. Teksid S.p.A. 84.791 100.000 100.000 83.607 100.000 100.000 100.000 100.000 100.000 100.000 Compania Industrial Frontera S.A. de C.V. Frontera Cacia Carmagnola Betim Frontera Frontera Wilmington Skoczow
Ingrandes-sur-Vienne France
277

Autodie International, Inc. Comau (Shanghai) Engineering Co. Ltd. Comau (Shanghai) International Trading Co. Ltd. Comau Argentina S.A.
Grand Rapids Shanghai Shanghai Buenos Aires
U.S.A. Peoples Rep.of China Peoples Rep.of China Argentina
1,000 5,000,000 200,000 500,000
USD USD USD ARS
100.00 100.00 100.00 100.00
Comau Pico Holdings Corporation Comau S.p.A. Comau S.p.A. Comau S.p.A. Comau do Brasil Industria e Comercio Ltda. Fiat Argentina S.A. Comau Inc. Comau S.p.A. Comau S.p.A. Fiat do Brasil S.A. Comau S.p.A. Comau S.p.A. Comau Pico Holdings Corporation Comau S.p.A. Comau Deutschland GmbH Comau S.p.A. Comau Pico Mexico S.de R.L. de C.V. Comau S.p.A. Comau S.p.A. Comau Deutschland GmbH Comau Pico Mexico S.de R.L. de C.V. Comau S.p.A. Comau Pico Mexico S.de R.L. de C.V. Comau S.p.A. Comau S.p.A. Comau Pico Holdings Corporation Comau S.p.A. Comau S.p.A. Comau Deutschland GmbH Comau S.p.A.
100.000 100.000 100.000 55.280 44.690 0.030 100.000 100.000 99.999 0.001 100.000 100.000 100.000 99.990 0.010 100.000 99.967 0.033 99.967 0.033 99.967 0.033 99.967 0.033 100.000 100.000 100.000 99.000 1.000 100.000
Comau Canada Inc. Comau Deutschland GmbH Comau do Brasil Industria e Comercio Ltda. Comau Estil Unl. Comau France S.A.S. Comau Inc. Comau India Private Limited Comau Pico Holdings Corporation Comau Pico Iaisa S.de R.L. de C.V. Comau Pico Mexico S.de R.L. de C.V. Comau Pico Pitex S.de R.L. C.V. Comau Pico Trebol S.de R.L. de C.V. Comau Poland Sp. z o.o. Comau Resources, Inc. Comau Romania S.R.L. Comau Russia OOO Comau Service Systems S.L. Publishing and Communications Itedi-Italiana Edizioni S.p.A. BMI S.p.A. Editrice La Stampa S.p.A. La Stampa Europe SAS Nexta Srl Publikompass S.p.A.
Windsor Boblingen Betim Luton Trappes Southfield Pune New York Tepotzotlan Tepotzotlan Tepotzotlan Tepotzotlan Bielsko-Biala Southfield Oradea Moscow Madrid
Canada Germany Brazil United Kingdom France U.S.A. India U.S.A. Mexico Mexico Mexico Mexico Poland U.S.A. Romenia Russia Spain
100 1,330,000 29,312,653 107,665,056 6,000,000 21,457 239,935,020 100 3,000 3,000 3,000 3,000 3,800,000 1,000 10,315,170 4,770,225 250,000
CAD EUR BRL USD EUR USD INR USD MXN MXN MXN MXN PLN USD RON RUB EUR
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Turin Genoa Turin Trappes Turin Milan
Italy Italy Italy France Italy Italy
5,980,000 124,820 4,160,000 1,278,750 50,000 3,068,000
EUR EUR EUR EUR EUR EUR
100.00 88.00 100.00 100.00 66.00 100.00
Fiat S.p.A. Itedi-Italiana Edizioni S.p.A. Itedi-Italiana Edizioni S.p.A. Itedi-Italiana Edizioni S.p.A. Itedi-Italiana Edizioni S.p.A. Itedi-Italiana Edizioni S.p.A.
100.000 88.000 100.000 100.000 66.000 100.000
278

Holding companies and Other companies Business Solutions S.p.A. C.R.F. Societ Consortile per Azioni Turin Orbassano Italy Italy 4,791,396 45,000,000 EUR EUR 100.00 100.00 Fiat S.p.A. Fiat Group Automobiles S.p.A. Fiat Partecipazioni S.p.A. Fiat Powertrain Technologies SpA C.R.F. Societ Consortile per Azioni Automotive Lighting Italia S.p.A. Fiat Partecipazioni S.p.A. Fiat Group Automobiles S.p.A. C.R.F. Societ Consortile per Azioni Fiat Partecipazioni S.p.A. Fiat Services S.p.A. Fiat do Brasil S.A. SGR-Sociedad para la Gestion de Riesgos S.A. Fiat Auto Argentina S.A. Fiat Partecipazioni S.p.A. Fiat Services S.p.A. Fiat Finance S.p.A. Fiat do Brasil S.A. Fiat Finance S.p.A. Fiat Finance Canada Ltd. Fiat Finance S.p.A. Fiat Services S.p.A. Fiat Finance S.p.A. Fiat S.p.A. Fiat S.p.A. Fiat S.p.A. Fiat Services S.p.A. Fiat Partecipazioni S.p.A. Fiat Group Purchasing S.r.l. Fiat Group Purchasing S.r.l. Fiat Partecipazioni S.p.A. Fiat Services S.p.A. Fiat Services S.p.A. Fiat S.p.A. Fiat Group Automobiles S.p.A. Fiat Partecipazioni S.p.A. 100.000 75.000 20.000 5.000 51.000 24.500 100.000 70.567 27.933 1.500 90.961 9.029 0.009 0.001 99.998 0.002 99.994 0.006 99.993 0.007 100.000 99.997 60.526 39.474 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 98.644 1.356 100.000
Centro Ricerche Plast-Optica S.p.A. Deposito Avogadro S.r.l. Elasis-Societ Consortile per Azioni
Amaro Turin Pomigliano dArco
Italy Italy Italy
1,033,000 100,000 20,000,000
EUR EUR EUR
75.50 100.00 100.00
Fiat Argentina S.A.
Buenos Aires
Argentina
5,292,117
ARS
100.00
Fiat do Brasil S.A. Fiat Financas Brasil Ltda Fiat Finance and Trade Ltd S.A. Fiat Finance Canada Ltd. Fiat Finance et Services S.A. Fiat Finance North America Inc. Fiat Finance S.p.A. Fiat Gestione Partecipazioni S.p.A. Fiat GmbH Fiat Group Marketing & Corporate Communication S.p.A. Fiat Group Purchasing France S.a.r.l. Fiat Group Purchasing S.r.l. Fiat Iberica S.A. Fiat Information Technology, Excellence and Methods S.p.A. Fiat Partecipazioni S.p.A. Fiat Polska Sp. z o.o.
Nova Lima Nova Lima Luxembourg Calgary Trappes Wilmington Turin Turin Ulm Turin Trappes Turin Madrid Turin Turin Warsaw
Brazil Brazil Luxembourg Canada France U.S.A. Italy Italy Germany Italy France Poland Italy Spain Italy Italy Poland
37,158,349 2,469,701 251,494,000 10,099,885 3,700,000 190,090,010 224,440,000 369,500,000 200,000 100,000,000 7,700 300,000 600,000 2,797,054 500,000 361,054,062 25,500,000
BRL BRL EUR CAD EUR USD EUR EUR EUR EUR EUR PLN EUR EUR EUR EUR PLN
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Fiat Group Purchasing Poland Sp. z o.o. Bielsko-Biala
279

Fiat Services Belgium N.V. Fiat Services Polska Sp. z o.o. Fiat Services S.p.A. Fiat Servizi per lIndustria S.c.p.a.
Zedelgem Bielsko-Biala Turin Turin
Belgium Poland Italy Italy
62,000 3,600,000 3,600,000 1,652,669
EUR PLN EUR EUR
100.00 100.00 100.00 99.36
Fiat U.K. Limited Fiat Services S.p.A. Fiat Services S.p.A. Business Solutions S.p.A. Fiat Partecipazioni S.p.A. Fiat Group Automobiles S.p.A. Iveco S.p.A. Fiat S.p.A. CNH Italia s.p.a. Teksid S.p.A. C.R.F. Societ Consortile per Azioni Comau S.p.A. Editrice La Stampa S.p.A. Fiat Services S.p.A. Magneti Marelli S.p.A. Fiat S.p.A. Fiat Services S.p.A. Fiat S.p.A. Fiat S.p.A. Fiat Group Automobiles S.p.A. CNH Global N.V. Iveco S.p.A. Comau S.p.A. Ferrari S.p.A. Fiat Group Purchasing S.r.l. Fiat Powertrain Technologies SpA Fiat Services S.p.A. Itedi-Italiana Edizioni S.p.A. Magneti Marelli S.p.A. Maserati S.p.A. Teksid S.p.A. Fiat Finance S.p.A. Fiat Partecipazioni S.p.A. Rimaco S.A. Fiat S.p.A. Fiat Partecipazioni S.p.A. Servizi e Attivit Doganali per lIndustria S.p.A. Fiat Services S.p.A.
99.960 0.040 100.000 100.000 51.000 25.500 6.000 5.000 3.000 2.000 1.500 1.500 1.500 1.500 1.500 100.000 100.000 100.000 51.000 13.000 10.000 6.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.000 1.000 100.000 100.000 100.000 100.000 100.000
Fiat Switzerland SA Fiat U.K. Limited Fiat U.S.A. Inc. Fiat-Revisione Interna S.c.r.l.
Paradiso Basildon New York Turin
Switzerland United Kingdom U.S.A. Italy
1,100,000 750,000 16,830,000 300,000
CHF GBP USD EUR
100.00 100.00 100.00 98.38
Neptunia Assicurazioni Marittime S.A. Rimaco S.A. Risk Management S.p.A. Sadi Polska-Agencja Celna Sp. z o.o. Servizi e Attivit Doganali per lIndustria S.p.A.
Lausanne Lausanne Turin Bielsko-Biala
Switzerland Switzerland Italy Poland
10,000,000 350,000 120,000 500,000
CHF CHF EUR PLN
100.00 100.00 100.00 100.00
Turin
Italy
520,000
EUR
100.00
280

SIRIO - Sicurezza Industriale Societ consortile per azioni
Turin
Italy
120,000
EUR
93.56
Fiat Partecipazioni S.p.A. Fiat Group Automobiles S.p.A. Iveco S.p.A. Fiat Powertrain Technologies SpA Magneti Marelli S.p.A. Fiat S.p.A. Comau S.p.A. Ferrari S.p.A. Teksid S.p.A. Irisbus Italia S.p.A. Fiat Services S.p.A. Sistemi Sospensioni S.p.A. Teksid Aluminum S.r.l. C.R.F. Societ Consortile per Azioni New Holland Kobelco Construction Machinery S.p.A. Fiat Servizi per lIndustria S.c.p.a. Fiat Finance S.p.A. Isvor Fiat Societ consortile di sviluppo e addestramento industriale per Azioni Fidis S.p.A. Automotive Lighting Italia S.p.A. CNH Italia s.p.a. Editrice La Stampa S.p.A. Elasis-Societ Consortile per Azioni FGA Officine Automobilistiche Grugliasco S.p.A. Astra Veicoli Industriali S.p.A. Fiat Group Marketing & Corporate Communication S.p.A. Fiat Group Purchasing S.r.l. Servizi e Attivit Doganali per lIndustria S.p.A. Fiat-Revisione Interna S.c.r.l. Fiat Center Italia S.p.A. Abarth & C. S.p.A. Itedi-Italiana Edizioni S.p.A. Maserati S.p.A. Orione-Societ Industriale per la Sicurezza e la Vigilanza Consortile per Azioni Risk Management S.p.A. Sisport Fiat S.p.A. - Societ sportiva dilettantistica
57.724 17.288 4.644 2.356 1.863 0.751 0.729 0.729 0.664 0.622 0.593 0.551 0.540 0.535 0.535 0.503 0.449 0.449 0.325 0.255 0.237 0.233 0.233 0.167 0.103 0.103 0.103 0.103 0.061 0.045 0.039 0.039 0.039
0.039 0.039 0.039
281

Magneti Marelli After Market Parts and Services S.p.A. Easy Drive S.r.l. Fiat Auto Var S.r.l. Fiat Information Technology, Excellence and Methods S.p.A. Plastic Components and Modules Automotive S.p.A. TEA S.r.l. i-FAST Automotive Logistics S.r.l. i-FAST Container Logistics S.p.A. Sisport Fiat S.p.A. - Societ sportiva dilettantistica Turin Italy 889,049 EUR 100.00 Fiat Partecipazioni S.p.A.
0.037 0.022 0.022 0.022 0.022 0.022 0.020 0.020 100.000
JOINTLY-CONTROLLED ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD

Fiat Group Automobiles FGA CAPITAL S.p.A. FAL Fleet Services S.A.S. FC France S.A. FGA Bank G.m.b.H. FGA Bank Germany G.m.b.H. FGA CAPITAL BELGIUM S.A. FGA Capital Danmark A/S FGA CAPITAL HELLAS S.A. FGA CAPITAL IFIC SA FGA Capital Netherlands B.V. FGA CAPITAL RE Limited FGA Capital Services Spain S.A. FGA Capital Spain E.F.C. S.A. FGA CAPITAL UK LTD. FGA CONTRACTS UK LTD. Fiat Distribuidora Portugal S.A. FGA INSURANCE HELLAS S.A. FGA Leasing GmbH FGA Leasing Polska Sp. z o.o. FGA WHOLESALE UK LTD. Fiat Bank Polska S.A. Turin Trappes Trappes Vienna Heilbronn Auderghem Glostrup Argyroupoli Alges Lijnden Dublin Alcal De Henares Alcal De Henares Slough Berkshire Slough Berkshire Alges Argyroupoli Vienna Warsaw Slough Berkshire Warsaw Italy France France Austria Germany Belgium Denmark Greece Portugal Ireland Netherlands Ireland Spain Spain United Kingdom United Kingdom Portugal Greece Austria Poland United Kingdom Poland 700,000,000 3,000,000 11,360,000 5,000,000 39,600,000 3,718,500 14,154,000 1,200,000 10,000,000 132,562 3,085,800 1,000,000 25,145,299 26,671,557 50,250,000 19,000,000 500,300 60,000 40,000 12,500,000 20,500,000 125,000,000 EUR EUR EUR EUR EUR EUR DKK EUR EUR EUR EUR EUR EUR EUR GBP GBP EUR EUR EUR PLN GBP PLN 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 49.99 50.00 50.00 50.00 50.00 Fiat Group Automobiles S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. Fidis S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL HELLAS S.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. 50.000 100.000 99.999 50.000 25.000 100.000 99.999 100.000 100.000 100.000 99.994 100.000 100.000 100.000 100.000 100.000 100.000 100.000 99.975 100.000 100.000 100.000 100.000
FGA CAPITAL IRELAND Public Limited Company Dublin
282
JOINTLY-CONTROLLED ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD (continued)

Fidis Finance (Suisse) S.A. Fidis Finance Polska Sp. z o.o. FL Auto Snc FL Location SNC Leasys S.p.A. FER MAS Oto Ticaret A.S. Fiat India Automobiles Limited (business Fiat Group Automobiles) G.E.I.E. Gisevel G.E.I.E.-Sevelind GAC FIAT Automobiles Co. Ltd. (business Fiat Group Automobiles) MEKATRO Arastirma-Gelistirme ve Ticaret A.S. PLATFORM Arastirma Gelistirme Tasarim ve Ticaret A.S.
Schlieren Warsaw Trappes Trappes Turin Istanbul Ranjangaon Paris Paris Changsha
Switzerland Poland France France Italy Turkey India France France People's Rep.of China Turkey Turkey Turkey Italy France Turkey
24,100,000 10,000,000 8,954,581 76,225 77,979,400 5,500,000 16,849,279,000 15,200 15,200 900,000,000 30,000,000 150,000 1,000,000 68,640,000 80,325,000 500,000,000
CHF PLN EUR EUR EUR TRY INR EUR EUR CNY TRY TRY TRY EUR EUR TRY
50.00 50.00 50.00 49.99 50.00 37.64 50.00 50.00 50.00 50.00 37.86 36.72 37.48 50.00 50.00 37.86
FGA CAPITAL S.p.A. FGA CAPITAL S.p.A. FC France S.A. FC France S.A. FGA CAPITAL S.p.A. Tofas-Turk Otomobil Fabrikasi Tofas A.S. Fiat Group Automobiles S.p.A. Fiat France Fiat France Fiat Group Automobiles S.p.A. Tofas-Turk Otomobil Fabrikasi Tofas A.S. Tofas-Turk Otomobil Fabrikasi Tofas A.S. Tofas-Turk Otomobil Fabrikasi Tofas A.S. Fiat Group Automobiles S.p.A. Fiat France Fiat Group Automobiles S.p.A.
100.000 100.000 99.998 99.980 100.000 99.418 50.000 50.000 50.000 50.000 100.000 97.000 99.000 50.000 50.000 37.856
Koc Fiat Kredi Tuketici Finansmani A.S. Istanbul Kocaeli Bursa
Societ Europea Veicoli Leggeri-Sevel S.p.A. Atessa Socit Europenne de Vhicules Lgers du Nord-Sevelnord Socit Anonyme Parigi Tofas-Turk Otomobil Fabrikasi Tofas A.S. Levent Fiat Powertrain Fiat India Automobiles Limited (business Fiat Powertrain) FIAT POWERTRAIN TECHNOLOGIES SOLLERS Investment Company B.V. FIAT POWERTRAIN TECHNOLOGIES SOLLERS Limited Liability Company GAC FIAT Automobiles Co. Ltd. (business Fiat Powertrain) Components Endurance Magneti Marelli Shock Absorbers (India) Private Limited Magneti Marelli Motherson Auto System Limited Magneti Marelli Motherson India Holding B.V. Magneti Marelli SKH Exhaust Systems Private Limited Pune New Delhi Ranjangaon Amsterdam Zavolzhje Changsha
India Netherlands Russia Peoples Rep.of China
16,849,279,000 1,000,000 10,000 900,000,000
INR EUR RUB CNY
50.00 50.00 50.00 50.00
Fiat Group Automobiles S.p.A. Fiat Powertrain Technologies SpA FIAT POWERTRAIN TECHNOLOGIES SOLLERS Investment Company B.V. Fiat Group Automobiles S.p.A.
50.000 50.000 100.000 50.000
India India
289,999,980 600,000,000
INR INR
50.00 49.99
Magneti Marelli S.p.A. Magneti Marelli Motherson India Holding B.V. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A.
50.000 63.333 100.000 18.330 0.000 50.000 50.000
Amsterdam New Delhi
Netherlands India
2,000,000 95,000,000
EUR INR
50.00 50.00
283

SAIC MAGNETI MARELLI Powertrain Co. Ltd Shanghai SKH Magneti Marelli Exhaust Systems Private Limited tema.mobility Metallurgical Products Hua Dong Teksid Automotive Foundry Co. Ltd. Zhenjiang-Jangsu New Delhi Turin
Peoples Rep.of China India Italy
12,000,000 95,450,000 850,000
EUR INR EUR
50.00 46.62 50.00
Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A.
50.000 46.621 50.000 50.000
Peoples Rep.of China
385,363,550
CNY
42.40
Teksid S.p.A.
50.000
SUBSIDIARIES ACCOUNTED FOR USING THE EQUITY METHOD

Fiat Group Automobiles Alfa Romeo Inc. F.A. Austria Commerz GmbH Fiat Auto Egypt S.A.E. Italcar SA Sirio Polska Sp. z o.o. Components Cofap Fabricadora de Pecas Ltda Santo Andre Brazil 75,720,716 BRL 68.26 Magneti Marelli do Brasil Industria e Comercio SA 68.350 Winter Garden Vienna Giza Casablanca Bielsko-Biala U.S.A. Austria Egypt Egypt Morocco Poland 3,000,000 37,000 50,000,000 5,000,000 28,000,000 1,350,000 USD EUR EGP EGP MAD PLN 100.00 100.00 80.40 79.60 99.94 100.00 Fiat Group Automobiles S.p.A. Fiat Group Automobiles Switzerland S.A. Fiat Group Automobiles S.p.A. Fiat Auto Egypt Industrial Company SAE Fiat Group Automobiles Maroc S.A. Fiat Auto Poland S.A. 100.000 100.000 80.400 99.000 99.986 100.000
Fiat Auto Egypt Industrial Company SAE Giza
Holding companies and Other companies Fabbrica Italia Pomigliano S.p.A. Fast-Buyer S.p.A. Fiat (China) Business Co., Ltd. Financire Pegaso France S.A. Isvor Fiat Societ consortile di sviluppo e addestramento industriale per Azioni Turin Turin Beijing Trappes Turin Italy Italy People's Rep.of China France Italy 200,000 500,000 3,000,000 260,832 300,000 EUR EUR USD EUR EUR 100,00 100,00 100,00 100,00 99,54 Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Gestione Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Group Automobiles S.p.A. Fiat Gestione Partecipazioni S.p.A. Comau S.p.A. Fiat Powertrain Technologies SpA Fiat S.p.A. Fiat Services S.p.A. Magneti Marelli S.p.A. Teksid S.p.A. Fiat Gestione Partecipazioni S.p.A. Fiat Gestione Partecipazioni S.p.A. Astra Veicoli Industriali S.p.A. Fiat Partecipazioni S.p.A. Rimaco S.A. Fiat Partecipazioni S.p.A. 100.000 100.000 100.000 100.000 54.000 16.000 12.000 3.000 3.000 3.000 3.000 3.000 3.000 100.000 99.992 0.008 100.000 99.960 99.785
Iveco Motors of China Limited in liquidation Iveco S.P.R.L. New Business 8 S.r.l. Sistemi Ambientali S.p.A. in liquidation
Shanghai Kinshasa Turin Rivoli
Peoples Rep.of China Congo (Dem. Rep. Congo) Italy Argentina Italy
300,000 1 50,000 150,000 9,544,080
USD CDF EUR ARS EUR
100.00 100.00 100.00 99.96 99.79
SGR-Sociedad para la Gestion de Riesgos S.A. Buenos Aires
284
% of voting rights
SUBSIDIARIES VALUED AT COST

Fiat Group Automobiles (*) CMP Componentes e Modulos Plasticos Industria e Comercio Ltda. CODEFIS Societ consortile per azioni Contagem Turin Brazil Italy 4,375,687 120,000 BRL EUR 100.00 68.44 Fiat Automoveis S.A. - FIASA Fiat Group Automobiles S.p.A. CNH Capital U.K. Ltd Iveco Partecipazioni Finanziarie S.r.l. FIAT AUTOMOBILES SERBIA DOO KRAGUJEVAC Fiat Group Automobiles Spain S.A. Fiat Group Automobiles Portugal, S.A. Fiat Group Automobiles S.p.A. Fiat Group Automobiles UK Ltd Fiat Automoveis S.A. - FIASA 100.000 51.000 14.000 5.000 100.000 95.000 80.000 100.000 100.000 100.000
FAS FREE ZONE Ltd. Kragujevac Fiat Auto Espana Marketing Instituto Agrupacion de Interes Economico Fiat Automobiles Service Co. Ltd. Fiat Motor Sales Ltd TCA - Tecnologia em Componentes Automotivos SA Ferrari Ferrari (Suisse) SA in liquidation Scuderia Ferrari Club S.c. a r.l. Components Automotive Lighting Japan K.K.
Kragujevac
Serbia
500
EUR
66.67
Alcal De Henares Nanjing Slough Berkshire Jaboatao do Guararapes
Spain Portugal People's Rep.of China United Kingdom Brazil
30,051 15,000 10,000,000 1,500,000 18,640,185
EUR EUR EUR GBP BRL
95.00 80.00 100.00 100.00 100.00
Fiat Auto Marketing Institute (Portugal) ACE Alges
Nyon Maranello
Switzerland Italy
0 105,000
CHF EUR
90.00 84.86
Ferrari S.p.A. Ferrari S.p.A.
100.000 94.286
KohoKu-Ku-Yokohama Japan India Brazil
10,000,000 125,000,000 1,000
JPY INR BRL
99.99 99.99 99.99
Automotive Lighting Reutlingen GmbH Magneti Marelli S.p.A. Magneti Marelli Sistemas Automotivos Industria e Comercio Ltda Fiat do Brasil S.A. Magneti Marelli S.p.A. Plastic Components and Modules Holding S.p.A. Plastic Components and Modules Automotive S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A.
100.000 100.000 99.900 0.100 100.000 100.000 100.000 99.956 100.000
Magneti Marelli Automotive Components Pune (India) Limited in liquidation Magneti Marelli Comandos Mecanicos Industria e Comercio Ltda Magneti Marelli d.o.o. Kragujevac, Kosovska 4 Parco Scientifico e Tecnologico della Basilicata - S.p.A. in liquidation Plastic Components and Modules Fuel Tanks S.p.A. Sistemi Comandi Meccanici Otomotiv Sanayi Ve Ticaret A.S. Sistemi Comandi Meccanici S.C.M. S.p.A. Sete Lagoas
Kragujevac Grugliasco Grugliasco Bursa Corbetta
Serbia Italia Italia Turchia Italia
500 120,000 120,000 90,000 1,800,000
EUR EUR EUR TRY EUR
99.99 99.99 99.99 99.95 99.99
(*) Asset held for sale.
285
SUBSIDIARIES VALUED AT COST (continued)

Production Systems Comau U.K. Limited Consorzio Fermag in liquidation Telford Bareggio United Kingdom Italy 2,500 144,608 GBP EUR 100.00 68.00 Comau S.p.A. Comau S.p.A. 100.000 68.000
Holding companies and Other companies Fiat Common Investment Fund Limited Fiat Gra.De EEIG London Watford United Kingdom United Kingdom 2 0 GBP GBP 100.00 97.29 Fiat U.K. Limited Fiat Group Automobiles S.p.A. CNH Global N.V. Fiat Netherlands Holding N.V. Business Solutions S.p.A. Fiat S.p.A. C.R.F. Societ Consortile per Azioni Comau S.p.A. Magneti Marelli S.p.A. Teksid S.p.A. Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Group Purchasing S.r.l. Rimaco S.A. Isvor Fiat Societ consortile di sviluppo e addestramento industriale per Azioni Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Sadi Polska-Agencja Celna Sp. z o.o. Fiat Services Polska Sp. z o.o. 100.000 46.000 23.000 23.000 2.000 2.000 1.000 1.000 1.000 1.000 100.000 100.000 99.825 0.175 99.998 100.000 100.000 100.000 100.000 100.000 100.000 100.000 90.000 10.000
Fiat Oriente S.A.E. in liquidation Fiat Partecipazioni France Socit par actions simplifie Fiat Partecipazioni India Private Limited Fides Corretagens de Securos Ltda Isvor Fiat India Private Ltd. in liquidation New Business 27 S.r.l. New Business 28 S.r.l. New Business 29 S.r.l. New Business 30 S.r.l. New Business 31 S.r.l. New Business 32 S.r.l. OOO Sadi Rus
Cairo Trappes New Delhi Nova Lima New Delhi Turin Turin Turin Turin Turin Turin Nizhniy Novgorod
Egypt France India Brazil India Italy Italy Italy Italy Italy Italy Russia
50,000 37,000 28,605,400 365,525 1,750,000 50,000 50,000 50,000 50,000 50,000 50,000 2,700,000
EGP EUR INR BRL INR EUR EUR EUR EUR EUR EUR RUB
100.00 100.00 100.00 100.00 99.54 100.00 100.00 100.00 100.00 100.00 100.00 100.00
286

Orione-Societ Industriale per la Sicurezza e la Vigilanza Consortile per Azioni
Turin
Italy
120,000
EUR
98.82
Fiat Partecipazioni S.p.A. Fiat S.p.A. Editrice La Stampa S.p.A. Fiat Group Automobiles S.p.A. CNH Italia s.p.a. Comau S.p.A. Ferrari S.p.A. Fiat Finance S.p.A. Fiat Powertrain Technologies SpA Fiat Services S.p.A. Iveco S.p.A. Magneti Marelli S.p.A. Sisport Fiat S.p.A. - Societ sportiva dilettantistica Teksid S.p.A.
77.822 18.003 0.439 0.439 0.220 0.220 0.220 0.220 0.220 0.220 0.220 0.220 0.220 0.220
ASSOCIATED COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD

Fiat Group Automobiles Chrysler Group LLC Utymat S.A. Wilmington Santa Margarita I Els Monjos U.S.A. Spain 0 4,644,453 USD EUR 20.00 37.50 FIAT NORTH AMERICA LLC FGA Investimenti S.p.A. 20.000 37.500
Fiat Powertrain Haveco Automotive Transmission Co. Ltd. Zhajiang Publishing and Communications Societ Editrice Mercantile - S.E.M. S.R.L. To-dis S.r.l. Genoa Turin Italy Italy 3,000,000 510,000 EUR EUR 40.00 45.00 Editrice La Stampa S.p.A. Editrice La Stampa S.p.A. 40.000 45.000 Peoples Rep.of China 200,010,000 CNY 33.33 Fiat Gestione Partecipazioni S.p.A. 33.330
Holding companies and Other companies Hangzhou IVECO Automobile Transmission Technology Co., Ltd. Iveco-Motor Sich, Inc. Otoyol Sanayi A.S. in liquidation Hangzhou Zaporozhye People's Rep.of China Ukraine Italy 240,000,000 26,568,000 52,674,386 762,019,050 CNY UAH TRY EUR 33.33 38.62 27.00 10.09 Fiat Gestione Partecipazioni S.p.A. Fiat Gestione Partecipazioni S.p.A. Fiat Gestione Partecipazioni S.p.A. Fiat S.p.A. 33.333 38.618 27.000 10.093 10.497
Samandira-Kartal/Istanbul Turkey
Rizzoli Corriere della Sera MediaGroup S.p.A. Milan
287
% of voting rights
ASSOCIATED COMPANIES VALUED AT COST

Fiat Group Automobiles Consorzio per la Reindustrializzazione Area di Arese S.r.l. in liquidation Fidis Rent GmbH Turin Auto Private Ltd. in liquidation Ferrari Iniziativa Fiorano S.r.l. Senator Software Gmbh Components Auto Componentistica Mezzogiorno A.C.M. Melfi Societ Consortile a responsabilit limitata Bari Servizi Industriali S.c.r.l. Flexider S.p.A. Mars Seal Private Limited Plastic Components and Modules Automotive S.p.A. Sistemi Sospensioni S.p.A. Magneti Marelli S.p.A. Magneti Marelli S.p.A. Magneti Marelli France S.a.s. Magneti Marelli S.p.A. 16.500 7.750 33.333 25.000 24.000 28.000 Modena Munich Italy Germany 90,000 25,565 EUR EUR 30.00 39.69 Ferrari S.p.A. Ferrari Financial Services AG 33.333 49.000 Arese Frankfurt Mumbai Italy Germany India 20,000 50,000 43,300,200 EUR EUR INR 30.00 49.00 50.00 Fiat Group Automobiles S.p.A. Fiat Group Automobiles Germany AG FGA Investimenti S.p.A. 30.000 49.000 50.000
Turin Modugno Turin Mumbai
Italy Italy Italy India Turkey
40,000 18,000 4,080,000 400,000 3,800,000
EUR EUR EUR INR TRY
24.25 33.33 25.00 24.00 28.00
Matay Otomotiv Yan Sanay Ve Ticaret A.S. Bursa Publishing and Communications Le Monde Europe S.A.S. Le Monde Presse S.A.S. Paris Paris
France France
5,024,274 7,327,930
EUR EUR
48.44 27.28
La Stampa Europe SAS La Stampa Europe SAS
48.443 27.277
Holding companies and Other companies Ciosa S.p.A. in liquidation Milan Italy Italy 516 51,650 EUR EUR 25.00 37.90 Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Plastic Components and Modules Automotive S.p.A. CNH Italia s.p.a. Fiat Gestione Partecipazioni S.p.A. Fiat Group Automobiles S.p.A. Elasis-Societ Consortile per Azioni Elasis-Societ Consortile per Azioni Fiat do Brasil S.A. Fiat Group Automobiles S.p.A. C.R.F. Societ Consortile per Azioni Centro Ricerche Plast-Optica S.p.A. 25.000 27.000 10.900 10.672 10.672 10.672 20.000 20.000 50.000 17.391 6.957 34.500 Consorzio Parco Industriale di Chivasso Chivasso
Consorzio per lo Sviluppo delle Aziende Turin Fornitrici in liquidation Consorzio Prode Naples
Italy Italy Italy Brazil Italy Italy
241,961 51,644 127,500 1 115,000 10,000
EUR EUR EUR BRL EUR EUR
30.83 20.00 20.00 50.00 24.35 26.05
Consorzio Scuola Superiore per lAlta Formazione Universitaria Federico II in liquidation Naples FMA-Consultoria e Negocios Ltda Innovazione Automotive e Metalmeccanica Scrl L.U.C.I. SRL So Paulo Lanciano Amaro
288
ASSOCIATED COMPANIES VALUED AT COST (continued)

Maxus MC2 S.p.A.
Turin
Italy Netherlands Italy
219,756 50,000 112,200
EUR EUR EUR
20.00 45.00 25.63
Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Ferrari S.p.A. CNH Italia s.p.a. C.R.F. Societ Consortile per Azioni Fiat Gestione Partecipazioni S.p.A. Fiat Partecipazioni S.p.A.
20.000 45.000 16.364 12.273 25.000 33.677 40.000
MB Venture Capital Fund I Participating Company F N.V. Amsterdam Nuova Didactica S.c. a r.l. Modena
Tecnologie per il Calcolo NumericoCentro Superiore di Formazione S.c. a r.l. Trento Zastava-Kamioni D.O.O. Zetesis S.p.A. in liquidation Kragujevac Milan
Italy Serbia Italy
100,000 1,673,505,893 283,150
EUR RSD EUR
25.00 33.68 40.00
OTHER COMPANIES VALUED AT COST

Components Editori Riuniti S.p.A. in liquidation Rome Italy 441,652 EUR 13.11 Plastic Components and Modules Holding S.p.A. 13.110
Holding companies and Other companies Centro di Eccellenza su Metodi e Sistemi per le Aziende Competitive Fisciano Consorzio Calef (Consorzio per la ricerca e lo sviluppo delle applicazioni industriali laser e del fascio elettronico) Rotondella Consorzio Lingotto Consorzio Spike Consorzio Technapoli Ercole Marelli & C. S.p.A. in liquidation Expo 2000 - S.p.A. in liquidation Fin.Priv. S.r.l. Turin Genoa Naples Milan Turin Milan Italy 225,000 EUR 16.00 Elasis-Societ Consortile per Azioni Elasis-Societ Consortile per Azioni C.R.F. Societ Consortile per Azioni Fiat Partecipazioni S.p.A. Fiat S.p.A. Fiat Gestione Partecipazioni S.p.A. Elasis-Societ Consortile per Azioni Fiat Partecipazioni S.p.A. Fiat Partecipazioni S.p.A. Fiat S.p.A. 16.000 5.319 5.213 11.500 5.400 15.000 11.110 13.000 18.949 14.285
Italy Italy Italy Italy Italy Italy Italy
83,445 9,612 90,380 1,626,855 9,633,000 2,205,930 20,000
EUR EUR EUR EUR EUR EUR EUR
10.53 16.90 15.00 11.11 13.00 18.95 14.29
289
DISCONTINUED OPERATIONS
SUBSIDIARIES CONSOLIDATED ON A LINE-BY-LINE BASIS

