Fiat : The Board of Directors examines the
Group’s results for the second quarter of 2000
The Board of Directors of Fiat S.p.A. met today in Turin under the chairmanship of Paolo Fresco to review the Group’s
consolidated results for the second quarter and the first half of 2000. The Group’s performance confirms the
improvements in profitability seen in the first quarter of the year, especially for Fiat Auto.
Highlights are as follows:
Strong growth in net revenues, which reached 15.5 billion euros 6 (+ 2423% compared to the second quarter of
1999).
Operating income doubled to 362 million euros (157 million euros in 1999); the return on sales earned by
industrial operations rose from 1.5% to 2.6%.
Fiat Auto confirmed the improvement of its results posting a return on sales of 0.6%, up from a loss of 2.3% in
the corresponding period of 1999.
Income before taxes attributable to the Group amounted to 122 million euros compared to 254 million euros in
the second quarter of the prior year, which, however, had benefited from extraordinary gains amounting to
approximately 150 million euros .
Definitive agreement signed with General Motors, laying the foundations for important industrial synergies for
Fiat Auto.
Net revenues, up 24,223.3% to 15.58915,473 million euros (compared to 12,548 million euros in the second quarter
of 1999) reflect, on the one hand, the changes in the scope of consolidation during the last 12 months - in particular,
the acquisitions of Case Corporation, Pico and Fraikin – and, on the other hand, solid growth in the majority of the
Sectors, especially Fiat Auto (+5.8%) and Iveco (+9.9%, excluding Fraikin). On a comparable consolidation basis, the
increase in the Group’s net revenues was about 7.3%, confirming the progress already recorded in the first quarter.
At 362 million euros, consolidated operating income before financial, extraordinary and tax items, more than doubled
the 157158 million euros recorded in the corresponding period of the previous year, thus accelerating the positive
trend already posted in the first quarter of 2000.
A contribution to this recovery came from Fiat Auto (with operating income of 44 million euros, compared to a loss of
148 million euros in the second quarter of 1999, a remarkable progress partially slowed by the strong competitive
pressures which continue to characterize the European car market) and from Iveco (with 98 million euros, compared to
76 million euros in the same period of the prior year).
The improvement in the Group’s profitability could have been higher if CNH had not reduced its contribution - which, at
108 million euros, is nevertheless positive - owing to the combined effect of the costs incurred to integrate New
Holland and Case, which had however been taken into account when the companies were acquired, and the greater
than expected difficulties encountered in the North American farm equipment market.
Remarkable progress was made by FiatAvio and Comau. On a comparable consolidation basis, (excluding, among
other things, the contribution by the Lubricants Division, sold in the first quarter of 2000), Magneti Marelli also improved
its operating results.
Income before taxes attributable to the Group (excluding minority interest) in the second quarter of 2000 was equal to
122 million euros, compared to 254 million euros in 1999. In 1999 net extraordinary income of approximately 150
million euros was recorded on the sale of certain non-strategic operations and
investments. Excluding net extraordinary income from the comparison, income before taxes attributable to the Group was higher than in the prior
year even though financial expenses increased as a result of the acquisitions made during the past twelve months.
Net financial position showed net debt of about 6,238 million euros, in line with the 6.4005,962 million euros at the end
of March 2000.
Net invested capital at June 30 was 21,060 million euros, compared to 14,790 million euros at the end of June 1999
and, as for net financial position, substantially in line with the 21,257 million euros at the end of March 2000. The
change compared to the prior year was mainly due to the consolidation of the
new acquisitions.
Performance in the first half of 2000
In the first semester 2000 as a whole, the Fiat Group achieved the following results:
consolidated net revenues reached [….] 29,776 million euros, with an increase of […%] 26.4% over the
corresponding period of 1999 (about 9% on a comparable consolidation and exchange basis+);
consolidated operating income amounted to [… ]475 million euros, compared to 163 million euros in the first half
of the prior year (+191%); the return on sales earned by industrial operations was 1.8% (0.9% in 1999);
income before taxes attributable to the Group amounted to 402 million euros compared to 231 million euros in
1999. Income before taxes for the first half of 2000 benefited from significant extraordinary income for 366
million euros, mainly as a result of the sale of the Lubricants Division of Magneti Marelli (in the first half of 1999,
net extraordinary income was equal to 230 million euros).
