Fiat Chrysler

(30.05% of share capital)

The main consolidated figures of the Fiat Group for 2013 are as follows.

Net revenues

For 2013 Fiat Group revenues totaled €86.8 billion, up 3% over the prior year (+7% at constant exchange rates).

Revenues in NAFTA were up 5% to €45.8 billion (constant exchange rates +9%) on the back of higher volumes. LATAM reported revenues of €10 billion, down 10% in nominal terms (constant exchange rates +1%). APAC was up 48% to €4.6 billion, driven by strong volume performance. For EMEA, revenues were down 2% to €17.4 billion, mainly reflecting volume declines in Europe during the first half. For Luxury Brands, revenues were up 31% to €3.8 billion, with Ferrari up 5% and Maserati more than doubling to €1.7 billion on the strength of new models introduced during the year. Components revenues were in line with 2012 at €8.1 billion (constant exchange rates +4%).

Trading profit/(loss)

Trading profit was €3,394 million, down 4% over the prior year, but up 1% at constant exchange rates; trading profit for 2013 includes €0.3 billion in higher R&D amortization. NAFTA reported a trading profit of €2,220 million (€2,443 million for 2012, IAS 19 restated) down 9% in nominal terms (constant exchange rates -6%), with positive volume and pricing more than offset by higher industrial costs, including content enhancements for new models and increased R&D amortization. LATAM posted a trading profit of €619 million (€1,056 million in 2012, IAS 19 restated) down 41% in nominal terms (constant exchange rates -33%), with the decrease primarily due to input cost inflation, unfavorable production mix and lower result in Venezuela. APAC increased 38% to €358 million, driven by strong volume growth. In EMEA, losses were reduced by one-third to €470 million, mainly on the back of improved product mix and cost efficiencies. For Luxury Brands, trading profit increased by 36% to €535 million, with Ferrari up 9% to €364 million, and Maserati tripling from the prior year’s level to €171 million. For Components, trading profit was 16% higher at €201 million (CONSTANT EXCHANGE RATES +21%).

EBIT

EBIT was €2,972 million (€3,404 million for 2012, IAS 19 restated). Net of unusuals, there was a year-over-year decrease of 4% to €3,491 million (€3,648 million for 2012, IAS 19 restated).

For full-year 2013, net unusual expense of €519 million included approximately €390 million in asset write-downs mainly associated with the rationalization of architectures associated with the new product strategy, particularly for the Alfa Romeo, Maserati and Fiat brands, as well as charges related to asset impairments for the cast-iron business in Teksid. In addition there was a €56 million write-off of the book value of the Equity Recapture Agreement Right considering the agreement closed in January 1, 2014 to purchase the remaining minority equity stake in Chrysler from the VEBA Trust. Other unusual charges in the year were the €115 million charge related to the June 2013 voluntary safety recall and customer satisfaction action in NAFTA and the net €43 million charge related to the February 2013 devaluation of the Venezuelan bolivar (VEF) relative to the U.S. dollar, offset by the €166 million gain following amendments to Chrysler’s U.S. and Canadian salaried defined benefit pension plans. For 2012, there was net unusual expense of €244 million.

For mass-market brands by region, NAFTA reported EBIT of €2,290 million, an 8% decrease over 2012 (IAS 19 restated) mainly reflecting lower trading profit and higher positive net unusual items. LATAM posted EBIT of €492 million (€1,025 million in 2012), reflecting lower trading profit performance and higher net unusual charges. APAC’s EBIT increased 25% to €318 million, with higher trading profit partially offset by losses in the Chinese joint ventures due to industrial costs related to new product launches. During the period, EMEA reduced losses by €217 million to EBIT of €520 million, reflecting a reduced trading loss and lower contribution from equity investments. Luxury Brands posted EBIT of €470 million (€392 million for 2012), with the trading profit improvement partially offset by €65 million in unusual charges. For Components, the EBIT was €146 million (€165 million for 2012), with net unusual charges of €60 million (€11 million for 2012).

Profit/(loss) for the year

Net financial expense totaled €1,964 million, an increase of €79 million over 2012. Excluding the impact of the Fiat stock option-related equity swaps (gains of €31 million for 2013, at their expiration, compared to €34 million for 2012), net financial expense increased by €76 million, largely due to a higher average net debt level. Profit before taxes was €1,008 million (€1,519 million for 2012, IAS 19 restated). The €511 million decrease reflected the €432 million decrease in EBIT and higher net financial expense.

Profit before taxes was €1,008 million (€1,519 million for 2012, IAS 19 restated). The €511 million decrease reflected the €432 million decrease in EBIT and higher net financial expense.

Income taxes were a positive €943 million, including a positive one-off of €1,500 million from the recognition of net deferred tax assets related to Chrysler. Net of this item, income taxes were a cost of €557 million (€623 million for 2012), of which €244 million for Fiat excluding Chrysler primarily related to the taxable income of companies operating outside Italy and employment-related taxes in Italy.

Net profit was €1,951 million (€896 million for 2012, IAS 19 restated), of which €904 million was attributable to owners of the parent (€44 million for 2012). Excluding unusual items and the positive deferred tax impact, net profit was €943 million (€1,140 million for 2012, IAS 19 restated). On the same basis, Fiat excluding Chrysler reported a net loss of €911 million (€787 million in 2012).

Equity

Equity attributable to owners of the parent of Fiat S.p.A. amounted to €8,326 million at December 31, 2013 compared to €6,187 million at December 31, 2012.

Net debt

At December 31, 2013 consolidated net debt was €9,793 million, up €193 million from €9,600 million at the beginning of the year.