Agricultural and Construction Equipment CNH Global N.V. Banco CNH Capital S.A. Bli Group Inc. Blue Leaf I.P. Inc. Case Brazil Holdings Inc. Case Canada Receivables, Inc. Case Credit Holdings Limited Case Dealer Holding Company LLC Case Equipment Holdings Limited Case Equipment International Corporation Case Europe S.a.r.l. Case Harvesting Systems GmbH CASE IH Machinery Trading (Shanghai) Co. Ltd. Case India Limited Case International Marketing Inc. Case LBX Holdings Inc. Case New Holland Inc. Case New Holland Machinery (Harbin) Ltd. Case United Kingdom Limited CNH Administradora de Servios Ltda. CNH America LLC CNH Argentina S.A. CNH Asian Holding Limited N.V. CNH Australia Pty Limited CNH Baumaschinen GmbH CNH Belgium N.V. CNH Canada, Ltd. CNH Capital America LLC CNH Capital Australia Pty Limited CNH Capital Benelux NV Amsterdam Curitiba Wilmington Wilmington Wilmington Calgary Wilmington Wilmington Wilmington Wilmington Berlin Shanghai Wilmington Wilmington Wilmington Wilmington Harbin Basildon Curitiba Wilmington Buenos Aires Zedelgem St. Marys Berlin Zedelgem Toronto Wilmington St. Marys Zedelgem Netherlands Brazil U.S.A. U.S.A. U.S.A. Canada People's Rep.of China U.S.A. U.S.A. U.S.A. U.S.A. Germany Peoples Rep.of China U.S.A. U.S.A. U.S.A. U.S.A. Peoples Rep.of China United Kingdom Brazil U.S.A. Argentina Belgium Australia Germany Belgium Canada U.S.A. Australia Belgium 536,824,395 433,919,523 1,000 1,000 1,000 1 5,000,000 5 1 5 1,000 7,622 281,211 2,250,000 5 5 5 5 2,859,091 3,763,618 100,000 0 29,611,105 34,594,401 306,785,439 61,355,030 27,268,300 28,000,100 0 83,249,000 61,500 EUR BRL USD USD USD CAD USD USD USD USD USD EUR EUR USD USD USD USD USD USD GBP BRL USD ARS EUR AUD EUR EUR CAD USD AUD EUR 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 Fiat Netherlands Holding N.V. CNH Global N.V. CNH Global N.V. CNH Latin America Ltda. CNH America LLC Bli Group Inc. CNH America LLC CNH Capital America LLC CNH Global N.V. CNH Capital America LLC CNH America LLC CNH America LLC CNH America LLC CNH America LLC CNH America LLC CNH America LLC CNH America LLC CNH America LLC CNH America LLC CNH Global N.V. CNH Asian Holding Limited N.V. CNH Europe Holding S.A. CNH America LLC Banco CNH Capital S.A. CNH Latin America Ltda. Case New Holland Inc. New Holland Holding (Argentina) S.A. CNH Latin America Ltda. CNH Global N.V. CNH Global N.V. CNH Europe Holding S.A. CNH Europe Holding S.A. CNH Global N.V. CNH Capital LLC CNH Australia Pty Limited CNH Global N.V. CNH Capital U.K. Ltd 88.800 0.065 98.761 1.239 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 99.000 1.000 100.000 99.900 0.100 100.000 80.654 19.346 100.000 100.000 100.000 100.000 100.000 100.000 100.000 98.999 1.001 88.857 0.000
Case Construction Machinery (Shanghai) Co., Ltd Shanghai
Le Plessis-Belleville France
290

CNH Capital Canada Insurance Agency Ltd. Calgary CNH Capital Canada Ltd. CNH Capital Equipment Loan and Lease Facility LLC CNH Capital Finance LLC CNH Capital Insurance Agency Inc. CNH Capital LLC CNH Capital Operating Lease Equipment Receivables LLC CNH Capital Receivables LLC CNH Capital U.K. Ltd CNH Componentes, S.A. de C.V. CNH Danmark A/S CNH Deutschland GmbH CNH Engine Corporation CNH Europe Holding S.A. CNH Financial Services A/S CNH Financial Services GmbH CNH Financial Services S.A.S. CNH France S.A. CNH International S.A. CNH Italia s.p.a. CNH Latin America Ltda. Calgary
Canada Canada
1 1
CAD CAD
88.86 88.86
CNH Capital Canada Ltd. Case Credit Holdings Limited CNH Canada, Ltd. CNH Capital America LLC Case Credit Holdings Limited CNH Capital America LLC CNH America LLC CNH Capital America LLC CNH Capital America LLC CNH Capital Benelux NV CNH America LLC CNH Europe Holding S.A. CNH Baumaschinen GmbH CNH Europe Holding S.A. CNH America LLC CNH Global N.V. CNH Global N.V. CNH Europe Holding S.A. CNH Global N.V. CNH Capital Benelux NV CNH Europe Holding S.A. CNH Global N.V. CNH Osterreich GmbH CNH Global N.V. CNH Global N.V. Case Brazil Holdings Inc. Case Equipment International Corporation CNH Europe Holding S.A. CNH Global N.V. CNH Belgium N.V. CNH Europe Holding S.A. CNH Italia s.p.a. CNH Capital America LLC CNH America LLC CNH Services S.r.l. CNH Italia s.p.a. CNH Global N.V.
100.000 99.500 0.500 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 90.000 10.000 100.000 100.000 100.000 100.000 98.888 1.112 100.000 100.000 75.000 25.000 85.658 12.557 1.785 99.999 100.000 100.000 99.980 0.020 100.000 50.000 99.997 100.000 100.000
Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Basildon Queretaro Hvidovre Heilbronn Wilmington Luxembourg Hvidovre Heilbronn
U.S.A. U.S.A. U.S.A. U.S.A. U.S.A. U.S.A. United Kingdom Mexico Denmark Germany U.S.A. Luxembourg Denmark Germany
5,000 5,000 5 0 0 0 10,000,001 135,634,842 12,000,000 18,457,650 1,000 53,000,000 500,000 1,151,000 50,860,641 138,813,150 100,000 15,600,000 847,210,015
USD USD USD USD USD USD GBP MXN DKK EUR USD USD DKK EUR EUR EUR CHF EUR BRL
88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86
Morigny-Champigny France Morigny-Champigny France Paradiso Turin Contagem Switzerland Italy Brazil
CNH Maquinaria Spain S.A. CNH Osterreich GmbH CNH Polska Sp. z o.o. CNH Portugal-Comercio de Tractores e Maquinas Agricolas Ltda CNH Receivables LLC CNH Reman LLC CNH Services (Thailand) Limited CNH Services S.r.l. CNH Trade N.V.
Coslada St. Valentin Plock Carnaxide Wilmington Wilmington Bangkok Modena Amsterdam
Spain Austria Poland Portugal U.S.A. U.S.A. Thailand Italy Netherlands
21,000,000 2,000,000 162,591,660 498,798 0 4,000,000 10,000,000 10,400 50,000
EUR EUR PLN EUR USD USD THB EUR EUR
88.86 88.86 88.86 88.86 88.86 44.43 88.86 88.86 88.86
291

CNH U.K. Limited CNH Wholesale Receivables LLC CNH-KAMAZ Commercial B.V. Fiatallis North America LLC Flexi-Coil (U.K.) Limited HFI Holdings Inc. JV Uzcaseagroleasing LLC JV UzCaseMash LLC JV UzCaseService LLC JV UzCaseTractor LLC Kobelco Construction Machinery America LLC Limited Liability Company CNH Parts and Service Operations MBA AG New Holland Credit Company, LLC New Holland Excavator Holdings LLC New Holland Fiat (India) Private Limited New Holland Holding (Argentina) S.A. New Holland Holding Limited New Holland Kobelco Construction Machinery S.p.A. New Holland Ltd New Holland Tractor Ltd. N.V. O & K - Hilfe GmbH Pryor Foundry Inc. Receivables Credit II Corporation Shanghai New Holland Agricultural Machinery Corporation Limited Steyr Center Nord GmbH Trucks and Commercial Vehicles Iveco S.p.A. Afin Bohemia s.r.o. Afin Broker de Asigurare - Reasigurare S.r.l. Afin Bulgaria EAD Afin Hungary Kereskedelmi KFT. Afin Leasing AG
Basildon Wilmington Amsterdam Wilmington Basildon Wilmington Tashkent Tashkent Tashkent Tashkent Wilmington Moscow Bassersdorf Wilmington Wilmington Mumbai Buenos Aires Basildon
United Kingdom U.S.A. Netherlands U.S.A. U.S.A. United Kingdom U.S.A. Uzbekistan Uzbekistan Uzbekistan Uzbekistan U.S.A. Russia Switzerland U.S.A. U.S.A. India Argentina United Kingdom
91,262,275 0 18,000 32 1 3,291,776 1,000 0 0 0 0 0 54,000,000 4,000,000 0 0 12,485,547,400 23,555,415 106,328,601 110,025,936 1,000,000 9,631,500 25,565 1,000 1 35,000,000 35,000
GBP USD EUR USD USD GBP USD USD USD USD USD USD RUB CHF USD USD INR ARS GBP EUR GBP EUR EUR USD CAD USD EUR
88.86 88.86 88.86 88.86 88.86 88.86 88.86 45.32 53.32 45.32 45.32 57.76 88.86 88.86 88.86 88.86 89.26 88.86 88.86 72.46 88.86 88.86 88.86 88.86 88.86 53.32 88.86
CNH Osterreich GmbH CNH Capital America LLC CNH Global N.V. CNH America LLC CNH America LLC CNH Canada, Ltd. CNH America LLC Case Credit Holdings Limited Case Equipment Holdings Limited Case Equipment Holdings Limited Case Equipment Holdings Limited New Holland Excavator Holdings LLC CNH Global N.V. CNH Global N.V. CNH Capital LLC CNH America LLC CNH Asian Holding Limited N.V. Fiat Group Automobiles S.p.A. CNH Latin America Ltda. CNH Europe Holding S.A. CNH Italia s.p.a. CNH Global N.V. New Holland Holding Limited CNH Baumaschinen GmbH CNH America LLC CNH Capital America LLC CNH Asian Holding Limited N.V. CNH Osterreich GmbH
100.000 100.000 100.000 100.000 100.000 100.000 100.000 51.000 60.000 51.000 51.000 65.000 100.000 100.000 100.000 100.000 96.407 3.593 100.000 100.000 81.544 100.000 100.000 100.000 100.000 100.000 60.000 100.000 48.965 51.035
Flagship Dealer Holding Company, LLC Wilmington
San Mauro Torinese Italy Basildon Antwerp Berlin Oklahoma City Calgary Shanghai United Kingdom Belgium Germany U.S.A. Canada People's Rep.of China
Ruckersdorf-Harmanns Austria
Turin Prague Bucharest Sofia Budapest Vienna
Italy Czech Republic Romenia Bulgaria Hungary Austria
200,000,000 1,000,000 25,000 200,000 24,000,000 1,500,000
EUR CZK RON BGN HUF EUR
100.00 100.00 100.00 100.00 100.00 100.00
Fiat S.p.A. Afin Leasing AG Afin Leasing Ifn s.a. Afin Leasing AG Afin Leasing AG Iveco International Trade Finance S.A.
100.000 100.000 100.000 100.000 100.000 100.000
292

Afin Leasing Ifn s.a.
Bucharest
Romenia
77,163,680
RON
100.00
Afin Leasing AG Afin Bohemia s.r.o. Afin Bulgaria EAD Afin Hungary Kereskedelmi KFT. Afin Slovakia S.R.O. Afin Leasing AG Afin Bulgaria EAD Fiat Netherlands Holding N.V. Afin Leasing AG Iveco S.p.A. Iveco Investitions GmbH Fiat Gestione Partecipazioni S.p.A. Iveco Espaa S.L. Iveco Partecipazioni Finanziarie S.r.l. Fiat Netherlands Holding N.V. Socit Charolaise de Participations S.A. Iveco Investitions GmbH Fiat Gestione Partecipazioni S.p.A. Iveco Espaa S.L. S.A. Iveco Belgium N.V. Iveco Nederland B.V. Iveco Espaa S.L. Iveco Espaa S.L. Iveco France Socit Charolaise de Participations S.A. Iveco Espaa S.L. Iveco Espaa S.L. S.A. Iveco Belgium N.V. Iveco Nederland B.V. Iveco Nederland B.V. Fiat Netherlands Holding N.V. Iveco Espaa S.L. Astra Veicoli Industriali S.p.A. Fiat Netherlands Holding N.V. Iveco Magirus AG Iveco Partecipazioni Finanziarie S.r.l. Iveco Partecipazioni Finanziarie S.r.l. Iveco France Fiat Netherlands Holding N.V.
99.800 0.050 0.050 0.050 0.050 100.000 100.000 70.000 100.000 100.000 90.000 10.000 99.996 0.004 99.998 100.000 95.000 5.000 89.088 95.000 5.000 100.000 100.000 99.983 0.017 100.000 100.000 75.000 25.000 100.000 100.000 99.000 1.000 100.000 100.000 100.000 100.000 97.978 100.000
Afin Slovakia S.R.O. Afin Trade Bulgaria Eood Amce-Automotive Manufacturing Co.Ethiopia AS Afin Baltica Astra Veicoli Industriali S.p.A. Effe Grundbesitz GmbH F. Pegaso S.A. Fiat Industrial Finance France S.A. Heuliez Bus S.A. IAV-Industrie-Anlagen-Verpachtung GmbH Ikarus Egyedi Autobusz GY Industrial Vehicles Center Hainaut S.A. Irisbus (U.K.) Ltd Irisbus Australia Pty. Ltd. Irisbus Benelux Ltd. Irisbus Deutschland GmbH Irisbus Italia S.p.A. IVC Brabant N.V. S.A. Iveco (Schweiz) AG Iveco Arac Sanayi VE Ticaret A.S. Iveco Argentina S.A. Iveco Austria GmbH Iveco Bayern GmbH Iveco Capital SA Iveco Contract Services Limited Iveco Czech Republic A.S. Iveco Danmark A/S
Bratislava Sofia Addis Ababa Harjumaa Piacenza Ulm Madrid Trappes Rorthais Ulm Budapest Charleroi Watford Dandenong Leudelange Unterschliessheim Turin Groot Kloten Cordoba Vienna Nuremberg Paradiso Watford Vysoke Myto Glostrup
Slovack Republic Bulgaria Ethiopia Estonia Italy Germany Spain France France Germany Hungary Belgium United Kingdom Australia Luxembourg Germany Italy Belgium Switzerland Argentina Austria Germany Switzerland United Kingdom Czech Republic Denmark
39,833 5,000 12,000,000 800,000 10,400,000 10,225,838 993,045 1,000,000 9,000,000 25,565 46,280,000 600,000 200,000 6,123,391 594,000 3,800,000 4,500,000 800,000 9,000,000 12,879,000 130,237,793 6,178,000 742,000 14,000,000 17,000,000 1,065,559,000 501,000
EUR BGN ETB EEK EUR EUR EUR EUR EUR EUR HUF EUR GBP AUD EUR EUR EUR EUR CHF TRY ARS EUR EUR CHF GBP CZK DKK
100.00 100.00 70.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 89.09 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 97.98 100.00
293

Iveco Espaa S.L. (business Trucks and Commercial Vehicles) Madrid Iveco Est Sas Iveco France Iveco Holdings Limited Iveco Insurance Vostok LLC Iveco International Trade Finance S.A. Iveco Investitions GmbH Iveco L.V.I. S.a.s. Hauconcourt Vnissieux Watford Moscow Paradiso Ulm Saint Priest
Spain France France United Kingdom Russia Switzerland Germany France Brazil United Kingdom Germany Germany Austria Germany Germany
121,612,116 2,005,600 92,856,130 47,000,000 740,000 30,800,000 2,556,459 503,250 334,720,744 117,000,000 50,000,000 6,493,407 1,271,775 511,292 30,776,857
EUR EUR EUR GBP RUB CHF EUR EUR BRL GBP EUR EUR EUR EUR EUR
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 95.00 88.00 100.00
Fiat Netherlands Holding N.V. Iveco France Iveco Espaa S.L. Fiat Netherlands Holding N.V. Fiat Netherlands Holding N.V. Afin Leasing AG Iveco Partecipazioni Finanziarie S.r.l. Iveco Magirus AG Fiat Gestione Partecipazioni S.p.A. Iveco France Iveco Espaa S.L. Iveco Holdings Limited Fiat Netherlands Holding N.V. Fiat Gestione Partecipazioni S.p.A. Iveco S.p.A. Iveco Magirus Fire Fighting GmbH Fiat Gestione Partecipazioni S.p.A. Iveco Magirus Brandschutztechnik GmbH Iveco Magirus Brandschutztechnik GmbH Iveco Magirus AG Fiat Gestione Partecipazioni S.p.A. Iveco Magirus Fire Fighting GmbH Fiat Netherlands Holding N.V. Iveco Magirus AG Iveco France Iveco Magirus AG Fiat Netherlands Holding N.V. Fiat Netherlands Holding N.V. Fiat Netherlands Holding N.V. Iveco Holdings Limited Iveco Limited Fiat Netherlands Holding N.V. Fiat Netherlands Holding N.V. Astra Veicoli Industriali S.p.A. Afin Leasing AG Iveco Czech Republic A.S.
100.000 100.000 50.326 49.674 100.000 100.000 100.000 99.020 0.980 100.000 100.000 100.000 88.340 6.000 5.660 99.764 0.236 95.000 88.000 90.032 9.968 100.000 100.000 100.000 99.767 100.000 100.000 100.000 100.000 50.000 50.000 100.000 99.997 0.001 100.000 100.000
Iveco Latin America Ltda (business Trucks and Commercial Vehicles) Vila da Serra Iveco Limited (business Trucks and Commercial Vehicles) Watford Iveco Magirus AG (business Trucks and Commercial Vehicles) Ulm Iveco Magirus Brandschutztechnik GmbH Iveco Magirus Brandschutztechnik GmbH Iveco Magirus Fire Fighting GmbH Iveco Magirus Firefighting CAMIVA S.a.s. (societ par actions simplifie) Iveco Nederland B.V. Iveco Nord Nutzfahrzeuge GmbH Iveco Nord S.A. Iveco Nord-Ost Nutzfahrzeuge GmbH Iveco Norge A.S. Iveco Otomotiv Ticaret A.S. Iveco Partecipazioni Finanziarie S.r.l. Iveco Pension Trustee Ltd Iveco Poland Ltd. Iveco Portugal-Comercio de Veiculos Industriais S.A. Iveco Romania S.r.l. Iveco Slovakia, s.r.o. Ulm Kainbach Weisweil
Iveco Magirus Brandschutztechnik Gorlitz GmbH Grlitz
Saint-Alban-Leysse France Andelst Hamburg Trappes Berlin Voyenenga Turin Watford Warsaw Vila Franca de Xira Bucharest Bratislava Netherlands Germany France Germany Norway Italy United Kingdom Poland Portugal Romenia Slovack Republic
1,870,169 4,537,802 1,611,500 45,730 2,120,000 18,600,000 15,060,046 50,000,000 2 46,974,500 15,962,000 17,500 6,639
EUR EUR EUR EUR EUR NOK TRY EUR GBP PLN EUR RON EUR
100.00 100.00 100.00 99.77 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 97.98
294

Iveco South Africa (Pty) Ltd. Iveco Sud-West Nutzfahrzeuge GmbH
Vorna Valley - Midrand South Africa Mannheim-Neckarau Germany Sweden Australia Ucraine Venezuela Germany Spain Italy Russia Russia Belgium United Kingdom France France Spain Italy Lithuania France Spain
15,000,750 1,533,900 600,000 47,492,260 49,258,692 2,498,644 3,017,000 48,080 2,833,830 50,000,000 868,545,000 6,000,000 41,700,000 2,370,000 7,022,400 610,000 214,763 138,500 1,067,500 520,560
ZAR EUR SEK AUD UAH VEF EUR EUR EUR RUB RUB EUR GBP EUR EUR EUR EUR LTL EUR EUR
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.87
Fiat Netherlands Holding N.V. Iveco Magirus AG Fiat Netherlands Holding N.V. Fiat Netherlands Holding N.V. Fiat Netherlands Holding N.V. Fiat Netherlands Holding N.V. Iveco Magirus AG Iveco Espaa S.L. Fiat Netherlands Holding N.V. Iveco S.p.A. Afin Leasing AG Fiat Netherlands Holding N.V. Afin Leasing AG Fiat Netherlands Holding N.V. Iveco Nederland B.V. Iveco Holdings Limited Iveco Espaa S.L. Iveco France Iveco Partecipazioni Finanziarie S.r.l. Iveco Partecipazioni Finanziarie S.r.l. Afin Leasing AG Iveco France Iveco Espaa S.L.
100.000 100.000 100.000 100.000 100.000 100.000 100.000 99.875 0.125 100.000 100.000 99.960 0.040 99.983 0.017 100.000 100.000 100.000 100.000 100.000 100.000 100.000 51.867
Iveco Sweden A.B. (business Trucks and Commercial Vehicles) Arlov Iveco Trucks Australia Limited Iveco Ukraine LLC Iveco Venezuela C.A. Iveco West Nutzfahrzeuge GmbH Mediterranea de Camiones S.L. Officine Brennero S.p.A. OOO Afin Leasing Vostok LLC OOO Iveco Russia S.A. Iveco Belgium N.V. Seddon Atkinson Vehicles Ltd Socit de Diffusion de Vehicules Industriels-SDVI S.A.S. Transolver Service S.A. Transolver Service S.p.A. UAB Afin Baltica (Lithuania) Utilitaries & Vhicules Industriels Franciliens-UVIF SAS Zona Franca Alari Sepauto S.A. FPT Industrial FPT Industrial S.p.A. 2 H Energy S.A.S. Componentes Mecanicos S.A. European Engine Alliance S.c.r.l. Fiat Powertrain Technologies Management (Shanghai) Co. Ltd. Fiat Powertrain Technologies of North America, Inc. FPT - Powertrain Technologies France S.A. Iveco Espaa S.L. (business FPT Industrial) Turin Fcamp Barcelona Turin Dandenong Kiev La Victoria Dsseldorf Valencia Trento Moscow Moscow Groot Watford
Socit Charolaise de Participations S.A. Vnissieux Trappes Madrid Turin Vilnius La Garenne Barcelona
Italy France Spain Italy
100,000,000 2,000,000 37,405,038 32,044,797
EUR EUR EUR EUR
100.00 100.00 100.00 96.29
Fiat S.p.A. Fiat Industrial Finance France S.A. Iveco Espaa S.L. FPT Industrial S.p.A. CNH Global N.V. FPT Industrial S.p.A. FPT Industrial S.p.A. Iveco France Fiat Industrial Finance France S.A. Fiat Netherlands Holding N.V.
100.000 100.000 100.000 66.667 33.333 100.000 100.000 97.200 2.800 100.000
Shanghai Wilmington Garchizy
People's Rep.of China U.S.A. France
2,000,000 1 73,444,960
USD USD EUR
100.00 100.00 100.00
Madrid
Spain
121,612,116
EUR
100.00
295

Iveco Latin America Ltda (business FPT Industrial) Iveco Limited (business FPT Industrial) Iveco Magirus AG (business FPT Industrial) Iveco Motorenforschung AG
Vila da Serra Watford Ulm Arbon
Brazil United Kingdom Germany Switzerland Sweden Peoples Rep.of China
334,720,744 117,000,000 50,000,000 4,600,000 600,000 580,000,000
BRL GBP EUR CHF SEK CNY
100.00 100.00 100.00 100.00 100.00 60.00
Iveco Espaa S.L. Iveco Holdings Limited Fiat Netherlands Holding N.V. Fiat Gestione Partecipazioni S.p.A. Iveco S.p.A. FPT Industrial S.p.A. Fiat Netherlands Holding N.V. FPT Industrial S.p.A. SAIC IVECO Commercial Vehicle Investment Company Limited
100.000 100.000 88.340 6.000 5.660 100.000 100.000 30.000 60.000
Iveco Sweden A.B. (business Trucks and Commercial Vehicles) Arlov SAIC Fiat Powertrain Hongyan Co. Ltd. Chongqing
Holding companies and Other companies Fiat Industrial Finance Europe S.A. Fiat Industrial Finance S.p.A. Fiat Industrial S.p.A. Fiat Netherlands Holding N.V. Luxembourg Turin Turin Amsterdam Luxembourg U.S.A. Italy Italy Netherlands 50,000,000 0 100,000,000 120,000 2,610,397,295 EUR USD EUR EUR EUR 100.00 100.00 100.00 100.00 100.00 Fiat Industrial Finance S.p.A. Fiat Industrial Finance S.p.A. Fiat S.p.A. Fiat S.p.A. Fiat S.p.A. 100.000 100.000 100.000 100.000 100.000 Fiat Industrial Finance North America Inc. Wilmington
JOINTLY-CONTROLLED ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD

Agricultural and Construction Equipment Case Mexico S.A. de C.V. Case Special Excavators N.V. CNH Comercial, SA de C.V. CNH de Mexico SA de CV CNH Industrial S.A. de C.V. CNH Servicios Comerciales, S.A. de C.V., SOFOM, E.N.R. CNH Servicios Corporativos S.A. de C.V. L&T-Case Equipment Private Limited LLC CNH-KAMAZ Industry New Holland HFT Japan Inc. Turk Traktor Ve Ziraat Makineleri A.S. Trucks and Commercial Vehicles Iveco - Oto Melara Societ consortile r.l. Iveco Acentro S.p.A. Rome Cagliari Italy Italy 40,000 3,000,000 EUR EUR CNY 50.00 50.00 50.00 Iveco S.p.A. Iveco S.p.A. Iveco S.p.A. 50.000 50.000 50.000 So Pedro Zedelgem So Pedro So Pedro So Pedro So Pedro So Pedro Mumbai Sapporo Ankara Mexico Belgium Mexico Mexico Mexico Mexico 50,000,000 Mexico India Japan Turkey 375,000 240,100,000 60,081,800 240,000,000 53,369,000 MXN MXN INR RUB JPY TRY 43.54 44.43 44.43 44.43 44.43 33.32 CNH Global N.V. CNH de Mexico SA de CV CNH America LLC CNH Global N.V. CNH Global N.V. CNH Global N.V. 49.000 99.999 50.000 50.000 50.000 37.500 810,000 1,100,000 160,050,000 165,276,000 200,050,000 MXN EUR MXN MXN MXN 44.43 44.43 44.43 44.43 44.43 CNH de Mexico SA de CV CNH Global N.V. CNH de Mexico SA de CV CNH Global N.V. CNH de Mexico SA de CV 100.000 50.000 100.000 50.000 100.000
Naberezhnye Chenly Russia
Naveco (Nanjing IVECO Motor Co.) Ltd. Nanjing
Peoples Rep.of China 2,527,000,000
296

SAIC IVECO Commercial Vehicle Investment Company Limited SAIC Iveco Hongyan Commercial Vehicles Co, Ltd. Transolver Finance Establecimiento Financiero de Credito S.A.
Shanghai
Peoples Rep.of China
160,000,000
USD
50.00
Iveco S.p.A. SAIC IVECO Commercial Vehicle Investment Company Limited Fiat Netherlands Holding N.V.
50.000
Chongqing Madrid
Peoples Rep.of China Spain
500,000,000 9,814,931
CNY EUR
33.50 50.00
67.000 50.000
SUBSIDIARIES ACCOUNTED FOR USING THE EQUITY METHOD

Agricultural and Construction Equipment CNH-KAMAZ Industrial B.V. Farmers New Holland Inc. Jackson New Holland, Inc. LLC CNH-KAMAZ Commerce Mid State New Holland, Inc. Northside New Holland Inc. Ridgeview New Holland Inc. Sunrise Tractor & Equipment Inc. Trucks and Commercial Vehicles Iveco Colombia S.a.s. Santa Fe' de Bogota Colombia 7,596,249,000 COP 100.00 Iveco Venezuela C.A. Iveco Latin America Ltda 99.990 0.010 Amsterdam Wilmington Wilmington Naberezhnye Chenly Wilmington Wilmington Wilmington Wilmington Netherlands U.S.A. U.S.A. Russia U.S.A. U.S.A. U.S.A. U.S.A. 18,000 800,000 371,000 20,408 400,000 250,000 534,000 691,000 EUR USD USD RUB USD USD USD USD 88.86 88.86 83.83 45.32 77.75 61.92 55.88 88.86 CNH Global N.V. CNH America LLC CNH America LLC CNH Global N.V. CNH America LLC CNH America LLC CNH America LLC CNH America LLC 100.000 100.000 94.340 51.000 87.500 69.680 62.884 100.000
SUBSIDIARIES VALUED AT COST

Agricultural and Construction Equipment Case Construction Equipment, Inc. Case IH Agricultural Equipment, Inc. Fermec North America Inc. International Harvester Company J.I. Case Company Limited New Holland Australia Pty Ltd RosCaseMash Trucks and Commercial Vehicles Altra S.p.A. Iveco Finland OY Genoa Espoo Italy U.S.A. Finland 516,400 20,000 100,000 EUR USD EUR 100.00 100.00 100.00 Iveco S.p.A. Iveco France Fiat Netherlands Holding N.V. 100.000 100.000 100.000 Irisbus North America Limited Liability Company Las Vegas Wilmington Wilmington Wilmington Wilmington Basildon St. Marys Saratov U.S.A. U.S.A. U.S.A. U.S.A. United Kingdom Italy Australia Italy Russia 1,000 1,000 5 1,000 2 120,000 1 120,000 0 USD USD USD USD GBP EUR AUD EUR RUB 88.86 88.86 88.86 88.86 88.86 88.86 88.86 88.86 33.99 CNH America LLC CNH America LLC CNH America LLC CNH America LLC Case United Kingdom Limited CNH Italia s.p.a. CNH Australia Pty Limited CNH Italia s.p.a. Case Equipment Holdings Limited 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 38.250 51.000
New Holland Agricultural Equipment S.p.A. Turin New Holland Construction Equipment S.p.A. Turin
297

M.R. Fire Fighting International S.A.
Brasov
Romenia
35,000,000
RON
75.88
Iveco Magirus Brandschutztechnik GmbH Iveco Magirus Brandschutztechnik Gorlitz GmbH Iveco Magirus Fire Fighting GmbH Saveco Partecipazioni S.r.l. OOO CABEKO Fiat Gestione Partecipazioni S.p.A. Iveco S.p.A.
74.000 1.000 1.000 50.520 49.000 0.480 100.000 99.059 0.000 0.941
OOO "CABEKO"
Nizhniy Novgorod
Russia
270,625,000
RUB
100.00
Saveco Partecipazioni S.r.l.
Turin
Italy
1,682,028
EUR
100.00
ASSOCIATED COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD

Agricultural and Construction Equipment Al-Ghazi Tractors Ltd CNH Capital Europe S.a.S. Employers Health Initiatives LLC Farm FZCO Karachi Puteaux Wilmington Jebel Ali Pakistan France U.S.A. United Arab Emirates Japan 214,682,226 88,482,297 790,000 6,600,000 16,000,000,000 PKR EUR USD AED JPY 38.36 44.34 44.43 25.58 17.77 CNH Global N.V. CNH Global N.V. CNH America LLC CNH Italia s.p.a. CNH Global N.V. 43.169 49.900 50.000 28.788 20.000
Kobelco Construction Machinery Co. Ltd. Tokyo Trucks and Commercial Vehicles GEIE V.IV.RE Iveco Finance Holdings Limited IVECO-AMT Ltd. V.IVE.RE Gruppo Europeo di Interesse Economico Boulogne Basingstoke Miass Turin
France United Kingdom Russia Italy
0 1,000 65,255,056 0
EUR EUR RUB EUR
50.00 49.00 33.33 50.00
Iveco S.p.A. Iveco Partecipazioni Finanziarie S.r.l. Fiat Netherlands Holding N.V. Iveco S.p.A.
50.000 49.000 33.330 50.000
ASSOCIATED COMPANIES VALUED AT COST

Agricultural and Construction Equipment Consorzio Nido Industria Vallesina Trucks and Commercial Vehicles Sotra S.A. Trucks & Bus Company Abidjan Tajoura Ivory Coast Libya 3,000,000,000 96,000,000 XOF LYD 39.80 25.00 Iveco France Iveco Espaa S.L. 39.800 25.000 Ancona Italy 53,903 EUR 34.41 CNH Italia s.p.a. 38.728
OTHER COMPANIES VALUED AT COST

Agricultural and Construction Equipment Polagris S.A. Pikieliszki Lithuania 1,133,400 LTL 9.82 CNH Polska Sp. z o.o. 11.054
298
APPENDIX II
INFORMATION REQUIRED UNDER ARTICLE 149-DUODECIES OF ThE REGOLAMENTO EMITTENTI ISSUED BY CONSOB
APPENDIX II
INFORMATION REQUIRED UNDER ARTICLE 149-DUODECIES OF ThE REGOLAMENTO EMITTENTI ISSUED BY CONSOB
The following table, prepared in accordance with Article 149-duodecies of the Regolamento Emittenti issued by Consob, reports fees charged for 2010 for audit and other services provided by the independent auditors and entities in their network.
( thousand) Audit Service Provider Deloitte & Touche S.p.A. Deloitte & Touche S.p.A. Deloitte network Deloitte & Touche S.p.A Deloitte & Touche S.p.A Deloitte network Deloitte & Touche S.p.A. Deloitte & Touche S.p.A. Deloitte network Fiat Group Entity Parent company Fiat S.p.A. Subsidiaries Subsidiaries Parent company Fiat S.p.A. Subsidiaries Subsidiaries Parent company Fiat S.p.A. Subsidiaries Subsidiaries 2010 Fees 182 5,344 15,874 339 1,014 100 205 364 1,212 24,634
(1) (2) (3) (4) (5) (6) (7)
Attestation
Other services
Total
(1) Includes Sarbanes-Oxley Act 404 certification for the subsidiary CNH. (2) Attestation of tax forms (Modello Unico, IRAP, domestic tax consolidation, Form 770); comfort letters for demerger executed by Fiat S.p.A. (3) Attestation of tax forms (Modello Unico, IRAP, Form 770) and reports for refund of tax credits and other contributions for research activities; attestations associated with the demerger and application for listing of Fiat Industrial S.p.A. shares. (4) Attestation of tax forms. (5) Review and analysis related to the accounting treatment for significant and non-recurring transactions, primarily relating to the demerger executed by Fiat S.p.A. (6) Primarily audits of periodic accounting for financed projects and activities associated with the demerger. (7) Primarily for activities connected to CNH securitization/factoring transactions and various bond issues.
ATTESTATION IN RESPECT OF ThE CONSOLIDATED FINANCIAL STATEMENTS UNDER ARTICLE 154-BIS OF LEGISLATIvE DECREE 58/98
299
ATTESTATION IN RESPECT OF ThE CONSOLIDATED FINANCIAL STATEMENTS UNDER ARTICLE 154-BIS OF LEGISLATIvE DECREE 58/98
1. The undersigned, Sergio Marchionne, in his capacity as the Chief Executive Officer of the Company, and Alessandro Baldi and Camillo Rossotto, as the executive officers responsible for the preparation of the Companys financial statements, pursuant to the provisions of Article 154-bis, clauses 3 and 4, of Legislative Decree no. 58 of 1998, hereby attest the adequacy with respect to the Company structure, and the effective application, of the administrative and accounting procedures applied in the preparation of the Companys consolidated financial statements at 31 December 2010. 2. The assessment of the adequacy of the administrative and accounting procedures used for the preparation of the consolidated financial statements at 31 December 2010 was based on a process defined by Fiat in accordance with the Internal Control Integrated Framework model issued by the Committee of Sponsoring Organizations of the Treadway Commission, an internationally-accepted reference framework. 3. The undersigned moreover attest that: 3.1 the consolidated financial statements at 31 December 2010: a) have been prepared in accordance with International Financial Reporting Standards, as endorsed by the European Union through Regulation (EC) 1606/2002 of the European Parliament and Counsel, dated 19 July 2002; b) correspond to the amounts shown in the Companys accounts, books and records; and c) provide a fair and correct representation of the financial conditions, results of operations and cash flows of the Company and its consolidated subsidiaries as of 31 December 2010 and for the year then ended. 3.2 The report on operations includes a reliable operating and financial review of the Company and of the Group as well as a description of the main risks and uncertainties to which they are exposed.
18 February 2011 /s/ Alessandro Baldi /s/ Camillo Rossotto Alessandro Baldi Camillo Rossotto EXECUTIvE OFFICERS RESPONSIBLE FOR ThE PREPARATION OF ThE COMPANYS FINANCIAL STATEMENT
/s/ Sergio Marchionne Sergio Marchionne ChIEF EXECUTIvE OFFICER
FIAT S.P.A. STATUTORY FINANCIAL STATEMENTS

at 31 December 2010
302 302 303 304 305 306 307 308 309 370 Income Statement Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity Income Statement pursuant to Consob Resolution no. 15519 of 27 July 2006 Statement of Financial Position pursuant to Consob Resolution no. 15519 of 27 July 2006 Statement of Cash Flows pursuant to Consob Resolution no. 15519 of 27 July 2006 Notes to the Statutory Financial Statements Appendix Information required under Article 149-duodecies of the Regolamento Emittenti issued by Consob Attestation in respect of the Statutory Financial Statements under Article 154-bis of Legislative Decree 58/98
371
302
FIAT S.P.A. STATUTORY FINANCIAL STATEMENTS AT 31 DECEMbER 2010
INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME
INCOME STATEMENT
(figures in ) Note
(*)
2010
2009
Dividends and other income from investments Impairment (losses)/reversals on investments Gains/(losses) on disposals Other operating income Personnel costs Other operating costs Financial income/(expense) PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) FROM CONTINUING OPERATIONS Profit/(loss) from discontinued operations PROFIT/(LOSS)
(*)
(1) (2) (3) (4) (5) (6) (7) (8)
428,723,556 155,700,000 5,748 61,762,491 (43,384,892) (101,590,587) (93,034,966) 408,181,350 33,778,159 441,959,509 441,959,509
1,259,831,240 (858,000,000) 75,431,036 (31,587,673) (85,905,353) (13,690,556) 346,078,694 (6,115,156) 339,963,538 339,963,538
Pursuant to Consob Resolution 15519 of 27 July 2006, the effects of transactions with related parties on Fiat S.p.A.s Income Statement are presented in a specific income statement provided on the following pages and commented on in the notes to individual line items and Note 30.
STATEMENT OF COMPREHENSIVE INCOME

