Fiat Chrysler Automobiles

(29.25% stake, 44.37% of voting rights on issued capital)

The key consolidated figures of FCA reported for the year 2014 are the following:

Net revenues

Net revenues increased by €9.5 billion year-over-year (+11%; +12% on a constant currency basis) to €96.1 billion, driven mainly by NAFTA (+15%), APAC (+34%) and Maserati (+67%), with increases also for EMEA (+4%) and Components (+7%). These increases were partly offset by a 13% reduction for LATAM (-7% on a constant currency basis), where vehicle shipments were down due to continued weak demand in the region’s main markets.

EBIT

EBIT totals €3,223 million for the year, a 7% increase (+9% on a constant currency basis) over the €3,002 million in 2013. EBIT includes unusual items which totaled a €428 million net charge in 2014, compared to €519 million in 2013.

In 2014 unusual items include primarily €495 million charge connected with the UAW Memorandum of Understanding entered into by FCA US on January 21, 2014 and €98 million negative impact from the devaluation of the Venezuelan bolivar (VEF) net of €223 million non-cash and non-taxable gain resulting from the fair value of the options representing approximately 10% of FCA US equity interest which was a portion of the 41.5% stake that FCA acquired from the VEBA Trust on January 21, 2014. In 2013 unusual items included €390 million in asset writedowns mainly associated with the rationalization of architectures associated with the new product strategy. In  addition there was a €56 million writeoff of the book value of the Equity Recapture Agreement Right in connection with the acquisition of the minority stake in FCA US and a €43 million charge related to the devaluation of the VEF. EBIT adjusted for these unusual items increased by €130 million on the back of strong improvements for APAC and Maserati, with EMEA reducing losses by €198 million, benefiting primarily from higher volumes and better product mix, manufacturing and purchase efficiencies. In LATAM, EBIT adjusted for unusual items decreased by €330 million mainly reflecting lower volumes, €51 million in negative exchange rate translation impacts and €45 million in start-up costs for the Pernambuco plant. NAFTA was substantially in line with the prior year despite the impact of higher warranty and recall costs. 

EBIT by segment is detailed as follows:

Profit for the year

Net financial expenses totaled €2,047 million, €60 million higher than 2013, with the impact of higher average debt levels partially offset by the benefits of FCA US  refinancing transactions completed in February. Excluding the impact of stock option-related equity swaps, net financial expenses were substantially in line with the prior year.

Tax expenses totaled €544 million for the year, compared with tax income of €936 million for 2013. In 2013, income taxes included a €1.5 billion positive one-time recognition of net deferred tax assets related to FCA US; excluding this item, net income tax expenses totaled €564 million. Higher deferred tax expense in 2014 due to utilization of a portion of the deferred tax assets recognized in 2013 were largely offset by non-recurring deferred tax benefits which did not occur in the prior year.

Net debt

Net industrial debt at year-end was €7.7 billion, compared to €7.0 billion at year-end 2013 (adjusted for the retrospective application of IFRS 11 – €0.4 billion impact). Excluding the effect of the acquisition of the minority interest in FCA US and fourth quarter capital transactions, net industrial debt increased by €0.3 billion, with investments in property, plant and equipment and intangible assets of €8.1 billion almost fully covered by cash flows from operations.

Significant events in 2014

On January 29, 2014, the board of directors of Fiat S.p.A. (“Fiat”) approved a proposed corporate reorganization resulting in the formation of Fiat Chrysler Automobiles N.V. ("FCA") as a fully integrated global automaker.

On August 1, 2014 the extraordinary general meeting of the shareholders of Fiat S.p.A. approved the cross-border legal merger of Fiat S.p.A. into its 100 percent-owned direct dutch subsidiary Fiat Investments N.V.

On October 12, 2014 the merger of Fiat S.p.A. with and into Fiat Investments N.V. became effective and at that time Fiat Investments N.V. was renamed Fiat Chrysler Automobiles N.V. (“FCA”) and became the holding company for the Fiat Chrysler Group. In connection with the merger, FCA issued 1,167,181,255 common shares for allotment to Fiat shareholders on the basis of the merger exchange ratio of one FCA common share for each Fiat ordinary share.

In addition FCA retained 35,000,000 common shares formerly constituting the share capital of Fiat Investments N.V. as treasury stock.

FCA also issued 408,941,767 special voting shares to eligible Fiat shareholders who elected to participate in its loyalty voting program.

The next day, FCA common shares commenced trading on the NYSE of New York and the MTA of Milan.

