Fiat responds to Italian regulator demands
The battle between Fiat and Italy may have entered a new phase. Last week, Consob (La Commissione Nazionale per le Società e la Borsa), the Italian version of the SEC, demanded details of Fiat’s future investment plans. The underlying cause is growing concern that Fiat plans to move production out of Italy. The demand became public when details were published in Il Sole 24 Oro and Corriere della Sera.
As Allpar reported last week, Fiat-Chrysler CEO Sergio Marchionne told reporters, “As much as possible, we mean to maintain workplaces in Italy.”.
Speaking specifically to the Consob demands, Marchionne said, “It is impossible to specify right now the details of the investments, site for site, that will happen now between and 2014. To us it does not seem logical, therefore, that Fiat must supply details of multi-year forecasts when the majority of the European nations are trying desperately to agree on solutions that the international financial markets demand for tomorrow.”
Today, Fiat reinforced Marchionne’s comments with the following announcement:
This press release is being issued in response to a request received by Fiat on 20 October 2011 from Consob, the Italian stock exchange regulator, for public disclosure of information pursuant to Article 114 of Legislative Decree 58/98.
Fiat regrets and finds it deplorable that on October 22, 2011 Consob’s detailed request had become public and reported by the press, In these circumstances, Fiat reserves all its rights to take appropriate measures to protect its interests.
The Company’s dismay is even greater at the manner in which the request, which is purely technical in nature and scope, has been interpreted by several parties, and in some cases even misrepresented, as being intended to verify, in detail, the level of implementation of the Fabbrica Italia project.
Fiat prepares multi-year strategic plans to provide direction for the group’s combined activities worldwide and communicates the essential elements of those plans to the market, together with indications of its medium-term group financial targets. Any significant variations in those targets constitute price sensitive information, which Fiat communicates to the market on a timely basis, as required by law. Consob monitors compliance with that obligation, among others, by issuers.
The Fabbrica Italia project has never been a financial plan, but rather the expression of a strategic direction that Fiat intends to follow, the significance and scope of which is to demonstrate Fiat’s commitment to resolving issues relating to its manufacturing sites in Italy, as well as contributing to the development of the nation’s industrial potential. Fiat has always made it extremely clear that achievement of such a result requires the cooperation of all parties, trade unions and relevant government agencies, involved in ensuring the governability of plants and effective implementation of agreements guaranteeing the necessary operating flexibility.
Fiat, like all of its competitors, continuously reviews its plans and must be able to adapt them to market conditions, to respond to actions and positions taken by other manufacturers and to all other factors that can influence and impact their implementation and their ultimate success. The assumptions on which Fiat’s plans are broad in nature and are not so detailed to enable, by monitoring the level of achievement of a particular target, a continuous and systematic confirmation of the extent of implementation of Fabbrica Italia.
Fiat is therefore unable to provide information on its financial plan which is so detailed to enable an analysis along the lines requested by Consob.
In light of the potential misconceptions, misunderstandings and unrealistic expectations of detail associated with the Fabbrica Italia project, Fiat will, with immediate effect, stop any and all references to Fabbrica Italia, while respecting commitments already initiated and confirming its broad strategic intentions to contribute to the resolution of Italy’s industrial problems and its future development.
With that premise, the information requested by Consob is provided below.
Investments for Fiat (excluding Chrysler): Fiat’s investment plan for the period 2010-2014 (as announced on 21 April 2010 and available on the corporate website)1 projects investments in tangible and intangible assets, inclusive of capitalized R&D, totaling €19.7 billion, of which: €3.7 billion in 2010; €4.5 billion in 2011; €4.2 billion in 2012; €3.6 billion in 2013; €3.7 billion in 2014.
Investments in tangible and intangible assets, inclusive of capitalized R&D expenditure and R&D charged directly to profit and loss, total €22.0 billion. €4.1 billion in 2010; €4.9 billion in 2011; €4.7 billion in 2012; €4.1 billion in 2013; €4.2 billion in 2014. Out of such investments €16 billion are planned in Italy, as the portion attributable to Fiat of a total investment of €20 billion, planned in Italy for Fiat and Fiat Industrial S.p.A.
For Fiat excluding Chrysler, investments in tangible and intangible assets, inclusive of capitalized R&D expenditure, for the period 1 January to 30 September 2011 were €2.1 billion. Including R&D expenditure charged directly to profit and loss, the amount was €2.5 billion, broken down by geographic area as follows: Italy: €1.2 billion; Europe (excluding Italy) €0.7 billion; Latin America: €0.5 billion; other regions: €0.1 billion.
With the approval of its third quarter results, Fiat confirmed its investment target for 2011 (tangible and intangible assets, inclusive of capitalized R&D, as per market practice) of approximately €5.5 billion for Fiat including Chrysler. Investments totaling €2.1 billion for the nine months ended September 30 were substantially in line with the full-year target provided above as well as with the previously announced target for Fiat excluding Chrysler.
Product Plan: Fiat confirms that, as of today, the information provided at the Sanford C. Bernstein Strategic Decisions Conference on September 20 remains valid. In particular, page 11 of the presentation (available on the corporate website)3 contains an overview of new and substantially refreshed models planned over the 2010-2014 period, by brand and by year.
The product plan is subject to continuing review and revision, based on trading conditions, market developments, cost and a number of other factors and, consequently, it is also subject to updates and modifications which Fiat reserves the right to introduce at any time.
Definition of the product plan and related investments is based on a strategy intended to maximize architecture convergence and standardization of components for the relative architectures (mini, small, compact, etc.) on which the various models are produced.
In consideration of the above, the plant allocation decision for individual models takes place in the months prior to production launch, based on a series of considerations, including the characteristics of the site and other contingent investment considerations, in order to ensure the best utilization of available production capacity and the greatest potential for success of the investment.
This approach follows current best practice in the automotive industry aimed at reducing development and manufacturing costs and ensuring flexibility in the utilization of production capacity.
A summary of the criteria and objectives upon which Fiat’s product plan is based is provided on pages 12 and 13 of the presentation given at the Fiat Investor Meeting on 28 June 2011 (available on the corporate website).
Geographic breakdown of revenues for 2011: The estimate regarding the geographic diversification of revenues for Fiat Group for 2011 (pro forma for Fiat with Chrysler) updated to today’s date is substantially confirmed as per page 4 of the presentation given at the Sanford C. Bernstein Strategic Decisions Conference on 20 September 2011 (available on the corporate website), with the only difference that the portion of expected revenues attributable to Europe is decreased by 2 percentage points and the portion of revenues expected for the rest of the world is increased by 2 percentage points.