( thousand) 2010 2009
PROFIT/(LOSS) (A) Gains/(losses) recognized directly in fair value reserve (investments in other companies) Income tax relating to components of other comprehensive income TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX (B) TOTAL COMPREHENSIVE INCOME (A)+(B)
441,959 (4,468) (4,468) 437,491
339,964 3,071 3,071 343,035
303

(figures in ) Note 31 December 2010
(*)
31 December 2009
ASSETS Non-current assets Intangible assets Property, plant and equipment Investments Other financial assets Other non-current assets Deferred tax assets Total non-current assets CURRENT ASSETS Inventory Trade receivables Current financial receivables Other current receivables Cash and cash equivalents Total current assets Assets to be demerged TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital Share premium reserve Legal reserve Other reserves and retained profit Own shares Profit/(loss) for the period Total equity NON-CURRENT LIABILITIES Provisions for employee benefits and other non-current provisions Non-current financial liabilities Other non-current liabilities Deferred tax liabilities Total non-current liabilities Current liabilities Provisions for employee benefits and other current provisions Trade payables Current financial liabilities Other payables Total current liabilities Liabilities to be demerged TOTAL EQUITY AND LIABILITIES
(*)
(9) (10) (11) (12) (13) (8)
317,168 31,385,527 11,423,278,781 143,946,821 147,228 11,599,075,525 8,078,126 311,525,962 350,553,632 239,970 670,397,690 5,190,346,053 17,459,819,268
312,952 31,444,524 13,990,570,445 26,887,235 203,339 14,049,418,495 60,015,344 646,074,366 198,923,165 473,678 905,486,553 14,954,905,048
(26) (14) (15) (16) (17) (18)
(19) 6,377,262,975 1,540,884,892 716,458,326 4,284,447,608 (656,553,154) 441,959,509 12,704,460,156 (20) (21) (22) (8) 20,072,106 2,561,442,000 13,560,651 7,000,000 2,602,074,757 9,273,701 41,011,205 294,591,561 368,407,888 713,284,355 1,440,000,000 17,459,819,268 6,377,262,975 1,540,884,892 699,460,149 4,185,828,196 (656,553,154) 339,963,538 12,486,846,596 25,441,360 1,816,781,700 14,351,219 1,856,574,279 8,464,485 156,249,422 156,711,975 290,058,291 611,484,173 14,954,905,048
(23) (24) (25) (26) (18)
Pursuant to Consob Resolution 15519 of 27 July 2006, the effects of transactions with related parties on the Statement of Financial Position of Fiat S.p.A. are presented in a specific statement of financial position provided on the following pages and commented on in the notes to individual line items and Note 30.
304
STATEMENT OF CASH FLOWS

( thousand)
(*)
A) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR B) CASH FROM/(USED IN) OPERATING ACTIVITIES: Profit/(loss) for the period Amortization and depreciation Non-cash cost of stock option plans Impairment losses/(reversals) on investments Fair value adjustment to equity swaps on Fiat shares Losses/(gains) on disposals Change in provisions for employee benefits and other provisions Change in deferred taxes Change in working capital TOTAL C) CASH FROM/(USED IN) INVESTING ACTIVITIES: Investments relating to: Incorporation and capitalization of subsidiaries Reductions in investments relating to: Proceeds from disposals Other (investments)/disposals, net TOTAL D) CASH FROM/(USED IN) FINANCING ACTIVITIES: Change in current financial assets Proceeds from non-current financial payables and other changes Repayment of non-current financial payables Change in current financial liabilities Increase in share capital Purchase of own shares Sale of own shares Dividends paid TOTAL E) NET CHANGE IN CASH AND CASH EQUIVALENTS F) CASH AND CASH EQUIVALENTS AT END OF THE YEAR
(*)
2010 474 441,959 1,714 17,241 (155,700) (107,070) (33) (4,559) 7,000 (137,315) 63,237
2009 495 339,964 1,706 4,659 858,000 (116,992) 1,141 (5,858) 274,280 1,356,900
(2,258,853) 36 3,706 (2,255,111) 197,418 2,194,660 (400,000) 436,681 (237,119) 2,191,640 (234) 240
(406,467) (6,429) (412,896) (606,947) 6,251 (318,556) (24,773) (944,025) (21) 474
Pursuant to Consob Resolution 15519 of 27 July 2006, the effects of transactions with related parties on the Statement of Cash Flows of Fiat S.p.A. are presented in a specific statement of cash flows provided on the following pages.
STATEMENT OF CHANGES IN EQUITY
305
STATEMENT OF CHANGES IN EQUITY

Share premium reserve 1,540,885 Reserve available for the purchase of own shares 1,142,740 Reserve for own shares 656,553 Retained profit/ (loss) 1,084,578 Gains/ (losses) recognized directly in equity (631) Stock option reserve 96,431 Other reserves (2) Own shares (1) Profit/ (loss) for the year 1,199,146
( thousand) Balances at 31 December 2008 Allocation of prior year profit: to the Legal reserve distribution of dividends to shareholders balance to retained profit Valuation of stock option plans Total comprehensive income for the period Balances at 31 December 2009 Allocation of prior year profit: to the Legal reserve distribution of dividends to shareholders balance to retained profit Carryforward and adjustment to reserve for the purchase of own shares Valuation of stock option plans Total comprehensive income for the period Balances at 31 December 2010
Share capital 6,377,263
Legal reserve 639,503
Total equity 12,169,744
89,829 (656,553)
59,957
(59,957) (24,773) 1,114,416 (1,159) 3,071 339,964 95,272 89,829 (656,553) 339,964 (1,114,416)
(24,773) (1,159) 343,035 12,486,847
6,377,263
1,540,885
699,460
1,142,740
656,553
2,198,994
2,440
16,998
(16,998) (237,119) 85,847 (85,847)
(237,119) -
(599,293)
599,293 17,241 (4,468) 441,959 112,513 89,829 (656,553) 441,959
17,241 437,491 12,704,460
6,377,263
1,540,885
716,458
543,447
656,553
2,884,134
(2,028)
(1) At 31 December 2010, own shares consisted of 38,568,458 ordinary shares having a total nominal value of 192,842 thousand (unchanged over 31 December 2009 and 31 December 2008). (2) Other reserves includes the reserve pursuant to Law 413/1991, the extraordinary reserve and the reserve for Spin-off difference.
306
INCOME STATEMENT
PURSUANT TO CONSOb RESOLUTION NO. 15519 OF 27 JULY 2006
INCOME STATEMENT
pursuant to Consob Resolution no. 15519 of 27 July 2006
( thousand) Note 2010 of which related parties (Note 30) 2009 of which related parties (Nota 30)
Dividends and other income from investments Impairment (losses)/reversals on investments Gains/(losses) on disposals Other operating income Personnel costs Other operating costs Financial income/(expense) PROFIT/(LOSS) BEFORE TAXES Income taxes PROFIT/(LOSS) FROM CONTINUING OPERATIONS Profit/(loss) from discontinued operations PROFIT/(LOSS)
(1) (2) (3) (4) (5) (6) (7) (8)
428,724 155,700 6 61,762 (43,385) (101,591) (93,035) 408,181 33,778 441,959 441,959
428,309 155,700 6 52,202 (21,549) (58,042) (93,773)
1,259,831 (858,000) 75,432 (31,588) (85,905) (13,691) 346,079 (6,115) 339,964 339,964
1,259,691 (858,000) 51,257 (18,397) (47,285) (5,885)
307

( thousand) Note 31 December 2010 of which related parties (Note 30) 31 December 2009 of which related parties (Note 30)
ASSETS Non-current assets Intangible assets Property, plant and equipment Investments Other financial assets Other non-current assets Deferred tax assets Total non-current assets Current assets Inventory Trade receivables Current financial receivables Other current receivables Cash and cash equivalents Total current assets Assets to be demerged TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital Share premium reserve Legal reserve Other reserves and retained profit Own shares Profit/(loss) for the period Total equity NON-CURRENT LIABILITIES Provisions for employee benefits and other non-current provisions Non-current financial liabilities Other non-current liabilities Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES Current liabilities Provisions for employee benefits and other current provisions Trade payables Current financial liabilities Other payables Total current liabilities Liabilities to be demerged TOTAL EQUITY AND LIABILITIES
(9) (10) (11) (12) (13) (8)
317 31,386 11,423,279 143,947 147 11,599,076 8,078 311,526 350,554 240 670,398 5,190,346 17,459,820
11,406,271 11,442
313 31,445 13,990,570 26,887 203 14,049,418 60,015 646,074 198,923 474 905,486 14,954,904
13,969,094 16,782
(26) (14) (15) (16) (17) (18)
342 311,526 240,546
7,152 646,074 121,910
5,190,346
(19) 6,377,263 1,540,885 716,458 4,284,448 (656,553) 441,959 12,704,460 (20) (21) (22) (8) 20,072 2,561,442 13,561 7,000 2,602,075 9,274 41,011 294,592 368,408 713,285 1,440,000 17,459,820 13,128 2,561,442 6,377,263 1,540,885 699,460 4,185,828 (656,553) 339,964 12,486,847 25,441 1,816,782 14,351 1,856,574 8,464 156,249 156,712 290,058 611,483 14,954,904 17,444 1,816,782
(23) (24) (25) (26) (18)
2,264 147,507 351,500 1,440,000
5,664 3,757 96,321 260,806
308

( thousand) 2010 of which related parties 2009 of which related parties
A) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR B) CASH FROM/(USED IN) OPERATING ACTIVITIES: Profit/(loss) for the period Amortization and depreciation Non-cash cost of stock option plans Impairment losses/(reversals) on investments Fair value adjustment to equity swaps on Fiat shares Losses/(gains) on disposals Change in provisions for employee benefits and other provisions Change in deferred taxes Change in working capital TOTAL C) CASH FROM/(USED IN) INVESTING ACTIVITIES: Investments relating to: Incorporation and capitalization of subsidiaries Reductions in investments relating to: Proceeds from disposals Other (investments)/disposals, net TOTAL D) CASH FROM/(USED IN) FINANCING ACTIVITIES: Change in current financial assets Proceeds from non-current financial payables and other changes Repayment of non-current financial payables Change in current financial liabilities Increase in share capital Purchase of own shares Sale of own shares Dividends paid TOTAL E) NET CHANGE IN CASH AND CASH EQUIVALENTS F) CASH AND CASH EQUIVALENTS AT END OF THE YEAR
474 441,959 1,714 17,241 (155,700) (107,070) (33) (4,559) 7,000 (137,315) 63,237
495 339,964 1,706 4,659 858,000 (116,992) 1,141 (5,858) 274,280 1,356,900
17,241 (155,700) (107,070) (9,980) (22,610)
6,385 858,000 (116,992) 6,260 (34,356)
(2,258,853) 36 3,706 (2,255,111) 197,418 2,194,660 (400,000) 436,681 (237,119) 2,191,640 (234) 240
(2,258,853) 36
(406,467) (6,429) (412,896) (606,947) 6,251 (318,556) (24,773) (944,025) (21) 474
(406,467)
197,418 2,194,660 (400,000) 472,386
(606,947) 6,251 (64,790)
(66,935)
NOTES
309
NOTES TO THE STATUTORY FINANCIAL STATEMENTS

PRINCIPAL ACTIVITIES Fiat S.p.A. (the Company) is a corporation organized under the laws of the Republic of Italy and is the Parent Company of the Fiat Group, holding interests, either directly or indirectly through sub-holdings, in the parent companies of business Sectors through which the Fiat Group operates. The Companys head office is in Turin, Italy. The financial statements of Fiat S.p.A. are prepared in euros which is the Companys functional currency. The Income Statement and Statement of Financial Position are presented in euros, while the Statement of Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity and amounts provided in the Notes are in thousands of euros, except where otherwise stated. As the Parent Company, Fiat S.p.A. has also prepared consolidated financial statements for the Fiat Group for the year ended 31 December 2010. Demerger and presentation of assets and liabilities to be demerged Pursuant to the Deed of Demerger executed on 16 December 2010, the Demerger approved by the Shareholders of Fiat S.p.A. and Fiat Industrial S.p.A. on 16 and 17 September 2010, respectively became effective on 1 January 2011. The Demerger consisted of the transfer by Fiat S.p.A. of its shareholdings in companies operating in the Agricultural and Construction Equipment (CNH), Trucks and Commercial Vehicles (Iveco) and related powertrain (FPT Industrial) sectors, in addition to other assets and liabilities detailed in the Demerger Plan (and described further on in this document), to Fiat Industrial S.p.A. Pursuant to IFRS 5 Assets held for sale and discontinued operations, in the statement of financial position of the parent company for the year ended 31 December 2010, Assets to be Demerged and Liabilities to be Demerged are presented separately from other assets and liabilities due to the fact that they constitute a disposal group. Details of the component elements of those line items are provided in Note 18 to the Financial Statements. Finally, as the Demerger is a business combination involving entities or businesses under common control, it is outside the scope of application of IFRS 3 and IFRIC 17. Accordingly, no adjustment to the carrying amount of assets and liabilities to be demerged has been made. For the purposes of the statutory financial statements, given Fiat S.p.A.s role as a holding company, the classification of Discontinued Operations does not exist and therefore the value of that line item in the income statement is zero. SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The 2010 financial statements represent the separate financial statements of the Parent Company, Fiat S.p.A., and have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Union, and with provisions implementing Article 9 of Legislative Decree 38/2005. The designation IFRS also includes all valid International Accounting Standards (IAS), as well as all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly the Standing Interpretations Committee (SIC).
310
NOTES
In compliance with European Regulation 1606 of 19 July 2002, beginning in 2005 the Fiat Group adopted the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), for the preparation of its consolidated financial statements. On the basis of national legislation implementing that Regulation, those accounting standards were also used to prepare the separate financial statements of the Parent Company, Fiat S.p.A., for the first time for the year ended 31 December 2006. The information required by IFRS 1 First-time Adoption of International Financial Reporting Standards relating to the effects of the transition to IFRS was provided in an Appendix to the 2006 separate financial statements. The financial statements are prepared under the historical cost convention, modified as required for the valuation of certain financial instruments, as well as on the going concern assumption. In this respect, despite the continuing difficult economic and financial environment, the Fiat Groups assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist about its ability to continue as a going concern, in view also of the measures already taken to adapt to the changed levels of demand and Fiat Groups industrial and financial flexibility. Format of the financial statements Presentation of Fiat S.p.A.s Income Statement is based on the nature of its revenues and expenses, given the specific activities carried out. Fiat Groups Consolidated Income Statement is classified according to function, which is considered more representative of the format used for management of the business sectors and internal reporting purposes and is in line with international practice in the automotive sector. For the Statement of Financial Position, Fiat S.p.A. has elected the current and non-current classification for the presentation of assets and liabilities. A mixed presentation has been selected for the presentation of the Consolidated Statement of Financial Position, as permitted under IAS 1, with assets only being classified between current and non-current. This election was made in view of the fact that the Consolidated Statement of Financial Position includes both industrial companies and financial services companies. In the Consolidated Statement of Financial Position, the portfolios of the financial services companies are included under current assets, as they will be realized in the course of the normal operating cycle. In addition, the financial services companies only obtain a portion of their funding directly from the market: the remainder is obtained from the Groups treasury companies (included under industrial activities), which provide funding both to industrial companies and financial services companies within the Group, on the basis of their specific requirements. Given the distribution of the financial services activities within the Group, any distinction between current and non-current financial liabilities in the Consolidated Statement of Financial Position would not be meaningful. There is no impact, however, on the presentation of liabilities for Fiat S.p.A. The Statement of Cash Flows is presented using the indirect method. In connection with the requirements of Consob Resolution 15519 of 27 July 2006 as to the format of the financial statements, specific supplementary Income Statement, Statement of Financial Position and Statement of Cash Flows formats have been added for related party transactions so as not to compromise an overall reading of the statements. Intangible assets Purchased or internally-generated intangible assets are recognized as assets in accordance with IAS 38 Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the costs of the asset can be determined reliably. Intangible assets with finite useful lives are measured at purchase or manufacturing cost, net of amortization charged on a straight-line basis over their estimated useful lives and of any impairment losses.
311
Property, plant and equipment Cost Property, plant and equipment are stated at acquisition or production cost, net of accumulated depreciation and any impairment losses, and are not revalued. Subsequent expenditures are capitalized only if they increase the future economic benefits embodied in that asset. All other expenditures are expensed as incurred. The assets are depreciated by the method and at the rates indicated below. Leases where the lessor retains substantially all the risks and rewards of ownership of the assets are classified as operating leases. Operating lease expenditures are expensed on a straight-line basis over the lease term. Depreciation Depreciation is calculated on a straight-line basis over the estimated useful life of an asset as follows:
Buildings Plant Furniture Fixtures Vehicles Annual depreciation rate 3% 10% 12% 20% 25%
Land is not depreciated. Impairment The Company reviews, at least annually, the recoverability of the carrying amount of intangible assets, tangible assets and investments in subsidiaries and associate companies, in order to determine whether there is any indication that those assets have suffered an impairment loss. If indications of impairment are present, the carrying amount of the asset is reduced to its recoverable amount. For investments in subsidiaries and associates that have distributed a dividend, the following are also considered indicators of impairment: if the carrying amount of the investment in the separate financial statements exceeds the book value of that companys equity (including any associated goodwill) as recognized in the consolidated financial statements; if the dividend exceeds the comprehensive income of the investee for the period to which the dividend relates. The recoverable amount of an asset is the higher of fair value less disposal costs and its value in use. In particular, in assessing whether investments in subsidiaries and associate companies are impaired, as their market value (fair value less costs to sell) cannot be reliably measured, the recoverable amount is considered to be their value in use, which is determined by estimating the present value of the estimated future cash flows based on expected profit or loss and a theoretical ultimate disposal, in line with the requirements of paragraph 33 of IAS 28. Where an impairment loss for assets subsequently no longer exists or has decreased, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but not in excess of the carrying amount that would have been recorded had no impairment loss been recognized. A reversal of an impairment loss is recognized in the income statement immediately.
312
NOTES
Financial instruments Presentation Financial instruments held by the Company are presented in the financial statements as described in the following paragraphs: Non-current assets: investments, other financial assets, other non-current assets. Current assets: trade receivables, current financial receivables, other current receivables, cash and cash equivalents. Non-current liabilities: non-current financial payables, other non-current liabilities. Current liabilities: trade payables, current financial payables (including asset-backed financing), other payables. The item cash and cash equivalents includes cash at banks, units in liquidity funds and other money market securities that are readily convertible into cash and are subject to an insignificant risk of changes in value. Non-current financial payables includes liabilities related to financial guarantees. These financial guarantees are contracts where the company undertakes to make specific payments to a counterparty for losses incurred as a result of the failure of a specified borrower to make payment in accordance with the terms of a given debt instrument. The present value of any related fees receivable is recognized under other non-current financial assets. Measurement Investments in subsidiaries and associate companies are stated at cost adjusted for any impairment losses. Any positive difference, arising on acquisition, between the purchase cost and the fair value of net assets acquired by the Company in the investee company is, accordingly, included in the carrying amount of the investment. Investments in subsidiaries and associate companies are tested annually, or more often if necessary, for impairment. Where evidence of impairment exists, an impairment loss is recognized directly in the income statement. If the companys share of losses of the investee exceeds the carrying amount of the investment and if the company has an obligation or intention to cover these losses, the companys interest is reduced to zero and a liability is recognized for its share of the additional losses. If the impairment loss subsequently no longer exists or is reduced, a reversal is recognized in the income statement up to the limit of the cost of the investment. Investments in other companies, comprising non-current financial assets that are not held for trading (available-for-sale financial assets), are initially measured at fair value. Any subsequent profits and losses resulting from changes in fair value, correlated to their market price, are recognized directly in equity until the investment is sold or is impaired; when the asset is disposed of, the cumulative gains or losses, including those previously recognized in equity, are reclassified in the income statement for the period; when the asset is impaired, accumulated losses are recognized in the income statement. Investments in other smaller companies for which a market price is not available are measured at cost, adjusted for any impairment losses. Other financial assets which the company has the intention to hold to maturity are recognized on the basis of the settlement date and, on initial recognition, are measured at acquisition cost (being representative of fair value) on initial recognition in the statement of financial position, inclusive of transaction costs other than in respect of assets held for trading. These assets are subsequently measured at amortized cost using the effective interest method. Other non-current assets, trade receivables, current financial receivables and other current receivables, excluding assets deriving from derivative financial instruments and all financial assets for which published price quotations in an active market are not available and whose fair value cannot be determined reliably, are measured, to the extent that they have a fixed term, at amortized cost, using the effective interest method. When the financial assets do not have a fixed term, they are measured at cost. Receivables with maturities of over one year which bear no interest or an interest rate significantly lower than market rates are discounted using market rates.
313
Assessments are made regularly for the purpose of verifying if there is objective evidence that a financial asset, separately or within a group of assets, may have been impaired. If any such evidence exists, an impairment loss is included in the income statement for the period. Non-current financial payables, other non-current liabilities, trade payables, current financial payables and other payables are measured on initial recognition at fair value (normally represented by their original cost), including any transaction costs. Financial liabilities are subsequently measured at amortized cost using the effective interest method, except for derivative financial instruments and liabilities for financial guarantee contracts. Financial liabilities hedged by derivative instruments are measured in accordance with hedge accounting principles applicable to fair value hedges. Gains and losses arising from measurement at fair value, caused by fluctuations in interest rates, are recognized in the income statement and are offset by the effective portion of the gain or loss arising from remeasurement at fair value of the hedging instrument. Liabilities for financial guarantee contracts are measured at the higher of the estimate of the contingent liability (determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets) and the amount initially recognized less any amount released to income over time. Derivative financial instruments Derivative financial instruments are used for hedging purposes, in order to reduce currency, interest rate and market price risks. In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and documentation of the hedging relationship, the hedge is expected to be highly effective, its effectiveness can be reliably measured and it is highly effective throughout the financial reporting periods for which the hedge is designated. All derivative financial instruments are measured in accordance with IAS 39 at fair value. When derivative financial instruments qualify for hedge accounting, the following accounting treatment applies: Fair value hedge Where a derivative financial instrument is designated as a hedge of the exposure to changes in fair value of a recognized asset or liability that is attributable to a particular risk and could affect the income statement, the gain or loss from remeasuring the hedging instrument at fair value is recognized in the income statement. The gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognized in the income statement. Cash flow hedge Where a derivative financial instrument is designated as a hedge of the exposure to variability in future cash flows of a recognized asset or liability or a highly probable forecast transaction and could affect the income statement, the effective portion of the gain or loss on the derivative financial instrument is recognized directly in equity. The cumulative gain or loss is removed from equity and recognized in the income statement in the same period in which the hedged transaction is recognized. The gain or loss associated with a hedge or part of a hedge that has become ineffective is recognized in the income statement immediately. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss realized to the point of termination remains in shareholders equity and is recognized in the income statement at the same time as the underlying transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealized gain or loss recognized in equity is immediately transferred to the income statement. If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative financial instruments are recognized immediately in the income statement.
314
NOTES
Inventory Inventory consists of contract work in progress related, in particular, to long-term construction contracts between Fiat S.p.A. and Treno Alta Velocit T.A.V. S.p.A. (merged into Rete Ferroviaria Italiana S.p.A. from 31 December 2010) under which Fiat S.p.A. as general contractor coordinates, organizes and manages the work. Work in progress refers to activities carried out directly and is recognized through measurement of the total contract income on a percentage completion basis, with the incremental portion of the work performed to date being recognized in the period. The cost-to-cost method is used to determine the percentage of completion of a contract (by dividing the costs incurred by the total costs forecast for the whole construction). Any losses expected to be incurred on contracts are fully recognized in the income statement and as a reduction in contract work in progress when they become known. Any advances received from customers for services performed are presented as a reduction in inventory. If the value of advances received exceeds inventory, any excess is recognized as advances under other payables. Sales of receivables Receivables sold in factoring transactions are derecognized if and only if the risks and rewards relating to ownership have been substantially transferred to the buyer. Receivables sold with recourse and without recourse that do not satisfy this condition remain in the statement of financial position, even if they have been legally sold; in such cases, a liability for the same amount is recognized for advances received. Assets held for sale This item includes non-current assets (or assets included in disposal groups) whose carrying amount will be recovered principally through a sale transaction rather than through continuing use. Assets held for sale (or disposal groups) are measured at the lower of their carrying amount and fair value less disposal costs. Employee benefits Post-employment benefit plans The company provides pension plans and other post-employment benefit plans to its employees. The pension plans for which the company has an obligation under Italian law are defined contribution plans, while the other post-employment benefit plans, for which the company generally has an obligation under national collective bargaining agreements, are defined benefit plans. Payments made by the Company for defined contribution plans are recognized as a cost in the income statement when incurred. Defined benefit plans are based on the employees working life and on the salary or wage received by the employee over a pre-determined period of service. The scheme underlying the employee severance indemnity of the Italian Group companies (Trattamento di Fine Rapporto or TFR) was classified as a defined benefit plan until 31 December 2006. Legislation relating to this scheme and leading to this classification was amended by Law 296 of 27 December 2006 (the 2007 Finance Law) and subsequent decrees and regulations issued in the first part of 2007. In view of these changes, and with specific reference to those regarding companies with at least 50 employees, this scheme only continues to be classified as a defined benefit plan in the consolidated financial statements for those benefits accruing up to 31 December 2006 (and not yet settled by the balance sheet date), while after that date the scheme is classified as a defined contribution plan.
315
The companys obligation to fund defined benefit plans and the annual cost recognized in the income statement is determined on an actuarial basis using the projected unit credit method. The portion of net cumulative actuarial gains and losses which exceeds the greater of 10% of the present value of the defined benefit obligation and 10% of the fair value of the plan assets at the end of the previous year is amortized over the average remaining service lives of employees (the corridor approach); the portion of actuarial gains and losses that does not exceed this threshold is deferred. Upon first-time adoption of IFRS, the Company elected to recognize all cumulative actuarial gains and losses existing at 1 January 2004 (date of first-time adoption of IFRS by the Fiat Group), despite having elected the corridor approach for recognition of subsequent actuarial gains and losses. The expense related to the reversal of discounting pension obligations for defined benefit plans are recognized under financial expense. The post-employment benefit obligation recognized in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses, arising from the application of the corridor method and unrecognized past service cost. Other long-term employee benefits The accounting treatment for other long-term benefits is the same as that for post-employment benefit plans except for the fact that actuarial gains and losses and past service costs are fully recognized in the income statement in the year in which they arise and the corridor method is not applied. Equity-based compensation The Company provides additional benefits to certain senior managers and employees in the form of equity participation schemes (stock options and stock grants). In accordance with IFRS 2 Share-based Payment, such plans constitute a component of the recipients compensation and the cost, based on the fair value of the instrument at the grant date, is recognized in the income statement on a straight-line basis over the period from the grant date to the vesting date, and a balancing entry recognized directly in equity. The initial measurement is not affected by any subsequent changes in fair value. In accordance with the transitional provisions of IFRS 2, the Company applied the Standard to all stock options granted after 7 November 2002 and not yet vested at 1 January 2005, the effective date of the Standard. Detailed information is provided in respect of all stock options granted on or prior to 7 November 2002. The compensation component from stock option plans based on Fiat S.p.A. shares relating to employees of other Group companies is recognized as a capital contribution to the subsidiaries which employ beneficiaries of the stock option plans, in accordance with IFRIC 11 and, as a result, is recorded as an increase in the carrying amount of the investment, with the offsetting credit being recognized directly in equity. Provisions The Company recognizes provisions when it has a legal or constructive obligation to third parties, when it is probable that an outflow of resources will be required to satisfy the obligation and when a reliable estimate of the amount can be made. Changes in estimates are reflected in the income statement in the period in which the change occurs. Own shares Own shares are recognized as a deduction from equity. The original cost of own shares, proceeds of any subsequent sale and other changes are presented as movements in equity.
316
NOTES
Dividends received and receivable Dividends from investees are recognized in the income statement when the right to receive the dividend is established. Revenue recognition Revenue is recognized if it is probable that economic benefits associated with the transaction will flow to the company and the revenue can be measured reliably. Revenue is presented net of any adjusting items. Revenue from services and from construction contracts are recognized using the percentage completion method described under inventory. Financial income and expense Financial income and expense are recognized in the income statement in the period in which they become receivable or payable. Finance costs attributable to investments in assets that necessarily require a substantial period of time to get ready for their intended use or sale (qualifying assets) are capitalized and amortized over the useful life of the class of assets to which they relate. Income taxes The tax charge for the period is determined on the basis of prevailing laws and regulations. Taxes on income are recognized in the income statement except to the extent that they relate to items directly charged or credited to equity, in which case the related income tax effect is recognized in equity. Deferred tax assets and liabilities are determined on the basis of all the temporary differences between the carrying amount of an asset or liability in the statement of financial position and its corresponding tax basis. Deferred tax assets resulting from unused tax losses and temporary differences are recognized to the extent that it is probable that future taxable profit will be available against which they can be utilized. Current and deferred income taxes and liabilities are offset when there is a legally enforceable right to offset. Deferred tax assets and liabilities are measured at the substantively enacted tax rates that are expected to apply to taxable income in the periods in which temporary differences will be reversed. Fiat S.p.A. and almost all its Italian subsidiaries have elected to take part in the domestic tax consolidation program pursuant to Articles 117/129 of the Consolidated Income Tax Act (T.U.I.R.); the election was made for a three-year period beginning in 2004. The election was renewed in 2007 and again in 2010, both times for a minimum three-year period. Fiat S.p.A. acts as the consolidating company in this program and calculates a single taxable base for the group of companies taking part, enabling benefits to be realized from the offsetting of taxable income and tax losses in a single tax return. Each company participating in the consolidation transfers its taxable income or tax loss to the consolidating company. Fiat S.p.A. recognizes receivables from companies contributing taxable income, corresponding to the amount of IRES (corporate income tax) paid on its behalf. In the case of a company contributing a tax loss to the consolidation, Fiat S.p.A. recognizes a payable to that company for the amount of the loss actually set off at group level. Dividends payable Dividends payable are recognized as changes in shareholders equity in the period in which they are approved by shareholders.
317
Use of estimates The preparation of financial statements and related disclosures that conform to IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of any changes are recognized directly in profit and loss in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. In this respect, the situation caused by the recent economic and financial crisis and the consequent difficulties experienced in many markets has led to the need to make assumptions regarding future performance which are characterized by significant uncertainty. As a consequence, therefore, it cannot be excluded that results may arise during the year which differ from estimates, and which may subsequently require adjustments, even significant, to the carrying amount of the item(s) in question, which obviously at present can neither be estimated nor predicted. The line item most impacted by the use of estimates is investments in subsidiaries and associates included under non-current assets, where estimates are used for the determination of impairment losses and reversals of impairment losses. No particular or significant issues have arisen, however, in relation to estimates used for the recognition of percentage completion of contract work in progress, employee benefits, taxes or provisions also taking into consideration their level of materiality. The line item investments in subsidiaries and associates was primarily influenced by estimates used in determination of the carrying amount of Fiat Group Automobiles S.p.A. (FGA), given the relative weighting of that investment. For the 2010 financial statements, the investment has been measured on the basis of its estimated value in use. Those estimates took into account expected performance for 2011, and the assumptions and resulting output are consistent with statements made in the Report on Operations under Subsequent Events and Outlook, in addition to the Fiat Group 2010-2014 Business Plan presented to the financial community on 21 April 2010. For valuation purposes, annual profit estimates were then reduced using adjustment factors that increase over the projected time horizon (as estimates become more difficult) as a further measure of prudence, given the continued uncertainty as to the timing of a return to normal market conditions. A theoretical terminal value (based on an ultimate disposal) was estimated assuming a perpetual growth rate of zero. The present value was calculated using a discount rate of 14.5%, considered prudent for the industry sector and geographic markets in which this subsidiary operates. The estimates and underlying assumptions provided reasonable support for the determination that no writedowns or reversals in value were necessary for 2010. Accounting standards, amendments and interpretations effective from 1 January 2010 but not applicable to the Company The following amendments, improvements and interpretations, effective from 1 January 2010, relate to issues that were not applicable to the Company at the date of these financial statements, but which may have an impact on the accounting treatment of future transactions or arrangements: IFRS 3 (2008) Business combinations. IAS 27 (2008) Consolidated and Separate Financial Statements. Improvement to IFRS 5 (2009) Non-current Assets Held for Sale and Discontinued Operations. Amendment to IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures consequential to the amendment to IAS 27. Improvements to IAS/IFRS (2009).
318
NOTES
Amendment to IFRS 2 Share based Payment: Group Cash-settled Share-based Payment Transactions. IFRIC 17 Distributions of Non-cash Assets to Owners. IFRIC 18 Transfers of Assets from Customers. Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged items. Accounting standards, amendments and interpretations not yet applicable and not early adopted by the Company On 8 October 2009, the IASB issued an amendment to IAS 32 Financial Instruments: Presentation on Classification of rights issues, which addresses accounting for rights issues (rights, options or warrants) denominated in a currency other than an issuers functional currency. Previously such rights issues were accounted for as derivative liabilities. However, the amendment requires that, provided certain conditions are met, such rights are classified as equity regardless of the currency in which the exercise price is denominated. The amendment is applicable retrospectively from 1 January 2011. Adoption of this amendment is not expected to have any impact on the Companys financial statements. On 4 November 2009, the IASB issued a revised version of IAS 24 Related Party Disclosures that simplifies the disclosure requirements for transactions with government-related entities and clarifies the definition of a related party. The revised standard is effective for annual periods beginning on or after 1 January 2011. Adoption of this standard will have no effect on the measurement of items in the financial statements. On 12 November 2009, the IASB issued IFRS 9 Financial Instruments, which was amended on 28 October 2010. The new standard, effective from 1 January 2013, represents completion of the first phase of a project to replace IAS 39 and introduces new requirements for classifying and measuring financial assets and liabilities and derecognition of financial assets. For financial assets, the standard uses a single approach to determine whether a financial asset is measured at amortized cost or fair value replacing the many different rules in IAS 39 which is based on how an entity manages its financial instruments and the contractual cash flow characteristics of the financial assets. For financial liabilities, on the other hand, the principal change relates to the recognition of changes in fair value of financial liabilities measured at fair value through profit or loss, when such changes are due to changes in the credit risk of the liability. According to the new standard, these changes must be recognized in other comprehensive income rather than through profit or loss. At the date of these financial statements, the new standard had not yet been endorsed by the European Union. On 26 November 2009, the IASB issued a minor amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement. The amendment applies when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permits an entity to treat the benefit of such early payment as an asset. The amendment has an effective date for mandatory adoption of 1 January 2011. Adoption of this amendment is not expected to have any impact on the Companys financial statements. On 26 November 2009, IFRIC issued the interpretation IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments that provides guidance on how to account for the extinguishment of a financial liability through the issue of equity instruments. The interpretation clarifies that when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entitys shares or other equity instruments to settle the financial liability fully or partially, then the entitys equity instruments issued to a creditor are part of the consideration paid to extinguish the financial liability and are measured at their fair value. The difference between the carrying amount of the financial liability extinguished and initial measurement of the equity instruments issued is recognized in profit or loss for the period. Adoption of the interpretation is mandatory from 1 January 2011. Adoption of this amendment is not expected to have any impact on the Companys financial statements.
319
On 6 May 2010, the IASB issued a set of amendments to IFRSs (Improvements to IFRSs) that are applicable from 1 January 2011. Set out below are those that may lead to changes in the presentation, recognition or measurement of items in the financial statements, excluding those that only relate to changes in terminology or editorial changes having a limited accounting effect and those that affect standards or interpretations that are not applicable to the Company. IFRS 1 First-time Adoption of International Financial Reporting Standards: this amendment clarifies that if an entity has to measure its assets at fair value due to a special event such as an IPO or a privatization in accordance with local law, the revalued amount may also be used in preparation of the IFRS financial statements even if the company had already determined the fair value of assets and liabilities existing at the date of transition to IFRSs. IFRS 7 Financial Instruments: Disclosures: this amendment emphasizes the interaction between the qualitative and quantitative disclosures required by the standard concerning the nature and extent of risks arising from financial instruments. This should help users of financial statements to link related disclosures and hence form an overall picture of the nature and extent of risks arising from financial instruments. In addition, the disclosure requirement relating to financial assets that are past due or impaired, but whose term has been renegotiated, and to the fair value of collateral has been removed. Adoption of these improvements is not expected to have any impact on the Companys financial statements. On 7 October 2010, the IASB issued amendments to IFRS 7 Financial Instruments: Disclosures, applicable for reporting periods commencing on or after 1 July 2011. The amendments allow users of financial statements to improve their understanding of transfers of financial assets, including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfers are undertaken around the end of a reporting period. At the date of these financial statements, application of these amendments had not yet been endorsed by the European Union. On 20 December 2010, the IASB issued a minor amendment to IAS 12 Income taxes, requiring an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. As a result of this amendment, SIC 21 Income Taxes Recovery of Revalued Non-Depreciable Assets will no longer apply. Adoption of the amendment is mandatory from 1 January 2012. At the date of these financial statements, the amendment had not yet been endorsed by the European Union. RISK MANAGEMENT The risks to which Fiat S.p.A. is exposed, either directly or indirectly through its subsidiaries, are the same as those of the companies of which it is Parent. Reference should therefore be made to the note on Risk Management included in the Notes to the Consolidated Financial Statements of the Fiat Group as well as to Note 28.
320
NOTES
COMPOSITION AND PRINCIPAL CHANGES 1. Dividends and other income from investments A breakdown of dividends and other income from investments is provided in the following table:
( thousand)
2010 180,000 99,990 80,000 50,000 18,319 428,309 415 428,724
2009 700,000 559,691 1,259,691 140 1,259,831
Dividends from subsidiaries: Fiat Finance S.p.A. Magneti Marelli S.p.A. Fiat Powertrain Technologies S.p.A. Fiat Netherlands Holding N.V. Business Solutions S.p.A. Fiat Group Automobiles S.p.A. Iveco S.p.A. (renamed Fiat Gestione Partecipazioni S.p.A.) Total dividends from subsidiaries Dividends from other companies Total dividends and other income from investments
For 2010, dividends from other companies related to dividends received from Fin. Priv. S.r.l. (349 thousand) and Assicurazioni Generali S.p.A. (66 thousand). For 2009, they included dividends from Assicurazioni Generali S.p.A. 2. Impairment (losses)/reversals on investments The following table provides a breakdown of impairment losses and reversals on investments:
( thousand)
2010 (80,000) (7,100) (11,100) (6,100) (104,300) 260,000 260,000 155,700
2009 (51,000) (31,000) (16,000) (560,000) (200,000) (858,000) (858,000)
Impairment losses: Fiat Powertrain Technologies S.p.A. Comau S.p.A. Teksid Aluminum S.r.l. Fiat Industrial S.p.A. Fiat Partecipazioni S.p.A. Iveco S.p.A. (renamed Fiat Gestione Partecipazioni S.p.A.) Fiat Group Automobiles S.p.A. Total impairment losses Reversal of impairment losses: Fiat Gestione Partecipazioni S.p.A. (formerly Iveco S.p.A.) Total value of reversals Total impairment (losses)/reversals on investments
As detailed in Note 11, as part of the transactions preliminary to the Demerger, Iveco S.p.A. sold (with effect from 1 December 2010 and on the basis of a valuation performed by an independent expert) its trucks and commercial vehicles and Industrial & Marine powertrain activities to two subsidiaries of Fiat S.p.A. (Nuove Iniziative Finanziarie Cinque S.p.A. and Nuova Immobiliare Nove S.p.A., later renamed Iveco S.p.A. and FPT Industrial S.p.A.) included within the group of activities to be transferred under the Demerger. Subsequent to that transaction, Iveco S.p.A. was renamed Fiat Gestione Partecipazioni S.p.A. At 31 December 2010, the carrying amount of the shareholding, which had been reduced by 560 million in 2009, was brought into line with the book value of the companys equity (which is deemed representative of its recoverable amount) resulting in an impairment reversal of 260 million.
321
Impairment losses recognized on the shareholdings in Fiat Powertrain Technologies S.p.A., Comau S.p.A. and Teksid Aluminum S.r.l. were substantially attributable to losses for the year and other changes in equity reported by those subsidiaries for the period and the adjusted carrying amounts are deemed representative of their estimated recoverable amount. The writedown on the shareholding in Fiat Industrial S.p.A. (incorporated in 2010 to become the holding company for the demerged activities) reflects costs incurred by the subsidiary during 2010, primarily in relation to incorporation and admission of its shares to listing on the Mercato Telematico Azionario (MTA) managed by Borsa Italiana S.p.A. With regard to the shareholding in Fiat Group Automobiles S.p.A., the estimates and assumptions used for preparation of the financial statements, as described in the section Use of Estimates, provided reasonable support for maintaining the carrying amount recognized in the 2009 financial statements unchanged, except for the capital increase undertaken during the year. This shareholding, which in 2005 and prior years was subject to writedowns that have not been fully reversed, includes total impairment losses of 2,907 million which could potentially be reversed in future periods. At 31 December 2010, the carrying amount of the shareholding was 5,524 million. For the remaining significant shareholdings, in particular, the parent companies of the Groups industrial Sectors Fiat Netherlands Holding N.V. (which holds a controlling interest in CNH Global N.V.), Magneti Marelli S.p.A. and Ferrari S.p.A. (all recognized at historic cost) no indications of impairment were identified. This also takes into consideration the carrying amounts of equity recognized in the consolidated statement of financial position, for which the recoverability of assets has already been adequately assessed. 3. Gains/(losses) on disposals For 2010, there was a 6 thousand gain on the sale of the 0.17% direct interest held in ElasisSociet Consortile per Azioni to Fiat Group Automobiles S.p.A. and Fiat Partecipazioni S.p.A. No gains or losses were reported for 2009. 4. Other operating income The following table provides a breakdown of other operating income:
( thousand)
Revenues from services rendered to Group companies Revenues from services rendered to third parties Changes in construction contract work in progress Other revenues and income from Group companies Other revenues and income from third parties Total other operating income
2010 45,137 5,456 6,986 4,183 61,762
2009 45,229 182,049 (164,254) 6,028 6,380 75,432
Revenues from services rendered to Group companies relate to services rendered by Fiat S.p.A. and management personnel to the principal companies in the Group (see Note 30). For 2009, revenues from services rendered to third parties related to fees payable to Fiat S.p.A. for activities carried out directly by the Company (management, coordination and organization) in relation to the contract with Treno Alta Velocit T.A.V. S.p.A. for the Turin-Novara line. These revenues were recognized following the closure of the project from an accounting perspective upon completion of the residual portion of work and formal acceptance by the customer as stipulated in the contract (see Note 26). Changes in construction contract work in progress relate to the current portion of fees payable to Fiat S.p.A. for activities carried out directly by the Company (management, coordination and organization) in relation to contracts with Treno Alta Velocit T.A.V. S.p.A. (merged into Rete Ferroviaria Italiana S.p.A. from 31 December 2010) that were still in progress at the end of the year (the Florence-Bologna line and Novara-Milan line). In 2009, this value was shown net of fees relating to the Turin-Novara line that were no longer recognized under contract work in progress but instead under revenues.
322
NOTES
Other revenues and income from Group companies mostly related to the recovery of costs, rental income from real estate properties and to directors fees paid by companies for duties performed by Fiat S.p.A. employees. Other revenues and income from third parties relate to miscellaneous income, recovery of costs and other prior year income. The overall decrease in other operating income over 2009 was due to the winding down of contract work for T.A.V. S.p.A. (now Rete Ferroviaria Italiana S.p.A.). 5. Personnel costs A breakdown of personnel costs is provided in the following table:
( thousand)
Wages and salaries Defined contribution plans and social security contributions Employee severance indemnity and other defined benefit plans Compensation component from stock option plans Other personnel costs Total personnel costs
2010 20,821 7,968 389 14,207 43,385
2009 20,692 7,921 389 (3,494) 6,080 31,588
The average number of employees for the year decreased from 152 in 2009 (66 managers, 79 white-collars and 7 blue-collars) to 144 in 2010 (63 managers, 74 white-collars and 7 blue-collars). As described in Note 4, certain of the companys managers (an average of 10 managers in 2010 and 11 in 2009) carried out their activities at the Groups principal subsidiaries and the related costs were recharged to those companies. Defined contribution plans consisted of the amounts paid by the Company to the Italian state social security organization (INPS) and other social security and assistance organizations for post-employment benefit defined contribution plans (pension plans and medical care) on behalf of all categories of employees. Following the introduction of Law 296/06, the employee severance indemnity accruing from 1 January 2007 and paid over to complementary pension funds or the treasury fund established by the Italian State social security organization INPS is treated as a cost for a defined contribution plan, while the adjustments to the employee severance indemnity accruing before 1 January 2007 are recognized in the statement of financial position under Employee severance indemnity and other defined benefit plans (see Note 20). Social security contributions consisted of the amount paid by the Company to social security agencies on behalf of employees for short-term benefits such as sickness, injury and compulsory maternity leave. The compensation component from stock option plans relates to plans for managers employed by Fiat S.p.A. which are based on Fiat S.p.A. shares and represents the notional cost recognized against the relevant equity reserve (see Note 19). In 2009, as performance targets for the relative tranches of the November 2006 and July 2008 Plans vesting during the period were not met, the probability of subsequent tranches vesting was re-evaluated and, at yearend 2009, Fiat S.p.A. released accruals for the notional cost of those tranches which had been recognized in prior years. No related charges arose in 2010. Other personnel costs related mainly to accruals to provisions for employee bonuses, leaving incentives and insurance. For 2010, compensation to executives with strategic responsibilities was 21,549 thousand (10,121 thousand of which was charged back to the Group companies where they carried out their activities). The total cost included the following: severance indemnity accrued during the year, amounting to 986 thousand; contributions by the Company to state and company defined contribution schemes and social security contributions for 4,582 thousand; costs for the year for a special defined benefit plan, amounting to 384 thousand (including the component recognized in financial expenses).
323
6. Other operating costs A breakdown of other operating costs is provided in the following table:
( thousand)
Costs for services rendered by Group companies Costs for services rendered by third parties Compensation component from stock option and stock grant plans Leases and rentals Purchase of goods Depreciation of property, plant and equipment Amortization of intangible assets Misc. operating costs Total other operating costs
2010 22,810 48,298 17,241 3,254 688 1,674 40 7,586 101,591
2009 25,352 39,592 8,154 3,685 734 1,644 62 6,682 85,905
Costs for services rendered by Group companies primarily consisted of assistance and consultancy of an administrative and financial nature, public relations, payroll services, security services and internal audit services (see Note 30). Costs for services rendered by third parties principally included legal, administrative and financial services as well as IT and technical services (T.A.V.). The increase over the prior year also reflects costs related to the Demerger of approximately 8 million. For 2010, compensation for directors and statutory auditors of Fiat S.p.A. amounted to 6,554 thousand and 230 thousand, respectively. The amount of directors fees includes fees resolved by shareholders as well as compensation established by the Board of Directors for directors vested with specific responsibilities. The compensation component from stock option and stock grant plans is connected with the options granted to the Chief Executive Officer and is represented by the notional cost, with the offsetting credit recognized directly in the relevant equity reserve (see Note 19). Miscellaneous operating costs consist of subscriptions to trade associations, indirect taxes and duties (local property taxes, non-deductible VAT, etc.), prior year expenses and other minor costs. 7. Financial income/(expense) Following is a breakdown of financial income/(expense):
( thousand)
Financial income Financial expense Net gains/(losses) from derivative financial instruments Total financial income/(expense)
2010 31,210 (234,830) 110,585 (93,035)
2009 14,190 (144,873) 116,992 (13,691)
324
NOTES
Financial income consisted of the following:

