Description
2014 was a major turning point in our history. With the decision announced on the first of January, we gave life to Fiat Chrysler Automobiles, a new global automotive player with the necessary resources to achieve solid, responsible and sustainable long-term growth.
2014 ANNUAL REPORT
FCA
ANNUAL REPORT
AT 31 DECEMBER 2014
F
C
A
A
n
n
u
a
l
R
e
p
o
r
t
a
t
3
1
D
e
c
e
m
b
e
r
2
0
1
4
Fiat Chrysler Automobiles N.V.
Registered Office: Amsterdam, The Netherlands
Amsterdam Chamber of Commerce: 60372958
Corporate Office: 25 St James’s Street, London SW1A 1HA U.K.
2014 ANNUAL REPORT
2014
|
ANNUAL REPORT 3
Consolidated Financial Statements
at December 31, 2014 ............................... 141
n
Consolidated Income Statement ....................... 142
n
Consolidated Statement
of Comprehensive Income/(Loss) ..................... 143
n
Consolidated Statement of Financial Position .... 144
n
Consolidated Statement of Cash Flows ............ 145
n
Consolidated Statements of Changes in Equity .... 146
n
Notes to the Consolidated Financial Statements .... 147
Company Financial Statements
at December 31, 2014 ............................... 257
n
Income Statement ............................................ 258
n
Statement of Financial Position ......................... 259
n
Notes to the Company Financial Statements .... 260
n
Other Information ............................................. 272
Appendix - FCA Companies
at December 31, 2014 ............................... 275
Independent Auditor’s Report .................. 293
Table of contents
Board of Directors and Auditors .................. 5
Letter from the Chairman ............................. 7
Letter from the Chief Executive Of?cer ....... 8
Certain De?ned Terms ................................ 10
Selected Financial Data .............................. 11
Sustainability Highlights ............................. 14
Creating Value for Our Shareholders ......... 15
Risk Factors ................................................ 17
Overview ..................................................... 36
Our Strategic Business Plan ...................... 38
Industry Overview ....................................... 40
Overview of Our Business .......................... 42
Operating Results ....................................... 56
Subsequent Events and 2015 Outlook ...... 93
Major Shareholders .................................... 94
Corporate Governance ............................... 95
Sustainability Disclosure .......................... 114
Remuneration of Directors ....................... 134
Table of contents
2014
|
ANNUAL REPORT 5
Board of Directors and Auditors
Board of Directors and Auditors
BOARD OF DIRECTORS
Chairman
John Elkann
(3)
Chief Executive Of?cer
Sergio Marchionne
Directors
Andrea Agnelli
Tiberto Brandolini d’Adda
Glenn Earle
(1)
Valerie A. Mars
(2)
Ruth J. Simmons
(3)
Ronald L. Thompson
(1)
Patience Wheatcroft
(1)(3)
Stephen M. Wolf
(2)
Ermenegildo Zegna
(2)
INDEPENDENT AUDITORS
Ernst & Young Accountants LLP
(1)
Member of the Audit Committee.
(2)
Member of the Compensation Committee.
(3)
Member of the Governance and Sustainability Committee.
6 2014
|
ANNUAL REPORT
2014
|
ANNUAL REPORT 7
Letter from the Chairman
Letter from the Chairman
Shareholders,
2014 was a major turning point in our history. With the decision announced on the ?rst of January, we gave life to Fiat
Chrysler Automobiles, a new global automotive player with the necessary resources to achieve solid, responsible and
sustainable long-term growth.
The targets set out in the strategic plan that was presented to analysts and investors by FCA’s management team
in Auburn Hills last May clearly demonstrate the level of our determination. To some, they may seem dif?cult if not
impossible to achieve. But, as in the past, we are prepared to embrace this challenge and measure ourselves by the
results.
One of the ?rst results we are pleased to report is that worldwide shipments in 2014 increased to a total of more than
4.6 million vehicles. Of particular note were the results achieved by Jeep, which posted an all-time annual sales record
of more than 1 million vehicles, and Maserati, which celebrated its 100th anniversary with the best results in its history.
In the pages of this annual report, you will ?nd another major result. In the fourth quarter, we posted a positive EBIT
for our European activities: something we have been working toward for seven and a half years. We fully intend to
continue building on this turnaround, which demonstrates the far-sightedness of the strategies we set in motion some
time ago.
Sharing technologies and architectures across brands and models has also proven to be one of our greatest
strengths. The new Jeep Renegade and Fiat 500X are the most concrete examples. Two very different models made
for customers with different requirements and produced alongside each other at the same plant and on the same
platform. They have already proven such a success with customers that the new plant in Pernambuco, Brazil, will soon
join our plant in Mel?, Italy in producing the innovative, compact Jeep.
During the year, we launched several major investment programs aimed at improving our product offering and
increasing the ef?ciency of our production processes. We also successfully completed a series of ?nancing
transactions that will provide us the necessary funding to move forward with our projects. FCA’s debut on the NYSE
on October 13th represents a major milestone in our strategic development, because it gives us access to the
enormous potential of the world’s largest ?nancial market.
We are proud of how much FCA has achieved in its ?rst year, but it is not time to celebrate yet because for us this is
just the beginning. We are working to bring many innovative new models to market that will not only meet the mobility
needs of customers around the world, but also have enormous appeal.
Whether you have been a shareholder for many years or just a few months, I would like to express my gratitude for
your support. Your trust is fundamental and it will enable FCA to deliver on its founding commitment: to continue with
the same energy and enthusiasm that marked our ?rst year and to achieve our ambitious development plans.
5 March 2015
/s/ John Elkann
John Elkann
CHAIRMAN
8 2014
|
ANNUAL REPORT
Letter from the
Chief Executive Of?cer
Letter from the Chief Executive Of?cer
Shareholders,
Our Group has just closed a truly momentous year that included: the acquisition of the remaining non-controlling
interest in Chrysler; the formation of Fiat Chrysler Automobiles – the world’s seventh-largest automaker; the debut
of our shares on the NYSE; our return to the U.S. equity markets; record sales for both Jeep and Maserati; and Alfa
Romeo’s return to North America after a 20-year absence.
We presented an ambitious ?ve-year plan to grow our business and continue building an extraordinary enterprise with
even greater potential to deliver sustainable long-term value.
To further enhance shareholder value, we also announced our plan to spin Ferrari off from FCA, list it on the stock
exchange and distribute FCA’s remaining Ferrari shares to FCA shareholders. We believe this course will give Ferrari
the necessary independence, as well as ensuring it a solid platform for future growth opportunities.
Our strong operating results in 2014 are testimony to our commitment to our values, our ability to remain focused on
our key objectives and our determination to continue building a truly unique organization. In fact, the Group was able
to post a pro?t in all regions for the fourth quarter of the year.
Worldwide vehicle shipments were up 6% over the prior year to 4.6 million units, driving revenues 11% higher to
€96.1 billion.
Adjusted for unusual items, EBIT was €3.7 billion and net pro?t was €955 million.
Available liquidity at year end totaled €26.2 billion.
In order to further fund the capital requirements of the Group’s ?ve-year business plan, the Board of Directors has
decided not to recommend a dividend on FCA common shares for 2014.
Looking at the performance of our mass-market operations by region, in NAFTA we continued to outperform the
market, with sales up 15% over the prior year.
In the U.S., we closed the year posting our 57th consecutive month of year-over-year sales gains and our best annual
sales since 2006. In addition, our market share was up 100 basis points which was the highest share growth of any
OEM. In Canada, we recorded 61 straight months of growth and the strongest annual sales performance in our
history.
In LATAM, results were positive, although below the prior year’s level primarily as a result of weaker demand in the
region’s main markets. Despite those conditions, FCA maintained its leadership in Brazil, a position we have held for
13 years, increasing the lead over our nearest competitor to 350 basis points. In Argentina, market share increased
140 basis points.
In APAC, we posted strong earnings on the back of signi?cant volume growth. Retail sales in the region, including JVs,
were up 34% and we signi?cantly outperformed the industry in each major market.
In EMEA, there were initial signs of a recovery in Europe with the industry registering a 5% increase – the ?rst after six
straight years of decline.
On the back of a more favorable product mix, increased volumes and industrial ef?ciencies, EMEA reduced losses
signi?cantly. EBIT adjusted for unusual items improved by €198 million for the full year, with a return to pro?tability in
the fourth quarter indicating that we are turning the corner in the region as our focus on producing premium vehicles
for export begins to pay off.
2014
|
ANNUAL REPORT 9
Both Ferrari and Maserati posted strong growth and Components also made a positive contribution.
With regard to the near-term outlook, we have already given guidance for the current year, with expected worldwide
shipments in the 4.8 to 5.0 million unit range, revenues of around €108 billion, EBIT in the €4.1to €4.5 billion range,
net pro?t of €1.0 to €1.2 billion and net industrial debt in the €7.5 billion to €8.0 billion range.
We will work towards the achievement of these targets with the same spirit that has brought us this far and with
respect for the diversity of experiences and cultures that coexist, both inside and outside the Group. That commitment
extends to the needs of local communities and the environment, as well as the legacy that we intend to leave future
generations.
For the sixth consecutive year, the Group was included in the prestigious DJSI World, with an overall result that places
FCA among the world’s leading companies in terms of economic, environmental and social performance.
For the third consecutive year, we were recognized as a leader for our commitment to addressing climate change.
On the basis of transparency in disclosure and performance, FCA was named among the top ranked companies in the
Climate Performance Leadership Index (CPLI).
These recognitions are the result of a business philosophy involving some 300,000 people throughout the
organization, each taking accountability for achieving our targets, striving for excellence and acting responsibly.
I’d like to take this opportunity to thank everyone in the FCA organization for embracing the culture of sustainability
and making a concrete contribution so that every year we, as a team, can look back with pride at the progress we
have made.
Thank you also to all of our shareholders for standing by us as we have grown and transformed the business and for
supporting us as we continue on this new global venture together.
5 March 2015
/s/ Sergio Marchionne
Sergio Marchionne
CHIEF EXECUTIVE OFFICER
10 2014
|
ANNUAL REPORT
Certain De?ned Terms
Certain De?ned Terms
In this report, unless otherwise speci?ed, the terms “we,” “our,” “us,” the “Group,”, “Fiat Group,”, the “Company” and
“FCA” refer to Fiat Chrysler Automobiles N.V., together with its subsidiaries and its predecessor prior to the completion
of the merger of Fiat S.p.A. with and into Fiat Investments N.V. on October 12, 2014 (at which time Fiat Investments
N.V. was renamed Fiat Chrysler Automobiles N.V., or FCA), the “Merger”, or any one or more of them, as the context
may require. References to “Fiat” refer solely to Fiat S.p.A., the predecessor of FCA prior to the Merger. References
to “FCA US” refers to FCA US LLC, formerly known as Chrysler Group LLC, together with its direct and indirect
subsidiaries.
In addition, all references to “U.S. Dollars”, “U.S. Dollar”, “U.S.$” and “$” refer to the currency of the United States of
America (or “U.S.”).
2014
|
ANNUAL REPORT 11
Selected Financial Data
The following tables set forth selected historical consolidated ?nancial and other data of FCA and has been derived, in
part, from:
the Consolidated ?nancial statements of FCA for the years ended December 31, 2014, 2013 and 2012, included
elsewhere in this document; and
the Consolidated ?nancial statements of the Fiat Group for the years ended December 31, 2011 and 2010, which
are not included in this document.
This data should be read in conjunction with Risk Factors, Operating Results and the Consolidated ?nancial
statements and related notes included elsewhere in this report.
Effective January 1, 2011, Fiat transferred a portion of its assets and liabilities to Fiat Industrial S.p.A., or Fiat Industrial,
now known as CNH Industrial N.V., or CNH Industrial, or CNHI, in the form of a scissione parziale proporzionale
(“partial proportionate demerger”) in accordance with Article 2506 of the Italian Civil Code.
On May 24, 2011, the Group acquired an additional 16 percent (on a fully-diluted basis) of FCA US, increasing its
interest to 46 percent (on a fully-diluted basis). As a result of the potential voting rights associated with options
that became exercisable on that date, the Group was deemed to have obtained control of FCA US for purposes of
consolidation. The operating activities from this acquisition date through May 31, 2011 were not material to the Group.
As such, FCA US was consolidated on a line-by-line basis by FCA with effect from June 1, 2011. Therefore the results
of operations and cash ?ows for the years ended December 31, 2014, 2013 and 2012 are not directly comparable
with those for the year ended December 31, 2011.
The Group adopted IAS 19 revised from January 1, 2013 and retrospectively applied those amendments from January
1, 2012. The Group also adopted IFRS 11 from January 1, 2014 and also retrospectively applied those amendments
from January 1, 2012. These amendments were not applied to the Consolidated income statement or to the
Consolidated Statement of Financial position for the years ended December 31, 2011 and 2010. Accordingly, these
statements are not directly comparable with those for the years ended and as of December 31, 2014, 2013 and 2012.
Selected Financial Data
12 2014
|
ANNUAL REPORT
Selected Financial Data
CONSOLIDATED INCOME STATEMENT DATA
2014 2013 2012 2011
(1)
2010
(2)
(€ million)
Net revenues 96,090 86,624 83,765 59,559 35,880
EBIT 3,223 3,002 3,434 3,291 1,106
Pro?t before taxes 1,176 1,015 1,524 1,932 706
Pro?t from continuing operations 632 1,951 896 1,398 222
Pro?t/(loss) from discontinued operations — — — — 378
Net pro?t 632 1,951 896 1,398 600
Attributable to:
Owners of the parent 568 904 44 1,199 520
Non-controlling interest 64 1,047 852 199 80
Earnings/(loss) per share from continuing operations (in Euro)
Basic per ordinary share 0.465 0.744 0.036 0.962 0.130
Diluted per ordinary share 0.460 0.736 0.036 0.955 0.130
Basic per preference share — — — 0.962 0.217
Diluted per preference share — — — 0.955 0.217
Basic per savings share — — — 1.071 0.239
Diluted per savings share — — — 1.063 0.238
Earnings/(loss) per share (in Euro)
Basic per ordinary share 0.465 0.744 0.036 0.962 0.410
Diluted per ordinary share 0.460 0.736 0.036 0.955 0.409
Basic per preference share — — — 0.962 0.410
Diluted per preference share — — — 0.955 0.409
Basic per savings share — — — 1.071 0.565
Diluted per savings share — — — 1.063 0.564
Dividends paid per share (in Euro)
(3)
Ordinary share — — — 0.090 0.170
Preference share
(4)
— — 0.217 0.310 0.310
Savings share
(4)
— — 0.217 0.310 0.325
Other Statistical Information (unaudited):
Shipments (in thousands of units) 4,608 4,352 4,223 3,175 2,094
Number of employees at period end 232,165 229,053 218,311 197,021 137,801
(1)
Upon obtaining control of FCA US on May 24, 2011, FCA US’s financial results were consolidated beginning June 1, 2011.
(2)
CNHI was reported as discontinued operations in 2010 as a result of its demerger from Fiat effective January 1, 2011.
(3)
Dividends paid represent cash payments in the applicable year that generally relates to earnings of the previous year.
(4)
In accordance with the resolution adopted by the shareholders’ meeting on April 4, 2012, Fiat’s preference and savings shares were
mandatorily converted into ordinary shares.
2014
|
ANNUAL REPORT 13
CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATA
At December 31,
2014 2013 2012 2011
(1)(2)
2010
(€ million)
Cash and cash equivalents 22,840 19,455 17,666 17,526 11,967
Total assets 100,510 87,214 82,633 80,379 73,442
Debt 33,724 30,283 28,303 27,093 20,804
Total equity 13,738 12,584 8,369 9,711 12,461
Equity attributable to owners of the parent 13,425 8,326 6,187 7,358 11,544
Non-controlling interests 313 4,258 2,182 2,353 917
Share capital 17 4,477 4,476 4,466 6,377
Shares issued (in thousands of shares):
Fiat S.p.A
Ordinary — 1,250,688 1,250,403 1,092,681 1,092,247
Preference
(4)
— — — 103,292 103,292
Savings
(4)
— — — 79,913 79,913
FCA
Common
(3)
1,284,919
Special Voting 408,942
(1)
The amounts at December 31, 2011 are equivalent to those at January 1, 2012 derived from the Consolidated financial statements.
(2)
The amounts at December 31, 2011 include the consolidation of FCA US.
(3)
Book value per common share at December 31, 2014 amounted to €10.45.
(4)
In accordance with the resolution adopted by the shareholders’ meeting on April 4, 2012, Fiat’s preference and savings shares were
mandatorily converted into ordinary shares.
14 2014
|
ANNUAL REPORT
Sustainability Highlights
Sustainability Highlights
2014 2013 2012
Employees
(1)
(no.) 228,690 225,587 214,836
of which are women (%) 20.3 19.6 19.2
Hours of training (thousand) 4,297 4,232 4,206
Employees participating in
performance evaluation process
(2)
(no.) 60,700 54,500 52,700
Frequency rate of accidents (no. accidents per 100,000 hours worked) 0.15 0.19 0.22
Severity rate of accidents (no. days of absence due to accidents per 1,000 hours worked) 0.05 0.06 0.07
Energy consumption by plants (terajoules) 48,645 48,322 45,692
CO
2
emissions by plants (thousands of tons) 4,283 4,178 3,965
Water withdrawal by plants (thousands of m
3
) 24,653 24,936 25,874
Waste generated by plants (thousands of tons) 1,744 1,809 1,761
Contributions to local communities
(3)
(€ million) 24.2 19.7 20.8
Note: all data audited is by SGS, an independent certification body. The scope, methodology, limitations and conclusions of the audit are provided
in the Assurance Statement issued by SGS The Netherlands and published in the FCA 2014 interactive Sustainability Report.
(1)
Employee workforce figures reported in this section do not include the 50% Sevel JV in EMEA or the 50% Fial JV in APAC.
(2)
Includes all employees participating in the PLM (Performance and Leadership Management) and PBF (Performance & Behavior Feedback)
evaluation processes.
(3)
Includes initiatives undertaken by the Group worldwide in support of local communities. Calculation based on London Benchmarking Group
(LBG) method.
2014
|
ANNUAL REPORT 15
Creating Value for Our Shareholders
Responsible Management across the Value Chain
Fiat Chrysler Automobiles (FCA) is a leading player in the global automotive landscape with unique, world-class
capabilities, and a vision built on the historic foundations and strengths inherited from Fiat and Chrysler.
Our guiding values and commitment to excellence - not only in terms of our products, but also for the integrity,
transparency and the sense of responsibility with which we conduct our activities - are essential to achieving this vision.
At FCA, sustainability is a way of conducting business that relies on an interconnected and integrated approach to
responsibility.
The foundation of a responsible company depends on full awareness of the nature and extent of this interconnection. It
lies at the heart of our understanding of how the potential effects of our activities can be mitigated through responsible
management and through the transformation of our ?nancial, manufactured, intellectual, social and natural capitals.
Managing our business responsibly requires that we consider all potential implications of our strategic decisions
and projects. This approach takes on even greater importance in today’s increasingly competitive landscape, where
market conditions are challenging and the mobility needs of customers are changing rapidly.
Over the years, sustainability at FCA has evolved in parallel with the organization, resulting in a well-developed model
that is integrated into every aspect of the Group’s activities. The sustainability management process is based on
shared responsibility that, beginning with the highest level of management, involves every area of activity and every
employee in each of the 40 countries where the Group has a presence.
To ensure tangible long-term value is created for stakeholders, the Group places particular emphasis on the following:
a governance model based on transparency and integrity
safe and eco-friendly products
a full-line product offering
competitive and innovative mobility solutions
promoting awareness and effective communication with consumers
proper management and professional development of employees
promotion of fair working conditions and respect for human rights
mutually bene?cial relationships with business partners and local communities
mitigation of environmental impacts from manufacturing and non-manufacturing processes
The Group uses multiple channels, including the corporate website and social networks, to provide up-to-date and
transparent information on its sustainability commitments and results.
Sustainability contents of the 2014 Annual Report address aspects identi?ed as being of greatest importance to the
Group’s internal and external stakeholders and reports on a selection of key long-term sustainability targets. Additional
information relating to the Group’s sustainability commitments is provided in the interactive 2014 Sustainability Report
available on the corporate website.
Creating Value
for Our Shareholders
16 2014
|
ANNUAL REPORT
Creating Value
for Our Shareholders
Sustainability Leadership
Our Group’s commitment to sustainability has received recognition at the global level from several leading
organizations and indices.
In 2014, FCA was included in the prestigious Dow Jones Sustainability Index World for the sixth time with a score of
87/100. The average for all Automobiles sector companies evaluated by RobecoSAM, the specialists in sustainability
investment, was 58/100. This result places FCA ?rmly among the world’s leading companies in terms of combined
economic, environmental and social performance.
For the third consecutive year, the Group was recognized as a leader for its commitment and results in addressing
climate change. On the basis of transparency in disclosure and performance, FCA was named as a leader in the
CDP Italy 100 Climate Disclosure Leadership Index (CDLI) and among the top ranked companies in the Climate
Performance Leadership Index (CPLI) 2014. FCA scored 98/100 for transparency in disclosure and was included in
The A List: the CDP Climate Performance Leadership Index 2014, which includes companies that have demonstrated
a superior approach to climate change mitigation.
During the year, the Group’s position was also con?rmed in the Euronext Vigeo Europe 120 and the Euronext Vigeo
Eurozone 120 indices, both established in collaboration with NYSE Euronext, which include the top ESG performers
based on an analysis of approximately 330 indicators.
FCA is also a member of numerous other leading indices including: ESI Excellence Europe, STOXX Global ESG
Leaders, STOXX Global ESG Environmental Leaders, STOXX Global ESG Social Leaders, STOXX Global ESG
Governance Leaders, ECPI Euro Ethical Equity, ECPI Emu Ethical Equity, ECPI Global Developed ESG Best in Class
Equity, FTSE ECPI Italia SRI Benchmark, FTSE ECPI Italia SRI Leaders, and Parks GLBT Diversity Index.
2014
|
ANNUAL REPORT 17
Risk Factors
We face a variety of risks in our business. The risks and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties that we are unaware of or that we currently believe to be immaterial, may also
become important factors that affect us.
Risks Related to Our Business, Strategy and Operations
Our pro?tability depends on reaching certain minimum vehicle sales volumes. If our vehicle sales deteriorate,
particularly sales of our minivans, larger utility vehicles and pick-up trucks, our results of operations and ?nancial
condition will suffer.
Our success requires us to achieve certain minimum vehicle sales volumes. As is typical for an automotive manufacturer,
we have signi?cant ?xed costs and, therefore, changes in vehicle sales volume can have a disproportionately large effect on
our pro?tability. For example, assuming constant pricing, mix and cost of sales per vehicle, that all results of operations were
attributable to vehicle shipments and that all other variables remain constant, a ten percent decrease in our 2014 vehicle
shipments would reduce our Earnings Before Interest and Taxes, or EBIT, by approximately 40 percent for 2014, without
accounting for actions and cost containment measures we may take in response to decreased vehicle sales.
Further, a shift in demand away from our minivans, larger utility vehicles and pick-up trucks in the U.S., Canada,
Mexico and Caribbean islands, or NAFTA, region towards passenger cars, whether in response to higher fuel prices
or other factors, could adversely affect our pro?tability in the NAFTA region. Our minivans, larger utility vehicles and
pick-up trucks accounted for approximately 44 percent of our total U.S. retail vehicle sales in 2014 (not including vans
and medium duty trucks) and the pro?tability of this portion of our portfolio is approximately 33 percent higher than
that of our overall U.S. retail portfolio on a weighted average basis. A shift in demand such that U.S. industry market
share for minivans, larger utility vehicles and pick-up trucks deteriorated by 10 percentage points and U.S. industry
market share for cars and smaller utility vehicles increased by 10 percentage points, whether in response to higher fuel
prices or other factors, holding other variables constant, including our market share of each vehicle segment, would
have reduced the Group’s EBIT by approximately 4 percent for 2014. This estimate does not take into account any
other changes in market conditions or actions that the Group may take in response to shifting consumer preferences,
including production and pricing changes.
Moreover, we tend to operate with negative working capital as we generally receive payments from vehicle sales
to dealers within a few days of shipment, whereas there is a lag between the time when parts and materials are
received from suppliers and when we pay for such parts and materials; therefore, if vehicle sales decline we will suffer
a signi?cant negative impact on cash ?ow and liquidity as we continue to pay suppliers during a period in which
we receive reduced proceeds from vehicle sales. If vehicle sales do not increase, or if they were to fall short of our
assumptions, due to ?nancial crisis, renewed recessionary conditions, changes in consumer con?dence, geopolitical
events, inability to produce suf?cient quantities of certain vehicles, limited access to ?nancing or other factors, our
?nancial condition and results of operations would be materially adversely affected.
Risk Factors
18 2014
|
ANNUAL REPORT
Risk Factors
Our businesses are affected by global ?nancial markets and general economic and other conditions over which we
have little or no control.
Our results of operations and ?nancial position may be in?uenced by various macroeconomic factors—including
changes in gross domestic product, the level of consumer and business con?dence, changes in interest rates for or
availability of consumer and business credit, energy prices, the cost of commodities or other raw materials, the rate of
unemployment and foreign currency exchange rates—within the various countries in which we operate.
Beginning in 2008, global ?nancial markets have experienced severe disruptions, resulting in a material deterioration
of the global economy. The global economic recession in 2008 and 2009, which affected most regions and business
sectors, resulted in a sharp decline in demand for automobiles. Although more recently we have seen signs of
recovery in certain regions, the overall global economic outlook remains uncertain.
In Europe, in particular, despite measures taken by several governments and monetary authorities to provide ?nancial
assistance to certain Eurozone countries and to avoid default on sovereign debt obligations, concerns persist regarding
the debt burden of several countries. These concerns, along with the signi?cant ?scal adjustments carried out in several
countries, intended to manage actual or perceived sovereign credit risk, led to further pressure on economic growth and to
new periods of recession. Prior to a slight improvement in 2014, European automotive industry sales declined over several
years following a period in which sales were supported by government incentive schemes, particularly those designed
to promote sales of more fuel ef?cient and low emission vehicles. Prior to the global ?nancial crisis, industry-wide sales of
passenger cars in Europe were 16 million units in 2007. In 2014, following six years of sales declines, sales in that region
rose 5 percent over 2013 to 13 million passenger cars. From 2011 to 2014, our market share of the European passenger
car market decreased from 7.0 percent to 5.8 percent, and we have reported losses and negative EBIT in each of the
past four years in the Europe, Middle East and Africa, or EMEA, segment. See Overview—Overview of Our Business
for a description of our reportable segments. These ongoing concerns could have a detrimental impact on the global
economic recovery, as well as on the ?nancial condition of European ?nancial institutions, which could result in greater
volatility, reduced liquidity, widening of credit spreads and lack of price transparency in credit markets. Widespread austerity
measures in many countries in which we operate could continue to adversely affect consumer con?dence, purchasing
power and spending, which could adversely affect our ?nancial condition and results of operations.
A majority of our revenues have been generated in the NAFTA segment, as vehicle sales in North America have experienced
signi?cant growth from the low vehicle sales volumes in 2009-2010. However, this recovery may not be sustained or may
be limited to certain classes of vehicles. Since the recovery may be partially attributable to the pent-up demand and average
age of vehicles in North America following the extended economic downturn, there can be no assurances that continued
improvements in general economic conditions or employment levels will lead to additional increases in vehicle sales. As a
result, North America may experience limited growth or decline in vehicle sales in the future.
In addition, slower expansion or recessionary conditions are being experienced in major emerging countries, such
as China, Brazil and India. In addition to weaker export business, lower domestic demand has also led to a slowing
economy in these countries. These factors could adversely affect our ?nancial condition and results of operations.
In general, the automotive sector has historically been subject to highly cyclical demand and tends to re?ect the
overall performance of the economy, often amplifying the effects of economic trends. Given the dif?culty in predicting
the magnitude and duration of economic cycles, there can be no assurances as to future trends in the demand for
products sold by us in any of the markets in which we operate.
In addition to slow economic growth or recession, other economic circumstances—such as increases in energy
prices and ?uctuations in prices of raw materials or contractions in infrastructure spending—could have negative
consequences for the industry in which we operate and, together with the other factors referred to previously, could
have a material adverse effect on our ?nancial condition and results of operations.
2014
|
ANNUAL REPORT 19
We may be unsuccessful in efforts to expand the international reach of some of our brands that we believe have global
appeal and reach.
The growth strategies re?ected in our 2014-2018 Strategic Business Plan, or Business Plan, will require us to make
signi?cant investments, including to expand several brands that we believe to have global appeal into new markets.
Such strategies include expanding sales of the Jeep brand globally, most notably through localized production in Asia
and Latin America and reintroduction of the Alfa Romeo brand in North America and other markets throughout the
world. Our plans also include a signi?cant expansion of our Maserati brand vehicles to cover all segments of the luxury
vehicle market. This will require signi?cant investments in our production facilities and in distribution networks in these
markets. If we are unable to introduce vehicles that appeal to consumers in these markets and achieve our brand
expansion strategies, we may be unable to earn a suf?cient return on these investments and this could have a material
adverse effect on our ?nancial condition and results of operations.
Product recalls and warranty obligations may result in direct costs, and loss of vehicle sales could have material
adverse effects on our business.
We, and the U.S. automotive industry in general, have recently experienced a signi?cant increase in recall activity to
address performance, compliance or safety-related issues. The costs we incur to recall vehicles typically include the
cost of replacement parts and labor to remove and replace parts, substantially depend on the nature of the remedy
and the number of vehicles affected, and may arise many years after a vehicle’s sale. Product recalls may also harm
our reputation and may cause consumers to question the safety or reliability of our products.
Any costs incurred, or lost vehicle sales, resulting from product recalls could materially adversely affect our ?nancial
condition and results of operations. Moreover, if we face consumer complaints, or we receive information from vehicle
rating services that calls into question the safety or reliability of one of our vehicles and we do not issue a recall, or if we
do not do so on a timely basis, our reputation may also be harmed and we may lose future vehicle sales.
We are also obligated under the terms of our warranty agreements to make repairs or replace parts in our vehicles
at our expense for a speci?ed period of time. Therefore, any failure rate that exceeds our assumptions may result in
unanticipated losses.
Our future performance depends on our ability to expand into new markets as well as enrich our product portfolio and
offer innovative products in existing markets.
Our success depends, among other things, on our ability to maintain or increase our share in existing markets and/
or to expand into new markets through the development of innovative, high-quality products that are attractive to
customers and provide adequate pro?tability. Following our January 2014 acquisition of the approximately 41.5
percent interest in FCA US that we did not already own, we announced our Business Plan in May 2014. Our Business
Plan includes a number of product initiatives designed to improve the quality of our product offerings and grow sales in
existing markets and expand in new markets.
It generally takes two years or more to design and develop a new vehicle, and a number of factors may lengthen that
schedule. Because of this product development cycle and the various elements that may contribute to consumers’
acceptance of new vehicle designs, including competitors’ product introductions, fuel prices, general economic
conditions and changes in styling preferences, an initial product concept or design that we believe will be attractive
may not result in a vehicle that will generate sales in suf?cient quantities and at high enough prices to be pro?table.
A failure to develop and offer innovative products that compare favorably to those of our principal competitors, in
terms of price, quality, functionality and features, with particular regard to the upper-end of the product range, or
delays in bringing strategic new models to the market, could impair our strategy, which would have a material adverse
effect on our ?nancial condition and results of operations. Additionally, our high proportion of ?xed costs, both due to
our signi?cant investment in property, plant and equipment as well as the requirements of our collective bargaining
agreements, which limit our ?exibility to adjust personnel costs to changes in demand for our products, may further
exacerbate the risks associated with incorrectly assessing demand for our vehicles.
20 2014
|
ANNUAL REPORT
Risk Factors
Further, if we determine that a safety or emissions defect, a mechanical defect or a non-compliance with regulation
exists with respect to a vehicle model prior to the retail launch, the launch of such vehicle could be delayed until
we remedy the defect or non-compliance. The costs associated with any protracted delay in new model launches
necessary to remedy such defect, and the cost of providing a free remedy for such defects or non-compliance in
vehicles that have been sold, could be substantial.
The automotive industry is highly competitive and cyclical and we may suffer from those factors more than some of
our competitors.
Substantially all of our revenues are generated in the automotive industry, which is highly competitive, encompassing the
production and distribution of passenger cars, light commercial vehicles and components and production systems.
We face competition from other international passenger car and light commercial vehicle manufacturers and distributors
and components suppliers in Europe, North America, Latin America and the Asia Paci?c region. These markets are all
highly competitive in terms of product quality, innovation, pricing, fuel economy, reliability, safety, customer service and
?nancial services offered, and many of our competitors are better capitalized with larger market shares.
Competition, particularly in pricing, has increased signi?cantly in the automotive industry in recent years. Global vehicle
production capacity signi?cantly exceeds current demand, partly as a result of lower growth in demand for vehicles.
This overcapacity, combined with high levels of competition and weakness of major economies, has intensi?ed and
may further intensify pricing pressures.
Our competitors may respond to these conditions by attempting to make their vehicles more attractive or less
expensive to customers by adding vehicle enhancements, providing subsidized ?nancing or leasing programs, or
by reducing vehicle prices whether directly or by offering option package discounts, price rebates or other sales
incentives in certain markets. These actions have had, and could continue to have, a negative impact on our vehicle
pricing, market share, and results of operations.
In the automotive business, sales to end-customers are cyclical and subject to changes in the general condition of
the economy, the readiness of end-customers to buy and their ability to obtain ?nancing, as well as the possible
introduction of measures by governments to stimulate demand. The automotive industry is also subject to the
constant renewal of product offerings through frequent launches of new models. A negative trend in the automotive
industry or our inability to adapt effectively to external market conditions coupled with more limited capital than many
of our principal competitors could have a material adverse impact on our ?nancial condition and results of operations.
Our current credit rating is below investment grade and any further deterioration may signi?cantly affect our funding
and prospects.
The ability to access the capital markets or other forms of ?nancing and the related costs depend, among other things,
on our credit ratings. Following downgrades by the major rating agencies, we are currently rated below investment
grade. The rating agencies review these ratings regularly and, accordingly, new ratings may be assigned to us in the
future. It is not currently possible to predict the timing or outcome of any ratings review. Any downgrade may increase
our cost of capital and potentially limit our access to sources of ?nancing, which may cause a material adverse effect
on our business prospects, earnings and ?nancial position. Since the ratings agencies may separately review and rate
FCA US on a stand-alone basis, it is possible that our credit ratings may not bene?t from any improvements in FCA
US’s credit ratings or that a deterioration in FCA US’s credit ratings could result in a negative rating review of us. See
Liquidity and Capital Resources for more information on our ?nancing arrangements.
2014
|
ANNUAL REPORT 21
We may not be able to realize anticipated bene?ts from any acquisitions and challenges associated with strategic
alliances may have an adverse impact on our results of operations.
We may engage in acquisitions or enter into, expand or exit from strategic alliances which could involve risks that may
prevent us from realizing the expected bene?ts of the transactions or achieving our strategic objectives. Such risks
could include:
technological and product synergies, economies of scale and cost reductions not occurring as expected;
unexpected liabilities;
incompatibility in processes or systems;
unexpected changes in laws or regulations;
inability to retain key employees;
inability to source certain products;
increased ?nancing costs and inability to fund such costs;
signi?cant costs associated with terminating or modifying alliances; and
problems in retaining customers and integrating operations, services, personnel, and customer bases.
If problems or issues were to arise among the parties to one or more strategic alliances for managerial, ?nancial or
other reasons, or if such strategic alliances or other relationships were terminated, our product lines, businesses,
?nancial position and results of operations could be adversely affected.
We may not achieve the expected bene?ts from our integration of the Group’s operations.
The January 2014 acquisition of the approximately 41.5 percent interest in FCA US we did not already own and the
related integration of the two businesses is intended to provide us with a number of long-term bene?ts, including
allowing new vehicle platforms and powertrain technologies to be shared across a larger volume, as well as
procurement bene?ts and global distribution opportunities, particularly the extension of brands into new markets.
The integration is also intended to facilitate penetration of key brands in several international markets where we believe
products would be attractive to consumers, but where we currently do not have signi?cant market penetration.
The ability to realize the bene?ts of the integration is critical for us to compete with other automakers. If we are unable
to convert the opportunities presented by the integration into long-term commercial bene?ts, either by improving
sales of vehicles and service parts, reducing costs or both, our ?nancial condition and results of operations may be
materially adversely affected.
We may be exposed to shortfalls in our pension plans.
Our de?ned bene?t pension plans are currently underfunded. As of December 31, 2014, our de?ned bene?t
pension plans were underfunded by approximately €5.1 billion (€4.8 billion of which relates to FCA US’s de?ned
bene?t pension plans). Our pension funding obligations may increase signi?cantly if the investment performance
of plan assets does not keep pace with bene?t payment obligations. Mandatory funding obligations may increase
because of lower than anticipated returns on plan assets, whether as a result of overall weak market performance
or particular investment decisions, changes in the level of interest rates used to determine required funding levels,
changes in the level of bene?ts provided for by the plans, or any changes in applicable law related to funding
requirements. Our de?ned bene?t plans currently hold signi?cant investments in equity and ?xed income securities,
as well as investments in less liquid instruments such as private equity, real estate and certain hedge funds. Due
to the complexity and magnitude of certain investments, additional risks may exist, including signi?cant changes in
investment policy, insuf?cient market capacity to complete a particular investment strategy and an inherent divergence
in objectives between the ability to manage risk in the short term and the ability to quickly rebalance illiquid and long-
term investments.
22 2014
|
ANNUAL REPORT
Risk Factors
To determine the appropriate level of funding and contributions to our de?ned bene?t plans, as well as the investment
strategy for the plans, we are required to make various assumptions, including an expected rate of return on plan
assets and a discount rate used to measure the obligations under de?ned bene?t pension plans. Interest rate
increases generally will result in a decline in the value of investments in ?xed income securities and the present value
of the obligations. Conversely, interest rate decreases will generally increase the value of investments in ?xed income
securities and the present value of the obligations.
Any reduction in the discount rate or the value of plan assets, or any increase in the present value of obligations, may
increase our pension expenses and required contributions and, as a result, could constrain liquidity and materially
adversely affect our ?nancial condition and results of operations. If we fail to make required minimum funding
contributions, we could be subject to reportable event disclosure to the U.S. Pension Bene?t Guaranty Corporation, as
well as interest and excise taxes calculated based upon the amount of any funding de?ciency. With our ownership in
FCA US now equal to 100 percent, we may become subject to certain U.S. legal requirements making us secondarily
responsible for a funding shortfall in certain of FCA US’s pension plans in the event these pension plans were
terminated and FCA US were to become insolvent.
We may not be able to provide adequate access to ?nancing for our dealers and retail customers.
Our dealers enter into wholesale ?nancing arrangements to purchase vehicles from us to hold in inventory and facilitate
retail sales, and retail customers use a variety of ?nance and lease programs to acquire vehicles.
Unlike many of our competitors, we do not own and operate a controlled ?nance company dedicated solely to our
mass-market operations in the U.S. and certain key markets in Europe. Instead we have elected to partner with
specialized ?nancial services providers through joint ventures and commercial agreements. Our lack of a controlled
?nance company in these key markets may increase the risk that our dealers and retail customers will not have access
to suf?cient ?nancing on acceptable terms which may adversely affect our vehicle sales in the future. Furthermore,
many of our competitors are better able to implement ?nancing programs designed to maximize vehicle sales in a
manner that optimizes pro?tability for them and their ?nance companies on an aggregate basis. Since our ability
to compete depends on access to appropriate sources of ?nancing for dealers and retail customers, our lack of a
controlled ?nance company in those markets could adversely affect our results of operations.
In other markets, we rely on controlled ?nance companies, joint ventures and commercial relationships with third
parties, including third party ?nancial institutions, to provide ?nancing to our dealers and retail customers. Finance
companies are subject to various risks that could negatively affect their ability to provide ?nancing services at
competitive rates, including:
the performance of loans and leases in their portfolio, which could be materially affected by delinquencies, defaults
or prepayments;
wholesale auction values of used vehicles;
higher than expected vehicle return rates and the residual value performance of vehicles they lease; and
?uctuations in interest rates and currency exchange rates.
Any ?nancial services provider, including our joint ventures and controlled ?nance companies, will face other demands
on its capital, including the need or desire to satisfy funding requirements for dealers or customers of our competitors
as well as liquidity issues relating to other investments. Furthermore, they may be subject to regulatory changes that
may increase their costs, which may impair their ability to provide competitive ?nancing products to our dealers and
retail customers.
To the extent that a ?nancial services provider is unable or unwilling to provide suf?cient ?nancing at competitive rates
to our dealers and retail customers, such dealers and retail customers may not have suf?cient access to ?nancing
to purchase or lease our vehicles. As a result, our vehicle sales and market share may suffer, which would adversely
affect our ?nancial condition and results of operations.
2014
|
ANNUAL REPORT 23
Vehicle sales depend heavily on affordable interest rates for vehicle ?nancing.
In certain regions, ?nancing for new vehicle sales has been available at relatively low interest rates for several years
due to, among other things, expansive government monetary policies. To the extent that interest rates rise generally,
market rates for new vehicle ?nancing are expected to rise as well, which may make our vehicles less affordable
to retail customers or steer consumers to less expensive vehicles that tend to be less pro?table for us, adversely
affecting our ?nancial condition and results of operations. Additionally, if consumer interest rates increase substantially
or if ?nancial service providers tighten lending standards or restrict their lending to certain classes of credit, our
retail customers may not desire to or be able to obtain ?nancing to purchase or lease our vehicles. Furthermore,
because our customers may be relatively more sensitive to changes in the availability and adequacy of ?nancing and
macroeconomic conditions, our vehicle sales may be disproportionately affected by changes in ?nancing conditions
relative to the vehicle sales of our competitors.
Limitations on our liquidity and access to funding may limit our ability to execute our Business Plan and improve our
?nancial condition and results of operations.
Our future performance will depend on, among other things, our ability to ?nance debt repayment obligations and
planned investments from operating cash ?ow, available liquidity, the renewal or re?nancing of existing bank loans
and/or facilities and possible access to capital markets or other sources of ?nancing. Although we have measures in
place that are designed to ensure that adequate levels of working capital and liquidity are maintained, declines in sales
volumes could have a negative impact on the cash-generating capacity of our operating activities. For a discussion
of these factors, see Liquidity and Capital Resources. We could, therefore, ?nd ourselves in the position of having to
seek additional ?nancing and/or having to re?nance existing debt, including in unfavorable market conditions, with
limited availability of funding and a general increase in funding costs. Any limitations on our liquidity, due to decreases
in vehicle sales, the amount of or restrictions in our existing indebtedness, conditions in the credit markets, general
economic conditions or otherwise, may adversely impact our ability to execute our Business Plan and impair our
?nancial condition and results of operations. In addition, any actual or perceived limitations of our liquidity may limit the
ability or willingness of counterparties, including dealers, customers, suppliers and ?nancial service providers, to do
business with us, which may adversely affect our ?nancial condition and results of operations.
Our ability to achieve cost reductions and to realize production ef?ciencies is critical to maintaining our
competitiveness and long-term pro?tability.
We are continuing to implement a number of cost reduction and productivity improvement initiatives in our operations,
for example, by increasing the number of vehicles that are based on common platforms, reducing dependence on sales
incentives offered to dealers and consumers, leveraging purchasing capacity and volumes and implementing World
Class Manufacturing, or WCM, principles. WCM principles are intended to eliminate waste of all types, and improve
worker ef?ciency, productivity, safety and vehicle quality as well as worker ?exibility and focus on removing capacity
bottlenecks to maximize output when market demand requires without having to resort to signi?cant capital investments.
As part of our Business Plan, we plan to continue our efforts to extend our WCM programs into all of our production
facilities and benchmark across all of our facilities around the world. Our future success depends upon our ability to
implement these initiatives successfully throughout our operations. While some productivity improvements are within our
control, others depend on external factors, such as commodity prices, supply capacity limitations, or trade regulation.
These external factors may make it more dif?cult to reduce costs as planned, and we may sustain larger than expected
production expenses, materially affecting our business and results of operations. Furthermore, reducing costs may prove
dif?cult due to the need to introduce new and improved products in order to meet consumer expectations.
24 2014
|
ANNUAL REPORT
Risk Factors
Our business operations may be impacted by various types of claims, lawsuits, and other contingent obligations.
We are involved in various product liability, warranty, product performance, asbestos, personal injury, environmental
claims and lawsuits, governmental investigations, antitrust, intellectual property, tax and other legal proceedings
including those that arise in the ordinary course of our business. We estimate such potential claims and contingent
liabilities and, where appropriate, record provisions to address these contingent liabilities. The ultimate outcome of
the legal matters pending against us is uncertain, and although such claims, lawsuits and other legal matters are not
expected individually to have a material adverse effect on our ?nancial condition or results of operations, such matters
could have, in the aggregate, a material adverse effect on our ?nancial condition or results of operations. Furthermore,
we could, in the future, be subject to judgments or enter into settlements of lawsuits and claims that could have a
material adverse effect on our results of operations in any particular period. While we maintain insurance coverage with
respect to certain claims, we may not be able to obtain such insurance on acceptable terms in the future, if at all, and
any such insurance may not provide adequate coverage against any such claims. See also Notes 26 and 33 of the
Consolidated ?nancial statements included elsewhere in this report for additional information.
Failure to maintain adequate ?nancial and management processes and controls could lead to errors in our ?nancial
reporting, which could harm our business reputation and cause a default under certain covenants in our credit
agreements and other debt.
We continuously monitor and evaluate changes in our internal controls over ?nancial reporting. In support of our
drive toward common global systems, we are extending the current ?nance, procurement, and capital project and
investment management systems to new areas of operations. As appropriate, we continue to modify the design and
documentation of internal control processes and procedures relating to the new systems to simplify and automate
many of our previous processes. Our management believes that the implementation of these systems will continue to
improve and enhance internal controls over ?nancial reporting. Failure to maintain adequate ?nancial and management
processes and controls could lead to errors in our ?nancial reporting, which could harm our business reputation.
In addition, if we do not maintain adequate ?nancial and management personnel, processes and controls, we may
not be able to accurately report our ?nancial performance on a timely basis, which could cause a default under certain
covenants in the indentures governing certain of our public indebtedness, and other credit agreements.
A disruption in our information technology could compromise con?dential and sensitive information.
We depend on our information technology and data processing systems to operate our business, and a signi?cant
malfunction or disruption in the operation of our systems, or a security breach that compromises the con?dential and
sensitive information stored in those systems, could disrupt our business and adversely impact our ability to compete.
Our ability to keep our business operating effectively depends on the functional and ef?cient operation of our
information, data processing and telecommunications systems, including our vehicle design, manufacturing,
inventory tracking and billing and payment systems. We rely on these systems to make a variety of day-to-day
business decisions as well as to track transactions, billings, payments and inventory. Such systems are susceptible to
malfunctions and interruptions due to equipment damage, power outages, and a range of other hardware, software
and network problems. Those systems are also susceptible to cybercrime, or threats of intentional disruption, which
are increasing in terms of sophistication and frequency. For any of these reasons, we may experience systems
malfunctions or interruptions. Although our systems are diversi?ed, including multiple server locations and a range
of software applications for different regions and functions, and we are currently undergoing an effort to assess and
ameliorate risks to our systems, a signi?cant or large-scale malfunction or interruption of any one of our computer or
data processing systems could adversely affect our ability to manage and keep our operations running ef?ciently, and
damage our reputation if we are unable to track transactions and deliver products to our dealers and customers.
A malfunction that results in a wider or sustained disruption to our business could have a material adverse effect on
our business, ?nancial condition and results of operations.
2014
|
ANNUAL REPORT 25
In addition to supporting our operations, we use our systems to collect and store con?dential and sensitive data,
including information about our business, our customers and our employees. As our technology continues to evolve,
we anticipate that we will collect and store even more data in the future, and that our systems will increasingly use
remote communication features that are sensitive to both willful and unintentional security breaches. Much of our
value is derived from our con?dential business information, including vehicle design, proprietary technology and
trade secrets, and to the extent the con?dentiality of such information is compromised, we may lose our competitive
advantage and our vehicle sales may suffer. We also collect, retain and use personal information, including data we
gather from customers for product development and marketing purposes, and data we obtain from employees. In the
event of a breach in security that allows third parties access to this personal information, we are subject to a variety
of ever-changing laws on a global basis that require us to provide noti?cation to the data owners, and that subject us
to lawsuits, ?nes and other means of regulatory enforcement. Our reputation could suffer in the event of such a data
breach, which could cause consumers to purchase their vehicles from our competitors. Ultimately, any signi?cant
compromise in the integrity of our data security could have a material adverse effect on our business.
We may not be able to adequately protect our intellectual property rights, which may harm our business.
Our success depends, in part, on our ability to protect our intellectual property rights. If we fail to protect our intellectual
property rights, others may be able to compete against us using intellectual property that is the same as or similar to
our own. In addition, there can be no guarantee that our intellectual property rights are suf?cient to provide us with
a competitive advantage against others who offer products similar to ours. Despite our efforts, we may be unable to
prevent third parties from infringing our intellectual property and using our technology for their competitive advantage.
Any such infringement and use could adversely affect our business, ?nancial condition or results of operations.
The laws of some countries in which we operate do not offer the same protection of our intellectual property rights as do the
laws of the U.S. or Europe. In addition, effective intellectual property enforcement may be unavailable or limited in certain
countries, making it dif?cult for us to protect our intellectual property from misuse or infringement there. Our inability to
protect our intellectual property rights in some countries may harm our business, ?nancial condition or results of operations.
We are subject to risks relating to international markets and exposure to changes in local conditions.
We are subject to risks inherent to operating globally, including those related to:
exposure to local economic and political conditions;
import and/or export restrictions;
multiple tax regimes, including regulations relating to transfer pricing and withholding and other taxes on
remittances and other payments to or from subsidiaries;
foreign investment and/or trade restrictions or requirements, foreign exchange controls and restrictions on the
repatriation of funds. In particular, current regulations limit our ability to access and transfer liquidity out of Venezuela
to meet demands in other countries and also subject us to increased risk of devaluation or other foreign exchange
losses. See Subsequent events and 2015 outlook for more information regarding our Venezuela operations; and
the introduction of more stringent laws and regulations.
Unfavorable developments in any one or a combination of these areas (which may vary from country to country) could
have a material adverse effect on our ?nancial condition and results of operations.
26 2014
|
ANNUAL REPORT
Risk Factors
Our success largely depends on the ability of our current management team to operate and manage effectively.
Our success largely depends on the ability of our senior executives and other members of management to effectively
manage the Group and individual areas of the business. In particular, our Chief Executive Of?cer, Sergio Marchionne,
is critical to the execution of our new strategic direction and implementation of the Business Plan. Although
Mr. Marchionne has indicated his intention to remain as our Chief Executive Of?cer through the period of our Business
Plan, if we were to lose his services or those of any of our other senior executives or key employees it could have a
material adverse effect on our business prospects, earnings and ?nancial position. We have developed succession
plans that we believe are appropriate in the circumstances, although it is dif?cult to predict with any certainty that we
will replace these individuals with persons of equivalent experience and capabilities. If we are unable to ?nd adequate
replacements or to attract, retain and incentivize senior executives, other key employees or new quali?ed personnel
our business, ?nancial condition and results of operations may suffer.
Developments in emerging market countries may adversely affect our business.
We operate in a number of emerging markets, both directly (e.g., Brazil and Argentina) and through joint ventures and
other cooperation agreements (e.g., Turkey, India, China and Russia). Our Business Plan provides for expansion of
our existing sales and manufacturing presence in our South and Central America, or LATAM, and Asia and Paci?c
countries, or APAC, regions. In recent years we have been the market leader in Brazil, which has provided a key
contribution to our ?nancial performance. Our exposure to other emerging countries has increased in recent years,
as have the number and importance of such joint ventures and cooperation agreements. Economic and political
developments in Brazil and other emerging markets, including economic crises or political instability, have had and
could have in the future material adverse effects on our ?nancial condition and results of operations. Further, in certain
markets in which we or our joint ventures operate, government approval may be required for certain activities, which
may limit our ability to act quickly in making decisions on our operations in those markets.
Maintaining and strengthening our position in these emerging markets is a key component of our global growth
strategy in our Business Plan. However, with competition from many of the largest global manufacturers as well as
numerous smaller domestic manufacturers, the automotive market in these emerging markets is highly competitive.
As these markets continue to grow, we anticipate that additional competitors, both international and domestic, will
seek to enter these markets and that existing market participants will try to aggressively protect or increase their
market share. Increased competition may result in price reductions, reduced margins and our inability to gain or hold
market share, which could have a material adverse effect on our ?nancial condition and results of operations.
Our reliance on joint ventures in certain emerging markets may adversely affect the development of our business in
those regions.
We intend to expand our presence in emerging markets, including China and India, through partnerships and joint
ventures. For instance, we have entered into a joint venture with Guangzhou Automobile Group Co., Ltd, or GAC
Group, which will localize production of three new Jeep vehicles for the Chinese market and expand the portfolio of
Jeep Sport Utility Vehicles, or SUVs, currently available to Chinese consumers as imports. We have also entered into a
joint venture with TATA Motors Limited for the production of certain of our vehicles, engines and transmissions in India.
Our reliance on joint ventures to enter or expand our presence in these markets may expose us to risk of con?ict
with our joint venture partners and the need to divert management resources to overseeing these shareholder
arrangements. Further, as these arrangements require cooperation with third party partners, these joint ventures may
not be able to make decisions as quickly as we would if we were operating on our own or may take actions that are
different from what we would do on a standalone basis in light of the need to consider our partners’ interests.
As a result, we may be less able to respond timely to changes in market dynamics, which could have an adverse effect
on our ?nancial condition and results of operations.
2014
|
ANNUAL REPORT 27
Laws, regulations and governmental policies, including those regarding increased fuel economy requirements and
reduced greenhouse gas emissions, may have a signi?cant effect on how we do business and may adversely affect
our results of operations.
In order to comply with government regulations related to fuel economy and emissions standards, we must devote
signi?cant ?nancial and management resources, as well as vehicle engineering and design attention, to these legal
requirements. We expect the number and scope of these regulatory requirements, along with the costs associated
with compliance, to increase signi?cantly in the future and these costs could be dif?cult to pass through to customers.
As a result, we may face limitations on the types of vehicles we produce and sell and where we can sell them, which
could have a material adverse impact on our ?nancial condition and results of operations.
Government initiatives to stimulate consumer demand for products sold by us, such as changes in tax treatment or purchase
incentives for new vehicles, can substantially in?uence the timing and level of our revenues. The size and duration of such
government measures are unpredictable and outside of our control. Any adverse change in government policy relating to those
measures could have material adverse effects on our business prospects, ?nancial condition and results of operations.
The ?nancial resources required to develop and commercialize vehicles incorporating sustainable technologies for the
future are signi?cant, as are the barriers that limit the mass-market potential of such vehicles.
Our product strategy is driven by the objective of achieving sustainable mobility by reducing the environmental impact
of vehicles over their entire life cycle. We therefore intend to continue investing capital resources to develop new
sustainable technology. We aim to increase the use of alternative fuels, such as natural gas, by continuing to offer a
range of dual-fuel passenger cars and commercial vehicles. Additionally, we plan to continue developing alternative
propulsion systems, particularly for vehicles driven in urban areas (such as the zero-emission Fiat 500e).
In many cases, technological and cost barriers limit the mass-market potential of sustainable natural gas and electric
vehicles. In certain other cases the technologies that we plan to employ are not yet commercially practical and depend
on signi?cant future technological advances by us and by suppliers. There can be no assurance that these advances
will occur in a timely or feasible manner, that the funds we have budgeted or expended for these purposes will be
adequate, or that we will be able to obtain rights to use these technologies. Further, our competitors and others are
pursuing similar technologies and other competing technologies and there can be no assurance that they will not
acquire similar or superior technologies sooner than we will or on an exclusive basis or at a signi?cant price advantage.
Labor laws and collective bargaining agreements with our labor unions could impact our ability to increase the
ef?ciency of our operations.
Substantially all of our production employees are represented by trade unions, are covered by collective bargaining
agreements and/or are protected by applicable labor relations regulations that may restrict our ability to modify
operations and reduce costs quickly in response to changes in market conditions. These and other provisions in our
collective bargaining agreements may impede our ability to restructure our business successfully to compete more
effectively, especially with those automakers whose employees are not represented by trade unions or are subject to less
stringent regulations, which could have a material adverse effect on our ?nancial condition and results of operations.
We depend on our relationships with suppliers.
We purchase raw materials and components from a large number of suppliers and depend on services and products
provided by companies outside the Group. Close collaboration between an original equipment manufacturer, or OEM,
and its suppliers is common in the automotive industry, and although this offers economic bene?ts in terms of cost
reduction, it also means that we depend on our suppliers and are exposed to the possibility that dif?culties, including
those of a ?nancial nature, experienced by those suppliers (whether caused by internal or external factors) could have
a material adverse effect on our ?nancial condition and results of operations.
28 2014
|
ANNUAL REPORT
Risk Factors
We face risks associated with increases in costs, disruptions of supply or shortages of raw materials.
We use a variety of raw materials in our business including steel, aluminum, lead, resin and copper, and precious
metals such as platinum, palladium and rhodium, as well as energy. The prices for these raw materials ?uctuate, and
market conditions can affect our ability to manage our cost of sales over the short term. We seek to manage this
exposure, but we may not be successful in managing our exposure to these risks. Substantial increases in the prices
for raw materials would increase our operating costs and could reduce pro?tability if the increased costs cannot be
offset by changes in vehicle prices or countered by productivity gains. In particular, certain raw materials are sourced
from a limited number of suppliers and from a limited number of countries. We cannot guarantee that we will be able to
maintain arrangements with these suppliers that assure access to these raw materials, and in some cases this access
may be affected by factors outside of our control and the control of our suppliers. For instance, natural or man-made
disasters or civil unrest may have severe and unpredictable effects on the price of certain raw materials in the future.
As with raw materials, we are also at risk for supply disruption and shortages in parts and components for use in our
vehicles for many reasons including, but not limited to, tight credit markets or other ?nancial distress, natural or man-
made disasters, or production dif?culties. We will continue to work with suppliers to monitor potential disruptions and
shortages and to mitigate the effects of any emerging shortages on our production volumes and revenues.
However, there can be no assurances that these events will not have an adverse effect on our production in the future,
and any such effect may be material.
Any interruption in the supply or any increase in the cost of raw materials, parts, components and systems could
negatively impact our ability to achieve our vehicle sales objectives and pro?tability. Long-term interruptions in supply
of raw materials, parts, components and systems may result in a material impact on vehicle production, vehicle
sales objectives, and pro?tability. Cost increases which cannot be recouped through increases in vehicle prices, or
countered by productivity gains, may result in a material impact on our ?nancial condition and/or results of operations.
We are subject to risks associated with exchange rate ?uctuations, interest rate changes, credit risk and other market risks.
We operate in numerous markets worldwide and are exposed to market risks stemming from ?uctuations in currency
and interest rates. The exposure to currency risk is mainly linked to the differences in geographic distribution of our
manufacturing activities and commercial activities, resulting in cash ?ows from sales being denominated in currencies
different from those connected to purchases or production activities.
We use various forms of ?nancing to cover funding requirements for our industrial activities and for providing ?nancing
to our dealers and customers. Moreover, liquidity for industrial activities is also principally invested in variable-rate
or short-term ?nancial instruments. Our ?nancial services businesses normally operate a matching policy to offset
the impact of differences in rates of interest on the ?nanced portfolio and related liabilities. Nevertheless, changes in
interest rates can affect net revenues, ?nance costs and margins.
We seek to manage risks associated with ?uctuations in currency and interest rates through ?nancial hedging
instruments. Despite such hedges being in place, ?uctuations in currency or interest rates could have a material adverse
effect on our ?nancial condition and results of operations. For example, the weakening of the Brazilian Real against the
Euro in 2014 impacted the results of operations of our LATAM segment. See Operating Results—Results of Operations.
Our ?nancial services activities are also subject to the risk of insolvency of dealers and retail customers, as well as
unfavorable economic conditions in markets where these activities are carried out. Despite our efforts to mitigate such
risks through the credit approval policies applied to dealers and retail customers, there can be no assurances that we
will be able to successfully mitigate such risks, particularly with respect to a general change in economic conditions.
2014
|
ANNUAL REPORT 29
We are a Dutch public company with limited liability, and our shareholders may have rights different from those of
shareholders of companies organized in the U.S.
The rights of our shareholders may be different from the rights of shareholders governed by the laws of U.S.
jurisdictions. We are a Dutch public company with limited liability (naamloze vennootsehap). Our corporate affairs are
governed by our articles of association and by the laws governing companies incorporated in the Netherlands.