Full-year outlook and strategic evolution
For the year 2000 as a whole, expectations of an improvement in results are confirmed as a consequence of both an
appreciable increase in sales and the improvements in operating income which are progressively being consolidated.
To obtain such results, constant attention will have to be paid to complete the integration of the companies which
recently became part of the Group and to rapidly achieve the synergies made possible by the agreements. With
particular reference to the market difficulties encountered by CNH especially in North America and Latin America, a
new restructuring plan was recently announced. This plan will principally involve the North American operations and will
accelerate and extend the scope of the existing one. The Group will also be engaged in completing the plan to reduce the costs of business support processes, which was
launched last year and will bring total efficiencies worth 1 billion euros by the end of 2000. Special attention will be
directed to reducing the level of debt of the Group.
The financial results for the second half of the year will also benefit from the important initiatives implemented by the
Group in the pursuit of its strategic objectives to increase the focus on its core business and accelerate the growth of
the services sector.
The first initiative is the agreement for the sale of 51% of Fiat Ferroviaria to the French group Alstom, which
provides for a call and put option for the remaining 49% over a period of two years. This is a further step for the
Fiat Group to focus on the areas in which, thanks to its industrial excellence and global leadership positions,
greater value for the stockholders can be created, while at the same time giving the operations being sold the
opportunity to be part of leading global enterprises. The second initiative is the agreement for the merger of Telexis, the Fiat Group company operating in the
telecommunications sector, with Acea-Telefónica to create Atlanet. The new company, in which Fiat holds a 28%
stake, plans to become one of the major operators in the Italian telecommunication market, thus leveraging the
assets and the expertise developed by Telexis in a high-tech sector and up to now entirely dedicated to the
Group’s service
During the first half of the year, tender offers were launched for the minority interest in Toro Assicurazioni and Magneti
Marelli. The first stage of the tender offer for Toro was successfully concluded on July 3, leading Fiat to hold a 97%
stake in the Company. The takeover bid for Magneti Marelli was concluded on July 24 with offers that brought the Fiat
stake to about 99%. Thanks to these transactions, in the second part of the year Fiat will increase its share in the
earnings of the two Companies, thus offsetting the financial expenses incurred to purchase full control. This control,
moreover, will provide the Group with greater strategic flexibility in pursuing the full, as yet unexpressed, potential of
these businesses.
The agreement with General Motors
On July 24, Fiat and General Motors finalized the strategic industrial alliance in Europe and Latin America signed last
March 13.
Final agreements were signed for the creation of two 50-50 joint ventures in the areas of purchasing and powertrain
production which will be consolidated in Fiat’s financial statements using the equity method for the 50% stake owned
by Fiat Auto.
The agreements provide the legal basis for the organization of the two new companies. The joint ventures will become
immediately operational while resources, employees and operations will be transferred in the course of this
year.
In addition, Fidis and GMAC, the financial companies of Fiat Auto and General Motors, signed a Credit Cooperation
agreement. The document formalizes the commitment of both Companies to commence a common study to identify
potential areas of cooperation in relation to geographic footprint, information technology, back office operations,
financing of the commercial network and others.
To seal the industrial alliance, General Motors underwrote a capital stock increase equal to a 20% stake in Fiat Auto
Holdings B.V. - the newly-established company which was set up as a result of the reorganization plan stemming from
the agreement – which controls Fiat Group’s operations in the automobile and light commercial vehicles sectors, with
the exception of Ferrari and Maserati. Fiat purchased more than 32 million ordinary shares of General Motors, equal to
about 5.6% of the capital stock of the American company.