( thousand)
2010 22,938 5,255 52 28,245 6 2,963 2,969 (4) 31,210
2009 3,427 5,440 63 8,930 9 5,134 5,143 117 14,190
Financial income from Group companies: Interest income on current account with Fiat Finance S.p.A. Fee income for sureties and personal guarantees Other financial income Total financial income from Group companies Financial income from third parties: Interest income on bank and other deposits Interest income on tax credits Total financial income from third parties Currency translation gains/(losses) Total financial income
Financial expense consisted of the following:

( thousand)
2010 224,955 5,808 79 1,642 119 232,603 847 517 863 2,227 234,830
2009 598 124,590 6,255 7 91 266 131,807 8,778 1,084 3,204 13,066 144,873
Financial expense to Group companies: Interest expense on current account with Fiat Finance S.p.A. Interest expense on Fiat Finance S.p.A. loans Commissions and other charges payable to Fiat Netherlands Holding N.V. Commissions and other charges payable to Fiat Finance S.p.A. Commissions and other charges payable to Fidis S.p.A. Interest and financial expense to other Group companies Total financial expense to Group companies Financial expense to third parties: Interest expense and charges for the sale of receivables Financial expense on employee benefits Other third party interest and financial expense Total financial expense to third parties Total financial expense
Net income from derivative financial instruments of 110,585 thousand (net income of 116,992 thousand for 2009) was essentially attributable to the gain arising from the change in fair value of the two equity swaps (which expire in 2011, following extension of the two contracts during the year) entered into as hedges against Fiat shares rising above the exercise price of the stock options granted to the Chief Executive Officer in 2004 and 2006 (see Note 19). At 31 December 2010, the equity swaps had a notional value, based on the contractual strike price, of 203,941 thousand. Although these equity swaps were entered into for hedging purposes, they do not qualify for hedge accounting under IFRS and accordingly are classified as held for trading. Following the Demerger, those equity swaps will based on the stock market performance of a basket consisting of the shares in Fiat S.p.A. and in Fiat Industrial S.p.A.
325
8. Income taxes A breakdown of taxes recognized in the income statement is provided below:
( thousand)
2010 (39,619) (39,619) 7,000 7,000 (1,159) (33,778)
2009 (5,858) (5,858) 11,973 6,115
Current taxes: IRES IRAP Total current taxes Deferred taxes for the period: IRAP Total deferred taxes for the period Taxes relating to prior periods Total income taxes
Current IRES tax for 2010 represents a 39,619 thousand income and relates to compensation receivable by Fiat S.p.A. for tax loss carryforwards contributed to the domestic tax consolidation scheme. Deferred IRAP relates to profit recognized on contract work in progress with T.A.V. S.p.A. (now Rete Ferroviaria Italiana S.p.A.)., for which there is a timing difference between taxation and accounting recognition. Taxes relating to prior periods represents income of 1,159 thousand related to the prior years domestic tax consolidation. For 2009, taxes relating to prior periods of 11,973 thousand consisted almost entirely of IRAP paid during the year in relation to the prior years income. A reconciliation between theoretical income taxes determined on the basis of tax rates applicable in Italy and income taxes reported in the financial statements is as follows:
( thousand)
Theoretical income taxes Tax effect of permanent differences Taxes relating to prior periods Tax loss carryforwards utilized Current and deferred income tax recognized in the financial statements, excluding IRAP IRAP (current and deferred) Income taxes reported in the income statement (current and deferred income taxes)
2010 112,250 (148,589) (1,159) (3,280) (40,778) 7,000 (33,778)
2009 95,172 (90,928) (2) (4,244) (2) 6,117 6,115
Theoretical income taxes are calculated by applying the IRES tax rate (27.5% for 2009 and 2010) to the result before taxes. IRAP tax is excluded to facilitate an understanding of the reconciliation between theoretical and reported income taxes; since it is calculated on a tax basis that differs from profit before taxes, it would otherwise generate distortions between one year and another. The permanent differences referred to above include, among other things, the tax effect of non-taxable income amounting to 183,506 thousand in 2010 (329,236 thousand in 2009) and of non-deductible costs amounting to 34,917 thousand in 2010 (238,308 thousand in 2009). In particular, for 2010 the tax effect of non-taxable income was principally attributable to dividends (112,004 thousand vs. 329,131 thousand in 2009) and impairment reversals on investments (71,500 thousand). Non-deductible costs principally included impairment losses on investments whose tax effect was 28,682 thousand (235,950 thousand in 2009).
326
NOTES
A breakdown of deferred tax liabilities, net of deferred tax assets, is provided in the following table.
31 December 2009 8,300 8,300 (422) (422) 378,397 (386,275) Recognized in income statement (515) (515) (47,010) 37 (46,973) (318,555) 359,043 (7,000) Charged to equity 31 December 2010 7,785 7,785 (47,010) (385) (47,395) 59,842 (27,232) (7,000)
( thousand)
Deferred tax assets arising from: Taxed provisions and other minor differences Total deferred tax assets Deferred tax liabilities arising from: Measurement of construction contracts by the percentage completion method Others Total deferred tax liabilities Theoretical tax benefit arising from tax loss carryforwards Adjustments for assets whose recoverability is not probable Total deferred tax liabilities, net of deferred tax assets
Deferred tax assets were determined through a critical analysis of the existence of the conditions for their future realization, using updated strategic plans and the related tax plans. As a consequence, the total theoretical future tax benefit arising from deductible temporary differences (7,785 thousand at 31 December 2010 and 8,300 thousand at 31 December 2009) and tax loss carryforwards (59,842 thousand at 31 December 2010 and 378,397 thousand at 31 December 2009) was rzeduced by 27,232 thousand at 31 December 2010 (386,275 thousand at 31 December 2009). Total temporary differences (deductible and taxable) and tax losses at 31 December 2010 and amounts for which deferred tax assets have not been recognized, broken down by year of expiry, are as follows:
Total at 31 December 2010 28,270 (146,852) 217,606 (99,024) 222 (145,451) (145,229) Year of expiry 2011 21,433 (145,451) 151,667 (27,649) 222 (145,451) (145,229) 2012 687 48,708 (49,395) 2013 687 (687) 2014 687 5,205 (5,892) Beyond 2014 4,776 (1,401) 12,026 (15,401) -
( thousand)
Temporary differences and tax losses relating to IRES: Deductible temporary differences Taxable temporary differences Tax losses Temporary differences and tax losses for which deferred tax assets have not been recognized Temporary differences and tax losses subject to national taxation Temporary differences relating to IRAP: Deductible temporary differences Taxable temporary differences Temporary differences and tax losses subject to local taxation
327
9. Intangible assets All intangible assets have been purchased and none of these have an indefinite useful life. At 31 December 2010, intangible assets totaled 317 thousand and were subject to the following changes during the year:
( thousand)
Gross carrying amount Accumulated amortization Net carrying amount
31 December 2009 573 (260) 313
Additions 44 44
Amortization (40) (40)
(Decreases) and Other changes 31 December 2010 (105) 512 105 (195) 317
Intangible assets essentially consist of leasehold improvements, which are amortized over the term of the lease agreement (4 and 12 years). Amortization on intangible assets is recognized in the income statement under other operating costs (Note 6). During 2009, changes in intangible assets were as follows:
( thousand)
Gross carrying amount Accumulated amortization Net carrying amount
31 December 2008 628 (253) 375
Additions -
Amortization (62) (62)
(Decreases) and Other changes 31 December 2009 (55) 573 55 (260) 313
10. Property, plant and equipment At 31 December 2010, property, plant and equipment totaled 31,386 thousand and were subject to the following changes during the year:
( thousand)
31 December 2009 46,082 (16,877) 29,205
Additions -
Depreciation (1,352) (1,352)
(Decreases) and Other changes 31 December 2010 46,082 (18,229) 27,853
Land and buildings Gross carrying amount Accumulated depreciation Net carrying amount Plant and machinery Gross carrying amount Accumulated depreciation Net carrying amount Other tangible assets Gross carrying amount Accumulated depreciation Net carrying amount Assets under development and advances Total property, plant and equipment Gross carrying amount Accumulated depreciation Net carrying amount
10,135 (10,021) 114
340 340
(84) (84)
10,475 (10,105) 370
4,775 (2,649) 2,126 -
589 589 687
(238) (238) -
(199) 199 -
5,165 (2,688) 2,477 687
60,992 (29,547) 31,445
1,616 1,616
(1,674) (1,674)
(199) 199 -
62,408 (31,022) 31,386
328
NOTES
Land and buildings include land for 610 thousand (unchanged with respect to the previous year) while buildings mainly comprise the companys headquarters in Via Nizza 250, Turin. Plant and machinery was principally made up of general plant used in the buildings. Other tangible assets comprised cars, office furniture and equipment. Assets under development and advances related to expenses recognized in 2010 for renovation of the Centro Storico Fiat (Via Chiabrera 20, Turin). At 31 December 2010, there were no contractual commitments to purchase items of property, plant and equipment or assets under development of a significant amount. No buildings were subject to liens, pledged as collateral or restricted in use. Depreciation of property, plant and equipment is recognized under other operating costs in the income statement (Note 6). During 2009 changes in Property, plant and equipment were as follows:
( thousand)
31 December 2008 46,082 (15,524) 30,558
Additions -
Depreciation (1,353) (1,353)
(Decreases) and Other changes 31 December 2009 46,082 (16,877) 29,205
Land and buildings Gross carrying amount Accumulated depreciation Net carrying amount Plant and machinery Gross carrying amount Accumulated depreciation Net carrying amount Other tangible assets Gross carrying amount Accumulated depreciation Net carrying amount Total property, plant and equipment Gross carrying amount Accumulated depreciation Net carrying amount
10,135 (9,899) 236
(122) (122)
10,135 (10,021) 114
4,731 (2,501) 2,230
78 78
(169) (169)
(34) 21 (13)
4,775 (2,649) 2,126
60,948 (27,924) 33,024
78 78
(1,644) (1,644)
(34) 21 (13)
60,992 (29,547) 31,445
11. Investments At 31 December 2010, investments totaled 11,423,279 thousand and underwent the following changes during the year:
Impairment (losses)/reversals and Fair value adjustments 155,700 (4,468) 151,232 Reclassification to Assets to be demerged 31 December 2010 (4,977,346) 11,274,486 131,785 17,008 (4,977,346) 11,423,279
( thousand)
Investments in subsidiaries Investments in associates Investments in other companies Total investments
31 December 2009 13,837,309 131,785 21,476 13,990,570
Additions 2,258,853 2,258,853
Decreases (30) (30)
329
Investments in subsidiaries and changes during the year are provided in the following table:
% ( thousand) interest 31 December 2009 Fiat Group Automobiles S.p.A. 100.00 4,474,081 Gross carrying amount 7,381,081 Accumulated impairment losses (2,907,000) Ferrari S.p.A. 85.00 1,055,204 Gross carrying amount 1,055,204 Accumulated impairment losses Maserati S.p.A. 100.00 103,798 Gross carrying amount 103,798 Accumulated impairment losses Fiat Netherlands Holding N.V. 100.00 3,827,346 Gross carrying amount 3,827,346 Accumulated impairment losses Fiat Gestione Partecipazioni S.p.A. (formerly Iveco S.p.A.) 100.00 1,573,632 Gross carrying amount 2,133,632 Accumulated impairment losses (560,000) Fiat Powertrain Technologies S.p.A. 100.00 648,912 Gross carrying amount 648,912 Accumulated impairment losses Magneti Marelli S.p.A. 99.99 611,854 Gross carrying amount 611,854 Accumulated impairment losses Teksid S.p.A. 84.79 76,084 Gross carrying amount 129,070 Accumulated impairment losses (52,986) Teksid Aluminum S.r.l. 100.00 37,292 Gross carrying amount 68,292 Accumulated impairment losses (31,000) Comau S.p.A. 100.00 92,050 Gross carrying amount 582,781 Accumulated impairment losses (490,731) Fiat Partecipazioni S.p.A. 98.64 934,452 Gross carrying amount 950,452 Accumulated impairment losses (16,000) Fiat Finance S.p.A. 100.00 222,263 Gross carrying amount 222,263 Accumulated impairment losses Fiat Finance North America Inc. 39.47 57,024 Gross carrying amount 58,585 Accumulated impairment losses (1,561) Other subsidiaries 123,317 Gross carrying amount 182,882 Accumulated impairment losses (59,565) Total investments in subsidiaries 13,837,309 Gross carrying amount 17,956,152 Accumulated impairment losses (4,118,843) Impairment (losses)/ reversals Reclassification to Assets to be demerged
Additions 1,050,000 1,050,000
Decreases
750,000 750,000 260,000 260,000 (80,000) (80,000)
(4,577,346) (4,577,346)
12,500 12,500 40,000 40,000
(11,100) (11,100) (7,100) (7,100)
406,353 406,353 2,258,853 2,258,853
(30) (30) (30) (30)
(6,100) (6,100) 155,700 155,700
(400,000) (400,000) (4,977,346) (4,977,346)
31 December 2010 5,524,081 8,431,081 (2,907,000) 1,055,204 1,055,204 103,798 103,798 1,833,632 2,133,632 (300,000) 568,912 648,912 (80,000) 611,854 611,854 76,084 129,070 (52,986) 38,692 80,792 (42,100) 124,950 622,781 (497,831) 934,452 950,452 (16,000) 222,263 222,263 57,024 58,585 (1,561) 123,540 189,205 (65,665) 11,274,486 15,237,629 (3,963,143)
330
NOTES
Significant changes to investments in subsidiaries during the year were as follows: Certain subsidiaries were recapitalized during the year in order to strengthen their capital structure. Investments made were as follows: Fiat Group Automobiles S.p.A. (1,050 million); Fiat Netherlands Holding N.V. (750 million) Comau S.p.A. (40 million) and Teksid Aluminum S.r.l. (12.5 million). Transactions preliminary to the Demerger included the incorporation of Fiat Industrial S.p.A. (with share capital of 120,000 and subsequent capital contributions of 6.1 million to ensure the funds necessary to cover start-up costs) and Fiat Industrial Finance S.p.A. (with share capital of 100 million), as well as the purchase from Fiat Partecipazioni S.p.A. and subsequent capital increases of Nuove Iniziative Finanziarie Cinque S.p.A. (later renamed Iveco S.p.A.) and Nuova Immobiliare Nove S.p.A. (later renamed FPT Industrial S.p.A.) in the amount of 200 million and 100 million, respectively. These two subsidiaries were involved in the reorganization, preliminary to the Demerger, of the legal structure of activities under the former Iveco S.p.A. (now Fiat Gestione Partecipazioni S.p.A.), which sold (with effect from 1 December 2010 and on the basis of a valuation performed by an independent expert) its trucks and commercial vehicles and Industrial & Marine powertrain activities to Nuove Iniziative Finanziarie Cinque S.p.A. and Nuova Immobiliare Nove S.p.A., respectively. The shareholdings to be transferred from Fiat S.p.A. to Fiat Industrial S.p.A. under the Demerger (Fiat Netherlands Holding N.V., new Iveco S.p.A., FPT Industrial S.p.A. and Fiat Industrial Finance S.p.A.), with a total book value of 4,977,346 thousand, were reclassified under Assets to be demerged (see Note 18). Impairment (losses)/reversals includes impairment losses and reversals arising from application of the cost method, as described in Note 2 above. A breakdown of investments in associates and changes during the year is as follows:
% interest 10.09 Impairment (losses)/ reversals 31 December 2010 131,785 131,785
( thousand)
RCS MediaGroup S.p.A. Total investments in associates
31 December 2009 131,785 131,785
Additions -
Decreases -
The carrying value of the interest in RCS MediaGroup S.p.A. (a listed company) was 53 million higher than the corresponding stock market value at the balance sheet date (34 million higher at year-end 2009), a value which continues to reflect a discount to the book value of equity. Therefore, given the relative carrying value of the investment in the Groups accounts, where it is recognized under the equity method, as well as the relative stake held, for which the current stock market price (which continues to be influenced by weak economic conditions in Italy) is not representative, it was deemed reasonable that the recoverable value of the investment is at least equivalent to the current carrying amount. A breakdown of investments in other companies and changes during the year is provided below:
( thousand)
Fin.Priv. S.r.l. Assicurazioni Generali S.p.A. Total investments in other companies
% interest 14.28 0.01
31 December 2009 17,943 3,533 21,476
Additions -
Decreases -
Fair value adjustments 31 December 2010 (3,603) 14,340 (865) 2,668 (4,468) 17,008
As they are non-current financial assets and not held for trading, investments in other companies are recognized at fair value which, for listed companies, corresponds to their market value at the balance sheet date. Similarly, the Companys investment in Fin.Priv. S.r.l. (a holding company whose assets are principally listed securities) was measured at fair value based on the market price of its portfolio. This led to a total decrease of 4,468 thousand in investments in other companies for 2010, which was recognized directly in equity (see Note 19).
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There were no investments in other companies in relation to whose obligations Fiat S.p.A. has unlimited liability (Article 2361 (2) of the Civil Code). A full list of investments with the additional disclosures required by Consob Communication DEM/6064293 of 28 July 2006 is attached. At 31 December 2010 and 2009, no investments held by the company had been pledged as security for financial or contingent liabilities. During 2009, changes in investments were as follows:
Impairment (losses)/reversals and Fair value adjustments 31 December 2009 (858,000) 13,837,309 131,785 3,071 21,476 (854,929) 13,990,570
( thousand)
Investments in subsidiaries Investments in associates Investments in other companies Total investments
31 December 2008 14,294,661 131,785 18,290 14,444,736
Additions 406,467 115 406,582
Decreases (5,819) (5,819)
12. Other financial assets A breakdown of other financial assets is provided in the following table:
( thousand)
Call option on Ferrari S.p.A. shares Financial asset relating to exercise of the call option on Ferrari S.p.A shares Fees receivables for guarantees given Debt securities Total other financial assets
31 December 2010 31 December 2009 10,032 132,431 11,442 16,782 74 73 143,947 26,887
Change (10,032) 132,431 (5,340) 1 117,060
At 31 December 2009, the call option on Ferrari S.p.A. shares included the value of the premium paid in October 2006 (10,032 thousand) for a call option on the 5% interest in Ferrari S.p.A. held by Mubadala Development Company PJSC. The option expired on 31 July 2010 and had an exercise price of 302.07 per share, less the value of any dividends distributed. In July 2010, Fiat S.p.A. exercised that option and pending completion of the sale through the transfer of the Ferrari S.p.A. shares from Mubadala Development Company PJSC and payment of the agreed consideration by Fiat S.p.A. a financial asset was recognized, under financial receivable relating to exercise of the call option on Ferrari shares, for an amount equivalent to the exercise price (122,399 thousand) plus the value of the premium paid and a corresponding financial liability was recognized in relation to the consideration amount (see Note 25). Fees receivables for guarantees given are measured at the present value of the fees to be received in future years for guarantees provided by the company (mainly for guaranteeing loans obtained by Group companies). Debt securities consist of listed Italian State securities pledged to fund scholarship grants. A breakdown of other financial assets by maturity date is as follows:
( thousand)
31 December 2010 136,024 7,746 177 143,947
31 December 2009 15,437 11,145 305 26,887
Other financial assets due within one year due after one year but within five years due beyond five years Total
332
NOTES
13. Other non-current assets At 31 December 2010, other non-current assets totaled 147 thousand, a net decrease of 56 thousand over 31 December 2009, and consisted of amounts receivable from tax authorities and employees beyond 12 months. 14. Trade receivables At 31 December 2010, trade receivables amounted to 8,078 thousand, a net decrease of 51,937 thousand over 31 December 2009, and included the following:
( thousand)
31 December 2010 31 December 2009 7,971 (156) 7,815 263 8,078 53,091 (228) 52,863 7,152 60,015
Change (45,120) 72 (45,048) (6,889) (51,937)
Third parties Receivables Allowance for doubtful accounts Total third parties Intercompany trade receivables Total trade receivables
Trade receivables from third parties mainly relate to amounts due from T.A.V. S.p.A. (now Rete Ferroviaria Italiana S.p.A.) for the progress of works on high speed rail sections during the latter part of the year. These receivables match the trade payables resulting from the progress of the works to be paid to the consortia CAV.E.T. and CAV.TO.MI. (see Note 24). Intercompany trade receivables includes adjustments following reassessment of amounts receivable from other Group companies for services provided. The allowance for doubtful accounts has been calculated on the basis of an assessment of the risk on a number of minor receivables from others. The carrying amount of trade receivables is deemed to approximate their fair value. All trade receivables are due within one year and there are no significant overdue balances. 15. Current financial receivables At 31 December 2010, current financial receivables totaled 311,526 thousand, a net decrease of 334,548 thousand over 31 December 2009 and consisted of amounts receivable from other Group companies, as detailed below:
( thousand)
Current account with Fiat Finance S.p.A. Assets arising from derivative financial instruments Other minor receivables due from Fiat Netherlands Holding N.V. Total current financial receivables
31 December 2010 31 December 2009 196,529 606,941 114,997 39,127 6 311,526 646,074
Change (410,412) 75,870 (6) (334,548)
The current account with Fiat Finance S.p.A. reflects the balance on the account held with that company as part of the Groups centralized treasury management. The amount reported at 31 December 2010 is net of 213,000 thousand reclassified under Assets to be demerged (see Note 18), representing financial receivables to be transferred to Fiat Industrial S.p.A. as a result of the Demerger.
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At 31 December 2010, assets arising from derivative financial instruments represents the fair value of the two equity swaps on Fiat S.p.A. shares entered into with major banks by Fiat Finance S.p.A., under instruction from Fiat S.p.A., to hedge against an increase in the share price above the exercise price of the stock options granted to the companys Chief Executive Officer in 2004 and in 2006, as described in Note 7. The fair value of those equity swap was based on market quotations at the balance sheet date. At 31 December 2009, this item totaled 39,127 thousand and represented the fair value of the first of the two above equity swaps entered into by Fiat Netherlands Holding N.V., while the fair value of the second equity swap was negative (see Note 25). The carrying amount of financial receivables is deemed to approximate their fair value. 16. Other current receivables At 31 December 2010, other current receivables amounted to 350,554 thousand, a net increase of 151,631 thousand over 31 December 2009. They are broken down as follows:
( thousand)
Intercompany receivables for consolidated IRES tax Other intercompany receivables VAT receivables IRES tax receivables IRAP tax receivables Other Total other current receivables
31 December 2010 31 December 2009 240,192 120,755 217 1,070 61,112 24,586 46,389 49,209 647 1,163 1,997 2,140 350,554 198,923
Change 119,437 (853) 36,526 (2,820) (516) (143) 151,631
Intercompany receivables for consolidated IRES tax arise from the tax calculated on the taxable income contributed by the Italian subsidiaries participating in the domestic tax consolidation program. Other intercompany receivables consist of miscellaneous amounts receivable. VAT tax receivable essentially relates to the balance of VAT credits for Italian subsidiaries participating in the VAT tax consolidation, in addition to VAT refund claims from prior periods. IRES tax receivables includes amounts receivable that Italian subsidiaries participating in the domestic tax consolidation transferred to Fiat S.p.A. in 2010 and previous years. At 31 December 2010, refund claims which had been factored amounted to 25,702 thousand (25,214 thousand at 31 December 2009) and were recognized on balance sheet, with the corresponding liability recorded under advances on factored receivables (see Note 25), pursuant to IAS 39. At 31 December 2010, no interest was recognized in relation to VAT receivables subject to refund (as was also the case at 31 December 2009), while interest on IRES tax receivables (100% factored) amounted to 2,702 thousand (2,214 thousand at 31 December 2009). The carrying amount of other current receivables is deemed to approximate their fair value. Other current receivables are almost entirely due by the end of 2011.
334
NOTES
17. Cash and cash equivalents Cash and cash equivalents consist of the following:
( thousand)
Cash at banks and post offices Cheques and cash in hand Total cash and cash equivalents
31 December 2010 31 December 2009 240 473 1 240 474
Change (233) (1) (234)
The above figures related to on demand deposits in euros in the companys current accounts. The carrying amount of cash and cash equivalents is deemed to be in line with their fair value. The credit risk relating to cash and cash equivalents is insignificant since the counterparties are leading national and international banks. 18. Assets and Liabilities to be demerged At 31 December 2010, Assets and liabilities to be demerged included the shareholdings and other assets and liabilities transferred to Fiat Industrial S.p.A. pursuant to the Demerger, with effect from 1 January 2011, as follows:
( thousand)
% owned 100.00% 100.00% 100.00% 100.00%
31 December 2010 4,577,346 200,000 100,000 100,000 4,977,346 213,000 5,190,346 1,440,000 1,440,000 3,750,346
Shareholdings Fiat Netherlands Holding N.V. Iveco S.p.A. (formerly Nuove Iniziative Finanziarie Cinque S.p.A.) FPT Industrial S.p.A. (formerly Nuova Immobiliare Nove S.p.A.) Fiat Industrial Finance S.p.A. Total shareholdings Financial receivables from Fiat Finance S.p.A. Assets to be demerged Financial payables to Fiat Finance S.p.A. Liabilities to be demerged Net assets to be demerged
Financial receivables from Fiat Finance S.p.A. represents a portion of the balance held on account with Fiat Finance S.p.A. in relation to the Groups centralized treasury management activities (see Note 15), while financial payables to Fiat Finance S.p.A. relates to the two variable rate euro denominated loans granted by Fiat Finance S.p.A., respectively: on 26/05/2010 for 1,050 million (maturing 25/05/2012) and on 26/07/2010 for 390 million (maturing 31/01/2011). The above value of net assets to be demerged is equivalent to the effect of the Demerger on equity described in Note 19. As values for the Demerger are based on the reported carrying amounts, no gains or losses were recognized and, accordingly, the above items were also transferred to Fiat Industrial S.p.A. at book value. 19. Equity At 31 December 2010, equity totaled 12,704,460 thousand, a 217,613 thousand increase over 31 December 2009, primarily attributable to profit for the year of 441,959 thousand net of dividend distributions of 237,119 thousand (0.17 to each ordinary share, 0.31 to each preference share and 0.325 to each savings share).
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Share capital Share capital totaled 6,377,263 thousand (fully paid) at 31 December 2010 and consisted of the following:
(no. of shares)
31 December 2010 1,092,247,485 103,292,310 79,912,800 1,275,452,595
31 December 2009 1,092,247,485 103,292,310 79,912,800 1,275,452,595
Shares issued and fully paid-up Ordinary shares Preference shares Savings shares Total shares issued
Following is a description of the composition of Fiat S.p.A.s share capital up to 31 December 2010 (i.e., immediately prior to the effective date of the Demerger). There were changes in the composition of share capital resulting from the Demerger, as described in the section Effects of the Demerger on Share Capital and Reserves, which follows. Until 31 December 2010, all shares had a par value of 5.00 each, with rights and privileges varying by share class. However, each share confers the right to share pro rata in any earnings allocated for distribution and any surplus assets remaining upon a winding-up, subject to the right of priority of preference and savings shares described below. Each ordinary share confers the right to vote without any restrictions whatsoever. Each preference share confers the right to vote only on matters which are reserved for an Extraordinary Meeting of Shareholders and on resolutions concerning Procedures for General Meetings. No voting rights are attached to savings shares. Prior to shareholder approval of the allocation of 2010 profit, the allocation of annual profit for Fiat S.p.A. will be as follows: to the legal reserve, 5% of net profit until the amount of the reserve is equal to one-fifth of share capital; to savings shares, a dividend of up to 0.31 per share; further allocations to the legal reserve, allocations to the extraordinary reserve and/or to retained profit reserve as may be resolved by Shareholders; to preference shares, a dividend of up to 0.31 per share; to savings shares and ordinary shares, an additional dividend, in equal amounts, up to 0.155 per share; and, to each ordinary, preference and savings share, in equal amounts, any remaining profit which Shareholders may resolve to distribute. When the dividend paid to savings shares in any year amounts to less than 0.31, the difference shall be added to the preferred dividend to which they are entitled in the following two years. In the event that the savings shares are delisted, any bearer shares shall be converted into registered shares and shall have the right to a higher dividend increased by 0.175, rather than 0.155, with respect to the dividend received by the ordinary and preference shares. In the event that the ordinary shares are delisted, the higher dividend received by the savings shares with respect to the dividend received by ordinary and preference shares shall be increased by 0.200 per share. In the event of a winding up, the Companys assets shall be distributed in the following order of priority: repayment of savings shares up to their par value, repayment of preference shares up to their par value, repayment of ordinary shares up to their par value; any balance remaining, in an equal pro rata amount to shares of all three classes.
336
NOTES
Following is a reconciliation between the number of shares outstanding at 31 December 2008 and at 31 December 2010:
31 December 2008 1,092,247 (38,568) 1,053,679 103,292 103,292 79,913 79,913 1,275,452 (38,568) 1,236,884 Capital increase (Purchases)/ sales of 31 December own shares 2009 1,092,247 (38,568) 1,053,679 103,292 103,292 79,913 79,913 1,275,452 (38,568) 1,236,884 Capital increase (Purchases)/ sales of 31 December own shares 2010 1,092,247 (38,568) 1,053,679 103,292 103,292 79,913 79,913 1,275,452 (38,568) 1,236,884
