Fiat Group and Fiat Auto Development Plan Presentation to Government, Local Authorities and Trade Unions Palazzo Chigi August 3, 2005

The Fiat Group An industrial Group focusing on automotive activities 2004 Revenues

of which

of which

manufactured in Italy

sold in Italy

Group: € 46,703 million

46.2%

33.4%

•

Fiat Auto: € 20,539 million

67.7%

50.3%

2004 Investments (IAS/IFRS)

of which R&D

Group: € 3,953 million •

Fiat Auto: € 2,282 million

Headcount at 06. 30.2005 Group: 179,771 • (*)

*

Fiat Auto: 50,947 including Fiat Powertrain and Sevel Val di Sangro

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 1

1,803 990

of which in Italy

of which South and Islands

83,320

30,957

33,887

19,787

2004 - Financial Highlights ™ 2004 Group targets achieved ™ Strategic freedom regained after the GM settlement ™ Leadership and organization changes ™ Last year of net loss for the Group

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 2

2005 – Strategic Development ™ Powertrain Technologies industrial business unit set up ™ Maserati acquisition to extend reach of Alfa Romeo brand into high-end sports market ™ Alliance between Iveco Finance and Barclays to strengthen financial services to Iveco customers ™ New LCV cooperation agreement between Fiat, PSA and Tofas in Turkey

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 3

2005 – 2Q Operations update (under IAS/IFRS) ™ Significant operating improvement on flat top-line • Group revenues at €12.1bn in line with Q2 ’04, but Auto revenues up 2.4% to €5.0bn helped by currency and better channel mix ™ Group trading profit at €360mn, doubled from 2004 • improved performance by all businesses, except for components ™ Fiat Auto loss sharply reduced from €238mn to €88mn ™ Net income at €217mn (+ €463mn), including €254mn net after-tax unusual items ™ Net industrial debt down €0.9bn to €9.2bn ™ Solid cash position at €7.3bn after payment of debts for €0.5bn ™ Pro-forma for conversion of mandatory convertible and Italenergia Bis put yields: • Net industrial debt to Group equity at 0.44:1 • Positive €35mn Q2 net income without net after-tax unusual items ™ 2005 financial objectives confirmed

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 4

2005 – Sectors ™ Automobiles • Difficult market particularly in the first half of the year • Launch of new products concentrated in the second half of the year • Thorough rationalization of costs in non-essential activities ™ Agricultural and Construction Equipment • Revenues up 5% in US$ terms • Weak environment in Latin America • CE market stronger than AG; US better than Europe ™ Commercial Vehicles • Revenues up 2-3% • Sound order portfolio • Rationalization underway ™ Components • Revenues up 5-6% ™ Business Solutions • Rationalization and focusing on activities of service/support to the Group Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 5

Agricultural and Construction Equipment (profitability comparision with 2004)

2,500

CATERPILLAR

Operating result [us$ million]

2,000

JOHN DEERE

1,500

1,000

500

AGCO 0 0

2 Revenues = US$2 bn

4

6

8 ROS [%]

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 6

10

12

14

16

Commercial Vehicles (profitability comparision with 2004) 1,600

DAIMLER

1,400 1,200

Operating result [us$ million]

PACCAR 1,000

VOLVO 800

SCANIA

600

MAN

400 200 0 0

2 Revenues = €2 bn

4

6

8 ROS [%]

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 7

10

12

14

16

Operating margin targets confirmed [under IAS/IFRS, before unusual items]

Operating Margin

Automobiles

2004 Achievements

(4.2%)

2005 Targets

(1.5%) excl. restructuring of

2007 Targets

2-4%

up to €320 mn 6-6.5% excl.

CNH

4.7%

restructuring

10%

of ~ €50 mn >4% excl.

Iveco

4.2%

restructuring

7,5%

of ~ €30 mn

Components

2.6%

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 8

~3%

5-7%

Group financial objectives confirmed [under IAS/IFRS]

2004 Achievements

2005 Targets

2006 Targets

Group Revenues Group Op. Income/margin

Sales CAGR of 6%

(a)

Group Cash Flow (b)

Group Net Income

Group break-even

Negative cash flow before exceptionals significantly reduced

ROS of 5-6%

Net industrial cash flow of ~€ 2.0 bn due to exceptionals (c)

Positive Group operating cash flow

Positive net income due to unusual items

Net income in excess of €700 mn

Net income of €1.62.0 bn EPS €1.25/1.55 (d)

1:1 net debt to

No more than 1:1 net

Group Net Industrial Debt (a) (b) (c) (d)

2007 Targets

Group equity

debt to Group equity

Before unusual items Cash Flow from operations Incl. Italenergia Bis: €1.8 bn; Real estate: €0.2 bn; GM settlement net of assumed Powertrain debt: €1.0 bn On a fully diluted basis