The rights of shareholders and the responsibilities of members of our board of directors may be different from the
rights of shareholders and the responsibilities of members of our board of directors in companies governed by the
laws of other jurisdictions including the U.S. In the performance of its duties, our board of directors is required by
Dutch law to consider our interests and the interests of our shareholders, our employees and other stakeholders, in all
cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties
will have interests that are different from, or in addition to, your interests as a shareholder.
It may be dif?cult to enforce U.S. judgments against us.
We are organized under the laws of the Netherlands, and a substantial portion of our assets are outside of the U.S.
Most of our directors and senior management and our independent auditors are resident outside the U.S., and all or
a substantial portion of their respective assets may be located outside the U.S. As a result, it may be dif?cult for U.S.
investors to effect service of process within the U.S. upon these persons. It may also be dif?cult for U.S. investors to
enforce within the U.S. judgments predicated upon the civil liability provisions of the securities laws of the U.S. or any
state thereof. In addition, there is uncertainty as to whether the courts outside the U.S. would recognize or enforce
judgments of U.S. courts obtained against us or our directors and of?cers predicated upon the civil liability provisions
of the securities laws of the U.S. or any state thereof. Therefore, it may be dif?cult to enforce U.S. judgments against
us, our directors and of?cers and our independent auditors.
We operate so as to be treated as exclusively resident in the United Kingdom for tax purposes, but the relevant tax
authorities may treat us as also being tax resident elsewhere.
We are not a company incorporated in the United Kingdom, or U.K. Therefore, whether we are resident in the U.K. for
tax purposes will depend on whether our “central management and control” is located (in whole or in part) in the U.K.
The test of “central management and control” is largely a question of fact and degree based on all the circumstances,
rather than a question of law. Nevertheless, the decisions of the U.K. courts and the published practice of Her
Majesty’s Revenue & Customs, or HMRC, suggest that we, a group holding company, are likely to be regarded as
having become U.K.-resident on this basis from incorporation and remaining so if, as we intend, (i) at least half of
the meetings of our Board of Directors are held in the U.K. with a majority of directors present in the U.K. for those
meetings; (ii) at those meetings there are full discussions of, and decisions are made regarding, the key strategic
issues affecting us and our subsidiaries; (iii) those meetings are properly minuted; (iv) at least some of our directors,
together with supporting staff, are based in the U.K.; and (v) we have permanent staffed of?ce premises in the U.K.
Even if we are resident in the U.K. for tax purposes on this basis, as expected, we would nevertheless not be treated
as U.K.-resident if (a) we were concurrently resident in another jurisdiction (applying the tax residence rules of that
jurisdiction) that has a double tax treaty with the U.K. and (b) there is a tie-breaker provision in that tax treaty which
allocates exclusive residence to that other jurisdiction.
Our residence for Italian tax purposes is largely a question of fact based on all circumstances. A rebuttable
presumption of residence in Italy may apply under Article 73(5-bis) of the Italian Consolidated Tax Act, or CTA.
However, we have set up and thus far maintained, and intend to continue to maintain, our management and
organizational structure in such a manner that we should be deemed resident in the U.K. from our incorporation for the
purposes of the Italy-U.K. tax treaty. The result of this is that we should not be regarded as an Italian tax resident either
for the purposes of the Italy-U.K. tax treaty or for Italian domestic law purposes. Because this analysis is highly factual
and may depend on future changes in our management and organizational structure, there can be no assurance
regarding the ?nal determination of our tax residence. Should we be treated as an Italian tax resident, we would
be subject to taxation in Italy on our worldwide income and may be required to comply with withholding tax and/or
reporting obligations provided under Italian tax law, which could result in additional costs and expenses.
30 2014
|
ANNUAL REPORT
Risk Factors
Even if our “central management and control” is in the U.K. as expected, we will be resident in the Netherlands for
Dutch corporate income tax and Dutch dividend withholding tax purposes on the basis that we are incorporated there.
Nonetheless, we will be regarded as solely resident in either the U.K. or the Netherlands under the Netherlands-U.K.
tax treaty if the U.K. and Dutch competent authorities agree that this is the case. We have applied for a ruling from the
U.K. and Dutch competent authorities that we should be treated as resident solely in the U.K. for the purposes of the
treaty. The outcome of that application cannot be guaranteed and it is possible that the U.K. and Dutch competent
authorities may fail to reach an agreement. We anticipate, however, that, so long as the factors listed in the third
preceding paragraph are present at all material times, the possibility that the U.K. and Dutch competent authorities will
rule that we should be treated as solely resident in the Netherlands is remote. If there is a change over time to the facts
upon which a ruling issued by the competent authorities is based, the ruling may be withdrawn or cease to apply.
We therefore expect to continue to be treated as resident in the U.K. and subject to U.K. corporation tax.
Unless and until the U.K. and the Dutch competent authorities rule that we should be treated as solely resident in the
U.K. for the purposes of the Netherlands-U.K. double tax treaty, the Netherlands will be allowed to levy tax on us as a
Dutch-tax-resident taxpayer.
The U.K.’s controlled foreign company taxation rules may reduce net returns to shareholders.
On the assumption that we are resident for tax purposes in the U.K., we will be subject to the U.K. controlled foreign
company, or CFC, rules. The CFC rules can subject U.K.-tax-resident companies (in this case, us) to U.K. tax on the
pro?ts of certain companies not resident for tax purposes in the U.K. in which they have at least a 25 percent direct
or indirect interest. Interests of connected or associated persons may be aggregated with those of the U.K.-tax-
resident company when applying this 25 percent threshold. For a company to be a CFC, it must be treated as directly
or indirectly controlled by persons resident for tax purposes in the U.K. The de?nition of control is broad (it includes
economic rights) and captures some joint ventures.
Various exemptions are available. One of these is that a CFC must be subject to tax in its territory of residence at
an effective rate not less than 75 percent of the rate to which it would be subject in the U.K., after making speci?ed
adjustments. Another of the exemptions (the “excluded territories exemption”) is that the CFC is resident in a
jurisdiction speci?ed by HMRC in regulations (several jurisdictions in which our group has signi?cant operations,
including Brazil, Italy and the U.S., are so speci?ed). For this exemption to be available, the CFC must not be involved
in an arrangement with a main purpose of avoiding U.K. tax and the CFC’s income falling within certain categories
(often referred to as the CFC’s “bad income”) must not exceed a set limit. In the case of the U.S. and certain other
countries, the “bad income” test need not be met if the CFC does not have a permanent establishment in any other
territory and the CFC or persons with an interest in it are subject to tax in its home jurisdiction on all its income (other
than non-deductible distributions). We expect that our principal operating activities should fall within one or more of the
exemptions from the CFC rules, in particular the excluded territories exemption.
Where the entity exemptions are not available, pro?ts from activities other than ?nance or insurance will only be subject
to apportionment under the CFC rules where:
some of the CFC’s assets or risks are acquired, managed or controlled to any signi?cant extent in the U.K. (a) other
than by a U.K. permanent establishment of the CFC and (b) other than under arm’s length arrangements;
the CFC could not manage the assets or risks itself; and
the CFC is party to arrangements which increase its pro?ts while reducing tax payable in the U.K. and the
arrangements would not have been made if they were not expected to reduce tax in some jurisdiction.
Pro?ts from ?nance activities (whether considered trading or non-trading pro?ts for U.K. tax purposes) or from
insurance may be subject to apportionment under the CFC rules if they meet the tests set out above or speci?c tests
for those activities. A full or 75 percent exemption may also be available for some non-trading ?nance pro?ts.
Although we do not expect the U.K.’s CFC rules to have a material adverse impact on our ?nancial position, the effect
of the new CFC rules on us is not yet certain. We will continue to monitor developments in this regard and seek to
mitigate any adverse U.K. tax implications which may arise. However, the possibility cannot be excluded that the CFC
rules may have a material adverse impact on our ?nancial position, reducing net returns to our shareholders.
2014
|
ANNUAL REPORT 31
The existence of a permanent establishment in Italy for us after the Merger is a question of fact based on all the
circumstances.
Whether we have maintained a permanent establishment in Italy after the Merger, or an Italian P.E., is largely a question of
fact based on all the circumstances. We believe that, on the understanding that we should be a U.K.-resident company
under the Italy-U.K. tax treaty, we are likely to be treated as maintaining an Italian P.E. because we have maintained and
intend to continue to maintain suf?cient employees, facilities and activities in Italy to qualify as maintaining an Italian P.E.
Should this be the case (i) the embedded gains on our assets connected with the Italian P.E. cannot be taxed as a result
of the Merger; (ii) our tax-deferred reserves cannot be taxed, inasmuch as they have been recorded in the Italian P.E.’s
?nancial accounts; and (iii) the Italian ?scal unit that was headed by Fiat before the Merger, or Fiscal Unit, continues with
respect to our Italian subsidiaries whose shareholdings are part of the Italian P.E.’s net worth.
According to Article 124(5) of the CTA, a mandatory ruling request should be submitted to the Italian tax authorities,
in order to ensure the continuity, via the Italian P.E., of the Fiscal Unit that was previously in place between Fiat and its
Italian subsidiaries. We ?led a ruling request with the Italian tax authorities in respect of the continuation of the Fiscal
Unit via the Italian P.E. on April 16, 2014. The Italian tax authorities issued the ruling on December 10, 2014, or the
Ruling, con?rming that the Fiscal Unit may continue via the Italian P.E. However, the Ruling is an interpretative ruling.
It is not an assessment of a certain set of facts and circumstances. Therefore, even though the Ruling con?rms that
the Fiscal Unit may continue via the Italian P.E., this does not rule out that the Italian tax authorities may in the future
verify whether we actually have a P.E. in Italy and potentially challenge the existence of such P.E. Because the analysis
is highly factual, there can be no assurance regarding our maintenance of an Italian P.E. after the Merger.
Risks Related to Our Indebtedness
We have signi?cant outstanding indebtedness, which may limit our ability to obtain additional funding on competitive
terms and limit our ?nancial and operating ?exibility.
The extent of our indebtedness could have important consequences on our operations and ?nancial results, including:
we may not be able to secure additional funds for working capital, capital expenditures, debt service requirements
or general corporate purposes;
we may need to use a portion of our projected future cash ?ow from operations to pay principal and interest on our
indebtedness, which may reduce the amount of funds available to us for other purposes;
we may be more ?nancially leveraged than some of our competitors, which may put us at a competitive
disadvantage; and
we may not be able to adjust rapidly to changing market conditions, which may make us more vulnerable to a
downturn in general economic conditions or our business.
These risks may be exacerbated by volatility in the ?nancial markets, particularly those resulting from perceived strains
on the ?nances and creditworthiness of several governments and ?nancial institutions, particularly in the Eurozone.
Even after the January 2014 acquisition of the approximately 41.5 percent interest in FCA US that we did not
already own, FCA US continues to manage ?nancial matters, including funding and cash management, separately.
Additionally, we have not provided guarantees or security or undertaken any other similar commitment in relation to
any ?nancial obligation of FCA US, nor do we have any commitment to provide funding to FCA US in the future.
Furthermore, certain of our bonds include covenants that may be affected by FCA US’s circumstances. In particular,
these bonds include cross-default clauses which may accelerate the relevant issuer’s obligation to repay its bonds
in the event that FCA US fails to pay certain debt obligations on maturity or is otherwise subject to an acceleration in
the maturity of any of those obligations. Therefore, these cross-default provisions could require early repayment of
those bonds in the event FCA US’s debt obligations are accelerated or are not repaid at maturity. There can be no
assurance that the obligation to accelerate the repayment by FCA US of its debts will not arise or that it will be able to
pay its debt obligations when due at maturity.
In addition, one of our existing revolving credit facilities, expiring in July 2016, provides some limits on our ability to
provide ?nancial support to FCA US.
32 2014
|
ANNUAL REPORT
Risk Factors
Restrictive covenants in our debt agreements could limit our ?nancial and operating ?exibility.
The indentures governing certain of our outstanding public indebtedness, and other credit agreements to which
companies in the Group are a party, contain covenants that restrict the ability of companies in the Group to, among
other things:
incur additional debt;
make certain investments;
enter into certain types of transactions with af?liates;
sell certain assets or merge with or into other companies;
use assets as security in other transactions; and
enter into sale and leaseback transactions.
For more information regarding our credit facilities and debt, see Liquidity and Capital Resources.
Restrictions arising out of FCA US’s debt instruments may hinder our ability to manage our operations on a
consolidated, global basis.
FCA US is party to credit agreements for certain senior credit facilities and an indenture for two series of secured
senior notes. These debt instruments include covenants that restrict FCA US’s ability to pay dividends or enter into
sale and leaseback transactions, make certain distributions or purchase or redeem capital stock, prepay other debt,
encumber assets, incur or guarantee additional indebtedness, incur liens, transfer and sell assets or engage in certain
business combinations, enter into certain transactions with af?liates or undertake various other business activities.
In particular, in January 2014 and February 2015, FCA US paid distributions of U.S.$1.9 billion and U.S.$1.3 billion,
respectively, to its members. Further distributions will be limited to 50 percent of FCA US’s cumulative consolidated
net income (as de?ned in the agreements) from the period from January 1, 2012 until the end of the most recent ?scal
quarter, less the amounts of the January 2014 and February 2015 distributions. See Liquidity and Capital Resources.
These restrictive covenants could have an adverse effect on our business by limiting our ability to take advantage of
?nancing, mergers and acquisitions, joint ventures or other corporate opportunities. In particular, the senior credit
facilities contain, and future indebtedness may contain, other and more restrictive covenants. These agreements also
restrict FCA US from prepaying certain of its indebtedness or imposing limitations that make prepayment impractical.
The senior credit facilities require FCA US to maintain borrowing base collateral coverage and a minimum liquidity
threshold. A breach of any of these covenants or restrictions could result in an event of default on the indebtedness
and the other indebtedness of FCA US or result in cross-default under certain of its or our indebtedness.
If FCA US is unable to comply with these covenants, its outstanding indebtedness may become due and payable and
creditors may foreclose on pledged properties. In this case, FCA US may not be able to repay its debt and it is unlikely
that it would be able to borrow suf?cient additional funds. Even if new ?nancing is made available to FCA US in such
circumstances, it may not be available on acceptable terms.
Compliance with certain of these covenants could also restrict FCA US’s ability to take certain actions that its
management believes are in FCA US’s and our best long-term interests.
Should FCA US be unable to undertake strategic initiatives due to the covenants provided for by the above-referenced
instruments, our business prospects, ?nancial condition and results of operations could be impacted.
No assurance can be given that restrictions arising out of FCA US’s debt instruments will be eliminated.
In connection with our capital planning to support the Business Plan, we have announced our intention to eliminate
existing contractual terms limiting the free ?ow of capital among Group companies, including through the redemption of
each series of FCA US’s outstanding secured senior notes no later than their optional redemption dates in June 2015
and 2016, as well as the re?nancing of outstanding FCA US term loans and its revolving credit facility at or before this
time. No assurance can be given regarding the timing of such transactions or that such transactions will be completed.
2014
|
ANNUAL REPORT 33
Substantially all of the assets of FCA US and its U.S. subsidiary guarantors are unconditionally pledged as security
under its senior credit facilities and secured senior notes and could become subject to lenders’ contractual rights if an
event of default were to occur.
FCA US and several of its U.S. subsidiaries are obligors or guarantors under FCA US’s senior credit facilities and
secured senior notes. The obligations under the senior credit facilities and secured senior notes are secured by senior
and junior priority, respectively, security interests in substantially all of the assets of FCA US and its U.S. subsidiary
guarantors. The collateral includes 100 percent of the equity interests in FCA US’s U.S. subsidiaries, 65 percent of
the equity interests in its non-U.S. subsidiaries held directly by FCA US and its U.S. subsidiary guarantors, all personal
property and substantially all of FCA US’s U.S. real property other than its Auburn Hills, Michigan headquarters.
An event of default under FCA US’s senior credit facilities and/or secured senior notes could trigger its lenders’ or
noteholders’ contractual rights to enforce their security interest in these assets.
Risks Relating to the Proposed Separation of Ferrari
No assurance can be given that the Ferrari separation will occur.
No assurance can be given as to whether and when the separation of Ferrari will occur. We may determine to delay or
abandon the separation at any time for any reason or for no reason.
The terms of the proposed separation of Ferrari and Ferrari’s stand-alone capital structure have not been determined.
The terms of the proposed separation of Ferrari and Ferrari’s stand-alone capital structure have not yet been determined.
However, the ?nal structure and terms of the separation may not coincide with the terms set forth in this report. No
assurance can be given as to the terms of the prospective interest in Ferrari or the terms of how it will be distributed.
We may be unable to achieve some or all of the bene?ts that we expect to achieve from our separation from Ferrari.
We may not be able to achieve the ?nancial and other bene?ts that we expect will result from the separation of Ferrari.
The anticipated bene?ts of the separation are based on a number of assumptions, some of which may prove incorrect.
For example, there can be no assurance that the separation of Ferrari will enable us to strengthen our capital base
suf?ciently to offset the loss of the earnings and potential earnings of Ferrari.
Following the Ferrari separation, the price of our common shares may ?uctuate signi?cantly.
We cannot predict the prices at which our common shares may trade after the separation, the effect of the separation
on the trading prices of our common shares or whether the market value of our common shares and the common
shares of Ferrari held by a shareholder after the separation will be less than, equal to or greater than the market value
of our common shares held by such shareholder prior to the separation.
We intend for the Ferrari separation to qualify as a generally tax-free distribution for our shareholders from a U.S.
federal income tax perspective, and as a tax-free transaction from an Italian income tax perspective, but no assurance
can be given that the separation will receive such tax-free treatment in the United States or in other jurisdictions.
It is our intention to structure the Ferrari separation and any spin-off to our shareholders in a tax ef?cient manner
from a U.S. federal income tax perspective, taking appropriate account of the potential impact on shareholders, but
no assurance can be given that the intended tax treatment will be achieved, or that shareholders, and/or persons
that receive the bene?t of Ferrari shares, will not incur substantial tax liabilities in connection with the separation and
distribution. In particular, the requirements for favorable treatment differ (and may con?ict) from jurisdiction to jurisdiction
and the relevant requirements are often complex, and no assurance can be given that any ruling (or similar guidance)
from any taxing authority would be sought or, if sought, granted. Following an initial public offering of a portion of our
equity interest in Ferrari, we currently intend to spin-off our remaining equity interest in Ferrari to holders of our common
shares and mandatory convertible securities (which we intend to treat as our stock for U.S. federal income tax purposes),
and we currently intend for such spin-off to qualify as a generally tax-free distribution for holders of our stock for U.S.
federal income tax purposes. However, the structure and terms of any distribution have not been determined and there
34 2014
|
ANNUAL REPORT
Risk Factors
can be no assurance that a distribution of Ferrari or any other spin-off would qualify as a tax-free distribution or that
holders of our shares or mandatory convertible securities would not recognize gain for U.S. federal income tax purposes
in connection with any such distribution or spin-off.
In addition, no assurance can be given that the Ferrari separation will not give rise to additional taxable income in Italy
in the hands of the Italian P.E. of FCA. Depending on how large this additional taxable income is, it may or may not be
fully offset by the current year or carried forward losses that the Fiscal Unit may use based on the Ruling.
In addition, no assurance can be given that our shareholders subject to Italian tax will not incur substantial Italian tax
liabilities in connection with the Ferrari separation.
Risks Related to our Common Shares
Our maintenance of two exchange listings may adversely affect liquidity in the market for our common shares and
could result in pricing differentials of our common shares between the two exchanges.
Shortly following the closing of the Merger and the listing of our common shares on the New York Stock Exchange, or
NYSE, we listed our common shares on the Mercato Telematico Azionario, or MTA. The dual listing of our common
shares may split trading between the two markets and adversely affect the liquidity of the shares in one or both
markets and the development of an active trading market for our common shares on the NYSE and may result in price
differentials between the exchanges. Differences in the trading schedules, as well as volatility in the exchange rate of
the two trading currencies, among other factors, may result in different trading prices for our common shares on the
two exchanges.
The loyalty voting structure may affect the liquidity of our common shares and reduce our common share price.
The implementation of the loyalty voting structure could reduce the liquidity of our common shares and adversely
affect the trading prices of our common shares. The loyalty voting structure was intended to reward shareholders
for maintaining long-term share ownership by granting initial shareholders and persons holding our common shares
continuously for at least three years at any time following the effectiveness of the Merger the option to elect to receive
our special voting shares. Our special voting shares cannot be traded and, immediately prior to the deregistration of
common shares from the FCA Loyalty Register, any corresponding special voting shares shall be transferred to us
for no consideration (om niet). This loyalty voting structure is designed to encourage a stable shareholder base and,
conversely, it may deter trading by those shareholders who are interested in gaining or retaining our special voting
shares. Therefore, the loyalty voting structure may reduce liquidity in our common shares and adversely affect their
trading price.
The loyalty voting structure may make it more dif?cult for shareholders to acquire a controlling interest, change our
management or strategy or otherwise exercise in?uence over us, and the market price of our common shares may be
lower as a result.
The provisions of our articles of association which establish the loyalty voting structure may make it more dif?cult for
a third party to acquire, or attempt to acquire, control of our company, even if a change of control were considered
favorably by shareholders holding a majority of our common shares. As a result of the loyalty voting structure, a
relatively large proportion of our voting power could be concentrated in a relatively small number of shareholders who
would have signi?cant in?uence over us. As of February 27, 2015, Exor had a voting interest in FCA of approximately
44.31 percent due to its participation in the loyalty voting structure and as a result will have the ability to exercise
signi?cant in?uence on matters involving our shareholders. Such shareholders participating in the loyalty voting
structure could effectively prevent change of control transactions that may otherwise bene?t our shareholders.
The loyalty voting structure may also prevent or discourage shareholders’ initiatives aimed at changing our
management or strategy or otherwise exerting in?uence over us.
The loyalty voting structure may also prevent or discourage shareholders’ initiatives aimed at changes in our
management.
2014
|
ANNUAL REPORT 35
There may be potential Passive Foreign Investment Company tax considerations for U.S. Shareholders.
Shares of our stock held by a U.S. holder would be stock of a passive foreign investment company, or a PFIC, for U.S.
federal income tax purposes with respect to a U.S. Shareholder if for any taxable year in which such U.S. Shareholder
held our common shares, after the application of applicable look-through rules (i) 75 percent or more of our gross
income for the taxable year consists of passive income (including dividends, interest, gains from the sale or exchange
of investment property and rents and royalties other than rents and royalties which are received from unrelated
parties in connection with the active conduct of a trade or business, as de?ned in applicable Treasury Regulations),
or (ii) at least 50 percent of its assets for the taxable year (averaged over the year and determined based upon value)
produce or are held for the production of passive income. U.S. persons who own shares of a PFIC are subject to a
disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the dividends they
receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
While we believe that shares of our stock are not stock of a PFIC for U.S. federal income tax purposes, this conclusion
is based on a factual determination made annually and thus is subject to change. Moreover, shares of our stock may
become stock of a PFIC in future taxable years if there were to be changes in our assets, income or operations.
Tax consequences of the loyalty voting structure are uncertain.
No statutory, judicial or administrative authority directly discusses how the receipt, ownership, or disposition of special
voting shares should be treated for Italian, U.K. or U.S. tax purposes and as a result, the tax consequences in those
jurisdictions are uncertain.
The fair market value of our special voting shares, which may be relevant to the tax consequences, is a factual
determination and is not governed by any guidance that directly addresses such a situation. Because, among other
things, the special voting shares are not transferable (other than, in very limited circumstances, together with our
associated common shares) and a shareholder will receive amounts in respect of the special voting shares only if
we are liquidated, we believe and intend to take the position that the fair market value of each special voting share is
minimal. However, the relevant tax authorities could assert that the value of the special voting shares as determined by
us is incorrect.
The tax treatment of the loyalty voting structure is unclear and shareholders are urged to consult their tax advisors in
respect of the consequences of acquiring, owning and disposing of special voting shares.
Tax may be required to be withheld from dividend payments.
Unless and until the U.K. and the Dutch competent authorities rule that we should be treated as solely resident in the
U.K. for the purposes of the Netherlands-U.K. double tax treaty, dividends distributed by us will be subject to Dutch
dividend withholding tax (subject to any relief which may be available under Dutch law or the terms of any applicable
double tax treaty) and we will be under no obligation to pay additional amounts in respect thereof.
In addition, even if the U.K. and Dutch competent authorities rule that we should be treated as solely resident in the
U.K. for the purposes of the Netherlands-U.K. double tax treaty, under Dutch domestic law dividend payments made
by us to Dutch residents may still be required to be paid subject to Dutch dividend withholding tax and we would have
no obligation to pay additional amounts in respect of such payments. We intend to seek con?rmation from the Dutch
tax authorities that such withholding will not be required, but no assurances can be given.
Should Dutch or Italian withholding taxes be imposed on future dividends or distributions with respect to our common
shares, whether such withholding taxes are creditable against a tax liability to which a shareholder is otherwise subject
depends on the laws of such shareholder’s jurisdiction and such shareholder’s particular circumstances. Shareholders
are urged to consult their tax advisors in respect of the consequences of the potential imposition of Dutch and/or
Italian withholding taxes.
See “We operate so as to be treated as exclusively resident in the United Kingdom for tax purposes, but the relevant
tax authorities may treat it as also being tax resident elsewhere.” in the section —Risks Related to Our Business,
Strategy and Operations.
36 2014
|
ANNUAL REPORT
Overview
Overview
We are an international automotive group engaged in designing, engineering, manufacturing, distributing and selling
vehicles, components and production systems. We are the seventh largest automaker in the world based on total
vehicle sales in 2014. We have operations in approximately 40 countries and sell our vehicles directly or through
distributors and dealers in more than 150 countries. We design, engineer, manufacture, distribute and sell vehicles
for the mass market under the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia and Ram
brands and the SRT performance vehicle designation. We support our vehicle sales by after-sales services and
parts worldwide using the Mopar brand for mass market vehicles. We make available retail and dealer ?nancing,
leasing and rental services through our subsidiaries, joint ventures and commercial arrangements. In addition, we
design, engineer, manufacture, distribute and sell luxury vehicles under the Ferrari and Maserati brands, which we
support with ?nancial services provided to our dealers and retail customers. We also operate in the components and
production systems sectors under the Magneti Marelli, Teksid and Comau brands.
Our activities are carried out through seven reportable segments: four regional mass-market vehicle segments
(NAFTA, LATAM, APAC and EMEA), Ferrari and Maserati, our two global luxury brand segments, and a global
Components segment (see Overview of Our Business for a description of these reportable segments).
On October 29, 2014 our Board of Directors announced that it had authorized the separation of Ferrari from FCA.
The separation is expected to be effected through a public offering of a portion of our interest in Ferrari and a spin-off
of our remaining equity interest in Ferrari to our shareholders.
In 2014, we shipped 4.6 million vehicles. For the year ended December 31, 2014, we reported net revenues of €96.1
billion, EBIT of €3.2 billion and net pro?t of €0.6 billion. At December 31, 2014 we had available liquidity of €26.2
billion (including €3.2 billion available under undrawn committed credit lines). At December 31, 2014 we had net
industrial debt of €7.7 billion.
History of FCA
FCA was incorporated as a public limited liability company (naamloze vennotschap) under the laws of the Netherlands
on April 1, 2014. Its principal of?ce is located at 25 St. James’s Street, London SW1A 1HA, United Kingdom
(telephone number: +44 (0)20 7766 0311).
Fiat, the predecessor to FCA, was founded as Fabbrica Italiana Automobili Torino, on July 11, 1899 in Turin, Italy as an
automobile manufacturer. Fiat opened its ?rst factory in 1900 in Corso Dante in Turin with 150 workers producing 24
cars. In 1902 Giovanni Agnelli, Fiat’s founder, became the Managing Director of the company.
Beginning in 2008, Fiat pursued a process of transformation in order to meet the challenges of a changing
marketplace characterized by global overcapacity in automobile production and the consequences of economic
recession that has persisted particularly in the European markets on which it had historically depended. As part
of its efforts to restructure operations, Fiat worked to expand the scope of its automotive operations, having
concluded that signi?cantly greater scale was necessary to enable it to be a competitive force in the increasingly
global automotive markets.
In April 2009, Fiat and Old Carco LLC, formerly known as Chrysler LLC, or Old Carco, entered into a master
transaction agreement, pursuant to which FCA US LLC, formerly known as Chrysler Group LLC, or FCA US, agreed to
purchase the principal operating assets of Old Carco and to assume certain of Old Carco’s liabilities. Old Carco traced
its roots to the company originally founded by Walter P. Chrysler in 1925 that, since that time, expanded through the
acquisition of the Dodge and Jeep brands.
Following the closing of that transaction on June 10, 2009, Fiat held an initial 20 percent ownership interest in FCA
US, with the UAW Retiree Medical Bene?ts Trust, or the VEBA Trust, the U.S. Treasury and the Canadian government
holding the remaining interests. FCA US’s operations were funded with ?nancing from the U.S. Treasury and Canadian
government. In addition, Fiat held several options to acquire additional ownership interests in FCA US.
2014
|
ANNUAL REPORT 37
Over the following years, Fiat acquired additional ownership interests in FCA US, leading to majority ownership and
full consolidation of FCA US’s results into our ?nancial statements from June 1, 2011. On May 24, 2011, FCA US
re?nanced the U.S. and Canadian government loans, and, in July 2011, Fiat acquired the ownership interests in FCA
US held by the U.S. Treasury and Canadian government.
In January 2014, Fiat purchased all of the VEBA Trust’s equity interests in FCA US, which represented the
approximately 41.5 percent of FCA US interest not then held by us. The transaction was completed on January 21,
2014, resulting in FCA US becoming an indirect 100 percent owned subsidiary of FCA.
On October 29, 2014, FCA’s Board of Directors announced that it had authorized the separation of Ferrari from FCA.
The separation is expected to be effected through a public offering of a portion of FCA’s interest in Ferrari and a spin-
off of FCA’s remaining equity interest in Ferrari shares to FCA’s shareholders.
The FCA Merger
On January 29, 2014, the Board of Directors of Fiat approved a proposed corporate reorganization resulting in the
formation of FCA and decided to establish FCA, organized in the Netherlands, as the parent company of the Group
with its principal executive of?ces in the United Kingdom.
On June 15, 2014, the Board of Directors of Fiat. approved the terms of a cross-border legal merger of Fiat, the
parent of the Group, into its 100 percent owned direct subsidiary, FCA, or the Merger. Fiat shareholders received
in the Merger one (1) FCA common share for each Fiat ordinary share that they held. Moreover, under the Articles
of Association of FCA, FCA shareholders received, if they so elected and were otherwise eligible to participate in
the loyalty voting structure, one (1) FCA special voting share for each FCA common share received in the Merger.
The loyalty voting structure is designed to provide eligible long-term FCA shareholders with two votes for each FCA
common share held.
FCA was incorporated under the name Fiat Investments N.V. with issued share capital of €200,000, fully paid and
divided into 20,000,000 common shares having a nominal value of €0.01 each. Capital increased to €350,000 on
May 13, 2014.
Fiat shareholders voted and approved the Merger at their extraordinary general meeting held on August 1, 2014. After
this approval, Fiat shareholders not voting in favor of the Merger were entitled to exercise cash exit rights (the “Cash
Exit Rights”) by August 20, 2014. The redemption price payable to these shareholders was €7.727 per share (the “Exit
Price”), equivalent to the average daily closing price published by Borsa Italiana for the six months prior to the date of
the notice calling the meeting).
On October 7, 2014, Fiat announced that all conditions precedent to completion of the Merger were satis?ed.
The Cash Exit Rights were exercised for a total of 60,002,027 Fiat shares equivalent to an aggregate amount of €464
million at the Exit Price. Pursuant to the Italian Civil Code, these shares were offered to Fiat shareholders not having
exercised the Cash Exit Rights. On October 7, 2014, at the completion of the offer period Fiat shareholders elected
to purchase 6,085,630 shares out of the total of 60,002,027 for a total of €47 million; as a result, concurrent with
the Merger, on October 12, 2014, a total of 53,916,397 Fiat shares were canceled in the Merger with a resulting net
aggregate cash disbursement of €417 million.
As a consequence, the Merger became effective on October 12, 2014. On October 13, 2014 FCA common shares
commenced trading on the NYSE and on the MTA. The Merger is recognized in FCA’s annual accounts from January
1, 2014. FCA, as successor of Fiat is now therefore the parent company of the Group. There were no accounting
effects as a direct result of the Merger.
38 2014
|
ANNUAL REPORT
Our Strategic Business Plan
Our Strategic Business Plan
Following our January 2014 acquisition of the remaining 41.5 percent interest in FCA US we did not already own, in May
2014, we announced our 2014–2018 Business Plan. Our Business Plan sets forth a number of clearly de?ned strategic
initiatives designed to capitalize on our position as a single, integrated company to become a leading global automaker,
including:
Premium and Luxury Brand Strategy. We intend to continue to execute on our premium and luxury brand strategy by
developing the Alfa Romeo and Maserati brands to service global markets. We believe these efforts will help us address
the issue of industry overcapacity in the European market, as well as our own excess production capacity in the EMEA
region, by leveraging the strong heritage and historical roots of these brands to grow the reach of these brands in all of
the regions in which we operate.
Recently, we have successfully expanded in the luxury end of the market through our introduction of two new Maserati
vehicles. We intend to replicate this on a larger scale with Alfa Romeo by introducing several new vehicles being
developed as part of an extensive product plan to address the premium market worldwide. In addition, we intend
to continue our development of the Maserati brand as a larger scale luxury vehicle brand capitalizing on the recent
successful launches of the next generation Quattroporte and the all new Ghibli. We also intend to introduce additional
new vehicles, including an all new luxury SUV in 2015, the Levante, that will allow Maserati to cover the full range of the
luxury vehicle market and position it to substantially expand volumes.
Building Brand Equity. As part of our Business Plan, we intend to further develop our brands to expand sales in markets
throughout the world with particular focus on our Jeep and Alfa Romeo brands, which we believe have global appeal and
are best positioned to increase volumes substantially in the regions in which we operate.
In particular, our Business Plan highlights our intention to leverage the global recognition of the Jeep brand and extend
the range of Jeep vehicles to meet global demand through localized production, particularly in APAC and LATAM.
We are also developing a range of vehicles that are expected to re-establish the Alfa Romeo brand, particularly in NAFTA,
APAC and EMEA, as a premier driver-focused automotive brand with distinctive Italian styling and performance.
In addition, we expect to take further steps to strengthen and differentiate our brand identities in order to address
differing market and customer preferences in each of the regions in which we operate. We believe that we can increase
sales and improve pricing by ensuring that all of our vehicles are more closely aligned with a brand identity established
in the relevant regional markets. For example, we announced as part of the Business Plan that Chrysler would be
our mainstream North American brand, with a wider range of models, including crossovers and our primary minivan
offering. Dodge will be restored to its performance heritage, which is expected to enhance brand identity and minimize
overlapping product offerings which tend to cause consumer confusion. We also intend to continue our repositioning
strategy of the Fiat brand in the EMEA region, leveraging the image of the Fiat 500 family, while positioning Lancia as an
Italy-focused brand. We will also continue to develop our pick-up truck and light commercial vehicle brands leveraging
our wide range of product offerings to expand further in EMEA as Fiat Professional, in LATAM as Fiat and in NAFTA as
Ram. For a description of our vehicle brands, see Mass Market Vehicle Brands section below.
Global Growth. As part of our Business Plan, we intend to expand vehicle sales in key markets throughout the world. In
order to achieve this objective, we intend to continue our efforts to localize production of Fiat brand vehicles through our
joint ventures in China and India, while increasing sales of Jeep vehicles in LATAM and APAC by localizing production
through our new facility in Brazil and the extension of the joint venture agreement in China. Local production will enable
us to expand the product portfolio we can offer in these important markets and importantly position our vehicles to better
address the local market demand by offering vehicles that are competitively priced within the largest segments of these
markets without the cost of transportation and import duties. We also intend to increase our vehicle sales in NAFTA,
continuing to build market share in the U.S. by offering more competitive products under our distinctive brands as well
as offering new products in segments we do not currently compete in. Further, we intend to leverage manufacturing
capacity in EMEA to support growth in all regions in which we operate by producing vehicles for export from EMEA,
including Jeep brand vehicles.
2014
|
ANNUAL REPORT 39
Continue convergence of platforms. We intend to continue to rationalize our vehicle architectures and standardize
components, where practicable, to more ef?ciently deliver the range of products we believe necessary to increase
sales volumes and pro?tability in each of the regions in which we operate. We seek to optimize the number of global
vehicle architectures based on the range of ?exibility of each architecture while ensuring that the products at each
end of the range are not negatively impacted, taking into account unique brand attributes and market requirements.
We believe that continued architectural convergence within these guidelines will facilitate speed to market, quality
improvement and manufacturing ?exibility allowing us to maximize product functionality and differentiation and
to meet diversi?ed market and customer needs. Over the course of the period covered by our Business Plan, we
intend to reduce the number of architectures in our mass market brands by approximately 25.0 percent.
Continue focus on cost ef?ciencies. An important part of our Business Plan is our continued commitment to
maintain cost ef?ciencies necessary to compete as a global automaker in the regions we operate. We intend to
continue to leverage our increased combined annual purchasing power to drive savings. Further, our efforts on
powertrain and engine research are intended to achieve the greatest cost-to-environmental impact return, with a
focus on new global engine families and an increase in use of the 8 and 9-speed transmissions to drive increased
ef?ciency and performance and re?nement. We also plan to continue our efforts to extend WCM principles into all
of our production facilities and benchmark our efforts across all facilities around the world, which is supported by
FCA US’s January 2014 legally binding memorandum of understanding, or MOU, with the UAW. We believe that the
continued extension of our WCM principles will lead to further meaningful progress to eliminate waste of all types
in the manufacturing process, which will improve worker ef?ciency, productivity, safety and vehicle quality. Finally,
we intend to drive growth in our components and production systems businesses by designing and producing
innovative systems and components for the automotive sector and innovative automation products, each of which
will help us focus on cost ef?ciencies in the manufacturing of our vehicles.
Continue to enhance our margins and strengthen our capital structure. Through the product and manufacturing
initiatives described above, we also expect to improve our pro?tability. We believe our product development and
repositioning of our vehicle offerings, along with increasing the number of vehicles manufactured on standardized
global platforms will provide an opportunity for us to improve our margins. We are also committed to improving our
capital position so we are able to continue to invest in our business throughout economic cycles. We believe we are
taking material steps toward achieving investment grade metrics and that we have substantial liquidity to undertake
our operations and implement our Business Plan. The proposed capital raising actions, along with our anticipated
re?nancing of certain FCA US debt, which will give us the ability to more fully manage our cash resources globally,
will allow us to further improve our liquidity and optimize our capital structure. Furthermore, we intend to reduce
our outstanding indebtedness, which will provide us with greater ?nancial ?exibility and enhance earnings and
cash ?ow through reducing our interest burden. Our goal is to achieve a positive net industrial cash balance by the
completion of our Business Plan. In light of this, and to further strengthen and support the Group’s capital structure,
we completed signi?cant capital transactions in December 2014 and we have announced our intent to and have
announced our intent to execute certain transactions in connection with our plan to separate Ferrari from FCA.
We believe that these improvements in our capital position will enable us to reduce substantially the liquidity we
need to maintain to operate our businesses, including through any reasonably likely cyclical downturns.
40 2014
|
ANNUAL REPORT
Industry Overview
Industry Overview
Vehicle Segments and Descriptions
We manufacture and sell passenger cars, light trucks and light commercial vehicles covering all market segments.
Passenger cars can be divided among seven main groups, whose de?nition could slightly vary by region. Mini cars,
known as “A segment” vehicles in Europe and often referred to as “city cars,” are between 2.7 and 3.7 meters in
length and include three- and ?ve-door hatchbacks. Small cars, known as “B segment” vehicles in Europe and “
sub-compacts” in the U.S., range in length from 3.7 meters to 4.4 meters and include three- and ?ve-door
hatchbacks and sedans. Compact cars, known as “C segment” vehicles in Europe, range in length from 4.3 meters
to 4.7 meters, typically have a sedan body and mostly include three- and ?ve-door hatchback cars. Mid-size cars,
known as “D segment” vehicles in Europe, range between 4.7 meters to 4.9 meters, typically have a sedan body or
are station wagons. Full-size cars range in length from 4.9 meters to 5.1 meters and are typically sedan cars or, in
Europe, station wagons. Minivans, also known as multi-purpose vehicles, or MPVs, typically have seating for up to
eight passengers. Utility vehicles include SUVs, which are four-wheel drive with true off-road capabilities, and cross
utility vehicles, or CUVs, which are not designed for heavy off-road use, but offer better on-road ride comfort and
handling compared to SUVs.
Light trucks may be divided between vans (also known as light commercial vehicles), which typically are used for
the transportation of goods or groups of people and have a payload capability up to 4.2 tons, and pick-up trucks,
which are light motor vehicles with an open-top rear cargo area and which range in length from 4.8 meters to 5.2
meters (in North America, the length of pick-up trucks typically ranges from 5.5 meters to 6 meters). In North America,
minivans and utility vehicles are categorized within trucks. In Europe, vans and pick-up trucks are categorized as light
commercial vehicles.
We characterize a vehicle as “new” if its vehicle platform is signi?cantly different from the platform used in the prior
model year and/or has had a full exterior renewal. We characterize a vehicle as “signi?cantly refreshed” if it continues
its previous vehicle platform but has extensive changes or upgrades from the prior model.
Our Industry
Designing, engineering, manufacturing, distributing and selling vehicles require signi?cant investments in product
design, engineering, research and development, technology, tooling, machinery and equipment, facilities and
marketing in order to meet both consumer preferences and regulatory requirements. Automotive original equipment
manufacturers, or OEMs, are able to bene?t from economies of scale by leveraging their investments and activities
on a global basis across brands and models. The automotive industry has also historically been highly cyclical,
and to a greater extent than many industries, is impacted by changes in the general economic environment. In
addition to having lower leverage and greater access to capital, larger OEMs that have a more diversi?ed revenue
base across regions and products tend to be better positioned to withstand industry downturns and to bene?t from
industry growth.
Most automotive OEMs produce vehicles for the mass market and some of them also produce vehicles for the luxury
market. Vehicles in the mass market are typically intended to appeal to the largest number of consumers possible.
Intense competition among manufacturers of mass market vehicles, particularly for non-premium brands, tends to
compress margins, requiring signi?cant volumes to be pro?table. As a result, success is measured in part by vehicle
unit sales relative to other automotive OEMs. Luxury vehicles on the other hand are designed to appeal to consumers
with higher levels of disposable income, and can therefore more easily achieve much higher margins. This allows
luxury vehicle OEMs to produce lower volumes, enhancing brand appeal and exclusivity, while maintaining pro?tability.
In 2014, 84 million automobiles were sold around the world. Although China is the largest single automotive sales
market, with approximately 18 million vehicles sold, the majority of automobile sales are still in the developed
markets, including North America, Western Europe and Japan. Growth in other emerging markets has also played an
increasingly important part in global automotive demand in recent years.
2014
|
ANNUAL REPORT 41
The automotive industry is highly competitive, especially in our key markets, such as the U.S., Brazil and Europe.
Vehicle manufacturers must continuously improve vehicle design, performance and content to meet consumer
demands for quality, reliability, safety, fuel ef?ciency, comfort, driving experience and style. Historically, manufacturers
relied heavily upon dealer, retail and ?eet incentives, including cash rebates, option package discounts, guaranteed
depreciation programs, and subsidized or subvented ?nancing or leasing programs to compete for vehicle sales.
Since 2009, manufacturers generally have worked to reduce reliance on pricing-related incentives as competitive
tools in the North American market, while pricing pressure, under different forms, is still affecting sales in the European
market since the inception of the ?nancial crisis. However, an OEM’s ability to increase or maintain vehicle prices and
reduce reliance on incentives is limited by the competitive pressures resulting from the variety of available competitive
vehicles in each segment of the new vehicle market as well as continued global manufacturing overcapacity in the
automotive industry. At the same time, OEMs generally cannot effectively lower prices as a means to increase vehicle
sales without adversely affecting pro?tability, since the ability to reduce costs is limited by commodity market prices,
contract terms with suppliers, evolving regulatory requirements and collective bargaining agreements and other
factors that limit the ability to reduce labor expenses.
OEMs generally sell vehicles to dealers and distributors, which then resell vehicles to retail and ?eet customers.
Retail customers purchase vehicles directly from dealers, while ?eet customers purchase vehicles from dealers or directly
from OEMs. Fleet sales comprise three primary channels: (i) daily rental, (ii) commercial and (iii) government. Vehicle sales
in the daily rental and government channels are extremely competitive and often require signi?cant discounts. Fleet sales
are an important source of revenue and can also be an effective means for marketing vehicles. Fleet orders can also help
normalize plant production as they typically involve the delivery of a large, pre-determined quantity of vehicles over several
months. Fleet sales are also a source of aftermarket service parts revenue for OEMs and service revenue for dealers.
Financial Services
Because dealers and retail customers ?nance the purchase of a signi?cant percentage of the vehicles sold worldwide,
the availability and cost of ?nancing is one of the most signi?cant factors affecting vehicle sales volumes. Most dealers
use wholesale or inventory ?nancing arrangements to purchase vehicles from OEMs in order to maintain necessary
vehicle inventory levels. Financial services companies may also provide working capital and real estate loans to facilitate
investment in expansion or restructuring of the dealers’ premises. Financing may take various forms, based on the nature
of creditor protection provided under local law, but ?nancial institutions tend to focus on maximizing credit protection
on any ?nancing originated in conjunction with a vehicle sale. Financing to retail customers takes a number of forms,
including simple installment loans and ?nance leases. These ?nancial products are usually distributed directly by the
dealer and have a typical duration of three to ?ve years. OEMs often use retail ?nancing as a promotional tool, including
through campaigns offering below market rate ?nancing, known as subvention programs. In such situations, an OEM
typically compensates the ?nancial services company up front for the difference between the ?nancial return expected
under standard market rates and the rates offered to the customer within the promotional campaign.
Many automakers rely on wholly-owned or controlled ?nance companies to provide this ?nancing. In other situations,
OEMs have relied on joint ventures or commercial relationships with banks and other ?nancial institutions in order to
provide access to ?nancing for dealers and retail customers. The model adopted by any particular OEM in a particular
market depends upon, among other factors, its sales volumes and the availability of stable and cost-effective funding
sources in that market, as well as regulatory requirements.
Financial services companies controlled by OEMs typically receive funding from the OEM’s central treasury or from
industrial and commercial operations of the OEM that have excess liquidity, however, they also access other forms
of funding available from the banking system in each market, including sales or securitization of receivables either
in negotiated sales or through securitization programs. Financial services companies controlled by OEMs compete
primarily with banks, independent ?nancial services companies and other ?nancial institutions that offer ?nancing to
dealers and retail customers. The long-term pro?tability of ?nance companies also depends on the cyclical nature of
the industry, interest rate volatility and the ability to access funding on competitive terms and to manage risks with
particular reference to credit risks. OEMs within their global strategy aimed to expand their business, may provide
access to ?nancial services to their dealers and retail customers, for the ?nancing of parts and accessories, as well as
pre-paid service contracts.
42 2014
|
ANNUAL REPORT
Overview of Our Business
Overview of Our Business
We design, engineer, develop and manufacture vehicles, components and production systems worldwide through
165 manufacturing facilities around the world and 85 research and development centers.
Our activities are carried out through seven reportable segments: four regional mass-market vehicle segments, the
Ferrari and Maserati luxury brand segments and a global Components segment, as discussed below.
Our four regional mass-market vehicle reportable segments deal with the design, engineering, development,
manufacturing, distribution and sale of passenger cars, light commercial vehicles and related parts and services in
speci?c geographic areas: NAFTA (U.S., Canada, Mexico and the Caribbean islands), LATAM (South and Central
America), APAC (Asia and Paci?c countries) and EMEA (Europe, Middle East and Africa). We also operate on a global
basis in the luxury vehicle and components sectors. In the luxury vehicle sector, we have the operating segments
Ferrari and Maserati, while in the components sector we have the operating segments Magneti Marelli, Teksid and
Comau. The operating segments in the components sector did not meet the quantitative thresholds required in IFRS
8 – Operating segments for separate disclosure, consequently, based on their characteristics and similarities, they
are presented as one reportable segment: “Components”. We support our mass-market vehicle sales with the sale
of related service parts and accessories, as well as service contracts, under the Mopar brand name. In support of
our vehicle sales efforts, we make available dealer and retail customer ?nancing either through subsidiaries or joint
ventures and through strategic commercial arrangements with third party ?nancial institutions.
For our mass-market brands, we have centralized design, engineering, development and manufacturing operations,
which allow us to ef?ciently operate on a global scale.
The following list sets forth our reportable segments:
(i) NAFTA: our operations to support distribution and sales of mass-market vehicles in the United States, Canada,
Mexico and Caribbean islands, the segment that we refer to as NAFTA, primarily through the Chrysler, Dodge, Fiat,
Jeep and Ram brands.
(ii) LATAM: our operations to support the distribution and sale of mass-market vehicles in South and Central America,
the segment that we refer to as LATAM, primarily under the Chrysler, Dodge, Fiat, Jeep and Ram brands, with the
largest focus of our business in the LATAM segment in Brazil and Argentina.
(iii) APAC: our operations to support the distribution and sale of mass-market vehicles in the Asia Paci?c region
(mostly in China, Japan, Australia, South Korea and India), the segment we refer to as APAC, carried out in the
region through both subsidiaries and joint ventures, primarily under the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat
and Jeep brands.
(iv) EMEA: our operations to support the distribution and sale of mass-market vehicles in Europe (which includes
the 28 members of the European Union and the members of the European Free Trade Association), the Middle
East and Africa, the segment we refer to as EMEA, primarily under the Abarth, Alfa Romeo, Chrysler, Fiat, Fiat
Professional, Jeep and Lancia brand names.
(v) Ferrari: the design, engineering, development, manufacturing, worldwide distribution and sale of luxury vehicles
under the Ferrari brand. On October 29, 2014, we announced our intention to separate Ferrari from FCA.
(vi) Maserati: the design, engineering, development, manufacturing, worldwide distribution and sale of luxury vehicles
under the Maserati brand.
(vii) Components: production and sale of lighting components, engine control units, suspensions, shock absorbers,
electronic systems, and exhaust systems and activities in powertrain (engine and transmissions) components,
engine control units, plastic molding components and in the after-market carried out under the Magneti Marelli
brand name; cast iron components for engines, gearboxes, transmissions and suspension systems, and aluminum
cylinder heads under the Teksid brand name; and design and production of industrial automation systems and
related products for the automotive industry under the Comau brand name.
2014
|
ANNUAL REPORT 43
The following chart sets forth the vehicle brands we sell in each mass-market regional segment:
NAFTA LATAM APAC EMEA
Abarth X
Alfa Romeo X X X
Chrysler X X X X
Dodge X X X
Fiat X X X X
Fiat Professional X X
Jeep X X X X
Lancia X
Ram X X
Note: Presence determined by sales in the regional segment, if material, through dealer entities of our dealer network.
We also hold interests in companies operating in other activities and businesses that are not considered part of our seven
reportable segments. These activities are grouped under “Other Activities,” which primarily consists of companies that
provide services, including accounting, payroll, tax, insurance, purchasing, information technology, facility management
and security, to our Group as well as CNHI, manage central treasury activities (excluding treasury activities for FCA US,
which are handled separately) and operate in media and publishing (La Stampa daily newspaper).
Mass-Market Vehicle Brands
We design, engineer, develop, manufacture, distribute and sell vehicles and service parts under 11 mass-market brands
and designations. We believe that we can continue to increase our vehicle sales by building the value of our mass-market
brands in particular by ensuring that each of our brands has a clear identity and market focus. In connection with our
multi-year effort to clearly de?ne each of our brands’ identities, we have launched several advertising campaigns that
have received industry accolades. We are reinforcing our effort to build brand value by ensuring that we introduce new
vehicles with individualized characteristics that remain closely aligned with the unique identity of each brand.
Abarth: Abarth, named after the company founded by Carlo Abarth in 1949, specializes
in performance modi?cation for on-road sports cars since the brand’s re-launch in 2007
through performance modi?cations on classic Fiat models such as the 500 (including
the 2012 launch of the Fiat 500 Abarth) and Punto, as well as limited edition models that
combine design elements from luxury brands such as the 695 Edizione Maserati and 695
Tributo Ferrari, for consumers seeking customized vehicles with steering and suspension
geared towards racing.
Alfa Romeo: Alfa Romeo, founded in 1910, and part of the Group since 1986, is known
for a long, sporting tradition and Italian design. Vehicles currently range from the three door
premium MiTo and the lightweight sports car, the 4c, to the compact car, the Giulietta.
The Alfa Romeo brand is intended to appeal to drivers seeking high-level performance and
handling combined with attractive and distinctive appearance.
Chrysler: Chrysler, named after the company founded by Walter P. Chrysler in 1925,
aims to create vehicles with distinctive design, craftsmanship, intuitive innovation and
technology standing as a leader in design, engineering and value, with a range of vehicles
from mid-size sedans (Chrysler 200) to full size sedans (Chrysler 300) and minivans
(Town & Country).
Dodge: With a traditional focus on “muscle car” performance vehicles, the Dodge
brand, which began production in 1914, offers a full line of cars, CUVs and minivans,
mainly in the mid-size and large size vehicle market, that are sporty, functional and
innovative, intended to offer an excellent value for families looking for high performance,
dependability and functionality in everyday driving situations.
44 2014
|
ANNUAL REPORT
Overview of Our Business
Fiat: Fiat brand cars have been produced since 1899. The brand has historically been strong
in Europe and the LATAM region and is currently primarily focused on the mini and small
vehicle segments. Current models include the mini-segment 500 and Panda and the
small-segment Punto. The brand aims to make cars that are ?exible, easy to drive, affordable
and energy ef?cient. The brand reentered the U.S. market in 2011 with the 500 model and, in
2013, the 500L model. Fiat continued expansion of the 500 family, with the introduction of the
500X crossover, which debuted at the Paris Motor Show in October 2014. Fiat also recently
launched the new Uno and the new Palio in the LATAM region.
Fiat Professional: Fiat Professional, launched in 2007 to replace the “Fiat Veicoli
Commerciali” brand, offers light commercial vehicles and MPVs ranging from large vans
(capable of carrying up to 4.2 tons) such as the Ducato, to panel vans such as the Doblò
and Fiorino for commercial use by small to medium size business and public institutions.
Fiat Professional vehicles are often readily ?tted as ambulances, tow trucks, school buses
and people carriers (especially suitable for narrow streets) and as recreational vehicles
such as campers and motor homes, where Fiat Professional is the market leader.
Jeep: Jeep, founded in 1941, is a globally recognized brand focused exclusively on
the SUV and off-road vehicles market. The Jeep Grand Cherokee is the most awarded
SUV ever. The brand’s appeal builds on its heritage associated with the outdoors and
adventurous lifestyles, combined with the safety and versatility features of the brand’s
modern vehicles. Jeep introduced the all-new 2014 Jeep Cherokee in October 2013
and recently unveiled the Jeep Renegade, a small segment SUV designed in the U.S.
and manufactured in Italy. Jeep set an all-time brand record in 2014 with over one million
vehicles sold.
Lancia: Lancia, founded in 1906, and part of the Fiat Group since 1969, covers the
spectrum of small segment cars and is targeted towards the Italian market.
Ram: Ram, established as a standalone brand separate from Dodge in 2009, offers a line
of full-size trucks, including light- and heavy-duty pick-up trucks such as the Ram 1500
pick-up truck, which recently became the ?rst truck to be named Motor Trend’s “Truck
of the Year” for two consecutive years, and cargo vans. By investing substantially in new
products, infusing them with great looks, re?ned interiors, durable engines and features
that further enhance their capabilities, we believe Ram has emerged as a market leader in
full size pick-up trucks. Ram customers, from half-ton to commercial, have a demanding
range of needs and require their vehicles to provide high levels of capability.
We also leverage the more than 75-year history of the Mopar brand to provide a full line of service parts and
accessories for our mass-market vehicles worldwide. As of December 31, 2014, we had 50 parts distribution centers
throughout the world to support our customer care efforts in each of our regions. Our Mopar brand accessories allow
our customers to customize their vehicles by including after-market sales of products from side steps and lift-kits,
to graphics packages, such as racing stripes, and custom leather interiors. Further, through the Mopar brand, we
offer vehicle service contracts to our retail customers worldwide under the “Mopar Vehicle Protection” brand, with
the majority of our service contract sales in 2014 in the U.S. and Europe. Finally, our Mopar customer care initiatives
support our vehicle distribution and sales efforts in each of our mass-market segments through 27 call centers located
around the world.
2014
|
ANNUAL REPORT 45
Vehicle Sales Overview
We are the seventh largest automotive OEM in the world based on worldwide new vehicle sales for the year ended
December 31, 2014. We compete with other large OEMs to attract vehicle sales and market share. Many of these
OEMs have more signi?cant ?nancial or operating resources and liquidity at their disposal, which may enable them to
invest more heavily on new product designs and manufacturing or in sales incentives.
Our new vehicle sales represent sales of vehicles primarily through dealers and distributors, or in some cases, directly
by us, to retail customers and ?eet customers. Our sales include mass-market and luxury vehicles manufactured at our
plants, as well as vehicles manufactured by our joint ventures and third party contract manufacturers. Our sales ?gures
exclude sales of vehicles that we contract manufactured for other OEMs. While our vehicle sales are illustrative of our
competitive position and the demand for our vehicles, sales are not directly correlated to our revenues, cost of sales or
other measures of ?nancial performance, as such results are primarily driven by our vehicle shipments to dealers and
distributors. The following table shows our new vehicle sales by geographic market for the periods presented.
For the Years Ended December 31,
Segment 2014 2013 2012
Millions of units
NAFTA 2.5 2.1 2.0
LATAM 0.8 0.9 1.0
APAC 0.3 0.2 0.1
EMEA 1.2 1.1 1.2
Total Mass-Market Brands 4.8 4.4 4.3
Ferrari — — —
Maserati 0.04 0.02 0.01
Total Worldwide 4.8 4.4 4.3
NAFTA
NAFTA Sales and Competition
The following table presents our mass-market vehicle sales and market share in the NAFTA segment for the periods
presented:
For the Years Ended December 31,
2014
(1)(2)
2013
(1)(2)
2012
(1)(2)
NAFTA Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
U.S. 2,091 12.4% 1,800 11.4% 1,652 11.2%
Canada 290 15.4% 260 14.6% 244 14.2%
Mexico 78 6.7% 87 7.9% 93 9.1%
Total 2,459 12.4% 2,148 11.5% 1,989 11.3%
(1)
Certain fleet sales that are accounted for as operating leases are included in vehicle sales.
(2)
Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided by
third-party sources, including IHS Global Insight and Ward’s Automotive.
46 2014
|
ANNUAL REPORT
Overview of Our Business
The following table presents our new vehicle market share information and our principal competitors in the U.S.,
our largest market in the NAFTA segment (certain totals in the tables included in this document may not add due to
rounding):
For the Years Ended December 31,
U.S. 2014 2013 2012
Automaker Percentage of industry
GM 17.4% 17.6% 17.6%
Ford 14.7% 15.7% 15.2%
Toyota 14.1% 14.1% 14.1%
FCA 12.4% 11.4% 11.2%
Honda 9.2% 9.6% 9.6%
Nissan 8.2% 7.9% 7.7%
Hyundai/Kia 7.8% 7.9% 8.6%
Other 16.2% 15.9% 16.0%
Total 100.0% 100.0% 100.0%
U.S. automotive market sales have steadily improved after a sharp decline from 2007 to 2010. U.S. industry sales,
including medium- and heavy-duty vehicles, increased from 10.6 million units in 2009 to 16.8 million units in 2014,
an increase of approximately 58.5 percent. Both macroeconomic factors, such as growth in per capita disposable
income and improved consumer con?dence, and automotive speci?c factors, such as the increasing age of vehicles in
operation, improved consumer access to affordably priced ?nancing and higher prices of used vehicles, contributed to
the strong recovery.
Our vehicle line-up in the NAFTA segment leverages the brand recognition of the Chrysler, Dodge, Jeep and
Ram brands to offer cars, utility vehicles, pick-up trucks and minivans under those brands, as well as vehicles in
smaller segments, such as the mini-segment Fiat 500 and the small & compact MPV segment Fiat 500L. With the
reintroduction of the Fiat brand in 2011 and the launch of the Dodge Dart in 2012, we now sell vehicles in all vehicle
segments. Our vehicle sales and pro?tability in the NAFTA segment are generally weighted towards larger vehicles
such as utility vehicles, trucks and vans, while overall industry sales in the NAFTA segment generally are more
evenly weighted between smaller and larger vehicles. In recent years, we have increased our sales of mini, small and
compact cars in the NAFTA segment.