(shares in thousands)
Ordinary shares issued Less: Own shares Ordinary shares outstanding Preference shares issued Less: Own shares Preference shares outstanding Savings shares issued Less: Own shares Savings shares outstanding Total shares issued by Fiat S.p.A. Less: Own shares Total Fiat S.p.A. shares outstanding
Italian regulations regarding the share capital and reserves of a joint stock corporation establish the following: The minimum permitted share capital is 120,000. Any change in the amount of share capital must be approved by shareholders in general meeting who may delegate powers to the Board of Directors, having validity for a maximum period of five years, to increase share capital up to a predetermined amount; shareholders are also required to take appropriate measures when share capital decreases by more than one-third as the result of recognized losses and to reduce share capital if, by the end of the following financial year, such losses have not been reduced to less than one-third. If as the consequence of a loss of more than one third of capital this then drops below the legal minimum, shareholders in general meeting are required to approve a decrease and simultaneous increase of capital to an amount not less than this minimum or must change a companys legal form. The right of each class of shares to participate in the distribution of profit is set out in the by-laws. An additional paid-in capital reserve is established if a company issues shares at a price exceeding their nominal value. This reserve may not be distributed until the legal reserve has reached one-fifth of share capital. A company may not purchase own shares for an amount exceeding the value of distributable profits and available reserves reported in its most recently approved financial statements. Any purchase must be approved by shareholders in general meeting and in no case may the nominal value of the shares acquired exceed one-fifth of share capital. With reference to share capital, on 3 November 2006 the Board of Directors of Fiat S.p.A. exercised its delegated powers under Article 2443 of the Italian Civil Code to institute a capital increase reserved for employees of the company and/or its subsidiaries up to a maximum of 1% of share capital, i.e. 50 million by issuance of a maximum of 10 million ordinary shares each of nominal value 5, corresponding to 0.78% of share capital and 0.92% of ordinary share capital, at a price of 13.37 each, to service the employee stock option plan described in the following paragraph. Execution of the capital increase is dependent on the conditions of the plan being satisfied. During 2010, Fiat reconfirmed the policy under which it intends to distribute 25% of consolidated net profit calculated on a 3-year rolling basis, with a minimum annual payout of 150 million. With the Demerger completed, on 27 January 2011, Fiat confirmed that for the 2011 financial year, a year of
337
transition, it is intended that the dividend policy will remain unchanged, with an expected distribution of 25% of consolidated profit for Fiat post Demerger and for Fiat Industrial, with a minimum payout of 50 million and 100 million, respectively. The Board of Directors of each group will formulate a dividend policy for subsequent financial periods by the end of 2011. For 2010, the Board of Directors will propose to Shareholders at the Annual General Meeting that they approve payment of a total dividend of 155.1 million (151.6 million excluding own shares held by Fiat S.p.A. at the date of publication of these financial statements). The dividend proposal is as follows: 0.09 per ordinary share; 0.31 per preference share; 0.31 per savings share. The objectives identified by Fiat for managing capital are to create value for shareholders as a whole, to safeguard business continuity and support the growth of the Group. As a result, Fiat endeavors to maintain an adequate level of capital that at the same time enables it to obtain a satisfactory economic return for its shareholders and guarantee access to affordable external sources of funds, including through the achievement of an adequate rating. Fiat constantly monitors the evolution of the ratio between debt and equity and in particular the level of net debt and the generation of cash from its industrial activities. In order to reach these objectives Fiat aims at a continuous improvement in the profitability of the business in which it operates. Further, as a general rule it may sell part of its assets to reduce the level of its debt, while the Board of Directors may make proposals to Shareholders in General Meeting to reduce or increase share capital or, where the law permits, to distribute reserves. In this context, Fiat S.p.A. also makes purchases of own shares, without exceeding the limits authorized by Shareholders in General Meeting, under the same logic of creating value, compatible with the objectives of achieving financial equilibrium and an improvement in its rating. Capital includes both the value brought to a company by its shareholders (share capital and share premium less own shares held, for a total value of 7,261,595 thousand at 31 December 2010, unchanged over 2009), and the value generated by Fiat S.p.A. in terms of the results achieved (retained profit and other reserves, before allocation of profit for the year, equal in total to 5,444,893 thousand at 31 December 2010 and 5,222,812 thousand at 31 December 2009, excluding gains and losses recognized directly in equity). Share premium reserve At 31 December 2010, this reserve totaled 1,540,885 thousand and was unchanged from 31 December 2009. Legal reserve At 31 December 2010, this reserve totaled 716,458 thousand, an increase of 16,998 thousand over 31 December 2009 following allocation of profits from the previous year as approved by Shareholders on 26 March 2010. Reserve available for the purchase of own shares This reserve was created through a transfer from the retained profit/(loss) reserve, following Shareholders approval for share repurchases. In particular, the share buy-backs were made under a program (the Program) approved by Shareholders at the General Meeting held on 5 April 2007 and subsequently renewed on 31 March 2008 and 27 March 2009. Under the Program, purchases were to be carried out on regulated markets in accordance with the following conditions: the Program would end on 27 September 2010 or, in any event, once the maximum amount of 1.8 billion (including Fiat S.p.A. shares already held by the Company) or a number of shares equivalent to 10% of share capital was reached; the maximum purchase price could not exceed the reference price reported by the Stock Exchange on the day before the purchase is made by more than 10%; for each share class, the maximum number of shares purchased daily could not exceed 20% of the total daily trading volume.
338
NOTES
Even though the buy-back program is on hold, to maintain the necessary operating flexibility over an adequate time period, Shareholders in the General Meeting of 26 March 2010 renewed their authorization for the purchase and disposal of own shares for an 18-month period, including transactions carried out through subsidiary companies, at the same time revoking their authorization given in the General Meeting of 27 March 2009 to the extent not exercised. The renewed authorization was for the purchase of a maximum number of shares, for all three classes combined, not to exceed 10% of share capital or a purchase value of 1.8 billion, inclusive of the 656.6 million in Fiat shares already held by the Company. On 16 September 2010, the shareholders of Fiat S.p.A. in view of the proposed reduction in par value from 5.00 to 3.50 per share resulting from the Demerger approved a reduction in the authorization for the purchase of own shares to a maximum value of 1.2 billion. The condition that the total number of shares, in all three classes, may not exceed 10% of share capital and all other provisions approved by Shareholders on 26 March 2010 shall continue to apply. At 31 December 2010, the reserve available for the purchase of own shares totaled 543,447 thousand, a decrease of 599,293 thousand over 31 December 2009, as a result of: the resolution passed by Shareholders on 26 March 2010, which, as mentioned above, revoked the existing authorization for share buy-backs to the extent not already exercised and, at the same time, renewed the authorization for share buy-backs for a maximum of 1.8 billion, including the existing reserve of 656.6 million for own shares held at that date, resulting in an available reserve of 1,142,740 thousand, which already existed at 31 December 2009 and has remained unchanged; the resolution passed by Shareholders on 16 September 2010, which approved a reduction in the authorization for the purchase of own shares to a maximum value of 1.2 billion, resulting in a 599,293 thousand decrease in the reserve available for the purchase of own shares and the transfer of the same amount to the retained profit/(loss) reserve. Although the share buy-back program has been placed on hold, the Board of Directors, in consideration of the fact that the current authorization expires on 26 September 2011 and to maintain the necessary operating flexibility for an adequate period, will propose to Shareholders at the Annual General Meeting that the authorization be renewed for a period of 18 months and for a maximum number of shares (for all three classes) not to exceed the percentage of share capital established by law or a total value of 1.2 billion, including the reserve for own shares that, after adjusting for the effects of the demerger, totaled 289 million. Should the proposal be approved, the Company would, however, have no obligation to buy back shares. At 18 February 2011, the total number of ordinary shares purchased from the beginning of the Program was 37.27 million, for a total invested amount of 665 million. Reserve for own shares This reserve amounted to 656,553 thousand at 31 December 2010, unchanged from 31 December 2009. This reserve is subject to certain restrictions imposed by law (Article 2357-ter of the Civil Code). Changes in the reserve represent increases through transfers from the reserve available for the purchase of own shares for own shares purchased and decreases for own shares sold. Retained profit/(loss) At 31 December 2010, retained profit totaled 2,884,134 thousand, an increase of 685,140 thousand over 31 December 2009, as a result of: the allocation of 85,847 thousand from the prior years profit to retained profit/(loss), as approved by Shareholders on 26 March 2010, following allocations to the Legal reserve and distributions to Shareholders; the transfer of 599,293 thousand from the reserve available for the purchase of own shares, following the reduction in the amount authorized for the purchase of own shares, approved by Shareholders on 16 September, already referred to above. Gains/(losses) recognized directly in equity This reserve includes gains and losses recognized directly in equity and in particular those arising from fair value adjustments on investments in other companies, as described previously (see Note 11).
339
At 31 December 2010, this reserve was a negative 2,028 thousand, representing a decrease of 4,468 thousand over 31 December 2009 attributable to fair value adjustments on the investments in Fin. Priv. S.r.l. and Assicurazioni Generali S.p.A. Stock option reserve At 31 December 2010, the stock option reserve totaled 112,513 thousand, an increase of 17,241 thousand over 31 December 2009, due to the cost recognized in the income statement for the year related to stock option and stock grant plans for the Chief Executive Officer that are based on Fiat S.p.A. shares (see Note 6). Other reserves At 31 December 2010, other reserves amounted to 89,829 thousand and were unchanged from 31 December 2009. The amount includes: Reserves pursuant to Law 413/1991: a total of 22,591 thousand corresponding to the compulsory revaluation of property (net of substitute tax) pursuant to Law 413 of 30 December 1991 and allocated to a specific reserve, as required by Law. Extraordinary reserve: a total of 28,044 thousand corresponding to the value approved by Shareholders on 11 May 2004. Reserve for Spin-off difference: a total of 39,194 thousand and includes the positive difference arising from the spin-off executed by Fiat Partecipazioni S.p.A. on 29 December 2008. Effects of the Demerger on Share Capital and Reserves As a consequence of the Demerger, from 1 January 2011 the equity of Fiat S.p.A. will be proportionally reduced by 3,750,346 thousand through a reduction in share capital of 1,913,179 thousand and in reserves of 1,837,167 thousand. Specifically: share capital will be reduced by 1,913,179 thousand to 4,464,084 thousand; the legal reserve will be reduced by 214,937 thousand to 501,521 thousand; the share premium reserve will be reduced by 462,266 thousand to 1,078,619 thousand; the retained profit reserve will be reduced by 1,159,964 thousand to 1,724,170 thousand. Fiat S.p.A.s share capital will be reduced through a reduction in par value per share (from 5.00 to 3.50) for all classes, rather than through the cancellation of shares. The 1.50 per share reduction in par value for Fiat S.p.A. shares (which corresponds pro rata to the reduction in net assets resulting from the Demerger) was fully offset by the issue of one new share in Fiat Industrial S.p.A. for every share in Fiat S.p.A., at a par value of 1.50 each. The newly issued shares in Fiat Industrial S.p.A. have identical rights and privileges to the corresponding class of shares in Fiat S.p.A. A portion of the distribution entitlement of each class of shares in Fiat S.p.A. was reallocated, on a pro rata basis, to the corresponding class of shares in Fiat Industrial S.p.A. such as to ensure that the priority and level of entitlement, as a percentage of par value, remain unchanged. Following the introduction of amendments to the By-laws, subsequent to approval of the allocation of 2010 profit, Fiat S.p.A.s annual profit will be allocated as follows: to the legal reserve, 5% of net profit until the amount of the reserve is equal to one-fifth of share capital; to savings shares, a dividend of up to 0.217 per share; further allocations to the legal reserve, allocations to the extraordinary reserve and/or to retained profit reserve as may be resolved by Shareholders; to preference shares, a dividend of up to 0.217 per share;
340
NOTES
to ordinary shares, a dividend of up to 0.1085 per share; to savings shares and ordinary shares, in equal amounts, an additional dividend of up to 0.1085 per share; to each ordinary, preference and savings share, in equal amounts, any remaining profit which Shareholders may resolve to distribute. When the dividend paid to savings shares in any year amounts to less than 0.217, the difference shall be added to the preferred dividend to which they are entitled in the following two years. In the event that the savings shares are delisted, any bearer shares shall be converted into registered shares and shall be entitled to a dividend that is 0.1225, rather than 0.1085, higher per share than the dividend paid on ordinary and preference shares. In the event that the ordinary shares are delisted, holders of savings shares shall be entitled to a dividend that is 0.140 higher than the dividend paid on ordinary and preference shares. Finally, with reference to the above resolutions adopted by the Board of Directors on 3 November 2006 in relation to share capital increases reserved for employees of the Company and/or its subsidiaries, following the Demerger the Companys share capital may be increased by a maximum of 35 million through the issue of up to 10 million new ordinary shares having a par value of 3.50 each. Own shares At 31 December 2010, the book value of own shares held was 656,553 thousand and related to 38,568,458 ordinary shares (average book value of 17.023 per share) representing 3.02% of share capital, and having a total par value of 192,842 thousand. The amount was unchanged over 31 December 2009, as no shares were bought or sold during 2010. There were also no changes for the previous year, as no shares were bought or sold during 2009. As a result of the Demerger, on 1 January 2011 Fiat S.p.A. was allotted 38,568,458 ordinary shares in Fiat Industrial S.p.A., corresponding to the number of own shares held. The portion of the reserve for own shares attributable to Fiat Industrial S.p.A. shares, totaling approximately 368 million, will be reclassified as an asset with initial measurement at fair value and a balancing entry recognized directly in equity, with no impact on 2011 profit or loss. As a consequence, the reserve for own shares will be reduced by approximately 368 million with an equivalent increase in the retained profit/(loss) reserve. As described below in relation to amendments to stock option and stock grant plans resulting from the Demerger, those 23,021,250 Fiat Industrial shares will be utilized service those incentive plans. Share-based compensation At 31 December 2010 and at 31 December 2009, the following share-based compensation plans relating to managers of Group companies or the Chief Executive Officer of Fiat S.p.A. were in place. Stock option plans linked to Fiat S.p.A. ordinary shares The stock option plans approved by the Board of Directors of Fiat S.p.A. prior to 2002 had all fully expired at 31 December 2010. The contractual terms of plans which expired during the year are as follows:
Plan Stock Options May 2002 (expired) Stock Options September 2002 (expired) Beneficiaries Former Chairman of Fiat S.p.A. Managers Grant date 14 May 2002 12 September 2002 Expiry date 1 January 2010 12 September 2010 Strike price () 12.699 10.397 Number of options granted 1,000,000 6,100,000 Vesting date 1 January 2005 12 September 2003 12 September 2004 12 September 2005 12 September 2006 Vesting portion 100% 25% 25% 25% 25%
341
On 26 July 2004, the Board of Directors granted Sergio Marchionne, as a part of his variable compensation as Chief Executive Officer, options to purchase 10,670,000 Fiat S.p.A. ordinary shares at a price of 6.583 per share, exercisable from 1 June 2008 to 1 January 2011. In each of the first three years following the grant date, the CEO acquired the right to purchase, beginning 1 June 2008, a maximum of 2,370,000 shares annually. As of 1 June 2008, he also acquired the right to exercise, effective from that date, the remaining options on 3,560,000 shares as predetermined performance objectives for the reference period had been met. On 27 March 2009, Shareholders considered it to be a priority interest for the Group to adopt changes to the plan which would reinstate its retention capability and approved a new vesting period which depended solely on the requirement for the CEO to remain in office, deferring the exercise of these options until 1 January 2011 and extending the exercise period until 1 January 2016, with all the other conditions remaining unaltered. At 31 December 2010 the features of the stock option plan are as follows:
Plan Stock Options July 2004 (modified) Beneficiary Chief Executive Officer Date of amendment 27 March 2009 Expiry date 1 January 2016 Strike price () 6.583 Number of options granted 10,670,000 Vesting date 31 December 2010 Vesting portion 100%
On 3 November 2006 the Board of Directors of Fiat S.p.A. approved (subject to the subsequent approval of Shareholders in general meeting, which was given on 5 April 2007) an eight year stock option plan, which granted certain managers of the Group and the Chief Executive Officer of Fiat S.p.A. the right to purchase a specific number of Fiat S.p.A. ordinary shares at a fixed price of 13.37 each. More specifically, the 10,000,000 options granted to employees and the 5,000,000 options granted to the Chief Executive Officer had a vesting period of four years, with an equal number vesting each year, were subject to achieving certain predetermined profitability targets (Non-Market Conditions or NMC) in the reference period and may be exercised from the date on which the 2010 financial statements are approved. The remaining 5,000,000 options granted to the Chief Executive Officer of Fiat S.p.A. also had a vesting period of four years with an equal number vesting each year and may be exercised from November 2010. The ability to exercise the options is additionally subject to specific restrictions regarding the duration of the employment relationship or the continuation of the position held. The contractual terms of the 2006 plan are as follows:
Plan Stock Option November 2006 Stock Option November 2006 Stock Option November 2006 Beneficiary Chief Executive Officer Expiry date 3 November 2014 Strike price () 13.37 Number of options granted 5,000,000 Vesting date November 2007 November 2008 November 2009 November 2010 1st Quarter 2008 (*) 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*) 1st Quarter 2008 (*) 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*) Vesting portion 25% 25% 25% 25% 25%*NMC 25%*NMC 25%*NMC 25%*NMC 25%*NMC 25%*NMC 25%*NMC 25%*NMC
3 November 2014
13.37
5,000,000
Managers
3 November 2014
13.37
10,000,000
(*)
On approval of the prior years consolidated financial statements; subject to continuation of the professional relationship.
As explained in greater detail in the section Amendments to the stock option plans and stock grant plans of Fiat S.p.A. arising from the Demerger which follows, vesting conditions for each plan, whether they consisted in the continuation of a professional relationship with the Fiat Group or in the achievement of specific performance objectives, expired on 31 December 2010. With specific reference to options granted under the 2006 Stock Option Plan, for which vesting was subject to the achievement of pre-established profitability targets, only the first tranche (i.e. 25%) of those rights have vested as the profitability targets established in 2006 for the 3-year period 2008-2010 were not met. As a result, the remaining 75% did not vest.
342
NOTES
On 26 February 2008, the Board of Directors of Fiat S.p.A. passed an incentive plan which was subsequently approved by Shareholders in their annual general meeting on 31 March 2008, by which an overall maximum of 4 million financial instruments could be assigned on a periodic basis until 2010 in the form of stock options and/or stock appreciation rights. The plan had the aim of attracting and retaining managers in key roles who had been hired or promoted following the granting of the stock option plan of 3 November 2006 or who had assumed greater responsibilities since the granting of the 2006 plan, and has the features of that plan in terms of performance, vesting and exercise rights. Implementing the first grant under this program on 23 July 2008, the Board of Directors assigned 1,418,500 stock options having an exercise price of 10.24 and a vesting period of three years that was subject to achieving certain predetermined profitability targets (Non-Market Conditions or NMC) in the reference period and together with rights exercisable from the date on which the 2010 financial statements are approved. As these profitability targets had not been met at 31 December 2010, none of the rights granted to employees vested. The contractual terms of the 2008 plan were as follows:
Plan Stock Option July 2008 (forfeited)
(*)
Beneficiary Managers
Expiry date 3 November 2014
Strike price () 10.24
Number of options granted 1,418,500
Vesting date 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*)
Vesting portion 18%*NMC 41%*NMC 41%*NMC
On approval of the prior years consolidated financial statements; subject to continuation of the professional relationship.
A summary of the terms of the stock option plans outstanding at 31 December 2010 is as follows:
Exercise price () 6.583 10.24 10.397 12.699 13.370 Total Options outstanding at 31 December 2010 2,101,250 2,101,250 Options outstanding at 31 December 2009 956,530 845,000 6,536,875 8,338,405 Managers compensation Average remaining contractual life (years) 3.8 Options outstanding at 31 December 2010 10,670,000 6,250,000 16,920,000 Compensation as member of the Board Options Average remaining outstanding at contractual life 31 December 2009 (years) 10,670,000 5.0 500,000 8,750,000 3.8 19,920,000
Changes during the year were as follows:

Managers compensation Average exercise price () 12.71 12.79 10.397 13.37 10.397 Compensation as member of the Board Average exercise price Number of options () 19,920,000 9.72 (2,500,000) 13.37 (500,000) 12.699 16,920,000 9.09 5,000,000 13.37 500,000 12.699
Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at 31 December 2010 Exercisable at 31 December 2010 Exercisable at 31 December 2009
Number of options 8,338,405 (5,447,155) (790,000) 2,101,250 845,000
The options forfeited during the year consist of unvested options regarding employees who have left the Group and options not vesting during the year due to the fact that certain non-market conditions were not reached for the November 2006 and July 2008 plans.
343
Granting of ordinary shares of Fiat S.p.A. without payment On 23 February 2009, the Board of Directors of Fiat S.p.A. passed an incentive plan which was subsequently approved by Shareholders in their annual general meeting on 27 March 2009, based on the granting of rights which, subject to the achievement of predetermined performance targets (Non-Market Conditions or NMC) for 2009 and 2010 and the continuation of the professional relationship with the Group, provided for 2 million Fiat S.p.A. ordinary shares to be granted to the CEO of Fiat S.p.A. without payment. Under this plan the rights vested in a single tranche on the approval of the Groups 2010 consolidated financial statements by the Board of Directors and the number of shares granted is determined as 25% of the rights granted in the event of reaching the 2009 targets and 100% of the rights granted in the event of reaching the 2010 targets. The Groups predetermined profitability targets relating to 2009 were reached. On 26 March 2010, Shareholders in general meeting introduced a pure retention component of 2 million additional rights into the Plan on the proposal of the Board of Directors; the vesting of these rights is subject to the sole condition that the CEOs professional relationship with the Group continues until the approval of the 2011 Consolidated financial statements. Moreover, the term of the original plan was also extended until the approval of the 2011 Consolidated financial statements and the targets for 2010 and 2011 were redefined. At 31 December 2010, the contractual terms of the plan were therefore as follows:
Plan Stock Grant 2009 (revised) Beneficiary Chief Executive Officer Number of shares 4,000,000 Vesting date 1st Quarter 2010 (*) 1st Quarter 2011 (*) 1st Quarter 2012 (*) 1st Quarter 2012 (*) Vesting portion 500,000 (**) 375,000*NMC (**) 1,125,000*NMC (**) 2,000,000 (**)
(*) On approval of the prior years consolidated financial statements. (**) Subject to continuation of the position held until the approval of the 2011 financial statements.
On 18 February 2011, the Board of Directors, having consulted the Compensation Committee, verified the vesting of 375,000 rights based on the achievement of the predetermined operating targets and, in light of the extraordinary transactions occurring during the year, also voted to make vesting of the remaining rights, which was dependent on the achievement of 2011 operating targets, conditional only on the continuation of a professional relationship with the Group until the end of 2011. As required by IFRS 2 the Group calculated the total incremental fair value arising from this change to the plan, which amounted to 19 million. This incremental fair value is being recognised in the income statement over the residual vesting period of the plan together with the fair value already calculated at the grant date and determined in 2009. The incremental fair value was calculated on the basis of the price of the Fiat S.p.A. ordinary share at the date of the change, which was 9.75 per share. Amendments to the stock option plans and stock grant plans of Fiat S.p.A. arising from the Demerger With regard to the above incentive plans and in consideration of the proposed Demerger, the Board of Directors, which met on 21 July 2010, confirmed the continuation of the share-based incentive plans the Group had in place, and voted to adopt, subject to the Demerger becoming effective and on the basis of the powers delegated to it by Shareholders, the appropriate amendments necessary to ensure that these plans fulfil the objectives for which they were adopted, even subsequent to the Demerger, while at the same time avoiding a revision of those plans that, even though fully legitimate, might appear to dilute the intended alignment of the interests of management with those of the Company and its shareholders. More specifically, applying the rules of the respective plans, the Board approved to realign the plans with respect to the shares underlying the stock options and stock grants in strict relation to the allotment ratio applicable for the Demerger and to allow employees leaving Fiat S.p.A. and joining Fiat Industrial S.p.A to retain their existing rights. Those entitled to stock options or stock grants will, therefore, receive one ordinary Fiat S.p.A. share and one ordinary Fiat Industrial S.p.A. share for each right they hold, with the option exercise price (for stock option plans) and the free granting of shares (for the stock grant plan) remaining unchanged. For the stock option plans, vesting conditions for each plan, whether these be the continuation of a professional relationship with the Group or the achievement of specific performance objectives, will expire on 31 December 2010, prior to the effective date of the Demerger.
344
NOTES
Similarly, under the stock grant plan the participant will be entitled to receive free of charge one Fiat ordinary share and one Fiat Industrial ordinary share for each right held, subject to the original conditions of the continuation of a professional relationship with the Group and/or achievement of specific performance objectives for 2010 and 2011, consistent with the 2010-2014 Business Plan. The 2011 performance objectives will consist of the portion relating to the Fiat Group post Demerger of the objectives originally established as part of the total objectives for the pre-Demerger Fiat Group. All stock option and stock grant plans, with the exception of the portion of the 2006 Plan relating to managers for which a capital increase was approved, will be serviced by the treasury shares held by Fiat S.p.A. and the ordinary shares of Fiat Industrial that will be allotted to Fiat S.p.A. without payment as a result of the Demerger. As the original conditions of the Plans allowed for amendments where there were extraordinary transactions impacting Fiat S.p.A.s share capital, a determination of the incremental fair value potentially resulting from such amendments is not required. Finally, the following shows availability of share capital and reserves: Availability for use of main equity items
( thousand)
Share capital Reserves: Share premium reserve Legal reserve Reserve available for the purchase of own shares Reserve for own shares Retained profit/(loss) Reserve under law 413/1991 Extraordinary reserve Reserve for Spin-off difference
31 December 2010 6,377,263 1,540,885 716,458 543,447 656,553 2,884,134 22,591 28,044 39,194
Possible use A, B, C (*) B A, B, C A, B, C A, B, C A, B, C A, B, C
Available amount
1,540,885 543,447 2,884,134 22,591 28,044 39,194
Key: A: capital increase B: coverage of losses C: dividend