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 9

2005-2008 Fiat Auto Development Plan

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 10

Product Range Plan – 2003-2004 Commercial launches Product range renewal started in 2003 New models

2003

FL = Facelift

2004

MY = Model Year

Punto FL

Stilo FL

N. Panda Multipla FL

Idea

Barchetta FL

Musa

Ypsilon 166 FL 156 sedan and Sportwagon FL

GT

GTV FL

Crosswagon Q4 147 FL

Spider FL

Stilo MW FL Van

Punto FL Van

Doblò Cargo MY

N. Panda Van

Stilo MW Van Strada FL

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 11

Multipla Van FL

Scudo FL

New Product Range – Expected production start-up New models

FL = Facelift

Product portfolio enrichment

Models not yet announced

2005

Croma

MY = Model Year

2006

2007

2008

Future C Segm.

New A Segm. (500)

Future MPV

Multipla MY

D200

Minicargo Panorama

Panda FL

Grande Punto FL

Idea FL

Croma FL

Grande Punto

SUV Doblò Panorama FL SUV

New C/D segment

Ypsilon FL

Specialty Phedra MY Musa FL

GT FL 159 Sedan

Future C Segm.

159 sedan and SW FL

Brera

Brera FL

159 Sportwagon

Brera Spider FL

Brera Spider Idea Van Doblò Cargo FL

Future high-end range

Future Scudo

Future C Segm. Van

Future MPV Van

Future Ducato

Minicargo

Grande Punto Van FL

Grande Punto Van

Panda Van FL

Strada FL

Idea Van FL

Multipla Van MY Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 12

Plants – 2005-06 Mirafiori

• • •

L0 / L1 MPV families and high-end range vehicles confirmed Production of current Punto continuing Grande Punto production (subject to agreement with Local Authorities execution)

Melfi

•

Production of Grande Punto started

Cassino

• • •

Production of Croma started Production of current Stilo continuing Production of future Fiat C Segment model confirmed

Pomigliano

• • •

Production of Alfa 147 and Alfa Gt confirmed Production of Alfa 159 sedan started Production of Alfa 159 Sportwagon confirmed

Termini Imerese

•

Ypsilon production confirmed

•

Production of future Ducato confirmed

• •

Production of Seicento Production of Panda

Sevel Val di Sangro

Tychy (PL)

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 13

Fiat Auto Investments – 2005-08 [under IAS/IFRS]

Total investments [€ million]

of which R&D [€ million]

of which painting systems

[€ million]

2005

2006

2007

2008

2,150

2,500

2,450

2,450

9,550

830

960

900

890

3,580

150

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 14

Total

Fiat Group Investments – 2005-08 2005

2006

2007

2008

Total

Total investments [€ million]

4,300

4,300

4,400

4,700

17,700

of which R&D [€ million]

1,700

1,970

1,930

1,870

7,470

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 15

Production Capacity of Italian Plants– 2005 Working days Shifts

Daily capacity

Mirafiori

5 days 3S

1,200

Melfi

6 days 3S

1,400

Cassino

5 days 2S

1,100

Pomigliano

5 days 2S

840

Termini Imerese

5 days 2S

580

Sevel

5 days 2S

800

Val di Sangro

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 16

Adjustment of Production Capacity – H2O Paint Shop ™ 2005 production capacity of Fiat Auto plants in Italy at approximately 5,900 cars/day ™ The Ministerial Decree no. 44/2004 requires painting systems to comply with new regulations on emissions in atmosphere by October 31, 2007 ™ Fiat Auto will invest approximately €150 million on painting systems to: • make them compliant with new regulations • ensure at the same time a production capacity aligned to market demand

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 17

Production Capacity of Italian Plants – 2005 Vs. 2008 2005

∆

2008

Working days Shifts

Daily capacity

Working days Shifts

Mirafiori

5 days 3S

1,200

5 days 3S

1,000

- 200

Melfi

6 days 3S

1,400

6 days 3S

1,400

=

Cassino

5 days 2S

1,100

5 days 2S

1,000

- 100

Pomigliano

5 days 2S

840

5 days 2S

840

=

Termini Imerese

5 days 2S

580

5 days 2S

400

- 180

Sevel Val di Sangro

5 days 2S

800

5 days 2S

1,000

+ 200

Total vehicles/year

1,430,000

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 18

Daily capacity

1,365,000

Capacity

-65,000

equal to - 280 vehicles/day

2007-2008 Manufacturing Footprint From 2007 production footprint based on: ™Industrial assessments: • • • •

More efficient utilization of production capacity Cost – competitiveness Platform convergence Optimization of investments

™Labor aspects: • Manpower utilization

On this basis: ™One model allocated at Mirafiori plant in 2008 ™Fiat new A segment car (500) to be produced at Tychy plant