NAFTA Distribution
In the NAFTA segment, our vehicles are sold primarily to dealers in our dealer network for sale to retail customers and
?eet customers. The following table sets forth the number of independent entities in our dealer and distributor network
in the NAFTA segment. The table counts each independent dealer entity, regardless of the number of contracts or
points of sale the dealer operates. Where we have a relationship with a general distributor, this table re?ects that
general distributor as one distribution relationship:
Distribution Relationships At December 31,
2014 2013 2012
NAFTA 3,251 3,204 3,156
In the NAFTA segment, ?eet sales in the commercial channel are typically more pro?table than sales in the government
and daily rental channels since they more often involve customized vehicles with more optional features and
accessories; however, vehicle orders in the commercial channel are usually smaller in size than the orders made in
the daily rental channel. Fleet sales in the government channel are generally more pro?table than ?eet sales in the
daily rental channel primarily due to the mix of products included in each respective channel. Rental car companies,
for instance, place larger orders of small and mid-sized cars and minivans with minimal options, while sales in the
government channel often involve a higher mix of relatively more pro?table vehicles such as pick-up trucks, minivans
and large cars with more options.
2014
|
ANNUAL REPORT 47
NAFTA Segment Mass-Market Dealer and Customer Financing
In the NAFTA segment, we do not have a captive ?nance company or joint venture and instead rely upon
independent ?nancial service providers, primarily our strategic relationship with Santander Consumer USA Inc.,
or SCUSA, to provide ?nancing for dealers and retail customers in the U.S. Prior to the agreement with SCUSA,
we principally relied on Ally Financial Inc., or Ally, for dealer and retail ?nancing and support. Additionally, we have
arrangements with a number of ?nancial institutions to provide a variety of dealer and retail customer ?nancing
programs in Canada. There are no formal retail ?nancing arrangements in Mexico at this time, although CF Credit
Services, S.A. de C.V. SOFOM E.R., or CF Credit, provides nearly all dealer ?nancing and about half of all retail
?nancing of our products in Mexico.
In February 2013, we entered into a private label ?nancing agreement with SCUSA, or the SCUSA Agreement, under
which SCUSA provides a wide range of wholesale and retail ?nancial services to our dealers and retail customers
in the U.S., under the Chrysler Capital brand name. The ?nancial services include credit lines to ?nance dealers’
acquisition of vehicles and other products that we sell or distribute, retail loans and leases to ?nance retail customer
acquisitions of new and used vehicles at dealerships, ?nancing for commercial and ?eet customers, and ancillary
services. In addition, SCUSA offers dealers construction loans, real estate loans, working capital loans and revolving
lines of credit.
The SCUSA Agreement has a ten year term from February 2013, subject to early termination in certain circumstances,
including the failure by a party to comply with certain of its ongoing obligations under the SCUSA Agreement. In
accordance with the terms of the agreement, SCUSA provided us an upfront, nonrefundable payment in May 2013
which is being amortized over ten years.
Under the SCUSA Agreement, SCUSA has certain rights, including limited exclusivity to participate in speci?ed
minimum percentages of certain retail ?nancing rate subvention programs. SCUSA’s exclusivity rights are subject to
SCUSA maintaining price competitiveness based on market benchmark rates to be determined through a steering
committee process as well as minimum approval rates.
The SCUSA Agreement replaced an auto ?nance relationship with Ally, which was terminated in 2013. As of
December 31, 2014, Ally was providing wholesale lines of credit to approximately 39 percent of our dealers in the U.S.
For the year ended December 31, 2014, we estimate that approximately 82 percent of the vehicles purchased by our
U.S. retail customers were ?nanced or leased through our dealer network, of which approximately 48 percent were
?nanced or leased through Ally and SCUSA.
LATAM
LATAM Sales and Competition
The following table presents our mass-market vehicle sales and market share in the LATAM segment for the periods
presented:
For the Years Ended December 31,
2014
(1)
2013
(1)
2012
(1)
LATAM Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
Brazil 706 21.2% 771 21.5% 845 23.3%
Argentina 88 13.4% 111 12.0% 85 10.6%
Other LATAM 37 3.0% 51 3.6% 51 3.7%
Total 830 16.0% 933 15.8% 982 16.8%
(1)
Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided
by third-party sources, including IHS Global Insight, National Organization of Automotive Vehicles Distribution and Association of Automotive
Producers.
48 2014
|
ANNUAL REPORT
Overview of Our Business
The following table presents our mass-market vehicle market share information and our principal competitors in Brazil,
our largest market in the LATAM segment:
For the Years Ended December 31,
Brazil 2014
(1)
2013
(1)
2012
(1)
Automaker Percentage of industry
FCA 21.2% 21.5% 23.3%
Volkswagen
(*)
17.7% 18.8% 21.2%
GM 17.4% 18.1% 17.7%
Ford 9.2% 9.4% 8.9%
Other 34.5% 32.2% 28.9%
Total 100.0% 100.0% 100.0%
(1)
Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided
by third-party sources, including IHS Global Insight, National Organization of Automotive Vehicles Distribution and Association of Automotive
Producers.
(*)
Including Audi.
The LATAM segment automotive industry decreased 12.5 percent from 2013, to 5.2 million vehicles (cars and light
commercial vehicles) in 2014. The decrease was mainly due to Brazil and Argentina with 6.9 percent and 28.7 percent
decreases, respectively. Over the past four years industry sales in the LATAM segment grew by 1.4 percent, mainly
due to Argentina and Other countries while Brazilian market remained substantially stable driven by economic factors
such as greater development of gross domestic product, increased access to credit facilities and incentives adopted
by Brazil in 2009 and 2012.
Our vehicle sales in the LATAM segment leverage the name recognition of Fiat and the relatively urban population
of countries like Brazil to offer Fiat brand mini and small vehicles in our key markets in the LATAM segment. We are
the leading automaker in Brazil, due in large part to our market leadership in the mini and small segments (which
represent almost 60 percent of Brazilian market vehicle sales). Fiat also leads the pickup truck market in Brazil (with
the Fiat Strada, 56.2 percent of segment share), although this segment is small as a percentage of total industry and
compared to other countries in the LATAM segment.
In Brazil, the automotive industry bene?ted from tax incentives in 2012, which helped our strong performance in that
year as we were able to leverage our operational ?exibility in responding to the sharp increase in market demand.
However, tax incentives have limited the ability of OEMs to recover cost increases associated with in?ation by
increasing prices, a problem that has been exacerbated by the weakening of the Brazilian Real. Increasing competition
over the past several years has further reduced our overall pro?tability in the region. Import restrictions in Brazil have
also limited our ability to bring new vehicles to Brazil. We plan to start production in our new assembly plant in Brazil in
2015, which we believe will enhance our ability to introduce new locally-manufactured vehicles that are not subject to
such restrictions.
LATAM Distribution
The following table presents the number of independent entities in our dealer and distributor network. In the LATAM
segment, we generally enter into multiple dealer agreements with a single dealer, covering one or more points of sale.
Outside Brazil and Argentina, our major markets, we distribute our vehicles mainly through general distributors and
their dealer networks. This table counts each independent dealer entity, regardless of the number of contracts or
points of sale the dealer operates. Where we have relationships with a general distributor in a particular market, this
table re?ects that general distributor as one distribution relationship:
Distribution Relationships At December 31,
2014 2013 2012
LATAM 441 450 436
2014
|
ANNUAL REPORT 49
LATAM Dealer and Customer Financing
In the LATAM segment, we provide access to dealer and retail customer ?nancing through both wholly-owned captive
?nance companies and through strategic relationships with ?nancial institutions.
We have two wholly-owned captive ?nance companies in the LATAM segment: Banco Fidis S.A. in Brazil and Fiat
Credito Compañia Financiera S.A. in Argentina. These captive ?nance companies offer dealer and retail customer
?nancing. In addition, in Brazil we have a signi?cant commercial partnership with Banco Itaù, a leading vehicle retail
?nancing company in Brazil, to provide ?nancing to retail customers purchasing Fiat brand vehicles. This partnership
was renewed in August 2013 for a ten-year term ending in 2023. Under this agreement, Banco Itaù has exclusivity
on our promotional campaigns and preferential rights on non-promotional ?nancing. We receive commissions in
connection with each vehicle ?nancing above a certain threshold. This agreement applies only to our retail customers
purchasing Fiat branded vehicles and excludes Chrysler, Jeep, Dodge and Ram brand vehicles, which are directly
?nanced by Banco Fidis S.A.
APAC Vehicle Sales, Competition and Distribution
APAC Sales and Competition
The following table presents our vehicle sales in the APAC segment for the periods presented:
For the Years Ended December 31,
2014
(1)(2)
2013
(1)(2)
2012
(1)(2)
APAC Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
China 182 1.0% 129 0.8% 57 0.4%
India
(3)
12 0.5% 10 0.4% 11 0.4%
Australia 44 4.0% 34 3.1% 23 2.1%
Japan 18 0.4% 16 0.4% 15 0.3%
South Korea 6 0.5% 5 0.4% 4 0.3%
APAC 5 major Markets 262 0.9% 194 0.7% 109 0.5%
Other APAC 5 — 6 — 6 —
Total 267 — 199 — 115 —
(1)
Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided by
third-party sources, including R.L. Polk Data, and National Automobile Manufacturing Associations.
(2)
Sales data include vehicles sold by certain of our joint ventures within the Chinese and, until 2012, the Indian market. Beginning in 2013, we
took over the distribution from the joint venture partner and we started distributing vehicles in India through wholly-owned subsidiaries.
(3)
India market share is based on wholesale volumes.
The automotive industry in the APAC segment has shown strong year-over-year growth. Industry sales in the ?ve
key markets (China, India, Japan, Australia and South Korea) where we compete increased from 16.3 million in 2009
to 28.2 million in 2014, a compound annual growth rate, or CAGR, of approximately 12 percent. Industry sales in
the ?ve key markets for 2013, 2012, 2011 and 2010 were 26.1 million, 23.8 million, 21.3 million and 20.3 million,
respectively. China was the driving force behind the signi?cant growth in the region. China’s industry volume increased
from 8.5 million passenger cars in 2009 to 18.4 million passenger cars in 2014, representing a CAGR of 17 percent.
Industry volumes in China for 2013, 2012, 2011 and 2010 were 16.7 million, 14.2 million, 13.1 million and 11.5 million
passenger cars, respectively. In 2014, the ?ve key markets grew by 8 percent over 2013, primarily driven by a 10
percent increase in China.
50 2014
|
ANNUAL REPORT
Overview of Our Business
We sell a range of vehicles in the APAC segment, including small and compact cars and utility vehicles.
Although our smallest mass-market segment by vehicle sales, we believe the APAC segment represents a signi?cant
growth opportunity and we have invested in building relationships with key joint venture partners in China and India in
order to increase our presence in the region. In 2010, the demand for mid-size vehicles in China led us to begin a joint
venture with Guangzhou Automobile Group Co. for the production of Fiat brand passenger cars. Currently the Fiat Ottimo
and Fiat Viaggio, along with our other Fiat-branded vehicles imported from Europe and North America, are distributed
through the joint venture’s local dealer network in that country. In addition, in 2014, we and GAC group announced that
together we will produce Jeep and Chrysler branded vehicles in China. We also work with a joint venture partner in India
to manufacture Fiat branded vehicles that we distribute through our wholly-owned subsidiary. In other parts of the APAC
segment, we distribute vehicles that we manufacture in the U.S. and Europe through our dealers and distributors.
APAC Distribution
In the key markets in the APAC segment (China, Australia, India, Japan and South Korea), we sell our vehicles through
a wholly-owned subsidiary or through our joint ventures to local independent dealers. In other markets where we
do not have a substantial presence, we have agreements with general distributors for the distribution of our vehicles
through their networks. The following table presents the number of independent entities in our dealer and distributor
network. The table counts each independent dealer entity, regardless of the number of contracts or points of sale the
dealer operates. Where we have relationships with a general distributor in a particular market, this table re?ects that
general distributor as one distribution relationship:
Distribution Relationships At December 31,
2014 2013 2012
APAC 729 671 470
APAC Dealer and Customer Financing
In the APAC segment, we operate a wholly-owned captive ?nance company, Fiat Automotive Finance Co., Ltd, which
supports, on a non-exclusive basis, our sales activities in China through dealer and retail customer ?nancing and
provides similar services to dealers and customers of CNHI. Vendor programs are also in place with different ?nancial
partners in India, Japan, South Korea and Australia.
EMEA Vehicle Sales, Competition and Distribution
EMEA Sales and Competition
The following table presents our passenger car and light commercial vehicle sales in the EMEA segment for the
periods presented:
For the Years Ended December 31,
2014
(1)(2)(3)
2013
(1)(2)(3)
2012
(1)(2)(3)
EMEA Passenger Cars Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
Italy 377 27.7% 374 28.7% 415 29.6%
Germany 84 2.8% 80 2.7% 90 2.9%
UK 80 3.2% 72 3.2% 64 3.1%
France 62 3.5% 62 3.5% 62 3.3%
Spain 36 4.3% 27 3.7% 23 3.3%
Other Europe 121 3.5% 123 3.7% 141 4.1%
Europe* 760 5.8% 738 6.0% 795 6.3%
Other EMEA** 126 — 137 — 122 —
Total 886 — 875 — 917 —
* 28 members of the European Union and members of the European Free Trade Association (other than Italy, Germany, UK, France, and Spain).
** Market share not included in Other EMEA because our presence is less than one percent.
(1)
Certain fleet sales accounted for as operating leases are included in vehicle sales.
(2)
Our estimated market share data is presented based on the European Automobile Manufacturers Association (ACEA) Registration Databases
and national Registration Offices databases.
(3)
Sale data includes vehicle sales by our joint venture in Turkey.
2014
|
ANNUAL REPORT 51
For the Years Ended December 31,
EMEA Light Commercial
Vehicles
2014
(1)(2)(3)
2013
(1)(2)(3)
2012
(1)(2)(3)
Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
Europe* 197 11.5% 182 11.6% 185 11.7%
Other EMEA** 68 — 68 — 72 —
Total 265 — 250 — 257 —
* 28 members of the European Union and members of the European Free Trade Association.
** Market share not included in Other EMEA because our presence is less than one percent.
(1)
Certain fleet sales accounted for as operating leases are included in vehicle sales.
(2)
Our estimated market share data is presented based on the national Registration Offices databases on products categorized under light
commercial vehicles.
(3)
Sale data includes vehicle sales by our joint venture in Turkey.
The following table summarizes our new vehicle market share information and our principal competitors in Europe, our
largest market in the EMEA segment:
For the Years Ended December 31,
Europe-Passenger Cars* 2014
(*)
2013
(*)
2012
(**)
Automaker Percentage of industry
Volkswagen 25.5% 25.1% 24.8%
PSA 10.7% 10.9% 11.7%
Renault 9.5% 8.9% 8.4%
GM 7.1% 7.9% 8.1%
Ford 7.3% 7.3% 7.5%
BMW 6.4% 6.4% 6.4%
FCA 5.9% 6.0% 6.4%
Daimler 5.4% 5.5% 5.2%
Toyota 4.3% 4.4% 4.3%
Other 17.9% 17.6% 17.2%
Total 100.0% 100.0% 100.0%
* Including all 28 European Union (EU) Member States and the 4 European Free Trade Association, or EFTA member states.
** Including all 27 European Union (EU) Member States and the 4 European Free Trade Association, or EFTA member states.
(1)
Market share data is presented based on the European Automobile Manufacturers Association, or ACEA Registration Databases, which also
includes Ferrari and Maserati within our Group.
In 2014, there was an improvement in passenger car industry volumes in Europe (EU28+EFTA), with unit sales
increasing 5.4 percent over the prior year to a total of 13 million, although still well below the pre-crisis level of
approximately 16 million units in 2007. As a result of production over-capacity, however, signi?cant price competition
among automotive OEMs continues to be a factor, particularly in the small and mid-size segments. Volumes were also
higher in the light commercial vehicle, or LCV, segment, with industry sales up 9.6 percent year-over-year to about
1.72 million units, following two consecutive years with industry volumes stable at around 1.6 million units. In 2014,
Fiat Professional, FCA’s LCV brand in Europe, introduced the sixth generation of its highly successful
Fiat Ducato, which has sold 2.7 million units since the nameplate was launched in 1981. The Ducato continued its
strong performance in 2014, taking the lead in the OEM ranking in its segment in Europe for the ?rst year ever, and
registering a further increase in market share - which has grown steadily since 2008 - to an all-time record of 20.9
percent. Fiat Professional also operates in Russia through wholly-owned subsidiaries. We also operate through joint
ventures and other cooperation agreements.
52 2014
|
ANNUAL REPORT
Overview of Our Business
During the year, FCA maintained its focus on production of a select number of models as it implemented a strategic
re-focus and realignment of the Fiat brand. Central to this strategy has been the expansion of the Fiat 500 family and
other selected economy models. This has resulted in FCA achieving a leading position in the “mini” and “compact
MPV” segments in Europe. We continued expansion of the 500 family in 2014, with the introduction of the 500X
crossover, which was debuted at the Paris Motor Show in October. Building on the history of Alfa Romeo, Fiat
and Lancia, we sell mini, small and compact passenger cars in the EMEA region under these brands. We are also
leveraging Jeep’s global brand recognition to offer Jeep brand SUVs, all of which the EMEA segment categorizes as
passenger cars. In September 2014, the Group launched the Jeep Renegade, FCA’s ?rst model designed in the U.S.
and produced in Italy. In addition, we sell LCV’s under the Fiat Professional brand, which mainly include half-ton pick-
up trucks and commercial vans.
In Europe, FCA’s sales are largely weighted to passenger cars, with approximately 53 percent of our total vehicle
sales in Europe in 2014 in the small car segment, re?ecting demand for smaller vehicles driven by driving conditions
prevalent in many European cities and stringent environmental regulations.
EMEA Distribution
In certain markets, such as Europe, our relationship with individual dealer entities can be represented by a number
of contracts (typically, we enter into one agreement per brand of vehicles to be sold), and the dealer can sell those
vehicles through one or more points of sale. In those markets, points of sale tend to be physically small and carry
limited inventory.
In Europe, we sell our vehicles directly to independent and our own dealer entities located in most European markets.
In other markets in the EMEA segment in which we do not have a substantial presence, we have agreements with
general distributors for the distribution of our vehicles through their existing distribution networks.
The following table summarizes the number of independent entities in our dealer and distributor network. The table
counts each independent dealer entity, regardless of the number of contracts or points of sale the dealer operates.
Where we have relationships with a general distributor in a particular market, this table re?ects that general distributor
as one distribution relationship:
Distribution Relationships At December 31,
2014 2013 2012
EMEA 2,143 2,300 2,495
EMEA Dealer and Customer Financing
In the EMEA segment, dealer and retail customer ?nancing is primarily managed by FCA Bank, our 50/50 joint
venture with Crédit Agricole Consumer Finance S.A., or Crédit Agricole. FCA Bank operates in 14 European countries
including Italy, France, Germany, the U.K. and Spain. We began this joint venture in 2007, and in July 2013, we
reached an agreement with Crédit Agricole to extend its term through December 31, 2021. Under the agreement, FCA
Bank will continue to bene?t from the ?nancial support of the Crédit Agricole Group while continuing to strengthen its
position as an active player in the securitization and debt markets. FCA Bank provides retail and dealer ?nancing to
support our mass-market brands and Maserati, as well as certain other OEMs.
Fidis S.p.A., our wholly-owned captive ?nance company, provides dealer and other wholesale customer ?nancing in
certain markets in the EMEA segment in which FCA Bank does not operate. We also operate a joint venture providing
?nancial services to retail customers in Turkey, and operate vendor programs with bank partners in other markets to
provide access to ?nancing in those markets.
2014
|
ANNUAL REPORT 53
Ferrari
Ferrari, a racing and sports car manufacturer founded in 1929 by Enzo Ferrari, began producing street cars in 1947,
beginning with the 125 S. Fiat acquired 50 percent of Ferrari in 1969, then expanding its stake to the current 90
percent. Scuderia Ferrari, the brand’s racing team division, has achieved enormous success, winning numerous
Formula One titles, including 16 constructors’ championships and 15 drivers’ championships. The street car division
currently produces vehicles ranging from sports cars (such as the 458 Italia, the 458 Spider and the F12 Berlinetta), to
the gran turismo models (such as the California and the FF), designed for long-distance, high-speed journeys.
We believe that Ferrari customers are seeking the state-of-the-art in luxury sports cars, with a special focus on the
very best Italian design and craftsmanship, along with unparalleled performance both on the track and on the road.
Ferrari recently presented the California T, which brings turbocharging back to its street cars for the ?rst time since
1992. We also launched the exclusive limited edition LaFerrari, which attracted orders for more than the production
run before its of?cial debut at the 2013 Geneva Motor Show. We believe LaFerrari sets a new benchmark for the
sector, incorporating the latest technological innovations that Ferrari will apply to future models. On October 29, 2014,
we announced our intention to separate Ferrari from FCA through a public offering of a portion of our shareholding in
Ferrari from our current shareholding and a spin-off of our remaining equity interest in Ferrari to our shareholders.
The following table shows the distribution of our Ferrari sales by geographic regions as a percentage of total sales for
each year ended December 31, 2014, 2013 and 2012:
As a percentage
of 2014 sales
As a percentage
of 2013 sales
As a percentage
of 2012 sales
Europe Top 5 countries
(1)
30% 30% 34%
U.S. 30% 29% 25%
Japan 6% 5% 5%
China, Hong Kong & Taiwan 9% 10% 10%
Other countries 25% 26% 26%
Total 100% 100% 100%
(1)
Europe Top 5 Countries by sales, includes Italy, UK, Germany, France and Switzerland.
In 2014, a total of 7.2 thousand Ferrari street cars were sold to retail customers, growth driven by the performance
of the limited edition LaFerrari. Ferrari experienced solid growth in North America, Ferrari’s largest market, Japan and
China, with European market substantially ?at year over year.
Ferrari vehicles are designed to maintain exclusivity and appeal to a customer looking for such rare vehicles, and as
a result, we deliberately limit the number of Ferrari vehicles produced each year in order to preserve the exclusivity of
the brand. Our efforts in designing, engineering and manufacturing our luxury vehicles focus on use of state-of-the-art
technology and luxury ?nishes to appeal to our luxury vehicle customers.
We sell our Ferrari vehicles through a worldwide distribution network of approximately 180 Ferrari dealers as of
December 31, 2014, that is separate from our mass-market distribution network.
Ferrari Financial Services, a ?nancial services company 90 percent owned by Ferrari, offers ?nancial services for
the purchase of all types of Ferrari vehicles. Ferrari Financial Services operates in Ferrari’s major markets, including,
Germany, U.K., France, Belgium, Switzerland, Italy, U.S. and Japan.
54 2014
|
ANNUAL REPORT
Overview of Our Business
Maserati
Maserati, a luxury vehicle manufacturer founded in 1914, became part of our business in 1993. We believe
that Maserati customers typically seek a combination of style, both in high quality interiors and external design,
performance, sports handling and comfort that come with a top of the line luxury vehicle. In 2013 the Maserati brand
has been re-launched by the introduction of the Quattroporte and Ghibli (luxury four door sedans), the ?rst addressed
to the ?agship large sedan segment and the second designed to address the luxury full-size sedan vehicle segment.
Maserati’s current vehicles also include the GranTurismo, the brand’s ?rst modern two door, four seat coupe, also
available in a convertible version. In 2014 we showcased the Ermenegildo Zegna version of the Quattroporte, which
will be produced in a limited run of 100 vehicles to commemorate the brand’s 100th anniversary. In addition, we
expect to launch a luxury SUV in 2016. This luxury SUV has been designed on the same platform as the Quattroporte
and the Ghibli and will complete the Maserati’s product portfolio with full coverage of the global luxury vehicle market.
Further, we recently presented a sports car concept (the Maserati Al?eri) expected to be put into production in the
coming years.
The following tables show the distribution of Maserati sales by geographic regions as a percentage of total sales for
each year ended December 31, 2014, 2013 and 2012:
As a percentage
of 2014 sales
As a percentage
of 2013 sales
As a percentage
of 2012 sales
Europe Top 4 countries
(1)
13% 9% 12%
U.S. 39% 41% 43%
Japan 4% 4% 5%
China 25% 26% 15%
Other countries 19% 20% 25%
Total 100% 100% 100%
(1)
Europe Top 4 Countries by sales, includes Italy, UK, and Switzerland.
In 2014, a total of 32.8 thousand Maserati vehicles were sold to retail customers, an increase of 183 percent
compared to 2013, on the back of continued strong performance for the Quattroporte and Ghibli, resulting in an
increase of approximately 170 percent in the U.S., the brand’s number one market, and in China, the brand’s second
largest market, combined with a fourfold increase in Europe.
We sell our Maserati vehicles through a worldwide distribution network of approximately 364 Maserati dealers as of
December 31, 2014, that is separate from our mass-market distribution network.
FCA Bank provides access to retail customer ?nancing for Maserati brand vehicles in Europe. In other regions, we rely
on local agreements with ?nancial services providers for ?nancing of Maserati brand vehicles.
2014
|
ANNUAL REPORT 55
Components Segment
We sell components and production systems under the following brands:
Magneti Marelli. Founded in 1919 as a joint venture between Fiat and Ercole Marelli, Magneti Marelli is an international
leader in the design and production of state-of-the-art automotive systems and components. Through Magneti
Marelli, we design and manufacture automotive lighting systems, powertrain (engines and transmissions) components
and engine control unit, electronic systems, suspension systems and exhaust systems, and plastic components
and modules. The Automotive Lighting business line, headquartered in Reutlingen, Germany, is dedicated to the
development, production and sale of automotive exterior lighting products for all major OEMs worldwide.
The Powertrain business line is dedicated to the production of engine and transmission components for automobiles,
motorbikes and light commercial vehicles and has a global presence due to its own research and development
centers, applied research centers and production plants. The Electronic Systems business line provides know-
how in the development and production of hardware and software in mechatronics, instrument clusters, telematics
and satellite navigation. We also provide aftermarket parts and services and operate in the motorsport business, in
particular electronic and electro-mechanical systems for championship motorsport racing, under the Magneti Marelli
brand. We believe the Magneti Marelli brand is characterized by key technologies available to its ?nal customers
at a competitive price compared to other component manufacturers, with high quality and competitive offerings,
technology and ?exibility.
Magneti Marelli provides wide-ranging expertise in electronics, through a process of ongoing innovation and
environmental sustainability in order to develop intelligent systems for active and passive vehicle safety, onboard
comfort and powertrain technologies. With 89 production facilities (including joint ventures) and 39 research and
development centers, Magneti Marelli has a presence in 19 countries and supplies all the major OEMs across the
globe. In several countries, Magneti Marelli’s activities are carried out through a number of joint ventures with local
partners with the goal of entering more easily into new markets by leveraging the partner’s local relationships.
Thirty-?ve percent of Magneti Marelli’s 2014 revenue is derived from sales to the Group.
Teksid. Originating from Fiat’s 1917 acquisition of Ferriere Piemontesi, the Teksid brand was established in 1978 and
today is specialized in grey and nodular iron castings production. Teksid produces engine blocks, cylinder heads,
engine components, transmission parts, gearboxes and suspensions. Teksid Aluminum, produces, aluminum cylinder
heads. Thirty-nine percent of Teksid’s 2014 revenue is derived from sales to the Group.
Comau. Founded in 1973, Comau, which originally derived its name from the acronyms of COnsorzio MAcchine
Utensili (consortium of machine tools), produces advanced manufacturing systems through an international network.
Comau operates primarily in the ?eld of integrated automation technology, delivering advanced turnkey systems to its
customers. Through Comau, we develop and sell a wide range of industrial applications, including robotics, while we
provide support service and training to customers. Comau’s main activities include powertrain metalcutting systems;
mechanical assembly systems and testing; innovative and high performance body welding and assembly systems;
and robotics. Comau’s automation technology is used in a variety of industries, including automotive and aerospace.
Comau also provides maintenance service in Latin America. Twenty-six percent of Comau’s 2014 revenue is derived
from sales to the Group.
56 2014
|
ANNUAL REPORT
Operating Results
Operating Results
Results of Operations
The following is a discussion of the results of operations for the year ended December 31, 2014 as compared to
the year ended December 31, 2013 and for the year ended December 31, 2013 as compared to the year ended
December 31, 2012. The discussion of certain line items (cost of sales, selling, general and administrative costs and
research and development costs) includes a presentation of such line items as a percentage of net revenues for the
respective periods presented, to facilitate the year-on-year comparisons.
For the Years Ended December 31,
(€ million) 2014 2013 2012
Net revenues 96,090 86,624 83,765
Cost of sales 83,146 74,326 71,473
Selling, general and administrative costs 7,084 6,702 6,775
Research and development costs 2,537 2,236 1,858
Other income/(expenses) 197 77 (68)
Result from investments 131 84 87
Gains/(losses) on the disposal of investments 12 8 (91)
Restructuring costs 50 28 15
Other unusual income/(expenses) (390) (499) (138)
EBIT 3,223 3,002 3,434
Net ?nancial expenses (2,047) (1,987) (1,910)
Pro?t before taxes 1,176 1,015 1,524
Tax expense/(income) 544 (936) 628
Net pro?t 632 1,951 896
Net pro?t attributable to:
Owners of the parent 568 904 44
Non-controlling interests 64 1,047 852
Net revenues
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Net revenues 96,090 86,624 83,765 9,466 10.9% 2,859 3.4%
2014 compared to 2013
Net revenues for the year ended December 31, 2014 were €96.1 billion, an increase of €9.5 billion, or 10.9 percent
(11.9 percent on a constant currency basis), from €86.6 billion for the year ended December 31, 2013.
The increase in net revenues was primarily attributable to (i) a €6.7 billion increase in NAFTA net revenues, related to
an increase in shipments and improved vehicle and distribution channel mix, (ii) a €1.6 billion increase in APAC net
revenues attributable to an increase in shipments and improved vehicle mix, (iii) a €1.1 billion increase in Maserati net
revenues primarily attributable to an increase in shipments, (iv) a €0.7 billion increase in EMEA net revenues mainly
attributable to an increase in shipments and improved mix, and (v) an increase of €0.5 billion in Components net
revenues, which were partially offset by (vi) a decrease of €1.3 billion in LATAM net revenues. The decrease in LATAM
net revenues was attributable to the combined effect of lower vehicle shipments and unfavorable foreign currency
translation effect related to the weakening of the Brazilian Real against the Euro, only partially offset by positive pricing
and vehicle mix.
2014
|
ANNUAL REPORT 57
2013 compared to 2012
Net revenues for the year ended December 31, 2013 were €86.6 billion, an increase of €2.8 billion, or 3.4 percent
(7.4 percent on a constant currency basis), from €83.8 billion for the year ended December 31, 2012.
The increase in net revenues was primarily attributable to increases of €2.3 billion in NAFTA segment net revenues
and €1.5 billion in APAC segment net revenues, both of which were largely driven by increases in shipments. In
addition, Maserati net revenues increased by €0.9 billion supported by an increase in shipments driven by the 2013
launches including the new Quattroporte in March and the Ghibli in October. These increases were partly offset by a
decrease of €1.1 billion in LATAM segment net revenues, and a €0.4 billion decrease in EMEA segment net revenues.
The decrease in LATAM segment net revenues was largely attributable to the combined effect of unfavorable foreign
currency translation related to the weakening of the Brazilian Real against the Euro, and a 3.0 percent decrease
in vehicle shipments. The decrease in EMEA segment net revenues was largely due to a decrease in shipments,
attributable to the combined effect of the persistent weak economic conditions in Europe, which resulted in a
1.8 percent passenger car industry contraction, and in part due to a decrease in our passenger car market share,
as a result of increasing competition in the industry.
See — Segments below for a detailed discussion of net revenues by segment.
Cost of sales
For the Years Ended December 31, Increase/(decrease)
(€ million, except
percentages) 2014
Percentage
of net
revenues 2013
Percentage
of net
revenues 2012
Percentage
of net
revenues 2014 vs. 2013 2013 vs. 2012
Cost of sales 83,146 86.5% 74,326 85.8% 71,473 85.3% 8,820 11.9% 2,853 4.0%
Cost of sales includes purchases, certain warranty and product-related costs, labor costs, depreciation, amortization
and logistic costs. We purchase a variety of components (including mechanical, steel, electrical and electronic, plastic
components as well as castings and tires), raw materials (steel, rubber, aluminum, resin, copper, lead, and precious
metals including platinum, palladium and rhodium), supplies, utilities, logistics and other services from numerous
suppliers which we use to manufacture our vehicles, parts and accessories. These purchases generally account for
approximately 80 percent of total cost of sales. Fluctuations in cost of sales are primarily related to the number of our
vehicles we produce and ship, along with changes in vehicle mix, as newer models of vehicles generally have more
technologically advanced components and enhancements and therefore additional costs per unit. The cost of sales
could also be affected, to a lesser extent, by ?uctuations in certain raw material prices.
58 2014
|
ANNUAL REPORT
Operating Results
2014 compared to 2013
Cost of sales for the year ended December 31, 2014 was €83.1 billion, an increase of €8.8 billion, or 11.9 percent
(12.8 percent on a constant currency basis), from €74.3 billion for the year ended December 31, 2013.
As a percentage of net revenues, cost of sales was 86.5 percent for the year ended December 31, 2014 compared to
85.8 percent for the year ended December 31, 2013.
The increase in cost of sales was primarily due to the combination of (i) €5.6 billion related to increased vehicle
shipments, primarily in the NAFTA, APAC, Maserati and EMEA segments, partially offset by a reduction in LATAM
shipments, (ii) €2.5 billion related to vehicle and distribution channel mix primarily attributable to the NAFTA segment,
and (iii) €0.5 billion arising primarily from price increases for certain raw materials in LATAM, which were partially offset
by (iv) favorable foreign currency translation effect of €0.7 billion.
In particular, the €2.5 billion increase in cost of sales related to vehicle and distribution channel mix was primarily
driven by the higher percentage of growth in certain SUV shipments as compared to passenger car shipments, along
with more retail shipments relative to ?eet shipments in NAFTA.
Cost of sales for the year ended December 31, 2014 increased by approximately €800 million due to an increase of
warranty expense and also included the effects of recently approved recall campaigns in the NAFTA segment.
The favorable foreign currency translation impact of €0.7 billion was primarily attributable to the LATAM segment,
driven by the weakening of the Brazilian Real against the Euro.
2013 compared to 2012
Cost of sales for the year ended December 31, 2013 was €74.3 billion, an increase of €2.8 billion, or 4.0 percent
(7.9 percent on a constant currency basis), from €71.5 billion for the year ended December 31, 2012. As a
percentage of net revenues, cost of sales was 85.8 percent for the year ended December 31, 2013 compared to
85.3 percent for the year ended December 31, 2012.
The increase in costs of sales was due to the combination of (i) increased costs of €2.1 billion related to increased
vehicle shipments, primarily in the NAFTA segment, (ii) increased costs of €1.7 billion primarily attributable to the
NAFTA segment, related to shifts in vehicle and distribution channel mix, (iii) increased cost of sales of €0.9 billion
relating to the new-model content enhancements, (iv) increased costs of €0.5 billion arising from price increases
for certain raw materials, and (v) an increase in other costs of sales of €0.5 billion, the effects of which were partially
offset by the positive impact of foreign currency translation of €2.8 billion, largely attributable to the weakening of the
U.S. Dollar and the Brazilian Real against the Euro.
In particular, the increase in cost related to vehicle mix was primarily driven by a higher percentage growth in truck
and certain SUV shipments as compared to passenger car shipments, while the shift in distribution channel mix was
driven by the relative growth in retail shipments, which generally have additional content per vehicle as compared
to ?eet shipments. The €0.5 billion increase in the price of raw materials was particularly related to the LATAM
segment, driven by the weakening of the Brazilian Real, which impacts foreign currency denominated purchases in
that segment. The increase in other costs of sales of €0.5 billion was largely attributable to increases in depreciation
relating to the investments associated with our recent product launches and an increase in labor costs in order to
meet increased production requirements both of which primarily related to the NAFTA segment.
2014
|
ANNUAL REPORT 59
Selling, general and administrative costs
For the Years Ended December 31, Increase/(decrease)
(€ million, except
percentages) 2014
Percentage
of net
revenues 2013
Percentage
of net
revenues 2012
Percentage
of net
revenues 2014 vs. 2013 2013 vs. 2012
Selling, general and
administrative costs 7,084 7.4% 6,702 7.7% 6,775 8.1% 382 5.7% (73) (1.1)%
2014 compared to 2013
Selling, general and administrative costs include advertising, personnel, and other costs. Advertising costs accounted
for approximately 44.0 percent and 43.0 percent of total selling, general and administrative costs for the year ended
December 31, 2014 and 2013 respectively.
Selling, general and administrative costs for the year ended December 31, 2014 were €7,084 million, an increase
of €382 million, or 5.7 percent, from €6,702 million for the year ended December 31, 2013. As a percentage of net
revenues, selling, general and administrative costs were 7.4 percent for the year ended December 31, 2014 compared
to 7.7 percent for the year ended December 31, 2013.
The increase in selling, general and administrative costs was due to the combined effects of (i) a €293 million increase
in advertising expenses driven primarily by the NAFTA, APAC and EMEA segments, (ii) a €157 million increase in other
selling, general and administrative costs primarily attributable to the LATAM and Maserati segments, and to a lesser
extent, the APAC segment which were partially offset by (iii) a reduction in other general and administrative expenses
in the NAFTA segment and (iv) the impact of favorable foreign currency translation of €68 million.
The increase in advertising expenses was largely attributable to the APAC and NAFTA segments to support the
growth of the business in their respective markets. In addition, advertising expenses increased within the NAFTA
segment for new product launches, including the all-new 2014 Jeep Cherokee and the all-new 2015 Chrysler 200.
There were additional increases in advertising expenses for the EMEA segment related to the Jeep brand growth and
new product launches, including the all-new 2014 Jeep Cherokee and Renegade. The favorable foreign currency
translation impact of €68 million was primarily attributable to the LATAM segment, driven by the weakening of the
Brazilian Real against the Euro.
The increase in other selling, general and administrative costs attributable to the Maserati segment has been driven
by the increase in volumes. The increase in other selling, general and administrative costs attributable to the APAC
segment was driven by volume growth in the region, while the increase in the LATAM segment includes the start-up
costs of the Pernambuco plant.
2013 compared to 2012
Selling, general and administrative costs for the year ended December 31, 2013 were €6,702 million, a decrease
of €73 million, or 1.1 percent, from €6,775 million for the year ended December 31, 2012. As a percentage of net
revenues, selling, general and administrative costs were 7.7 percent for the year ended December 31, 2013 compared
to 8.1 percent for the year ended December 31, 2012.
The decrease in selling, general and administrative costs was due to the combined effects of the positive impact of
foreign currency translation of €240 million, partially offset by a €102 million increase in personnel expenses, largely
related to the NAFTA segment, and an increase in advertising expenses of €37 million. In particular, advertising
expenses increased in 2013 due to the product launches in the NAFTA segment (2014 Jeep Grand Cherokee, the
all-new 2014 Jeep Cherokee and the all-new Fiat 500L), in the APAC segment (Dodge Journey) and the Maserati
segment (Quattroporte and Ghibli), which continued following launch to support the growth in their respective
markets, which were partially offset by a decrease in advertising expenses for the EMEA segment as a result of efforts
to improve the focus of advertising campaigns.
60 2014
|
ANNUAL REPORT
Operating Results
Research and development costs
For the Years Ended December 31, Increase/(decrease)
(€ million, except
percentages) 2014
Percentage
of net
revenues 2013
Percentage
of net
revenues 2012
Percentage
of net
revenues 2014 vs. 2013 2013 vs. 2012
Research and
development
costs expensed
during the year 1,398 1.5% 1,325 1.5% 1,180 1.4% 73 5.5% 145 12.3%
Amortization of
capitalized
development
costs 1,057 1.1% 887 1.0% 621 0.7% 170 19.2% 266 42.8%
Write-down of
costs previously
capitalized 82 0.1% 24 0.0% 57 0.1% 58 241.7% (33) (57.9)%
Research and
development
costs 2,537 2.6% 2,236 2.6% 1,858 2.2% 301 13.5% 378 20.3%
We conduct research and development for new vehicles and technology to improve the performance, safety,
fuel ef?ciency, reliability, consumer perception and environmental impact (i.e. reduced emissions) of our vehicles.
Research and development costs consist primarily of material costs and personnel related expenses that support the
development of new and existing vehicles with powertrain technologies.
2014 compared to 2013
Research and development costs for the year ended December 31, 2014 were €2,537 million, an increase of
€301 million, or 13.5 percent, from €2,236 million for the year ended December 31, 2013. As a percentage of net
revenues, research and development costs were 2.6 percent both for years ended December 31, 2014 and 2013.
The increase in research and development costs was attributable to the combined effects of (i) an increase in the
amortization of previously capitalized development costs of €170 million, (ii) an increase in research and development
costs expensed during the period of €73 million and (iii) an increase in write-down of costs previously capitalized of
€58 million.
Research and development costs capitalized as a percentage of total expenditures on research and development
were 61.9 percent for the year ended December 31, 2014, as compared to 60.6 percent for the year ended
December 31, 2013. Expenditures on research and development amounted to €3,665 million for the year ended
December 31, 2014, an increase of 8.9 percent, from €3,367 million, for the year ended December 31, 2013,
resulting in a 5.5 percent increase in research and development costs expensed.
The increase in amortization of capitalized development costs was attributable to the launch of new products, and in
particular related to the NAFTA segment, driven by the all-new 2014 Jeep Cherokee, which began shipping to dealers
in late October 2013, and the all-new 2015 Chrysler 200, which was launched in the ?rst quarter of 2014, and began
arriving in dealerships in May 2014.
2014
|
ANNUAL REPORT 61
2013 compared to 2012
Research and development costs for the year ended December, 31 2013 were €2,236 million, an increase of
€378 million, or 20.3 percent, from €1,858 million for the year ended December 31, 2012. As a percentage of net
revenues, research and development costs were 2.6 percent for the year ended December 31, 2013 compared to
2.2 percent for the year ended December 31, 2012.
The increase in research and development costs was attributable to the combined effects of (i) an increase in the
amortization of capitalized development costs of €266 million and (ii) an increase in research and development costs
expensed during the year of €145 million, which were partly offset by €33 million lower write-down of costs previously
capitalized.
The increase in amortization of capitalized development costs was largely attributable to new product launches. In
particular, amortization of capitalized development in the NAFTA segment increased as a result of the 2013 launches,
including the all-new 2014 Jeep Cherokee, the Jeep Grand Cherokee and the Ram 1500. The €145 million increase
in research and development costs expensed during the year was largely attributable to increases in the NAFTA
segment, largely driven by an increase in expenses related to personnel involved in research and development
activities. In particular, at December 31, 2013 a total of 18,700 employees were dedicated to research and
development activities at Group level, compared to 17,900 at December 31, 2012.
Other income/(expenses)
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Other income/(expenses) 197 77 (68) 120 155.8% 145 n.m.
2014 compared to 2013
Other income/(expenses) for the year ended December 31, 2014 amounted to net income of €197 million, as
compared to net income of €77 million for the year ended December 31, 2013.
For both years ended December 31, 2014 and December 31, 2013, there were no items that either individually or in
aggregate are considered material.
2013 compared to 2012
Other income/(expenses) for the year ended December 31, 2013 amounted to net other income of €77 million, an
increase of €145 million, from net other expenses of €68 million for the year ended December 31, 2012.
For 2013 other income/(expenses) was comprised of other income of €291 million, which was partially offset by other
expenses of €214 million. Of the total 2013 other income, €140 million related to rental, royalty and licensing income,
and €151 million related to miscellaneous income, which includes insurance recoveries and other costs recovered.
Other expenses mainly related to indirect tax expenses incurred.
For 2012 other income/(expenses) was comprised of other income of €242 million, which was more than offset by
other expenses of €310 million. Of the total 2012 other income, €132 million related to rental, royalty and licensing
income, and €110 million related to miscellaneous income. In 2012, other expenses mainly related to indirect tax
expenses incurred.
62 2014
|
ANNUAL REPORT
Operating Results
Result from investments
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Result from investments 131 84 87 47 56.0% (3) (3.4)%
2014 compared to 2013
The largest contributors to result from investments for the years ended December 31, 2014 and 2013 were FCA
Bank S.p.A (“FCA Bank”) formerly known as FGA Capital S.p.A., a jointly-controlled ?nance company that manages
activities in retail automotive ?nancing, dealership ?nancing, long-term car rental and ?eet management in 14
European countries and Tofas-Turk Otomobil Fabrikasi A.S. a jointly-controlled Turkish automaker.
Result from investments for the year ended December 31, 2014 was €131 million, an increase of €47 million, or
56.0 percent, from €84 million for the year ended December 31, 2013. The increase in result from investments was
primarily attributable to the €20 million decrease in the loss relating to the Group’s investment in RCS MediaGroup
and to the €26 million increase in results from investments in the EMEA segment.
2013 compared to 2012
Result from investments for the year ended December, 31 2013 was €84 million, a decrease of €3 million,
or 3.4 percent, from €87 million for the year ended December 31, 2012.
The decrease was largely attributable to the combined effect of a €23 million increase in the loss of a Chinese joint
venture and a €12 million decrease in the pro?t of the Turkish joint venture, which were almost entirely offset by a
€35 million decrease in the loss relating to the Group’s investment in RCS MediaGroup.
Gains/(losses) on the disposal of investments
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Gains/(losses) on the disposal of investments 12 8 (91) 4 50.0% 99 n.m.
2014 compared to 2013
Gains on the disposal of investments for the year ended December 31, 2014 were €12 million, an increase of
€4 million, from €8 million for the year ended December 31, 2013.
For both years ended December 31, 2014 and December 31, 2013, there were no items that either individually or in
aggregate are considered material.
2013 compared to 2012
Gains on the disposal of investments for the year ended December 31, 2013 were €8 million, an increase of
€99 million from a loss on the disposal of investments for the year ended December 31, 2012 of €91 million.
The loss on disposal of investments recognized in 2012 relates to the write-down of our investment in Sevelnord
Société Anonyme, a vehicle manufacturing joint venture with PSA Peugeot Citroen following its remeasurement at
fair value as a result of being classi?ed as an asset held for sale in 2012, in accordance with IFRS 5 - Non-current
Assets Held for Sale and Discontinued Operations. In 2012, we entered into an agreement with PSA Peugeot Citroen
providing for the transfer of its shareholding in Sevelnord Société Anonyme. The investment was sold in the ?rst
quarter of 2013.
2014
|
ANNUAL REPORT 63
Restructuring costs
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Restructuring costs 50 28 15 22 78.6% 13 86.7%
2014 compared to 2013
Restructuring costs for the year ended December 31, 2014 were €50 million, an increase of €22 million, from
€28 million for the year ended December 31, 2013.
Restructuring costs for the year ended December 31, 2014 mainly relate to the LATAM and Components segments.
Restructuring costs for the year ended December 31, 2013 mainly relate to Other activities partially offset by release of
a restructuring provision previously recognized in the NAFTA segment.
2013 compared to 2012
Restructuring costs for the year ended December 31, 2013 were €28 million, an increase of €13 million, from
€15 million for the year ended December 31, 2012.
Net restructuring costs for 2013 mainly relate to a €38 million restructuring provision related to activities included
within other activities, partially offset by a €10 million release of a previously recognized provision related to the NAFTA
segment primarily related to decreases in expected workforce reduction costs and legal claim reserves.
Net restructuring costs for 2012 include EMEA segment restructuring costs of €43 million and €20 million related
to the Components segment and other activities, which were partially offset by a €48 million release of a previously
recognized provision related to the NAFTA segment.
Other unusual income/(expenses)
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Other unusual income/(expenses) (390) (499) (138) 109 21.8% (361) (261.6)%
2014 compared to 2013
Other unusual expenses for the year ended December 31, 2014 were €390 million, a decrease of €109 million from
€499 million for the year ended December 31, 2013.
For the year ended December 31, 2014, Other unusual income/(expenses) amounted to net expenses of €390 million,
primarily relating to the €495 million expense recognized in the NAFTA segment in connection with the execution of
the MOU with the UAW which was entered into by FCA US on January 21, 2014, which was partially offset by the
non-cash and non-taxable gain of €223 million on the remeasurement to fair value of the previously exercised options
on approximately 10 percent of FCA US’s membership interest in connection with FCA’s acquisition of the remaining
41.5 percent ownership interest in FCA US that was not previously owned. In addition, Other unusual expenses
include a €98 million remeasurement charge recognized in the LATAM segment as a result of the Group’s change
in the exchange rate used to remeasure its Venezuelan subsidiary’s net monetary assets in U.S. Dollar, based on
developments in the ?rst quarter 2014 related to the foreign exchange process in Venezuela as described in more
detail in the discussion of results for LATAM below. For the year ended December 31, 2014, Other unusual expenses
also included the €15 million compensation costs deriving from the resignation of the former Ferrari chairman.
64 2014
|
ANNUAL REPORT
Operating Results
2013 compared to 2012
Other unusual expenses for the year ended December 31, 2013 were €499 million, an increase of €361 million, from
€138 million for the year ended December 31, 2012.
Other unusual expenses for the year ended December 31, 2013 included other unusual expenses of €686 million, and
other unusual income of €187 million.
Other unusual expenses for the year ended December 31, 2013 mainly included (i) impairments of €385 million,
(ii) €115 million related to voluntary safety recalls and customer satisfaction actions in the NAFTA segment, and
(iii) €43 million related to the devaluation of the Venezuelan Bolivar, or VEF, against the U.S. Dollar. In particular,
impairments for 2013 include €272 million related to the rationalization of architectures (the combination of systems
that enables the generation of speci?c vehicle platforms for the different models in a certain segment), associated with
the new product strategy for the Alfa Romeo, Maserati and Fiat brands, €57 million related to asset impairments for
the cast iron business in Teksid and €56 million related to write-off of certain equity recapture rights resulting from the
acquisition of the remaining 41.5 interest in FCA US that was not previously owned. Refer to the Consolidated ?nancial
statements included elsewhere in this report for further information on the acquisition of the remaining 41.5 percent
interest in FCA US.
Other unusual income for the year ended December 31, 2013 mainly included the impacts of curtailment gains and plan
amendments of €166 million related to changes made to FCA US’s U.S. and Canadian de?ned bene?t pension plans.
Other unusual expenses for the year ended December 31, 2012 primarily consisted of costs arising from disputes
relating to operations terminated in prior years, costs related to the termination of the Sevelnord Société Anonyme joint
venture and to the rationalization of relationships with certain suppliers.
EBIT
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
EBIT 3,223 3,002 3,434 221 7.4% (432) (12.6)%
2014 compared to 2013
EBIT for the year ended December 31, 2014 was €3,223 million, an increase of €221 million, or 7.4 percent
(9.4 percent on a constant currency basis), from €3,002 million for the year ended December 31, 2013.
The increase in EBIT was primarily attributable to the combined effect of (i) a €397 million decrease in EMEA loss, (ii) a
€202 million increase in APAC (iii) a €169 million increase in Maserati, (iv) a €114 million increase in Components and
(v) the non-cash and non-taxable gain of €223 million on the remeasurement to fair value of the previously exercised
options on approximately 10 percent of FCA US’s membership interest in connection with the acquisition of the
remaining 41.5 percent interest in FCA US that was not previously owned, which were partially offset by (vi) a
€643 million decrease in NAFTA and (vii) a €315 million decrease in LATAM.
2013 compared to 2012
EBIT for the year ended December 31,2013 was €3,002 million, a decrease of €432 million, or 12.6 percent
(7.2 percent on a constant currency basis), from €3,434 million for the year ended December 31, 2012.
The decrease in EBIT was primarily attributable to the combined effect of (i) a €533 million decrease in LATAM
segment EBIT and (ii) a €201 million decrease in NAFTA segment EBIT, which were partially offset by (iii) a
€219 million decrease in EMEA segment EBIT loss, (iv) a €49 million increase in Maserati segment EBIT.
See —Segments for a detailed discussion of EBIT by segment.
2014
|
ANNUAL REPORT 65
Net ?nancial income/(expenses)
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Net ?nancial income/(expenses) (2,047) (1,987) (1,910) (60) (3.0)% (77) (4.0)%
2014 compared to 2013
Net ?nancial expenses for the year ended December 31, 2014 were €2,047, an increase of €60 million, or 3.0
percent, from €1,987 million for the year ended December 31, 2013.
Excluding the gain on the Fiat stock option-related equity swaps of €31 million recognized in the year ended
December 31, 2013, net ?nancial expenses were substantially unchanged as the bene?ts from the new ?nancing
transactions completed in February 2014 by FCA US were offset by higher average debt levels (refer to Note 27 to
the Consolidated ?nancial statements included elsewhere in this report for a more detailed description of the new
?nancings of FCA US).
2013 compared to 2012
Net ?nancial expenses for the year ended December 31, 2013 were €1,987 million, an increase of €77 million, or 4.0
percent, from €1,910 million for the year ended December 31, 2012. Excluding the gains on the Fiat stock option-
related equity swaps (€31 million for 2013, at their expiration, compared to €34 million for 2012), net ?nancial expense
was €74 million higher, largely due to a higher average net debt level.
Tax expense/(income)
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Tax expense/(income) 544 (936) 628 1,480 158.1% (1,564) n.m
2014 compared to 2013
Tax expense for the year ended December 31, 2014 was €544 million, compared with tax income of €936 million
for the year ended December 31, 2013. At December 31, 2013, previously unrecognized deferred tax assets of
€1,500 million were recognized, principally related to tax loss carry forwards and temporary differences in the NAFTA
operations.
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 bene?ts which did not occur in the prior year.
In 2014, the Group’s effective tax rate is equal to 39.5%. The difference between the theoretical and the effective
income taxes is primarily due to €379 million arising from the unrecognized deferred tax assets on temporary
differences and tax losses originating in the year in EMEA, which is partially offset by the recognition of non-recurring
deferred tax bene?ts of €173 million.
66 2014
|
ANNUAL REPORT
Operating Results
2013 compared to 2012
Tax income for the year ended December 31, 2013 was €936 million, compared to tax expense of €628 million for
the year ended December 31, 2012.
The increase in tax income was due to the recognition of previously unrecognized deferred tax assets related to FCA
US of €1,500 million. The FCA US deferred tax assets were recognized as a result of the recoverability assessment
performed at December 31, 2013, which reached the conclusion that it was probable that future taxable pro?t will
allow the deferred tax assets to be recovered. For further details of the recoverability assessment. Excluding the effect
of the previously unrecognized deferred tax assets, the effective rate of tax would have been 48.7 percent compared
to 35.7 percent for 2012. See Note 10 to the Consolidated ?nancial statements included elsewhere in this report for a
reconciliation of the theoretical tax expense to the effective tax charge. The increase in the effective tax rate was mainly
attributable to lower utilization of tax losses carried forward for which deferred tax assets had not been recognized in
the past, partially offset by lower unrecognized deferred tax assets on temporary differences and tax losses arising in
the year.
Segments
The following is a discussion of net revenues, EBIT and shipments for each segment.
(€ million, except
shipments which are
in thousands of units)
Net revenues
for the years ended
December 31,
EBIT
for the years ended
December 31,
Shipments
(*)
for the years ended
December 31,
2014 2013 2012 2014 2013 2012 2014 2013 2012
NAFTA 52,452 45,777 43,521 1,647 2,290 2,491 2,493 2,238 2,115
LATAM 8,629 9,973 11,062 177 492 1,025 827 950 979
APAC 6,259 4,668 3,173 537 335 274 220 163 103
EMEA 18,020 17,335 17,717 (109) (506) (725) 1,024 979 1,012
Ferrari 2,762 2,335 2,225 389 364 335 7 7 7
Maserati 2,767 1,659 755 275 106 57 36 15 6
Components 8,619 8,080 8,030 260 146 165 n.m. n.m. n.m.
Other activities 831 929 979 (114) (167) (149) n.m. n.m. n.m.
Unallocated items
& adjustments
(1)
(4,249) (4,132) (3,697) 161 (58) (39) n.m. n.m. n.m.
Total 96,090 86,624 83,765 3,223 3,002 3,434 4,608 4,352 4,223
(1)
Primarily includes intercompany transactions which are eliminated on consolidation.
NAFTA
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are in
thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 52,452 100.0% 45,777 100.0% 43,521 100.0% 6,675 14.6% 2,256 5.2%
EBIT 1,647 3.1% 2,290 5.0% 2,491 5.7% (643) (28.1)% (201) (8.1)%
Shipments 2,493 n.m. 2,238 n.m. 2,115 n.m. 255 11.4% 123 5.8%
2014
|
ANNUAL REPORT 67
Net revenues
2014 compared to 2013
NAFTA net revenues for the year ended December 31, 2014 were €52.5 billion, an increase of €6.7 billion, or
14.6 percent, from €45.8 billion for the year ended December 31, 2013. The total increase of €6.7 billion was
primarily attributable to (i) an increase in shipments of €4.4 billion, (ii) favorable market and vehicle mix of €1.9 billion
and (iii) favorable net pricing of €0.4 billion.
The 11.4 percent increase in vehicle shipments from 2,238 thousand units for the year ended December 31, 2013, to
2,493 thousand units for the year ended December 31, 2014, was largely driven by increased demand of the Group’s
vehicles, including the all-new 2014 Jeep Cherokee, Ram pickups and the Jeep Grand Cherokee. These increases
were partially offset by a reduction in the prior model year Chrysler 200 and Dodge Avenger shipments due to their
discontinued production in the ?rst quarter of 2014 in preparation for the launch and changeover to the all-new 2015
Chrysler 200, which began arriving in dealerships in May 2014.
Of the favorable mix impact of €1.9 billion, €1.7 billion related to vehicle mix due to higher proportion of trucks and
certain SUVs as compared to passenger cars (as these larger vehicles generally have a higher selling price), and
€0.2 billion related to a shift in distribution channel mix to greater retail shipments as a percentage of total shipments,
which is consistent with the continuing strategy to grow U.S. retail market share while maintaining stable ?eet shipments.
Favorable net pricing of €0.4 billion re?ected favorable pricing and pricing for enhanced content, partially offset by
incentive spending on certain vehicles in portfolio.
2013 compared to 2012
NAFTA net revenues for the year ended December 31, 2013 were €45.8 billion, an increase of €2.3 billion,
or 5.2 percent (8.7 percent on a constant currency basis), from €43.5 billion for the year ended December 31, 2012.
The total increase of €2.3 billion was mainly attributable to the combination of (i) an increase in shipments of €1.5
billion, (ii) favorable market and vehicle mix of €1.2 billion and (iii) favorable vehicle pricing of €0.9 billion, which were
partially offset by (iv) unfavorable foreign currency impact of €1.5 billion.
The 5.8 percent increase in vehicle shipments from 2,115 thousand vehicles for the year ended December 31, 2012
to 2,238 thousand vehicles for the year ended December 31, 2013, was primarily driven by increased demand for our
products, as evidenced by the increase in market share, from 11.3 percent for the year ended December 31, 2012 to
11.5 percent for the year ended December 31, 2013. The increase in shipments was supported by the launch of the
Ram 1500 in late 2012 and the all-new 2014 Jeep Cherokee, the effects of which were partially offset by a decrease in
Jeep Liberty shipments following its discontinued production during 2012. Of the favorable mix impact of €1.2 billion,
€0.9 billion was related to the increase of shipments of trucks and certain SUVs, as compared to passenger cars
(as trucks generally have a higher selling price), while a shift in the distribution channel mix towards higher priced retail
shipments and away from ?eet shipments resulted in an increase in net revenues of €0.3 billion. Our ability to increase
sales price of current year models to re?ect enhancements made resulted in an increase in net revenues of €0.9
billion. These increases were partially offset by the impact of the weakening of the U.S. Dollar against the Euro during
2013, which amounted to €1.5 billion.
68 2014
|
ANNUAL REPORT
Operating Results
EBIT
2014 compared to 2013
NAFTA EBIT for the year ended December 31, 2014 was €1,647 million, a decrease of €643 million, or 28.1 percent,
from EBIT of €2,290 million for the year ended December 31, 2013.
The decrease in NAFTA EBIT was primarily attributable to the combination of (i) increased industrial costs of €1,577
million (ii) an increase of €575 million in other unusual expenses and (iii) a €29 million increase in selling, general and
administrative costs largely attributable to higher advertising costs to support new vehicle launches, including the
all-new 2014 Jeep Cherokee and the all-new 2015 Chrysler 200, partially offset by (iv) the favorable volume/mix
impact of €1,129 million, driven by the previously described increase in shipments, and (v) favorable net pricing of
€411 million due to favorable pricing and pricing for enhanced content, partially offset by incentive spending on certain
vehicles in portfolio.