(*) Fully available to increase capital and cover losses. Any other use requires that the legal reserve first be increased to 20% of share capital (which may also occur through a transfer from the share premium reserve). At 31 December 2010, the required increase would be 558,995 thousand.
20. Provisions for employee benefits and other non-current provisions At 31 December 2010, provisions for employee benefits and other non-current provisions amounted to 20,072 thousand, a net decrease of 5,369 thousand over 31 December 2009, and consisted of the following:
( thousand)
Provisions for employee benefits and similar provisions Other non-current provisions Total provisions for employee benefits and other non-current provisions
31 December 2009 24,196 1,245 25,441
Accruals 1,623 1,623
Utilizations (5,217) (224) (5,441)
Other changes 31 December 2010 (1,551) 19,051 1,021 (1,551) 20,072
345
Provisions for employee benefits and similar provisions The Company provides post-employment benefits for its employees, either directly or by contributing to independently administered funds. The benefits are generally based on the employees remuneration and years of service. The obligations relate both to active employees and to retirees. The Company provides post-employment benefits under defined contribution and/or defined benefit plans. In the case of defined contribution plans, the company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Once the contributions have been paid the company has no further payment obligations. Liabilities for contributions accrued but not yet paid at the balance sheet date are included in the item other payables (see Note 26).The company recognizes the contribution cost for the year on the basis of the service rendered by the employee in the item personnel costs (see Note 5). In the case of post-employment benefits the companys obligation is determined on an actuarial basis, using the Projected Unit Credit Method. Any resulting actuarial gains and losses are accounted for using the corridor approach. Finally, the company grants certain other long-term benefits to its employees; these benefits include those generally paid when the employee attains a specific seniority. In this case, the measurement of the obligation reflects the probability that payment will be made and the period over which the payment is expected to be made. The amount of this obligation is calculated on an actuarial basis using the Projected Unit Credit Method. The corridor approach is not used for the actuarial gains and losses arising from this obligation. Changes in provisions for employee benefits during the year are as follows:
( thousand)
31 December 2009 6,988 16,304 23,292 904 24,196
Accruals 182 1,245 1,427 196 1,623
Utilizations (1,183) (3,927) (5,110) (107) (5,217)
Other changes 31 December 2010 (409) (1,109) (1,518) (33) (1,551) 5,578 12,513 18,091 960 19,051
Post-employment benefits: Employee severance indemnity Other Total post-employment benefits Other long-term employee benefits Total provisions for employee benefits and similar provisions
Post-employment benefits and other long-term employee benefits are calculated on the basis of the following actuarial assumptions:
Discount rate Future salary increase rate Inflation rate Theoretical retirement age Mortality rate Average annual departure rate 31 December 2010 3.83% 2.06% 2.00% Years: 60(F) / 65(M) SI02 9.34% 31 December 2009 4.62% 4.31% 2.00% Years: 60(F) / 65(M) SI02 9.58%
346
NOTES
The provisions for employee benefits and similar may be summarized as follows: Employee severance indemnity The employee severance indemnity represents the obligation to employees under Italian law (amended by Law 296/06) that has accrued up to 31 December 2006 and that will be settled when the employee leaves the company. In certain circumstances, a portion of the accrued liability may be given to an employee during his working life as an advance. This is an unfunded defined benefit plan, under which the benefits are almost fully accrued, with the sole exception of future revaluations. Other The item other includes post-employment benefits accrued by employees, former employees and the Chief Executive Officer following additional or individual labor agreements. These schemes are unfunded. Other long-term employee benefits This item mainly includes benefits which are due to employees who reach a specified seniority. Post-employment benefits at 31 December 2010 and 2009 are made up as follows:
Employee severance indemnity 31 31 December December 2010 2009 4,993 585 5,578 6,280 708 6,988 31 December 2010 11,736 777 12,513 Other 31 December 2009 17,486 (1,182) 16,304 31 December 2010 16,729 1,362 18,091 Total 31 December 2009 23,766 (474) 23,292
( thousand)
Present value of unfunded defined benefit plan obligations Unrecognized actuarial gains/(losses) Net liability
The amounts recognized in the income statement for post-employment benefits are as follows:
( thousand)
Employee severance indemnity 2010 2009 (9) (9) 191 182 341 341
2010 919 919 326 1,245
Other 2009 1,084 88 1,172 743 1,915
2010 919 (9) 910 517 1,427
Total 2009 1,084 88 1,172 1,084 2,256
Service cost: Current service cost Net actuarial (gains)/losses recognized during the year Total service cost Interest costs Total cost/(return) for post-employment benefits
The items current service cost and net actuarial (gains) losses recognized during the year are recorded in the income statement item personnel costs (see Note 5) if relating to employees and in other operating costs (see Note 6) if relating to the Chief Executive Officer. Interest costs are recognized under financial income/(expense) in the income statement (see Note 7).
347
Changes in the present value of the obligation for post-employment benefits are as follows:
( thousand)
Present value of obligation at the beginning of the year Current service cost Interest costs Actuarial (gains)/losses arising during the year Benefits paid Other changes Present value of obligation at the end of the year
Employee severance indemnity 2010 2009 6,280 6,334 191 341 957 397 (2,456) (1,059) 21 267 4,993 6,280
2010 17,486 919 326 (1,890) (5,132) 27 11,736
Other 2009 18,679 1,084 743 (834) (2,230) 44 17,486
2010 23,766 919 517 (933) (7,588) 48 16,729
Total 2009 25,013 1,084 1,084 (437) (3,289) 311 23,766
The present value of the defined benefit obligations in 2010 and the three previous years is as follows:
( thousand)
31 December 2010 31 December 2009 31 December 2008 31 December 2007 4,993 11,736 16,729 6,280 17,486 23,766 6,334 18,679 25,013 6,280 11,851 18,131
Present value of obligation at the end of the year: Employee severance indemnity Others Total
The effects of the differences between the previous actuarial assumptions and what has actually occurred (experience adjustments) at 31 December 2010 and 2009 is as follows:
( thousand)
2010 806 (612) 194
2009 323 (1,459) (1,136)
Experience adjustments actuarial (gains)/losses: Employee severance indemnity Others Total effect on the present value of defined benefit obligation
Other non-current provisions At 31 December 2010, this item totaled 1,021 thousand (1,245 thousand at 31 December 2009) and mainly relates to future amounts to be paid to employees who left the Company in previous years under a long-term benefit program which bridges the period prior to retirement. During 2009, changes in provisions for employee benefits and other non-current provisions were as follows:
( thousand)
Provisions for employee benefits and similar provisions Other non-current provisions Total provisions for employee benefits and other non-current provisions
31 December 2008 25,163 1,255 26,418
Utilizations (2,459) (10) (2,469)
Other changes 31 December 2009 (764) 24,196 1,245 (764) 25,441
348
NOTES
21. Non-current financial liabilities At 31 December 2010, non-current financial liabilities totaled 2,561,442 thousand, an increase of 744,660 thousand over 31 December 2009, and included the following:
( thousand)
Financial payables to Group companies Financial guarantees Total non-current financial liabilities
31 December 2010 2,550,000 11,442 2,561,442
31 December 2009 1,800,000 16,782 1,816,782
Change 750,000 (5,340) 744,660
Financial payables to Group companies related to euro-denominated loans received from Fiat Finance S.p.A. which are due beyond 12 months. Interest is payable on those loans at rates between 6.81% and 7.18%. The amount reported at 31 December 2010 is net of 1,050,000 thousand reclassified under Liabilities to be demerged (see Note 18), representing non-current financial payables to be demerged to Fiat Industrial S.p.A. as a result of the Demerger. Principal changes during 2010 included repayment of a 400 million loan received on 24/05/2006 (maturing 24/02/2010 with interest of 6.35% p.a.), in addition to two new variable rate loans received, respectively, on 05/03/2010 for 400 million (maturing 05/03/2012) and on 23/06/2010 for 750 million (maturing 22/06/2012). The breakdown of loans by maturity is as follows:
( thousand)
Maturing in 2011 Maturing in 2012 Maturing in 2013 Total financial payables to Group companies
31 December 2010 400,000 1,150,000 1,000,000 2,550,000
The fair value of these loans at 31 December 2010 was 2.7 billion and was calculated using market rates of interest appropriately adjusted to reflect the credit spreads applicable to Fiat at the balance sheet date. The item financial guarantees represents the fair value of the liabilities assumed in relation to guarantees issued. After assessing the potential risks in relation to which contingent liabilities must be recognized and given that this item relates essentially to guarantees provided in relation to loans received by Group companies, it has been concluded that the present value of fees receivable for guarantees issued (see other financial assets in Note 12) represented the best estimate of the fair value of these guarantees. The breakdown by maturity date is as follows:
( thousand)
31 December 2010 3,593 7,746 103 11,442
31 December 2009 5,344 11,145 293 16,782
Financial guarantees due within one year due after one year but within five years due beyond five years Total
349
22. Other non-current liabilities At 31 December 2010, other non-current liabilities amounted to 13,561 thousand, showing a net decrease of 790 thousand over the previous year end. The item consisted of the following:
( thousand)
31 December 2010 4,385 9,176 13,561
31 December 2009 4,690 9,661 14,351
Change (305) (485) (790)
Non-current post-employment benefits to be paid: to a former Chief Executive Officer to former employees Total other non-current liabilities
The non-current post-employment benefits to be paid represent the present value of benefits (see Note 20) to be paid to a former Chief Executive Officer and management personnel that have left the Company. A breakdown of other non-current liabilities by due date is as follows:
( thousand)
31 December 2010 819 4,550 8,192 13,561
31 December 2009 791 4,394 9,166 14,351
Other non-current liabilities due within one year due after one year but within five years due beyond five years Total
23. Provisions for employee benefits and other current provisions At 31 December 2010, this item totaled 9,274 thousand, a net increase of 810 thousand over 31 December 2009, and consisted of the following:
( thousand)
Provision for employee bonuses Total provisions for employee benefits and other current provisions
31 December 2009 8,464 8,464
Utilizations and Other changes 31 December 2010 (8,109) 9,274 (8,109) 9,274
The provision for employee bonuses primarily represents the estimate of variable compensation payable to employees accrued at 31 December 2010. Changes in provisions for employee benefits and other current provisions during 2009 were as follows:
( thousand)
Provision for employee bonuses Total provisions for employee benefits and other current provisions
31 December 2008 6,346 6,346
Utilizations and Other changes 31 December 2009 (6,136) 8,464 (6,136) 8,464
350
NOTES
24. Trade payables At 31 December 2010, trade payables totaled 41,011 thousand, a net decrease of 115,238 thousand over 31 December 2009, and consisted of the following:
( thousand)
Trade payables to third parties Intercompany trade payables for goods and services Total trade payables
31 December 2010 38,913 2,098 41,011
31 December 2009 152,657 3,592 156,249
Change (113,744) (1,494) (115,238)
Trade payables to third parties are mainly due to CAV.E.T. and CAV.TO.MI. in relation to the work performed over the latter part of the year (see Note 14). Trade payables are due within one year and their carrying amount at the balance sheet date is deemed to approximate their fair value. 25. Current financial liabilities At 31 December 2010, current financial liabilities amounted to 294,592 thousand, representing a net increase of 137,880 thousand over the previous year end. The amounts related to:
( thousand)
31 December 2010 Financial payables to Group companies: Loans from Fiat Finance S.p.A. 100,000 Liabilities arising from derivative financial instruments Accrued interest expense 47,507 Total financial payables to Group companies 147,507 Financial payables to third parties: Financial payable relating to exercise of call option on Ferrari S.p.A. shares 122,399 Advances on factored receivables 24,686 Other loans from factoring companies Total financial payables to third parties 147,085 Total current financial liabilities 294,592
31 December 2009 31,200 65,121 96,321 57,889 2,502 60,391 156,712
Change 100,000 (31,200) (17,614) 51,186 122,399 (33,203) (2,502) 86,694 137,880
Loans from Fiat Finance S.p.A. relates to a euro denominated loan provided at fixed market rates in December 2010, with a maturity of less than twelve months. At 31 December 2010, the current financial payables due to be transferred from Fiat S.p.A. to Fiat Industrial S.p.A. pursuant to the Demerger, amounting to 390,000 thousand, were reclassified under Liabilities to be demerged (see Note 18). At 31 December 2009, amounts due for derivative financial instruments (31,200 thousand) represented the fair value of the second of the two equity swaps on Fiat S.p.A. shares, which was negative and therefore recognized as a liability. The item financial payable relating to exercise of call option on Ferrari S.p.A. shares consists of the payable recognized following the exercise of the call option on the 5% interest in Ferrari S.p.A. held by Mubadala Development Company PJSC. The amount reported represents the price for exercise of the call option on those shares (see Note 12). Advances on factored receivables relates to advances on IRES receivable (see Note 16). At 31 December 2009, this item also related to advances on VAT receivable and on amounts receivable from T.A.V. S.p.A. for work completed on the Novara-Milan rail line. Current financial payables are denominated in euros. The carrying amounts are deemed to be in line with their fair value.
351
26. Other payables At 31 December 2010, other payables amounted to 368,408 thousand, a net increase of 78,350 thousand over 31 December 2009, and included the following:
( thousand) 31 December 2010 Advances 2,009 Other payables: Intercompany payables: Consolidated VAT 131,408 Consolidated IRES tax 211,576 Other intercompany payables 104 Total intercompany payables 343,088 Social security payables 1,837 Current amounts payable to employees, directors and statutory auditors 13,038 Payables to shareholders of Toro Assicurazioni S.p.A., Magneti Marelli S.p.A. and Comau S.p.A. for public offerings 642 Dividends payable 330 Other 295 Total other payables 359,230 Tax payables: VAT payable 2,388 Taxes withheld on payments to employees and independent contractors 4,245 Other 432 Total tax payables 7,065 Accrued expenses and deferred income 104 Total other payables 368,408
31 December 2009 5,865
Change (3,856)
124,348 133,806 258,154 1,803 5,629 860 290 1,871 268,607 13,034 2,022 433 15,489 97 290,058
7,060 77,770 104 84,934 34 7,409 (218) 40 (1,576) 90,623 (10,646) 2,223 (1) (8,424) 7 78,350
Advances This item consists of the difference between inventories and progress payments and contractual advances received from the customer Treno Alta Velocit T.A.V. S.p.A. (merged into Rete Ferroviaria Italiana S.p.A. as of 31 December 2010) for contract work in progress and is made up as follows:
( thousand) Contract work in progress Less: Progress payments for work completed Gross amount due to the customer Net contractual advances Total advances 31 December 2010 242,709 244,479 1,770 239 2,009 31 December 2009 237,254 242,370 5,116 749 5,865 Change 5,455 2,109 (3,346) (510) (3,856)
The item relates to contracts for the high speed railway project between Fiat S.p.A. and Treno Alta Velocit T.A.V. S.p.A. (which was in turn engaged by F.S. S.p.A.), for the operational engineering and construction of two lines (Bologna-Florence and Turin-Milan, the latter divided into two sub-lines: Turin-Novara and Novara-Milan). At 31 December 2010, the contractual amounts (including for additional work, monetary adjustments and other contractual amounts) totaled 5,190 million for the Bologna-Florence line and 2,278 million for the Milan-Novara sub-line. The contractual amount for the Turin-Novara sub-line (project completed and accounting closed at the end of 2009) was 4,669 million.
352
NOTES
As part of such project, Fiat S.p.A., as the general contractor, engaged CAV.E.T. and CAV.TO.MI. for the engineering and construction activities, retaining all work coordination, organizational and management activities. Contract work in progress therefore reflects the fees earned by Fiat S.p.A. in the form of a percentage (approximately 3.5%) of the contractual amounts, for the activities directly carried out. The work is paid through progress payments made by T.A.V. S.p.A. to Fiat S.p.A. based on the stage of completion of the works and advance payments, which Fiat S.p.A. then pays over to CAV.E.T. and CAV. TO.MI. net of its contractual percentage earned. These amounts may be analyzed by line as follows:
( thousand)
Contract work in progress Florence-Bologna line Novara-Milan line Less: Progress payments for work completed Florence-Bologna line Novara-Milan line Gross amount due to the customer Florence-Bologna line Novara-Milan line
31 December 2010 242,709 161,110 81,599 244,479 161,829 82,650 1,770 719 1,051
31 December 2009 237,254 159,355 77,899 242,370 160,580 81,790 5,116 1,225 3,891
Change 5,455 1,755 3,700 2,109 1,249 860 (3,346) (506) (2,840)
Contract work in progress is measured on the basis of the stage of completion in relation to the sales price, which in this case is the consideration contractually agreed for the activities directly carried out by Fiat S.p.A. Contract costs relating to the contract revenue recognized totaled 97,258 thousand at 31 December 2010 (95,589 thousand at 31 December 2009). Changes in contract work in progress have been recognized in the income statement under the item other operating income (see Note 4). When the lines are contractually completed, the final contractual revenues for the activities directly carried out are recognized in the income statement under other operating income, net of any decrease in inventories. At the same time the accounts for inventories and amounts classified as advances are closed. In 2009, the Secondary Final Test Certificate relating to the completion of residual work on the Turin-Novara line was signed (the Principal Final Test Certificate, relating to approximately 94% of the total value of the line had already been signed in 2006), representing the final contractual document for the work on the Turin-Novara line, and the project was closed from an accounting perspective. Net advances for work completed were as follows:
Advances received from customers 31 December 31 December 2010 2009 5,177,313 5,086,961 2,268,473 2,245,905 7,445,786 7,332,866 Advances paid to suppliers 31 December 31 December 2010 2009 5,015,484 4,926,381 2,185,823 2,164,115 7,201,307 7,090,496 Net advances for work completed 31 December 31 December 2010 2009 161,829 160,580 82,650 81,790 244,479 242,370
( thousand)
Florence-Bologna line Novara-Milan line Progress payments for work completed
353
Advances relate to amounts received as down payments from the customer T.A.V. S.p.A. at the commencement of the contracts, which are then recovered as the work progresses. Amounts were as follows:
Contractual advances received from customers 31 December 31 December 2010 2009 993 2,184 7,914 19,630 8,907 21,814 Contractual advances paid to suppliers 31 December 31 December 2010 2009 955 2,101 7,713 18,964 8,668 21,065 Net contractual advances 31 December 31 December 2010 2009 38 83 201 666 239 749
( thousand)
Florence-Bologna line Novara-Milan line Contractual advances
At 31 December 2010, bank guarantees and sureties totaling 907 million were given by Fiat S.p.A. to T.A.V. S.p.A. against contractual advances received, performance of the work and withholding amounts on progress payments. Under agreements entered into with the consortia mentioned and the institutions issuing the guarantees, 875 million of the total represents direct liability of the consortia towards the issuing banks and insurance companies, with no joint responsibility on the part Fiat S.p.A. More specifically, 498 million in guarantees provided by Fiat S.p.A. to T.A.V. S.p.A. relate to the Bologna-Florence line, 398 million to the Novara-Milan sub-line and 11 million to the Turin-Novara sub-line (two-year guarantees issued on the final work subject to testing in 2009). Indemnities assumed directly by the CAV.E.T. consortium amounted to 481 million, while those for the CAV.TO.MI. consortium totaled 383 million for the Novara-Milan sub-line and 11 million for the Turin-Novara sub-line. Release of these guarantees is generally linked to the formal testing (Final Test Certificates) required contractually for acceptance of the work by the customer, except where other specific conditions have been stipulated. Finally, for those lines where work was still in progress at year end (Bologna-Florence and Novara-Milan) the lines were formally handed over to T.A.V. S.p.A. in 2009 and the high-speed line was opened to the public, following the favorable technical opinion received from the Testing Commission. However, since at 31 December 2010 (as also at 31 December 2009), activities to complete the ancillary work and cleanup, in addition to the contractual obligation for final approval of the work (Final Principal and/or Secondary Test Certificates) and to release the bank guarantees were still in progress, from an accounting perspective the project remained open at that date. Tax payables and other payables The main components of these items are as follows. At 31 December 2010, intercompany payables for consolidated VAT of 131,408 thousand (124,348 thousand at 31 December 2009) relate to the VAT credits of Italian subsidiaries transferred to Fiat S.p.A. as part of the consolidated VAT procedure. At 31 December 2010, payables to Group companies in connection with the IRES tax consolidation amounted to 211,576 thousand (133,806 thousand at 31 December 2009) and represent the remuneration due for the tax losses contributed by the Italian subsidiaries to the domestic tax consolidation for 2010, the IRES tax credits of the Italian subsidiaries transferred to Fiat S.p.A. as part of the tax consolidation procedure for 2010 and payables relating to the domestic tax consolidation for 2009. Tax payables and other payables are all due within one year and their carrying amount is deemed to approximate their fair value.
354
NOTES
27. Guarantees issued, commitments and contingent liabilities Guarantees issued Outstanding guarantees were as follows:
( thousand)
31 December 2010
31 December 2009
Change
Guarantees issued Sureties on behalf of Group companies on behalf of third parties Total sureties Other guarantees on behalf of Group companies on behalf of third parties Total other guarantees Total guarantees issued
251,666 1,134 252,800 14,878,826 14,878,826 15,131,626
218,598 1,530 220,128 15,888,414 2,780 15,891,194 16,111,322
33,068 (396) 32,672 (1,009,588) (2,780) (1,012,368) (979,696)
Sureties At 31 December 2010, sureties totaled 252,800 thousand, an increase of 32,672 thousand over 31 December 2009. This amount mostly relates to sureties provided on behalf of Group companies on Billets de Trsorerie issued (Fiat Finance and Trade Ltd S.A. 61,444 thousand), medium- to long-term loans granted by banks (5,967 thousand) and lease payments on property (184,255 thousand). Sureties granted to third parties relate to the remaining interest-bearing certificates issued by Sava and not yet redeemed. Other guarantees At 31 December 2010, other guarantees amounted to 14,878,826 thousand, a decrease of 1,012,368 thousand over 31 December 2009, mainly attributable to guarantees on bonds issued during the year. These all involved guarantees issued on behalf of Group companies, consisting of: 1,322,192 thousand for loans (Banco CNH Capital S.A. 766,560 thousand, Fiat Finance S.p.A. 400,000 thousand, Fiat Finance and Trade Ltd S.A. 110,000 thousand, Fiat Automoveis S.A. - FIASA 45,620 thousand, Magneti Marelli Controle Motor Ltda. 12 thousand); 8,941,876 thousand for bonds issued (Fiat Finance and Trade Ltd S.A. 7,908,300 thousand, Fiat Finance North America Inc. 1,033,576 thousand); 3,305,987 thousand for credit facilities (Fiat Finance and Trade Ltd S.A. 2,000,000 thousand, Fiat Finance S.p.A. 713,657 thousand, CNH Global N.V. 300,000 thousand, Fiat Finance Canada Ltd. 131,362 thousand, Fiat Finance North America Inc. 110,988 thousand, Financiera Pegaso S.A. 49,980 thousand); 1,307,059 thousand for VAT receivables as part of the VAT consolidation procedure, as required by the Ministerial Decree of 13 December 1979 (as subsequently amended), and 1,712 thousand for other guarantees. At 31 December 2010, there were no guarantees outstanding on behalf of third parties (the guarantee issued on behalf of the joint venture Hua Dong Teksid Automotive Foundry Co. Ltd., amounting to 2,780 thousand at 31 December 2009, expired during 2010). In relation to guarantees of approximately 1,320 million outstanding at 31 December 2010 issued on behalf of companies transferred to Fiat Industrial Group under the Demerger, at the date of these financial statements that commitment had been reduced by 553 million as a result of repayment of the underlying loans or transfer of guarantee obligations to Fiat Industrial S.p.A. and consequent release of Fiat S.p.A. from its commitments. For amounts still subject to guarantees from Fiat S.p.A., agreements have been reached with creditors concerning the transfer of those guarantee obligations to Fiat Industrial S.p.A. and are in the process of being formalized.
355
In addition: in 2005, Fiat S.p.A. provided guarantees on credit facilities in local currency, equivalent to approximately 58 million, granted by Citibank to the Groups Indian subsidiaries New Holland Fiat (India) Private Ltd. and Comau India Private Limited. As at 31 December 2010 (as also at 31 December 2009) these credit facilities were unutilized; in 2005, in relation to the early collection by Fiat Partecipazioni S.p.A. of the residual consideration for the sale of the aviation business, Fiat S.p.A. is jointly and severally liable with Fiat Partecipazioni S.p.A. to the purchaser, Avio Holding S.p.A., should Fiat Partecipazioni S.p.A. fail to pay the compensation (following either an arbitration award or an out-of-court settlement) provided for by the sales agreement signed with the seller in 2003. Similarly, in connection with the sale of the controlling interest in the railway business, Fiat S.p.A. is liable to the purchaser, Alstom N.V., for any failure of the company that sold the business (now Fiat Partecipazioni S.p.A.) to comply with the contractual compensation obligations. Commitments During 2010, Fiat S.p.A. did not enter into any agreements or contracts which resulted in the assumption of significant new commitments. The residual commitment (5,575 thousand at 31 December 2009), in the name and on behalf of Fiat S.p.A. and its subsidiaries under the sponsorship agreement signed with Juventus Football Club S.p.A. in May 2007 for the 2007-2008, 2008-2009 and 2009-2010 seasons, was satisfied. Beginning with the 2008-2009 season, these sponsorship costs were borne by the subsidiary CNH Global N.V. Teksid Fiat S.p.A. is subject to a put option held by Renault (with reference to the original 33.5% investment in Teksid, now 15.2%). In particular, Renault has the right to sell its interest in Teksid to Fiat in the event of: a breach in application of the protocol agreement and admission to receivership or other administrative proceeding; Renaults investment in Teksid falling below 15% or Teksid deciding to make a significant strategic investment outside the foundry sector; control of Fiat being acquired by another automaker. The exercise price of the option is established as follows: for the original 6.5% of the share capital of Teksid, the initial investment price increased by a given interest rate; for the remaining amount of share capital of Teksid, the share of the accounting net equity at the exercise date. Contingent liabilities In connection with significant asset divestitures carried out in prior years, Fiat S.p.A. directly or indirectly through its subsidiaries provided indemnities to purchasers with the maximum amount of potential liability under these contracts generally capped at a percentage of the purchase price. These liabilities primarily relate to liabilities potentially arising from a breach of representations and warranties under these contracts and, in certain instances, environmental or tax matters, generally for a limited period of time. At 31 December 2010, potential obligations relating to these indemnities were approximately 799 million (approximately 827 million at 31 December 2009), net of provisions set aside by individual companies. Certain other indemnities have been provided that do not limit potential payment and, as such, it is not possible to estimate the maximum potential future payments that could result from claims made under these indemnities. Certain claims for damages are still pending against Fiat S.p.A. Given this fact and the specific conditions of the related proceedings, the possible outcome of this situation cannot be reasonably estimated and, therefore, the likelihood of any costs to be borne by the company cannot be determined.
356
NOTES
28. Information on financial risks The manner in which Fiat S.p.A. measures and manages financial risks is consistent with Group policy. In particular, the categories of the major risks to which the company is exposed are set out below. Credit risk The maximum credit risk to which Fiat S.p.A. is theoretically exposed at 31 December 2010 is represented by the carrying amounts at which financial assets are recognized in the statement of financial position and the nominal value of the guarantees provided as discussed in Note 27. Amounts receivable at the balance sheet date are essentially due from Group companies, from the tax authorities and from T.A.V. S.p.A. The risk on receivables from the latter company is limited to the margin earned by Fiat S.p.A. (of approximately 3.5%), since a condition for the settlement of payables to consortium companies is the receipt of the amounts due from T.A.V. S.p.A. Guarantees given are mainly on behalf of Group companies. There are no significant overdue balances. Liquidity risk Liquidity risk arises if the company is unable to obtain, at economical terms, the funding needed to carry out its operating activities. Fiat S.p.A. participates in the Groups centralized treasury management and, as a result, the liquidity risks to which it is exposed are strictly correlated to those which the Fiat Group is exposed to as a whole. The two main determinants of the Groups liquidity position are, on one side, the cash generated by or used in operating and investing activities and, on the other, the maturity and renewal of debt or invested liquidity and market conditions. The Group has adopted a series of policies and procedures whose purpose is to optimize the management of financial resources and to reduce liquidity risk by: centralizing the management of collections and payments, where it may be economical in the context of the local civil, currency and tax regulations of the countries in which the Group is present; maintaining an adequate level of available liquidity; diversifying the sources of funding and maintaining a continuous and active presence in the capital markets; obtaining adequate credit lines; and monitoring future liquidity based on business planning. Management believes that the funding currently available, in addition to those funds that will be generated from operating and funding activities, will enable the Group to satisfy the requirements of its investing activities and its working capital needs and to fulfill its obligations to repay its debts at their maturity date. Currency risk At 31 December 2010, Fiat S.p.A. had no significant amounts receivable or payable or derivative financial instruments exposed to currency risk. Interest rate risk Fiat S.p.A. satisfies its financial requirements through the Groups centralized treasury management system. In particular: non-current financial payables consist of fixed rate loans from Fiat Finance S.p.A. (see Note 21). The change in fair value of these loans resulting from a hypothetical, immediate and adverse change of 10% in market interest rates would have been approximately 8 million (8 million also at 31 December 2009);
357
current financial receivables principally consist of current account deposits with Fiat Finance S.p.A. (see Note 15), while current financial payables consist mainly of loans and other amounts payable to Fiat Finance S.p.A. and liabilities related to advances on the sale of receivables to banks (see Note 25). In addition, non-current financial payables to Fiat Finance S.p.A. (see Note 21) include variable rate loans. The cost of these items is affected by changes in short-term interest rates. For short-term or variable rate transactions, a hypothetical, immediate and adverse change of 10% in short-term interest rates would have led to pre-tax net financial expense being approximately 1 million higher on an annualized basis (at 31 December 2009, the impact was not material). Other risks relating to derivative financial instruments As discussed in Note 7, Fiat S.p.A. holds certain derivative financial instruments whose value is linked to the trends in the price of listed shares (equity swaps on Fiat shares). Although these transactions were entered into for hedging purposes, they do not always qualify for hedge accounting under IFRS. As a result, fluctuations in their value could affect the Companys results. The potential loss in fair value of derivative financial instruments held by the company at 31 December 2010, linked to changes in the price of listed shares, which would arise in the case of a hypothetical, immediate and adverse change of 10% in the underlying securities, amounts to approximately 32 million (21 million at 31 December 2009). The difference over the prior year is attributable to the change in price of the instrument used for the simulation. 29. Fair value hierarchy IFRS 7 requires financial instruments recognized at fair value in the statement of financial position to be classified on the basis of a hierarchy that reflects the significance of the inputs used in determining fair value. This hierarchical classification applies the following levels: Level 1 quoted prices in active markets for the asset or liability being measured; Level 2 inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) on the market; Level 3 inputs that are not based on observable market data. The following table provides the classification of financial assets and liabilities measured at fair value at 31 December 2010 according to this fair value hierarchy.
( thousand)
Note
Level 1
Level 2
Level 3
Total
Assets at fair value: Investments in other companies (available for sale) recognized at fair value directly in equity Derivative financial assets (current) Total assets Total liabilities
(11) (15)
2,668 2,668 -
14,340 114,997 129,337 -
17,008 114,997 132,005 -
In 2010, there were no transfers from Level 1 to Level 2 of the fair value hierarchy or vice versa. 30. Transactions between Group Companies and with Related Parties Intercompany and related party transactions for Fiat S.p.A. consist for the most part of transactions carried out with the companys subsidiaries, carried out on commercial terms that are normal in the respective markets, considering the characteristics of the goods or services involved.
358
NOTES
The effects of these transactions on the single items of the 2010 and 2009 financial statements, which may also be found in the supplementary financial statements and in the explanatory Notes, is summarized in the following tables:
Other operating income
2010 2009 2010
Counterparty
( thousand)
Personnel costs
2009
Other operating costs

2010 2009 2010
Financial income/ (expense)