Before the merger

On January 1, 2014, the Fiat Group 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, representing remaining 41.5% of capital. The transaction closed on January 21, 2014. In consideration for the sale of its membership interests in Chrysler, the VEBA Trust received an aggregate consideration of:

• a special distribution of $1.9 billion paid by Chrysler to its members on January 21, 2014 (FNA directed its portion of the special distribution to the VEBA Trust as part of the purchase consideration) and
• a payment of $1.75 billion from FNA to the VEBA Trust.

On January 21, 2014, Chrysler and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (”UAW”) entered into a memorandum of understanding under the collective bargaining agreement with the UAW in which the UAW made commitments to support Chrysler industrial operations, including to use its best efforts to cooperate in the continued roll-out of World Class Manufacturing, or WCM, programs and to actively assist in the achievement of Chrysler’s long-term business plan. In consideration of these commitments, Chrysler agreed to make payments to the VEBA Trust totaling $700 million to be paid in four equal annual installments. The initial payment of $175 million was made on January 21, 2014 and additional payments will be payable on each of the next three anniversaries of the initial payment.

Following the acquisition of the VEBA Trust’s equity interests in Chrysler, on February 7, 2014 Chrysler repaid all amounts outstanding including accrued and unpaid interest of approximately $5.0 billion under the VEBA Trust Note.

On May 6, 2014 the CEO along with members of the executive management of the Group presented the Group’s 2014-2018 Business Plan to financial analysts and institutional investors in Auburn Hills (Michigan, U.S.).

After the merger

On October 29, 2014 the board of directors of FCA announced that in connection with FCA’s implementation of a capital plan appropriate to support the Group’s long-term success, it has authorized the separation of Ferrari S.p.A. from FCA. The separation will be effected through a public offering of FCA’s interest in Ferrari equal to 10% of Ferrari’s outstanding shares and a distribution of FCA’s remaining Ferrari shares to FCA shareholders.

The same board of directors meeting authorized the offer and sale of FCA common shares and mandatory convertible securities. FCA will offer up to 100 million FCA common shares including 35 million common shares currently held in treasury by FCA and approximately 54 million common shares that will be issued by FCA to replenish the share capital canceled following the exercise by Fiat S.p.A. shareholders of cash exit rights under Italian law in connection with the cross-border merger of Fiat S.p.A. into FCA. Those Fiat shares were redeemed and cancelled in the merger as required by Italian law.

$2.5 billion in aggregate principal amount of mandatory convertible securities are expected to be offered in an SEC-registered offering to U.S. and international institutional investors. The mandatory convertible securities will be mandatorily convertible into FCA common shares at maturity. The interest rate, conversion rates and other terms and conditions of the mandatory convertible securities will be determined at pricing of the offering. It is expected that investors participating in the offering, subject to completion of the spin-off of Ferrari, will be entitled to participate in the spin-off and receive shares of Ferrari pursuant to customary provisions adjusting the conversion terms.

In connection with discussions regarding capital planning to support the Group’s 2014-2018 Business Plan, FCA confirmed its intention to eliminate any contractual terms limiting the free flow of capital among members of the Group. As a result, FCA expects to redeem each series of FCA US outstanding secured senior notes no later than at its initial optional redemption date of June 2015 for the 8% Senior Secured Notes due 2019 and June 2016 for the 8-1/4% Secured Senior Notes due 2021.

On December 16, 2014, FCA announced that it had completed the sale of 100 million common shares, nominal value €0.01 per share, and $2,875 million in aggregate notional amount of its 7.875% mandatory convertible securities due 2016. The common shares sold consisted of the common shares previously held by FCA as treasury shares and additional common shares that FCA issued to replenish the share capital canceled in accordance with applicable law following the exercise by Fiat S.p.A. shareholders of cash exit rights under Italian law in connection with the cross-border merger of Fiat into FCA. The offerings reflect the exercise in full of the underwriters’ options to purchase additional common shares and mandatory convertible securities.

The common shares were sold to the public at a public offering price of $11.00 per common share. The mandatory convertible securities were sold to the public at 100% of the notional amount of $100 per mandatory convertible security. Total net proceeds, before expenses, from both offerings were approximately $3,887 million.

The mandatory convertible securities will be mandatorily converted into FCA common shares on December 15, 2016, unless earlier converted at the option of the holder or FCA or upon certain specified events in accordance with their terms. The mandatory convertible securities will pay a coupon of 7.875% per annum, payable annually in arrears, on December 15, 2015 and 2016, which may, at FCA’s discretion, be paid in common shares of FCA at the mandatory conversion date. FCA will have the option to defer payment of coupons, provided that such deferral may not extend past the maturity date. The mandatory convertible securities were issued in denominations of $100 per mandatory convertible security. The maximum conversion rate of the mandatory convertible securities was set at 9.0909 common shares per mandatory convertible security and the minimum conversion rate was set at 7.7369 common shares per mandatory convertible security, in each case subject to adjustment in certain circumstances.