The increase in industrial costs was attributable to an increase in warranty expenses of approximately €800 million
which included the effects of certain recall campaigns, an increase in base material costs of €978 million mainly
related to higher base material costs associated with vehicles and components and content enhancements on new
models and €262 million in higher research and development costs and depreciation and amortization.
For the year ended December 31, 2014, unusual items were negative by €504 million primarily re?ecting the
€495 million charge in the ?rst quarter of 2014 connected with the UAW MOU entered into by FCA US on
January 21, 2014.
For the year ended December 31, 2013, unusual items were positive by €71 million, primarily including (i) a
€115 million charge related to the June 2013 voluntary safety recall for the 1993-1998 Jeep Grand Cherokee and
the 2002-2007 Jeep Liberty, as well as the customer satisfaction action for the 1999-2004 Jeep Grand Cherokee,
partially offset by (ii) the impacts of a curtailment gain and plan amendments of €166 million with a corresponding net
reduction pension obligation in NAFTA.
2013 compared to 2012
NAFTA EBIT for the year ended December 31, 2013 was €2,290 million, a decrease of €201 million, or 8.1 percent
(4.9 percent on a constant currency basis), from €2,491 million for the year ended December 31, 2012.
The decrease in NAFTA EBIT was primarily attributable to the combination of (i) favorable pricing effects of
€868 million, driven by our ability to increase sales price of current year models for enhancements made and
(ii) favorable volume/mix impact of €588 million, driven by an increase of shipments of trucks and certain SUVs as
compared to passenger cars, which were more than offset by (iii) increased industrial costs of €1,456 million (iv) an
increase in selling, general and administrative costs of €90 million largely attributable to costs incurred in launching
new products during 2013, (v) unfavorable foreign currency translation of €79 million, driven by the weakening of
the U.S. dollar against the Euro during 2013, and (vi) a €23 million increase in other unusual income. In particular,
the increase in industrial costs was attributable to an increase in cost of sales related to new-model content
enhancements, an increase in depreciation and amortization, driven by the new product launches, including the
all-new 2014 Jeep Cherokee, the Jeep Grand Cherokee and the Ram 1500 pick-up truck and an increase in labor
costs in order to meet increased production requirements. The increase in other unusual income was attributable
to the combined effects of a gain recognized from amendments to FCA US’s U.S. and Canadian de?ned bene?t
pension plans, offset by charges related to voluntary safety recalls and customer satisfaction action for certain models
produced in various years from 1993 to 2007 by Old Carco.
2014
|
ANNUAL REPORT 69
LATAM
For the Years Ended December 31, Increase/(decrease)
(€ million, except
percentages and
shipments which are
in thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 8,629 100.0% 9,973 100.0% 11,062 100.0% (1,344) (13.5)% (1,089) (9.8)%
EBIT 177 2.1% 492 4.9% 1,025 9.3% (315) (64.0)% (533) (52.0)%
Shipments 827 n.m 950 n.m. 979 n.m. (123) (12.9)% (29) (3.0)%
Net revenues
2014 compared to 2013
LATAM net revenues for the year ended December 31, 2014 were €8.6 billion, a decrease of €1.3 billion, or
13.5 percent (6.9 percent on a constant currency basis), from €10.0 billion for the year ended December 31, 2013.
The total decrease of €1.3 billion was attributable to (i) a decrease of €1.2 billion driven by lower shipments, and (ii)
unfavorable foreign currency translation of €0.7 billion, which were partially offset by (iii) favorable net pricing and
vehicle mix of €0.6 billion.
The 12.9 percent decrease in vehicle shipments from 950 thousand units for the year ended December 31, 2013, to
827 thousand units for the year ended December 31, 2014 re?ected the weaker demand in the region’s main markets,
where Brazil continued the negative market trend started in 2012, Argentina was impacted by import restrictions and
additional tax on more expensive vehicles and Venezuela suffered from weaker trading conditions. The weakening
of the Brazilian Real against the Euro impacted net revenues by €0.6 billion, in particular, the average exchange rate
used to translate Brazilian Real balances for the year ended December 31, 2014, was 8.9 percent lower than the
average exchange rate used for the same period in 2013.
2013 compared to 2012
LATAM net revenues for the year ended December 31, 2013 were €10.0 billion, a decrease of €1.1 billion, or 9.8
percent (an increase of 0.7 percent on a constant currency basis), from €11.1 billion for the year ended December
31, 2012. The total decrease of €1.1 billion was attributable to the combination of the impact of (i) unfavorable foreign
currency translation of €1.2 billion, and (ii) €0.3 billion related to a decrease in vehicle shipments, which were partially
offset by (iii) favorable mix of €0.1 billion and (iv) favorable pricing impact of €0.1 billion.
LATAM net revenues were signi?cantly impacted by the weakening of the Brazilian Real against the Euro, as the
average exchange rate used to translate 2013 balances was 14.3 percent lower than the average exchange rate
for 2012, impacting net revenues negatively by €1.2 billion. The 3.0 percent vehicle shipment decrease from
979 thousand units for 2012 to 950 thousand units for 2013, which impacted net revenues by €0.3 billion, was largely
attributable to reductions of shipments in Brazil. In 2012 sales tax incentives were introduced to promote the sale of
small vehicles, a segment in which we hold a market leading position. As such, we were well positioned to meet the
increased consumer demand for small cars, recording an increase in shipments in 2012. In 2013, the gradual phase
out of the tax incentives was initiated and was a contributing factor to a shift in market demand away from the small
car segment and into larger vehicles, resulting in a decrease in our Brazilian market share, from 23.3 percent in 2012
to 21.5 percent in 2013.
70 2014
|
ANNUAL REPORT
Operating Results
EBIT
2014 compared to 2013
LATAM EBIT for the year ended December 31, 2014 was €177 million, a decrease of €315 million, or 64.0 percent
(53.7 percent on a constant currency basis), from €492 million for the year ended December 31, 2013.
The decrease in LATAM EBIT was primarily attributable to the combination of (i) unfavorable volume/mix impact
of €228 million attributable to a decrease in shipments, partially offset by an improvement in vehicle mix in Brazil,
(ii) an increase in industrial costs of €441 million largely attributable to price increases for certain foreign currency
denominated purchases, which were impacted by the weakening of the Brazilian Real, (iii) the impact of unfavorable
foreign currency translation of €51 million attributable to the weakening of the Brazilian Real against the Euro, partially
offset by (v) favorable pricing of €381 million driven by pricing actions in Brazil and Argentina.
In particular, LATAM net other unusual expenses amounted to €112 million for the year ended December 31, 2014,
which included €98 million for the remeasurement charge on the Venezuelan subsidiary’s net monetary assets,
compared to €127 million for the year ended December 31, 2013 which included €75 million attributable to the
streamlining of architectures and models associated to the refocused product strategy and €43 million relating to the
loss recognized on translation of certain monetary liabilities from VEF into U.S. Dollar.
During the year ended December 31, 2014, the economic conditions in Venezuela declined due to high in?ation, the
downward trend in the price of oil which began during the fourth quarter of 2014, and continued uncertainty regarding
liquidity within the country and the availability of U.S. Dollar. In addition, the Venezuelan government enacted a law in
January 2014 which provided limits on costs, sales prices and pro?t margins (30 percent maximum above structured
costs) across the Venezuelan economy. There remains uncertainty as to the application of certain aspects of this law
by the Venezuelan government; therefore, we are unable to assess its impact on our vehicle, parts and accessory
sales. Despite the negative economic conditions in Venezuela, we continued to obtain cash to support future
operations through the SICAD I auctions and were also able to complete our workforce reduction initiative.
As of December 31, 2014, we continue to control and therefore consolidate our Venezuelan operations. We will
continue to assess conditions in Venezuela and if in the future, we conclude that we no longer maintain control over
our operations in Venezuela, we may incur a pre-tax charge of approximately €247 million using the current exchange
rate of 12.0 VEF to U.S. Dollar.
Based on ?rst quarter 2014 developments related to the foreign exchange process in Venezuela, we changed the
exchange rate used to remeasure our Venezuelan subsidiary’s net monetary assets in U.S. Dollar. The of?cial exchange
rate was increasingly reserved only for purchases of those goods and services deemed “essential” by the Venezuelan
government. As of March 31, 2014, we began to use the exchange rate determined by an auction process conducted by
Venezuela’s Supplementary Foreign Currency Administration System, referred to as the SICAD I rate.
In late March 2014, the Venezuelan government introduced an additional auction-based foreign exchange system,
referred to as SICAD II rate. Prior to the new exchange system described below, the SICAD II rate had ranged from
49 to 52.1VEF to U.S. Dollar in the period since its introduction. The SICAD II rate was expected to be used primarily
for imports and has been limited to amounts of VEF that could be exchanged into other currencies, such as the
U.S. Dollar. As a result of the March 2014 exchange agreement between the Central Bank of Venezuela and the
Venezuelan government and the limitations of the SICAD II rate, we believed at December 31, 2014, that any future
remittances of dividends would be transacted at the SICAD I rate. As a result, we determined that the SICAD I rate is
the most appropriate rate to use as of December 31, 2014.
As of December 31, 2014 and 2013, the net monetary assets of FCA Venezuela LLC, formerly known as Chrysler de
Venezuela LLC, or FCA Venezuela, denominated in VEF were 783 million (€54 million) and 2,221 million
(€255 million), respectively, which included cash and cash equivalents denominated in VEF of 1,785 million
(€123 million) and 2,347 million (€270 million), respectively. Based on our net monetary assets at December 31, 2014,
a charge of approximately €5 million would result for every 10.0 percent devaluation of the VEF.
2014
|
ANNUAL REPORT 71
On February 10, 2015, the Venezuelan government introduced a new market-based exchange system, referred to
as Marginal Currency System, or the SIMADI rate, with certain speci?ed limitations on its usage by individuals and
legal entities. On February 12, 2015, the SIMADI rate began trading at 170 VEF to U.S. Dollar and is expected to be
used by individuals and legal entities in the private sector. We are currently evaluating our utilization of the SIMADI rate
since this new exchange system is limited by certain government mandated restrictions. In addition, the Venezuelan
government announced that the SICAD I and SICAD II auction-based exchange systems would be merged into a
single exchange system, with a rate starting at 12.0 VEF to U.S. Dollar. We continue to monitor the appropriate rate
to be used for remeasuring our net monetary assets. Additionally, we will continue to monitor the currency exchange
regulations and other factors to assess whether our ability to control and bene?t from our Venezuelan operations has
been adversely affected.
2013 compared to 2012
LATAM EBIT for the year ended December 31, 2013 was €492 million, a decrease of €533 million, or 52.0 percent
(44.5 percent on a constant currency basis), from €1,025 million for December 31, 2012.
The decrease in LATAM EBIT was primarily attributable to the combination of (i) an increase in industrial costs of
€257 million related to increased labor costs and price increases for certain purchases, as the weakening of the
Brazilian Real affected the prices of foreign currency denominated purchases, (ii) unfavorable volume/mix impact
of €111 million, driven by the combination of the previously described 3.0 percent decrease in shipments, and an
increase in the proportion of vehicles produced in Argentina, for which we have higher manufacturing and logistic
costs than in Brazil, (iii) a €96 million increase in other unusual expenses, (iv) the impact of unfavorable foreign
currency translation of €77 million related to the previously described weakening of the Brazilian Real against the Euro
and (v) an increase in selling, general and administrative costs of €37 million mainly due to new advertising campaigns
in Brazil, which were partially offset by favorable pricing impact of €64 million, supported by new product launches.
In particular, the most signi?cant components of other unusual expenses included €75 million attributable to the
streamlining of architectures and models associated to the refocused product strategy and €43 million relating to the
loss recognized on translation of certain monetary liabilities from VEF into U.S. Dollar, on the devaluation of the of?cial
exchange rate of the VEF. For further details see Notes 8 and 21 to the Consolidated ?nancial statements included
elsewhere in this report.
APAC
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are in
thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 6,259 100.0% 4,668 100.0% 3,173 100.0% 1,591 34.1% 1,495 47.1%
EBIT 537 8.6% 335 7.2% 274 8.6% 202 60.3% 61 22.3%
Shipments 220 n.m 163 n.m. 103 n.m. 57 35.0% 60 58.3%
Net revenues
2014 compared to 2013
APAC net revenues for the year ended December 31, 2014 were €6.3 billion, an increase of €1.6 billion,
or 34.1 percent (34.6 percent on a constant currency basis), from €4.7 billion for the year ended December 31, 2013.
The total increase of €1.6 billion was primarily attributable to an increase in shipments and improved vehicle mix.
The 35.0 percent increase in shipments from 163 thousand units for the year ended December 31, 2013, to
220 thousand units for the year ended December 31, 2014, was largely supported by shipments to China and
Australia, and in particular, driven by Jeep Grand Cherokee, Dodge Journey and the newly-launched Jeep Cherokee.
72 2014
|
ANNUAL REPORT
Operating Results
2013 compared to 2012
APAC net revenues for the year ended December 31, 2013 were €4.7 billion, an increase of €1.5 billion,
or 47.1 percent (54.2 percent on a constant currency basis), from €3.2 billion for the year ended December 31, 2012.
The total increase of €1.5 billion was mainly attributable to an increase in shipments of €1.8 billion, which was partially
offset by the impact of unfavorable foreign currency translation of €0.2 billion.
The 58.3 percent increase in vehicle shipments from 103 thousand units for the year ended December 31, 2012 to
163 thousand units for the year ended December 31, 2013 was primarily driven by our performance in China and
Australia. In particular, our performance in China was driven by efforts to grow our dealer network, the reintroduction
of the Dodge Journey and our continued strong performance of the Jeep brand, as a result of which our China
market share increased from 0.4 percent in 2012 to 0.8 percent in 2013, while our growth in Australia was mainly
driven by the Fiat and Alfa Romeo brands, resulting in an increase in market share from 2.1 percent for the year
ended December 31, 2012 to 3.1 percent for the year ended December 31, 2013. The increase in shipments also
resulted in an increase in service parts, accessories and service contracts and other revenues, supported our market
share growth in APAC markets. The impact of unfavorable foreign currency translation was primarily attributable to
?uctuations of the U.S. Dollar and to a lesser extent, the Japanese Yen against the Euro. In particular, the FCA US
portion of APAC segment net revenues were translated from FCA US’s functional currency which is the U.S. Dollar
into the Euro, and not from the individual entity functional currency into Euro.
EBIT
2014 compared to 2013
APAC EBIT for the year ended December 31, 2014 was €537 million, an increase of €202 million, or 60.3 percent
(unchanged on a constant currency basis) from €335 million for the year ended December 31, 2013.
The increase in APAC EBIT was primarily attributable to (i) a positive volume/mix impact of €494 million as a result of
the increase in shipments described above partially offset by (ii) an increase in selling, general and administrative costs
of €111 million to support the growth of the APAC operations, (iii) an increase in industrial costs of €54 million due to
higher research and development costs, increased ?xed manufacturing costs for new product initiatives and higher
production volumes, (iv) unfavorable pricing of €142 million due to the increasingly competitive trading environment,
particularly in China.
2013 compared to 2012
APAC EBIT for the year ended December 31, 2013 was €335 million, an increase of €61 million, or 22.3 percent
(27.7 percent on a constant currency basis) from €274 million for the year ended December 31, 2012.
The increase in APAC EBIT was attributable to the combined effect of (i) the positive volume and mix impact of
€423 million, driven by the efforts to grow our presence in the APAC markets and the previously described 2013
launches of new vehicles, which was partially offset by (ii) an increase in industrial costs of €106 million in higher
research and development costs and ?xed manufacturing costs, attributable to the growth in our business,
(iii) unfavorable pricing effects of €79 million due to the increasingly competitive environment, particularly in China,
(iv) an increase in selling, general and administrative costs of €72 million driven by the advertising and promotional
expenses incurred in relation to the 2013 launches, including the Dodge Journey and Jeep Compass/Patriot in China
and the new Fiat Punto and Fiat Panda in Australia (v) a €26 million decrease in the results of investments, and (vi)
the impact of unfavorable foreign currency translation of €15 million. The decrease in result from investments was
largely due to the €23 million increase in the loss recorded in the Chinese joint venture GAC FIAT Automobiles Co,
attributable to the costs incurred in relation to the future launch of the Fiat Viaggio.
2014
|
ANNUAL REPORT 73
EMEA
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are
in thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 18,020 100.0% 17,335 100.0% 17,717 100.0% 685 4.0% (382) (2.2)%
EBIT (109) (0.6)% (506) (2.9)% (725) (4.1)% 397 78.5% 219 30.2%
Shipments 1,024 n.m 979 n.m. 1,012 n.m. 45 4.6% (33) (3.3)%
Net revenues
2014 compared to 2013
EMEA net revenues for the year ended December 31, 2014 were €18.0 billion, an increase of €0.7 billion, or 4.0
percent, from €17.3 billion for the year ended December 31, 2013.
The €0.7 billion increase in EMEA net revenues was mainly attributable to the combination of (i) a €0.6 billion increase
in vehicle shipments, (ii) a €0.3 billion favorable sales mix impact primarily driven by Jeep brand and LCV shipments,
partially offset by (iii) unfavorable pricing of €0.1 billion due to the increasingly competitive trading environment
particularly related to passenger cars in Europe and (iv) €0.1 billion lower components sales.
In particular, the 4.6 percent increase in vehicle shipments, from 979 thousand units for the year ended December 31,
2013, to 1,024 thousand units for the year ended December 31, 2014, was largely driven by the Fiat 500 family, the
Jeep brand (the all-new Renegade and Cherokee) and the new Fiat Ducato.
2013 compared to 2012
EMEA net revenues for the year ended December 31, 2013 were €17.3 billion, a decrease of €0.4 billion,
or 2.2 percent (1.4 percent on a constant currency basis), from €17.7 billion for the year ended December 31, 2012.
The total decrease of €0.4 billion was attributable to the combined effects of (i) a decrease in vehicle shipments of
€0.4 billion, (ii) unfavorable vehicle pricing of €0.2 billion, (iii) a decrease in service parts, accessories and service
contracts and other revenues of €0.1 billion and (iv) the impact of unfavorable foreign currency translation of
€0.1 billion mainly due to ?uctuations of the U.S. Dollar and the British Pound Sterling which were partially offset by
(v) the effects of a change in scope of consolidation, arising from obtaining control of VM Motori S.p.A. in 2013, a
diesel engine manufacturing company which impacted net revenues positively by €0.2 billion and (vi) positive vehicle
mix of €0.1 billion.
The 3.3 percent decrease in vehicle shipments, from 1,012 thousand units in 2012 to 979 thousand units in 2013,
impacted net revenues by €0.4 billion. The decrease in vehicle shipments was in part due to the persistent weak
economic conditions in Europe (EU27 + EFTA), which resulted in a 1.8 percent passenger car industry contraction,
and in part due to a decrease in our passenger car market share from 6.3 percent in 2012 to 6.0 percent in 2013,
while LCV market share decreased from 11.7 percent for 2012 to 11.6 percent for 2013, as a result of the increasing
competition in the industry. These conditions led to a decrease in service parts, accessories and service contracts and
other revenues of €0.1 billion, while the highly competitive environment and resulting price pressure impacted pricing
unfavorably by €0.2 billion. In July 2013, the Group’s option to acquire the remaining 50.0 percent stake in VM Motori
S.p.A. became exercisable, which resulted in consolidation on a line-by-line basis. This resulted in a positive impact
to net revenues of €0.2 billion. The shift in sales mix towards newly launched and content enriched vehicles, for which
sales prices were adjusted, such as the Fiat 500L and the new Fiat Panda over other vehicles, such as the existing Fiat
Panda resulted in a positive vehicle mix impact of €0.1 billion.
74 2014
|
ANNUAL REPORT
Operating Results
EBIT
2014 compared to 2013
EMEA EBIT loss for the year ended December 31, 2014 was €109 million, an improvement of €397 million, or
78.5 percent, from an EBIT loss of €506 million for the year ended December 31, 2013.
The decrease in EMEA EBIT loss was primarily attributable to the combination of (i) a €199 million decrease in other
unusual expenses, (ii) a favorable volume/mix impact of €174 million driven by the previously described increase in
shipments and improved vehicle mix, (iii) a decrease in net industrial costs of €166 million mainly driven by industrial
and purchasing ef?ciencies, which were partially offset by (iv) unfavorable pricing of €85 million as a result of the
competitive trading environment and resulting price pressure and (v) an increase in selling, general and administrative
costs of €67 million mainly related to advertising expenses primarily to support the growth of Jeep brand and the Jeep
Renegade launch.
In 2013, other unusual expenses were €195 million which included the write-off of previously capitalized research and
development related to new model development for Alfa Romeo products which were switched to a new platform
considered more appropriate for the brand.
2013 compared to 2012
EMEA EBIT for the year ended December 31, 2013 was a loss of €506 million, an improvement of €219 million, or
30.2 percent (31.9 percent on a constant currency basis), from a loss of €725 million for the year ended December
31, 2012.
The decrease in EMEA EBIT loss was attributable to the combined effect of (i) a decrease in selling, general and
administrative costs of €199 million as a result of the cost control measures implemented in response to the European
market weakness, including efforts to improve the focus of advertising initiatives, (ii) a decrease in industrial costs of
€139 million attributable to industrial ef?ciencies driven by the WCM program and purchasing savings implemented
and (iii) a positive volume and mix impact of €77 million, primarily driven by the Fiat 500 family of vehicles, the effects of
which were partially offset by (iv) unfavorable net pricing effects of €172 million, attributable to increased competitive
pressure, particularly in the ?rst half of 2013, and (v) a decrease in the results of investments of €16 million.
Ferrari
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are in
thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 2,762 100.0% 2,335 100.0% 2,225 100.0% 427 18.3% 110 4.9%
EBIT 389 14.1% 364 15.6% 335 15.1% 25 6.9% 29 8.7%
Shipments 7 n.m. 7 n.m. 7 n.m. 0 0 0 0
Net Revenues
2014 compared to 2013
For the year ended December 31, 2014, Ferrari net revenues were €2.8 billion, an increase of €0.4 billion, or 18.3
percent, from €2.3 billion for the year ended December 31, 2013. The increase was primarily attributable to the
increased volumes and improved vehicle mix driven by the contribution of the LaFerrari model.
2013 compared to 2012
Ferrari net revenues for the year ended December 31, 2013 were €2.3 billion, an increase of €0.1 billion,
or 4.9 percent, from €2.2 billion for the year ended December 31, 2012. The total increase of €0.1 billion was primarily
attributable to the launch of the production and sale of engines to Maserati for use in their new vehicles in 2013.
2014
|
ANNUAL REPORT 75
EBIT
2014 compared to 2013
Ferrari EBIT for the year ended December 31, 2014, was €389 million, an increase of €25 million, or 6.9 percent
from €364 million for the year ended December 31, 2013. For 2014 EBIT includes an unusual charge of €15 million
in compensation cost related to the resignation of the former chairman. Increase in EBIT was attributable to higher
volumes and improved sales mix largely driven by the contribution of the LaFerrari model.
2013 compared to 2012
Ferrari EBIT for 2013 was €364 million, an increase of €29 million, or 8.7 percent, from €335 million for 2012,
attributable to favorable vehicle mix and an increase in the contribution from licensing activities and revenues from the
personalization of vehicles.
Maserati
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are in
thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 2,767 100.0% 1,659 100.0% 755 100.0% 1,108 66.8% 904 119.7%
EBIT 275 9.9% 106 6.4% 57 7.5% 169 159.4% 49 86.0%
Shipments 36 n.m. 15 n.m. 6 n.m. 21 140.0% 9 150.0%
Net revenues
2014 compared to 2013
Maserati net revenues were €2.8 billion, an increase of €1.1 billion, or 66.8 percent from €1.7 billion for the year
ended December 31, 2013, primarily driven by an increase in vehicle shipments from 15 thousand units for the year
ended December 31, 2013, to 36 thousand units for the year ended December 31, 2014.
2013 compared to 2012
Maserati net revenues for 2013 were €1.7 billion, an increase of €0.9 billion, from €0.8 billion for 2012. The increase
of €0.9 billion was largely attributable to the increase in vehicle shipments driven primarily by the 2013 launches of the
new Quattroporte model in March and the new Ghibli in October.
EBIT
2014 compared to 2013
Maserati EBIT for the year ended December 31, 2014 was €275 million, an increase of €169 million, or 159.4
percent, from €106 million for the year ended December 31, 2013. The increase was primarily driven by the growth
in shipments, as previously discussed. In 2013, EBIT included €65 million in unusual charges related to the write-
down of previously capitalized development costs following the decision to switch a future model to a more technically
advanced platform.
2013 compared to 2012
Maserati EBIT for 2013 was €106 million, an increase of €49 million, or 86.0 percent, from €57 million for 2012,
attributable to the combined effect of strong volume growth driven by the previously described 2013 product
launches, which was partially offset by an increase in other unusual expenses of €65 million related to the write-down
of capitalized development costs related to a new model, which will be developed on a more technically advanced
platform considered more appropriate for the Maserati brand.
76 2014
|
ANNUAL REPORT
Operating Results
Components
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Magneti Marelli
Net revenues 6,500 5,988 5,828 512 8.6% 160 2.7%
EBIT 204 169 131 35 20.7% 38 29.0%
Teksid
Net revenues 639 688 780 (49) (7.1)% (92) (11.8)%
EBIT (4) (70) 4 66 (94.3)% (74) n.m.
Comau
Net revenues 1,550 1,463 1,482 87 5.9% (19) (1.3)%
EBIT 60 47 30 13 27.7% 17 56.7%
Intrasegment eliminations
Net revenues (70) (59) (60) (11) 18.6% 1 (1.7)%
Components
Net revenues 8,619 100.0% 8,080 100.0% 8,030 100.0% 539 6.7% 50 0.6%
EBIT 260 3.0% 146 1.8% 165 2.1% 114 78.1% (19) (11.5)%
Net revenues
2014 compared to 2013
Components net revenues for the year ended December 31, 2014, revenues were €8.6 billion, an increase of
€0.5 billion, or 6.7 percent (9.3 percent on a constant currency basis), from €8.1 billion for the year ended December
31, 2013.
Magneti Marelli
Magneti Marelli net revenues for the year ended December 31, 2014, were €6.5 billion, an increase of €0.5 billion, or
8.6 percent, from €6.0 billion for the year ended December 31, 2013 primarily re?ecting positive performance in North
America, China and Europe, partially offset by performance in Brazil, which was impacted by the weakening of the
Brazilian Real against the Euro.
Teksid
Teksid net revenues for the year ended December 31, 2014 were €639 million, a decrease of €49 million, or
7.1 percent, from €688 million for the year ended December 31, 2013, primarily attributable to a 4.0 percent decrease
in cast iron business volumes, which were partially offset by a 24.0 percent increase in aluminum business volumes.
Comau
Comau net revenues for the year ended December 31, 2014 were €1.6 billion, an increase of €0.1 billion,
or 5.9 percent, from €1.5 billion for the year ended December 31, 2013, mainly attributable to the body welding
business.
2014
|
ANNUAL REPORT 77
2013 compared to 2012
Components net revenues for the year ended December 31, 2013 were €8.1 billion, an increase of €0.1 billion,
or 0.6 percent (4.4 percent on a constant currency basis), from €8.0 billion for the year ended December 2012.
Magneti Marelli
Magneti Marelli net revenues for 2013 were €6.0 billion, an increase of €0.2 billion, or 2.7 percent, from €5.8 billion
for 2012, primarily driven by the performance of the automotive lighting and to a lesser extent, the electronics business
units. See Overview—Components Segment—Magneti Marelli for a description of the Magneti Marelli business
lines. In particular, the automotive lighting net revenues increased by 11.6 percent driven by large orders from Asian
and North American OEM clients, and the effect of the full-year contribution of lighting solutions launched in the
second half of 2012, while electronics net revenues increased by 7.0 percent, driven by the trend of increasingly
technologically advanced vehicle components.
Teksid
Teksid net revenues for the year ended December 31, 2013 were €0.7 billion, a decrease of €0.1 billion,
or 11.8 percent, from €0.8 billion for 2012, attributable to a €0.1 billion decrease in net revenues from the cast iron
business, attributable to a decrease in iron prices and a decrease in cast iron volumes sold.
Comau
Comau net revenues for both years ended December 31, 2013 and December 31, 2012 were €1.5 billion, attributable
to the combined effects of (i) an increase in body welding revenues supported by large orders from European and
North American customers, which was offset by (ii) decreased powertrain revenues. See Overview—Components
Segment—Comau for a description of the Comau business lines.
EBIT
2014 compared to 2013
Components EBIT for the year ended December 31, 2014 was €260 million, an increase of €114 million,
or 78.1 percent, from €146 million for the year ended December 31, 2013.
Magneti Marelli
Magneti Marelli EBIT for the year ended December 31, 2014 EBIT was €204 million, an increase of €35 million,
20.7 percent, from €169 million for the year ended December 31, 2013. EBIT includes unusual charges of €20 million
for 2014 (unusual income of €1 million for 2013). Excluding these unusual charges, EBIT increased by €56 million,
mainly re?ecting higher volumes and the bene?t of cost containment actions and ef?ciencies.
Teksid
Teksid EBIT loss for the year ended December 31, 2014 was €4 million, a decrease of €66 million, from an EBIT loss
of €70 million for the year ended December 31, 2013. In 2013, EBIT included unusual charges of €60 million, mainly
related to impairment of assets in the Cast Iron business unit.
Comau
Comau EBIT for the year ended December 31, 2014 was €60 million, an increase of €13 million, or 27.7 percent,
from €47 million for the year ended December 31, 2013, primarily due to volume in body welding operations and an
improved mix.
78 2014
|
ANNUAL REPORT
Operating Results
2013 compared to 2012
Components EBIT for the year ended December 31, 2013 was €146 million, a decrease of €19 million,
or 11.5 percent (6.7 percent on a constant currency basis), from €165 million for the year ended December 31, 2012.
Magneti Marelli
Magneti Marelli EBIT for the year ended December 31, 2013 was €169 million, an increase of €38 million, or 29.0
percent, from €131 million for the year ended December 31, 2012, attributable to the previously described increase in
net revenues, which was partially offset by higher costs incurred in relation to product launches in North America, and
the impact of unusual charges recognized in 2012.
Teksid
Teksid EBIT for the year ended December 31, 2013 was a loss of €70 million, compared to a gain of €4 million for
the year ended December 31, 2012, attributable to the combined effects of volume decreases from the cast iron
business, and €60 million other unusual expenses, related to asset impairments of the cast iron business.
Comau
Comau EBIT for the year ended December 31, 2013 was €47 million, an increase of €17 million, or 56.7 percent,
from €30 million for the year ended December 31, 2012, primarily attributable to the body welding operations.
Liquidity and Capital Resources
Liquidity Overview
We require signi?cant liquidity in order to meet our obligations and fund our business. Short-term liquidity is required
to purchase raw materials, parts and components for vehicle production, and to fund selling, administrative, research
and development, and other expenses. In addition to our general working capital and operational needs, we expect
to use signi?cant amounts of cash for the following purposes: (i) capital expenditures to support our existing and
future products; (ii) principal and interest payments under our ?nancial obligations and (iii) pension and employee
bene?t payments. We make capital investments in the regions in which we operate primarily related to initiatives to
introduce new products, enhance manufacturing ef?ciency, improve capacity, and for maintenance and environmental
compliance. Our capital expenditures in 2015 are expected to be approximately between €8.5 and €9.0 billion, which
we plan to fund primarily with cash generated from our operating activities, as well as with credit lines provided to
certain of our Group entities.
Our business and results of operations depend on our ability to achieve certain minimum vehicle sales volumes. As
is typical for an automotive manufacturer, we have signi?cant ?xed costs, and therefore, changes in our vehicle sales
volume can have a signi?cant effect on pro?tability and liquidity. We generally receive payment for sales of vehicles to
dealers and distributors, shortly after shipment, whereas there is a lag between the time we receive parts and materials
from our suppliers and the time we are required to pay for them. Therefore, during periods of increasing vehicle sales,
there is generally a corresponding positive impact on our cash ?ow and liquidity. Conversely, during periods in which
vehicle sales decline, there is generally a corresponding negative impact on our cash ?ow and liquidity. Thus, delays
in shipments of vehicles, including delays in shipments in order to address quality issues, tend to negatively affect our
cash ?ow and liquidity. In addition, the timing of our collections of receivables for export sales of vehicles, ?eet sales
and part sales tend to be longer due to different payment terms. Although we regularly enter into factoring transactions
for such receivables in certain countries, in order to anticipate collections and transfer relevant risks to the factor, a
change in volumes of such sales may cause ?uctuations in our working capital. The increased internationalization of
our product portfolio may also affect our working capital requirements as there may be an increased requirement to
ship vehicles to countries different from where they are produced. Finally, working capital can be affected by the trend
and seasonality of sales under vehicle buy-back programs.
2014
|
ANNUAL REPORT 79
Management believes that the funds currently available, in addition to those funds that will be generated from
operating and ?nancing activities, will enable the Group to meet its obligations and fund its businesses including
funding planned investments, working capital needs and ful?lling its obligations to repay its debts in the ordinary
course of business.
Liquidity needs are met primarily through cash generated from operations, including the sale of vehicles, service and
parts to dealers, distributors and other consumers worldwide.
The operating cash management, main funding operations and liquidity investment of the Group, excluding FCA
US, are centrally coordinated by dedicated treasury companies with the objective of ensuring effective and ef?cient
management of the Group’s funds. The companies raise capital in the ?nancial markets through various funding
sources. See Overview—Industry Overview—Financial Services.
FCA US continues to manage its liquidity independently from the rest of the Group. Intercompany ?nancing from FCA
US to other Group entities is not restricted other than through the application of covenants requiring that transactions
with related parties be conducted at arm’s length terms or be approved by a majority of the “disinterested” members
of the Board of Directors of FCA US. In addition, certain of FCA US’s ?nancing agreements place restrictions on the
distributions which it is permitted to make. In particular, dividend distributions, other than certain exceptions including
certain permitted distributions and distributions with respect to taxes, are generally limited to an amount not to exceed
50.0 percent of cumulative consolidated net income (as de?ned in the agreements) from January 1, 2012.
FCA has not provided any guarantee, commitment or similar obligation in relation to any of FCA US’s ?nancial
indebtedness, nor has it assumed any kind of obligation or commitment to fund FCA US. However, certain bonds
issued by FCA and its subsidiaries (other than FCA US and its subsidiaries) include covenants which may be affected
by circumstances related to FCA US, in particular there are cross-default clauses which may accelerate repayments in
the event that FCA US fails to pay certain of its debt obligations.
At December 31, 2014 the treasury companies of the Group, excluding FCA US and its subsidiaries, had access to
approximately €3.3 billion of medium/long term committed credit lines expiring beyond 12 months (€3.2 billion at
December 31, 2013), of which €2.1 billion relate to the three year syndicated revolving credit line due in July 2016
which was undrawn at December 31, 2014 and December 31, 2013.
Additionally, the operating entities of the Group, excluding FCA US and its subsidiaries, have access to dedicated
credit facilities in order to fund investments and working capital requirements. In particular the Brazilian companies
have committed credit lines available, mainly in relation to the set-up of our new plant in the State of Pernambuco,
Brazil, with residual maturities after twelve months, to fund scheduled investments, of which approximately €0.9 billion
was undrawn at December 31, 2014 (approximately €1.8 billion was undrawn at December 31, 2013).
FCA US has access to a revolving credit facility of U.S. $1.3 billion (€1.1 billion), maturing in May 2016, or the
Revolving Credit Facility, which was also undrawn at December 31, 2014 and December 31, 2013. See —Total
Available Liquidity below.
The following pages discuss in more detail the principal covenants relating to the Group’s revolving credit facilities and
certain other ?nancing agreements. At December 31, 2014 and at December 31, 2013, the Group was in compliance
with all covenants under its ?nancing agreements.
Long-term liquidity requirements may involve some level of debt re?nancing as outstanding debt becomes due or
we are required to make amortization or other principal payments. Although we believe that our current level of total
available liquidity is suf?cient to meet our short-term and long-term liquidity requirements, we regularly evaluate
opportunities to improve our liquidity position in order to enhance ?nancial ?exibility and to achieve and maintain a
liquidity and capital position consistent with that of our principal competitors.
However, any actual or perceived limitations of our liquidity may limit the ability or willingness of counterparties,
including dealers, consumers, suppliers, lenders and ?nancial service providers, to do business with us, or require us
to restrict additional amounts of cash to provide collateral security for our obligations. Our liquidity levels are subject to
a number of risks and uncertainties, including those described in the Risk Factors section.
80 2014
|
ANNUAL REPORT
Operating Results
Total Available Liquidity
At December 31, 2014, our total available liquidity was €26.2 billion (€22.7 billion at December 31, 2013), including
€3.2 billion available under undrawn committed credit lines, primarily related to the €2.1 billion three year syndicated
revolving credit line and the U.S.$1.3 billion (approximately €1.1 billion) Revolving Credit Facility of FCA US. The terms of
the Revolving Credit Facility require FCA US to maintain a minimum liquidity of U.S.$3.0 billion (€2.5 billion), which include
any undrawn amounts under the Revolving Credit Facility. Total available liquidity includes cash and cash equivalents and
current securities. Total available liquidity is subject to intra-month, foreign exchange and seasonal ?uctuations resulting
from business and collection-payment cycles as well as to changes in foreign exchange conversion rates.
The following table summarizes our total available liquidity:
As of December 31,
(€ million) 2014 2013 2012
Cash, cash equivalent and current securities
(1)
23,050 19,702 17,922
Undrawn committed credit lines
(2)
3,171 3,043 2,935
Total available liquidity
(3)
26,221 22,745 20,857
(1)
Current securities comprise short term or marketable securities which represent temporary investments but which do not satisfy all the
requirements to be classified as cash equivalents as they may not be able to be readily converted into cash or they are subject to significant
risk of change in value (even if they are short-term in nature or marketable).
(2)
Excludes the undrawn €0.9 billion medium/long-term dedicated credit lines available to fund scheduled investments as of December 31, 2014
(€1.8 billion was undrawn as of December 31, 2013 and €1.3 billion was undrawn as of December 31, 2012).
(3)
The majority of our liquidity is available to our treasury operations in Europe, U.S. (subject to the previously discussed restrictions on FCA US
distributions) and Brazil; however, liquidity is also available to certain subsidiaries which operate in other areas. Cash held in such countries
may be subject to restrictions on transfer depending on the foreign jurisdictions in which these subsidiaries operate. Based on our review of
such transfer restrictions in the countries in which we operate and maintain material cash balances, we do not believe such transfer restrictions
have an adverse impact on the Group’s ability to meet its liquidity requirements at the dates represented above.
Our liquidity is principally denominated in U.S. Dollar and in Euro. Out of the total €23.0 billion of cash, cash
equivalents and current securities available at December 31, 2014 (€19.7 billion at December 31, 2013, €17.9 billion
at December 31, 2012), €10.6 billion, or 46.0 percent were denominated in U.S. Dollar (€8.3 billion, or 42.1 percent,
at December 31, 2013) and €6.2 billion, or 27.0 percent, were denominated in Euro (€6.1 billion, or 31.0 percent,
at December 31, 2013). Liquidity available in Brazil and denominated in Brazilian Reals accounted for €1.6 billion or
7.0 percent at December 31, 2014 (€1.5 billion, or 7.6 percent, at December 31, 2013), with the remainder being
distributed in various countries and denominated in the relevant local currencies.
The increase in total available liquidity from December 31, 2013 to December 31, 2014 primarily re?ects a €3,385
million increase in cash and cash equivalents. Refer to Cash Flows, below for additional information regarding change
in cash and cash equivalents.
Acquisition of the Remaining Equity Interest in FCA US
On January 1, 2014 we announced an agreement with the VEBA Trust, under which our wholly owned subsidiary,
FCA North America Holdings LLC (“FCA NA”, formerly known as Fiat North America LLC), would acquire the
remaining 41.5 percent ownership interest in FCA US held by the VEBA Trust for total consideration of U.S.$3,650
million (equivalent to €2,691 million). The transaction closed on January 21, 2014. The consideration for the
acquisition consisted of:
a special distribution paid by FCA US to its members on January 21, 2014 of U.S.$1,900 million (equivalent to
€1,404 million) wherein FCA NA directed its portion of the special distribution to the VEBA Trust as part of the
purchase consideration which served to fund a portion of the transaction; and
a cash payment by FCA NA to the VEBA Trust of U.S.$1,750 million (equivalent to €1.3 billion) on January 21,
2014.
The distribution from FCA US was funded from FCA US’s available cash on hand. The payment by FCA NA was
funded by Fiat’s available cash on hand.
2014
|
ANNUAL REPORT 81
FCA US New Debt Issuances and Prepayment of VEBA Trust Note
In February 2014, FCA US prepaid all amounts outstanding including accrued and unpaid interest of approximately
U.S.$5.0 billion (€3.6 billion) related to its ?nancial liability to the VEBA Trust, or the VEBA Trust Note. Such
prepayment was ?nanced by FCA US as follows:
proceeds from new senior credit facilities – a U.S.$250 million (€181 million) incremental term loan under FCA US’s
existing tranche B term loan facility that matures on May 24, 2017 and a new U.S.$1,750 million (€1.3 billion) term
loan, issued under a new term loan credit facility, that matures on December 31, 2018;
proceeds from secured senior notes due 2019 – issuance of U.S.$1,375 million (€1.0 billion) aggregate principal
amount of 8.0 percent secured senior notes due June 15, 2019, at an issue price of 108.25 percent of the
aggregate principal amount, which were incremental to the secured senior notes due 2019 that were issued in May
2011, (together, the 2019 Notes); and
proceeds from secured senior notes due 2021 – issuance of U.S.$1,380 million (€1.0 billion) aggregate principal
amount of 8.25 percent secured senior notes due June 15, 2021 at an issue price of 110.5 percent of the
aggregate principal amount, which were incremental to the secured senior notes due 2021 that were issued in May
2011, (together, the 2021 Notes).
The 2019 Notes and the 2021 Notes are collectively referred to as the Secured Senior Notes.
Cash Flows
Year Ended December 31, 2014 compared to Years Ended December 31, 2013 and 2012
The following table summarizes the cash ?ows from operating, investing and ?nancing activities for each of the years
ended December 31, 2014, 2013 and 2012. For a complete discussion of our cash ?ows, see our Consolidated
statement of cash ?ows included in our Consolidated ?nancial statements included elsewhere in this report.
(€ million) 2014 2013 2012
Cash and cash equivalents at beginning of the period 19,455 17,666 17,526
Cash ?ows from operating activities during the year 8,169 7,618 6,492
Cash ?ows used in investing activities (8,140) (8,054) (7,542)
Cash ?ows from ?nancing activities 2,137 3,136 1,610
Translation exchange differences 1,219 (911) (420)
Total change in cash and cash equivalents 3,385 1,789 140
Cash and cash equivalents at end of the period 22,840 19,455 17,666
Operating Activities — Year Ended December 31, 2014
For the year ended December 31, 2014, our net cash from operating activities was €8,169 million and was primarily
the result of:
(i) net pro?t of €632 million adjusted to add back (a) €4,897 million for depreciation and amortization expense and
(b) other non-cash items of €352 million, which primarily include (i) €381 million related to the non-cash portion
of the expense recognized in connection with the execution of the MOU Agreement entered into by the UAW and
FCA US on January 21, 2014 (ii) €98 million remeasurement charge recognized as a result of the Group’s change
in the exchange rate used to remeasure its Venezuelan subsidiary’s net monetary assets in U.S. Dollar (reported,
for the effect on cash and cash equivalents, in the “Translation exchange differences”) which were partially offset
by (iii) the non-taxable gain of €223 million on the remeasurement at fair value of the previously exercised options
on approximately 10 percent of FCA US’s membership interests in connection with the acquisition of the remaining
41.5 percent interest in FCA US not previously owned;
82 2014
|
ANNUAL REPORT
Operating Results
(ii) a net increase of €1,239 million in provisions, mainly related to a €1,023 million increase in Other provisions
following net adjustments to warranties for NAFTA and higher accrued sales incentives, primarily due to an
increase in retail incentives as well as an increase in dealer stock levels to support increased sales volumes in
NAFTA and a €216 million increase in employees bene?ts mainly related to U.S. and Canada pension plan as
lower discount rates impact was not fully offset by higher return on assets;
(iii) positive impact of change in working capital of €965 million primarily driven by (a) €1,495 million increase in trade
payables, mainly related to increased production in EMEA and NAFTA as a result of increased consumer demand
for our vehicles (b) €123 million decrease in trade receivables in addition to (c) €21 million increase in net other
current assets and liabilities, which were partially offset by (d) €674 million increase in inventory (net of vehicles
sold under buy-back commitments), mainly related to increased ?nished vehicle and work in process levels at
December 31, 2014 compared to December 31, 2013, in part driven by higher production levels in late 2014 to
meet anticipated consumer demand in NAFTA, EMEA and Maserati.
(iv) €87 million dividends received from jointly-controlled entities.
The translation exchange differences in the period were positive for €1,219 million and mainly re?ect the increase in
Euro translated value of U.S. Dollar denominated cash and cash equivalent balances, due to the appreciation of the
U.S. Dollar, as compared to December 31, 2013.
Operating Activities — Year Ended December 31, 2013
For the year ended December 31, 2013, our net cash from operating activities was €7,618 million and was primarily
the result of:
(i) net pro?t of €1,951 million adjusted to add back (a) €4,635 million for depreciation and amortization expense and
(b) other non-cash items of €535 million, which primarily include €336 million of impairment losses on tangible and
intangible assets, €59 million loss related to the devaluation of the of?cial exchange rate of the VEF per U.S. Dollar,
€56 million write-off of the book value of the equity recapture rights resulting from the acquisition of the remaining
41.5 interest in FCA US that was not previously owned, €105 million of write-down in ?nancial assets from the
lending portfolio of our ?nancial services activities, partially offset by €74 million of the share of pro?t or loss of
equity method investees;
(ii) positive impact of change in working capital of €1,410 million primarily driven by (a) €1,328 million increase in
trade payables, mainly related to increased production in NAFTA as a result of increased consumer demand for
our vehicles, and increased production of Maserati, (b) €817 million in net other current assets and liabilities,
mainly related to increases in accrued expenses and deferred income as well as indirect taxes payables,
(c) €213 million decrease in trade receivables, principally due to the contraction of sales volumes in EMEA and
LATAM which were partially offset by (d) €948 million increase in inventory (net of vehicles sold under buy-back
commitments), mainly related to increased ?nished vehicle and work in process levels at December 31, 2013
compared to December 31, 2012, in part driven by higher production levels in late 2013 to meet anticipated
consumer demand in NAFTA, APAC and Maserati segment;
(iii) a net increase of €457 million in provisions, mainly related to accrued sales incentives due to increased dealer
stock levels at December 31, 2013 compared to December 31, 2012 to support increased sales volumes; which
were partially offset by a net reduction in the post-retirement bene?t reserve; and
(iv) €92 million dividends received from jointly-controlled entities.
These positive contributions were partially offset by:
(i) €1,578 million non-cash impact of deferred taxes mainly arising from the recognition of previously unrecognized
deferred tax assets relating to FCA US.
2014
|
ANNUAL REPORT 83
Operating Activities — Year Ended December 31, 2012
For the year ended December 31, 2012, our net cash from operating activities was €6,492 million and was primarily
the result of:
(i) net pro?t of €896 million, adjusted to add back (a) €4,201 million for depreciation and amortization expense,
(b) other non-cash items of €582 million, which primarily include €515 million following the retrospective
application of the IAS 19 - Employee Bene?ts revised from January 1, 2013, €106 million of impairment losses on
tangible and intangible assets and €50 million of write-down in ?nancial assets from the lending portfolio of our
?nancial services activities, partially offset by €74 million of the share of pro?t or loss of equity method investees,
and €31 million related to the non-cash gain on fair value measurement of equity swaps on Fiat and CNHI ordinary
shares and (c) net losses of €105 million on disposal of property, plant and equipment and intangible assets, and
investments primarily related to the termination of the joint venture Sevelnord Societè Anonyme for €91 million;
(ii) change in net working capital of €689 million primarily driven by (a) €506 million increase in trade payables,
mainly related to increased production in response to increased consumer demand of our vehicles especially
in NAFTA and APAC, partially offset by reduced production and sales levels in EMEA, (b) €961 million in other
current assets and liabilities, primarily due to increases in accrued expenses, deferred income and taxes which
were partially offset by (c) €572 million increase in inventory (net of vehicles sold under buy-back commitments),
primarily due to increased ?nished vehicle and work in process levels at December 31, 2012 versus December 31,
2011, driven by an increase in our vehicle inventory levels in order to support consumer demand in NAFTA and
APAC and (d) €206 million increase in trade receivables, primarily due to an increase in receivables from third
party international dealers and distributors due to increased sales at the end of 2012 as compared to 2011 due to
consumer demand;
(iii) a net increase of €63 million in provisions, mainly related to accrued sales incentives due to increased dealer stock
levels at December 31, 2012 compared to December 31, 2011 to support increased sales volumes which were
partially offset by a net reduction in the post-retirement bene?t reserve; and
(iv) €89 million dividends received from jointly-controlled entities.
Investing Activities — Year Ended December 31, 2014
For the year ended December 31, 2014, net cash used in investing activities was €8,140 million and was primarily the
result of:
(i) €8,121 million of capital expenditures, including €2,267 million of capitalized development costs, to support
investments in existing and future products. Capital expenditure primarily relates to the mass-market operations in
NAFTA and EMEA and the ongoing construction of the new plant at Pernambuco, Brazil, and
(ii) €137 million of a net increase in receivables from ?nancing activities, of which €104 million related to the increased
lending portfolio of the ?nancial services activities of the Group and €31 million related to increased ?nancial
receivables due from jointly controlled ?nancial services companies.
Investing Activities — Year Ended December 31, 2013
For the year ended December 31, 2013, our net cash used in investing activities was €8,054 million, and was primarily
the result of:
(i) €7,492 million of capital expenditures, including €2,042 million of capitalized development costs, to support
our investments in existing and future products. The capitalized development costs primarily include materials
costs and personnel related expenses relating to engineering, design and development focused on content
enhancement of existing vehicles, new models and powertrain programs in NAFTA and EMEA. The remaining
capital expenditure primarily relates to the car mass-market operations in NAFTA and EMEA and the ongoing
construction of the new LATAM plant at Pernambuco, Brazil;
84 2014
|
ANNUAL REPORT
Operating Results
(ii) €166 million related to equity investments, which principally includes €94 million of additional investment in RCS
MediaGroup S.p.A., €37 million of capital injection into the 50.0 percent joint venture related to GAC Fiat Chrysler
Automobiles Co. Ltd (previously known as GAC Fiat Automobiles Co. Ltd.); and
(iii) €459 million of net increase in receivables from ?nancing activities, primarily due to the increased lending portfolio
of the ?nancial services activities of the Group.
These cash out?ows were partially offset by:
(i) €59 million proceeds from the sale of tangible and intangible assets.
Investing Activities — Year Ended December 31, 2012
For the year ended December 31, 2012, our net cash used in investing activities was €7,542 million, and was primarily
the result of:
(i) €7,564 million of capital expenditures, including €2,138 million of capitalized development costs, to support our
investments in existing and future products;
partially offset by:
(ii) €118 million proceeds from the sale of tangible assets.
Financing Activities —Year Ended December 31, 2014
For the year ended December 31, 2014, net cash from ?nancing activities was €2,137 million and was primarily the
result of:
(i) net proceeds from the mandatory convertible securities issuance due 2016 of €2,245 million and the net proceeds
from the offering of 100 million common shares of €849 million;
(ii) proceeds from bond issuances for a total amount of €4,629 million which includes (a) approximately €2,556
million of notes issued as part of the Global Medium Term Notes Program (“GMTN Program”) and (b) €2,073
million (for a total face value of U.S.$2,755 million) of Secured Senior Notes issued by FCA US used to repay the
VEBA Trust Note;
(iii) proceeds from new medium-term borrowings for a total of €4,876 million, which include (a) the incremental term
loan entered into by FCA US of U.S.$250 million (€181 million) under its existing tranche B term loan facility and (b)
the new U.S.$1,750 million (€1.3 billion) tranche B term loan, issued under a new term loan credit facility entered
into by FCA US to facilitate the prepayment of the VEBA Trust Note, and new medium term borrowing in Brazil;
and
(iv) a positive net contribution of €548 million from the net change in other ?nancial payables and other ?nancial
assets/liabilities.
These positive items, were partially offset by:
(i) the cash payment to the VEBA Trust for the acquisition of the remaining 41.5 percent ownership interest in FCA
US held by the VEBA Trust equal to U.S.$3,650 million (€2,691 million) and U.S.$60 million (€45 million) of tax
distribution by FCA US to cover the VEBA Trust’s tax obligation. In particular the consideration for the acquisition
consisted of a special distribution paid by FCA US to its members on January 21, 2014 of U.S.$1,900 million
(€1,404 million) (FCA NA’s portion of the special distribution was assigned to the VEBA Trust as part of the
purchase consideration) which served to fund a portion of the transaction; and a cash payment by FCA NA to
the VEBA Trust of U.S.$1,750 million (€1.3 billion). The special distribution by FCA US and the cash payment by
FCA NA for an aggregate amount of €2,691 million is classi?ed as acquisition of non-controlling interest while the
tax distribution (€45 million) is classi?ed separately in the Statement of cash ?ows in the Consolidated ?nancial
statements included elsewhere in this report,
2014
|
ANNUAL REPORT 85
(ii) payment of medium-term borrowings for a total of €5,838 million, mainly related to the prepayment of all amounts
under the VEBA Trust Note amounting to approximately U.S.$5 billion (€3.6 billion), including accrued and unpaid
interest, and repayment of medium term borrowings primarily in Brazil;
(iii) the repayment on maturity of notes issued under the GMTN Program, for a total principal amount of
€2,150 million;
(iv) the net cash disbursement of €417 million for the exercise of cash exit rights in connection with the Merger.
Financing Activities —Year Ended December 31, 2013
For the year ended December 31, 2013, net cash from ?nancing activities was €3,136 million and was primarily the
result of:
(i) proceeds from bond issuances for a total amount of €2,866 million, relating to notes issued as part of the GMTN
Program;
(ii) the repayment on maturity of notes issued under the GMTN Program in 2006, for a total principal amount of €1
billion;
(iii) proceeds from new medium-term borrowings for a total of €3,188 million, which mainly include (a) new borrowings
by the Brazilian companies for €1,686 million, primarily in relation to investments in the country (b) €400 million
loan granted by the European Investment Bank in order to fund our investments and research and development
costs in Europe and (c) €595 million (U.S.$790 million) related to the amendments and re-pricings in 2013 of the
U.S.$3.0 billion tranche B term loan which matures May 24, 2017 and the revolving credit facility that matures in
May 2016. In particular, pursuant to such amendments and re-pricings in 2013, an amount of U.S.$790 million
of the outstanding principal balance of the U.S.$3.0 billion tranche B term loan which matures May 24, 2017 was
repaid. However, new and continuing lenders acquired the portion of such loan, therefore the principal balance
outstanding did not change. Refer to —FCA US Senior Credit Facilities, below, for additional information regarding
this transaction;
(iv) repayment of medium-term borrowings on their maturity for a total of €2,558 million, including the €595 million
(U.S.$790 million) relating to the amendments and re-pricings of the Senior Credit Facilities described above; and
(v) a positive net contribution of €677 million from the net change in other ?nancial payables and other ?nancial
assets/liabilities.
Financing Activities —Year Ended December 31, 2012
For the year ended December 31, 2012, net cash from ?nancing activities was €1,610 million and was primarily the
result of:
(i) proceeds from bond issuances for a total amount of €2,535 million, relating to notes issued as part of the GMTN
Program;
(ii) the repayment on maturity of notes issued as part of the GMTN Program in 2009, for a total principal amount of
€1,450 million;
(iii) proceeds from new medium-term borrowings for a total of €1,925 million, which include new borrowings by the
Brazilian companies for €1,236 million, mainly in relation to investments and operations in the country;
(iv) repayment of medium-term borrowings on their maturity for a total of €1,535 million;
(v) a positive net contribution of €171 million from the net change in other ?nancial payables and other ?nancial
assets/liabilities; and
(vi) dividends paid to shareholders and minorities for a total €58 million.
86 2014
|
ANNUAL REPORT
Operating Results
Net Industrial Debt
Net Industrial Debt is management’s primary measure for analyzing our ?nancial leverage and capital structure and is
one of the key targets used to measure our performance.
The following table details our Net Debt for industrial activities and ?nancial services at December 31, 2014 and
December 31, 2013.
All FCA US activities are included under industrial activities. Since FCA US’s treasury activities (including funding and
cash management) are managed separately from the rest of the Group we also provide the analysis of Net Industrial
Debt split between FCA excluding FCA US, and FCA US.
December 31, 2014 December 31, 2013
Industrial
Activities
Financial
Services
Consoli-
dated
Industrial
Activities
Financial
Services
Consoli-
dated
(€ million) Total
FCA ex
FCA US FCA US Total
FCA ex
FCA US FCA US
Third Parties Debt (Principal) (31,381) (21,011) (10,370) (1,980) (33,361) (27,624) (18,325) (9,299) (2,031) (29,655)
Capital Market
(1)
(17,378) (12,473) (4,905) (351) (17,729) (13,981) (11,661) (2,320) (239) (14,220)
Bank Debt (11,904) (7,484) (4,420) (1,216) (13,120) (7,635) (5,095) (2,540) (1,297) (8,932)
Other Debt
(2)
(2,099) (1,054) (1,045) (413) (2,512) (6,008) (1,569) (4,439) (495) (6,503)
Accrued Interest and Other
Adjustments
(3)
(362) (200) (162) (1) (363) (626) (467) (159) (2) (628)
Debt with third Parties (31,743) (21,211) (10,532) (1,981) (33,724) (28,250) (18,792) (9,458) (2,033) (30,283)
Intercompany Financial
Receivables/Payables (net)
(4)
1,453 1,515 (62) (1,453) — 1,336 1,415 (79) (1,336) —
Current ?nancial receivables
from jointly-controlled ?nancial
services companies
(5)
58 58 — — 58 27 27 — — 27
Debt, net of intercompany and
current ?nancial receivables
from jointly-controlled ?nancial
services companies (30,232) (19,638) (10,594) (3,434) (33,666) (26,887) (17,350) (9,537) (3,369) (30,256)
Other ?nancial assets/
(liabilities) (net)
(6)
(229) (251) 22 (4) (233) 399 323 76 (3) 396
Current securities 180 180 — 30 210 219 219 — 28 247
Cash and cash equivalents 22,627 10,653 11,974 213 22,840 19,255 9,579 9,676 200 19,455
Net Debt (7,654) (9,056) 1,402 (3,195) (10,849) (7,014) (7,229) 215 (3,144) (10,158)
(1)
Includes bonds (€16,980 million at December 31, 2014 and €13,966 million at December 31, 2013) and other securities issued in financial
markets (€749 million, which includes the coupon related to mandatory convertible securities issuance, at December 31, 2014 and €254 million
at December 31, 2013 mainly from LATAM financial services companies.
(2)
Includes The VEBA Trust Note (€3,419 million at December 31, 2013), Canadian HCT notes (€620 million at December 31, 2014 and
€664 million at December 31, 2013), asset backed financing, i.e. sales of receivables for which derecognition is not allowed under IFRS (€469
million at December 31, 2014 and €756 million at December 31, 2013), arrangements accounted for as a lease under IFRIC 4 -Determining
whether an arrangement contains a lease, and other financial payables. All amounts outstanding under the VEBA Trust Note were prepaid on
February 7, 2014.
(3)
Includes adjustments for fair value accounting on debt (€67 million at December 31, 2014 and €78 million at December 31, 2013) and (accrued)/
deferred interest and other amortizing cost adjustments (€296 million at December 31, 2014 and €550 million net at December 31, 2013).
(4)
Net amount between Industrial Activities financial receivables due from Financial Services (€1,595 million at December 31, 2014 and €1,465
million at December 31, 2013 and Industrial Activities financial payables due to Financial Services (€142 million at December 31, 2014 and
€129 million at December 31, 2013).
(5)
Financial receivables from FCA Bank (previously known as FGA Capital S.p.A, or FGAC.
(6)
Fair value of derivative financial instruments (net negative €271 million at December 31, 2014 and net positive €376 million at December 31,
2013) and collateral deposits (€38 million at December 31, 2014 and €20 million at December 31, 2013).