2009
Abarth & C. S.p.A. Banco CNH Capital S.A. CNH Global N.V. CNH Italia S.p.A. Comau S.p.A. C.R.F. S.c.p.A. Elasis S.c.p.A. Ferrari S.p.A. Fiat Argentina S.A. Fiat Group Automobiles S.p.A. Fiat Automoveis S.A. - FIASA Fiat Finance Canada Ltd. Fiat Finance S.p.A. Fiat Finance and Trade Ltd S.A. Fiat France Fiat Services S.p.A. Fiat Group Marketing & Corporate Comm. S.p.A. Fiat Group Purchasing S.r.l. Fiat Partecipazioni S.p.A. Fiat Polska S.p. z.o.o. Fiat Powertrain Technologies S.p.A. Fiat-Revisione Interna S.c.r.l. Fiat Servizi per lIndustria S.c.p.A. FGA Capital S.p.A. Fidis S.p.A. Fiat Netherlands Holding N.V. Fiat Gestione Partecipazioni S.p.A. Leasys S.p.A. Fiat I.T.E.M. S.p.A. Maserati S.p.A. Magneti Marelli S.p.A. Maxus MC2 S.p.A. Orione S.c.p.A. Risk Management S.p.A. Fiat Group International S.A. Sirio S.c.p.A. Teksid S.p.A. Fiat Finance North America Inc. Fiat Group Automobiles Belgium S.A. Other Group companies Total Group companies Other related parties Total Group companies and other related parties Total line item Percentage of line item
429 1,051 1,432 504 498 2,149 21,251 829 951 536 2,618 155 254 4,617 110 31 427 7,267 699 4,616 637 58 974 30 52,123 79 52,202 61,762 85%
200 712 1,323 476 471 3,342 20,059 847 645 692 1,986 262 257 3,276 214 396 344 404 8,085 500 4,772 190 620 60 1,051 73 51,257 51,257 75,432 68%
21,549 21,549 43,385 50%
18,397 18,397 31,588 35%
1 54 4 121 240 2,195 11 1,420 4,989 9 2,523 5 8 4,189 1,441 53 150 1,770 2,810 3,506 138 1,218 139 205 27,199 30,843 58,042 101,591 57%
844 91 54 121 1,324 2,144 20 1,396 4,457 10 1,667 4 141 3,181 2,084 55 866 2,018 3,355 229 3,535 31 307 1,230 127 188 29,479 17,806 47,285 85,905 55%
400 125 7 (5) 11 98 385 87 (188,225) 3,161 (5) (5) (5) 1 (5) (5) (5) 4 (1,647) 91,358 54 (5) 14 (5) (3) 1 333 108 (93,773) (93,773) (93,035) 100%
409 190 17 (7) (7) 119 522 258 (121,472) 2,869 (7) 99 (7) 7 34 (7) (7) 4 (98) 110,800 58 (7) 17 (6) (7) (7) (7) (5) 322 41 (5,885) (5,885) (13,691) 43%
359
In addition to the impact of intercompany and related party transactions on the income statement, as detailed in the previous table, there was also a 6 thousand gain on the disposal of the minority interest held in ElasisSociet Consortile per Azioni to Fiat Group Automobiles S.p.A and Fiat Partecipazioni S.p.A., described above in Note 3.
31 December 2010 Counterparty
( thousand)
CNH Italia S.p.A. Fiat Group Automobiles S.p.A. Fiat Finance S.p.A. Fiat Group Marketing & C.C. S.p.A. Fiat-Revisione Interna S.c.r.l. Fiat Servizi per lIndustria S.c.p.A. Fiat Partecipazioni S.p.A. Leasys S.p.A. Sirio S.c.p.A. Other Group companies IRES tax consolidation VAT consolidation Financial guarantee contracts Total Group companies Other related parties Total Group companies and other related parties Total line item Percentage of line item
Other fin. assets 11,442 11,442 11,442 143,947 8%
Trade recs. 56 207 263 79 342 8,078 4%
Current financial recs. 311,526 311,526 311,526 311,526 100%
Other Non-current Non-current current employee fin. recs. provisions pays. 7 88 2,550,000 180 49 30 240,192 11,442 240,546 2,561,442 13,128 240,546 350,554 69% 13,128 20,072 65% 2,561,442 2,561,442 100%
Current employee provisions 9,274 0%
Trade pays. 151 783 145 121 164 537 197 2,098 166 2,264 41,011 6%
Current fin. pays. 147,507 147,507 147,507 294,592 50%
Other pays. 104 39 65 211,576 131,408 343,192 8,308 351,500 368,408 95%
360
NOTES
31 December 2009 Other fin. ( thousand) assets CNH Italia S.p.A. Comau S.p.A. C.R.F. S.c.p.A. Elasis S.c.p.A. Ferrari S.p.A. Fiat Group Automobiles S.p.A. Fiat Finance Canada Ltd. Fiat Finance S.p.A. Fiat Group Marketing & Corp. C. S.p.A. Fiat Group International S.A. Fiat Group Purchasing S.p.A. Fiat Item S.p.A. Fiat Polska S.p. z.o.o. Fiat Powertrain Technologies S.p.A. Fiat-Revisione Interna S.c.r.l. Fiat Servizi per lIndustria S.c.p.A. Fiat Services S.p.A. Fiat Netherlands Holding N.V. Iveco S.p.A. (now Fiat Gestione Partecipazioni S.p.A.) Leasys S.p.A. Magneti Marelli S.p.A. Orione S.c.p.A. Risk Management S.p.A. Sirio S.c.p.A. Teksid S.p.A. Other Group companies IRES tax consolidation VAT consolidation Financial guarantee contracts 16,782 Total Group companies 16,782 Other related parties Total Group companies and other related parties 16,782 Total line item 26,887 Percentage of line item 62% Counterparty Trade recs. 868 132 142 88 582 1,703 221 616 63 366 130 69 625 984 117 143 303 7,152 7,152 60,015 12% Current financial receivables 606,941 39,133 646,074 646,074 646,074 100% Other Non-current Non-current current employee fin. recs. provisions pays. 1,800,000 1,070 63 22 120,755 121,910 121,910 198,923 61% 17,444 17,444 25,441 69% 16,782 1,816,782 Current employee provisions 5,664 5,664 8,464 67% Trade pays. 71 1,862 29 2 173 716 16 117 89 363 118 36 3,592 165 3,757 156,249 2% Current fin. pays. 64,614 31,707 96,321 96,321 156,712 61% Other pays. 133,806 124,348 258,154 2,652 260,806 290,058 90%
1,816,782 1,816,782 100%
Items arising from the domestic tax consolidation (see Notes 16 and 26) and the consolidated VAT settlement (see Note 26) are not reported in the above tables, as they do not represent actual commercial transactions between Group companies but relate only to the financial treatment provided under the Italian tax code for relationships between Italian Group companies and the tax authorities. In a similar manner the asset and liability balances (each of the same amount) relating to the valuation of financial guarantee contracts (see Notes 12 and 21) have also not been reported by individual counterparty as they are not material, being only representative of the present value of the estimated commissions to be earned in future years.
361
Details of the most significant transactions between Fiat S.p.A. and Group companies summarized in the above tables are as follows: services provided by Fiat S.p.A. and management personnel at various Group companies (Fiat Group Automobiles S.p.A., Fiat Gestione Partecipazioni S.p.A. formerly Iveco S.p.A., Magneti Marelli S.p.A., Ferrari S.p.A., Fiat Powertrain Technologies S.p.A., Fiat Group Purchasing S.r.l., Teksid S.p.A., Comau S.p.A. and other minor); lease of property or office space (Fiat Finance S.p.A., Fiat Group Marketing & Corporate Communication S.p.A., Fiat Partecipazioni S.p.A. and other minor companies) and the recovery of directors fees and expenses; provision of sureties and other guarantees (see Note 27) on issues of bonds and Billets de Trsorerie (Fiat Finance and Trade Ltd S.A. and Fiat Finance North America Inc.) bank loans and credit facilities (Fiat Finance and Trade Ltd S.A., Fiat Finance S.p.A., Banco CNH Capital S.A., CNH Global N.V., Fiat Finance Canada Ltd., Fiat Finance North America Inc., Fiat Automoveis S.A.- FIASA and other minor subsidiaries), property rental payments (Fiat Group Automobiles S.p.A. and its subsidiaries) and to tax authorities for Group company VAT credits; management of current accounts, obtaining short- and medium-term loans and financial assistance (Fiat Finance S.p.A.); management of derivative financial instruments (Fiat Netherlands Holding N.V. and Fiat Finance S.p.A.); purchases of administrative, tax, corporate assistance and consultancy services and related IT systems (Fiat Services S.p.A. and Fiat I.T.E.M. S.p.A.), public relations services (Fiat Group Marketing & Corporate Communication S.p.A.), personnel and other management services (Fiat Servizi per lIndustria S.c.p.A.), security services (Orione S.c.p.A. and Sirio S.c.p.A.), supervisory and internal audit services (Fiat-Revisione Interna S.c.r.l.), vehicle leases (Leasys S.p.A.) maintenance services and services for office space (Fiat Partecipazioni S.p.A.). Intercompany transactions in 2010 also related to management of the portfolio of investments in subsidiaries, whose effects on the Companys earnings and financial position were as described above, in particular: receipt of dividends from investees (see Note 1); the sale of the minority interest held in Elasis Societ Consortile per Azioni to Fiat Group Automobiles and Fiat Partecipazioni S.p.A., as part of the restructuring of the holdings in consortium companies for the Groups research (see Note 3); subscription to capital increases of 1,050 million for Fiat Group Automobiles S.p.A., 750 million for Fiat Netherlands Holding N.V., 40 million for Comau S.p.A. and 12.5 million for Teksid Aluminum S.r.l. to strengthen their capital structure (see Note 11); the purchase from Fiat Partecipazioni S.p.A. and subsequent capital increase of Nuove Iniziative Finanziarie 5 S.p.A. (subsequently renamed Iveco S.p.A.) and Nuova Immobiliare Nove S.p.A. (subsequently renamed FPT Industrial S.p.A.) in the amount of 200 million and 100 million respectively, in addition to establishment of the subsidiaries Fiat Industrial S.p.A. (incorporated with share capital of 120,000 with a further contribution to cover start-up costs of 6.1 million) and Fiat Industrial Finance S.p.A. with share capital of 100 million. All of the above transactions were undertaken in preparation for the demerger of activities to Fiat Industrial S.p.A. (see Note 11); incorporation of Fiat Switzerland S.A. in preparation for the reorganization of local activities. In 2010, transactions with related parties (as defined under IAS 24) other than subsidiaries are presented above under Other related parties. Those transactions essentially related to: professional and advisory services and services as secretary of the Board of Directors and sub-committees were provided to Fiat S.p.A. by Mr. Franzo Grande Stevens for fees of 1,000 thousand; fees for the directors and statutory auditors of Fiat S.p.A., as well as the compensation component arising from stock option and stock grant plans for the Chief Executive Officer based on Fiat S.p.A. shares; compensation due to Fiat S.p.A. executives having strategic responsibilities.
362
NOTES
31. Net financial position Pursuant to the Consob Communication of 28 July 2006 and in compliance with the CESRs recommendations for the consistent implementation of the European Commissions Regulation on Prospectuses issued on 10 February 2005, the net financial position of Fiat S.p.A. at 31 December 2010 is as follows:
( thousand)
Cash and cash equivalents Current financial receivables: from Group companies from third parties Non-current financial payables: due to Group companies due to third parties Current financial payables: due to Group companies due to third parties Net financial position due to Group companies due to third parties Net financial position subject to demerger due to Group companies due to third parties Net financial position - Total due to Group companies due to third parties
31 December 2010 240 311,526 311,526 (2,561,442) (2,561,442) (294,592) (147,507) (147,085) (2,544,268) (2,397,423) (146,845) (1,227,000) (1,227,000) (3,771,268) (3,624,423) (146,845)
31 December 2009 474 646,074 646,074 (1,816,782) (1,816,782) (156,712) (96,321) (60,391) (1,326,946) (1,267,029) (59,917) (1,326,946) (1,267,029) (59,917)
Change (234) (334,548) (334,548) (744,660) (744,660) (137,880) (51,186) (86,694) (1,217,322) (1,130,394) (86,928) (1,227,000) (1,227,000) (2,444,322) (2,357,394) (86,928)
32. Significant non-recurring transactions and unusual or abnormal transactions During 2010, Fiat S.p.A. did not take part in any significant non-recurring transaction or unusual or abnormal transaction as defined in the Consob Communication of 28 July 2006. 33. Subsequent Events As a result of the Demerger, with effect from 1 January 2011, the shareholdings and other assets and liabilities described in Note 18 were transferred to Fiat Industrial S.p.A. and the share capital and reserves of Fiat S.p.A. were adjusted as described in Note 19. As a result of the Demerger, Fiat S.p.A. shareholders were granted, for no consideration, one share in Fiat Industrial S.p.A. for each share of the same class held in Fiat S.p.A. at the time of the Demerger. One ordinary, preference or savings share of Fiat Industrial S.p.A. was, therefore, allotted for each share of the same class held in Fiat S.p.A. Consequently, Fiat S.p.A. was allotted 38,568,458 Fiat Industrial ordinary shares corresponding to the number of own shares held, as discussed in Note 19. On 3 January 2011, the shares of Fiat Industrial S.p.A. were admitted to listing on the Mercato Telematico Azionario. On 10 January 2011, Fiat increased its stake in Chrysler from 20% to 25% following achievement of the first of the three Performance Events (i.e., attainment of US regulatory approval and a commitment to produce an engine based on Fiats FIRE family in the USA) stipulated in the alliance agreement. On 9 February 2011, Moodys Investors Service completed the review of Fiat S.p.A.s rating for possible for downgrade initiated on 21 July 2010. Fiat S.p.A.s long-term debt rating was affirmed at Ba1 and its short-term rating at Not Prime. The outlook is negative.
363
List of equity investments with additional information required by Consob (Communication DEM/6064293 of 28 July 2006)
Subsidiaries Company and registered office Fiat Group Automobiles S.p.A. Turin At 31.12.09 capital contribution At 31.12.10 Ferrari S.p.A Modena At 31.12.09 At 31.12.10 Maserati S.p.A. Modena At 31.12.09 At 31.12.10 Fiat Gestione Partecipazioni S.p.A. Turin (formerly Iveco S.p.A) At 31.12.09 Impairment reversal At 31.12.10 Fiat Powertrain Technologies S.p.A. Turin At 31.12.09 impairment At 31.12.10 Magneti Marelli S.p.A. Corbetta At 31.12.09 Ordinary shares At 31.12.09 At 31.12.10 Preference shares At 31.12.09 At 31.12.10 At 31.12.10 Teksid S.p.A. Turin At 31.12.09 At 31.12.10 Teksid Aluminum S.r.l. Carmagnola At 31.12.09 capital contribution impairment At 31.12.10 Share Capital (*) () 745,031,979 745,031,979 20,260,000 20,260,000 40,000,000 40,000,000 Result for the latest financial year (*) () (134,673,153) 369,666,285 104,640,221 157,928,154 (24,319,603) (7,742,674) Equity (*) () 856,206,538 2,275,872,823 530,422,655 688,350,809 67,836,712 60,094,039 % owned by Fiat S.p.A. 100.00 100.00 85.00 85.00 100.00 100.00 Number of shares 745,031,979 745,031,979 6,888,400 6,888,400 40,000,000 40,000,000 Book value () 4,474,081,024 1,050,000,000 5,524,081,024 1,055,203,823 1,055,203,823 103,798,379 103,798,379
369,500,000 369,500,000 525,000,000 525,000,000 254,325,965
(254,007,877) 1,365,468,716 4,684,546 (48,781,405) (134,715,249)
457,348,864 1,822,817,580 918,601,714 789,820,309 455,050,583
100.00 100.00 100.00 100.00 99.99 100.00 100.00 99.36 99.36 99.99 84.79 84.79 100.00
369,500,000 369,500,000 750,000,000 750,000,000 254,301,607 250,500,601 250,500,601 3,801,006 3,801,006 254,301,607 60,543,388 60,543,388
1,573,631,676 260,000,000 1,833,631,676 648,912,584 (80,000,000) 568,912,584 611,854,217 602,696,271 602,696,271 9,157,946 9,157,946 611,854,217 76,083,758 76,083,758 37,292,021 12,500,000 (11,100,000) 38,692,021
254,325,965 71,403,261 71,403,261 5,000,000
32,732,151 4,328,864 1,885,946 (31,077,630)
387,782,736 145,321,833 147,207,779 8,758,374
5,000,000
(11,050,549)
10,207,825
100.00
(*) Figures taken from the separate financial statements of the subsidiaries % owned by Fiat S.p.A. Any indirect interest in the ordinary share capital of subsidiaries is also indicated
364
NOTES
List of equity investments (continued)

Company and registered office Comau S.p.A. Grugliasco At 31.12.09 capital contribution impairment At 31.12.10 Fiat Partecipazioni S.p.A. Turin At 31.12.09 At 31.12.10 Share Capital (*) () 48,013,959 Result for the latest financial year (*) () (45,770,610) Equity (*) () 80,369,600 % owned by Fiat S.p.A. 100.00 Number of shares 48,013,959 Book value () 92,050,496 40,000,000 (7,100,000) 124,950,496 934,451,675 934,451,675
48,013,959 356,158,302 361,054,062
(22,963,957) (15,908,554) (27,721,564)
97,405,643 934,162,949 919,387,476
100.00 100.00 98.64 +1.36 ind. 100.00 100.00 100.00 100.00 100.00 100.00
48,013,959 356,158,302 356,158,302
Fiat Finance S.p.A. Turin At 31.12.09 224,440,000 At 31.12.10 224,440,000 Business Solutions S.p.A. Turin At 31.12.09 4,791,396 At 31.12.10 4,791,396 Itedi Italiana Edizioni S.p.A. Turin At 31.12.09 5,980,000 At 31.12.10 5,980,000 Fiat Industrial S.p.A. Turin subscription to share capital capital contribution impairment At 31.12.10 120,000 Fiat Switzerland S.A. Paradiso (Switzerland) subscription to share capital CHF 100,000 partial acquisition of activities in FGI Fiat Group International S.A. by Fiat Switzerland S.A. CHF 1,000,000 At 31.12.10 879,718 CHF 1,100,000 Rimaco S.A. Lausanne (Switzerland) merger of FGI Fiat Group International S.A into Rimaco S.A. CHF At 31.12.10 279,910 CHF 350,000 Fiat Finance North America Inc. Wilmington (USA) At 31.12.09 131,951,971 USD 190,090,010 At 31.12.10 142,261,645 USD 190,090,010
5,395,194 17,292,422 4,947,508 8,069,470 (1,586,503) (15,571,825)
433,754,480 271,046,902 24,068,845 13,820,394 26,173,189 10,601,365
224,440,000 224,440,000 4,791,396 4,791,396 5,980,000 5,980,000
222,262,897 222,262,897 36,405,062 36,405,062 25,899,105 25,899,105 120,000 6,159,333 (6,100,000) 179,333 74,211
(6,159,333)
120,000
100.00 100.00
80,000 100
1,247,799 (1,127,562) (1,409,903) 8,124,074 10,158,342 100.00 1,000 1,100 1,322,010
100.00 29,762,761 37,215,356 226,165,144 282,796,896 100.00 350
32,197,079 32,197,079
1,690,769 2,435,722 884,825 1,182,303
142,480,500 205,257,409 146,431,648 195,661,968
39.47 39.47 +60.53 ind.
150 150
57,023,858 57,023,858
365
List of equity investments (continued)

Company and registered office Fiat U.S.A. Inc. New York (USA) At 31.12.09 USD At 31.12.10 USD Isvor Fiat Societ consortile di sviluppo e addestramento Industriale per Azioni Turin At 31.12.09 At 31.12.10 Fiat-Revisione Interna S.c.r.l. Turin At 31.12.09 At 31.12.10 Fiat Servizi per lIndustria S.c.p.A. Turin At 31.12.09 At 31.12.10 Orione S.c.p.A.-Societ Industriale per la Sicurezza e la Vigilanza Consortile per Azioni Turin At 31.12.09 At 31.12.10 SIRIO - Sicurezza Industriale Societ consortile per Azioni Turin At 31.12.09 At 31.12.10 Total subsidiaries
Share Capital (*) () 11,682,632 16,830,000 12,595,420 16,830,000
Result for the latest financial year (*) () (24,869) (35,827) (25,650) (34,273)
Equity (*) () 23,843,010 34,348,240 25,680,263 34,313,967
% owned by Fiat S.p.A. 100.00 100.00
Number of shares 1,000 1,000
Book value () 27,257,726 27,257,726
300,000 300,000
756,266 (342,692)
1,784,642 1,441,947
3.00 3.00 +97.00 ind. 51.00 51.00 +49.00 ind. 5.00 5.00 +95.00 ind.
9,000 9,000
300,000 300,000
13,464 19,512
633,536 653,048
153,000 153,000
n.v. 186,980 n.v. 186,980
1,652,669 1,652,669
342,456 346,234
3,521,606 3,950,785
82,633 82,633
70,720 70,720
120,000 120,000
130,713 148,809
556,825 705,634
18.00 18.00 +80.90 ind.
21,603 21,603
21,107 21,107
120,000 120,000
349,717 1,902,695
2,105,175 4,007,870
0.75 0.75 +93.16
901 901 ind.
764 764 11,274,486,294
366
NOTES
List of equity investments with additional information required by Consob (Communication DEM/6064293 of 28 July 2006)
Subsidiaries to be demerged Share Capital (*) Company and registered office () Fiat Netherlands Holding N.V. Amsterdam (The Netherlands) At 31.12.09 2,610,397,295 capital contribution At 31.12.10 2,610,397,295 Iveco S.p.A. Turin (formerly Nuove Iniziative Finanziarie Cinque S.p.A.) acquisition and capital increase At 31.12.10 200,000,000 FPT Industrial S.p.A. Turin (formerly Nuova Immobiliare Nove S.p.A.) acquisition and capital increase At 31.12.10 100,000,000 Fiat Industrial Finance S.p.A. Turin subscription to share capital At 31.12.10 100,000,000 Total Subsidiaries to be demerged
(*) Figures taken from the separate financial statements of the subsidiaries
Result for the latest financial year (*) () (117,636,617) 374,041,969
Equity (*) () 3,938,171,301 5,522,622,699
% owned by Fiat S.p.A. 100.00 100.00
Number of shares 94,923,538 94,923,538
Book value () 3,827,346,053 750,000,000 4,577,346,053
(34,810,710)
165,197,064
100.00
200,000,000 200,000,000
200,000,000 200,000,000
(18,177,149)
81,831,951
100.00
100,000,000 100,000,000 100,000,000 100,000,000
100,000,000 100,000,000 100,000,000 100,000,000 4,977,346,053
62,305
100,062,305
100.00
Associate companies Company and registered office RCS MediaGroup S.p.A. Milan At 31.12.09 At 31.12.10 (*) Total associate companies Share Capital (*) () 762,019,050 762,019,050 Result for the latest financial year (*) () 79,343,926 (36,118,684) Equity (*) () 1,265,643,760 1,231,214,144 % owned by Fiat S.p.A. 10.09 10.09 Number of shares 76,907,627 76,907,627 Book value () 131,785,440 131,785,440 131,785,440
(*) Figures taken from the 2008 and 2009 Separate Financial Statements
Other companies Company and registered office Assicurazioni Generali S.p.A. Trieste At 31.12.09 fair value adjustment At 31.12.10 Fin.Priv. S.r.l. Milan At 31.12.09 fair value adjustment At 31.12.10 Consorzio Lingotto Turin At 31.12.09 At 31.12.10 Total other companies % owned by Fiat S.p.A. 0.01 0.01 14.29 14.29 5.40 5.40 Number of shares 187,710 187,710 Book value () 3,532,702 (865,343) 2,667,359 17,943,247 (3,603,838) 14,339,409 279 279 17,007,047
367
FEES PAID TO MEMbERS OF THE bOARD OF DIRECTORS, STATUTORY AUDITORS, GENERAL MANAGERS AND EXECUTIVES WITH STRATEGIC RESPONSIbILITIES ( THOUSAND) (ART. 78 OF CONSOb REGULATION 11971/99)
Bonuses and other incentives
Name John Elkann Sergio Marchionne Andrea Agnelli Carlo Barel di SantAlbano Roland Berger Tiberto Brandolini dAdda Ren Carron Luca Cordero di Montezemolo Luca Garavoglia Gian Maria Gros-Pietro Virgilio Marrone Vittorio Mincato Pasquale Pistorio Ratan Tata Mario Zibetti Riccardo Perotta Giuseppe Camosci Piero Locatelli
Office held in 2010 Chairman Vice Chairman Chief Executive Officer Director Director Director Director Director Director Chairman Director Director Director Director Director Director Director Chairman of the Board of Statutory Auditors Statutory Auditor Statutory Auditor
Term of office 21/04-31/12/2010 1/01-21/04/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 21/04-31/12/2010 1/01-21/04/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010 1/01-31/12/2010
Expiration (*) 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012
Compensation for office held 550.0

1)
Non-cash benefits (**) 39.0
Other fees
Total 589.0 3,473.3 65.0 65.0 68.0 65.0 62.0 8,713.0 71.0 95.0 65.0 92.0 65.0 59.0 95.0 100.0
3,050.0 65.0 65.0

3)
423.3
2)
68.0 65.0 62.0 211.0

4)
10.0
1,033.0
5)
7,459.0
6)
71.0 95.0 65.0 92.0 65.0 59.0 95.0 100.0 65.0 65.0 30,0
7)
95.0 65.0
Executives with strategic responsibilities (***)

(*) (**) (***) 1) 2)
116.0
8)
558.0
9)
17,417.0
10)
18,091.0
11)
year in which term of office expires at General Meeting held to approve the financial statements. includes the use of transport for personal purposes. includes 16 executives employed as at 31 December 2010 and 2 executives who left the Group during the year. Gross annual compensation for the office of Chairman is 500,000. Gross annual compensation for the office held at the subsidiary Fiat Switzerland SA. This amount does not include the compensation for the office held at Fiat Group Automobiles (500 thousand) which he does not receive but is paid to Fiat S.p.A. The Chief Executive Officer has the right to receive, in the event of termination of the office held, a sum payable over twenty years, the amount of which, after ten years, may not be greater than five times the fixed portion of his annual compensation. The relevant accrual recognized by Fiat S.p.A. in 2010 was 842.9 thousand. 3) Compensation paid to Exor S.p.A. 4) Includes, for the period 1/01/2010-21/04/2010, the relevant portion of gross annual compensation for the office of Chairman of Fiat S.p.A. 5) Extraordinary one-off amount for service as Chairman of Fiat S.p.A. for the period 2004/2010. 6) Compensation for the office held at Ferrari S.p.A., including the variable portion. Mr. Montezemolo, as Chairman of Ferrari S.p.A., has the right to receive, in the event of termination of the office held, a sum payable over twenty years, the amount of which, after ten years, may not be greater than five times the fixed portion of his annual compensation. The relevant accrual recognized by Ferrari for 2010 was 966.7 thousand. 7) Compensation for the office of Chairman of the Board of Statutory Auditors of Magneti Marelli S.p.A. 8) Includes fringe benefits. 9) Variable portion of compensation. 10) Includes salary, amounts paid following termination of employment in the amount of 6,683 thousand and compensation for offices held at subsidiaries that are retained by the executives. 11) Social contributions paid by the company are not included.
368
NOTES
STOCK OPTIONS GRANTED TO MEMbERS OF THE bOARD OF DIRECTORS, GENERAL MANAGERS AND EXECUTIVES WITH STRATEGIC RESPONSIbILITIES (ARTICLE 78 OF CONSOb REGULATION 11971/99)
Options expired in the year
Grantee Office held at the date of the grant
Options held at the beginning of the year Average exercise price Exercise period Number (mm/yy) of options
Options granted during the year Average exercise price Exercise period Number (mm/yy) of options
Options exercised during the year Average Average market price exercise at exercise price date
Options held at the end of the year Average exercise price Exercise period (mm/yy)
Name Stock options on Fiat shares (*) Paolo Fresco Sergio Marchionne Executives with strategic responsibilities Stock options on Ferrari shares Luca Cordero di Montezemolo Stock options on CNH shares (5) Executives with strategic responsibilities
Number of options
Number of options
Number of options
Chairman
500,000
12.699 9.640
01/0501/10 11/1011/16 (1)(2) 05/0611/14 (3)
(500,000) (6)
9.09 11/1011/16 02/1111/14
Chief Executive Officer 19,420,000
(2,500,000) (6) 16,920,000
2,105,000
13.278
(1,468,750) (6)
636,250
13.37
80,000
175
10/0412/10 (4)
(80,000) (6)
149,939
23.481
01/15
111,250
31.076
02/16 (7)
40,046
15.776
33.000
221,143
28.697
02/16
(*) For further information, see Note 19 to Fiat S.p.A. financial statements. (1) The vesting of one-third of the 2004 stock option grant was subject to the achievement of predetermined profit targets which was met in 2008, making the entire 2004 grant of 10,670,000 stock options fully vested in 2008. At the March 2009 Annual General Meeting the Shareholders approved to extend the exercise period, beginning 1 January 2011 and expiring 1 January 2016. (2) The vesting of one-half, or 5,000,000 stock options of the 2006 stock option grant was subject to the achievement of predetermined performance targets: only the first tranche (i.e. 25%) of those rights vested. The exercise period begins with the approval of the 2010 Financial Statements and terminates in November 2014. (3) Vesting of the options partially subject to achievement of predetermined performance targets. With reference to the portion subject to predetermined performance targets, only the first tranche (i.e. 25%) of those rights vested. The exercise period begins with the approval of the 2010 Financial Statements and terminates in November 2014. (4) Options exercisable upon placement of Ferrari S.p.A. shares on the stock market. (5) Prices expressed in US dollars. (6) Options expired comprises either expired options or options forfeited during the period. (7) Grants also include past grants of new executives with strategic responsibilities.
369
STOCK GRANTS AWARDED TO MEMBERS OF THE BOARD OF DIRECTORS, GENERAL MANAGERS AND EXECUTIVES WITH STRATEGIC RESPONSIBILITIES (ARTICLE 78 OF CONSOB REGULATION 11971/99)
Grantee Office held at the date of the grant
Grants held at the beginning of the year Number of grants Exercise period (mm/yy) Number of grants
Grants awarded during the year Exercise period (mm/yy)
Grants expired in the year Number of grants
Grants held at the end of the year Number of grants Exercise period (mm/yy)
Name Stock grants on Fiat shares (*) Sergio Marchionne Stock grants on CNH shares Executives with strategic responsibilities
2,000,000
02/11
2,000,000
02/12
4,000,000 (1)
01/12
100,000
01/11
100,000
01/15 (2)
100,000
100,000
01/15
(*) For further information, see Note 19 to Fiat S.p.A. financial statements. (1) Following the Board of Directors resolution of 18 February 2011, all grants are conditional only on the continuation of a professional relationship with the Group until the end of 2011. For further information see Note 19 to Fiat S.p.A. financial statements. (2) Consists of a Performance Share grant with final vesting upon approval of 2014 Financial Statements. Earlier partial vesting may occur after the 2012 and 2013 full year results.
18 February 2011 On behalf of the Board of Directors
/s/ John Elkann John Elkann CHAIRMAN
370
APPENDIX INFORMATION REQUIRED UNDER ARTICLE 149DUODECIES OF THE REGOLAMENTO EMITTENTI ISSUED bY CONSOb
APPENDIX INFORMATION REQUIRED UNDER ARTICLE 149-DUODECIES OF THE REGOLAMENTO EMITTENTI ISSUED BY CONSOB
The following table, prepared in accordance with Article 149-duodecies of the Regolamento Emittenti issued by Consob, reports fees charged for 2010 for audit and other services provided by the independent auditors. No services were provided by entities in their network.
( thousand)
Service Provider Deloitte & Touche S.p.A. Deloitte & Touche S.p.A.(1) Deloitte & Touche S.p.A.(2)
2010 Fees 182 339 205 726
Audit Attestation Other services Total
(1) Examination of pro-forma financial information for Fiat S.p.A. and subsidiaries included in the Information Document prepared pursuant to the Consob Issuer Regulations. Limited audit of Fiat S.p.A.s statutory financial statements for the six months ended 30 June 2010 and limited audit of Fiat S.p.A.s consolidated financial statements for the quarter and nine months ended 30 September 2010 for the purpose of disclosures required in relation to the Demerger. Attestation of tax forms (Modello Unico, IRAP, Domestic Tax Consolidation and Form 770). (2) Review and analysis related to the accounting treatment for significant non-recurring transactions, primarily related to the demerger executed by Fiat S.p.A. Verification of documents related to industrial initiatives.
ATTESTATION IN RESPECT OF THE STATUTORY FINANCIAL STATEMENTS UNDER ARTICLE 154-BIS OF LEGISLATIVE DECREE 58/98
371
ATTESTATION IN RESPECT OF THE STATUTORY FINANCIAL STATEMENTS UNDER ARTICLE 154-BIS OF LEGISLATIVE DECREE 58/98
1. The undersigned, Sergio Marchionne, in his capacity as the Chief Executive Officer of the Company, and Alessandro Baldi and Camillo Rossotto, as the executive officers responsible for the preparation of the Companys financial statements, pursuant to the provisions of Article 154-bis, clauses 3 and 4, of Legislative Decree no. 58 of 1998, hereby attest the adequacy with respect to the Company structure, and the effective application, of the administrative and accounting procedures applied in the preparation of the Companys statutory financial statements at 31 December 2010. 2. The assessment of the adequacy of the administrative and accounting procedures used for the preparation of the statutory financial statements at 31 December 2010 was based on a process defined by Fiat in accordance with the Internal Control Integrated Framework model issued by the Committee of Sponsoring Organizations of the Treadway Commission, an internationally-accepted reference framework. 3. The undersigned moreover attest that: 3.1 the statutory financial statements at 31 December 2010: a) have been prepared in accordance with International Financial Reporting Standards, as endorsed by the European Union through Regulation (EC) 1606/2002 of the European Parliament and Counsel, dated 19 July 2002; b) correspond to the amounts shown in the Companys accounts, books and records; and c) provide a fair and correct representation of the financial conditions, results of operations and cash flows of the Company as of 31 December 2010 and for the year then ended. 3.2 The report on operations includes a reliable operating and financial review of the Company as well as a description of the main risks and uncertainties to which it is exposed.
18 February 2011 /s/ Sergio Marchionne Sergio Marchionne CHIEF EXECUTIVE OFFICER /s/ Alessandro Baldi /s/ Camillo Rossotto Alessandro Baldi Camillo Rossotto EXECUTIVE OFFICERS RESPONSIbLE FOR THE PREPARATION OF THE COMPANYS FINANCIAL STATEMENTS
373
AUDITORS REPORTS
374
AUDITORS REPORTS
AUDITORS REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ARTICLES 14 AND 16 OF LEGISLATIVE DECREE N. 39 OF 27 JANUARY 2010
To the Shareholders of FIAT S.p.A. 1. We have audited the consolidated financial statements of Fiat S.p.A. and its subsidiaries (the Fiat Group) as of and for the year ended 31 December, 2010, which comprise the statement of financial position, the income statement, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the related notes to financial statements. These consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the requirements of national regulations issued pursuant to art. 9 of Italian Legislative Decree n. 38/2005 are the responsibility of the Companys Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 2. We conducted our audit in accordance with the Auditing Standards recommended by CONSOB, the Italian Commission for listed Companies and the Stock Exchange. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The consolidated financial statements present for comparative purposes prior year data. As explained in the notes to the consolidated financial statements, as consequence of the demerger of Fiat S.p.A. (Scissione Parziale Proporzionale pursuant to Article 2506-bis of the Italian Civil Code) approved by the Shareholders Meeting on 16 September, 2010, the consolidated financial statements as of 31 December, 2010 have been prepared in accordance with IFRS 5 Non-current assets held for sale and Discontinued Operations; as a consequence the Directors have re-presented comparative figures related to the prior years consolidated income statement, statement of cash flows and the related notes with respect to the data previously reported and audited by us, on which we issued an auditors report dated 18 February, 2010. These changes in presentation of the comparative figures and related disclosures included in the notes to the consolidated financial statements have been audited by us for the purpose of expressing our opinion on the consolidated financial statements as of and for the year ended 31 December, 2010.
375
3. In our opinion, the consolidated financial statements of the Fiat Group as of and for the year ended 31 December, 2010 comply with International Financial Reporting Standards as adopted by the European Union and the requirements of national regulations issued pursuant to art. 9 of Italian Legislative Decree n. 38/2005; accordingly, they give a true and fair view of the financial position, of the results of operations and of the cash flows of the Fiat Group for the year then ended. 4. The Directors of Fiat S.p.A. are responsible for the preparation of the report on operations and the annual report on Corporate Governance in accordance with the applicable laws and regulations. Our responsibility is to express an opinion on the consistency of the report on operations and of the information reported in compliance with art. 123-bis of Italian Legislative Decree n. 58/1998, paragraph 1, letters c), d), f), l), m) and paragraph 2, letter b) in the annual report on Corporate Governance, with the consolidated financial statements, as required by law. For this purpose, we have performed the procedures required under Auditing Standard n. 001 issued by the Italian Accounting Profession (CNDCEC) and recommended by CONSOB. In our opinion, the report on operations and the information reported in compliance with art. 123-bis of Italian Legislative Decree n. 58/1998 paragraph 1, letters c), d), f), l), m) and paragraph 2, letter b) included in the annual report on Corporate Governance are consistent with the consolidated financial statements of the Fiat Group as of and for the year ended 31 December, 2010. DELOITTE & TOUCHE S.p.A.
/s/ Colin Johnston Colin Johnston Partner Turin, Italy 21 February 2011
This report has been translated into the English language solely for the convenience of international readers.
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AUDITORS REPORTS
AUDITORS REPORT ON THE STATUTORY FINANCIAL STATEMENTS PURSUANT TO ARTICLES 14 AND 16 OF LEGISLATIVE DECREE N. 39 OF 27 JANUARY 2010
To the Shareholders of FIAT S.P.A. 1. We have audited the statutory financial statements of Fiat S.p.A. as of and for the year ended 31 December, 2010, which comprise the statement of financial position, the income statement, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the related notes to financial statements. These financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of national regulations issued pursuant to art. 9 of Italian Legislative Decree n. 38/2005 are the responsibility of the Companys Directors. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the Auditing Standards recommended by CONSOB, the Italian Commission for listed Companies and the Stock Exchange. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. For the opinion on the prior years financial statements, the data of which are presented for comparative purposes, reference should be made to our auditors report issued on 18 February, 2010. 3. In our opinion, the statutory financial statements of Fiat S.p.A. as of and for the year ended 31 December, 2010 comply with International Financial Reporting Standards as adopted by the European Union and the requirements of national regulations issued pursuant to art. 9 of Italian Legislative Decree n. 38/2005; accordingly, they give a true and fair view of the financial position of Fiat S.p.A., and of the results of its operations and its cash flows for the year then ended.
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4. The Directors of Fiat S.p.A. are responsible for the preparation of the report on operations and the annual report on Corporate Governance in accordance with the applicable laws and regulations. Our responsibility is to express an opinion on the consistency of the report on operations and of the information reported in compliance with art. 123-bis of Italian Legislative Decree n. 58/1998, paragraph 1, letters c), d), f), l), m) and paragraph 2, letter b) in the annual report on Corporate Governance, with the financial statements, as required by law. For this purpose, we have performed the procedures required under Auditing Standard n. 001 issued by the Italian Accounting Profession (CNDCEC) and recommended by CONSOB. In our opinion, the report on operations and the information reported in compliance with art. 123-bis of Italian Legislative Decree n. 58/1998 paragraph 1, letters c), d), f), l), m) and paragraph 2, letter b) included in the annual report on Corporate Governance are consistent with the financial statements of Fiat S.p.A. as of and for the year ended 31 December, 2010. DELOITTE & TOUCHE S.p.A.
/s/ Colin Johnston Colin Johnston Partner Turin, Italy 21 February 2011
This report has been translated into the English language solely for the convenience of international readers.
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REPORTS OF THE BOARD OF STATUTORY AUDITORS
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REPORTS OF THE bOARD OF STATUTORY AUDITORS
REPORT OF THE BOARD OF STATUTORY AUDITORS ON THE CONSOLIDATED FINANCIAL STATEMENTS