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 19

Market Forecast 2005-2008 Western Europe ™ Passenger cars • Decrease in demand expected in 2005 (- 1.5% vs 2004), partially recovering in 2006 • Modest growth expected in following years (+ 0.4% CAGR) to 14.6 million units at end of period ™ Light Commercial Vehicles • Overall stable market at approximately 1.9 million units

Italy ™ Passenger cars • Decrease in demand expected in 2005 (approximately - 5% vs 2004), slightly recovering in 2006 • Slight but steady recovery at 1.5% per year starting from 2007 (demand at approximately 2.3 million units in 2008) ™ Light Commercial Vehicles • Stable demand at approximately 215 k units Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 20

Current Manpower Utilization per Plant 2005

2006

2007

2008

71%

85%

85%

>100%

>100%

>100%

>100%

>100%

Cassino

91%

95%

>100%

>100%

Pomigliano

95%

>100%

>100%

>100%

Termini Imerese

54%

89%

91%

80%

100%

>100%

>100%

>100%

Mirafiori

Melfi

Sevel Val di Sangro

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 21

Fiat Auto and Fiat Powertrain Technologies The Fiat Auto Development Plan goes alongside the Product Development Plan of Fiat Powertrain Technologies ™ FPT integrates all Fiat Group expertise in the design of engines and transmissions. Some applications of excellence are already being manufactured: • Gasoline FIRE engines family • Multijet Diesel technology • Robotized transmission

™ Innovative applications are being developed, in particular: • New 1.4 16v Turbo gasoline FIRE engine (fuel optimization and lower emissions) – production planned at the Termoli plant from 2007 • New 1.6 diesel 4-cylinder engine (fuel optimization and lower emissions) with production start-up from 2007 at the Pratola Serra plant • M40 transmission for light commercial vehicles (new high torque six-speed transmission to replace PSA trasmissions) – at Termoli from 2006

™ Under study: • Multiair Technology with electronic valve control to optimize fuel consumption and to lower emissions (available from 2008-2009) • Small engine (two or three-cylinder) with low environmental impact (available from 2010) Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 22

Applications not yet announced

Compressed Natural Gas (CNG) Engines – Fiat Auto Strategy Particular importance is given to CNG powered vehicles: ™ Environmental friendly technology (CO2 and NOx emissions reductions) ™ Fiat Auto leading presence in the CNG market (50%+ market share in Europe in 2004), with the widest range of models (Punto, Multipla, Doblò) and light commercial vehicles (Punto Van, Doblò Cargo, Ducato) ™ Additional investment programs in CNG technology: •

1.2 FIRE engine on Fiat Panda (end of 2006), CO2 target: less than 105 g/Km (-35% vs current 1.2 gasoline engine)

•

CNG application for new 1.4 FIRE Turbo engine

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 23

2005-08 Plan The execution of the plan calls for: • Profitability of the Fiat Group in line with stated objectives • Financing and grants for R&D and innovation initiatives • Extraordinary grants for specific programs (Mirafiori)

FINANCIAL RESOURCES

• • • •

OPERATING CONDITIONS

Competitiveness (costs) and Quality Flexibility (volumes and plant utilization) Productivity (stick to tack time) Right-sizing of business governance costs

• Shared objectives • Dialogue and consultation with Trade Unions

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 24

SUPPORT

Fiat Investments and Government Grants 2000 - 2004

Total Fiat investments [€ million]

22,415

Total government grants [€ million]

643

of which, capital investment grants

594

of which interest subsidies

49

[€ million]

[€ million]

of which R&D and Innovation

[€ million]

8,847

Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 25

of which R&D and Innovation

[€ million]

205

Initiatives to be Funded

™ Promptly examine new financing requests out of the State owned Cassa Depositi e Prestiti and make projects approved by the Italian Government’s economic agency CIPE on July 29th, 2005 operational as soon as possible ™ Support new R&D projects which will be submitted to MIUR (Ministry of Education, University and Research) and MPA (Ministry for Productive Activities) through subsidized loans and capital grants, and finalization of past years projects ™ Within the framework of Sustainable Mobility Project, readily pass into law measures reastablishing incentives for the purchase of CNG vehicles (Law 403/97), of the new CNG Plan of the Ministry for the Environment, and of a new plan to replace existing coach park Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 26

2005 – 2008 Development Plan The execution of the plan calls for : • Profitability of the Fiat Group in line with the stated objectives • Financing and grants for R&D and innovation initiatives • Extraordinary grants for specific programs (Mirafiori)

FINANCIAL RESOURCES

• • • •

OPERATING CONDITIONS

Competitiveness (costs) and Quality Flexibility (volumes and plant utilization) Productivity (stick to tack time) Right-sizing of business governance costs

• Shared objectives • Dialogue and consultation with Trade Unions

SUPPORT

The implementation of the Plan will ensure continuity to the manufacturing activity in the plants in Italy. Fiat Group and Fiat Auto Development Plan - Palazzo Chigi – August 3, 2005 – Slide 27