2014
|
ANNUAL REPORT 87
Change in Net Industrial Debt
The following section sets forth an explanation of the changes in our Net Industrial Debt for the historical periods.
2014
In 2014 Net Industrial Debt increased by €640 million, from €7,014 million at December 31, 2013 to €7,654 million at
December 31, 2014. The movements in Net Industrial Debt were primarily driven by:
payments for the acquisition of the remaining 41.5 percent interest in FCA US previously not owned, inclusive
of approximately 10 percent of previously exercised options subject to ongoing litigation, of €2,691 million
(U.S.$3,650 million);
investments in industrial activities of €8,119 million representing investments in property, plant and equipment and
intangible assets;
The increases noted above were partially offset by the reductions in Net Industrial Debt primarily driven by:
contribution of the mandatory convertible securities issuance due 2016 of €1,910 million (net proceeds of €2,245
million net of the liability component of €335 million) and the net proceeds from the offering of 100 million common
shares of €849 million, net of the exercise of cash exit rights in connection with the Merger for a net aggregate cash
disbursement of €417 million;
cash ?ow from industrial operating activities of €8,017 million which represents the consolidated cash ?ow from
operating activities of €8,169 million net of the cash ?ows from operating activities attributable to ?nancial services
of €152 million. For an explanation of the drivers in consolidated cash ?ows from operating activities see the —
Cash Flows section above.
2013
In 2013 Net Industrial Debt increased by €64 million, from €6,950 million at December 31, 2012 to €7,014 million at
December 31, 2013. The movements in Net Industrial Debt were primarily driven by:
Cash ?ow from industrial operating activities of €7,534 million which represents the consolidated cash ?ow from
operating activities of €7,618 million net of the cash ?ows from operating activities attributable to ?nancial services
of €84 million. For an explanation of the drivers in consolidated cash ?ows from operating activities see —Operating
Activities —Year Ended December 31, 2013 above;
Investments in industrial activities property, plant and equipment of €7,486 million, representing the majority of the
Group’s investments in property, plant and equipment of €7,492 million; and
Additional investments in RCS MediaGroup S.p.A. for an amount of €94 million.
2012
In 2012 Net Industrial Debt increased by €1,090 million, from €5,860 million at January 1, 2012 to €6,950 million at
December 31, 2012. The movements in Net Industrial Debt were primarily driven by:
Cash ?ow from industrial operating activities of €6,390 million which represents the consolidated cash ?ow from
operating activities of €6,492 million net of the cash ?ows from operating activities attributable to ?nancial services
of €102 million. For an explanation of the drivers in consolidated cash ?ows from operating activities see —
Operating Activities —Year Ended December 31, 2012;
Investments in industrial activities property, plant and equipment of €7,560 million, representing almost all of the
Group’s investments in property, plant and equipment of €7,564 million; and
Proceeds from disposals of property, plant and equipment of €127 million representing almost all of the
consolidated total of €130 million.
88 2014
|
ANNUAL REPORT
Operating Results
Capital Market
At December 31, 2014 and December 31, 2013 capital market debt mainly relates to notes issued under the GMTN
Program by the Group, excluding FCA US, and the Secured Senior Notes of FCA US. In addition we had €749 million
(which included the coupon related to issuance of the mandatory convertible securities described in more detail
in Note 23 to the Consolidated ?nancial statements included elsewhere in this report) and €254 million short and
medium-term marketable ?nancial instruments issued by various subsidiaries, principally in LATAM at December 31,
2014 and December 31, 2013, respectively.
The following table sets forth our outstanding bonds at December 31, 2014 and 2013
Currency
Face value of
outstanding
bonds
(in million) Coupon Maturity
December 31,
2014
December 31,
2013
Global Medium Term Notes: (€ million)
Fiat Chrysler Finance Europe S.A. EUR 900 6.125% July 8, 2014 — 900
Fiat Chrysler Finance Europe S.A. EUR 1,250 7.625% September 15, 2014 — 1,250
Fiat Chrysler Finance Europe S.A. EUR 1,500 6.875% February 13, 2015 1,500 1,500
Fiat Chrysler Finance Europe S.A. CHF 425 5.000% September 7, 2015 353 346
Fiat Chrysler Finance Europe S.A. EUR 1,000 6.375% April 1, 2016 1,000 1,000
Fiat Chrysler Finance Europe S.A. EUR 1,000 7.750% October 17, 2016 1,000 1,000
Fiat Chrysler Finance Europe S.A. CHF 400 5.250% November 23, 2016 333 326
Fiat Chrysler Finance Europe S.A. EUR 850 7.000% March 23, 2017 850 850
Fiat Chrysler Finance North America Inc. EUR 1,000 5.625% June 12, 2017 1,000 1,000
Fiat Chrysler Finance Europe S.A. CHF 450 4.000% November 22, 2017 374 367
Fiat Chrysler Finance Europe S.A. EUR 1,250 6.625% March 15, 2018 1,250 1,250
Fiat Chrysler Finance Europe S.A. EUR 600 7.375% July 9, 2018 600 600
Fiat Chrysler Finance Europe S.A. CHF 250 3.125% September 30, 2019 208 —
Fiat Chrysler Finance Europe S.A. EUR 1,250 6.750% October 14, 2019 1,250 1,250
Fiat Chrysler Finance Europe S.A. EUR 1,000 4.750% March 22, 2021 1,000 —
Fiat Chrysler Finance Europe S.A. EUR 1,350 4.750% July 15, 2022 1,350 —
Others EUR 7 7 7
Total Global Medium Term Notes 12,075 11,646
Other bonds:
FCA US (Secured Senior Notes) U.S.$ 2,875 8.000% June 15, 2019 2,368 1,088
FCA US (Secured Senior Notes) U.S.$ 3,080 8.250% June 15, 2021 2,537 1,232
Total other bonds 4,905 2,320
Hedging effect and amortized
cost valuation 668 500
Total bonds 17,648 14,466
Notes Issued Under The GMTN Program
All bonds issued by the Group, excluding FCA US, are currently governed by the terms and conditions of the GMTN
Program. A maximum of €20 billion may be used under this program, of which notes of approximately €12.1 billion
have been issued and are outstanding to December 31, 2014 (€11.6 billion at December 31, 2013). The GMTN
Program is guaranteed by FCA. We may from time to time buy back bonds in the market that have been issued by the
Group. Such buybacks, if made, depend upon market conditions, our ?nancial situation and other factors which could
affect such decisions.
2014
|
ANNUAL REPORT 89
The bonds issued by Fiat Chrysler Finance Europe S.A. (formerly known as Fiat Finance and Trade Ltd S.A.) and
by Fiat Chrysler Finance North America Inc. (formerly known as Fiat Finance North America Inc.) impose covenants
on the issuer and, in certain cases, on FCA as guarantor, which include: (i) negative pledge clauses which require
that, in case any security interest upon assets of the issuer and/or FCA is granted in connection with other bonds or
debt securities having the same ranking, such security should be equally and ratably extended to the outstanding
bonds; (ii) pari passu clauses, under which the bonds rank and will rank pari passu with all other present and future
unsubordinated and unsecured obligations of the issuer and/or FCA; (iii) periodic disclosure obligations; (iv) cross-
default clauses which require immediate repayment of the bonds under certain events of default on other ?nancial
instruments issued by the Group’s main entities; and (v) other clauses that are generally applicable to securities of a
similar type. A breach of these covenants may require the early repayment of the notes. In addition, the agreements
for the bonds guaranteed by FCA contain clauses which could require early repayment if there is a change of the
controlling shareholder of FCA leading to a resulting a ratings downgrade by ratings agencies.
FCA US Secured Senior Notes
FCA US may redeem, at any time, all or any portion of the Secured Senior Notes on not less than 30 and not more
than 60 days’ prior notice mailed to the holders of the Secured Senior Notes to be redeemed.
Prior to June 15, 2015, the 2019 Notes will be redeemable at a price equal to the principal amount of the 2019
Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make–whole” premium
calculated under the indenture governing these notes. On and after June 15, 2015, the 2019 Notes are redeemable
at redemption prices speci?ed in the 2019 Notes, plus accrued and unpaid interest to the date of redemption. The
redemption price is initially 104.0 percent of the principal amount of the 2019 Notes being redeemed for the twelve
months beginning June 15, 2015, decreasing to 102.0 percent for the twelve months beginning June 15, 2016 and
to par on and after June 15, 2017.
Prior to June 15, 2016, the 2021 Notes will be redeemable at a price equal to the principal amount of the 2021
Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make–whole” premium
calculated under the indenture governing these notes. On and after June 15, 2016, the 2021 Notes are redeemable
at redemption prices speci?ed in the 2021 Notes, plus accrued and unpaid interest to the date of redemption. The
redemption price is initially 104.125 percent of the principal amount of the 2021 Notes being redeemed for the
twelve months beginning June 15, 2016, decreasing to 102.750 percent for the twelve months beginning June 15,
2017, to 101.375 percent for the twelve months beginning June 15, 2018 and to par on and after June 15, 2019.
The indenture governing the Secured Senior Notes issued by FCA US includes af?rmative covenants, including
the reporting of ?nancial results and other developments. The indenture also includes negative covenants which
limit FCA US’s ability and, in certain instances, the ability of certain of its subsidiaries to, (i) pay dividends or make
distributions of FCA US’s capital stock or repurchase FCA US’s capital stock; (ii) make restricted payments; (iii) create
certain liens to secure indebtedness; (iv) enter into sale and leaseback transactions; (v) engage in transactions with
af?liates; (vi) merge or consolidate with certain companies and (vii) transfer and sell assets. The indenture provides
for customary events of default, including but not limited to, (i) non-payment; (ii) breach of covenants in the indenture;
(iii) payment defaults or acceleration of other indebtedness; (iv) a failure to pay certain judgments and (v) certain events
of bankruptcy, insolvency and reorganization. If certain events of default occur and are continuing, the trustee or the
holders of at least 25.0 percent in aggregate of the principal amount of the Secured Senior Notes outstanding under
one of the series may declare all of the notes of that series to be due and payable immediately, together with accrued
interest, if any. As of December 31, 2014, FCA US was in compliance with all covenants.
The Secured Senior Notes are secured by security interests junior to the Senior Credit Facilities (as de?ned below) in
substantially all of FCA US’s assets and the assets of its U.S. subsidiary guarantors, subject to certain exceptions. The
collateral includes 100.0 percent of the equity interests in FCA US’s U.S. subsidiaries and 65.0 percent of the equity
interests in certain of its non-U.S. subsidiaries held directly by FCA US and its U.S. subsidiary guarantors.
90 2014
|
ANNUAL REPORT
Operating Results
Bank Debt
Bank debt principally comprises amounts due under (i) the senior credit facilities of FCA US (€4.0 billion at December
31, 2014 and €2.1 billion at December 31, 2013), (ii) ?nancial liabilities of the Brazilian operating entity (€4.7 billion
at December 31, 2014 and €2.9 billion at December 31, 2013) relating to a number of ?nancing arrangements, also
with certain Brazilian development banks, primarily used to support capital expenditure, including in our new plant
in the State of Pernambuco as well as to fund the ?nancial services business in that country, (iii) loans provided by
the European Investment Bank (€1.0 billion at December 31, 2014 and €1.1 billion at December 31, 2013) to fund
our investments and research and development costs, (iv) amounts drawn down by FCA excluding FCA US treasury
companies under short and medium term credit facilities (€1.4 billion at December 31, 2014 and €1.1 billion at
December 31, 2013) and (v) amounts outstanding relating to ?nancing arrangements of Chrysler de Mexico with
certain Mexican development banks, amounting to €0.4 billion at December 31, 2014 and 2013.
The main terms and conditions of the principal bank facilities are described as follows.
FCA US Senior Credit Facilities
The Tranche B Term Loan due 2017 of FCA consists of the existing U.S.$3.0 billion tranche B term loan (€2,471
million) that matures on May 24, 2017, or the Original Tranche B Term Loan, and an additional U.S.$250 million (€206
million at December 31, 2014) term loan entered into on February 7, 2014 under the Original Tranche B Term Loan
that also matures on May 24, 2017, collectively the Tranche B Term Loan due 2017. The Original Tranche B Term
Loan was re-priced in June and in December 2013 and subsequently, all amounts outstanding under Tranche B Term
Loan due 2017 will bear interest at FCA’s option at either a base rate plus 1.75 percent per annum or at LIBOR plus
2.75 percent per annum, subject to a base rate ?oor of 1.75 percent per annum or a LIBOR ?oor of 0.75 percent per
annum. For the year ended December 31, 2014, interest was accrued based on LIBOR. The outstanding principle
amount of the Tranche B Term Loan due 2017 is payable in equal quarterly installments of U.S.$8.1 million (€6.7
million) commencing on March 2014, with the remaining balance due at maturity in May 2017. The Tranche B Term
Loan due 2017 was fully drawn and a total of €2,587 million (including accrued interest) was outstanding at December
31, 2014 (€2,119 million including accrued interest at December 31, 2013).
On February 7, 2014, FCA US entered into a new U.S.$1,750 million (€1.3 billion) tranche B term loan issued under
a new term loan credit facility, or the Tranche B Term Loan due 2018, that matures on December 31, 2018. The
outstanding principal amount of the Tranche B Term Loan due 2018 is payable in quarterly installments of U.S.$4.4
million (€3.6 million), commencing June 30, 2014, with the remaining balance due at maturity. The Tranche B Term
Loan due 2018 bears interest, at FCA US’s option, either at a base rate plus 1.50 percent per annum or at LIBOR
plus 2.50 percent per annum, subject to a base rate ?oor of 1.75 percent per annum or a LIBOR ?oor of 0.75 percent
per annum. At December 31, 2014, a total of €1,421 million (including accrued interest) was outstanding on the
Tranche B Term Loan due 2018.
FCA US may pre-pay, re?nance or re-price the Tranche B Term Loan due 2017 and the Tranche B Term Loan due
2018 without premium or penalty.
In addition, FCA US had a secured revolving credit facility amounting to U.S.$1.3 billion (€1.1 billion) which matures
in May 2016 and remains undrawn at December 31, 2014. The secured revolving credit facility was also re-priced
in June 2013 and as a result, all amounts outstanding under the secured revolving credit facility bear interest, at the
option of FCA US, either at a base rate plus 2.25 percent per annum or at LIBOR plus 3.25 percent per annum. At
December 31, 2014, the secured revolving credit facility was undrawn.
The Tranche B Term Loan due 2017, Tranche B Term Loan due 2018 and the Revolving Credit Facility, are collectively
referred to as the Senior Credit Facilities. Subject to the limitations in the credit agreements governing the Senior
Credit Facilities, or the Senior Credit Agreements and the indenture governing the Secured Senior Notes, FCA US
has the option to increase the amount of the Revolving Credit Facility in an aggregate principal amount not to exceed
U.S.$700 million (approximately €577 million) subject to certain conditions.
2014
|
ANNUAL REPORT 91
The Senior Credit Facilities are secured by a senior priority security interest in substantially all of FCA US’s assets and
the assets of its U.S. subsidiary guarantors, subject to certain exceptions. The collateral includes 100.0 percent of the
equity interests in FCA US’s U.S. subsidiaries and 65.0 percent of the equity interests in its non-U.S. subsidiaries held
directly by FCA US and its U.S. subsidiary guarantors.
The Senior Credit Agreements include negative covenants, including but not limited to: (i) limitations on incurrence,
repayment and prepayment of indebtedness; (ii) limitations on incurrence of liens; (iii) limitations on making certain
payments; (iv) limitations on transactions with af?liates, swap agreements and sale and leaseback transactions;
(v) limitations on fundamental changes, including certain asset sales and (vi) restrictions on certain subsidiary
distributions. In addition, the Senior Credit Agreements require FCA US to maintain a minimum ratio of “borrowing
base” to “covered debt” (as de?ned in the Senior Credit Agreements), as well as a minimum liquidity of U.S.$3.0 billion
(€2.5 billion), which includes any undrawn amounts on the Revolving Credit Facility.
The Senior Credit Agreements contain a number of events of default related to: (i) failure to make payments when due;
(ii) failure to comply with covenants; (iii) breaches of representations and warranties; (iv) certain changes of control;
(v) cross–default with certain other debt and hedging agreements and (vi) the failure to pay or post bond for certain
material judgments. As of December 31, 2014 FCA US was in compliance with all covenants under the Senior Credit
Agreements.
Syndicated Credit Facility of the Group Excluding FCA US
FCA, excluding FCA US, has a syndicated credit facility in the amount of €2.1 billion, or the Syndicated Credit Facility,
which was undrawn at December 31, 2014 and December 31, 2013. The covenants of this facility include ?nancial
covenants (Net Debt/Earnings Before Interest, Taxes, Depreciation and Amortization, or EBITDA, and EBITDA/Net
Interest ratios related to industrial activities) and negative pledge, pari passu, cross default and change of control
clauses. The failure to comply with these covenants, in certain cases if not suitably remedied, can lead to the
requirement to make early repayment of the outstanding loans.
The syndicated credit facility currently includes limits to FCA’s ability to extend guarantees or loans to FCA US.
European Investment Bank Borrowings
We have ?nancing agreements with the European Investment Bank, or EIB, for a total of €1.1 billion primarily to
support investments and research and development projects. In particular, ?nancing agreements include (i) two
facilities of €400 million (maturing in 2018) and €250 million (maturing in 2015) for the purposes of supporting
research and development programs in Italy to protect the environment by reducing emissions and improving energy
ef?ciency and (ii) €500 million facility (maturing in 2021) for an investment program relating to the modernization and
expansion of production capacity of an automotive plant in Serbia.
As of December 31, 2014 and December 31, 2013 these facilities had been fully drawn.
The covenants applicable to the EIB borrowings are similar to those applicable to the Syndicated Credit Facility
explained above.
92 2014
|
ANNUAL REPORT
Operating Results
Other Debt
At December 31, 2014, Other debt mainly relates to the unsecured Canadian Health Care Trust notes, or HCT Notes,
totaling €651 million including accrued interest (€703 million at December 31, 2013) including accrued interest), which
represents FCA US’s ?nancial liability to the Canadian Health Care Trust arising from the settlement of its obligations
for postretirement health care bene?ts for National Automobile, Aerospace, Transportation and General Workers
Union of Canada, or CAW (now part of Unifor), which represented employees, retirees and dependents. The HCT
Notes were issued in four tranches on December 31, 2010, and have maturities up to 2024. Interest is accrued at the
stated rate of 9.0 percent per annum for the HCT tranche A and B notes and 7.5 percent per annum for HCT tranche
C note. The HCT tranche D note was fully repaid in 2012. The terms of each of the HCT Notes are substantially
similar and provide that each note will rank pari passu with all existing and future unsecured and unsubordinated
indebtedness for borrowed money of FCA US, and that FCA US will not incur indebtedness for borrowed money that
is senior in any respect in right of payment to the HCT Notes.
Other debt at December 31, 2013 also included the VEBA Trust Note (€3,575 million including accrued interest),
which represented FCA US’s ?nancial liability to the VEBA Trust having a principal amount outstanding of U.S.$4,715
million (€3,419 million). The VEBA Trust Note was issued by FCA US in connection with the settlement of its
obligations related to postretirement healthcare bene?ts for certain UAW retirees. The VEBA Trust Note had an implied
interest rate of 9.0 percent per annum and required annual payments of principal and interest through July 15, 2023.
On February 7, 2014, FCA US prepaid the VEBA Trust Note (see —FCA US New Debt Issuances and Prepayment of
VEBA Trust Note).
The remaining components of Other debt mainly relate to amounts outstanding under ?nance leases, amounts due to
related parties and interest bearing deposits of dealers in Brazil.
At December 31, 2014, debt secured by assets of the Group, excluding FCA US, amounts to €777 million (€432
million at December 31, 2013), of which €379 million (€386 million at December 31, 2013) is due to creditors for
assets acquired under ?nance leases and the remaining amount mainly related to subsidized ?nancing in Latin
America. The total carrying amount of assets acting as security for loans amounts to €1,670 million at December 31,
2014 (€418 million at December 31, 2013).
At December 31, 2014, debt secured by assets of FCA US amounts to €9,881 million (€5,180 million at December
31, 2013), and includes €9,093 million (€4,448 million at December 31, 2013) relating to the Secured Senior
Notes and the Senior Credit Facilities, €251 million (€165 million at December 31, 2013) was due to creditors for
assets acquired under ?nance leases and other debt and ?nancial commitments for €537 million (€567 million at
December 31, 2013).
2014
|
ANNUAL REPORT 93
Subsequent Events
and 2015 Outlook
Subsequent Events and 2015 Outlook
Subsequent events
The Group has evaluated subsequent events through March 5, 2015, which is the date the ?nancial statements were
authorized for issuance. There were no subsequent events.
2015 Outlook
The Group indicates the following guidance for 2015:
Worldwide shipments in 4.8 to 5.0 million unit range;
Net revenues of ~€108 billion;
EBIT
(*)
in €4.1 to €4.5 billion range;
Net Income
(*)
in €1.0 to €1.2 billion range, with EPS
(**)
in €0.64 to €0.77 range;
Net Industrial Debt in €7.5 billion to €8.0 billion range.
Figures do not include any impacts for the previously announced capital transactions regarding Ferrari.
(*)
Excluding eventual unusual items
(**)
EPS calculated including the MCS conversion at minimum number of shares at 222 million.
March 5, 2015
The Board of Directors
John P. Elkann
Sergio Marchionne
Andrea Agnelli
Tiberto Brandolini D’Adda
Glenn Earle
Valerie Mars
Ruth J. Simmons
Ronald L. Thompson
Patience Wheatcroft
Stephen M. Wolf
Ermenegildo Zegna
94 2014
|
ANNUAL REPORT
Major Shareholders
Major Shareholders
Exor is the largest shareholder of FCA through its 29.19 percent shareholding interest in our issued common
shares (as of February 27, 2015). See “The FCA Merger.” Exor also purchased U.S.$886 million (€730 million) in
aggregate notional amount of mandatory convertible securities that were issued in December 2014 (see Note 23 of
the Consolidated ?nancial statements included elsewhere in this report). As a result of the loyalty voting mechanism,
Exor’s voting power is approximately 44.31 percent.
Consequently, Exor could strongly in?uence all matters submitted to a vote of FCA shareholders, including approval of
annual dividends, election and removal of directors and approval of extraordinary business combinations.
Exor is controlled by Giovanni Agnelli e C. S.a.p.az., (“G.A.”) which holds 51.39 percent of its share capital. G.A. is a
limited partnership with interests represented by shares (Societa’ in Accomandita per Azioni), founded by Giovanni
Agnelli and currently held by members of the Agnelli and Nasi families, descendants of Giovanni Agnelli, founder of
Fiat. Its present principal business activity is to purchase, administer and dispose of equity interests in public and
private entities and, in particular, to ensure the cohesion and continuity of the administration of its controlling equity
interests. The managing directors of G.A. are John Elkann, Tiberto Brandolini d’Adda, Alessandro Nasi, Andrea
Agnelli, Gianluigi Gabetti, Gianluca Ferrero, Luca Ferrero de’ Gubernatis Ventimiglia and Maria Sole Agnelli.
Based on the information in FCA’s shareholder register, regulatory ?lings with the Netherlands Authority for the
Financial Markets (stichting Autoriteit Financiële Markten, the “AFM”) and the SEC and other sources available to FCA,
the following persons owned, directly or indirectly, in excess of three percent of the common shares of FCA, as of
February 27, 2015:
FCA Shareholders
Number of Issued
Common Shares Percentage Owned
Exor
(1)
375,803,870 29.19
Baillie Gifford & Co.
(2)
68,432,691 5.32
(1)
As a result of the issuance of the mandatory convertible securities completed in December 2014 (“MCS Offering”), Exor beneficially owns
444,352,804 common shares of FCA, consisting of (i) 375,803,870 common shares of FCA owned prior to the MCS Offering, and (ii)
68,548,934 common shares underlying the mandatory convertible securities purchased in the MCS Offering, at the minimum conversion
rate of 7.7369 common shares per mandatory convertible security (being the rate at which Exor may convert the mandatory convertibles
securities into common shares at its option). Including the common shares into which the mandatory convertibles securities sold in the offering
completed in December 2014, are convertible at the option of the holders, the percentage is 29.43%. In addition, Exor holds 375,803,870
special voting shares. Exor’s beneficial ownership in FCA was approximately 44.31% prior to the issuance of the mandatory convertible
securities. Current Exor’s beneficial ownership in FCA is approximately 42.75%, calculated as the ratio of (i) the aggregate number of common
and special voting shares owned prior to the MCS Offering, and the common shares underlying the mandatory convertible securities purchased
by Exor in the MCS Offering, at the minimum conversion rate as set forth above and (ii) the aggregate number of outstanding common and
special voting shares, and the common shares underlying all of the mandatory convertible securities sold in the MCS Offering, at the minimum
conversion rate set forth above.
(2)
Baillie Gifford & Co., as an investment adviser in accordance with rule 240.13d-1 (b), beneficially owns 123,397,920 common shares with sole
dispositive power (7.27% of the issued shares), of which 68,432,691 common shares are held with sole voting power (4.03% of the issued
shares).
As of February 27, 2015, approximately 1,000 holders of record of FCA common shares had registered addresses in
the U.S. and in total held approximately 320 million common shares, or 25 percent of the FCA common shares.
2014
|
ANNUAL REPORT 95
Corporate Governance
Corporate Governance
Introduction
Fiat Chrysler Automobiles N.V. (the “Company”) is a public company with limited liability, incorporated and organized
under the laws of the Netherlands, which results from the cross-border merger of Fiat S.p.A. with and into Fiat
Investments N.V., renamed Fiat Chrysler Automobiles N.V. upon effectiveness of the merger on October 12, 2014
(the “Merger”). The Company quali?es as a foreign private issuer under the New York Stock Exchange (“NYSE”) listing
standards and its common shares are listed on the NYSE and on the Mercato Telematico Azionario managed by
Borsa Italiana S.p.A. (“MTA”).
In accordance with the NYSE Listed Company Manual, the Company is permitted to follow home country practice
with regard to certain corporate governance standards. The Company has adopted, except as discussed below, the
best practice provisions of the Dutch corporate governance code issued by the Dutch Corporate Governance Code
Committee, which entered into force on January 1, 2009 (the “Dutch Corporate Governance Code”) and contains
principles and best practice provisions that regulate relations between the board of directors of a company and its
shareholders.
In this report the Company addresses its overall corporate governance structure. The Company discloses, and intends
to disclose any material departure from the best practice provisions of the Dutch Corporate Governance Code in its
future annual reports.
Board of Directors
Pursuant to the Company’s articles of association (the “Articles of Association”), its board of directors (the “Board
of Directors”) may have three or more directors (the “Directors”). At the general meeting of shareholders held on
August 1, 2014, the number of the Directors upon completion of the merger was set at eleven and the current slate
of Directors was elected. The term of of?ce of the current Board of Directors will expire on April 16, 2015 and the
Company’s general meeting of shareholders will elect a new Board of Directors for a one-year term. Each Director
may be reappointed at any subsequent general meeting of shareholders.
The Board of Directors as a whole is responsible for the strategy of the Company. The Board of Directors is composed
of two executive Directors (i.e., the Chairman and the Chief Executive Of?cer), having responsibility for the day-to-day
management of the Company, and nine non-executive Directors, who do not have such day-to-day responsibility
within the Company or the Group. Pursuant to Article 17 of the Articles of Association, the general authority to
represent the Company shall be vested in the Board of Directors and the Chief Executive Of?cer.
On October 13, 2014 the Board of Directors appointed the following internal committees: (i) an Audit Committee, (ii) a
Governance and Sustainability Committee, and (iii) a Compensation Committee.
On certain key industrial matters the Board of Directors is advised by the Group Executive Council (the “GEC”): the
GEC is an operational decision-making body of the Company’s group (the “Group”), which is responsible for reviewing
the operating performance of the businesses, and making decisions on certain operational matters.
Seven Directors quali?ed as independent (representing a majority) for purposes of NYSE rules, Rule 10A-3 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Dutch Corporate Governance Code.
The Board of Directors has also appointed Mr. Ronald L. Thompson as Senior Non-Executive Director in accordance
with Section III.8.1 of the Code.
Directors are expected to prepare themselves for and to attend all Board of Directors meetings, the annual general
meeting of shareholders and the meetings of the committees on which they serve, with the understanding that, on
occasion, a Director may be unable to attend a meeting.
Since October 12, 2014 - after the effectiveness of the merger transaction - to the year-end there were two meetings
of the Board of Directors. The average attendance at those meetings was 95.45%.
96 2014
|
ANNUAL REPORT
Corporate Governance
The current composition of the Board of Directors is the following:
John Elkann (executive director) - John Elkann is Chairman of FCA He was appointed chairman of Fiat on 21 April
2010 where he has served as vice chairman since 2004 and as a board member since December 1997. He is also
chairman and chief executive of?cer of Exor and chairman of Giovanni Agnelli e C. Sapaz.. Born in New York in
1976, he obtained a scienti?c baccalaureate from the Lycée Victor Duruy in Paris, and graduated in Engineering
and Management from Politecnico, the Engineering University of Turin (Italy). While at university, he gained work
experience in various companies of the Fiat Group in the UK and Poland (manufacturing) as well as in France (sales
and marketing). He started his professional career in 2001 at General Electric as a member of the Corporate Audit
Staff, with assignments in Asia, the USA and Europe. He is chairman of Cushman & Wake?eld and Italiana Editrice
and a board member of CNHI, The Economist Group, News Corporation and Banca Leonardo. He is a member of
the IAC of Brookings Institution and of MoMA. He also serves as vice chairman of the Italian Aspen Institute and of
the Giovanni Agnelli Foundation.
Born in 1976, Italian citizenship.
Sergio Marchionne (executive director) - Mr. Marchionne currently serves as Chief Executive Of?cer of FCA
and Chairman and Chief Executive Of?cer of both FCA US LLC and FCA Italy S.p.A. Since October 2014, Mr.
Marchionne has served as Chairman of Ferrari S.p.A. Mr. Marchionne leads the GEC and has been Chief Operating
Of?cer of its NAFTA region since September 2011. He also serves as Chairman of CNHI. He was the chairman of
Fiat Industrial and CNH Global N.V. until the integration of these companies into CNHI. Prior to joining the Company,
Mr. Marchionne served as Chief Executive Of?cer of SGS SA, Chief Executive Of?cer ?rst and then Chairman of
the Lonza Group Ltd. and Chief Executive Of?cer of Alusuisse Lonza (Algroup). He also served as Vice President
of Legal and Corporate Development and Chief Financial Of?cer of the Lawson Mardon Group after serving as
Chief Financial Of?cer of Acklands Ltd. and Executive Vice President of Glenex Industries. Mr. Marchionne holds a
Bachelor of Laws from Osgoode Hall Law School at York University in Toronto, Canada and a Master of Business
Administration and a Bachelor of Commerce from the University of Windsor, Canada. Mr. Marchionne also holds a
Bachelor of Arts with a major in Philosophy and minor in Economics from the University of Toronto. Mr. Marchionne
serves on the Board of Directors of Philip Morris International Inc. and as Chairman of SGS SA headquartered in
Geneva. Additionally, Mr. Marchionne serves as Chairman of CNHI, and as a director of Exor, a shareholder of FCA
and CNHI. Mr. Marchionne is on the Board of Directors of ACEA (European Automobile Manufacturers Association).
He previously served as appointed non-executive Vice Chairman and Senior Independent Director of UBS AG as
well as a director of Fiat Industrial.
Born in 1952, Canadian and Italian citizenship.
Andrea Agnelli (non-executive director) - Andrea Agnelli is chairman of Juventus Football Club S.p.A. and Lamse
S.p.A., a holding company of which he is a founding shareholder. Born in Turin in 1975, he studied at Oxford (St.
Clare’s International College) and Milan (Università Commerciale Luigi Bocconi). While at university, he gained
professional experience both in Italy and abroad, including positions at: Iveco-Ford in London; Piaggio in Milan;
Auchan Hypermarché in Lille; Schroder Salomon Smith Barney in London; and, ?nally, Juventus Football Club
S.p.A. in Turin. He began his career in 1999 at Ferrari Idea in Lugano, where he was responsible for promoting
and developing the Ferrari brand in non-automotive areas. In November 2000, he moved to Paris and assumed
responsibility for marketing at Uni Invest SA, a Banque San Paolo company specialized in managed investment
products. From 2001 to 2004, Mr. Agnelli worked at Philip Morris International in Lausanne, where he initially had
responsibility for marketing and sponsorships and, subsequently, corporate communication. In 2005, he returned
to Turin to work in strategic development for IFIL Investments S.p.A. (now Exor). Mr. Agnelli is a general partner
of Giovanni Agnelli e C. S.a.p.az., a member of the board of directors of Exor, a member of the advisory board of
BlueGem Capital Partners LLP, in addition to serving on the board of the European Club Association. Mr. Agnelli
has been a member of the board of directors of Fiat since May 30, 2004.
Born in 1975, Italian citizenship.
2014
|
ANNUAL REPORT 97
Tiberto Brandolini d’Adda (non-executive director) - Born in Lausanne (Switzerland) in 1948 and a graduate
in commercial law from the University of Parma. From 1972 to 1974, Mr. Brandolini d’Adda gained his initial work
experience in the international department of Fiat and then at Lazard Bank in London. In 1975, he was appointed
assistant to the Director General for Enterprise Policy at the European Economic Commission in Brussels. In 1976
he joined I?nt, as general manager for France. In 1985, he was appointed general manager for Europe and then in
1993 managing director of Exor group (formerly I?nt), where he also served as vice chairman from 2003 until 2007.
He has extensive international experience as a main board director of several companies, including: Le Continent,
Bolloré Investissement, Société Foncière Lyonnaise, Sa?c-Alcan and Chateau Margaux. Mr. Brandolini d’Adda
served as director and then, from 1997 to 2003, as chairman of the conseil de surveillance of Club Mediterranée.
In May 2004, he was appointed chairman of the conseil de surveillance of Worms & Cie, where he had served as
deputy chairman since 2000. In May 2005, he became chairman and chief executive of?cer of Sequana Capital
(formerly Worms & Cie). Mr. Brandolini d’Adda currently serves as chairman of Exor S.A. (Luxembourg) and is also
a member of the board of directors of YAFA S.p.A. He is general partner of Giovanni Agnelli & C. S.a.p.az. and vice
chairman of Exor, formed through the merger between IFI and IFIL Investments. Brandolini d’Adda is Of?cier de la
Légion d’Honneur. He has been a member of the board of directors of Fiat since May 30, 2004.
Born in 1948, Italian citizenship.
Glenn Earle (non-executive director) - Glenn Earle is a Senior Advisor at Af?liated Managers Group Limited (AMG)
and a Board Member and Trustee of the Royal National Theatre and of Teach First, where he is a member of the
Finance Committee. He is also a Director of Rothesay Holdco UK and Chairman of the Advisory Board of Cambridge
University Judge Business School. Mr. Earle retired in December 2011 from Goldman Sachs International, where he
was most recently a Partner Managing Director and the Chief Operating Of?cer. He previously worked at Goldman
Sachs in various roles in New York, Frankfurt and London from 1987, becoming a Partner in 1996. From 1979 to
1985, he worked in the Latin America department at Grindlays Bank/ANZ in London and New York, leaving as a Vice
President. He is a graduate of Emmanuel College, Cambridge and of Harvard Business School, where he earned
an MBA with High Distinction and was a Baker Scholar and Loeb, Rhoades Fellow. His other activities include
membership of The Higher Education Commission and The William Pitt Group at Chatham House. His previous
responsibilities include membership of the Board of Trustees of the Goldman Sachs Foundation and of the Ministerial
Task Force for Gifted and Talented Youth and the Development Advisory Forum of Emmanuel College, Cambridge.
Mr. Earle has been an independent member of the Board of Directors of Fiat since June 23, 2014.
Born in 1958, British citizenship.
Valerie Mars (non-executive director) - Valerie Mars serves as senior vice president & head of corporate
development for Mars, Incorporated, a $32 billion diversi?ed food business, operating in over 120 countries and
one of the largest privately held companies in the world. In this position, she focuses on acquisitions, joint ventures
and divestitures for the company. She served on the Mars, Incorporated audit committee, currently serves on
its remuneration committee and is a member of the board of Royal Canin. Additionally, Mars is a member of the
Rabobank North American Advisory Board and is on the Board of Hello Stage. Mars is also a founding partner of
KKM, a consulting partnership dedicated to advising family businesses that are planning the transition from the
owner-manager to the next generation. Mars served on the board of Celebrity Inc., a NASDAQ listed company, from
1994 to September 2000. Previously, Mars was the director of corporate development for Masterfoods Europe. Her
European work experience began in 1996 when she became general manager of Masterfoods Czech and Slovak
Republics. Mars joined M&M/Mars on a part time basis in 1992 and began working on special projects. She worked
on due diligence for acquisition, was part of the company’s Innovation Team and VO2Max Team. Prior to joining
Mars, Incorporated, Mars was a controller with Whitman Heffernan Rhein, a boutique investment company. She
began her career with Manufacturers Hanover Trust Company as a training program participant and rose to Assistant
Secretary, supporting U.S. -based clients and then companies with global operations like General Motors and Dow
Chemical. Mars was involved in a number of community and educational organizations and currently serves on the
Board of Conservation International. She is a Director Emeritus of The Open Space Institute. Previously she served on
the Hotchkiss School Alumni Nominating Committee and the Prague American Chamber of Commerce Board. Mars
holds a Bachelor of Arts degree from Yale University and a MBA from the Columbia Business School.
Born in 1959, American citizenship.
98 2014
|
ANNUAL REPORT
Corporate Governance
Ruth J. Simmons (non-executive director) - Ruth J. Simmons was appointed to the board of directors of
Chrysler Group LLC in June 2012. Simmons was President of Brown University from 2001 until June 30, 2012
and remains with the university as president emerita. Prior to joining Brown University, she was president of Smith
College, where she started the ?rst engineering program at a U.S. women’s college. She also was vice provost at
Princeton University and provost at Spelman College and she held various positions of increasing responsibility
until becoming Associate Dean of the faculty at Princeton University; she previously was Assistant Dean and then
Associate Dean at the University of Southern California; she held various positions including Acting Director of
international programs at the California State University (Northridge); she was Assistant Dean at the College of
Liberal Arts, Assistant Professor of French at the University of New Orleans, Admissions Of?cer at the Radcliffe
College, instructor in French at the George Washington University and interpreter-Language Services Division at the
U.S. Department of State. Simmons serves on several boards, including those of Princeton University and Texas
Instruments. Simmons is a graduate of Dillard University in New Orleans (1967), and received her Ph.D. in Romance
languages and literatures from Harvard University (1973). Simmons is a Fellow of the American Academy of Arts
and Sciences and a member of the Council on Foreign Relations.
Born in 1945, American citizenship.
Ronald L. Thompson (non-executive director) - Ronald L. Thompson is the senior non-executive director of
FCA. He was appointed to the board of directors of FCA US on July 6, 2009. Thompson is currently chairman of the
board of trustees for Teachers Insurance and Annuity Association, or TIAA, a for-pro?t life insurance company that
serves the retirement and ?nancial needs of faculty and employees of colleges and universities, hospitals, cultural
institutions and other nonpro?t organizations. He also serves on the Board of Trustees for Washington University in
St. Louis, Mo., on the Board of Directors of the Medical University of South Carolina Foundation and as a member
of the Advisory Board of Plymouth Venture Partners Fund. Thompson was the Chief Executive Of?cer and Chairman
of Midwest Stamping Company of Maumee, Ohio, a manufacturer of medium and heavy gauge metal components
for the automotive market. Under Thompson’s ownership, the company experienced rapid growth as a Tier One
automotive supplier and became one of the largest minority-owned companies in the U.S. He sold the company
in late 2005. Thompson has served on the boards of many different companies including Commerce Bank of St.
Louis, GR Group (U.S.), Illinova Corporation, Interstate Bakeries Corporation, McDonnell Douglas Corporation,
Midwest Stamping Company, Ralston Purina Company and Ryerson Tull, Inc. He was also a member of the Board
of Directors of the National Association of Manufacturers. He was General Manager at Puget Sound Pet Supply
Company and Chairman and Chief Executive Of?cer at Evaluation Technologies. Thompson has served on the
faculties of Old Dominion University, Virginia State University and the University of Michigan.
Thompson holds a Ph.D. and Master of Science in Agricultural Economics from Michigan State University and a
Bachelor of Business Administration from the University of Michigan.
Born in 1949, American citizenship.
Patience Wheatcroft (non-executive director) - Patience Wheatcroft is a British national and graduate in law
from the University of Birmingham. She is also a member of the House of Lords and a ?nancial commentator and
journalist. Ms. Wheatcroft currently serves on the advisory board of the public relations company Bell Pottinger
LLP. She also serves as non-executive director of the wealth management company St. James’s Place PLC.
Ms. Wheatcroft has a broad range of experience in the media and corporate world with past positions at the Wall
Street Journal Europe, where she was editor-in-chief, The Sunday Telegraph, The Times, Mail on Sunday, as well
as serving as non-executive director of Barclays Group PLC and Shaftesbury PLC. Since 2011, she has been a
member of the House of Lords. Finally, Ms. Wheatcroft is also on the board of trustees of the British Museum. Ms.
Wheatcroft has been an independent member of the board of directors of Fiat since April 4, 2012.
Born in 1951, British citizenship.
2014
|
ANNUAL REPORT 99
Stephen M. Wolf (non-executive director) - Stephen M. Wolf was appointed to the board of directors of Chrysler
Group LLC on July 6, 2009. Wolf became chairman of R. R. Donnelley & Sons Company, a full service provider of
print and related services, in 2004. He has served as the managing partner of Alpilles LLC since 2003. Previously,
he was chairman of US Airways Group Inc. and US Airways Inc. Wolf was chairman and CEO of US Airways from
1996 until 1998. Prior to joining US Airways, Wolf had served since 1994 as senior advisor to the investment
banking ?rm Lazard Frères & Co. From 1987 to 1994, he served as chairman and chief executive of?cer of UAL
Corporation and United Airlines Inc. Wolf’s career in the aviation industry began in 1966 with American Airlines,
where he rose to the position of vice president. He joined Pan American World Airways as a senior vice president in
1981 and became president and COO of Continental Airlines in 1982. In 1984, he became president and CEO of
Republic Airlines, where he served until 1986 at which time he orchestrated the Company’s merger with Northwest
Airlines. Thereafter, he served as chairman and CEO of Tiger International, Inc. and The Flying Tiger Line, Inc. where
he oversaw the sale of the company to Federal Express. Wolf also serves as a member of the board of directors of
Philip Morris International and as Chairman of the Advisory Board of Trilantic Capital Partners, previously Lehman
Brothers Merchant Banking. Wolf had also served as chairman of Lehman Brothers Private Equity Advisory Board.
Wolf is an honorary trustee of The Brookings Institution. Wolf holds a Bachelor of Arts degree in Sociology from San
Francisco State University.
Born in 1941, American citizenship.
Ermenegildo Zegna (non-executive director) year of birth: 1955, nationality: Italian/Swiss - Ermenegildo Zegna
has been Chief Executive Of?cer of the Ermenegildo Zegna Group since 1997, having served on the board since
1989. Previously, he held senior executive positions within the Zegna Group including the U.S., after a retail
experience at Bloomingdale’s, New York. Zegna, the standard of excellence for the entire luxury fashion industry, is
a vertically integrated company that covers sourcing wool at the markets of origin, manufacturing, marketing right
through directly operated stores. Under the guidance of the fourth generation, the Group expanded its network to
545 stores, of which 310 are fully owned, in over 100 countries. In 2013, Zegna reached consolidated sales of 1.27
billion euro, achieving global leadership in men’s luxury wear. The company’s success is based on an increasingly
wide-reaching portfolio of products and styles - formal, casual and sports apparel, avant-garde lines, shoes,
leather accessories, and under license fragrances, eyewear, underwear and watches. He is also a member of the
international advisory board of IESE Business School of Navarra; he is board member of the Camera Nazionale della
Moda Italiana and of the Council for the United States and Italy. In 2011 he was nominated Cavaliere del Lavoro by
the President of the Italian Republic. A graduate in economics from the University of London, Ermenegildo Zegna
also studied at the Harvard Business School.
Born in 1955, Italian and Swiss citizenship.
100 2014
|
ANNUAL REPORT
Corporate Governance
Board Regulations
On October 29, 2014 the Board of Directors adopted its regulations. Such regulations deal with matters that concern
the Board of Directors and its committees internally.
The regulations contain provisions concerning the manner in which meetings of the Board of Directors are called
and held, including the decision-making process. The regulations provide that meetings may be held by telephone
conference or video-conference, provided that all participating Directors can follow the proceedings and participate in
real time discussion of the items on the agenda.
The Board of Directors can only adopt valid resolutions when the majority of the Directors in of?ce shall be present at
the meeting or be represented thereat.
A Director may only be represented by another Director authorized in writing.
A Director may not act as a proxy for more than one other Director.
All resolutions shall be adopted by the favorable vote of the majority of the Directors present or represented at the
meeting, provided that the regulations may contain speci?c provisions in this respect. Each Director shall have one vote.
The Board of Directors shall be authorized to adopt resolutions without convening a meeting if all Directors shall have
expressed their opinions in writing, unless one or more Directors shall object in writing to the resolution being adopted
in this way prior to the adoption of the resolution.
The regulations are available on the Company’s website.
The Audit Committee
The Audit Committee is responsible for assisting and advising the Board of Directors’ oversight of: (i) the integrity
of the Company’s ?nancial statements, (ii) the Company’s policy on tax planning, (iii) the Company’s ?nancing, (iv)
the Company’s applications of information and communication technology, (v) the systems of internal controls that
management and the Board of Directors have established, (vi) the Company’s compliance with legal and regulatory
requirements, (vii) the Company’s compliance with recommendations and observations of internal and independent
auditors, (viii) the Company’s policies and procedures for addressing certain actual or perceived con?icts of
interest, (ix) the independent auditors’ quali?cations, independence, remuneration and any non-audit services for
the Company, (x) the performance of the Company’s internal auditors and of the independent auditors, (xi) risk
management guidelines and policies, and (xii) the implementation and effectiveness of the Company’s ethics and
compliance program.
The Audit Committee currently consists of Mr. Glenn Earle (Chairman), Mr. Thompson and Ms. Wheatcroft. The
Audit Committee is elected by the Board of Directors and is comprised of at least three non-executive Directors.
Audit Committee members are also required (i) not to have any material relationship with the Company or to serve
as auditors or accountants for the Company, (ii) to be “independent”, for purposes of NYSE rules, Rule 10A-3 of the
Exchange Act and the Dutch Corporate Governance Code, and (iii) to be “?nancially literate” and have “accounting
or selected ?nancial management expertise” (as determined by the Board of Directors). At least one member of the
Audit Committee shall be a “?nancial expert” as de?ned by the Sarbanes-Oxley Act and the rules of the U.S. Securities
and Exchange Commission and best practice provision III.5.7 of the Dutch Corporate Governance Code. No Audit
Committee member may serve on more than four audit committees for other public companies, absent a waiver from
the Board of Directors, which must be disclosed in the annual report on Form 20-F. Unless decided otherwise by the
Audit Committee, the independent auditors of the Company attend its meetings while the Chief Executive Of?cer and
Chief Financial Of?cer are free to attend the meetings.
Since October 12, 2014 - after the effectiveness of the merger transaction - to the year-end the Audit Committee met
twice and attendance of Directors at those meetings was 100%.
2014
|
ANNUAL REPORT 101
The Compensation Committee
The Compensation Committee is responsible for, among other things, assisting and advising the Board of Directors
in: (i) determining executive compensation consistent with the Company’s remuneration policy, (ii) reviewing and
approving the remuneration structure for the executive Directors, (iii) administering equity incentive plans and deferred
compensation bene?t plans, and (iv) discussing with management the Company’s policies and practices related to
compensation and issuing recommendations thereon.
The Compensation Committee currently consists of Mr. Wolf (Chairman), Ms. Mars and Mr. Zegna. The
Compensation Committee is elected by the Board of Directors and is comprised of at least three non-executive
directors. Unless decided otherwise by the Compensation Committee, the Head of Human Resources of the
Company attends its meetings.
Since October 12, 2014 - after the effectiveness of the merger transaction - to the year-end the Compensation
Committee met once with 67% attendance of Directors at such meeting.
The Governance and Sustainability Committee
The Governance and Sustainability Committee is responsible for, among other things, assisting and advising the
Board of Directors with: (i) the identi?cation of the criteria, professional and personal quali?cations for candidates
to serve as Directors, (ii) periodical assessment of the size and composition of the Board of Directors, (iii) periodical
assessment of the functioning of individual Directors and reporting on this to the Board of Directors, (iv) proposals
for appointment of executive and non-executive Directors, (v) supervision of the selection criteria and appointment
procedure for senior management, (vi) monitoring and evaluating reports on the Group’s sustainable development
policies and practices, management standards, strategy, performance and governance globally, and (vii) reviewing,
assessing and making recommendations as to strategic guidelines for sustainability-related issues, and reviewing the
annual Sustainability Report.
The Governance and Sustainability Committee currently consists of Mr. Elkann (Chairman), Ms. Wheatcroft and Ms.
Simmons. The Governance and Sustainability Committee is elected by the Board of Directors and is comprised of at
least three Directors. No more than two members may be non-independent, and at most one of the members may be
an executive Director.
In addition, as described above, the charters of the Audit Committee, Compensation Committee and Governance and
Sustainability Committee set forth independence requirements for their members for purposes of the Dutch Corporate
Governance Code. Audit Committee members are also required to qualify as independent for purposes of NYSE rules
and Rule 10A-3 of the Exchange Act.
Since October 12, 2014 to the year-end the Governance and Sustainability Committee did not have any meeting.
Amount and Composition of the remuneration of the Board of Directors
Details of the remuneration of the Board of Directors and its committees are set forth under the Section Remuneration
of Directors.
Indemni?cation of Directors
The Company shall indemnify any and all of its Directors, of?cers, former Directors, former of?cers and any person
who may have served at its request as a Director or of?cer of another company in which it owns shares or of which
it is a creditor, against any and all expenses actually and necessarily incurred by any of them in connection with the
defense of any action, suit or proceeding in which they, or any of them, are made parties, or a party, by reason of
being or having been Director or of?cer of the Company, or of such other company, except in relation to matters as to
which any such person shall be adjudged in such action, suit or proceeding to be liable for gross negligence or willful
misconduct in the performance of duty. Such indemni?cation shall not be deemed exclusive of any other rights to
which those indemni?ed may be entitled otherwise.
102 2014
|
ANNUAL REPORT
Corporate Governance
Con?ict of interest
A Director shall not participate in discussions and decision making of the Board of Directors with respect to a matter in
relation to which he or she has a direct or indirect personal interest that is in con?ict with the interests of the Company
and the business associated with the Company (“Con?ict of Interest”).
In addition, the Board of Directors as a whole may, on an ad hoc basis, resolve that there is such a strong appearance
of a Con?ict of Interest of an individual Director in relation to a speci?c matter, that it is deemed in the best interest of
a proper decision making process that such individual Director be excused from participation in the decision making
process with respect to such matter even though such Director may not have an actual Con?ict of Interest.
At least annually, each Director shall assess in good faith whether (i) he or she is independent under (A) best practice
provision III.2.2. of the Dutch Corporate Governance Code, (B) the requirements of Rule 10A-3 under the Exchange
Act, and (C) Section 303A of the NYSE Listed Company Manual; and (ii) he or she would have a Con?ict of Interest
in connection with any transactions between the Company and a signi?cant shareholder or related party of the
Company, including af?liates of a signi?cant shareholder (such con?ict, a “Related-Party Con?ict”), it being understood
that currently Exor S.p.A. would be considered a signi?cant shareholder.
The Directors shall inform the Board of Directors through the Senior Non-executive Director or the Secretary of the
Board of Directors as to all material information regarding any circumstances or relationships that may impact their
characterization as “independent,” or impact the assessment of their interests, including by responding promptly
to the annual D&O questionnaires circulated by or on behalf of the Secretary that are designed to elicit relevant
information regarding business and other relationships.
Based on each Director’s assessment described above, the Board of Directors shall make a determination at
least annually regarding such Director’s independence and such Director’s Related-Party Con?ict. These annual
determinations shall be conclusive, absent a change in circumstances from those disclosed to the Board of Directors,
that necessitates a change in such determination.
Loyalty Voting Structure
The Company implemented a loyalty voting structure, pursuant to which the former shareholders of Fiat S.p.A. were
able to elect to receive one special voting share with a nominal value of €0.01 per share for each common share
they were entitled to receive in the Merger, provided that they ful?lled the requirements described in the terms and
conditions of the special voting shares. Such shareholders had their common shares registered in a separate register
(the “Loyalty Register”) of the Company’s shareholders register. Following this registration, a corresponding number
of special voting shares were allocated to the above-mentioned Shareholders. By signing an election form, whose
execution was necessary to elect to receive special voting shares, shareholders also agreed to be bound by the terms
and conditions thereof, including the transfer restrictions described below.
Following the completion of the Merger, new shareholders may at any time elect to participate in the loyalty voting
structure by requesting that the Company registers all or some of their common shares in the Loyalty Register. If these
common shares have been registered in the Loyalty Register (and thus blocked from trading in the regular trading
system) for an uninterrupted period of three years in the name of the same shareholder, such shares become eligible
to receive special voting shares (the “Qualifying Common Shares”) and the relevant shareholder will be entitled to
receive one special voting share for each such Qualifying Common Share. If at any time such common shares are de-
registered from the Loyalty Register for whatever reason, the relevant shareholder shall lose its entitlement to hold a
corresponding number of special voting shares.
A holder of Qualifying Common Shares may at any time request the de-registration of some or all such shares from
the Loyalty Register, which will allow such shareholder to freely trade its common shares. From the moment of such
request, the holder of Qualifying Common Shares shall be considered to have waived her or his rights to cast any
votes associated with such Qualifying Common Shares. Upon the de-registration from the Loyalty Register, the
relevant shares will therefore cease to be Qualifying Common Shares. Any de-registration request would automatically
trigger a mandatory transfer requirement pursuant to which the special voting shares will be acquired by the Company
for no consideration (om niet) in accordance with the terms and conditions of the special voting shares.
2014
|
ANNUAL REPORT 103
The Company’s common shares are freely transferable. However, any transfer or disposal of the Company’s common
shares with which special voting shares are associated would trigger the de-registration of such common shares from
the Loyalty Register and the transfer of all relevant special voting shares to the Company. Special voting shares are not
admitted to listing and are transferable only in very limited circumstances. In particular, no shareholder shall, directly or
indirectly: (a) sell, dispose of or transfer any special voting share or otherwise grant any right or interest therein; or (b)
create or permit to exist any pledge, lien, ?xed or ?oating charge or other encumbrance over any special voting share
or any interest in any special voting share.
The purpose of the loyalty voting structure is to grant long-term shareholders an extra voting right by means of
granting a special voting share (shareholders holding special voting shares are entitled to exercise one vote for each
special voting share held and one vote for each common share held), without entitling such shareholders to any
economic rights, other than those pertaining to the common shares. However, under Dutch law, the special voting
shares cannot be excluded from economic entitlements. As a result, pursuant to the Articles of Association, holders
of special voting shares are entitled to a minimum dividend, which is allocated to a separate special dividend reserve
(the “Special Dividend Reserve”). A distribution from the Special Dividend Reserve or the (partial) release of the Special
Dividend Reserve, will require a prior proposal from the board of directors and a subsequent resolution of the meeting
of holders of special voting shares. The power to vote upon the distribution from the Special Dividend Reserve is
the only power that is granted to that meeting, which can only be convened by the Board of Directors as it deems
necessary. The special voting shares do not have any other economic entitlement.
Section 10 of the terms and conditions of the special voting shares include liquidated damages provisions intended to
discourage any attempt by holders to violate the terms thereof. These liquidated damages provisions may be enforced
by the Company by means of a legal action brought by the Company in the courts of the Netherlands. In particular, a
violation of the provisions of the above-mentioned terms and condition concerning the transfer of special voting shares
may lead to the imposition of liquidated damages.
Pursuant to Section 12 of the terms and conditions of the special voting shares, any amendment to the terms and
conditions (other than merely technical, non-material amendments) may only be made with the approval of the general
meeting of shareholders of the Company.
A Shareholder must promptly notify the Company upon the occurrence of a change of control, which is de?ned in
Article 1.1. of the Articles of Association as including any direct or indirect transfer, carried out through one or a series
of related transactions, by a shareholder that is not an individual (natuurlijk persoon) as a result of which (i) a majority of
the voting rights of such shareholder, (ii) the de facto ability to direct the casting of a majority of the votes exercisable
at general meetings of shareholders of such shareholder and/or (iii) the ability to appoint or remove a majority of the
directors, executive directors or board members or executive of?cers of such shareholder or to direct the casting of
a majority or more of the voting rights at meetings of the board of directors, governing body or executive committee
of such shareholder has been transferred to a new owner. No change of control shall be deemed to have occurred if
(a) the transfer of ownership and/or control is an intragroup transfer under the same parent company, (b) the transfer
of ownership and/or control is the result of the succession or the liquidation of assets between spouses or the
inheritance, inter vivo donation or other transfer to a spouse or a relative up to and including the fourth degree or (c)
the fair market value of the Qualifying Common Shares held by such shareholder represents less than twenty percent
(20%) of the total assets of the Transferred Group at the time of the transfer and the Qualifying Common Shares held
by such shareholder, in the sole judgment of the Company, are not otherwise material to the Transferred Group or the
change of control transaction.
Article 1.1. of the Articles of Association de?nes “Transferred Group” as comprising the relevant shareholder together
with its af?liates, if any, over which control was transferred as part of the same change of control transaction, as such
term is de?ned in the above mentioned Article of the Articles of Association. A change of control will trigger the de-
registration of the relevant Qualifying Common Shares from the Loyalty Register and the suspension of the special
voting rights attached to the Qualifying Common Shares.
104 2014
|
ANNUAL REPORT
Corporate Governance
If the Company was to be dissolved and liquidated, after all the debts of the Company have been paid, any
remaining balances would be distributed in the following order of priority: (i) ?rst, to satisfy the aggregate balance
of share premium reserves and other reserves than the Special Dividend Reserve to the holders of common shares
in proportion to the aggregate nominal value of the common shares held by each of them; (ii) second, an amount
equal to the aggregate amount of the nominal value of the common shares to the holders thereof in proportion to the
aggregate nominal value of the common shares held by each of them; (iii) third, an amount equal to the aggregate
amount of the special voting shares dividend reserve to the holders of special voting shares in proportion to the
aggregate nominal value of the special voting shares held by each of them; and (iv) fourth, the aggregate amount of
the nominal value of the special voting shares to the holders thereof in proportion to the aggregate nominal value of the
special voting shares held by each of them.
General Meeting of Shareholders
At least one general meeting of shareholders shall be held every year, which meeting shall be held within six months
after the close of the ?nancial year.
Furthermore, general meetings of shareholders shall be held in the case referred to in Section 2:108a of the Dutch Civil
Code as often as the Board of Directors, the Chairman or the Chief Executive Of?cer deems it necessary to hold them
or as otherwise required by Dutch law, without prejudice to what has been provided in the next paragraph hereof.
Shareholders solely or jointly representing at least ten percent (10%) of the issued share capital may request the Board
of Directors, in writing, to call a general meeting of shareholders, stating the matters to be dealt with.
If the Board of Directors fails to call a meeting, then such shareholders may, on their application, be authorized by
the interim provisions judge of the court (voorzieningenrechter van de rechtbank) to convene a general meeting of
shareholders. The interim provisions judge (voorzieningenrechter van de rechtbank) shall reject the application if he is
not satis?ed that the applicants have previously requested the Board of Directors in writing, stating the exact subjects
to be discussed, to convene a general meeting of shareholders.
General meetings of shareholders shall be held in Amsterdam or Haarlemmermeer (Schiphol Airport), the Netherlands,
and shall be called by the Board of Directors, the Chairman or the Chief Executive Of?cer, in such manner as is
required to comply with the law and the applicable stock exchange regulations, not later than on the forty-second day
prior to the day of the meeting.
All convocations of general meetings of shareholders and all announcements, noti?cations and communications
to shareholders shall be made by means of an announcement on the Company’s corporate website and such
announcement shall remain accessible until the relevant general meeting of shareholders. Any communication to
be addressed to the general meeting of shareholders by virtue of Dutch law or the Articles of Association, may be
either included in the notice, referred to in the preceding sentence or, to the extent provided for in such notice, on the
Company’s corporate website and/or in a document made available for inspection at the of?ce of the Company and
such other place(s) as the Board of Directors shall determine.
Convocations of general meetings of shareholders may be sent to Shareholders through the use of an electronic
means of communication to the address provided by such Shareholders to the Company for this purpose.