Dear Shareholders, The 2010 consolidated financial statements of Fiat S.p.A. provided to you report a net profit of 600 million, of which 80 million is attributable to non-controlling interests. They were provided to us within the statutory term, together with the report on operations, and were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the requirements of Italian regulations issued pursuant to Article 9 of Legislative Decree 38/2005. The audit conducted by Deloitte & Touche S.p.A., the independent auditors, led to their opinion that: the consolidated financial statements of the Fiat Group as of and for the year ended 31 December 2010 comply with International Financial Reporting Standards as adopted by the European Union and the requirements of national regulations issued pursuant to art. 9 of Italian Legislative Decree n. 38/2005; accordingly, they give a true and fair view of the financial position, of the results of operations and of the cash flows of the Fiat Group for the year then ended. The audit report also stated that: In our opinion, the report on operations and the information reported in compliance with art. 123-bis of Italian Legislative Decree n. 58/1998 paragraph 1, letters c), d), f), l), m) and paragraph 2, letter b) included in the annual report on Corporate Governance are consistent with the consolidated financial statements of the Fiat Group as of and for the year ended 31 December 2010. Pursuant to Article 41 (3) of Legislative Decree 127/1991, the Board of Statutory Auditors did not review those results and information or the consolidated financial statements, except for the items specified below. The definition of the scope of consolidation, selection of the consolidation methods and the procedures applied comply with the requirements of IFRS, including presentation of the demerger in accordance with IFRS 5 in relation to discontinued operations. Therefore, the structure of the consolidated financial statements is technically correct and consistent overall with the applicable legislation. The report on operations adequately presents the results of operations for 2010 and the financial position at year end, as well as events occurring for the consolidated group of companies subsequent to year end. Based on our examination, the report is consistent with the consolidated financial statements. Turin, 21 February 2011 THE STATUTORY AUDITORS /s/ Riccardo Perotta Riccardo Perotta /s/ Giuseppe Camosci Giuseppe Camosci /s/ Piero Locatelli Piero Locatelli
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REPORT OF THE BOARD OF STATUTORY AUDITORS TO SHAREHOLDERS

Dear Shareholders, Article 153 of Legislative Decree 58 of 24 February 1998 requires the Board of Statutory Auditors to report the results of its oversight activity to Shareholders at the General Meeting called to approve the statutory financial statements, indicating any omissions or improper transactions that have come to its attention, and empowers it to submit motions relating to the financial statements, their approval and other matters under its jurisdiction. This Report fulfills that requirement, in addition to the provisions of Article 2429 (2) of the Civil Code. During the past year, we carried out our responsibilities under Article 149 of Legislative Decree 58/1998 and are thereby able to report on the following items. We report in particular that, for greater clarity of presentation, we have organized the report into three sections: the first relates to oversight activities in general; the second to activities carried out in relation to the demerger undertaken by the Company during 2010; and, the third relates to investigations carried out in relation to complaints received by the Statutory Auditors and qualified by the complainant as pursuant to Article 2408 of the Civil Code. Oversight We attended the meetings of the Board of Directors, where we received information on the Companys activities and on transactions having a significant impact on the financial statements that were subject to Board approval and carried out by the Company and/or its subsidiaries. In this regard, we ascertained that the aforementioned transactions complied with the applicable provisions of law and the By-laws, were not in conflict with any resolution adopted by Shareholders and were consistent with management best practice. The Companys organizational structure appears to be adequate for its size. As part of our work, we met with the heads of the various Company departments and with representatives of the Independent Auditors, from whom we obtained comprehensive information indicating that the Company conformed with management best practice. A group-wide internal control system, which is constantly upgraded, is in place both for Fiat S.p.A. and subsidiaries. We evaluated and monitored the adequacy of the internal control system and the administrative and accounting system, as well as the reliability of the latter in providing a fair presentation of operations, through: i) an examination of the Compliance Officers report on Fiats Internal Control System; ii) an examination of the reports from Internal Audit, in addition to information on its monitoring of the implementation of remediation plans resulting from audit activities; iii) information received from the heads of the respective functions; iv) an examination of corporate documents and the results of the audit work conducted by the Independent Auditors; v) interaction with the statutory and independent auditors of subsidiaries pursuant to Article 151 (1) & (2) of Legislative Decree 58/1998; vi) participation in the activities of the Internal Control Committee, established as a sub-committee of the Companys Board of Directors and composed of three independent Directors. Participation in the activities of the Internal Control Committee enabled the Board of Statutory Auditors to coordinate its own activities with the activities of said Committee for the performance of its role as committee for internal control and audit pursuant to Article 19 of Legislative Decree 39/2010 with the Statutory Auditors overseeing, in particular:
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the process relating to financial reporting; the effectiveness of the systems of internal control, internal audit and risk management; the independent audits of the annual statutory and consolidated accounts; aspects relative to the independence of the independent auditors, with particular reference to non-audit services provided to the audited entity. In that regard, we note that on 2 February 2011, we received a communication from Deloitte & Touche S.p.A. with whom we have had a frequent exchange of information stating that Fiat S.p.A. had retained its services to perform audits of the statutory and consolidated financial statements, limited audits of the half-yearly condensed financial statements, agreed upon procedures for auditing of the quarterly reports, as well as the engagements listed below for which the respective fees are indicated: Review and analysis of the accounting treatment, with reference to the statutory financial statements of Fiat S.p.A. and the consolidated financial statements for the Fiat Group for the year ended 31 December 2010, of significant and non-recurring transactions connected to the partial and proportional demerger of Fiat S.p.A. to Fiat Industrial S.p.A., with fees totaling 170,000. Examination of the pro forma consolidated financial information for Fiat S.p.A. and subsidiaries (Fiat Group Post-Demerger) and Fiat Industrial S.p.A. and subsidiaries (Fiat Industrial Group) for the year ended 31 December 2009 included in the Information Document prepared by Fiat S.p.A. pursuant to Article 70 of the Consob Issuer Regulations, with fees totaling 180,000. Examination of the pro forma consolidated financial information for Fiat S.p.A. and subsidiaries (Fiat Group Post-Demerger) for the year ended 31 December 2009 and the six months ended 30 June 2010 included in the Information Document prepared pursuant to Article 57 of the Consob Issuer Regulations, with fees totaling 65,000. Fee related to the limited audit of the interim financial statements for Fiat S.p.A. and subsidiaries (Fiat Group) for the nine months ended 30 September 2010, with fees totaling 80,000. Agreed upon procedures for verification and examination of documentation relating to various industrial initiatives, with fees totaling 35,000. A voluntary limited audit of the half-year statutory financial statements of Fiat S.p.A. at 30 June 2010, with fees totaling 9,000. Attestation of tax forms (Modello Unico, IRAP, tax consolidation and Form 770) with fees totaling 5,000. It is also noted that on 21 February 2011, Deloitte & Touche S.p.A. presented a report pursuant to Article 19 (3) of Legislative Decree 39/2010 in which it communicated that no fundamental issues had emerged during the audit process and no significant deficiencies were identified in the system of internal control over financial reporting. As a result of the activities carried out, the Board of Statutory Auditors expressed an opinion on the overall adequacy of Fiats Internal Control System and noted that, in its role as committee for internal control and audit, no issues had arisen requiring communication to Shareholders. The guidelines provided by Fiat S.p.A. to its subsidiaries pursuant to Article 114 (2) of Legislative Decree 58/1998 also appear to be adequate. With reference to Article 36 of the Consob Market Regulations, relating to the principal subsidiaries incorporated in and subject to the laws of a non-EU member state, we report that at 31 December 2010 the companies to which that provision applies are included among those companies considered relevant for the purposes of Fiats system of internal control over financial reporting, in relation to which no deficiencies have been reported.
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The Board of Directors provided us with the report on operations for the first half of the year by the statutory deadline and published it in accordance with the Consob requirements. It also complied with the legal requirement for quarterly reports. With regard to Consob communications, for those matters falling under our jurisdiction, we can confirm the following: the information provided by the Directors in the report on operations is comprehensive and complete; as required by Legislative Decree 58/1998, we have been informed on a constant basis on matters falling under our jurisdiction; no third party, related party or intercompany transactions which were atypical and/or unusual, as defined in the Consob Communication of 28 July 2006, were revealed by the periodic checks and audits we performed; with regard to intercompany transactions, the Board of Directors states in the Notes to the Financial Statements that numerous transactions involving the sale of goods and the provision of services took place between the Company and other Group companies, as well as related parties. The report on operations further states that these transactions were executed at standard market terms for the nature of the goods and/or services offered. In that regard, we report that on 21 October 2010, the Board of Directors adopted, subsequent to the favorable opinion expressed by the Internal Control Committee, guidelines for preparation of the Procedures for Transactions with Related Parties, pursuant to Article 4 of Consob Regulation 17221 of 12 March 2010, as subsequently amended. The procedures, which comply with Consob Regulation 17221 of 12 March 2010 and the Consob Communication of 24 September 2010, apply from 1 January 2011 and are published on Fiat S.p.A.s website (www.fiatspa.com); no issues requiring mention arose from meetings conducted with the Statutory Auditors of the principal subsidiaries; we have reviewed and obtained information on the organizational and procedural measures implemented pursuant to and for the effects of Legislative Decree 231/2001, as amended, on the liability of legal persons for the crimes addressed therein. No significant issues requiring mention arose from the report of the Compliance Program Supervisory Body on activities carried out during 2010 or meetings conducted between that Body and the Board of Statutory Auditors; no significant issues arose during meetings held with the Independent Auditors pursuant to Article 150 of Legislative Decree 58/1998; the report of the Independent Auditors, issued on 21 February 2011, contains no qualifications or emphasis paragraphs; in compliance with Article 149 (1)(c-bis) of Legislative Decree 58/1998, we acknowledge the affirmation of the Directors in the Annual Report on Corporate Governance that: the Fiat Group adopted and adheres to the Corporate Governance Code for Italian Listed Companies issued in March 2006, with additions and amendments related to the specific characteristics of the Group. We confirmed that the Group actually complies with the Corporate Governance Code and that its various aspects were discussed in the Annual Report on Corporate Governance submitted to you by the Board of Directors, to which you are referred for more complete information. The Board of Statutory Auditors verified the activities undertaken in relation to the selection and appointment of independent auditors for Fiat S.p.A. for the nine-year period 2012-2020. In particular, the Board was informed of the formal phases of the bid process involving Ernst&Young, KPMG and PricewaterhouseCoopers, in addition to the content of meetings with representatives of those audit firms to outline the bid process, provide necessary clarifications and discuss the elements necessary for the aforementioned audit firms to formulate their proposals. The Board of Statutory Auditors then met with the audit firms participating in the process for appointment of independent auditors for the Fiat Group for the nine-year period 2012-2020, each of which gave a separate presentation of the proposed working methods, in addition to the methodologies they would adopt in the event of their appointment.
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Upon conclusion of the above process, the Statutory Auditors formulated a recommendation for appointment of the independent auditors for the nine-year period 2012-2020, which has been presented to the Internal Control Committee and the Board of Directors and will be submitted to Shareholders during this General Meeting. Demerger In relation to the demerger of Fiat S.p.A. in favor of Fiat Industrial S.p.A., on 23 June 2010, the Board of Statutory Auditors received its first status report on the transaction from the Companys management. In particular, they provided details of the transaction through which Fiat S.p.A. (Fiat) would transfer a portion of its assets and liabilities to a newly incorporated wholly-owned subsidiary (Fiat Industrial), consisting of the shareholdings in Fiat Netherlands Holding N.V. (FNH), Nuove Iniziative Finanziarie Cinque S.p.A. (now Iveco S.p.A.), Nuova Immobiliare Nove S.p.A. (now FPT Industrial S.p.A.) and Fiat Industrial Finance S.p.A., in addition to a portion of its net debt. A description was also provided of how, prior to the Boards approval of the demerger plan, the legal structure of Iveco and the Industrial & Marine business line of FPT was reorganized. In addition, it was explained that, given the legal form of the demerger (scissione parziale proporziale under the Italian Civil Code), the shareholder structure of Fiat Industrial S.p.A. would be substantially equivalent to the existing structure of Fiat S.p.A. and that Fiat S.p.A. shareholders would be allotted, for no compensation, one share in Fiat Industrial for every share of the same class held in Fiat at the time of the demerger. It was then explained that the objective of the demerger was preeminently industrial and that execution of the deed of demerger would be subject to admission of the shares in Fiat Industrial to listing and issue of the necessary approvals. The transaction would have effect from 1 January 2011. During the meetings, there were presentations on the planned reorganization of Iveco to separate the trucks and commercial vehicles activities from the powertrain activities, as well as the establishment of a new group having an adequate financial structure, including in terms of expected cash flows. The Statutory Auditors were also appraised of the planned reorganization of the treasury activities post demerger, whose principal objective was to separate the activities of the Treasury into two companies with operating autonomy to provide centralized treasury services to Fiat Group and Fiat Industrial Group. The above to be executed while guaranteeing both structures, along with the necessary separation, use of the current procedures, the existing levels of operating security, automation and connectivity with the banking system and various legal entities within the Group. The Statutory Auditors were also appraised of legal aspects and timing relating to the demerger, in particular in relation to the treatment of ordinary, preference and savings shares so as to not prejudice the rights of any shareholders, either directly or indirectly. In addition, information was given to the Statutory Auditors on the impacts of the demerger on the statutory and consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS), with particular emphasis on the treatment of the transaction as a business combination under common control and therefore with assets and liabilities being transferred at their existing book value. In addition, the Statutory Auditors were informed that in the 2010 consolidated financial statements, items relating to the future Fiat Industrial Group would be presented in a single line item as discontinued operations, but with detail provided in the notes and that, for completeness, the report on operations would also include consolidated data for the entire Fiat Group, with no separate evidence of discontinued operations. During the second half of 2010, the Board of Statutory Auditors received periodic updates on formal activities related to the future listing of Fiat Industrial Group and activities to finance the group independently from Fiat S.p.A., as well as on documents filed with Borsa Italiana and Consob in relation to the application for admission of Fiat Industrial to listing, including the Business Plan for Fiat Industrial Group and, lastly, on the sponsors for the listing and the transfer of lines of credit.
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The Statutory Auditors took note of the approval for the listing of Fiat Industrials shares issued by Borsa Italiana and receipt of the decision of equivalence from Consob and the positive conclusion, therefore, of the demerger of activities from Fiat S.p.A. and listing of Fiat Industrial S.p.A. Complaints under Article 2408 of the Civil Code It is necessary to refer back to the minutes of the General Meetings of 26 March 2010 and 16 September 2010, the full text of which will not be replicated herein for the sake of brevity. On 24 March 2010, the shareholder Mr. Bava presented a complaint under Article 2408 of the Civil Code, which the Board of Statutory Auditors received on 25 March, for acts which he considered improper related to: the alleged ambiguity and contradiction in the press release issued by Fiat on March 24th in relation to comments appearing in the daily newspaper La Repubblica regarding a supposed spin-off of the auto business and plan for employee redundancies. That statement was alleged to be ambiguous and contradictory in that it concluded with the affirmation that any speculative comments which may have appeared in the press were premature and not based on fact and, in the opinion of Mr. Bava, such comments could be either premature or not based on fact but not both; an alleged violation of the principle of prudence due to the dividend proposal submitted for the approval of Shareholders at the meeting of 26 March 2010. In particular, the dividend would be funded through dividends received from the subsidiaries Fiat Group Automobiles and Iveco, which resulted in a write-down of 760 million on those investments. These assertions were accompanied by references to certain extracts from the 2009 financial statements and, in particular, the section relating to the main risks and uncertainties to which Fiat S.p.A. and the Group are exposed. During the general meeting of 26 March 2010, Bava remarked that, liquidity had increased disproportionately and wanted to understand the reasoning as lately the Company was paying interest at rates of between 6.87% and 9%, compared to a return on capital of 2%; he stated that all that liquidity has a cost, that it is not possible to not take the net financial position into account and that amounts receivable from financing activities, which are trade receivables, cannot be included; he made a formal demand under Article 2408 of the Civil Code to provoke reflection on his assertions and gave notice that he would also draw the matter to the attention of the competent body for it to be monitored. During the general meeting of 16 September 2010, the Statutory Auditors informed shareholders that Mr. Bava and Mr. Zola (also a shareholder) had both brought complaints on 14 September 2010 under Article 2408 of the Civil Code for acts they considered improper. Specifically: Mr. Bava considered it improper that his request for the email address of the Chairman of Fiat S.p.A., to whom he wished to send his questions for todays meeting, was refused; Mr. Zola considered the fact that the notice of the general meeting did not include information details such as the date and signature and also that it only had one item on the agenda, to be peculiar, unusual and unlawful, such that it constituted improper conduct. He also believed that the general meeting should have provided for different times of entry for the holders of ordinary and preference shares in order to prevent the holders of different classes of shares from being obliged to attend parts of the meeting in which they were not allowed to speak or vote.
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He also asked for an explanation of why a general meeting had not been called for the holders of savings shares. Lastly, he denounced the absence of an independent appraisal in support of the transaction being submitted to shareholders for approval. During the general meeting of 16 September 2010, Mr. Bava claimed that it was not legitimate to combine the ordinary and extraordinary general meetings, and that, for the transaction being proposed at the general meeting, in accordance with Articles 2506 and 2443 of the Civil Code, a sworn appraisal of the assets in kind and the receivables should have been carried out. The Statutory Auditors re-examined the above assertions closely, took note of proceedings at the general meetings of 26 March 2010 and 16 September 2010, at which they were present, and determined that the opinions expressed by the Chairman on behalf of the Statutory Auditors in a specific communication were complete. Those opinions are available in the full text of the minutes of the meetings. In particular, in relation to the complaint presented by Mr. Bava under Article 2408 of the Civil Code, as described above, also immediately prior to the general meeting held on 26 March 2010, in which the Statutory Auditors were essentially asked to carry out further verification of the Companys liquidity position, a demand which was repeated during the general meeting of 16 September 2010, we note the following: the Statutory Auditors had already expressed their view during the meeting of 26 March 2010 that ruled out any improper conduct; nevertheless, as part of their monitoring activities, and with the aid of the Independent Auditors, the Statutory Auditors have continued to review the matter each quarter and, as at 31 December 2010, have found no evidence of improper conduct. In relation to the complaint brought by Bava under Article 2408 of the Civil Code asking to be informed of the amount earned by the lawyer Mr. Anfora for his services to Fiat, given that Mr. Anfora was representing the Company in a dispute against him without having charged a fee, the Statutory Auditors, despite the irregular manner in which the demand was presented, examined the issue and concluded that the conferment/execution of a mandate for professional services does not constitute an improper act. In any event, in relation to the criminal matter to which Mr. Bava referred, the Statutory Auditors note that as of todays date no invoice for legal services has been submitted to the Company. We are not aware of other facts or considerations to be reported to Shareholders. In conclusion, we note that during the year, the Company assessed the effective independence of the independent directors, and we confirm that the principles and procedures for assessment were fairly applied in accordance with Article 3.c.5 of the Corporate Governance Code. We confirmed our own continued independence as required under Article 10.c.2 of the Corporate Governance Code. Based on the audits we performed in the areas within our jurisdiction, pursuant to Article 149 of Legislative Decree 58/1998, and in consideration of the information received from the Independent Auditors, we have verified that the statutory financial statements for the year ended 31 December 2010, which report net profit of 441,959,509, have been prepared and are presented in accordance with the applicable provisions of law. In particular, we verified that none of the exemptions permitted under Article 2423 (4) of the Civil Code were exercised.
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As part of the oversight activities described above, the Board of Statutory Auditors met 12 times, in addition to being present at the 5 meetings of the Board of Directors and the 9 meetings of the Internal Control Committee. On the basis of the control and oversight activities carried out during the year, we find nothing that would prevent approval of the statutory financial statements at 31 December 2010 or the motions put forward by the Board of Directors.
Turin, 21 February 2011 THE STATUTORY AUDITORS /s/ Riccardo Perotta Riccardo Perotta /s/ Giuseppe Camosci Giuseppe Camosci /s/ Piero Locatelli Piero Locatelli
Following is a list of positions as director or statutory auditor held by members of the Board of Statutory Auditors at other companies at 31 December 2010 (pursuant to Article 144-quinquiesdecies of the Issuer Regulations). For each position, term of office expires upon approval of financial statements for the year indicated in brackets. Riccardo Perotta: Chairman of the Board of Statutory Auditors at Coface Assicurazioni S.p.A. (2011), Coface Factoring Italia S.p.A. (2010), Hyundai Motor Company Italy S.r.l. (2010), Jeckerson S.p.A. (2010), Meccano S.p.A. (2012), Metroweb S.p.A. (2011), Value Partners S.p.A. (2011); Regular auditor at Boing S.p.A. (2010), Mediolanum S.p.A. (2010), Prada S.p.A. (31 January 2012) and Director at Intesa Sanpaolo Private Banking S.p.A. (2012). Giuseppe Camosci: Chairman of the Board of Statutory Auditors at AEREA S.p.A. (2010), Magneti Marelli S.p.A. (2012), Immobiliare Elfin S.r.l. (2011), Samsung Electronics Italia S.p.A. (2010), ICAL S.p.A. (2012); Regular auditor at BNP Paribas Lease Group S.p.A. (2012), Finos S.p.A. Gruppo Trussardi (2012), Locatrice Italiana S.p.A. (2012), Therabel Gienne Pharma S.p.A. (2011), Trussardi S.p.A. (2012), TRS formerly Sosir S.p.A. Gruppo Trussardi (2012), Fortis Lease S.p.A. (2012) and Director at SAPIO S.r.l. (2010). Piero Locatelli: Regular auditor at Giovanni Agnelli & C. S.a.p.a. (2011) and Simon Fiduciaria S.p.A. (2010).
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AGENDA AND RELATED REPORTS AND MOTIONS
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Dear Shareholders, We hereby submit the Statutory Financial Statements for the year ended 31 December 2010 for your approval and propose that the profit for the year of e441,959,509 be allocated as follows: to the Legal Reserve, e22,097,975; to Shareholders, a dividend of: e0.09 per ordinary share, representing a total of approximately e98.3 million (e94.8 million excluding own shares currently held); e0.31 per preference share, representing a total of approximately e32 million; e0.31 per savings share, representing a total of approximately e24.8 million; to Retained Profit, the remaining amount totaling approximately e264.8 million. Payment of the dividend will be from 21 April 2011, with detachment of the coupon on 18 April. The dividend will be payable on shares outstanding at the coupon detachment date. 18 February 2011 On behalf of the Board of Directors /s/ John Elkann John Elkann CHAIRMAN
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MOTION FOR THE PURCHASE AND DISPOSAL OF OWN SHARES

Dear Shareholders, At the General Meeting of 26 March 2010, Shareholders renewed the authorization of 27 March 2009 for the purchase of a maximum number of own shares for all three classes not to exceed 10% of share capital or an aggregate amount of e1.8 billion, including existing reserves for own shares of e656.6 million. In consideration of the reduction in the par value of shares following the demerger of activities to Fiat Industrial S.p.A., on 16 September 2010, Shareholders approved a reduction in the authorization for the purchase of own shares to a maximum value of e1.2 billion. The condition that the total number of shares, in all three classes, may not exceed 10% of share capital and all other provisions approved by Shareholders on 26 March 2010 shall continue to apply. No shares were repurchased under that authorization. The most recent purchases were in June 2008 and totaled 5.73 million ordinary shares (or 0.52% of share capital) for an invested amount of e61.2 million. Following that, the program was suspended. As a result of the Demerger, on 1 January 2011 Fiat S.p.A. was allotted 38,568,458 ordinary shares in Fiat Industrial S.p.A., corresponding to the number of own shares held. The portion of the reserve for own shares attributable to Fiat Industrial S.p.A. shares, totaling approximately e368 million, has been reclassified as an asset with initial measurement at fair value. As a consequence, the reserve for own shares was reduced by approximately e368 million with an equivalent increase in the retained profit reserve. Following these adjustments, which will have no impact on 2011 profit or loss, the reserve for own shares totaled e289 million. In order to maintain the necessary operating flexibility over an adequate time period and in consideration of the fact that the current shareholder authorization expires on 26 September 2011, we are proposing that you renew authorization for the purchase and disposal of own shares including in both cases through Group subsidiaries, subject to the limits and in accordance with the procedures provided in the Italian Civil Code, the combined provisions of Article 132 of Legislative Decree 58 of 24 February 1998 and Article 144-bis of the Issuer Regulations, and other applicable laws and regulations. We believe that this authorization provides the Company with a strategic opportunity for investment for all purposes permitted by law, including the servicing of incentive plans. We therefore propose that you revoke the previous resolution of 26 March 2010 and subsequent amendments, for the part not already utilized as at the date of the Annual General Meeting, and authorize the purchase of own shares for all three classes (par value of e3.50 each) for a period of eighteen months and for an amount not to exceed the legally established percentage of share capital, inclusive of the Fiat shares already held by the Company and its subsidiaries. As at 18 February 2011, Fiat S.p.A. owned 38,568,458 ordinary shares, equal to 3.02% of share capital. No other Group company owned Fiat shares. The maximum and minimum purchase price per share shall be directly related to the market price specifically, the reference price reported by the Stock Exchange on the day prior to the purchase. The maximum and minimum price may not be more than 10% higher or lower, respectively, than the reference price.
392
Nevertheless, the Company intends to maintain reserves available for the purchase of a maximum aggregate amount of e1.2 billion, including existing reserves (e289 million at 18 February 2011) for own shares. Purchases will be made on one or more occasions on regulated markets and in accordance with the terms and procedures established by Borsa Italiana consistent with equality of treatment for all shareholders. However, should the opportunity arise, purchases may also be made through a public tender offer, offer for exchange, or other permitted procedure. We are also requesting authorization to dispose of own shares, directly or through subsidiaries, on one or more occasions, even if the total of approved purchases has not been made, without time limits or restraints and in a manner suitable to the interests of the Company, as permitted by law (including the transfer of rights related to the shares, such as, for example, stock lending). Own shares may also be used to service incentive plans for directors and executives, as well as any additional plans that may be established by the Board in the future and subsequently submitted for the approval of Shareholders. In such an event, the shares shall be sold at the prices set when the rights are granted. 18 February 2011 On behalf of the Board of Directors /s/ John Elkann John Elkann CHAIRMAN
393
APPOINTMENT OF INDEPENDENT AUDITORS

Dear Shareholders, Deloitte & Touche S.p.A.s mandate as independent auditors, approved by Shareholders on 3 May 2006, will expire with the issue of their report on the statutory financial statements for the year ended 31 December 2011 and, pursuant to law, is no longer renewable. The Board of Directors hereby submits the recommendation of the Board of Statutory Auditors relative to the appointment of independent auditors for the nine-year period 1 January 2012 31 December 2020, which is as follows: RECOMMENDATION OF THE BOARD OF STATUTORY AUDITORS OF FIAT SPA FOR THE APPOINTMENT OF INDEPENDENT AUDITORS FOR THE NINE-YEAR PERIOD 2012 2020. Dear Shareholders, With the engagement of Deloitte & Touche S.p.A. for the period 2006-2011 nearing expiry, it is necessary to appoint independent auditors, in accordance with Legislative Decrees 58/1998 and 39/2010. Fiat S.p.A. invited Reconta Ernst & Young S.p.A., KPMG S.p.A. and PricewaterhouseCoopers S.p.A. to submit proposals for the nine-year period 1 January 2012 31 December 2020 in relation to Fiat S.p.A. and principal subsidiaries. The outgoing auditors, Deloitte & Touche S.p.A., provided information on their activities to the firms invited to submit proposals. The three prospective firms, all meeting the necessary legal requirements, submitted proposals. In response to the Companys follow-up request, only two of the firms elected to provide additional information, which included a revised fee proposal. The Board of Statutory Auditors, with the assistance of the relevant functions within Fiat S.p.A., then proceeded with the activities necessary to formulate its recommendation, taking into consideration, among other things, that: each central working team is composed of individuals objectively considered to have an adequate professional profile; the number of hours required to carry out the audit activities is estimated at between a minimum of 1,130,750 and a maximum of 1,144,002 for the nine-year period; all offers incorporate a reduction, albeit at differing levels, in the number of hours for the second and subsequent years, with a consequent reduction in cost;
394
the fee proposals for execution of the work ranged from a minimum of e52,492,948.00 to a maximum of e82,653,518.00 for the period; mechanisms would exist to avoid situations potentially compromising the auditors independence. On the basis of the description of principles, criteria, methods and scope of the examination and audit activities that the prospective audit firms intend to adopt in relation to execution of the mandate, the Board of Statutory Auditors considers the adequacy and completeness of the audit plans to have been suitably illustrated. In particular, no elements emerged in relation to which the independence, technical capability, organization or experience of the participants would be considered inadequate to the breadth and complexity of the proposed mandate. This is indirectly confirmed by the fact that many other Italian and foreign companies both listed and non-listed have engaged the above audit firms for similar activities. Considering their substantial equivalence in other areas examined, and even though it cannot and should not constitute the principal factor considered in relation to the mandate to be executed, the Statutory Auditors deem it important to also take the level of proposed fees into account. The Board of Statutory Auditors, therefore, proposes that Reconta Ernst & Young S.p.A. be appointed as the Companys independent auditors for the nine-year period 2012-2020. The firm estimates that, in relation to Fiat S.p.A. and subsidiaries, it will spend a total of 1,130,750 hours over the period, of which: in relation to Fiat S.p.A.: 7,020 hours for audit of the statutory and consolidated financial statements, including audit activities carried out during the financial year; 5,460 hours for limited audits of the half-year condensed financial statements; for audit activities relating to subsidiaries: 1,118,270 hours. The total fee proposed is e52,492,948.00, of which: in relation to Fiat S.p.A.: e356,592.00 for audit of the statutory and consolidated financial statements, including audit activities carried out during the financial year; e277,350.00 for limited audits of the half-year condensed financial statements; for audit activities relating to subsidiaries: e51,859,006.00.
395
In addition to the above amounts, (i) reimbursement of regulatory fees payable to Consob and (ii) reimbursement of expenses up to a limit of 5% of audit fees. Annual fees and expenses will be adjusted by 75% of any change in the cost of living index in excess of 5% for the country to which the currency indicated in the engagement letter relates (ISTAT index for Italy or the equivalent in other eurozone countries or for other local currencies), as formulated in the audit proposal. The Statutory Auditors Dear Shareholders, We propose that you approve the motion for appointment of the independent auditors for the nine-year period 1 January 2012 31 December 2020, as proposed by the Board of Statutory Auditors. 18 February 2011 On behalf of the Board of Directors /s/ John Elkann John Elkann CHAIRMAN
CONTACTS
Head Office Via Nizza, 250 - 10126 Turin (Italy) Tel. +39 011 00 61 111 web site: www.fiatspa.com Investor Relations Tel. +39 011 00 62 709 Fax +39 011 00 63 796 e-mail: investor.relations@fiatspa.com Sustainability Tel. +39 011 00 63 908 e-mail: sustainability@fiatspa.com Press Office Tel. +39 011 00 63 088 Fax +39 011 00 62 459 e-mail: mediarelations@fiatspa.com
Head Office Via Nizza, 250 - 10126 Turin (Italy) Tel. +39 011 00 61 111 web site: www.fiatindustrial.com Investor Relations Fax +39 011 00 63 796 e-mail: investor.relations@fiatindustrial.com Sustainability Tel. +39 011 00 62 627 e-mail: sustainability@fiatindustrial.com Press Office Tel. +39 011 00 72 122 Fax +39 011 00 74 411 e-mail: mediarelations@fiatindustrial.com
This document is printed on eco-responsible Arjowiggins Graphic Cocoon Silk paper (150 gsm for internal pages and 300 gsm for cover): an extra-white coated paper made from 100% recycled pulp with EU Flower certification FR/011/003
by using Cocoon Silk from Arjowiggins Graphic, rather than a non-recycled paper, the environmental impact was reduced by:
2,392.4
kg of landfill
69,984
liters of water
603
kg of CO2
6,464
kWh of energy
4,307
km travel in the average European car
3,888
kg of wood
Fiat S.p.A. offsets the GHG emissions from paper used to print its Annual Report, Sustainability Report and Corporate Governance Report. The total of 17 tons in CO2 emissions will be offset by a forestry project in Italy.
Illustrations and creative design Atelier Roger Pfund, Communication visuelle S.A. Geneva, Switzerland Graphic design In Adv + Sunday Turin, Italy Editorial coordination Sunday Turin, Italy Printing Stamperia Artistica Nazionale Trofarello (TO), Italy Printed in Italy March 2011
Fiat S.p.A. Registered Office: 250 Via Nizza, Turin, ITALY Share capital: 4,464,812,520 Turin companies Register/ Tax code: 00469580013

Fiat Annual Report 2010

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Fiat Annual Report 2010

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ANNUAL REPORT

105th financial year

BOARD OF DIRECTORS AND AUDITORS

BOARD OF DIRECTORS AND AUDITORS

LETTER FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER

LETTER FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER

/s/ John Elkann John Elkann CHAIRMAN

/s/ Sergio Marchionne Sergio Marchionne CHIEF EXECUTIVE OFFICER

THE GROUP AT A GLANCE

THE GROUP AT A GLANCE

Fiat Group pre Demerger

56,258 2010 50,102 2009 2008 0

2010 2009 59,564(*) 2008 50,000 60,000

2,204 1,058 3,362 0 1,000 2,000 3,000 4,000

10,000 20,000 30,000 40,000

2010 2,442 2009 4,418 2008 5,949 0

THE GROUP AT A GLANCE

STRUCTURE: FIAT & FIAT INDUSTRIAL

STRUCTURE: FIAT & FIAT INDUSTRIAL

THE GROUP AT A GLANCE

FIAT GROUP BRANDS

FIAT GROUP BRANDS

THE GROUP AT A GLANCE

FIAT GROUP BRANDS

THE GROUP AT A GLANCE

FIAT INDUSTRIAL GROUP BRANDS

FIAT INDUSTRIAL GROUP BRANDS

THE GROUP AT A GLANCE

FIAT INDUSTRIAL GROUP BRANDS

THE GROUP AT A GLANCE

FIAT & FIAT INDUSTRIAL WORLDWIDE

FIAT & FIAT INDUSTRIAL WORLDWIDE

REVENUES BY DESTINATION EMPLOYEES PLANTS R&D CENTERS

REVENUES BY DESTINATION EMPLOYEES PLANTS R&D CENTERS

REVENUES BY DESTINATION EMPLOYEES PLANTS R&D CENTERS

REVENUES BY DESTINATION EMPLOYEES PLANTS R&D CENTERS

REVENUES BY DESTINATION EMPLOYEES PLANTS R&D CENTERS

THE GROUP AT A GLANCE

118 Operating performance: Discontinued Operations

(1) (1) (1) (1) (1) (1)

CONTINUING AND DISCONTINUED OPERATIONS

(1) (1) (1) (1) (1) (1)

SELECT DATA BY REGION Fiat Group pre Demerger

2010 81,353 47,080 11,423 47,471 12,597 199,924

FTSE ITALIA ALL SHARE

30.5% 5.2% 3.1% 2.4% 2.2% 20.6% 8.0% 24.5%

John Griffin (through Blue Ridge Capital)

EARNINGS PER SHARE

2010 0.410 0.565 0.409 0.564

2009 (0.677) (0.677) (0.677) (0.677)

2008 1.290 1.445 1.285 1.440

2007 1.537 1.692 1.526 1.681

Capital Research & Management Co.

REFERENCE PRICE PER SHARE (*):

Ordinary shares Preference shares Savings shares

30.12.10 15.430 11.170 11.090

31.12.09 10.250 6.000 6.295

31.12.08 4.590 2.440 3.035

28.12.07 17.695 14.640 14.655

29.12.06 14.468 12.119 13.880

MONTHLY MINIMUM AND MAXIMUM PRICE IN 2010

KEY EVENTS IN 2010

KEY EVENTS IN 2010