Letter from the Chairman and the Chief Executive Officer

Dear Shareholders,

2010 got off to a difficult start, with the previous year’s 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 doesn’t 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 Group’s 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.
Today’s 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 organization’s 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 brand’s 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


/f/ John Elkann

John Elkann


/f/ Sergio Marchionne

 Sergio Marchionne







© 2011 FIAT S.p.A - P.IVA 00469580013