The notice shall state the place, date and hour of the meeting and the agenda of the meeting as well as the other data
required by law.
An item proposed in writing by such number of Shareholders who, by Dutch law, are entitled to make such proposal,
shall be included in the notice or shall be announced in a manner similar to the announcement of the notice, provided
that the Company has received the relevant request, including the reasons for putting the relevant item on the agenda,
no later than the sixtieth day before the day of the meeting.
The agenda of the annual general meeting shall contain, inter alia, the following items:
a) adoption of the annual accounts;
b) the implementation of the remuneration policy;
2014
|
ANNUAL REPORT 105
c) the policy of the Company on additions to reserves and on dividends, if any;
d) granting of discharge to the Directors in respect of the performance of their duties in the relevant ?nancial year;
e) the appointment of Directors;
f) if applicable, the proposal to pay a dividend;
g) if applicable, discussion of any substantial change in the corporate governance structure of the Company; and
h) any matters decided upon by the person(s) convening the meeting and any matters placed on the agenda with due
observance of applicable Dutch law.
The Board of Directors shall provide the general meeting of shareholders with all requested information, unless this
would be contrary to an overriding interest of the Company. If the Board of Directors invokes an overriding interest, it
must give reasons.
When convening a general meeting of shareholders, the Board of Directors shall determine that, for the purpose
of Article 19 and Article 20 of the Articles of Association, persons with the right to vote or attend meetings shall
be considered those persons who have these rights at the twenty-eighth day prior to the day of the meeting (the
“Record Date”) and are registered as such in a register to be designated by the Board of Directors for such purpose,
irrespective whether they will have these rights at the date of the meeting. In addition to the Record Date, the notice
of the meeting shall further state the manner in which shareholders and other parties with meeting rights may have
themselves registered and the manner in which those rights can be exercised.
The general meeting of shareholders shall be presided over by the Chairman or, in his absence, by the person chosen
by the Board of Directors to act as chairman for such meeting.
One of the persons present designated for that purpose by the chairman of the meeting shall act as secretary and take
minutes of the business transacted. The minutes shall be con?rmed by the chairman of the meeting and the secretary
and signed by them in witness thereof.
The minutes of the general meeting of shareholders shall be made available, on request, to the shareholders no later
than three months after the end of the meeting, after which the shareholders shall have the opportunity to react to the
minutes in the following three months. The minutes shall then be adopted in the manner as described in the preceding
paragraph.
If an of?cial notarial record is made of the business transacted at the meeting then minutes need not be drawn up and
it shall suf?ce that the of?cial notarial record be signed by the notary.
As a prerequisite to attending the meeting and, to the extent applicable, exercising voting rights, the shareholders
entitled to attend the meeting shall be obliged to inform the Board of Directors in writing within the time frame
mentioned in the convening notice. At the latest this notice must be received by the Board of Directors on the day
mentioned in the convening notice.
Shareholders and those permitted by Dutch law to attend the general meetings of the shareholders may cause
themselves to be represented at any meeting by a proxy duly authorized in writing, provided they shall notify
the Company in writing of their wish to be represented at such time and place as shall be stated in the notice of
the meetings. For the avoidance of doubt, such attorney is also authorized in writing if the proxy is documented
electronically. The Board of Directors may determine further rules concerning the deposit of the powers of attorney;
these shall be mentioned in the notice of the meeting.
The Company is exempt from the proxy rules under the U.S. Securities Exchange Act of 1934, as amended.
The chairman of the meeting shall decide on the admittance to the meeting of persons other than those who are
entitled to attend.
106 2014
|
ANNUAL REPORT
Corporate Governance
For each general meeting of shareholders, the Board of Directors may decide that shareholders shall be entitled to
attend, address and exercise voting rights at such meeting through the use of electronic means of communication,
provided that shareholders who participate in the meeting are capable of being identi?ed through the electronic means
of communication and have direct cognizance of the discussions at the meeting and the exercising of voting rights (if
applicable). The Board of Directors may set requirements for the use of electronic means of communication and state
these in the convening notice. Furthermore, the Board of Directors may for each general meeting of shareholders
decide that votes cast by the use of electronic means of communication prior to the meeting and received by the
Board of Directors shall be considered to be votes cast at the meeting. Such votes may not be cast prior to the
Record Date. Whether the provision of the foregoing sentence applies and the procedure for exercising the rights
referred to in that sentence shall be stated in the notice.
Prior to being allowed admittance to a meeting, a shareholder and each person entitled to attend the meeting, or
its attorney, shall sign an attendance list, while stating his name and, to the extent applicable, the number of votes
to which he is entitled. Each shareholder and other person attending a meeting by the use of electronic means of
communication and identi?ed in accordance with the above shall be registered on the attendance list by the Board of
Directors. In the event that it concerns an attorney of a shareholder or another person entitled to attend the meeting,
the name(s) of the person(s) on whose behalf the attorney is acting, shall also be stated. The chairman of the meeting
may decide that the attendance list must also be signed by other persons present at the meeting.
The chairman of the meeting may determine the time for which shareholders and others entitled to attend the general
meeting of shareholders may speak if he considers this desirable with a view to the orderly conduct of the meeting as
well as other procedures that the chairman considers desirable for the ef?cient and orderly conduct of the business of
the meeting.
Every share (whether common or special voting) shall confer the right to cast one vote.
Shares in respect of which Dutch law determines that no votes may be cast shall be disregarded for the purposes
of determining the proportion of shareholders voting, present or represented or the proportion of the share capital
present or represented.
All resolutions shall be passed with an absolute majority of the votes validly cast unless otherwise speci?ed herein.
Blank votes shall not be counted as votes cast.
All votes shall be cast in writing or electronically. The chairman of the meeting may, however, determine that voting by
raising hands or in another manner shall be permitted.
Voting by acclamation shall be permitted if none of the Shareholders present or represented objects.
No voting rights shall be exercised in the general meeting of shareholders for shares owned by the Company or by a
subsidiary of the Company. Pledgees and usufructuaries of shares owned by the Company and its subsidiaries shall
however not be excluded from exercising their voting rights, if the right of pledge or usufruct was created before the
shares were owned by the Company or a subsidiary. Neither the Company nor any of its subsidiaries may exercise
voting rights for shares in respect of which it holds a right of pledge or usufruct.
Without prejudice to the Articles of Association, the Company shall determine for each resolution passed:
a) the number of shares on which valid votes have been cast;
b) the percentage that the number of shares as referred to under a. represents in the issued share capital;
c) the aggregate number of votes validly cast; and
d) the aggregate number of votes cast in favor of and against a resolution, as well as the number of abstentions.
2014
|
ANNUAL REPORT 107
Issuance of shares
The general meeting of shareholders or alternatively the Board of Directors, if it has been designated to do so by the
general meeting of shareholders, shall have authority to resolve on any issuance of shares and rights to subscribe for
shares. The general meeting of shareholders shall, for as long as any such designation of the Board of Directors for this
purpose is in force, no longer have authority to decide on the issuance of shares and rights to subscribe for shares.
For a period of ?ve years from October 12, 2014, the Board of Directors has been irrevocably authorized to issue shares
and rights to subscribe for shares up to the maximum aggregate amount of shares as provided for in the company’s
authorized share capital as set out in Article 4.1 of the Articles of Association, as amended from time to time.
The general meeting of shareholders or the Board of Directors if so designated in accordance with the Articles of
Association, shall decide on the price and the further terms and conditions of issuance, with due observance of what
has been provided in relation thereto in Dutch law and the Articles of Association.
If the Board of Directors is designated to have authority to decide on the issuance of shares or rights to subscribe for
shares, such designation shall specify the class of shares and the maximum number of shares or rights to subscribe
for shares that can be issued under such designation. When making such designation the duration thereof, which shall
not be for more than ?ve years, shall be resolved upon at the same time. The designation may be extended from time
to time for periods not exceeding ?ve years. The designation may not be withdrawn unless otherwise provided in the
resolution in which the designation is made.
Payment for shares shall be made in cash unless another form of consideration has been agreed. Payment in a
currency other than euro may only be made with the consent of the Company.
The Board of Directors has also been designated as the authorized body to limit or exclude the rights of pre-emption
of shareholders in connection with the authority of the Board of Directors to issue common shares and grant rights to
subscribe for common shares as referred to above.
In the event of an issuance of common shares every holder of common shares shall have a right of pre-emption with
regard to the common shares or rights to subscribe for common shares to be issued in proportion to the aggregate
nominal value of his common shares, provided however that no such right of pre-emption shall exist in respect of
shares or rights to subscribe for common shares to be issued to employees of the Company or of a group company
pursuant to any option plan of the Company.
A shareholder shall have no right of pre-emption for shares that are issued against a non-cash contribution.
In the event of an issuance of special voting shares to qualifying shareholders, shareholders shall not have any right of
pre-emption.
The general meeting of shareholders or the Board of Directors, as the case may be, shall decide when passing the
resolution to issue shares or rights to subscribe for shares in which manner the shares shall be issued and, to the
extent that rights of pre-emption apply, within what period those rights may be exercised.
Corporate of?ces
The Company is incorporated under the laws of the Netherlands. It has its corporate seat in Amsterdam, the
Netherlands, and the place of effective management of the Company is in the United Kingdom.
The business address of the Board of Directors and the senior managers is 25 St. James’s Street, SW1A1HA London,
United Kingdom.
The Company is registered at the Dutch trade register under number 60372958 and at the Companies House in the
United Kingdom under ?le number FC031853.
108 2014
|
ANNUAL REPORT
Corporate Governance
Internal Control System
The Group has in place an internal control system (the “System”), based on the model provided by the COSO
Framework (Committee of Sponsoring Organizations of the Treadway Commission Report - Enterprise Risk
Management model) and the principles of the Dutch Corporate Governance Code, which consists of a set of policies,
procedures and organizational structures aimed at identifying, measuring, managing and monitoring the principal
risks to which the Company is exposed. The System is integrated within the organizational and corporate governance
framework adopted by the Company and contributes to the protection of corporate assets, as well as to ensuring
the ef?ciency and effectiveness of business processes, reliability of ?nancial information and compliance with laws,
regulations, the Articles of Association and internal procedures.
The System, which has been developed on the basis of international best practices, consists of the following three
levels of control:
Level 1: operating areas, which identify and assess risk and establish speci?c actions for management of such risk;
Level 2: departments responsible for risk control, which de?ne methodologies and instruments for managing risk
and monitoring such risk;
Level 3: internal audit, which conducts independent evaluations of the System in its entirety.
Principal Characteristics of the Internal Control System and Internal Control over Financial Reporting
The Company has in place a system of risk management and internal control over ?nancial reporting based on
the model provided in the COSO Framework, according to which the internal control system is de?ned as a set of
rules, procedures and tools designed to provide reasonable assurance of the achievement of corporate objectives.
In relation to the ?nancial reporting process, reliability, accuracy, completeness and timeliness of the information
contribute to the achievement of such corporate objectives. Risk management is an integral part of the internal control
system. A periodic evaluation of the system of internal control over ?nancial reporting is designed to ensure the overall
effectiveness of the components of the COSO Framework (control environment, risk assessment, control activities,
information and communication, and monitoring) in achieving those objectives.
The Company has a system of administrative and accounting procedures in place that ensure a high degree of
reliability in the system of internal control over ?nancial reporting.
The approach adopted by the Company for the evaluation, monitoring and continuous updating of the system of
internal control over ?nancial reporting, is based on a ‘top-down, risk-based’ process consistent with the COSO
Framework. This enables focus on areas of higher risk and/or materiality, where there is risk of signi?cant errors,
including those attributable to fraud, in the elements of the ?nancial statements and related documents. The key
components of the process are:
identi?cation and evaluation of the source and probability of material errors in elements of ?nancial reporting;
assessment of the adequacy of key controls in enabling ex-ante or ex-post identi?cation of potential misstatements
in elements of ?nancial reporting; and
veri?cation of the operating effectiveness of controls based on the assessment of the risk of misstatement in
?nancial reporting, with testing focused on areas of higher risk.
Identi?cation and evaluation of the risk of misstatements which could have material effects on ?nancial reporting is
carried out through a risk assessment process that uses a top-down approach to identify the organizational entities,
processes and the related accounts, in addition to speci?c activities, which could potentially generate signi?cant
errors. Under the methodology adopted by the Company, risks and related controls are associated with the
accounting and business processes upon which accounting information is based.
Signi?cant risks identi?ed through the assessment process require de?nition and evaluation of key controls that
address those risks, thereby mitigating the possibility that ?nancial reporting will contain any material misstatements.
2014
|
ANNUAL REPORT 109
In accordance with international best practices, the Group has two principal types of control in place:
controls that operate at Group or subsidiary level, such as delegation of authorities and responsibilities, separation
of duties, and assignment of access rights for IT systems; and
controls that operate at process level, such as authorizations, reconciliations, veri?cation of consistencies, etc.
This category includes controls for operating processes, controls for closing processes and cross-sector controls
carried out by captive service providers. These controls can be preventive (i.e., designed to prevent errors or fraud
that could result in misstatements in ?nancial reporting) or detective (i.e., designed to reveal errors or fraud that have
already occurred). They may also be de?ned as manual or automatic, such as application-based controls relating to
the technical characteristics and con?guration of IT systems supporting business activities.
An assessment of the design and operating effectiveness of key controls is carried out through tests performed by
internal audit functions, both at group and subsidiary level, using sampling techniques recognized as best practices
internationally. Internal Audit also conducts a qualitative review of the tests performed by subsidiary companies.
The assessment of the controls may require the de?nition of compensating controls and plans for remediation
and improvement. The results of monitoring are subject to periodic review by the manager responsible for of the
Company’s ?nancial reporting and communicated by him to senior management and to the Audit Committee (which in
turn reports to the Board of Directors).
Code of Conduct
The Company and all its subsidiaries refer to the principles contained in the Fiat S.p.A. code of conduct (the “Code of
Conduct”) and related Guidelines until approval of the new Code of Conduct by the Board of Directors.
The latest version of the Code of Conduct, a revision of the 2003 version, took effect in February 2010. The Code
of Conduct represents a set of values recognized, adhered to and promoted by the Group which understands that
conduct based on the principles of diligence, integrity and fairness is an important driver of social and economic
development.
The Code of Conduct is a pillar of the governance system which regulates the decision-making processes and
operating approach of the Group and its employees in the interests of stakeholders. The Code of Conduct ampli?es
aspects of conduct related to the economic, social and environmental dimensions, underscoring the importance of
dialog with stakeholders. Explicit reference is made to the UN’s Universal Declaration on Human Rights, the principal
Conventions of the International Labor Organization (ILO), the OECD Guidelines for Multinational Enterprises and
the U.S. Foreign Corrupt Practices Act (FCPA). The Code of Conduct was amended to include speci?c guidelines
relating to: the Environment, Health and Safety, Business Ethics and Anti-corruption, Suppliers, Human Resource
Management, Respect of Human Rights, Con?icts of Interest, Community Investment, Data Privacy and Use of IT and
Communications Equipment.
In May 2014, the Code of Conduct was updated to reinforce the principles regarding “Antitrust” and “Export controls”
regulations and two new related Guidelines also entered into force. The Code of Conduct applies to all Directors,
employees of Group companies and other individuals or companies that act in the name and on behalf of one or more
Group companies.
The Company promotes adoption of the Code of Conduct as a best practice standard of business conduct by
partners, suppliers, consultants, agents, dealers and others with whom it has a long-term relationship. In fact, Group
contracts worldwide include speci?c clauses relating to recognition and adherence to the principles underlying the
Code of Conduct and related guidelines, as well as compliance with local regulations, particularly those related to
corruption, money-laundering, terrorism and other crimes constituting liability for legal persons.
The Code of Conduct is available on the Investors section (Fiat S.p.A. Archive) of the Group’s website.
110 2014
|
ANNUAL REPORT
Corporate Governance
Insider Trading Policy
On October 10, 2014 the Fiat Investments‘s Board of Directors adopted an insider trading policy setting forth
guidelines and recommendations to all Directors, of?cers and employees of the Group with respect to transactions
in the Company’s securities. This policy, which also applies to immediate family members and members of the
households of persons covered by the policy, is designed to prevent insider trading or allegations of insider trading,
and to protect the Company’s for integrity and ethical conduct.
Sustainability Practices
The Group is committed to operating in an environmentally and socially-responsible manner.
As discussed above, the Governance and Sustainability Committee was assigned responsibility for strategic oversight
of sustainability-related issues and reviews the annual Sustainability Report. The GEC de?nes the strategic approach,
evaluates the congruity of the Sustainability Plan with business objectives and is regularly updated on the Group’s
sustainability performance.
The Sustainability Unit, which is part of the Group’s ?nancial organization, has operational responsibility for promoting
a culture of sustainability throughout the Group, it facilitates the process of continuous improvement, and contributes
to managing risks and strengthening the relationship with and perceptions of stakeholders, in addition to managing
sustainability reporting and communications.
The Code of Conduct includes guidelines aimed at ensuring the Group’s activities are conducted in a consistent and
responsible manner. In addition, the Group has also adopted “Sustainability Guidelines for Suppliers,” setting forth
expectations for suppliers and sub-suppliers of the Group worldwide, “Environmental Guidelines,” which provide clear
indications on how to establish and update environmental targets, develop new products and execute daily activities
worldwide, and “Green Logistics Principles” setting forth principles for ensuring respect for the environment in the
Group’s logistical and supply chain operations.
The Group also produces a Sustainability Plan, to drive continuous improvement in the Group’s sustainability
performance. The Sustainability Plan reports on the annual progress of existing and new targets, as well as actions to
be implemented in order to reach these commitments.
The Sustainability Plan is part of the Sustainability Report, which is prepared on a voluntary basis applying the Global
Reporting Initiative’s G4 guidelines (GRI - G4) - comprehensive approach, taking also into account international
Integrated Reporting Framework principles and contents.
The Company’s sustainability model results in a variety of initiatives related to good corporate governance;
environmentally responsible products, plants and processes; a healthy, safe and inclusive work environment; and
constructive relationships with local communities and business partners, as these are the milestones along the
Group’s path of continual improvement oriented to long-term value creation.
Over the years, the Group has placed particular emphasis on the reduction of polluting emissions, fuel consumption
and greenhouse gas emissions in:
engines, by developing increasingly ef?cient technologies for conventional engines, expanding the use of alternative
fuels (such as natural gas and biofuels), and developing alternative propulsion systems (such as hybrid or electric
solutions), based on the speci?c energy needs and fuel availability of the various countries:
production plants, by cutting energy consumption levels and promoting the use of renewable energy;
transport activities, by increasing low-emission transport and involving our employees to reduce their commuting
emissions;
supplier activities, by promoting environmental responsibility and spreading the principles and culture of World
Class Manufacturing;
of?ce-related activities, such as business travel, of?ce activities and information technology emissions;
eco-responsible driving behavior, by providing dealers and customers with information and training on vehicle use
and maintenance.
2014
|
ANNUAL REPORT 111
The Company’s achievements in improving its sustainability performance have been recognized through inclusion in several
leading sustainability indices. In particular, in 2014 the Company was included in the Dow Jones Sustainability World Index.
Compliance with Dutch Corporate Governance Code
While the Company endorses the principles and best practice provisions of the Dutch Corporate Governance Code,
its current corporate governance structure applies as follows the following best practice provisions:
As far the provisions of paragraph II.1.8 regarding the limitation of positions of directors is concerned, the Company
endorses that a proper performance by its Directors of their duties is assured. Given the historical af?liation between
the Company and CNH Industrial N.V., the Company values the current connection between both companies
through the combined positions of Mr Elkann and Mr Marchionne and therefore does not apply those provisions.
The Company applies the best practice provisions in the paragraphs II.2.4 and II.2.5 of the Dutch Corporate
Governance Code. However, prior to the Merger Fiat S.p.A. implemented the 2012 Long Term incentive Plan (the
“Plan”). Pursuant to the Plan, options and stock grants (the “Equity Rights”) related to Fiat S.p.A. were granted
by Fiat S.p.A. to eligible persons prior to the Merger. The Plan provides that such Equity Rights may be exercised
within one year after the date of granting. Due to the Merger, the Equity Rights related to Fiat S.p.A. that were
already granted by Fiat S.p.A. pursuant to the Plan (and that are considered acquired rights) had to be converted
into comparable Equity Rights relating to the Company. In order to achieve this, the Company has granted (rights
to acquire) common shares in the capital of the Company under the Plan under the same terms as apply to the
corresponding Equity Rights related to Fiat S.p.A., including in respect of the term for exercising the Equity Rights.
Pursuant to the provisions of the paragraphs II.3.3 and III.6.2, a Director may not take part in any discussion or
decision-making that involves a subject or transaction in relation to which he or she may appear to have a con?ict of
interest with the Company. However, the de?nition of con?ict of interest as referred to in the Dutch Civil Code refers
to an actual con?ict of interest and as such the regulations of the Board of Directors are geared towards an actual
con?ict of interest and do not include the reference to the appearance of a con?ict of interest. Nevertheless, these
regulations stipulate that the Board of Directors as a whole may, on an ad hoc basis, resolve that there is such a strong
appearance of a con?ict of interest of an individual Director in relation to a speci?c matter, that it is deemed in the best
interest of proper decision making process that such individual Director be recused from participation in the decision
making process with respect to such matter even though such Director may not have an actual con?ict of interest.
The Company does not have a retirement schedule as referred to in paragraph III.3.6 of the Dutch Corporate
Governance Code, because pursuant to the Articles of Association the term of of?ce of Directors is approximately
one year, such period expiring on the day the ?rst annual general meeting of shareholders is held in the following
calendar year. This approach is in line with the general practice for companies listed in the U.S. As the Company is
listed at NYSE, the Company also relies on certain US governance policies, one of which is the reappointment of
our directors at each annual general meeting of shareholders.
The Governance and Sustainability Committee currently has only one non-independent member as required by
paragraph III.5.1. of the Code and although the committee charter allows for the Governance and Sustainability
Committee to have no more than two non-independent members, at the moment the Company does not intend
to make use of this possibility. Mr John Elkann, being an executive Director, has a position on the Governance
and Sustainability Committee to which paragraph III.8.3 of the Dutch Corporate Governance Code applies. The
position of Mr Elkann as executive Director in this committee inter alia follows from the duties of the governance and
sustainability committee, which are more extensive than the duties of a selection and appointment committee and
include duties that warrant participation of an executive Director.
The Dutch Corporate Governance Code provisions primarily refer to companies with a two-tier board structure
(consisting of a management board and a separate supervisory board), while the Company has implemented a one-
tier board. The best practices re?ected in the Dutch Corporate Governance Code for supervisory board members
apply by analogy to non-executive directors. Unlike supervisory board members of companies with a two-tier
board to which provision III.7.1 of the Dutch Corporate Governance Code applies, non-executive directors of the
Company also have certain management tasks. In view hereof, non-executive directors have the opportunity to
elect whether (part of) their annual retainer fee will be made in common shares of the Company.
112 2014
|
ANNUAL REPORT
Corporate Governance
IN CONTROL STATEMENT
Internal Control System
The Board of Directors is responsible for designing, implementing and maintaining internal controls, including proper
accounting records and other management information suitable for running the business.
The principal characteristics of the Internal Control System and Internal Control over Financial Reporting adopted by
the Company are described in the speci?c paragraph mentioned above.
Based on the assessment performed, the Board of Directors concluded that, as of December 31, 2014 the Group’s
and the Company’s Internal Control over Financial Reporting is considered effective.
March 5, 2015
John Elkann
Chairman
Sergio Marchionne
Chief Executive Of?cer
2014
|
ANNUAL REPORT 113
RESPONSIBILITIES IN RESPECT TO THE ANNUAL REPORT
The Board of Directors is responsible for preparing the Annual Report, inclusive of the Consolidated and Company
Financial Statements and Report on Operations, in accordance with Dutch law and International Financial Reporting
Standards as issued by the International Accounting Standards Board and as adopted by the European Union (IFRS).
In accordance with Section 5:25c, paragraph 2 of the Dutch Financial Supervision Act, the Board of Directors states
that, to the best of its knowledge, the Financial Statements prepared in accordance with applicable accounting
standards provide a true and fair view of the assets, liabilities, ?nancial position and pro?t or loss for the year of the
Company and its subsidiaries and that the Report on Operations provides a true and a fair view of the performance
of the business during the ?nancial year and the position at balance sheet date of the Company and its subsidiaries,
together with a description of the principal risks and uncertainties that the Company and the Group face.
March 5, 2015
The Board of Directors
John Elkann
Sergio Marchionne
Andrea Agnelli
Tiberto Brandolini d’Adda
Glenn Earle
Valerie Mars
Ruth J. Simmons
Ronald L. Thompson
Patience Wheatcroft
Stephen M. Wolf
Ermenegildo Zegna
114 2014
|
ANNUAL REPORT
Sustainability Disclosure
Sustainability Disclosure
Sustainability Governance and Commitment to Stakeholders
Sustainability Governance
All areas of the Group have an active role in addressing the goals and challenges of sustainability. The sustainability
management process is based on a model of shared responsibility that begins with the top level of management
and involves every area and function within the organization. All employees worldwide are expected to conduct their
activities responsibly.
Several entities within the organization are responsible for directing and coordinating sustainability activities across the
Group’s businesses. Those entities include:
The Sustainability Team, through its of?ces in Italy, the U.S., Brazil and China, has a key role in promoting a culture
of sustainability within the Group and facilitating the process of continuous improvement, while contributing to
risk management, cost optimization, stakeholder engagement and enhancement of the Group’s image. The
team collaborates with individuals within the business areas, regions and central functions that have operational
responsibility for issues such as the environment, energy, innovation and human resources, and supports them
in identifying key areas for action. It also manages relationships with international sustainability organizations, as
well as sustainability rating agencies and investment analysts, with the support and coordination of the Investor
Relations team.
The Cross-functional Sustainability Committee (CSC) consists of the heads of the principal central functions, operating
segments and regions, who are often also consulted individually. The CSC evaluates and facilitates operational
decisions, as well as serving in an advisory capacity for proposals submitted by the Sustainability Team to the
Group Executive Council (GEC), the decision-making body composed of the Chief Executive Of?cer (CEO) and
Chief Operating Of?cers (COOs) of the regions and operating segments, together with the heads of various central
functions. The GEC is responsible for de?ning the strategic approach, approving operating guidelines and evaluating
the alignment of the Sustainability Plan with business objectives. The CSC periodically updates the GEC on individual
initiatives and the Group’s overall sustainability performance.
The Governance and Sustainability Committee (a committee of the Board of Directors) evaluates proposals relating
to strategic guidelines for sustainability-related issues and, as appropriate, formulates proposals to the Board of
Directors. This Committee also reviews the annual Sustainability Report.
Commitment to Stakeholders
Our ability to generate value through our business decisions is intrinsically linked to how effective we are in listening
to and understanding the needs and expectations of our stakeholders. FCA has established a global target
to expand and innovate the sustainability dialogue with our stakeholders, and to reach an increasing number
worldwide each year.
The decisions made by many of our stakeholders - including customers, suppliers, dealers, employees, public
institutions, trade and industry groups, investors and local communities - affect the Group’s activities. Similarly, the
Group’s activities and results affect, to varying degrees, the actions and expectations of stakeholders.
For this reason, operating responsibly requires continuous engagement with stakeholders at the local and global
levels, as indicated in the Group’s Stakeholder Engagement Guidelines.
Over time, our engagement has evolved and we have developed a variety of channels to communicate with each type
of stakeholder. This has fostered a deeper understanding of stakeholder expectations and led to the implementation
of initiatives that are more effective at addressing their speci?c needs.
2014
|
ANNUAL REPORT 115
In 2014, FCA conducted 14 internal sustainability-focused Stakeholder Engagement events in Italy, the U.S. and
China. These events provided a platform for more than 400 employees representing the various business areas to
express their views, needs and priorities. The participants took part in discussions and workshops that addressed the
economic, environmental and social impacts of FCA’s activities. The events were also effective in identifying material
aspects speci?c to each region.
Materiality Analysis
FCA’s sustainability reporting focuses on topics that have been determined to be material in accordance with the
Global Reporting Initiative (G4) framework (“Material Aspects are those that re?ect the organization’s signi?cant
economic, environmental and social impacts; or substantively in?uence the assessments and decisions of
stakeholders”, Global Reporting Initiative, Sustainability Reporting Guidelines- G4, pg. 7).
In 2014, material topics identi?ed in prior years were subjected to a thorough review and the FCA materiality diagram
was updated accordingly (The materiality analysis was carried out in accordance with the AA1000 Stakeholder
Engagement Standard guidelines for the steps relating to the identi?cation, mapping and prioritization of stakeholders,
and to the analysis of the results of their involvement. The guidance notes on Accountability and the criteria de?ned
by the Global Reporting Initiative (GRI-G4) were also followed with regard to outlining an approach to the materiality
principle and the identi?cation of material issues). In addition to the results from our stakeholder engagement activities,
the determination of materiality also took into account strategic priorities, corporate values, competitive activities and
social expectations.
An analysis of the scope of each material aspect con?rmed that it has impacts throughout the entire organization
and across all operating segments and regions. In addition, each aspect has impacts outside the organization in
geographical areas where the Group operates and for all stakeholder categories identi?ed.
Product Social Environment
Alternative fuels (natural gas, biofuel)
I
m
p
o
r
t
a
n
t
Important
V
e
r
y
i
m
p
o
r
t
a
n
t
Very important
I
n
c
r
e
a
s
i
n
g
i
m
p
o
r
t
a
n
c
e
f
o
r
e
x
t
e
r
n
a
l
s
t
a
k
e
h
o
l
d
e
r
s
Increasing importance for internal stakeholders
Vehicle safety
Vehicle fuel economy
Vehicle quality
Alternative propulsion and drive systems
(hybrid and electric)
Product innovation
New mobility solutions
Vehicle CO
2
emissions
Energy and CO
2
emissions from operations, of?ces
Waste generated by operations
Environmental impact of logistics
Responsible sourcing
and recycling
Water used by operations
Workforce diversity
and equal opportunities
Engagement with trade unions Engagement
with business partners
Employee development and training
Employee health and safety
Human rights along the value chain
Business integrity and ethical standards
Customer satisfaction
Community engagement
Employee well-being and work-life balance
116 2014
|
ANNUAL REPORT
Sustainability Disclosure
Research, Innovation and Sustainable Mobility
FCA is committed to meeting the mobility needs of customers, while reducing the environmental and social impact of
vehicles over their entire life cycle. The Group’s global research and innovation activities are focused on developing
solutions for increasingly sustainable mobility, by reducing fuel consumption and emissions, improving vehicle
recyclability and safety, and developing new models of mobility. Continuous innovation is essential to development of
products that are environmentally and socially sustainable, as well as affordable.
Innovating for Sustainable Products and Processes
All innovation activities worldwide are coordinated through a common framework, the FCA Global Innovation Process
(GIP). Developed in collaboration with, and on the basis of, input from the Group’s four operating regions, the GIP
covers all phases of the innovation process, from idea generation to pre-competitive development. As part of that
process, guidelines and targets are then formalized in the Strategic Agenda.
During 2014, the process was further enhanced through improved integration of the four regions in several aspects of
project de?nition and management. As a result, achievements for current projects were optimized and proposals for
new initiatives were harmonized on the global level.
The process is coordinated centrally by the Chief Technology Of?cer who, as a member of the Group Executive
Council, ensures alignment of the innovation process with the Group’s strategic objectives, and enables synergies and
the transfer of new solutions across the Group’s global product portfolio.
At year-end 2014, the Group’s research and innovation activities involved approximately 20,000 individuals at 85
centers worldwide.
During the year, the Group invested approximately €3.7 billion in R&D (Includes capitalized R&D and R&D charged
directly to the income statement), representing around 3.9% of net revenues from Industrial Activities.
The Group’s innovation activities have generated a signi?cant intellectual property portfolio over the years and, at year-
end 2014, FCA had a total of 8,311 registered patent applications and 3,719 protected product designs.
Patents - FCA worldwide
Total patents registered at December 31, 2014 8,311
of which: registered in 2014 596
Patents pending at December 31, 2014 3,410
of which: new patent applications ?led in 2014 414
Designs - FCA worldwide
Design rights registered at 31 December 2014 3,719
of which: registered in 2014 294
Centers of Excellence
CRF, headquartered in Orbassano (Turin, Italy) with additional sites across Italy, was established in 1978 as a focal point
for the Company’s research and innovation activities. It is a recognized center of excellence at the international level.
The mission of CRF is to:
develop and transfer innovative systems and features, materials, processes with innovation expertise in order to
improve the competitiveness of FCA products;
represent FCA in European collaborative research programs, joining pre-competitive projects and promoting
networking actions;
support FCA in the protection and enhancement of intellectual property.
2014
|
ANNUAL REPORT 117
CRF draws on technical skills and knowledge covering the full spectrum of automotive engineering disciplines and is
equipped with state-of-the-art laboratories for testing powertrain systems, analyzing materials and electromagnetic
compatibility, and conducting noise and vibration analysis and driving simulations. All research activities are conducted
in coordination with the technical areas and operating regions of FCA.
Located in Windsor, Canada, the FCA Automotive Research and Development Centre (ARDC) opened in May 1996
in partnership with the University of Windsor and serves as an illustration of what can be achieved when industry,
academia and government work together. The ARDC is equipped with six road-test simulators and a range of
research and development support facilities, including the Automotive Coatings Research Facility, the Automotive
Lighting Research Facility and the Vehicle Recycling Laboratory.
Dedication to innovation in numbers (no.) 2014
CRF employees at year end 914
Collaborative research projects, running at the end of 2014 264
of which: approved in 2014 17
Strategy to Minimize Emissions
The Group’s sustainable product strategy is based on reducing the environmental impact of vehicles over their entire
life cycle and addressing emissions challenges on several fronts. Key elements in this strategy include optimizing the
ef?ciency of conventional engines, offering a full range of alternative fuel vehicles, developing alternative propulsion and
emission reduction systems, reducing the energy requirements of vehicles, promoting driver behavior that contributes
to reducing emissions and introducing new mobility services and solutions.
Immediate and tangible results can best be achieved by combining conventional and alternative technologies,
while recognizing and accommodating the different economic, geographic and fuel requirements of each market.
Affordability is also a key consideration: even the most effective technologies cannot have a signi?cant impact on the
environment if they are too expensive to reach a suf?ciently large number of people.
The Group’s commitment to increasingly sustainable mobility is particularly focused on the EMEA and NAFTA regions,
where approximately 73% of Group revenues were generated in 2014.
In the European Union, the Group’s Mass-Market brands (Fiat, Alfa Romeo, Lancia, Abarth, Chrysler and Jeep) have
reduced average CO
2
emissions per vehicle sold by 24% over the past 14 years. In addition, approximately 73% of
Group cars sold in 2014 had CO
2
emissions at or below 120 g/km, and 82% at or below 130 g/km.
New registrations by CO
2
emissions level in European Union for Mass-Market Brands (g/km)
(*)
up to 100 12%
from 101 to 110 15%
from 111 to 120 46%
from 121 to 130 9%
above 130 18%
Total 100%
(*)
CO
2
data based on New European Driving Cycle (NEDC) measurement standard.
In the United States, vehicle ef?ciency is measured by fuel economy (Data is reported to the U.S. National Highway
Traf?c Safety Administration (NHTSA) and provided by model year, meaning the year used to designate a discrete
vehicle model, irrespective of the calendar year in which the vehicle was actually produced, provided that the
production period does not exceed 24 months. CAFE standards from NHTSA are set independently for passenger
cars and light duty trucks. Fuel economy is based on the most recent NHTSA required submission, which for 2014
re?ects mid-model year data. Previous year data is adjusted to re?ect ?nal EPA/NHTSA reports) expressed in miles
per gallon (mpg). Actual ?eet performance is dependent on many factors, including the vehicles and technologies FCA
offers, as well as the mix of vehicles consumers choose to buy.
118 2014
|
ANNUAL REPORT
Sustainability Disclosure
In 2014, trucks, including SUVs, pickup trucks and minivans, accounted for approximately three quarters of FCA sales
in the United States. FCA light duty truck fuel economy improved 6% from 2013 to 2014, increasing from 24.5 mpg in
2013 to 26.0. Due to consumer preference for FCA large cars and larger displacement engines in 2014, FCA domestic
passenger car mpg declined, from 32.3 in 2013 to 31.1.
The Group introduced a number of new solutions in 2014 to improve the eco-performance of our products.
Innovative Powertrains
The latest addition to the FIRE family of gasoline engines - the 140 hp, 1.4-liter Turbo MultiAir II - was launched in
Europe on the new Jeep Renegade in late 2014 and is now also available on the Fiat 500X. This second generation
MultiAir technology brings further improvements in fuel ef?ciency and CO
2
emissions (up to 2% based on the New
European Driving Cycle), building on the advantages of the ?rst generation MultiAir engines that delivered reductions of
up to 10% compared with a conventional gasoline engine of the same displacement.
The new high-performance 1.8-liter Turbo GDI (Euro 6) was introduced on the Alfa Romeo Giulietta for the European
market in combination with the 6-speed TCT (twin clutch) sequential automatic transmission. The aluminum engine
block, electronically-controlled thermostat, variable displacement oil pump and other features all contribute to the
engine’s best-in-class CO
2
emissions performance.
The Start&Stop system was introduced on the 8-valve, 1.2-liter versions of the Fiat 500 and Lancia Ypsilon, further
improving average CO
2
emissions for our vehicle ?eet in Europe.
With respect to new diesel engines in Europe, availability of the second-generation 120 hp, 1.6-liter MultiJet II and
140 hp, 2.0-liter MultiJet II, both Euro 6 compliant, has been extended to the Fiat 500X. Equipped with the 1.6-liter
engine, the 500X delivers fuel consumption as low as 4.1 liters/100 km and CO
2
emissions of 109 g/km (combined
cycle). Other eco-friendly technologies on the 500X include: a smart alternator, which modulates energy output based
on current energy demand and battery charge level; optimization of the engine cooling circuit to reduce warm-up
time; and a variable displacement oil pump that improves energy ef?ciency by regulating oil pressure based on actual
operating conditions.
In the NAFTA region, FCA’s 3.0-liter EcoDiesel engine on the Ram 1500 delivers the highest fuel economy among all
full-size truck competitors - 12% higher than the next-closest competitor. In 2014, in response to strong consumer
demand, FCA increased the EcoDiesel mix to 20% of Ram 1500 production. This engine is also available on the Jeep
Grand Cherokee, delivering 30 miles per gallon with a driving range of more than 730 miles.
During 2014, FCA continued to expand availability of the Group’s advanced technology transmissions. The new
Jeep Renegade became the world’s ?rst small SUV with a nine-speed automatic transmission. This transmission
delivers a smooth driving experience and improved fuel ef?ciency. The nine-speed transmission is also available on
the new Fiat 500X.
In addition, the Jeep Renegade and Fiat 500X are equipped with rear-axle disconnect, which reduces energy loss when
4x4 capability isn’t needed and, as a consequence, improves overall fuel ef?ciency. This technology seamlessly and
automatically switches between two- and four-wheel drive for full-time torque management under all driving conditions.
FCA’s highly ef?cient TorqueFlite eight-speed automatic transmission is now powering more than one million vehicles,
with availability expanded to include all versions of the Chrysler 300, Dodge Charger and Challenger. The TorqueFlite
was already available on the Ram 1500 pickup, Lancia Thema, Dodge Durango and Jeep Grand Cherokee.
Depending on the application, this transmission contributes to fuel economy improvements of up to 12%, compared
with the previous ?ve-speed and six speed transmissions it replaces.
Research activities on gasoline engines have been devoted to the continuous evolution of the MultiAir system
capabilities. The aim is to maintain the highest thermal ef?ciency over the entire engine operating ?eld. Smart
auxiliaries, lightweight materials and low friction components are being assessed for future engine platforms to further
reduce fuel consumption and CO
2
emissions.
Research activities on diesel engines have been focused on both the combustion process and after-treatment technologies.
The aim of the combustion research has been to mitigate pollutant formation and enhance fuel consumption.
2014
|
ANNUAL REPORT 119
Research on after-treatment systems have been focused mainly on passive and active NOx reduction technologies to
address real driving conditions.
For Magneti Marelli, eco-sustainable products (Includes hybrid engine, Xenon and LED headlights, LED tail lights,
GDI injection systems, electronic control modules, automated manual transmissions and components of dual clutch
transmissions) contributed €1.7 billion in revenues for 2014, representing an increase of 21% over the prior year
(€1.41billion).
Natural gas, electric and hybrid solutions
A key element in Group’s emissions reduction strategy is the development of alternatives to the conventional gasoline
engine.
The Group believes that natural gas is currently the most effective and affordable solution available for reducing
CO
2
emissions and pollution levels, particularly in urban areas. The level of CO
2
emissions from a car running on
natural gas is 23% lower than for an equivalent gasoline-powered vehicle. In addition, natural gas in the form of
biomethane, which is produced from biomass, has signi?cant potential for development as a widely-available
renewable energy source. The Group continued as the undisputed leader in this market sector in Europe with over
56,000 natural gas vehicles sold in 2014 (+34% compared with 2011). In North America, FCA remains the only
automaker to offer a factory-built natural gas pickup, the Ram 2500 Heavy Duty CNG. The Group continued research
and development of technologies that will use natural gas even more ef?ciently. Advances in engine technology that
leverage the properties of natural gas offer signi?cant potential for achieving solutions to meet the CO
2
emissions
targets being phased in across Europe through 2020.
FCA maintained its long-standing leadership in biofuel vehicles in Brazil with more than 680,000 Flexfuel and TetraFuel
vehicles sold in 2014, accounting for approximately 98% of vehicles sold by the Group. Flexfuel technology enables
the use of varying blends of gasoline and bioethanol, while the TetraFuel engine is the ?rst in the world capable of
running on four different fuels: bioethanol, Brazilian gasoline (re?ned crude oil and 22% anhydrous ethanol), standard
gasoline and natural gas.
The Group is also investing in hybrid and electric vehicle development. The Fiat 500e battery electric vehicle,
launched in the U.S. in 2013 delivers a best-in-class 108 highway MPGe (MPGe is the measure devised by the
U.S. Environmental Protection Agency for determining how many miles an electric vehicle can travel on a quantity
of battery-generated electricity having the same energy content as a gallon of gasoline) rating and a class-leading
87 miles of combined city/highway driving. In 2014, two new plug-in hybrid electric vehicles were announced in the
2014-2018 FCA Business Plan: a Chrysler Town & Country minivan PHEV for 2016 and a Chrysler Full Size Crossover
PHEV. Also included in the Business Plan was the application on a future vehicle of a mild hybrid using belt starter
generator (BSG) technology. BSG offers improvement in fuel economy combined with a reduction in CO
2
emissions at
a relatively low cost.
FCA is focused on researching electric/hybrid solutions that are competitive in terms of both cost and performance.
Electric vehicles do not yet offer the same level of advantages for the environment and consumers as natural gas
vehicles. Limitations such as cost, range, recharging speed and infrastructure have thus far prevented widespread
market penetration of electric vehicles. FCA supports public and private sector pilot projects aimed at overcoming
these barriers and testing the market potential for widespread application of electric vehicles. One Group initiative in
this area is a car sharing service, established in conjunction with the City of Turin, where FCA has provided a ?eet of
eight all-electric Fiat 500e vehicles. This represents the ?rst test of the Fiat 500e technology in Europe. The Fiat 500e is
also included in the ?eet supplied to Expo 2015 by FCA, which is an Of?cial Global Partner for sustainable mobility.
FCA has established partnerships with several government entities, universities and other organizations to develop
electric technologies. Among these is a 5-year, €13.7 million partnership with McMaster University, a public research
university in Hamilton (Canada), with funding support from the Canadian government. The project will advance FCA’s
electri?cation strategy through the development of multiple prototypes of critical components, platforms and tools
designed to strengthen the Company’s future product lines. The ?rst of three phases was completed in 2014, and
resulted in the ?ling of four new patent applications.
120 2014
|
ANNUAL REPORT
Sustainability Disclosure
Innovative Vehicle Architectures
Solutions for an optimal balance between vehicle safety, comfort and emissions levels are focused on minimizing
vehicle weight, aerodynamic drag, rolling resistance and the energy demands of auxiliary systems.
In 2014, the Group introduced the latest architectural solutions on the new Jeep Renegade and Fiat 500X. High-
Strength Steels (HSS), which represent more than 70% of the weight of the new Jeep Renegade, ensure a strong,
rigid structure. The Renegade was designed with integrated aerodynamic features to reduce drag and contribute to
improving fuel economy. These features include fully integrated, aerodynamic-tuned body and fascias; an extensive
rear spoiler; integrated underbelly pans; an integrated sill; aerodynamic spats; and a tail lamp designed to kick air off
the side of the body.
Sustainable Materials
Research and innovation for materials used in Group vehicles are concentrated in three areas:
research on new materials and structures to reduce vehicle weight (e.g., high-strength steels, new light alloys,
composite plastic materials)
analysis of biomaterials suitable for automotive applications (e.g., recycled polypropylene reinforced with natural
?bers for use in vehicle interiors, and bioplastics from renewable sources)
identi?cation of alternative uses for materials recovered at end of vehicle life (e.g., use of scrap tires to produce
rubberized asphalt)
Promoting Eco-Sustainable Driving
Driving behavior is a signi?cant contributing factor to the environmental impact of vehicles. Aware of the substantial
difference drivers can make, FCA has continued to invest in the eco
rive system, which provides personalized tips to
help drivers improve their driving style and, as a consequence, reduce fuel consumption and vehicle emissions. The
ecorive system is now available on nearly all Fiat and Fiat Professional models sold in Europe, Brazil, the U.S. and
Canada.
An analysis of the best drivers revealed that the system can contribute to reducing fuel consumption by as much
as 16%. By the end of 2014, ecorive had been used by more than 98,400 customers and contributed to annual
avoidance of more than -6,000 tons per year of CO
2
emissions.
On the Fiat 500L, 500L and 500X, the latest version of this application, ecorive Live, allows drivers to see tips
and suggestions via the new Uconnect multimedia system. Real-time feedback on driving style enables immediate
reductions in fuel consumption and emissions.
Mobility Models
The Group’s innovation activities also focus on solutions to respond to emerging mobility needs of customers and FCA
employees.
One initiative is Enjoy, an innovative car-sharing service launched in Milan, Italy, by the energy company ENI, in
collaboration with FCA and Trenitalia. In 2014, Enjoy was extended to include Rome and Florence. Enjoy is designed
to address traf?c congestion and improve the quality of life for urban residents. FCA supplies the vehicles for this
initiative, which represents the largest car-sharing ?eet in Italy with more than 1,400 cars. Features of the service
include online or smartphone application sign-up and management, as well as the ability to instantly select from a
pool of available vehicles parked at locations around the city. Drivers can also leave the vehicle at any of the approved
parking facilities within the service coverage area.
Another innovative mobility program, the Fiat 500e Pass, provides alternative transportation to Fiat 500e customers
in the U.S. The program offers a ?exible solution for situations when a 500e customer needs to drive beyond the
vehicle’s range or needs the carrying capability of a larger vehicle. Customers receive up to 12 days of alternate
transportation each year for the ?rst three years after the date of purchase.
2014
|
ANNUAL REPORT 121
Mobility options are also available to support employee commuting. One project is easygo, started at Mira?ori, Turin
(Italy). Easygo targeted approximately 18,000 employees who commute to and from the complex, and has been
implemented in other plants as well. Through a dedicated portal, employees can arrange car-pooling with coworkers
and access updated information on public transport and mobility services.
In the U.S., a grassroots sustainability program promotes vanpool options for employee commuting. In 2014, over 170
vanpool participants avoided driving individual vehicles an additional 3 million km.
The program advantages include reducing the environmental impact of daily commuting, as well as employee bene?ts
such as reducing commute times, cost, stress and the risk of accidents.
In addition FCA’s Autonomy program provides tailored vehicle solutions for customers with reduced motor abilities. In
Italy, revenues from the sale of Autonomy vehicles totaled €117 million in 2014.
Youth have an important part to play in any discussion about the future of mobility. In collaboration with the Italian
Departments of Education and the Environment, FCA launched the Fiat Likes U project in 2012 (with students from
eight universities across Italy taking part. The project represents the ?rst time in Europe that an automaker has worked
with universities on an initiative to promote environmental awareness and the use of eco-friendly cars through the
three-pronged approach of Mobility (free car-sharing service for students), Study (eight €5,000 university scholarships
and eight seminars conducted by FCA managers) and Work (eight paid internships within the Group).
The initiative has proved extremely successful: more than 1,200 students used the car service in 2014, which includes
a ?eet of Fiat Pandas and 500Ls totaling more than 250,000 km. The cities involved in 2014 were Turin, Pisa, Padua,
Bologna and Rotterdam.
In addition to the expansion of the program in Italy to 10 national universities, the second phase of the Fiat Likes U
project extends to ?ve additional countries: Netherlands, Spain, Poland, Denmark and Germany, reaching 785,000
students.
FCA is also a Global Partner of Expo 2015 in Milan, a non-commercial Universal Exposition oriented towards
interpreting the collective challenges faced by humanity.
Beginning in 2013, FCA provided a ?eet of sustainable cars for use up to and during the Expo. A total of 35 vehicles
are already in use, including 21 natural gas-powered Fiat 500Ls. Closer to the opening of the Expo, an additional 50
natural gas/biomethane Fiat 500Ls will be made available for car sharing by visiting delegations from around the world,
together with 10 Fiat 500e electric service vehicles.
In the United States, the Group has been heavily engaged in research on future social and technological trends that
will affect nearly every aspect of our business - from design to manufacturing, marketing and human resources. In
2014, three research initiatives focused on mobility trends including Global Urban Mobility, U.S. Family Mobility and
U.S. demographics. The research provided insight into functional and experiential vehicle needs for new mobility
concepts, services and products.
A customer focused approach
The Group’s products and services are designed to ensure the highest level of customer satisfaction and loyalty by
addressing the increasing diversi?cation in mobility needs.
Feedback received during the Stakeholder Engagement events held in 2014 provided con?rmation that customer
services, vehicle quality and vehicle safety are issues of primary importance to the Group’s stakeholders.
In line with our 2020 targets for engagement with existing and potential customers, we have introduced several
innovative communication tools that to help us better understand their individual needs. At the same time, expanded
consumer access to information increases expectations that businesses will respond rapidly to their requirements.
The Group monitors customer satisfaction on a continuous basis and, where appropriate, develops new customer
channels that help contribute to improvements in product safety and service quality.
122 2014
|
ANNUAL REPORT
Sustainability Disclosure
Interaction with Customers
The Group has established a network of specialist Customer Contact Centers (CCC) whose role is to ensure a
consistent, high standard of quality in the interaction with existing and potential customers. A total of 27 Centers with
around 1,100 customer care professionals manage more than 11 million contacts a year, with services ranging from
information, to complaint management and coordination of roadside assistance in some area. The Customer Contact
Centers, together with the dealer network, represent the primary channel of communication with customers.
The CCCs regularly monitor customer satisfaction levels to identify potential areas for improvement in service levels or
introduction of customized, on-demand channels of communication. Major emphasis is given to training for personnel
who communicate directly with customers given the importance of transparency and professionalism in the customer
relationship.
Managing Vehicle Safety
At FCA, we take transportation safety personally. Customers trust the quality and safety of our products, and we
constantly do our utmost to warrant this con?dence.
In 2014 we made an important organizational move to amplify our commitment to safety, as FCA US established the
new of?ce of Vehicle Safety and Regulatory Compliance. The reorganization created a stand-alone organization led
by a senior vice president who reports directly to the CEO of FCA US, ensuring a high level of information ?ow and
accountability. This new structure establishes a focal point for working with consumers, regulatory agencies and other
partners to enhance safety in real-world conditions.
In addition, the safety organizations in FCA’s four regions - EMEA, NAFTA, LATAM and APAC - constantly share
information and best practices in order to harmonize design guidelines and processes. Safety design guidelines are
implemented from the concept phase of every new model through the release of detailed design speci?cations to all
the providers of sub-systems for the vehicle.
Our overall approach recognizes that safer highways, improved traf?c management and driver education all have a
role to play in enhancing safety on the road. That is why we strive to connect our safety efforts to a collective goal we
share with our employees, drivers, dealers, suppliers, law enforcement, regulators and researchers.
In 2014, a number of FCA vehicles have earned top ratings based on performing to the highest levels during
assessments by independent agencies. These ratings help validate our continuing efforts to deliver the latest
advancements in both passive and active safety technologies.
In Europe, Jeep Renegade was awarded the prestigious Euro NCAP Five-Star rating, with an overall score of 80/100,
achieving a rating of 87% for adult occupant protection, 85% for child occupant protection, 65% for pedestrian
protection and 74% for driving assistance safety systems. Given that Euro NCAP has adopted even stricter thresholds
for the Five-Star rating in relation to adult occupant, child occupant and pedestrian protection, this rating is even more
signi?cant.
In APAC, the Fiat Ottimo was awarded Five Stars in the C-NCAP conducted in China and the highest possible overall
vehicle safety score (Five Stars) was also achieved by Maserati Ghibli in the Australasian New Car Assessment
Program (ANCAP).
To date in the U.S., the 2015 Chrysler 200 FWD, Dodge Challenger, Dodge Dart and Jeep Grand Cherokee 4WD
have earned Five-Star overall safety ratings in the U.S. NCAP conducted by the National Highway Traf?c Safety
Administration (NHTSA). The Insurance Institute for Highway Safety (IIHS) gave the Chrysler 200 a Top Safety Pick+
status. Collision-warning systems are a prerequisite to achieve IIHS Top Safety Pick+ status. The IIHS also gave the
Dodge Dart a Top Safety Pick rating.
The most noticeable improvements in future safety will occur through the continued integration of active safety
systems such as pre-crash warnings, advanced emergency braking, lane departure warnings and lane-keeping assist
technologies.
2014
|
ANNUAL REPORT 123
Product Quality
The Group is committed to offering vehicles of the highest quality, while at the same time addressing the speci?c
requirements of each market. Quality practices and processes have been standardized worldwide to ensure
consistent achievement of that objective.
Vehicle quality improvements are implemented by dedicated model-speci?c teams as well as by cross-functional
teams. Their activities include establishing preventive checks and controls for processes, identifying areas
for improvement and implementing the relevant improvement measures. Quality assessment is based on a
comprehensive set of internal metrics, such as reliability, together with external (3
rd
party) measurement speci?c to
each region.
Employees
The Group’s employees are crucial to its ability to compete as a leader in the global auto sector, as well as to create
value that is sustainable over the long term.
As of December 31, 2014, the Group had a total of 228,690 employees, a 1.4% increase over year-end 2013.
Employees by region
Europe 38.5%
North America 37.4%
South America 20.6%
Asia 3.4%
Rest of World 0.1%
Total 100.0%
Employees by category
(1)(2)
Hourly 69.5%
Salaried 15.0%
Professional 14.5%
Manager 1.0%
Total 100.0%
(1)
Employee workforce figures reported in this section do not include the 50% Sevel JV in EMEA or the 50% Fiat JV in APAC.
(2)
There are four main categories of employees: hourly, salaried, professional and manager. Professional encompasses all individuals who perform
specialized and managerial roles (including “professional” and “professional expert” under the FCA Italy classification system and “mid-level
professional” and “senior professional” under the FCA US classification). Manager refers to individuals in senior management roles (including
those identified as “professional masters,” “professional seniors” and “executives” under the FCA Italy classification system, and “senior
managers” and above under the FCA US classification).
There were a total of 32,198 new hires during the year, of which 44% were in North America, this region experienced
continued increases in production to meet consumer demand. Approximately 5,670 ?xed-term contracts were converted
to permanent, demonstrating the Group’s continued commitment to the long-term stability of the workforce.
Employee turnover
Employees at December 31, 2013 225,587
New Hires 32,198
Departures (27,912)
Change in scope of operations (1,183)
Employees at December 31, 2014 228,690
124 2014
|
ANNUAL REPORT
Sustainability Disclosure
Management and Development
Stakeholder engagement dialogue, which was expanded to all regions worldwide in the past two years, continued to
con?rm that the professional development of Group employees is an issue of major importance.
Recognizing performance, facilitating professional development and ensuring equal opportunity to compete for key
positions within the organization are essential elements of the Group’s commitment to its staff.
FCA uses a structured process to identify and develop talent, as well as to promote employee motivation.
The Performance and Leadership Management (PLM) process implemented worldwide is used to evaluate managers,
professionals and salaried employee performance. This program facilitates setting speci?c objectives for individual
results and professional development.
Performance and leadership mapping involves around 60,700 Group employees worldwide, including all managers
and professionals, and a sub-set of salaried personnel. The Group also uses other performance evaluation processes
to determine individual variable compensation.
Talent management and succession planning are also integral to the Human Resources management model, and are
designed to ensure the alignment of objectives and processes across the four operating regions. In 2014, Talent Reviews
were conducted for 16 different professional families, companies and functions. These Talent Reviews identi?ed talented
individuals with leadership potential who merit additional investment in their professional development.
During the year, the Group also invested around €66 million in training and skill-building initiatives, which represent
another important management tool.
The Group’s extensive training programs were expanded to include new initiatives aimed at strengthening individual
skills and performance by leveraging the Group’s diversity of talent, experience and cultures. The new initiatives included
training and seminars designed to equip employees to operate with the same degree of effectiveness in different cultural
settings. About 4.3 million hours of training were provided during the year to around 180,000 employees.
The model adopted in 2012 to evaluate bene?ts and potential savings from training initiatives has been consolidated
as a best practice and re?ned. Based on the industry leading World Class Manufacturing (WCM) Cost Deployment
framework, this model is called Cost Deployment of Training. With reference to the training initiatives most speci?c
to ?eld activities, the potential savings generated from the result of training were calculated. The application of this
methodology to on-the-job-training has allowed for the generation of process ef?ciencies resulting from investments
in employee training as well as from converting them into their corresponding economic value. The savings generated
through this perimeter of training initiatives was €3.9 million on an overall cost of €1.5 million.
Diversity: Equal Opportunity and Innovation
Diversity is fundamental to the overall success of an organization. FCA is committed to ensuring a work environment
where employees feel respected, valued and included. Diversity, including gender diversity, brings a wealth of
perspectives and experience to the Group and signi?cantly enhances its ability to compete and to understand
customers, cultures and local communities.
During the year, the Group hired people of 65 different nationalities around the world, further enhancing the
multicultural makeup of the organization and the diversity of experience and perspectives.
The percentage of female employees continued to grow, reaching 20.3% of the total workforce at year-end 2014.
Women now also account for approximately 13.2% of management personnel.
The Group also continued to ensure equal opportunities for minority groups, including speci?c opportunities for
disabled workers.
FCA’s commitment to equal opportunity and to a culture free from discrimination is formally set out in the Group Code
of Conduct as well as in guidelines and procedures.
Together, the Code of Conduct and guidelines ensure uniform application of the Group’s standards worldwide, which
take precedence in jurisdictions where legislation is less stringent.
2014
|
ANNUAL REPORT 125
Diversity within an organization is closely correlated to the ability to innovate. To help foster creativity at all levels
within the organization, the Group has set a long-term goal to increase employee contribution through new initiatives
and channels. As part of the World Class Manufacturing (WCM) program, for example, employees worldwide are
encouraged to submit suggestions to improve production processes. Speci?c initiatives in each region are also
designed to increase employee involvement and encourage innovative ideas through the use of non-traditional
channels and forums. At the FCA US Headquarters and Technology Center, there is a dedicated Innovation Space,
which serves as a genuine think tank equipped with tools and materials for idea development. In 2014, nearly 50
training and workshop activities, involving roughly 750 employees, were held in the Innovation Space. In the LATAM
region, the BIS program allowed the collection of about 1,500 employee projects in 2014.
The EMEA region launched the iPropose initiative in 2012, which, similar to the BIS program, is designed to encourage
employees to propose ideas to reduce cost and increase competitiveness. In 2014, an additional 3,500 employees
joined the initiative. The adoption of the best suggestions, as well as the implementation of speci?c projects led by
interfunctional teams and aimed at optimizing value of product and services (e.g. packaging, transportation).
Health and Safety in the Workplace
Fiat Chrysler Automobiles is committed to providing a safe and healthy working environment at every site worldwide
and in every area of activity.
The Group’s health and safety strategy targets the following key areas:
application of uniform procedures for identi?cation and evaluation of risks
adherence to the highest safety and ergonomics standards for plant and machinery design
promotion of safe behavior through training initiatives and awareness campaigns
assurance of a healthy work environment and promotion of a healthy lifestyle.
For several years, FCA has been tracking and analyzing performance data in each of these areas on a monthly basis.
Health and safety performance indicators are, in fact, an integral component of the Group’s industrial performance
measures.