Net industrial debt at December 31, 2013 was €6.6 billion and increased by €0.1 billion for the year. Net of equity investments, the cash flow was a positive €0.1 billion, with cash absorption for Fiat excluding Chrysler of €1.6 billion more than compensated for by cash generation from Chrysler.

In 2013, total capital expenditure for the Fiat Group was €7.4 billion, substantially in line with 2012 (€7.5 billion), but 3% higher at constant exchange rates. Working capital contributed €1.5 billion (€0.7 billion in 2012).

Significant events in 2013

Alliances and acquisitions

On July 30^th, Fiat Group Automobiles (“FGA”), Crédit Agricole (“CASA”) and Crédit Agricole Consumer Finance (“CACF”) reached an agreement to extend the 50/50 Joint Venture in FGA Capital (“FGAC”) up to December 31, 2021. The extension of the alliance is intended by the partners to ensure the long-term sustainability of FGAC, a captive finance company that manages FGA’s main activities in retail auto financing, dealership financing, long-term car rental and fleet management in 14 European countries. FGAC will continue to benefit from the financial support of Crédit Agricole Group, while strengthening its own position as an active player in the securitization and debt markets. 

In connection with its participation in the recapitalization of RCS MediaGroup S.p.A. (RCS), Fiat subscribed 75,791,217 new RCS ordinary shares for a total amount of nearly €94 million (including cost of the rights). Following completion of the RCS capital increase on July 17th, Fiat holds 87,327,360 RCS ordinary shares, representing 20.55% of new ordinary share capital.

Major financing transactions

On June 21^st, Fiat S.p.A. signed an agreement for a €2 billion 3-year committed revolving credit facility to replace the €1.95 billion 3-year revolving credit facility signed in July 2011. The syndication was successfully completed on July 18 with 19 banks. As a result of the positive response, the facility was increased on that date to €2.1 billion.

Taking advantage of market conditions and its improved credit profile, on June 21^st, Chrysler Group LLC announced that it had reduced the interest rate for its $3.0 billion Tranche B Term Loan and its undrawn $1.3 billion revolving credit facility. Certain loan covenants were also amended to be consistent with those in the Company’s bond agreement. Subsequently, on December 23rd, Chrysler Group LLC further reduced the interest rate on the Tranche B Term Loan. The interest rate re-pricing for the two transactions is expected to reduce annual interest costs by approximately $72 million.

Fiat accessed the debt capital market four times during the year:

• an €1.25 billion bond was issued on March 15th (fixed coupon 6.625%, due March 2018).
• an €850 million bond was issued on July 21st (fixed coupon 6.75%, due October 2019). On September 17th, following re-opening of the transaction, a further €400 million of bonds was issued, increasing the total principal amount of the bond to €1.25 billion.
• a CHF 450 million bond was issued on November 22nd (fixed coupon 4.00%, due November 2017).

All of the above bonds were issued by Fiat Finance and Trade Ltd. S.A. and guaranteed by Fiat S.p.A. under the GMTN Program. In all cases the notes were rated ‘B1’ by Moody’s, ‘BB-‘ by Standard & Poor’s and ‘BB-‘ by Fitch.

Rating actions

On February 25^th, Fitch Ratings lowered its rating on Fiat S.p.A.’s long-term debt from ‘BB’ to ‘BB-‘, while the short-term rating was confirmed at ‘B’, with a negative outlook. Fitch Ratings then confirmed its ratings and outlook on September 18^th.

Significant events subsequent to December 31, 2013

On January 1^st, 2014, Fiat S.p.A. announced an agreement with the VEBA Trust, under which its wholly-owned subsidiary, Fiat North America LLC (“FNA”), would acquire all of the VEBA Trust’s equity membership interests in Chrysler Group LLC (“Chrysler Group”), representing 41.4616% of Chrysler Group. The transaction closed on January 21, 2014. In consideration for the sale of its membership interests in Chrysler Group, the VEBA Trust received an aggregate consideration of $3,650 million consisting of a special distribution paid by Chrysler Group to its members, in an aggregate amount of $1,900 million (FNA’s portion of the special distribution was paid by FNA to the VEBA Trust as part of the purchase consideration) and a payment from FNA for the remainder of $1,750 million in cash purchase consideration to the VEBA Trust. Fiat funded the $1,750 million in cash from available cash on hand and Chrysler Group funded the special distribution from available cash on hand.

Contemporaneously, Chrysler Group and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”) entered into a memorandum of understanding (“MoU”) to supplement Chrysler Group’s existing collective bargaining agreement. Under the MoU, Chrysler Group will provide additional payments to the VEBA Trust of an aggregate of $700 million in four equal annual installments. In consideration for these payments, the UAW has agreed to certain commitments to continue to support the industrial operations at Chrysler and the further implementation of the Fiat-Chrysler alliance, including using best efforts to cooperate in the continued roll-out of Fiat-Chrysler World Class Manufacturing programs.

On January 10^th, Standard & Poor’s Ratings Services:

• raised its ratings on Chrysler Group LLC, including the corporate credit rating, to 'BB-' from 'B+'. The outlook is stable;
• confirmed its rating on Fiat S.p.A.’s long-term debt at ‘BB-‘. The short-term rating was confirmed at ‘B’. The outlook remains stable.

On February 11^th, Moody’s Investors Service lowered Fiat S.p.A.’s Corporate Family Rating from ‘Ba3’ to ‘B1’ and consequently, in accordance with their methodology, ratings on the notes issued by Fiat Finance & Trade Ltd. S.A. and Fiat Finance North America Inc. were also lowered from ‘B1’ to ‘B2’