The commitment to achieving “zero accidents” is formalized in the Health and Safety Guidelines - which form the basis
for policies in each area of activity - and through global adoption of an Occupational Health and Safety Management
System (OHSMS) certi?ed to the OHSAS 18001 standard.
At year-end 2014, a total of 134 plants, accounting for 170,000 employees, had an OHSMS in place that was OHSAS
18001 certi?ed.
Measures implemented over the years have contributed to signi?cant improvements in all accident indicators. In 2014,
the Frequency Rate was down 21.1% compared with the prior year (with 0.15 accidents per 100,000 hours worked)
and the Severity Rate was down 16.7% (with 0.05 days absence due to accidents per 1,000 hours worked).
Effective safety management is also assured through the application of World Class Manufacturing tools and
methodologies, active involvement of employees, development of speci?c know-how and targeted investment.
In Italy, investment in health and safety, combined with other measures, has resulted in a progressive reduction in the
level of risk attributed to Group plants by INAIL, the national accident and disability agency. As a result, the Group was
eligible for “good performer” premium discounts, resulting in total savings of about €16 million in 2012, €14.6 million
in 2013 and €18.4 million in 2014.
In addition to safety in the workplace, the Group also has numerous initiatives to promote the health and well-being of
employees and their families.
One example is represented by the FCA “WELL” initiative that promotes a healthy lifestyle and prevention of
cardiovascular disease. This focus on healthy lifestyles is re?ected in the Group’s sponsorship of Expo 2015, which is
dedicated to the theme “access to food that is healthy, safe and suf?cient for everyone on the planet.”
126 2014
|
ANNUAL REPORT
Sustainability Disclosure
Environment Health and Safety Leadership Awards
The Environment Health and Safety Leadership Award (EHSLA) is a group-wide recognition program open to all FCA
employees and contractors.
The main objectives of the EHSLA are:
to recognize individual and group initiatives that contribute to improvements in the safety and environmental
performance of FCA’s products and production processes
to promote knowledge sharing and application of best practices
to encourage a culture of environmental awareness and safety.
Industrial Relations and Social Dialogue
At the Investor Day held in Auburn Hills on May 6, 2014, FCA presented its 2014-2018 Business Plan to members of
the international ?nancial community, dealers, suppliers and media. In addition, as con?rmation of the importance the
Group places on social dialogue, representatives of the most represented trade unions at Group plants in Europe, the
U.S. and Brazil were also invited to attend.
At the European level, EU regulations require that all Community-scale undertakings establish a European Works
Council (EWC), which ensures workers the right to information and consultation. Fiat S.p.A., the predecessor of
FCA, ?rst established an EWC in 1997 on the basis of the establishing agreement signed in 1996 and subsequently
renewed (with amendments and modi?cations).
During 2014, FCA and the IndustriALL - European Trade Union (The European federation of metalworking, chemical
and textile sector trade unions) jointly agreed on solutions to issues, primarily related to the absence of af?liated
trade unions in certain Member States, that had prevented the proper establishment of a European Works Council
in implementation of the renewal agreement signed in June 2011. The FCA EWC held its ?rst meeting on 19-20
November 2014, with 16 members representing workers in each of the European member states where the Group
has a signi?cant presence. Also present were representatives of the trade unions signatories to the establishing
agreement. During the meeting, management presented information relating to the Group’s ?nancial performance,
changes in workforce, current market conditions and sales performance for each of the Group’s main businesses.
Participants were also given an overview of the 5-year business plan for EMEA, as presented on May 6, as well as the
corporate reorganization and creation of FCA completed during the year.
Collective bargaining
Collective bargaining, conducted in accordance with local law and practice, resulted in various agreements with trade
unions on both wage and employment conditions.
Worldwide, approximately 90% of FCA employees are covered by collective bargaining agreements. Also of major
signi?cance in this area are the supplementary pension and health care schemes, which are the result of negotiations
and continuous dialogue between FCA and the trade unions.
In Italy, where all employees are covered by collective bargaining, FCA and the trade unions reached an agreement
for 2014, which included a €260 one-time payment to all personnel in the company’s employ on the date of the
agreement, an in-principle agreement on the employment conditions already negotiated and a commitment to
conclude a 3-year collective labor agreement with changes in current wage and employment conditions that re?ect the
operating requirements of the 2014-2018 business plan. Negotiations for renewal of the collective labor agreement,
initiated in late 2014, are still ongoing.
Outside Italy, an average 81% of employees are covered by collective bargaining agreements. That percentage varies
from country to country on the basis of local practice and regulations.
For FCA companies in the European Union, wage negotiations in 2014 took into account the fact that the Group’s
operations in the region were still loss-making. Plants were operating below capacity and the auto market remained
weak as many European economies continue to struggle with low levels of in?ation and, in some cases, even de?ation.
Accordingly, in 2014 the Group worked to contain the cost of labor without reducing activities or personnel.
2014
|
ANNUAL REPORT 127
In Poland, company-level wage negotiations were limited to payment of a one-time amount for employees at Group
companies where activity levels had been increased.
In France, the annual negotiation (Négociation Annuelle Obligatoire) concluded with no general wage increases except
for the Magneti Marelli plant in Châtellerault, where the reference parameters for 2014 had already been agreed to with
the trade unions in 2012.
In Serbia, the 3-year collective agreement for employees of Fiat Automobili Srbija d.o.o in Kragujevaç was renewed at
year end, bringing it into line with new labor legislation that came into effect in July 2014. In December, the company
de?ned criteria for the determination of the “Christmas Bonus,” which is based on actual employee hours worked.
Following the establishment of trade union representation at Magneti Marelli d.o.o. Kragujevac and pending initiation
of negotiations for a company-level agreement, the company will continue to apply the company’s Internal Rulebook,
which has been updated to re?ect the requirements of the new labor legislation. At Fiat Services d.o.o Kragujevac,
trade union representation was established during the year and negotiations for a company-level agreement to
replace the Internal Rulebook were initiated. The parties agreed to an extension of the original negotiating deadline to
incorporate changes relative to the new labor legislation and negotiations were completed in January 2015.
In Spain, an agreement was reached with trade unions in September to extend the collective labor agreement at
Mecaner S.A.U., which expired at year-end 2014, for a further two years. Under the new agreement, wages will be
increased by 0.5% in 2015 and 0.9% in 2016.
In Brazil, FIEMG (Federação das Indústrias do Estado de Minas Gerais) and metalworking sector trade unions for
the State of Minas Gerais completed wage negotiations in November with agreement to increase the “database”
(Minimum wage) in line with in?ation. Agreements were also negotiated at the company level that provided one-time
amounts additional to the sector-level agreement.
In Mexico, the annual contractual negotiation at Teksid Hierro de Mexico concluded with workers being awarded a
4.3% increase in hourly employee wages, in line with in?ation. At the Comau facility in Tepotzotlan (since relocated to
San Martin Obispo), workers received a 4.5% increase.
In 2014, the level of labor unrest at Group companies in Italy, including local labor actions, was negligible in terms of
the number of instances and level of employee participation.
Outside Italy, the overall level of labor unrest was negligible and mostly related to local issues at individual plants.
Management of Production Levels
The Group’s 2014 ?nancial results demonstrated once again the importance of the contribution of FCA US LLC
(formerly Chrysler Group LLC) and the global diversi?cation of the Group’s businesses. During the year, the Group
was able to respond to higher demand in several markets through the use of ?exible labor mechanisms. As part of the
2014-2018 Business Plan presented in May, the Group set out a new industrial strategy for EMEA, where production
will be increased to support the planned growth in global sales for the premium brands (Maserati, Jeep, Alfa Romeo)
and the 500 family. On the basis of that plan, the Group expects its plants in EMEA will achieve full capacity utilization
by 2018 thanks to 40% of total production destined for markets outside Europe. With the European auto market only
beginning to shows signs of a recovery in the fourth quarter, work stoppages remained necessary in 2014. The Group
maintained its policy of protecting jobs through the use of temporary layoff bene?t schemes, where possible or other
mechanisms provided under collective bargaining agreements or company policy.
In Italy, Group companies continued to utilize temporary layoff schemes to manage weak demand levels and to
implement various restructuring and reorganization activities linked to new investment. There was, however, a 22.1%
decrease in utilization of these schemes versus the prior year, re?ecting the gradual upturn in production and return of
workers to the plants.
Elsewhere in Europe, minimal stoppages were directly related to ?uctuations in demand. There were no signi?cant
restructurings or reorganizations during the year.
In LATAM, Group shipments were down year-over-year due to continued weak trading conditions across the region.
128 2014
|
ANNUAL REPORT
Sustainability Disclosure
In Brazil, where the Group maintained its market leadership, the realignment of production levels to changes in
market demand was primarily managed through the use of ?exible labor mechanisms and reorganization of shifts, in
agreement with the unions.
In 2014, FCA US increased vehicle production through revised operating patterns at its NAFTA facilities in response
to market demand. To support the increase in production output, the company has correspondingly increased
staf?ng levels, including manufacturing employees to support current and anticipated production volumes, as well as
additional engineering, R&D and other highly-skilled employees to support product development, sales, marketing and
other corporate activities.
Sustainable Supply Chain Management
Group Purchasing has primary responsibility for supplier management, including establishing global purchasing
strategies and processes. The organization works closely with internal clients and suppliers to integrate key
environmental, social and governance considerations into its global purchasing processes, enabling responsible and
sustainable economic success for the Group as a whole. In addition to the buying teams, several other teams within
Group Purchasing support the selection, management and development of a high-quality, high-performing automotive
supply base. These include Supplier Quality, Supplier Relations, Product Development Purchasing, and Integration,
Methods and Strategy. Group Purchasing operates according to eight Foundational Principles whose objective
is to maximize the value of our supplier partnerships. These principles are: 1. mutual transparency, 2. proactive
collaboration, 3. sense of urgency, 4. integrity, 5. long-term mindset, 6. empathy and advocacy, 7. continuous
improvement and 8. personal accountability.
In 2014, Group Purchasing managed around €53.4 billion in direct materials purchases through a base of 3,127 direct
materials suppliers. The supplier base is highly concentrated, with the top 176 suppliers, which are considered
strategic, accounting for approximately 59% of total purchases by value. The Group classi?es suppliers as strategic
through a formal process based on the following criteria: allocated spending amount, production and spare parts
capacity, absence of technical and commercially-viable alternatives, and the value of Group procurement orders as a
percentage of the supplier’s annual turnover. Approximately 69% of direct materials purchases (by value) are destined
for plants in NAFTA, 18% for plants in EMEA, and 8% for plants in LATAM, and 5% for plants in APAC. By source,
71% of direct materials purchases are from NAFTA, 16% from EMEA, 2% from LATAM, and 11% from APAC.
Environmental and Social Impacts of Suppliers
FCA aims to prevent or mitigate any adverse environmental or social impacts that may be directly linked to our
own business activities, or to products and services from our suppliers. As partners, suppliers play a key role in
the continuity of our activities and can also have a signi?cant impact on external perceptions of our social and
environmental responsibility. Any adverse event within the supply chain can not only have a direct, material impact on
production and economic performance - both for us and our suppliers - but can also affect our collective reputations.
As such, building and maintaining collaborative, long-term relationships with our suppliers are essential elements in the
effective prevention or mitigation of any potential negative environmental or social impacts of our activities.
Our target for 2020 is to conduct sustainability audits or assessments of all Tier 1 suppliers with potential exposure to
signi?cant environmental or social risks. For strategic suppliers, these audits will be conducted by external auditors.
The assessment of supplier compliance with sustainability criteria is conducted in three phases over a period of
approximately one year. The ?rst phase is the completion of a self-assessment questionnaire. In 2014, Group
Purchasing introduced the Supplier Sustainability Self-Assessment (SSSA) questionnaire in all four operating
regions. This standardized tool - developed by the Automotive Industry Action Group (AIAG) with the contribution
of a workgroup that included FCA and other auto industry OEMs and suppliers - has a three-fold purpose: 1) to
communicate our expectations to suppliers; 2) to determine the effective level of sustainability activity within the
supply base; and 3) to create an effective and ef?cient tool that reduces the burden of multiple and similar information
requests received by suppliers. The Group has developed a user interface (accessible via the eSupplier Connect
portal), which can be used by suppliers to complete the SSSA online.
2014
|
ANNUAL REPORT 129
The questionnaire covers environmental, labor practice, human rights, compliance, ethics, diversity, and health and
safety criteria. During 2014, it was expanded with an increased emphasis on water and environmental stewardship.
The results of the self-assessment are used to create a risk map for the purpose of identifying any suppliers that may
be at risk and, therefore, require further investigation.
On-site Supplier Audits may be conducted by either FCA Supplier Quality Engineers (SQE) or external auditors. If any
critical issues are identi?ed during an audit, a supplier may be placed on watch status or, in particularly severe cases,
the relationship with the supplier may be suspended or terminated. Where areas for improvement are identi?ed, a plan
of corrective actions may be developed with the supplier concerned. Each action plan sets out speci?c responsibilities
within the supplier’s organization, activities and deadlines for implementation.
In addition to the existing monitoring programs, the Group has also adopted models of consultation and collaboration
with suppliers based on effective, interactive communication processes. Initiatives such as local seminars, discussion
forums and training programs have been developed over the years to facilitate the exchange of ideas and knowledge
and to increase the level of collaboration.
On the environmental front, for example, suppliers are encouraged to develop internal policies and guidelines and to
adopt a certi?ed environmental management system. As part of the Group’s 2020 target to monitor CO
2
emissions
of at least 90% of our top suppliers, we are continuing to support suppliers in addressing climate change issues,
including reducing greenhouse gas emissions.
In 2014, selected suppliers were invited to participate in CDP’s supply chain program. The 88 suppliers that disclosed
(out of 126 invited) achieved a score of 65/100 for transparency in disclosure and placed in the C performance band
for commitment toward reducing carbon emissions. The results revealed that measures implemented by these
suppliers had yielded a 62 million ton reduction in CO
2
equivalent emissions. The Group has also initiated a series of
consultations with several strategic suppliers on monitoring water management within the supply chain and, over the
next few years, developing a joint water stewardship strategy in water-stressed areas.
Another important area of long-term focus for the Group, in collaboration with industry peers and stakeholders, is
the respect of human rights and working conditions at all levels in the supply chain. In-depth training on responsible
working conditions is offered to suppliers in partnership with AIAG. Developed in collaboration with other automakers,
the training is designed to help assure and protect the rights and dignity of the workers who make vehicle
components. We are also committed to promoting entrepreneurial growth by providing entrepreneurs the practical
capacity-building training they need to achieve a higher level of sustainability.
In addition, the Group encourages supplier innovation through various initiatives focused on cost reduction. The
Technical Cost Reduction SUPER (SUpplier Product Enhancement Reward) Program, for example, encourages
suppliers to be proactive by sharing the economic bene?ts generated through proposals for innovative manufacturing
technologies and leaner component design. During 2014, approximately 300 ideas were implemented by suppliers in
NAFTA, EMEA and LATAM regions, allowing to share economic bene?ts for approximately €43 million.
Reducing the environmental impact of manufacturing and non-manufacturing processes
FCA is fully committed to minimizing the impact of our activities on the environment in all areas from manufacturing
processes to logistics, dealerships and commercial and administrative of?ces. Efforts to reduce our environmental
footprint and continuously improve environmental performance are an integral part of the Group’s overall industrial
strategy.
A recent example of this commitment is the new Jeep plant in Pernambuco, Brazil, where FCA is dedicating the
maximum know-how and resources to make it the Group’s most technologically-advanced and sustainable plant in
the world.
130 2014
|
ANNUAL REPORT
Sustainability Disclosure
World class manufacturing processes
The World Class Manufacturing (WCM) program was ?rst adopted about 10 years ago and has been implemented at
nearly all FCA plants worldwide. WCM represents the concrete application of our model of environmental sustainability
and, in particular, our efforts to reduce the impacts of our production processes. WCM is a rigorous manufacturing
methodology that involves the entire organization and encompasses all phases of production and distribution. In 2014,
approximately 48,000 WCM-related projects were implemented, including several speci?cally targeted at reducing
environmental impacts. Through the Environment Pillar, in particular, speci?c tools and methodologies are developed
to reduce waste and optimize the use of natural resources. Approximately 3,700 projects based on this pillar led to
reductions in natural resources consumption.
The Group has also developed an Environmental Management System (EMS), aligned with ISO 14001 standards,
which has been implemented worldwide. The EMS consists of a system of methodologies and processes designed to
prevent or reduce the environmental impact of the Group’s manufacturing activities through, for example, reductions
in emissions, water consumption and waste generation and conservation of energy and raw materials. At year-end
2014, 100% of FCA plants included in the 2012 scope of reporting were ISO 14001 certi?ed.
Energy Consumption and Emissions
In response to increasingly stringent environmental regulations, the Group is continuously researching solutions
that will enable further reductions in greenhouse gas emissions and the use of fossil fuels. Over time, this has also
generated signi?cant savings in energy-related costs.
In 2014, approximately 2,700 energy-related projects developed under WCM contributed to a reduction of approximately
3,300 terajoules in energy used, with a corresponding reduction of around 290,000 tons in CO
2
emissions.
As a result of the success of these energy-related initiatives, energy consumption remained in line with the prior year
- despite a year-over-year increase in production volumes - and was well below the 2010 level in both absolute terms
and on a per vehicle produced basis.
Direct and indirect energy consumption (terajoules) 2014 2013 2012
Total energy consumption 48,645 48,322 45,692
Total CO
2
emissions from manufacturing processes also remained stable compared with 2013, but well below the
2010 level also on both a total and per vehicle produced basis.
FCA uses CO
2
emissions per vehicle produced as the primary indicator of its energy performance and, for 2020, is
targeting a 32% reduction compared with 2010.
Total CO
2
emissions (thousands of tons of CO
2
) 2014 2013 2012
Total CO
2
emissions 4,283 4,178 3,965
In 2014, 20.4% of electricity used at FCA plants was from renewable sources.
Water Management
In many parts of the world, water scarcity is one of the greatest challenges faced by governments, businesses and
individuals.
To protect this essential natural resource, the Group has adopted Water Management Guidelines that establish criteria
for sustainable management of the entire water cycle, including technologies and procedures to maximize recycling
and reuse of water and minimize the level of pollutants in discharged water.
2014
|
ANNUAL REPORT 131
In 2014, the level of water reuse in the manufacturing cycle at FCA plants worldwide was 99.3%, representing a total
of about 3.3 billion m
3
in water savings.
As a result, total water consumption (withdrawal) was reduced by 1.1% versus 2013 (generating savings of
approximately €2.4 million) and 27.9% versus 2010. For 2020, FCA is targeting a 40% reduction in water consumed
per vehicle produced compared with 2010.
Water withdrawal (thousands of m
3
) 2014 2013 2012
Total water withdrawal 24,653 24,936 25,874
Waste Management
To reduce the consumption of raw materials and related environmental impacts, FCA has implemented procedures to
ensure maximum recovery and reuse of materials and minimum waste. What cannot be reused is recycled. If neither
reuse nor recovery is possible, waste is disposed of using the method having the least environmental impact, with
land?lls only used as a last resort. These principles are incorporated in the Waste Management Guidelines formalized
in 2012 and adopted at Group sites worldwide.
As a result of continued improvements in the waste management cycle, FCA achieved a 3.6% year-over-year
reduction in total waste generated despite higher production volumes.
At the Group level, the percentage of waste recovered increased to 80.6% of total waste generated. Waste sent to land?ll
accounted for 16.9% and was essentially related to inert sand from Teksid foundries. Plants that produce for the mass-
market brands, which account for the majority of total waste generated, reduced waste to land?ll either to zero or very
close to zero. For hazardous waste, the Group achieved a 3.3% year-over-year reduction (-38.8% since 2010).
The reduction in the total volume of waste generated led to savings of around €9 million and revenues of around €32
million worldwide in 2014.
Waste generated (thousands of tons) 2014 2013 2012
Waste recovered
(1)
1,406 1,339 1,291
% of waste recovered
(1)
80.6% 74.0% 73.3%
Waste disposed of 338 470 470
Total waste generated 1,744 1,809 1,761
of which hazardous 38 39 40
(1)
2012 and 2013 data updated to be consistent with Global Reporting Initiative G4 standard.
Logistics Processes
Ef?cient and eco-sustainable logistics are important elements of the FCA value creation process.
In recent years, we have signi?cantly reduced both the environmental impact and the cost of our logistics activities.
This has primarily been possible through increased use of reusable packaging and optimization of transport ?ows
throughout the supply chain which has reduced emissions and traf?c associated with the movement of materials,
components and ?nished products.
In 2010, the Group published the Green Logistics Principles as part of a process of greater coordination with our
logistics partners. These principles focus on four main areas:
low-emissions transport
intermodal transport solutions
optimized use of available transport capacity
reduced use of packaging and protective materials.
Several initiatives have been launched in support of these principles.
132 2014
|
ANNUAL REPORT
Sustainability Disclosure
In EMEA, Mopar Parts and Service increased the use of reusable containers in 2014, leading to a year-over-year
reduction of more than 1,000 tons of cardboard and wood used in packaging and shipping, and generating €150,000
in cost savings.
In addition, increased use of reusable containers on international routes to and from NAFTA resulted in a further
reduction of 201 tons of wood between July and December 2014.
We have also set targets for increased use of low emissions and alternative fuel vehicles in our ?eet, which will further
improve environmental performance and costs.
In 2014, the Group purchased 24 new Euro VI trucks for transport operations in EMEA and ordered 179 compressed
natural gas trucks for FCA Transport ?eet in NAFTA.
FCA is also engaging external carriers through Green Clauses in contracts, questionnaires, workshops and
certi?cations.
Eco-sustainable dealers
In 2014, the Group continued a number of initiatives to extend its environmental commitment to the dealer network.
In Brazil, the Sustainability Program for Dealerships was launched, with 559 dealerships (accounting for 84% of the
FCA network in Brazil) participating in the ?rst step of the initiative.
In Italy, Group-owned dealerships implemented measures that led to a 19% reduction in energy consumption and
avoidance of 1,500 tons in CO
2
emissions versus 2012. Over the same time period, 6,600 tons in CO
2
emissions were
avoided through the use of electricity generated from renewable sources, resulting in both environmental bene?ts and
cost savings. During 2014, speci?c initiatives to monitor energy and water consumption were implemented at Group-
owned dealerships in other European countries.
Of?ces
During the year, the Group continued its program of replacing electronic of?ce equipment (computers, monitors and
printers) with energy-ef?cient equipment certi?ed by Energy Star, as well as the migration from physical to virtual
servers. For the period 2010-2014, these initiatives led to a reduction of more than 33,400 tons of CO
2
emissions.
New and existing initiatives provided the opportunity for employee involvement and training on issues relating to
personal health, the environment (waste management, water consumption, energy savings) and good practices
in the workstation environment. The ultimate objective of these initiatives is to generate awareness of sustainable
practices applicable both in the of?ce and at home. One example is the Better Of?ce initiative - implemented at various
facilities in Italy and covering approximately 2,300 employees - through which employees are given tips on sustainable
practices in the of?ce and at home via information lea?ets, videos and signage. In 2015, the initiative will be extended
to other sites and countries.
Another initiative is the Zero Waste to Land?ll program instituted at the FCA US Headquarters and Technology Center
in Auburn Hills (Michigan, U.S.), where more than 14,600 people work. Of a total 7,626 tons of waste generated at the
Auburn Hills complex during 2014, zero waste was disposed of via land?ll.
At the same site, in 2014, manual cooling demand-matching controls were replaced with automatic controls, reducing
annual electricity consumption by 12 million kWh, eliminating 9,000 tons of CO
2
emissions and saving over €525,000.
2014
|
ANNUAL REPORT 133
Responsibility to local communities
The Group actively contributes to the advancement of local communities through initiatives that, in line with
the Fiat Chrysler Automobiles (FCA) Guidelines for Investment in Local Communities, are also consistent with
the characteristics and positioning of the Group and its brands. Depending on the scope and level of ?nancial
commitment, projects are approved and managed either centrally or locally by the relevant plant, company or brand.
Initiatives primarily target communities around the Group’s industrial sites and, from time to time, also include
responses to natural disasters in other geographic areas. Social initiatives primarily take the form of investment in
targeted projects, planned in collaboration with local stakeholders, which contribute to the long-term development
of the local community. In addition to monetary contributions, the Group’s investment also often includes employees
volunteering their time and knowledge on projects that address community development, education, the environment
and basic social needs.
Particular attention has been given to educational initiatives, which accounted for 52.9% of more than €24 million
contributed in 2014, as education is vital to the sustainable development and quality of life in local communities. The
Group has set speci?c targets for 2020 to advance education and training among youth, with a particular focus on
programs designed to expand science, technology, engineering and math skills and opportunities, including initiatives
that address innovation, mobility and environmental issues.
Speci?c indicators are used to measure the impact and effectiveness of local community initiatives and identify
opportunities for further development.
134 2014
|
ANNUAL REPORT
Remuneration of Directors
Remuneration of Directors
Introduction
This Remuneration Report (the “Report”) describes the Company’s remuneration policy applicable to the Executive
Directors (the “Policy”) and the remuneration paid to the members of the Company’s Board of Directors in 2014 (both
Executive and non-Executive Directors). Information is also provided on the remuneration paid to the members of Fiat
S.p.A.’s Board of Directors in 2014.
Prior to the completion of the Merger, Fiat, as FCA’s sole shareholder, adopted the Policy, which will remain effective
until a new remuneration policy is approved by FCA’s ?rst general shareholders’ meeting following completion of the
Merger. The form and amount of the compensation to be paid to each of FCA’s directors is determined by the FCA
Board of Directors in accordance with the remuneration policy.
Remuneration Policy for Executive Directors
The Board of Directors determines the compensation for our executive directors at the recommendation of the
Compensation Committee and with reference to the remuneration policy. The remuneration policy is approved by
shareholders and is published on our corporate website www.fcagroup.com.
The objective of the remuneration policy is to provide a compensation structure that allows FCA to attract and retain
the most highly quali?ed executive talent and by motivating such executives to achieve business and ?nancial goals
that create value for shareholders in a manner consistent with our core business and leadership values.
The Policy is based on the remuneration policies adopted in the past by the Company (and its predecessors) as
aligned with Dutch law and the Dutch Corporate Governance Code.
Features of the remuneration for executive directors
FCA’s compensation policy aims to provide total compensation that:
Attracts, retains and motivates quali?ed executives;
Is competitive against the comparable market;
Reinforces our performance driven culture and meritocracy; and
Is aligned to shareholders interests.
The remuneration structure for executive directors provides a ?xed component as well as short and long-term variable
performance based components. FCA believes that the remuneration structure promotes the interests of FCA in
the short and the long-term and is designed to encourage the executive directors to act in the best interests of the
Company and not in their own interests. In determining the level and structure of the compensation of the executive
directors, the non-executive directors will take into account, among other things, the ?nancial and operational results
as well as other business objectives of FCA.
In general, the ?xed remuneration component of executive directors compensation is intended to adequately
compensate individuals for services performed even if the variable compensation components are not received as
a result of the performance targets set by the Board of Directors not being met. This is considered fundamental in
discouraging behavior that is aimed solely at achieving short-term results and actions inconsistent with the target level
of risk established by the Group.
Executive directors are also eligible to receive variable compensation, either immediate or deferred, subject to the
achievement of pre-established challenging economic and ?nancial performance targets.
2014
|
ANNUAL REPORT 135
The Company establishes target compensation levels using a market-based approach and periodically benchmarks
its executive compensation program against peer companies and monitors compensation levels and trends in the
market.
For the CEO, the competitive benchmark included both a US and European peer group. The US peer companies
included General Motors, Ford, General Electric, Hewlett-Packard, IBM, Boeing, Procter & Gamble, Johnson &
Johnson, PepsiCo, United Technologies, Dow Chemical, Caterpillar, ConocoPhillips, P?zer, Lockheed Martin,
Johnson Controls, Honeywell, Deere, General Dynamics, 3M, Northrop, Grumman, Raytheon, Xerox, Goodyear,
Whirlpool. The non US peer companies included Volkswagen, Daimler, BMW Group, Siemens, Nestlé, BASF,
ArcelorMittal, Airbus, Peugeot, Unilever, Novartis, Saint-Gobain, Renault, Bayer, ThyssenKrupp, Rio Tinto, Roche,
Continental, Lyondell Basell, Sano?, and Volvo.
For the Chairman, the same peer group companies were used excluding those companies who do not have an
Executive Chairman only role. Most US companies in the peer group do not have a separate Executive Chairman role;
whereas, most European companies in the peer group do.
Remuneration of Executive Directors
Introduction
The level and structure of the remuneration of the Executive Directors will be determined by the Company’s Board
of Directors at the recommendation of the Compensation Committee within the scope of the Policy and taking into
account the scenario analyses made. It will furthermore be based on compensation levels offered in the market in
general and for the sector.
The Company periodically benchmarks its executive compensation program and the compensation offered to
executive directors against peer companies and monitors compensation levels and trends in the market.
Remuneration elements
On such basis, the compensation of executive directors consists, inter alia, of the following elements:
Fixed component
The primary objective of the base salary (the ?xed part of the annual cash compensation) for executive directors is
to attract and retain well quali?ed senior executives. The Company’s policy is to periodically benchmark comparable
salaries paid to other executives with similar experience in its compensation peer group.
Variable components
The Company’s Chairman is not eligible to receive variable compensation while the CEO is eligible to receive variable
compensation, subject to the achievement of pre-established ?nancial and other designated performance targets.
The variable components of the CEO’s remuneration, both the short and the long-term components, are linked to
predetermined, assessable targets.
Annually, scenario analyses are carried out with respect to the possible outcomes of the variable remuneration
components and how they may affect the remuneration of the executive directors. Such analysis was also carried out
for the ?nancial year 2014.
Short-Term Incentives
The primary objective of performance based short-term variable cash based incentives is to focus on the business
priorities for the current or next year. The CEO’s short-term variable incentive is based on achieving short-term
(annual) ?nancial and other designated objectives proposed by the Compensation Committee and approved by the
non-executive directors each year.
136 2014
|
ANNUAL REPORT
Remuneration of Directors
In regards to the CEO’s annual performance bonus determination, the Compensation Committee and the non-
executive directors:
approve the executive directors’ target and maximum allowable bonus,
select the choice and weighting of metrics,
set the stretch objectives,
review any unusual items that occurred in the performance year to determine the appropriate overall measurement
of achievement, and approve the ?nal bonus determination
The annual objectives for the CEO are comprised of three equally weighted metrics, Trading Pro?t, Net Income, and
Net Industrial Debt. The target achievement for target incentive (which is 100% of base salary) corresponds to the
Board approved targets each year and is consistent with the Company’s ?ve year business plan and external guidance
to investors. The threshold for any incentive earned is 90% of target and maximum payout of 2.5 x base salary is set at
achieving 150% of the objectives or greater. Results and achievement are reviewed by the Compensation Committee
each year typically in the January Board meeting.
Long-Term Incentives
The primary objective of the performance based long-term variable equity based incentives is to reward and retain well
quali?ed senior executives over the longer term while aligning their interests with those of shareholders.
FCA’s long-term variable incentives consists of a share-based incentive plan that links a portion of the variable
component to the achievement of pre-established performance targets consistent with the Company’s strategic
horizon.
As typical with the objective of using equity based awards, these awards help align the executive directors’ interests
with shareholder interests by delivering greater value to the executive director as shareholder value increases.
On 4 April 2012, Fiat S.p.A. General Shareholders Meeting adopted a Long Term Incentive Plan (the “Retention
LTI”), in the form of stock grants. As a result of the Shareholders’ resolution the Group attributed the Chief Executive
Of?cer with 7 million rights, representative of an equal number of Fiat S.p.A. ordinary shares. The rights vested ratably,
one third on 22 February 2013, one third on 22 February 2014 and one third on 22 February 2015, subject to the
requirement that the Chief Executive Of?cer remained in of?ce.
On October 29, 2014, in connection with the formation of FCA and the presentation of the new ?ve year business
plan, the Board of Directors of FCA approved an equity incentive plan (“EIP”) and a new long term incentive program,
covering a ?ve year performance period, 2014-2018, consistent with the Company’s strategic horizon and under
which equity awards can be granted to eligible individuals. The award vesting under the program is conditional on
meeting two independent metrics, Net Income and Relative Total Shareholder Return weighted 50/50 at target. The
awards have three (3) vesting opportunities, one-third after three years’ cumulative results, one-third after four years’
cumulative results and the ?nal third after the full ?ve years’ results. Half of the target award that is subject to the Net
Income metric’s performance begins a payout at 80% of the target achieved and the maximum payout is at 100%
of target. With respect to the other half of the award, the Relative Shareholder Return metric has a partial vesting
if ranked 7th or better among an industry speci?c peer group of 11 and a maximum pay-out of 150% if ranked 1st
among the 11 peers. The peer group includes FCA, Volkswagen AG, Toyota Motor, Daimler AG, General Motors,
Ford Motor, Honda Motor, BMW AG, Hyundai Motor, PSA Peugeot Citroen, and Renault SA. Awards to the CEO
of performance share units under this program are subject to the approval of the shareholders at the next general
meeting of shareholders and are described in the relevant materials.
Extraordinary Incentives
In addition, upon proposal of the Compensation Committee, the non-executive directors retain authority to grant
periodic bonuses for speci?c transactions that are deemed exceptional in terms of strategic importance and effect
on the Company’s results, with the form of any such bonus (cash, common shares of the Company or options to
purchase common shares) to be determined by the non-executive directors.
2014
|
ANNUAL REPORT 137
In 2014, the non-executive directors exercised this authority and approved a €24.7 million (US$ 30 million) cash award,
a one-time grant of 1,620,000 restricted shares (which is subject to the approval of the Company’s general meeting of
shareholders and will vest upon approval) and a €12 million (US$ 15 million) post-mandate award for the CEO, who was
instrumental in major strategic and ?nancial accomplishments for the Group. Most notably, through the CEO’s vision and
guidance, FCA was formed, creating enormous value for the Company, its shareholders, employees and stakeholders.
Pension Provisions and Severance Payments
Both executive directors have a post-mandate bene?t in an amount equal to ?ve times their last annual base
compensation. The award is payable quarterly over a period of 20 years commencing three months after the
conclusion of employment with the Company, with an option for a lump sum payment. In addition, the CEO
participates in Company sponsored pension schemes and is eligible for the post-mandate bene?t mentioned in the
previous paragraph. In 2014 the Company booked in connection with all these bene?ts an amount of € 12.9 million.
For the CEO, an amount of two (2) times the prior year ?xed and variable compensation is provided in the event of an
involuntarily termination except for reason of termination for cause.
1
Other Bene?ts
Executive directors may also be entitled to usual and customary fringe bene?ts such as personal use of aircraft,
company car and driver, personal/home security, medical insurance, accident and disability insurance, tax preparation
and ?nancial counseling. The Compensation Committee may grant other bene?ts to the executive directors in
particular circumstances.
Remuneration Policy for Non-Executive Directors
Remuneration of non-executive directors is set forth in the remuneration policy approved by the Company’s
Shareholders and periodically reviewed by the Compensation Committee.
The current annual remuneration for the non-executive directors is:
US$200,000 for each non-executive director
An additional US$10,000 for each member of the Audit Committee and $20,000 for the Audit Committee Chairman.
An additional US$5,000 for each member of the Compensation Committee and the Governance Committee and
$15,000 for the Compensation Committee Chairman and the Governance Committee Chairman
An additional US$25,000 for the lead independent director
An automobile perquisite of one (1) assigned company-furnished vehicle, rotated semi-annually, subject to taxes
related to imputed income/employee price on purchase or lease of Company vehicles.
Non-executive directors elect whether their annual retainer fee will be made in half in cash and common shares of FCA or
100% in common shares of FCA; whereas, the committee membership and committee chair fee payments will be made
all in cash (providing a board fee structure common to other large multinational companies to help attract a multinational
board membership). Remuneration of non-executive directors is ?xed and not dependent on FCA’s ?nancial results.
Non-executive directors are not eligible for variable compensation and do not participate in any incentive plans.
Set forth below is information relating to the ?xed and variable compensation (including other bene?ts, but excluding
the extraordinary incentives, pension provisions and severance payments described above) that was paid in 2014
by FCA and its subsidiaries to the current members of the FCA Board of Directors and to the individuals who served
on Fiat’s Board of Directors as of October 11, 2014, including as a consequence of the applicable performance
criteria having been met. None of Messrs. Marchionne, Palmer or Neilson received compensation for their services as
directors or of?cers of FCA prior to the effective time of the Merger.
1
In 2014 Ferrari S.p.A. booked an amount of €15 million in connection with the resignation as Chairman of Ferrari S.p.A. of Mr. Luca Cordero
di Montezemolo, former director of Fiat. S.p.A.
138 2014
|
ANNUAL REPORT
Remuneration of Directors
In Euro Of?ce held
In of?ce
from/to Annual fee
Annual
Incentive
(1)
Other
Compensation Total
Directors of FCA N.V.
ELKANN John Philipp Chairman
01/01/2014-
12/31/2014 1,442,161 - 243,702
(2)
1,685,863
MARCHIONNE Sergio CEO
01/01/2014-
12/31/2014 2,500,108 4,000,000 111,410 6,611,518
AGNELLI Andrea Director
01/01/2014-
12/31/2014 80,211 - - 80,211
BRANDOLINI D’ADDA Tiberto Director
01/01/2014-
12/31/2014 80,211 - - 80,211
EARLE Glenn Director
06/23/2014-
12/31/2014 74,065 - - 74,065
MARS Valerie Director
10/12/2014-
12/31/2014 42,212 - - 42,212
SIMMONS Ruth J. Director
10/12/2014-
12/31/2014 42,212 - 1,774
(2)
43,986
THOMPSON Ronald L. Director
10/12/2014-
12/31/2014 62,295
(3)
- 1,589
(2)
63,884
WHEATCROFT Patience Director
01/01/2014-
12/31/2014 106,716 - - 106,716
WOLF Stephen M. Director
10/12/2014-
12/31/2014 54,836
(3)
- 1,520
(2)
56,356
ZEGNA Ermenegildo Director
10/12/2014-
12/31/2014 42,212 - - 42,212
Former directors of Fiat S.p.A.
BIGIO Joyce Victoria Director
01/01/2014-
10/11/2014 66,347 - - 66,347
CARRON René Director
01/01/2014-
10/11/2014 70,250 - - 70,250
CORDERO DI MONTEZEMOLO Luca Director
01/01/2014-
10/11/2014 2,095,528 - - 2,095,528
GROS-PIETRO Gian Maria Director
06/22/2014-
10/11/2014 45,653 - - 45,653
TOTAL 6,805,017 4,000,000 359,995 11,165,012
(1)
The annual incentives are related to the performance in 2014 which are paid out in 2015.
(2)
The stated amount refer to the use of transport
(3)
The amount in the table refers to both FCA NV and FCA US board service fees.
The tables below give an overview of the stock option plans and share plans of the Company held by the CEO (for
stock options) and by the CEO and other Board Members for share plans.
Stock Options
Grant Date Exercise Price (€) Number of Options
Beginning Balance as of 1/1/2014
26/07/04 6.583 10,670,000
03/11/06 13.370 6,250,000
Beginning Total 16,920,000
Vested/Not Exercised 16,920,000
Not Vested -
Options granted during in 2014 - - -
Options exercised in 2014
26/07/04 6.583 10,670,000
03/11/06 13.370 6,250,000
Total Options Exercised in 2014 16,920,000
Closing Total -
2014
|
ANNUAL REPORT 139
Share Plans
Grant
Date
Vesting
Date
Fair Value
on
Granting
Date
(1)
Thompson Wolf Simmons Marchionne Total
Beginning balance
01/01/2014
Fiat Stock grants 04/04/2012 02/22/2015 € 4.205 — — — 4,666,667 4,666,667
2009 FCA US RSUs 12/11/09 06/10/2012 US$ 10.47 499,478 499,478 — — 998,957
2012 FCA US RSUs 07/30/2012 06/10/2013 US$ 10.47 25,032 25,032 25,032 25,032 100,128
2013 FCA US RSUs 07/30/2013 06/10/2014 US$ 10.47 20,161 20,161 20,161 20,161 80,645
544,672 544,672 45,193 45,193 1,179,730
(2)
Post-dilution
adjusted
(3)
beginning balance
01/01/2014
Fiat stock grants 04/4/2012 02/22/2015 € 4.205 — — — 4,666,667 4,666,667
2009 FCA US RSUs 12/11/09 06/10/2012 US$ 8.07 648,023 648,023 — — 1,296,047
2012 FCA US RSUs 07/30/2012 06/10/2013 US$ 8.07 32,477 32,477 32,477 32,477 129,906
2013 FCA US RSUs 07/30/2013 06/10/2014 US$ 8.07 26,157 26,157 26,157 26,157 104,629
706,657 706,657 58,634 58,634 1,530,582
Granted during 2014
Vested during 2014
Fiat stock grants 04/04/2012 02/22/2015 € 4.205 — — — 2,333,333 2,333,333
2013 FCA US RSUs 07/30/2013 06/10/2014 US$ 8.07 26,157 26,157 26,157 26,157 26,157
Ending Balance as of
12/31/2014
FCA stock grants 04/4/2012 02/22/2015 € 4.205 — — — 2,333,334 2,333,334
2009 FCA US RSUs
(4)
12/11/09 06/10/2012 US$ 9.00 648,023 648,023 — — 1,296,047
2012 FCA US RSUs
(4)
07/30/2012 06/10/2013 US$ 9.00 32,477 32,477 32,477 32,477 129,906
2013 FCA US RSUs
(4)
07/30/2013 06/10/2014 US$ 9.00 26,157 26,157 26,157 26,157 104,629
706,657 706,657 58,634 58,634 1,530,582
(1)
Fair value of the FCA US RSUs beginning balance and ending balances reflects the reevaluation price in effect on those dates.
(2)
Mr. Marchionne does not receive any direct compensation for his service on behalf of FCA US (previously Chrysler Group LLC). In connection
with his service as a Director of FCA US, similarly to the equity-based compensation granted to the other Board Members, he was assigned
“Restricted Stock Units” under the Director RSU Plan. Such RSUs will be paid within 60 days following the date he ceases to serve as a Director.
(3)
FCA US RSU awards were adjusted for dilution by a factor of 1.2974 in June 2014.
(4)
FCA US RSUs will be paid within 60 days following the date FCA NV Board service ceases. The FCA US RSUs were revalued at US$ 9.00/unit
as of December 31, 2014.
The total cost booked in 2014 by the Company in connection with the share plans was €2.6 million; no costs were
booked in 2014 for stock options plans.
Executive Of?cers’ Compensation
The aggregate amount of compensation paid to or accrued for executive of?cers that held of?ce during 2014 was
approximately €22 million, including €2 million of pensions and similar bene?ts paid or set aside by us. The aggregate
amounts include 19 executives at December 31, 2014; during 2014, organizational changes occurred that were taken
into consideration, pro-rata temporis, in the total compensation ?gures.
Consolidated
Financial Statements
AT DECEMBER 31, 2014
Consolidated Income Statement ___________________________________________________________________ 142
Consolidated Statement of Comprehensive Income/(Loss) ____________________________________________ 143
Consolidated Statement of Financial Position ________________________________________________________ 144
Consolidated Statement of Cash Flows _____________________________________________________________ 145
Consolidated Statements of Changes in Equity _______________________________________________________ 146
Notes to the Consolidated Financial Statements _____________________________________________________ 147
142 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Consolidated
Income Statement
Consolidated Income Statement
for the years ended December 31, 2014, 2013 and 2012
For the years ended December 31,
2014 2013 2012
Note (€ million)
Net revenues (1) 96,090 86,624 83,765
Cost of sales (2) 83,146 74,326 71,473
Selling, general and administrative costs (3) 7,084 6,702 6,775
Research and development costs (4) 2,537 2,236 1,858
Other income/(expenses) 197 77 (68)
Result from investments: (5) 131 84 87
Share of the pro?t of equity method investees 117 74 74
Other income from investments 14 10 13
Gains and (losses) on the disposal of investments (6) 12 8 (91)
Restructuring costs (7) 50 28 15
Other unusual income/(expenses) (8) (390) (499) (138)
EBIT 3,223 3,002 3,434
Net ?nancial expenses (9) 2,047 1,987 1,910
Pro?t before taxes 1,176 1,015 1,524
Tax expense/(income) (10) 544 (936) 628
Pro?t from continuing operations 632 1,951 896
Net pro?t 632 1,951 896
Net pro?t attributable to:
Owners of the parent 568 904 44
Non-controlling interests 64 1,047 852
Basic earnings per ordinary share (in €) (12) 0.465 0.744 0.036
Diluted earnings per ordinary share (in €) (12) 0.460 0.736 0.036
The accompanying notes are an integral part of the Consolidated financial statements.
2014
|
ANNUAL REPORT
Consolidated
Financial Statements
143
Consolidated Statement of
Comprehensive Income/(Loss)
Consolidated Statement
of Comprehensive Income/(Loss)
for the years ended December 31, 2014, 2013 and 2012
For the years ended December 31,
2014 2013 2012
Note (€ million)
Net pro?t (A) 632 1,951 896
Items that will not be reclassi?ed to the Consolidated income
statement in subsequent periods:
(Losses)/gains on remeasurement of de?ned bene?t plans (23) (333) 2,676 (1,846)
Share of (losses)/gains on remeasurement of de?ned bene?t
plans for equity method investees (23) (4) (7) 4
Related tax impact (23) 29 239 3
Total items that will not be reclassi?ed to the Consolidated
income statement in subsequent periods (B1) (308) 2,908 (1,839)
Items that may be reclassi?ed to the Consolidated income
statement in subsequent periods:
(Losses)/gains on cash ?ow hedging instruments (23) (292) 162 184
(Losses)/gains on available-for-sale ?nancial assets (23) (24) 4 27
Exchange differences on translating foreign operations (23) 1,282 (720) (285)
Share of Other comprehensive income/(loss) for equity
method investees (23) 51 (88) 36
Related tax impact (23) 73 (27) (24)
Total items that may be reclassi?ed to the Consolidated
income statement in subsequent periods (B2) 1,090 (669) (62)
Total Other comprehensive income/(loss), net of tax
(B1)+(B2)=(B) 782 2,239 (1,901)
Total Comprehensive income/(loss) (A)+(B) 1,414 4,190 (1,005)
Total Comprehensive income/(loss) attributable to:
Owners of the parent 1,282 2,117 (1,062)
Non-controlling interests 132 2,073 57
The accompanying notes are an integral part of the Consolidated financial statements.
144 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Consolidated Statement
of Financial Position
Consolidated Statement of Financial Position
At December 31, 2014 and 2013
At December 31,
2014 2013
Note (€ million)
Assets
Intangible assets: 22,847 19,514
Goodwill and intangible assets with inde?nite useful lives (13) 14,012 12,440
Other intangible assets (14) 8,835 7,074
Property, plant and equipment (15) 26,408 23,233
Investments and other ?nancial assets: (16) 2,020 2,052
Investments accounted for using the equity method 1,471 1,388
Other investments and ?nancial assets 549 664
De?ned bene?t plan assets 114 105
Deferred tax assets (10) 3,547 2,903
Total Non-current assets 54,936 47,807
Inventories (17) 12,467 10,278
Trade receivables (18) 2,564 2,544
Receivables from ?nancing activities (18) 3,843 3,671
Current tax receivables (18) 328 312
Other current assets (18) 2,761 2,323
Current ?nancial assets: 761 815
Current investments 36 35
Current securities (19) 210 247
Other ?nancial assets (20) 515 533
Cash and cash equivalents (21) 22,840 19,455
Total Current assets 45,564 39,398
Assets held for sale (22) 10 9
Total Assets 100,510 87,214
Equity and liabilities
Equity: (23) 13,738 12,584
Equity attributable to owners of the parent 13,425 8,326
Non-controlling interest 313 4,258
Provisions: 20,372 17,427
Employee bene?ts (25) 9,592 8,326
Other provisions (26) 10,780 9,101
Deferred tax liabilities (10) 233 278
Debt (27) 33,724 30,283
Other ?nancial liabilities (20) 748 137
Other current liabilities (29) 11,495 8,963
Current tax payables 346 314
Trade payables (28) 19,854 17,207
Liabilities held for sale (22) — 21
Total Equity and liabilities 100,510 87,214
The accompanying notes are an integral part of the Consolidated financial statements.
2014
|
ANNUAL REPORT
Consolidated
Financial Statements
145
Consolidated Statement
of Cash Flows
Consolidated Statement of Cash Flows
for the years ended December 31, 2014, 2013 and 2012
For the years ended December 31,
2014 2013 2012
Note (€ million)
Cash and cash equivalents at beginning of the period (21) 19,455 17,666 17,526
Cash ?ows provided by operating activities:
Net pro?t for the period 632 1,951 896
Amortization and depreciation 4,897 4,635 4,201
Net losses on disposal of tangible and intangible assets 8 31 14
Net (gains)/losses on disposal of investments (10) (8) 91
Other non-cash items (32) 352 535 582
Dividends received 87 92 89
Change in provisions 1,239 457 63
Change in deferred taxes (179) (1,578) (72)
Change in items due to buy-back commitments and GDP vehicles (32) 178 93 (61)
Change in working capital (32) 965 1,410 689
Total 8,169 7,618 6,492
Cash ?ows used in investing activities:
Investments in property, plant and equipment and intangible assets (32) (8,121) (7,492) (7,564)
Acquisitions and capital increases in joint ventures, associates and
unconsolidated subsidiaries (17) (166) (24)
Net cash acquired in the acquisition of interests in subsidiaries and
joint operations (32) 6 15 14
Proceeds from the sale of tangible and intangible assets 40 59 118
Proceeds from disposal of other investments 38 5 21
Net change in receivables from ?nancing activities (137) (459) (14)
Change in current securities 43 (10) (64)
Other changes 8 (6) (29)
Total (8,140) (8,054) (7,542)
Cash ?ows provided by ?nancing activities:
Issuance of bonds 4,629 2,866 2,535
Repayment of bonds (2,150) (1,000) (1,450)
Issuance of other medium-term borrowings 4,876 3,188 1,925
Repayment of other medium-term borrowings (5,838) (2,558) (1,535)
Net change in other ?nancial payables and other ?nancial assets/
liabilities 548 677 171
Issuance of Mandatory Convertible Securities and other share
issuances (23) 3,094 - -
Cash Exit Rights following the merger of Fiat into FCA (417) - -
Exercise of stock options 146 4 22
Dividends paid (15) (1) (58)
Distribution of certain tax obligations of the VEBA Trust (32) (45) - -
Acquisition of non-controlling interests (32) (2,691) (34) -
Distribution for tax withholding obligations on behalf of non-
controlling interests - (6) -
Total 2,137 3,136 1,610
Translation exchange differences 1,219 (911) (420)
Total change in Cash and cash equivalents 3,385 1,789 140
Cash and cash equivalents at end of the period (21) 22,840 19,455 17,666
The accompanying notes are an integral part of the Consolidated financial statements.
146 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Consolidated Statements
of Changes in Equity
Consolidated Statements of Changes in Equity
for the years ended December 31, 2014, 2013 and 2012
Attributable to owners of the parent
Share
capital
Treasury
shares
Other
reserves
Cash
?ow
hedge
reserve
Currency
translation
differences
Available-
for-sale
?nancial
assets
Remeasu-
rement of
de?ned
bene?t
plans
Cumulative
share of OCI
of equity
method
investees
Non-
controlling
interests Total
(€ million)
At December 31, 2011 4,466 (289) 3,930 (170) 834 (43) (1,291) (79) 2,353 9,711
Capital increase — — — — — — — — 22 22
Effect of the conversion of preference
and savings shares into ordinary
shares 10 — (10) — — — — — — —
Share-based payments — 30 (15) — — — — — — 15
Dividends distributed — — (40) — — — — — (18) (58)
Purchase and sale of shares in
subsidiaries from/to non-controlling
interests — — 22 1 3 — (114) — (232) (320)
Net Pro?t — — 44 — — — — — 852 896
Other comprehensive income/(loss) — — — 184 (219) 26 (1,136) 39 (795) (1,901)
Other changes — — 4 — — — — — — 4
At December 31, 2012 4,476 (259) 3,935 15 618 (17) (2,541) (40) 2,182 8,369
Capital increase 1 — 2 — — — — — 1 4
Dividends distributed — — — — — — — — (1) (1)
Share-based payments — — 9 — — — — — — 9
Net Pro?t — — 904 — — — — — 1,047 1,951
Other comprehensive income/(loss) — — — 86 (567) 4 1,784 (94) 1,026 2,239
Distribution for tax withholding
obligations on behalf of NCI — — — — — — — — (6) (6)
Purchase of shares in subsidiaries from
non-controlling interests — — 2 — — — — — — 2
Other changes — — 8 — — — — — 9 17
At December 31, 2013 4,477 (259) 4,860 101 51 (13) (757) (134) 4,258 12,584
Capital increase 2 — 989 — — — — — 3 994
Merger (4,269) 224 4,045 — — — — — — —
Mandatory Convertible Securities — — 1,910 — — — — — — 1,910
Exit Rights (193) — (224) — — — — — — (417)
Dividends distributed — — — — — — — — (50) (50)
Share-based payments — 35 (31) — — — — — — 4
Net Pro?t — — 568 — — — — — 64 632
Other comprehensive income/(loss) — — — (205) 1,198 (24) (303) 48 68 782
Distribution for tax withholding
obligations on behalf of NCI — — — — — — — — (45) (45)
Purchase of shares in subsidiaries from
non-controlling interests — — 1,633 35 175 — (518) — (3,990) (2,665)
Other changes — — 4 — — — — — 5 9
At December 31, 2014 17 — 13,754 (69) 1,424 (37) (1,578) (86) 313 13,738
The accompanying notes are an integral part of the Consolidated financial statements.
2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
147
Notes to the Consolidated Financial Statements
At December 31, 2014 and 2013
PRINCIPAL ACTIVITIES
The FCA Merger
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. and decided to establish Fiat Chrysler Automobiles N.V.,
organized in the Netherlands, as the parent of the Group with its principal executive of?ces in the United Kingdom.
Fiat Chrysler Automobiles N.V. was incorporated as a public limited liability company (naamloze vennootschap) under
the laws of the Netherlands on April 1, 2014 under the name Fiat Investments N.V.
On June 15, 2014, the Board of Directors of Fiat approved the terms of a cross-border legal merger of Fiat into its 100
percent owned direct subsidiary Fiat Investments N.V. (the “Merger”), subject to several conditions precedent. At that
time, Fiat ordinary shares were listed on the Mercato Telematico Azionario (“MTA”) organized and managed by Borsa
Italiana S.p.A, as well as Euronext Paris and Frankfurt stock exchange. On October 7, 2014, Fiat announced that all
conditions precedent for the completion of the Merger were satis?ed:
Fiat shareholders had voted and approved the Merger at their extraordinary general meeting held on August 1,
2014. The New York Stock Exchange (“NYSE”) had provided notice that the listing of Fiat Chrysler Automobiles
N.V. common shares was approved on October 6, 2014 subject to issuance of these shares upon effectiveness of
the Merger. On the same day Borsa Italiana S.p.A. had approved the listing of the common shares of Fiat Chrysler
Automobiles N.V. on the MTA,
the creditors’ opposition period provided under the Italian law had expired on October 4, 2014, and no creditors’
oppositions were ?led,
exercise of the Cash Exit Rights by Fiat shareholders resulted in a total exercise of 60,002,027 Fiat shares,
equivalent to an aggregate amount of €464 million at the €7.727 per share exit price, and
pursuant to the Italian Civil Code, a total of 60,002,027 Fiat shares (equivalent to an aggregate amount of €464
million at the €7.727 per share exit price) were offered to Fiat shareholders not having exercised the Cash Exit
Rights. On October 7, 2014, at the completion of the offer period, Fiat shareholders elected to purchase 6,085,630
shares out of the total of 60,002,027 shares for a total of €47 million; as a result, concurrent with the Merger,
on October 12, 2014, 53,916,397 Fiat shares were canceled in the Merger with a resulting net aggregate cash
disbursement of €417 million.
The Merger was completed and became effective on October 12, 2014. The Merger, which took the form of a reverse
merger resulted in Fiat Investments N.V. being the surviving entity which was then renamed Fiat Chrysler Automobiles
N.V. (“FCA”). On October 13, 2014, FCA common shares commenced trading on the NYSE and on the MTA. The last
day of trading of Fiat ordinary shares on the MTA, Euronext France and Deutsche Börse was October 10, 2014. The
Merger is recognized in FCA’s Consolidated ?nancial statements from January 1, 2014 and FCA, as successor of Fiat,
is the parent company. As the Merger is a business combination in which all of the combining entities are controlled
ultimately by the same party both before and after the business combination, and based on the fact that the control is
not transitory, the transition was deemed to be a combination of entities under common control and therefore outside
the scope of IFRS 3R - Business Combinations and IFRIC 17 - Distributions of Non-cash Assets to Owners. As a
result, the Merger was accounted for without adjusting the carrying amounts of assets and liabilities involved in the
transaction and did not have an impact on the Consolidated ?nancial statements.
148 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Corporate Information
The Group and its subsidiaries, among which the most signi?cant is FCA US LLC (“FCA US”), formerly known as
Chrysler Group LLC or Chrysler, together with its subsidiaries, are engaged in the design, engineering, manufacturing,
distribution and sale of automobiles and light commercial vehicles, engines, transmission systems, automotive-related
components, metallurgical products and production systems. In addition, the Group is also involved in certain other
activities, including services (mainly captive) and publishing, which represent an insigni?cant portion of the Group’s
business.
SIGNIFICANT ACCOUNTING POLICIES
Authorization of Consolidated ?nancial statements and compliance with International Financial Reporting
Standards
These Consolidated ?nancial statements, together with notes thereto of FCA, at December 31, 2014 were authorized
for issuance on March 5, 2015 and have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code. The
Consolidated ?nancial statements are also prepared in accordance with the IFRS adopted by the European Union.
The designation “IFRS” also includes International Accounting Standards (“IAS”) as well as all interpretations of the
IFRS Interpretations Committee (“IFRIC”).
Basis of Preparation
The Consolidated ?nancial statements are prepared under the historical cost method, modi?ed as required for the
measurement of certain ?nancial instruments, as well as on a going concern basis. In this respect, the Group’s
assessment is that no material uncertainties (as de?ned in paragraph 25 of IAS 1- Presentation of Financial
Statements) exist about its ability to continue as a going concern.
The Group’s presentation currency is Euro (€).
Format of the Consolidated Financial Statements
For presentation of the Consolidated income statement, the Group uses a classi?cation based on the function of
expenses, rather than based on their nature, as it is more representative of the format used for internal reporting
and management purposes and is consistent with international practice in the automotive sector. The Group also
presents a subtotal for Earnings before Interest and Taxes (“EBIT”). EBIT distinguishes between the Pro?t before
taxes arising from operating items and those arising from ?nancing activities. EBIT is the primary measure used by the
Chief Operating Decision Maker (identi?ed as the Chief Executive Of?cer) to assess the performance of and allocate
resources to the operating segments.
For the Consolidated statement of ?nancial position, a mixed format has been selected to present current and non-
current assets and liabilities, as permitted by IAS 1 paragraph 60. More speci?cally, the Group’s Consolidated ?nancial
statements include both industrial and ?nancial services companies. The investment portfolios of the ?nancial services
companies are included in current assets, as the investments will be realized in their normal operating cycle. However,
the ?nancial services companies obtain only a portion of their funding from the market; the remainder is obtained from
Group operating companies through the Group’s treasury companies (included within the industrial companies), which
provide funding to both industrial and ?nancial services companies in the Group, as the need arises. This ?nancial
services structure within the Group does not allow the separation of ?nancial liabilities funding the ?nancial services
operations (whose assets are reported within current assets) and those funding the industrial operations. Presentation
of ?nancial liabilities as current or non-current based on their date of maturity would not facilitate a meaningful
comparison with ?nancial assets, which are categorized on the basis of their normal operating cycle. Disclosure as to
the due date of the ?nancial liabilities is provided in Note 27.
The Consolidated statement of cash ?ows is presented using the indirect method.
2014
|
ANNUAL REPORT 149
Reclassi?cations
Certain prior year amounts have been reclassi?ed to conform to the current year presentation.
New standards and amendments effective from January 1, 2014
The following new standards and amendments that are applicable from January 1, 2014 were adopted by the Group
for the purpose of the preparation of the Consolidated ?nancial statements.
IFRS 11 - Joint arrangements
The Group adopted IFRS 11, as amended as of January 1, 2014. The adoption of this standard required the
reclassi?cation of investments previously classi?ed as jointly controlled entities under IAS 31 - Interests in joint
ventures, as either “joint operations” (if the Group has rights to the assets, and obligations for the liabilities, relating to
an arrangement) or “joint ventures” (if the Group has rights only to the net assets of an arrangement). The classi?cation
focuses on the rights and obligations of the arrangements, as well as their legal form. Under the new standard, joint
ventures are accounted for under the equity method while joint operations are accounted for by recognizing the
Group’s share of assets, liabilities, revenues and expenses (these interests would have previously been accounted for
using the equity method under IAS 31).
As a result of the IFRS 11 retrospective application, the Group’s interest in Sevel S.p.A., a joint arrangement with
PSA-Peugeot and the Group’s interests in Fiat India Automobiles Limited, a joint arrangement with Tata Motor, were
classi?ed as joint operations. Therefore, the Group recognized its share of assets, liabilities, revenues and expenses
instead of recognizing its interest in the net assets of the entities under the equity method. The Group’s interests in
joint arrangements which were classi?ed as jointly controlled entities under IAS 31 and have been reclassi?ed as Joint
ventures under IFRS 11 continue to be accounted for using the equity method. The reclassi?cation of these interests
had no impact on these Interim Consolidated Financial Statements.
The impacts of the adoption of IFRS 11 on comparative amounts are set out below:
For the Year Ended December 31, 2013 For the Year Ended December 31, 2012
Amounts as
originally
reported IFRS 11
Amounts as
adjusted
Amounts as
originally
reported IFRS 11
Amounts as
adjusted
(€ million)
Items of Consolidated income statement
impacted by IFRS 11
Net revenues 86,816 (192) 86,624 83,957 (192) 83,765
Cost of sales 74,570 (244) 74,326 71,701 (228) 71,473
Selling, general and administrative costs 6,689 13 6,702 6,763 12 6,775
Research and development costs 2,231 5 2,236 1,850 8 1,858
Other income/(expenses) 68 9 77 (102) 34 (68)
Result from investments 97 (13) 84 107 (20) 87
EBIT 2,972 30 3,002 3,404 30 3,434
Net ?nancial income/(expenses) (1,964) (23) (1,987) (1,885) (25) (1,910)
Tax (income)/expenses (943) 7 (936) 623 5 628
Net pro?t 1,951 — 1,951 896 — 896
Net pro?t attributable to
Owners of the parent 904 — 904 44 — 44
Non-controlling interests 1,047 — 1,047 852 — 852
Basic and diluted earnings per share
Basic earnings per ordinary share 0.744 — 0.744 0.036 — 0.036
Diluted earnings per ordinary share 0.736 — 0.736 0.036 — 0.036
150 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
For the Year Ended December 31, 2013 For the Year Ended December 31, 2012
Amounts
as originally
reported IFRS 11
Amounts
as adjusted
Amounts
as originally
reported IFRS 11
Amounts
as adjusted
(€ million)
Items of Consolidated statement of
comprehensive income/(loss) impacted by
IFRS 11
Net pro?t 1,951 — 1,951 896 — 896
Gains/(losses) on remeasurement of de?ned
bene?t plans, net of tax 2,678 (2) 2,676 (1,839) — (1,839)
Share of gains/(losses) on remeasurement of
de?ned bene?t plans for equity method investees (9) 2 (7) — — —
Exchange differences on translating foreign
operations (708) (12) (720) (270) (15) (285)
Share of Other comprehensive income/(loss) for
equity method investees (100) 12 (88) 21 15 36
At December 31, 2013 At December 31, 2012 At January 1, 2012
Amounts
as
originally
reported IFRS 11
Amounts
as
adjusted
Amounts
as
originally
reported IFRS 11
Amounts
as
adjusted
Amounts
as
originally
reported IFRS 11
Amounts
as
adjusted
(€ million)
Items of Consolidated statement of ?nancial
position impacted by IFRS 11
Assets
Intangible assets 19,509 5 19,514 19,284 10 19,294 18,200 — 18,200
Property, plant and equipment 22,844 389 23,233 22,062 434 22,496 20,830 295 21,125
Investments and other ?nancial assets 2,260 (208) 2,052 2,287 (168) 2,119 2,663 (97) 2,566
Deferred tax assets 2,893 10 2,903 1,738 9 1,747 1,689 10 1,699
Total Non-current assets 47,611 196 47,807 45,464 285 45,749 43,487 208 43,695
Inventories 10,230 48 10,278 9,295 64 9,359 9,123 43 9,166
Trade receivables 2,406 138 2,544 2,702 114 2,816 2,625 89 2,714
Receivables from ?nancing activities — — — 3,727 (7) 3,720 3,968 (15) 3,953
Current tax receivables 291 21 312 236 30 266 369 — 369
Other current assets 2,302 21 2,323 2,163 32 2,195 2,088 13 2,101
Cash and cash equivalents 19,439 16 19,455 17,657 9 17,666 17,526 — 17,526
Total Current assets 39,154 244 39,398 36,587 242 36,829 36,488 130 36,618
Total Assets 86,774 440 87,214 82,106 527 82,633 80,041 338 80,379
Equity and liabilities
Equity 12,584 — 12,584 8,369 — 8,369 9,711 — 9,711
Of which
Other reserves — — — 3,935 — 3,935 3,930 — 3,930
Currency translation differences — — — 633 (15) 618 834 — 834
Remeasurement of de?ned bene?t plans — — — (2,534) (7) (2,541) (1,287) (4) (1,291)
Cumulative share of OCI of equity method investees — — — 18 22 40 (83) 4 (79)
Non-controlling interest — — — 2,182 — 2,182 2,353 — 2,353
Provisions 17,360 67 17,427 20,276 52 20,328 18,182 60 18,242
Employee bene?ts 8,265 61 8,326 11,486 60 11,546 9,584 56 9,640
Other provisions 9,095 6 9,101 8,790 (8) 8,782 8,598 4 8,602
Deferred tax liabilities — — — 801 — 801 761 1 762
Debt 29,902 381 30,283 27,889 414 28,303 26,772 321 27,093
Other current liabilities 8,943 20 8,963 7,781 30 7,811 7,538 21 7,559
Trade payables 17,235 (28) 17,207 16,558 31 16,589 16,418 (65) 16,353
Total Equity and liabilities 86,774 440 87,214 82,106 527 82,633 80,041 338 80,379
2014
|
ANNUAL REPORT 151
For the Year Ended December 31, 2013 For the Year Ended December 31, 2012
Amounts
as originally
reported IFRS 11
Amounts
as adjusted
Amounts
as originally
reported IFRS 11
Amounts
as adjusted
(€ million)
Effects on Consolidated statement
of cash ?ows
Cash and cash equivalents at beginning
of the period 17,657 9 17,666 17,526 — 17,526
Cash ?ows from/(used in) operating activities 7,589 29 7,618 6,444 48 6,492
Of which
Pro?t/(loss) for the period — — — 896 — 896
Other non-cash items — — — 562 20 582
Cash ?ows from/(used in) investing activities (8,086) 32 (8,054) (7,537) (5) (7,542)
Cash ?ows from/(used in) ?nancing activities 3,188 (52) 3,136 1,643 (33) 1,610
Translation exchange differences (909) (2) (911) (419) (1) (420)
Total change in cash and cash equivalents 1,782 7 1,789 131 9 140
Cash and cash equivalents at end of the period 19,439 16 19,455 17,657 9 17,666
IFRS 10 - Consolidated Financial Statements
The Group adopted IFRS 10, as amended, effective January 1, 2014. The new standard builds on existing principles
by identifying a single control model applicable to all entities, including “structured entities”. The standard also provides
additional guidance to assist in the determination of control where this is dif?cult to assess.
In accordance with the transition provision in IFRS 10, the Group reassessed the conclusion on control of its investees
on January 1, 2014 without reporting any signi?cant effect on the adoption of the new standard.
IFRS 12 - Disclosure of Interests in Other Entities
The Group adopted IFRS 12, as amended, effective January 1, 2014. The standard is a new and comprehensive
standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint
arrangements, associates, structured entities and other unconsolidated entities. Other than the modi?cations to the
disclosures regarding these interests reported in these Consolidated ?nancial statements, the adoption of the new
standard did not have any effect on these Consolidated ?nancial statements.
Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32 – Financial Instruments: Presentation)
The Group adopted the amendments to IAS 32 – Financial Instruments: Presentation effective January 1, 2014.
The amendments clarify the application of certain offsetting criteria for ?nancial assets and ?nancial liabilities and are
required to be applied retrospectively. There was no signi?cant effect on the Consolidated ?nancial statements from
the application of these amendments.
Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36 – Impairment of assets)
The Group adopted the amendments to IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets on
January 1,2014 which addresses the disclosure of information about the recoverable amount of impaired assets if
the recoverable amount is based on fair value less cost of disposal. There was no effect on the Consolidated ?nancial
statements from the adoption of these amendments. The application of these amendments will result in expanded
disclosure in the notes to future consolidated ?nancial statements when there is an impairment that is based on fair
value less cost of disposal.
152 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39 – Financial Instruments:
Recognition and Measurement)
These amendments, which were adopted from January 1, 2014, allow hedge accounting to continue in a situation
where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central
counterparty as a result of laws or regulation, if speci?c conditions are met. There was no signi?cant effect on the
Consolidated ?nancial statements from the application of these amendments.
Accounting for an obligation to pay a levy that is not income tax (IFRIC Interpretation 21 – Levies an interpretation of
IAS 37 – Provisions, Contingent Liabilities and Contingent Assets)
The interpretation, effective from January 1, 2014, sets out the accounting for an obligation to pay a levy that is not
income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability
should be recognized. There was no signi?cant effect on the Consolidated ?nancial statements from the application of
this interpretation.
New standards, amendments and interpretations not yet effective
In November 2013, the IASB published narrow scope amendments to IAS 19 – Employee bene?ts entitled “De?ned
Bene?t Plans: Employee Contributions”. These amendments apply to contributions from employees or third parties
to de?ned bene?t plans in order to simplify their accounting in speci?c cases. The amendments are effective,
retrospectively, for annual periods beginning on or after July 1, 2014 with earlier application permitted. No signi?cant
effect is expected from the ?rst time adoption of these amendments.
In December 2013, the IASB issued Annual Improvements to IFRSs 2010 – 2012 Cycle and Annual Improvements
to IFRSs 2011–2013 Cycle. The most important topics addressed in these amendments are, among others,
the de?nition of vesting conditions in IFRS 2 – Share-based payments, the disclosure on judgment used in the
aggregation of operating segments in IFRS 8 – Operating Segments, the identi?cation and disclosure of a related
party transaction that arises when a management entity provides key management personnel service to a reporting
entity in IAS 24 – Related Party disclosures, the extension of the exclusion from the scope of IFRS 3 – Business
Combinations to all types of joint arrangements and to clarify the application of certain exceptions in IFRS 13 – Fair
value Measurement. The improvements are effective for annual periods beginning on or after January 1, 2015. No
signi?cant effect is expected from the adoption of these amendments.
In May 2014, the IASB issued amendments to IFRS 11 – Joint arrangements: Accounting for acquisitions of interests
in joint operations, clarifying the accounting for acquisitions of an interest in a joint operation that constitutes a
business. The amendments are effective, retrospectively, for annual periods beginning on or after January 1, 2016 with
earlier application permitted. No signi?cant effect is expected from the adoption of these amendments.
In May 2014, the IASB issued an amendment to IAS 16 – Property, Plant and Equipment and to IAS 38 – Intangible
Assets. The IASB has clari?ed that the use of revenue-based methods to calculate the depreciation of an asset is
not appropriate because revenue generated by an activity that includes the use of an asset generally re?ects factors
other than the consumption of the economic bene?ts embodied in the asset. The IASB also clari?ed that revenue
is generally presumed to be an inappropriate basis for measuring the consumption of the economic bene?ts
embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances.
These amendments are effective for annual periods beginning on or after January 1, 2016, with early application
permitted. The Group is currently evaluating the method of implementation and impact of this amendment on its
Consolidated ?nancial statements.
In May 2014, the IASB issued IFRS 15 – Revenue from contracts with customers. The standard requires a company
to recognize revenue upon transfer of control of goods or services to a customer at an amount that re?ects the
consideration it expects to receive. This new revenue recognition model de?nes a ?ve step process to achieve this
objective. The updated guidance also requires additional disclosures about the nature, amount, timing and uncertainty
of revenue and cash ?ows arising from customer contracts. The standard is effective for annual periods beginning
on or after January 1, 2017, and requires either a full or modi?ed retrospective application. The Group is currently
evaluating the method of implementation and impact of this standard on its Consolidated ?nancial statements.
2014
|
ANNUAL REPORT 153
In July 2014 the IASB issued IFRS 9 – Financial Instruments. The improvements introduced by the new standard
includes a logical approach for classi?cation and measurement of ?nancial instruments driven by cash ?ow
characteristics and the business model in which an asset is held, a single “expected loss” impairment model for
?nancial assets and a substantially reformed approach for hedge accounting. The standard is effective, retrospectively
with limited exceptions, for annual periods beginning on or after January 1, 2018 with earlier application permitted. The
Group is currently evaluating the impact of this standard on its Consolidated ?nancial statements.
In September 2014, the IASB issued narrow amendments to IFRS 10 – Consolidated Financial Statements and
IAS 28 – Investments in Associates and Joint Ventures (2011). The amendments address an acknowledged
inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or
contribution of assets between an investor and its associate or joint venture. The main consequence of the
amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed
in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute
a business, even if these assets are housed in a subsidiary. The amendments will be effective, prospectively, for
annual periods commencing on or after January 1, 2016.
In September 2014 the IASB issued the Annual Improvements to IFRSs 2012-2014 cycle, a series of amendments
to IFRSs in response to issues raised mainly on IFRS 5 – Non-current assets held for sale and discontinued
operations, on the changes of method of disposal, on IFRS 7 – Financial Instruments: Disclosures on the
servicing contracts, on the IAS 19 – Employee Bene?ts, on the discount rate determination. The effective date of
the amendments is January 1, 2016. The Group is currently evaluating the impact of these amendments on its
Consolidated ?nancial statements.
In December 2014 the IASB issued amendments to IAS 1- Presentation of Financial Statements as part of its
major initiative to improve presentation and disclosure in ?nancial reports. The amendments make clear that
materiality applies to the whole of ?nancial statements and that the inclusion of immaterial information can inhibit the
usefulness of ?nancial disclosures. Furthermore, the amendments clarify that companies should use professional
judgment in determining where and in what order information is presented in the ?nancial disclosures. The
amendments are effective for annual periods beginning on or after January 1, 2016 with early application permitted.
Basis of Consolidation
Subsidiaries
Subsidiaries are entities over which the Group has control. Control is achieved when the Group has power over the
investee, when it is exposed to, or has rights to, variable returns from its involvement with the investee, and has the
ability to use its power over the investee to affect the amount of the investor’s returns. Subsidiaries are consolidated
on a line by line basis from the date on which control is achieved by the Group. The Group reassesses whether or not
it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements
of control listed above.
The Group recognizes a non-controlling interest in the acquiree on a transaction-by-transaction basis, either at fair
value or at the non-controlling interest’s share of the recognized amounts of the acquiree’s identi?able net assets.
Net pro?t or loss and each component of Other comprehensive income/(loss) are attributed to Equity attributable to
owners of the parent and to Non-controlling interest. Total comprehensive income /(loss) of subsidiaries is attributed to
Equity attributable to the owners of the parent and to the non-controlling interest even if this results in a de?cit balance
in Non-controlling interest.
Changes in the Group’s ownership interests in a subsidiary that do not result in the Group losing control over the
subsidiary are accounted for as an equity transaction. The carrying amounts of the Equity attributable to owners of the
parent and Non-controlling interests are adjusted to re?ect the changes in their relative interests in the subsidiary. Any
difference between the carrying amount of the non-controlling interests and the fair value of the consideration paid or
received in the transaction is recognized directly in the Equity attributable to the owners of the parent.
154 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Subsidiaries are deconsolidated from the date on which control ceases. When the Group ceases to have control
over a subsidiary, it de-recognizes the assets (including any goodwill) and liabilities of the subsidiary at their carrying
amounts at the date when control is lost, and de-recognizes the carrying amount of non-controlling interests in the
former subsidiary at the same date and recognizes the fair value of any consideration received from the transaction.
Any retained interest in the former subsidiary is remeasured to its fair value at the date when control is lost. This fair
value is the initial carrying amount for the purposes of subsequent accounting for the retained interest as an associate,
joint venture or ?nancial asset. In addition, any amounts previously recognized in Other comprehensive income/(loss)
in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.
This may mean that amounts previously recognized in Other comprehensive income/(loss) are reclassi?ed to the
Consolidated income statement or transferred directly to retained earnings as required by other IFRS.
Interests in Joint Ventures and Associates
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the arrangement. Joint control involves the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
An associate is an entity over which the Group has signi?cant in?uence. Signi?cant in?uence is the power to participate in
the ?nancial and operating policy decisions of the investees but does not have control or joint control over those policies.
Joint ventures and associates are accounted for using the equity method of accounting from the date on which joint
control and signi?cant in?uence is obtained. On acquisition of the investment, any excess of the cost of the investment
and the Group’s share of the net fair value of the investee’s identi?able assets and liabilities is recognized as goodwill
and is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the
investee’s identi?able assets and liabilities over the cost of the investment is included as income in the determination of
the Group’s share of the investee’s pro?t or loss in the acquisition period.
Under the equity method, the investments are initially recognized at cost, and adjusted thereafter to recognize the
Group’s share of the pro?t or loss and Other comprehensive income/(loss) of the investee. The Group’s share of the
investee’s pro?t or loss is recognized in the Consolidated income statement. Distributions received from an investee
reduce the carrying amount of the investment. Post-acquisition movements in Other comprehensive income/(loss)
are recognized in Other comprehensive income/(loss) with a corresponding adjustment to the carrying amount of
the investment.
Unrealized gains on transactions between the Group and its joint ventures and associates are eliminated to the extent
of the Group’s interest in the joint venture or associate. Unrealized losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
When the Group’s share of the losses of a joint venture or associate exceeds the Group’s interest in that joint venture
or associate, the Group discontinues recognizing its share of further losses. Additional losses are provided for, and
a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made
payments on behalf of the joint venture or associate.
The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or
a joint venture or when it is classi?ed as available-for-sale.
2014
|
ANNUAL REPORT 155
Interests in Joint Operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
assets and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous
consent of the parties sharing control.
When the Group undertakes its activities under joint operations, it recognizes in relation to its interest in the joint
operation: (i) its assets, including its share of any assets held jointly, (ii) its liabilities, including its share of any liabilities
incurred jointly, (iii) its revenue from the sale of its share of the output arising from the joint operation (iv) its share of
the revenue from the sale of the output by the joint operation and (v) its expenses, including its share of any expenses
incurred jointly.
Interests in other companies
Interests in other companies are measured at fair value. Investments in equity investments that do not have a
quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost.
For investments classi?ed as available-for-sale, ?nancial assets gains or losses arising from changes in fair value are
recognized in Other comprehensive income/(loss) until the assets are sold or are impaired; at that time, the cumulative
Other comprehensive income/(loss) is recognized in the Consolidated income statement. Interests in other companies
for which fair value is not available are stated at cost less any impairment losses.
Dividends received are included in Other income/(expenses) from investments.
Transactions eliminated in consolidation
All intra-group balances and transactions and any unrealized gains and losses arising from intra-group transactions
are eliminated in preparing the Consolidated ?nancial statements.
Unrealized gains and losses arising from transactions with associates and joint ventures are eliminated to the extent of
the Group’s interest in those entities. Unrealized losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred.
Foreign currency transactions
The functional currency of the Group’s entities is the currency of their primary economic environment. In individual
companies, transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated
at the exchange rate prevailing at that date. Exchange differences arising on the settlement of monetary items or on
reporting monetary items at rates different from those at which they were initially recorded during the period or in
previous ?nancial statements, are recognized in the Consolidated income statement.
Consolidation of foreign entities
All assets and liabilities of foreign consolidated companies with a functional currency other than the Euro are translated
using the closing rates at the date of the Consolidated statement of ?nancial position. Income and expenses are
translated into Euro at the average exchange rate for the period. Translation differences resulting from the application
of this method are classi?ed as Other comprehensive income/(loss) until the disposal of the investment. Average
exchange rates for the period are used to translate the cash ?ows of foreign subsidiaries in preparing the Consolidated
statement of cash ?ows.
Goodwill, assets acquired and liabilities assumed arising from the acquisition of entities with a functional currency
other than the Euro are recognized in the Consolidated ?nancial statements in the functional currency and translated
at the exchange rate at the acquisition date. These balances are translated at subsequent balance sheet dates at the
relevant exchange rate.
156 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The principal exchange rates used to translate other currencies into Euros were as follows:
2014 2013 2012
Average At December 31, Average At December 31, Average At December 31,
U.S. Dollar 1.329 1.214 1.328 1.379 1.285 1.319
Brazilian Real 3.121 3.221 2.867 3.258 2.508 2.704
Chinese Renminbi 8.187 7.536 8.164 8.349 8.106 8.221
Serbian Dinar 117.247 120.958 113.096 114.642 113.120 113.718
Polish Zloty 4.184 4.273 4.197 4.154 4.185 4.074
Argentine Peso 10.782 10.382 7.263 8.988 5.836 6.478
Pound Sterling 0.806 0.779 0.849 0.834 0.811 0.816
Swiss Franc 1.215 1.202 1.231 1.228 1.205 1.207
Business combinations
Business combinations are accounted for by applying the acquisition method of accounting in accordance with IFRS
3 - Business Combinations.
Under this method:
The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of
the acquisition-date fair values of the assets acquired and liabilities assumed by the Group and the equity interests
issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in the
Consolidated income statement as incurred.
The identi?able assets acquired and the liabilities assumed are recognized at their acquisition date fair values,
except for deferred tax assets and liabilities, assets and liabilities relating to employee bene?t arrangements,
liabilities or equity instruments relating to share-based payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree
and assets (or disposal groups) that are classi?ed as held for sale, which are measured in accordance with the
relevant IFRS standard.
Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the acquisition-date fair value of any previously held equity interest in the
acquiree over the acquisition-date values of the identi?able net assets acquired. If the value of the identi?able net
assets acquired exceeds the aggregate of the consideration transferred, any non-controlling interest recognized
and the fair value of any previously held interest in the acquiree, the excess is recognized as a gain in the
Consolidated income statement.
Non-controlling interest is initially measured either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s identi?able net assets. The selection of the measurement method is made on a transaction-
by-transaction basis.
Any contingent consideration arrangement in the business combination is initially measured at its acquisition-date
fair value and included as part of the consideration transferred in the business combination in order to measure
goodwill. Contingent consideration that is classi?ed within Equity is not remeasured and its subsequent settlement
is accounted for within Equity. Contingent consideration that is classi?ed within Liabilities is remeasured at fair value
at each reporting date with changes in fair value recorded in the Consolidated income statement.
During the measurement period, which may not exceed one year from the acquisition date, any adjustments to the
value of assets or liabilities recognized at the acquisition date arising from additional information obtained about
facts and circumstances that existed at the acquisition date are recognized retrospectively with corresponding
adjustments to goodwill.
2014
|
ANNUAL REPORT 157
When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is
remeasured at its acquisition-date fair value and any resulting gain or loss is recognized in the Consolidated income
statement. Changes in the equity interest in the acquiree that have been recognized in Other comprehensive
income/(loss) in prior reporting periods are reclassi?ed to the Consolidated income statement as if the equity
interest had been disposed.
Intangible assets
Goodwill
Goodwill is not amortized, but is tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired. After initial recognition, Goodwill is measured at cost less any
accumulated impairment losses.
Development costs
Development costs for vehicle project production and related components, engines and production systems are
recognized as an asset if, and only if, both of the following conditions under IAS 38 – Intangible assets are met: that
development costs can be measured reliably and that the technical feasibility of the product, volumes and pricing
support the view that the development expenditure will generate future economic bene?ts. Capitalized development
costs include all direct and indirect costs that may be directly attributed to the development process.
Capitalized development costs are amortized on a straight-line basis from the start of production over the expected
life cycle of the models (generally 5-6 years) or powertrains developed (generally 10-12 years). All other development
costs are expensed as incurred.
Intangible assets with inde?nite useful lives
Intangible assets with inde?nite useful lives consist principally of brands which have no legal, contractual, competitive,
economic, or other factors that limit their useful lives. Intangible assets with inde?nite useful lives are not amortized, but
are tested for impairment annually or more frequently whenever there is an indication that the asset may be impaired,
by comparing the carrying amount with the recoverable amount.
Property, plant and equipment
Cost
Property, plant and equipment is initially recognized at cost which comprises the purchase price, any costs directly
attributable to bringing the assets to the location and condition necessary to be capable of operating in the manner
intended by management and any initial estimate of the costs of dismantling and removing the item and restoring
the site on which it is located. Self-constructed assets are initially recognized at production cost. Subsequent
expenditures and the cost of replacing parts of an asset are capitalized only if they increase the future economic
bene?ts embodied in that asset. All other expenditures are expensed as incurred. When such replacement costs are
capitalized, the carrying amount of the parts that are replaced is recognized in the Consolidated income statement.
Assets held under ?nance leases, which provide the Group with substantially all the risks and rewards of ownership, are
recognized as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the Consolidated statement of position within Debt. The assets are
depreciated by the method and at the rates indicated below depending on the nature of the leased assets.
Leases under which the lessor retains substantially all the risks and rewards of ownership of the leased assets are
classi?ed as operating leases. Operating lease expenditures are expensed on a straight-line basis over the lease terms.
158 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Depreciation
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets during years ended
December 31, 2014, 2013 and 2012, as follows:
Depreciation rates
Buildings 3% - 8%
Plant, machinery and equipment 3% - 33%
Other assets 5% - 33%
Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of property, plant or
equipment or an intangible asset that is deemed to be a qualifying asset as de?ned in IAS 23 - Borrowing Costs
are capitalized. The amount of borrowing costs eligible for capitalization corresponds to the actual borrowing costs
incurred during the period less any investment income on the temporary investment of any borrowed funds not yet
used. The amount of borrowing costs capitalized as of December 31, 2014 and 2013 was €256 million and €230
million, respectively.
Impairment of assets
At the end of each reporting period, the Group assesses whether there is any indication that its Intangible assets
(including development costs) and its Property, plant and equipment may be impaired. Goodwill and Intangible assets
with inde?nite useful lives are tested for impairment annually or more frequently, if there is an indication that an asset
may be impaired.
If indications of impairment are present, the carrying amount of the asset is reduced to its recoverable amount which
is the higher of fair value less costs to sell and its value in use. The recoverable amount is determined for the individual
asset, unless the asset does not generate cash in?ows that are largely independent of those from other assets or
groups of assets, in which case the asset is tested as part of the cash-generating unit (“CGU”) to which the asset
belongs. A CGU is the smallest identi?able group of assets that generates cash in?ows that are largely independent
of the cash in?ows from other assets or groups of assets. In assessing the value in use of an asset or CGU, the
estimated future cash ?ows are discounted to their present value using a discount rate that re?ects current market
assessments of the time value of money and the risks speci?c to the asset or CGU. An impairment loss is recognized
if the recoverable amount is lower than the carrying amount. Impairment of Property plant and equipment and
Intangible assets arising from transactions that are only incidentally related to the ordinary activities of the Group and
that are not expected to occur frequently, are considered to hinder comparability of the Group’s year-on-year ?nancial
performance and are recognized within Other unusual expenses.
When an impairment loss for assets, other than Goodwill no longer exists or has decreased, the carrying amount of
the asset or CGU is increased to the revised estimate of its recoverable amount, but not in excess of the carrying
amount that would have been recorded had no impairment loss been recognized. The reversal of an impairment loss
is recognized in the Consolidated income statement.
2014
|
ANNUAL REPORT 159
Financial instruments
Presentation
Financial instruments held by the Group are presented in the Consolidated ?nancial statements as described in the
following paragraphs.
Investments and other non-current ?nancial assets comprise investments in unconsolidated companies and other
non-current ?nancial assets (held-to-maturity securities, non-current loans and receivables and other non-current
available-for-sale ?nancial assets).
Current ?nancial assets, as de?ned in IAS 39 – Financial Instruments: Recognition and Measurement, include Trade
receivables, Receivables from ?nancing activities, Current investments, Current securities and Other ?nancial assets
(which include derivative ?nancial instruments stated at fair value), as well as Cash and cash equivalents. Cash and
cash equivalents include cash at banks, units in money market funds and other money market securities, comprising
commercial paper and certi?cates of deposit, that are readily convertible into cash and are subject to an insigni?cant
risk of changes in value. Money market funds comprise investments in high quality, short-term, diversi?ed ?nancial
instruments which can generally be liquidated on demand. Current securities include short-term or marketable
securities which represent temporary investments of available funds and do not satisfy the requirements for being
classi?ed as cash equivalents. Current securities include both available-for-sale and held-for-trading securities.
Financial liabilities comprise Debt and Other ?nancial liabilities (which include derivative ?nancial instruments stated at
fair value), Trade payables and Other current liabilities.
Measurement
Non-current ?nancial assets other than Investments, as well as current ?nancial assets and ?nancial liabilities, are
accounted for in accordance with IAS 39 – Financial Instruments: Recognition and Measurement.
Current ?nancial assets and held-to-maturity securities are recognized on the basis of the settlement date and, on
initial recognition, are measured at acquisition cost, including transaction costs. Subsequent to initial recognition,
available-for-sale and held-for-trading ?nancial assets are measured at fair value. When market prices are not directly
available, the fair value of available-for-sale ?nancial assets is measured using appropriate valuation techniques (e.g.
discounted cash ?ow analysis based on market information available at the balance sheet date).
Gains and losses on available-for-sale ?nancial assets are recognized in Other comprehensive income/(loss) until the
?nancial asset is disposed of or is impaired. When the asset is disposed of, the cumulative gains or losses, including
those previously recognized in Other comprehensive income/(loss), are reclassi?ed to the Consolidated income
statement for the period, within Financial income and expenses. When the asset is impaired, accumulated losses are
recognized in the Consolidated income statement. Gains and losses arising from changes in the fair value of held-for-
trading ?nancial instruments are included in the Consolidated income statement for the period.
Loans and receivables which are not held by the Group for trading (loans and receivables originating in the ordinary
course of business), held-to-maturity securities and equity investments whose fair value cannot be determined reliably,
are measured, to the extent that they have a ?xed term, at amortized cost, using the effective interest method. When
the ?nancial assets do not have a ?xed term, they are measured at acquisition cost. Receivables with maturities of over
one year which bear no interest or an interest rate signi?cantly lower than market rates are discounted using market
rates. Assessments are made regularly as to whether there is any objective evidence that a ?nancial asset or group
of assets may be impaired. If any such evidence exists, any impairment loss is included in the Consolidated income
statement for the period.
Except for derivative instruments, ?nancial liabilities are measured at amortized cost using the effective interest method.
Financial assets and liabilities hedged against changes in fair value (fair value hedges) are measured in accordance
with hedge accounting principles: gains and losses arising from remeasurement at fair value, due to changes in the
respective hedged risk, are recognized in the Consolidated income statement and are offset by the effective portion of
the loss or gain arising from remeasurement at fair value of the hedging instrument.
160 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Derivative ?nancial instruments
Derivative ?nancial instruments are used for economic hedging purposes, in order to reduce currency, interest
rate and market price risks (primarily related to commodities and securities). In accordance with IAS 39 - Financial
Instruments: Recognition and Measurement, derivative ?nancial instruments qualify for hedge accounting only when
there is formal designation and documentation of the hedging relationship at inception of the hedge, the hedge is
expected to be highly effective, its effectiveness can be reliably measured and it is highly effective throughout the
?nancial reporting periods for which it is designated.
All derivative ?nancial instruments are measured at fair value.
When derivative ?nancial instruments qualify for hedge accounting, the following accounting treatments apply:
Fair value hedges – Where a derivative ?nancial instrument is designated as a hedge of the exposure to changes in
fair value of a recognized asset or liability that is attributable to a particular risk and could affect the Consolidated
income statement, the gain or loss from remeasuring the hedging instrument at fair value is recognized in the
Consolidated income statement. The gain or loss on the hedged item attributable to the hedged risk adjusts the
carrying amount of the hedged item and is recognized in the Consolidated income statement.
Cash ?ow hedges – Where a derivative ?nancial instrument is designated as a hedge of the exposure to variability
in future cash ?ows of a recognized asset or liability or a highly probable forecasted transaction and could affect
the Consolidated income statement, the effective portion of any gain or loss on the derivative ?nancial instrument
is recognized directly in Other comprehensive income/(loss). The cumulative gain or loss is reclassi?ed from Other
comprehensive income/(loss) to the Consolidated income statement at the same time as the economic effect
arising from the hedged item affects the Consolidated income statement. The gain or loss associated with a hedge
or part of a hedge that has become ineffective is recognized in the Consolidated income statement immediately.
When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to
occur, the cumulative gain or loss realized to the point of termination remains in Other comprehensive income/(loss)
and is recognized in the Consolidated income statement at the same time as the underlying transaction occurs. If
the hedged transaction is no longer probable, the cumulative unrealized gain or loss held in Other comprehensive
income/(loss) is recognized in the Consolidated income statement immediately.
Hedges of a net investment – If a derivative ?nancial instrument is designated as a hedging instrument for a net
investment in a foreign operation, the effective portion of the gain or loss on the derivative ?nancial instrument
is recognized in Other comprehensive income/(loss). The cumulative gain or loss is reclassi?ed from Other
comprehensive income/(loss) to the Consolidated income statement upon disposal of the foreign operation.
If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative ?nancial
instruments are recognized immediately in the Consolidated income statement.
Transfers of ?nancial assets
The Group de-recognizes ?nancial assets when the contractual rights to the cash ?ows arising from the asset are no
longer held or if it transfers the ?nancial asset and transfers substantially all the risks and rewards of ownership of the
?nancial asset. On derecognition of ?nancial assets, the difference between the carrying amount of the asset and the
consideration received or receivable for the transfer of the asset is recognized in the Consolidated income statement.
The Group transfers certain of its ?nancial, trade and tax receivables, mainly through factoring transactions. Factoring
transactions may be either with recourse or without recourse. Certain transfers include deferred payment clauses
(for example, when the payment by the factor of a minor part of the purchase price is dependent on the total amount
collected from the receivables) requiring ?rst loss cover, meaning that the transferor takes priority participation
in the losses, or requires a signi?cant exposure to the cash ?ows arising from the transferred receivables to be
retained. These types of transactions do not meet the requirements of IAS 39 – Financial Instruments: Recognition
and Measurement for the derecognition of the assets since the risks and rewards connected with collection are
not transferred, and accordingly the Group continues to recognize the receivables transferred by this means on the
Consolidated balance sheet and recognizes a ?nancial liability of the same amount under Asset-backed ?nancing. The
gains and losses arising from the transfer of these receivables are only recognized when they are de-recognized.
2014
|
ANNUAL REPORT 161
Inventories
Inventories of raw materials, semi-?nished products and ?nished goods are stated at the lower of cost and net
realizable value, cost being determined on a ?rst in-?rst-out (FIFO) basis. The measurement of Inventories includes
the direct costs of materials, labor and indirect costs (variable and ?xed). A provision is made for obsolete and
slow-moving raw materials, ?nished goods, spare parts and other supplies based on their expected future use and
realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs for sale and distribution.
The measurement of production systems construction contracts is based on the stage of completion determined
as the proportion of cost incurred at the balance sheet date over the estimated total contract cost. These items are
presented net of progress billings received from customers. Any losses on such contracts are fully recorded in the
Consolidated income statement when they are known.
Employee bene?ts
De?ned contribution plans
Costs arising from de?ned contribution plans are expensed as incurred.
De?ned bene?t plans
The Group’s net obligations are determined separately for each plan by estimating the present value of future bene?ts
that employees have earned in the current and prior periods, and deducting the fair value of any plan assets. The
present value of the de?ned bene?t obligation is measured using actuarial techniques and actuarial assumptions that are
unbiased and mutually compatible and attributes bene?ts to periods in which the obligation to provide post-employment
bene?ts arise by using the Projected Unit Credit Method. Plan assets are recognized and measured at fair value.
When the net obligation is a potential asset, the recognized amount is limited to the present value of any economic
bene?ts available in the form of future refunds or reductions in future contributions to the plan (asset ceiling).
The components of the de?ned bene?t cost are recognized as follows:
the service costs are recognized in the Consolidated income statement by function and presented in the relevant
line items (Cost of sales, Selling, general and administrative costs, Research and development costs, etc.);
the net interest on the de?ned bene?t liability or asset is recognized in the Consolidated income statement as
Financial income (expenses), and is determined by multiplying the net liability/(asset) by the discount rate used to
discount obligations taking into account the effect of contributions and bene?t payments made during the year; and
the remeasurement components of the net obligations, which comprise actuarial gains and losses, the return on
plan assets (excluding interest income recognized in the Consolidated income statement) and any change in the
effect of the asset ceiling are recognized immediately in Other comprehensive income/(loss). These remeasurement
components are not reclassi?ed in the Consolidated income statement in a subsequent period.
Past service costs arising from plan amendments and curtailments are recognized immediately in the Consolidated
income statement within Other unusual income /(expenses). Gains and losses on the settlement of a plan are recognized
in the Consolidated income statement within Other unusual income/(expenses) when the settlement occurs.
Other long term employee bene?ts
The Group’s obligations represent the present value of future bene?ts that employees have earned in return for their
service during the current and prior periods. Remeasurement components on other long term employee bene?ts are
recognized in the Consolidated income statement in the period in which they arise.
Termination bene?ts
Termination bene?ts are expensed at the earlier of when the Group can no longer withdraw the offer of those bene?ts
and when the Group recognizes costs for a restructuring.
162 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Share-based compensation
Share-based compensation expenses are measured at the fair value of the goods or services received. If this fair value
cannot be reliably estimated, their value is measured indirectly by reference to the fair value of the equity instruments
granted. Compensation expense for equity-classi?ed awards is measured at the grant date based on the fair value of
the award. For those awards with post-vesting contingencies, an adjustment is applied to the fair value of the award
to account for the probability of meeting the contingencies. Liability-classi?ed awards are remeasured to fair value at
each balance sheet date until the award is settled.
Share-based compensation expenses are recognized over the employee service period with an offsetting increase
to equity or other liabilities depending on the nature of the award. If awards contain certain performance conditions
in order to vest, the Group recognizes the cost of the award when achievement of the performance condition is
probable. Share-based compensation expenses related to plans with graded vesting are generally recognized
using the graded vesting method. Share-based compensation expenses are recognized in Selling, general and
administrative costs in the Consolidated income statement.
Provisions
Provisions are recognized when the Group has a present obligation, legal or constructive, as a result of a past event,
it is probable that an out?ow of resources embodying economic bene?ts will be required to settle the obligation and a
reliable estimate of the amount of the obligation can be made. Changes in estimates of provisions are re?ected in the
Consolidated income statement in the period in which the change occurs.
Revenue recognition
Revenue from sale of vehicles and service parts is recognized if it is probable that the economic bene?ts associated
with a transaction will ?ow to the Group and the revenue can be reliably measured. Revenue is recognized when
the risks and rewards of ownership are transferred to the customer, the sales price is agreed or determinable and
collectability is reasonably assured. For vehicles, this generally corresponds to the date when the vehicles are made
available to dealers, or when the vehicle is released to the carrier responsible for transporting vehicles to dealers.
Revenues are recognized net of discounts, including but not limited to, sales incentives and customer bonuses.
The estimated costs of sales incentive programs include incentives offered to dealers and retail customers, and
granting of retail ?nancing at a signi?cant discount to market interest rates. These costs are recognized at the time of
the sale of the vehicle.
New vehicle sales with a buy-back commitment, or through the Guarantee Depreciation Program (“GDP”) under
which the Group guarantees the residual value or otherwise assumes responsibility for the minimum resale value
of the vehicle, are not recognized at the time of delivery but are accounted for similar to an operating lease. Rental
income is recognized over the contractual term of the lease on a straight-line basis. At the end of the lease term, the
Group recognizes revenue for the portion of the vehicle sales price which had not been previously recognized as rental
income and recognizes the remainder of the cost of the vehicle in Cost of sales.
Revenues from services contracts, separately-priced extended warranty and from construction contracts are
recognized as revenues over the contract period in proportion to the costs expected to be incurred based on historical
information. A loss on these contracts is recognized if the sum of the expected costs for services under the contract
exceeds unearned revenue.
Revenues also include lease rentals recognized over the contractual term of the lease on a straight-line basis as well
as interest income from ?nancial services companies.
Cost of sales
Cost of sales comprises expenses incurred in the manufacturing and distribution of vehicles and parts, of which, cost
of materials and components are the most signi?cant portion. The remaining costs principally include labor costs,
consisting of direct and indirect wages, as well as depreciation, amortization and transportation costs.
2014
|
ANNUAL REPORT 163
Cost of sales also includes warranty and product-related costs, estimated at the time of sale to dealer networks
or to the end customer. Depending on the speci?c nature of the recall, including the signi?cance and magnitude,
certain warranty costs incurred are reported as Other unusual expenses, as the Group believes that this separate
identi?cation allows the users of the Consolidated ?nancial statements to better analyze the comparative year-on-
year ?nancial performance of the Group. Expenses which are directly attributable to the ?nancial services companies,
including the interest expenses related to their ?nancing as a whole and provisions for risks and write-downs of assets,
are reported in Cost of sales.
Government Grants
Government grants are recognized in the ?nancial statements when there is reasonable assurance of the Group’s
compliance with the conditions for receiving such grants and that the grants will be received. Government grants are
recognized as income over the periods necessary to match them with the related costs which they are intended to offset.
The bene?t of a government loan at a below-market rate of interest is treated for accounting purposes as a
government grant. The bene?t of the below-market rate of interest is measured as the difference between the initial
carrying amount of the loan (fair value plus transaction costs) and the proceeds received, and it is accounted for in
accordance with the policies used for the recognition of government grants.
Taxes
Income taxes include all taxes based on the taxable pro?ts of the Group. Current and deferred taxes are recognized
as income or expense and are included in the Consolidated income statement for the period, except tax arising from
(i) a transaction or event which is recognized, in the same or a different period, either in Other comprehensive income/
(loss) or directly in Equity, or (ii) a business combination.
Deferred taxes are accounted for under the full liability method. Deferred tax liabilities are recognized for all taxable
temporary differences between the carrying amounts of assets or liabilities and their tax base, except to the extent that
the deferred tax liabilities arise from the initial recognition of goodwill or the initial recognition of an asset or liability in
a transaction which is not a business combination and at the time of the transaction, affects neither accounting pro?t
nor taxable pro?t. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is
probable that taxable pro?t will be available against which the deductible temporary differences can be utilized, unless
the deferred tax assets arise from the initial recognition of an asset or liability in a transaction that is not a business
combination and at the time of the transaction, affects neither accounting pro?t nor taxable pro?t.
Deferred tax assets and liabilities are measured at the substantively enacted tax rates in the respective jurisdictions in
which the Group operates that are expected to apply to the period when the asset is realized or liability is settled.
The Group recognizes deferred tax liabilities associated with the existence of a subsidiary’s undistributed pro?ts,
except when it is able to control the timing of the reversal of the temporary difference, and it is probable that this
temporary difference will not reverse in the foreseeable future. The Group recognizes deferred tax assets associated
with the deductible temporary differences on investments in subsidiaries only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable pro?t will be available against which the
temporary difference can be utilized.
Deferred tax assets relating to the carry-forward of unused tax losses and tax credits, as well as those arising from
deductible temporary differences, are recognized to the extent that it is probable that future pro?ts will be available
against which they can be utilized. The Group reassesses unrecognized deferred tax assets at the end of each year
and recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future
taxable pro?t will allow the deferred tax asset to be recovered.
Current income taxes and deferred taxes are offset when they relate to the same taxation authority and there is a
legally enforceable right of offset.
Other taxes not based on income, such as property taxes and capital taxes, are included in Other income/(expenses).
164 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
SEGMENT REPORTING
The Group’s activities are carried out through seven reportable segments: four regional mass-market vehicle segments
(NAFTA, LATAM, APAC and EMEA), Ferrari, Maserati and the Components segment as discussed below. As of
December 31, 2013 and 2012, the Group had included Ferrari and Maserati as one reportable segment labeled Luxury
Brands as both operating segments did not individually meet the quantitative thresholds set by IFRS 8 - Operating
Segments to be separate reporting segments and they met the aggregation criteria. At December 31, 2014, there is no
change in the nine operating segments that had previously been identi?ed by the Group, however, the Ferrari operating
segment met the quantitative threshold for being a separate reportable segment. As a result, and in accordance with
IFRS 8 - Operating Segments, the ?nancial information for the Ferrari operating segment is re?ected as a separate
reportable segment as of and for the year ended December 31, 2014. The prior period ?nancial information presented for
comparative purposes was also restated to re?ect the Ferrari operating segment as a separate reportable segment. The
Group also re?ects Maserati as a separate reportable segment, as the ?nancial information for this operating segment is
used by the Group’s chief operating decision maker and this operating segment does not meet the aggregation criteria
stipulated in IFRS 8 for aggregation with another of the Group’s operating segments.
The Group’s four regional mass-market vehicle reportable segments deal with the design, engineering, development,
manufacturing, distribution and sale of passenger cars, light commercial vehicles and related parts and services
in speci?c geographic areas: NAFTA (U.S., Canada, Mexico and Caribbean islands), LATAM (South and Central
America), APAC (Asia and Paci?c countries) and EMEA (Europe, Middle East and Africa). The Group also operates on
a global basis in the luxury vehicle and components sectors. In the luxury vehicle sector the Group has two reportable
segments: Ferrari and Maserati. In the components sector, the Group has the following three operating segments:
Magneti Marelli, Teksid and Comau which did not meet the quantitative thresholds required in IFRS 8 - Operating
Segments for separate disclosure. Therefore, based on their characteristics and similarities, the three operating
segments within the components sector are presented within the reportable segment “Components”.
The operating segments re?ect the components of the Group that are regularly reviewed by the Chief Executive
Of?cer, who is the “chief operating decision maker” as de?ned under IFRS 8– Operating segments, for making
strategic decisions, allocating resources and assessing performance.
In more detail, the reportable segments identi?ed by the Group are the following:
NAFTA mainly earns its revenues from the design, engineering, development, manufacturing, distribution and sale
of vehicles under the Chrysler, Jeep, Dodge, Ram and Fiat brand names and from sales of the related parts and
accessories (under the Mopar brand name) in the United States, Canada, Mexico and Caribbean islands.
LATAM mainly earns its revenues from the design, engineering, development, manufacturing, distribution and sale
of passenger cars and light commercial vehicles and related spare parts under the Fiat and Fiat Professional brand
names in South and Central America and from the distribution of the Chrysler, Jeep, Dodge and Ram brand cars in
the same region. In addition, it provides ?nancial services to the dealer network in Brazil and Argentina.
APAC mainly earns its revenues from the distribution and sale of cars and related spare parts under the Abarth, Alfa
Romeo, Chrysler, Dodge, Fiat and Jeep brands mostly in China, Japan, Australia, South Korea and India. These
activities are carried out through both subsidiaries and joint ventures.
EMEA mainly earns its revenues from the design, engineering, development, manufacturing, distribution and
sale of passenger cars and light commercial vehicles under the Fiat, Alfa Romeo, Lancia, Abarth, Jeep and Fiat
Professional brand names, the sale of the related spare parts in Europe, Middle East and Africa, and from the
distribution of the Chrysler, Dodge and Ram brand cars in the same areas. In addition, the segment provides
?nancial services related to the sale of cars and light commercial vehicles in Europe, primarily through the joint
venture FCA Bank S.p.A. (formerly FGA Capital S.p.A.) set up with the Crédit Agricole group.
Ferrari earns its revenues from the design, engineering, development, manufacturing, distribution and sale of luxury
sport cars under the Ferrari brand.
Maserati earns its revenues from the design, engineering, development, manufacturing, distribution and sale of
luxury sport cars under the Maserati brand.
2014
|
ANNUAL REPORT 165
Components (Magneti Marelli, Teksid and Comau) earns its revenues from the production and sale of lighting
components, engine control units, suspensions, shock absorbers, electronic systems, exhaust systems and plastic
molding components and in the spare parts distribution activities carried out under the Magneti Marelli brand name,
cast iron components for engines, gearboxes, transmissions and suspension systems and aluminum cylinder heads
(Teksid), in addition to the design and production of industrial automation systems and related products for the
automotive industry (Comau).
USE OF ESTIMATES
The Consolidated ?nancial statements are prepared in accordance with IFRS which require the use of estimates,
judgments and assumptions that affect the carrying amount of assets and liabilities, the disclosure of contingent
assets and liabilities and the amounts of income and expenses recognized. The estimates and associated
assumptions are based on elements that are known when the ?nancial statements are prepared, on historical
experience and on any other factors that are considered to be relevant.
The estimates and underlying assumptions are reviewed periodically and continuously by the Group. If the items
subject to estimates do not perform as assumed, then the actual results could differ from the estimates, which would
require adjustment accordingly. The effects of any changes in estimate are recognized in the Consolidated income
statement in the period in which the adjustment is made, or in future periods.
The items requiring estimates for which there is a risk that a material difference may arise in respect of the carrying
amounts of assets and liabilities in the future are discussed below.
Pension plans
The Group sponsors both non-contributory and contributory de?ned bene?t pension plans primarily in the U.S. and
Canada. The majority of the plans are funded plans. The non-contributory pension plans cover certain hourly and
salaried employees. Bene?ts are based on a ?xed rate for each year of service. Additionally, contributory bene?ts are
provided to certain salaried employees under the salaried employees’ retirement plans. These plans provide bene?ts
based on the employee’s cumulative contributions, years of service during which the employee contributions were
made and the employee’s average salary during the ?ve consecutive years in which the employee’s salary was highest
in the 15 years preceding retirement or the freeze of such plans, as applicable.
The Group’s de?ned bene?t pension plans are accounted for on an actuarial basis, which requires the use of estimates
and assumptions to determine the net liability or net asset. The Group estimates the present value of the projected
future payments to all participants taking into consideration parameters of a ?nancial nature such as discount rates,
the rates of salary increases and the likelihood of potential future events estimated by using demographic assumptions
such as mortality, dismissal and retirement rates. These assumptions may have an effect on the amount and timing of
future contributions.
In 2013, the Group amended the U.S. and Canadian salaried de?ned bene?t pension plans. The U.S. plans were
amended in order to comply with Internal Revenue Service regulations, to cease the accrual of future bene?ts
effective December 31, 2013, and to enhance the retirement factors. The Canada amendment ceased the accrual
of future bene?ts effective December 31, 2014, enhanced the retirement factors and continued to consider future
salary increases for the affected employees. The plan amendments resulted in the remeasurement of the plans and
a corresponding curtailment gain. As a result, the Group recognized a €509 million net reduction to its pension
obligation, a €7 million reduction to de?ned bene?t plan assets, and a corresponding €502 million increase in Other
comprehensive income/(loss) for the year ended December 31, 2013. There were no signi?cant plan amendments or
curtailments to the Group’s pension plans for the year ended December 31, 2014.
166 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Plan obligations and costs are based on existing retirement plan provisions. Assumptions regarding any potential
future changes to bene?t provisions beyond those to which the Group is presently committed are not made. The
assumptions used in developing the required estimates include the following key factors:
Discount rates. The Group selects discount rates on the basis of the rate of return on high-quality (AA-rated) ?xed
income investments for which the timing and amounts of payments match the timing and amounts of the projected
pension payments.
Salary growth. The salary growth assumption re?ects the Group’s long-term actual experience, outlook and
assumed in?ation.
In?ation. The in?ation assumption is based on an evaluation of external market indicators.
Expected contributions. The expected amount and timing of contributions is based on an assessment of minimum
funding requirements. From time to time contributions are made beyond those that are legally required.
Retirement rates. Retirement rates are developed to re?ect actual and projected plan experience.
Mortality rates. Mortality rates are developed using our plan-speci?c populations, recent mortality information
published by recognized experts in this ?eld and other data where appropriate to re?ect actual and projected plan
experience.
Plan assets measured at net asset value. Plan assets are recognized and measured at fair value in accordance with
IFRS 13 - Fair Value Measurement. Plan assets for which the fair value is represented by the net asset value (“NAV”)
since there are no active markets for these assets amounted to €2,750 million and €2,780 million at December 31,
2014 and at 2013, respectively. These investments include private equity, real estate and hedge fund investments.
In 2014, following the release of new standards by the Canadian Institute of Actuaries, mortality assumptions used for
our Canadian bene?t plan valuations were updated to re?ect recent trends in the industry and the revised outlook for
future generational mortality improvements. The change increased our Canadian pension obligations by approximately
€41 million.
Additionally, retirement rate assumptions used for our U.S. bene?t plan valuations were updated to re?ect an ongoing
trend towards delayed retirement for FCA US employees. The change decreased our U.S. pension obligations by
approximately €261 million.
Signi?cant differences in actual experience or signi?cant changes in assumptions may affect the pension obligations
and pension expense. The effects of actual results differing from assumptions and of amended assumptions are
included in Other comprehensive income/(loss). The weighted average discount rate used to determine the bene?t
obligation for the de?ned bene?t obligation for the de?ned bene?t plan was 4.03 percent at December 31, 2014 (4.69
percent at December 31, 2013).
At December 31, 2014 the effect of the indicated decrease or increase in selected factors, holding all other
assumptions constant, is shown below:
Effect on pension
de?ned bene?t
obligation
(€ million)
10 basis point decrease in discount rate 317
10 basis point increase in discount rate (312)
At December 31, 2014, the net liabilities and net assets for pension bene?ts amounted to €5,166 million and to
€104 million, respectively (€4,253 million and €95 million, respectively at December 31, 2013). Refer to Note 25 for a
detailed discussion of the Group’s pension plans.
2014
|
ANNUAL REPORT 167
Other post-employment bene?ts
The Group provides health care, legal, severance indemnity and life insurance bene?ts to certain hourly and salaried
employees. Upon retirement, these employees may become eligible for continuation of certain bene?ts. Bene?ts and
eligibility rules may be modi?ed periodically.
Health care, life insurance plans and other employment bene?ts are accounted for on an actuarial basis, which
requires the selection of various assumptions. The estimation of the Group’s obligations, costs and liabilities
associated with these plans requires the use of estimates of the present value of the projected future payments to
all participants, taking into consideration parameters of a ?nancial nature such as discount rate, the rates of salary
increases and the likelihood of potential future events estimated by using demographic assumptions such as mortality,
dismissal and retirement rates.
Plan obligations and costs are based on existing plan provisions. Assumptions regarding any potential future changes
to bene?t provisions beyond those to which the Group is presently committed are not made.
The assumptions used in developing the required estimates include the following key factors:
Discount rates. The Group selects discount rates on the basis of the rate of return on high-quality (AA-rated) ?xed
income investments for which the timing and amounts of payments match the timing and amounts of the projected
bene?t payments.
Health care cost trends. The Group’s health care cost trend assumptions are developed based on historical cost
data, the near-term outlook, and an assessment of likely long-term trends.
Salary growth. The salary growth assumptions re?ect the Group’s long-term actual experience, outlook and
assumed in?ation.
Retirement and employee leaving rates. Retirement and employee leaving rates are developed to re?ect actual and
projected plan experience, as well as legal requirements for retirement in respective countries.
Mortality rates. Mortality rates are developed using our plan-speci?c populations, recent mortality information
published by recognized experts in this ?eld and other data where appropriate to re?ect actual and projected plan
experience.
Additionally, retirement rate assumptions used for our U.S. bene?t plan valuations were updated to re?ect an ongoing
trend towards delayed retirement for FCA US employees. The change decreased our other post-employment bene?t
obligations by approximately €40 million.
At December 31, 2014 the effect of the indicated decreases or increases in the key factors affecting the health
care, life insurance plans and severance indemnity in Italy (trattamento di ?ne rapporto or “TFR”), holding all other
assumptions constant, is shown below:
Effect on health
care and life
insurance de?ned
bene?t obligation
Effect on the TFR
obligation
(€ million)
10 basis point / (100 basis point for TFR) decrease in discount rate 28 55
10 basis point / (100 basis point for TFR), increase in discount rate (28) (49)
100 basis point decrease in health care cost trend rate (43) —
100 basis point increase in health care cost trend rate 50 —
168 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Recoverability of non-current assets with de?nite useful lives
Non-current assets with de?nite useful lives include property, plant and equipment, intangible assets and assets held
for sale. Intangible assets with de?nite useful lives mainly consist of capitalized development costs related to the EMEA
and NAFTA segments.
The Group periodically reviews the carrying amount of non-current assets with de?nite useful lives when events and
circumstances indicate that an asset may be impaired. Impairment tests are performed by comparing the carrying
amount and the recoverable amount of the CGU. The recoverable amount is the higher of the CGU’s fair value less
costs of disposal and its value in use. In assessing the value in use, the pre-tax estimated future cash ?ows are
discounted to their present value using a pre-tax discount rate that re?ects current market assessments of the time
value of money and the risks speci?c to the CGU.
Due to impairment indicators existing in 2014 primarily related to losses incurred in EMEA due to weak demand for
vehicles and strong competition, impairment tests relating to the recoverability of CGUs in EMEA were performed. The
tests compared the carrying amount of the assets allocated to the CGUs (comprising property, plant and equipment
and capitalized development costs) to their value in use using pre-tax estimated future cash ?ows discounted to their
present value using a pre-tax discount rate. The test con?rmed that the value in use of the CGUs in EMEA was greater
than the carrying value at December 31, 2014 and as a result, there was no impairment loss recognized in 2014.
In addition, the recoverable amount of the EMEA segment as a whole was assessed. The value in use of the EMEA
segment was determined using the following assumptions:
the reference scenario was based on the 2014-2018 strategic business plan presented in May 2014 and the
consistent projections for 2019;
the expected future cash ?ows, represented by the projected EBIT before Result from investments, Gains on the
disposal of investments, Restructuring costs, Other unusual income/(expenses), Depreciation and Amortization
and reduced by expected capital expenditure, include a normalized future result beyond the time period explicitly
considered used to estimate the Terminal Value. This normalized future result was assumed substantially in line with
2017-2019 amounts. The long-term growth rate was set at zero;
the expected future cash ?ows were discounted using a pre-tax Weighted Average Cost of Capital (“WACC”) of
10.3 percent. This WACC re?ects the current market assessment of the time value of money for the period being
considered and the risks speci?c to the EMEA region. The WACC was calculated by referring to the yield curve of
10-year European government bonds, to FCA’s cost of debt, and other factors.
Furthermore, a sensitivity analysis was performed by simulating two different scenarios:
a) WACC was increased by 1.0 percent for 2018, 2.0 percent for 2019 and 3.0 percent for Terminal Value;
b) Cash-?ows were reduced by estimating the impact of a 1.7 percent decrease in the European car market demand for 2015,
a 7.5 percent decrease for 2016 and a 10.0 percent decrease for 2017-2019 as compared to the base assumptions.
In all scenarios the recoverable amount was higher than the carrying amount.
The estimates and assumptions described above re?ect the Group’s current available knowledge as to the expected
future development of the businesses and are based on an assessment of the future development of the markets and
the automotive industry, which remain subject to a high degree of uncertainty due to the continuation of the economic
dif?culties in most countries of the Eurozone and its effects on the industry. More speci?cally, considering the
uncertainty, a future worsening in the economic environment in the Eurozone, particularly in Italy, that is not re?ected
in these Group assumptions, could result in actual performance that differs from the original estimates, and might
therefore require adjustments to the carrying amounts of certain non-current assets in future periods.
In 2013, as a result of the new product strategy and decline in the demand for vehicles in EMEA, the Group performed
impairment tests related to the recoverability of the CGUs in EMEA and the EMEA segment as a whole using pre-tax
estimated future cash ?ows discounted to their present value using a pre-tax discount rate of 12.2 percent and the
same methodology for the recoverable amount as described above. For the year ended December 31, 2013, total
impairments of approximately €116 million relating to EMEA were recognized as a result of testing the CGUs in EMEA
(of which €61 million related to development costs and €55 million related to Property, plant and equipment).
2014
|
ANNUAL REPORT 169
As a result of new product strategies, the streamlining of architectures and related production platforms associated
with the Group’s refocused product strategies, the operations to which speci?c capitalized development costs
belonged was redesigned. For example, certain models were switched to new platforms considered technologically
more appropriate. As no future economic bene?ts were expected from these speci?c capitalized development costs,
they were written off in accordance with IAS 38 - Intangible Assets. For the year ended December 31, 2014, speci?c
capitalized development costs of €47 million within the EMEA segment and €28 million of development costs within
the NAFTA segment were written off and recorded within Research and development costs in the Consolidated
income statement. In addition, in 2014, the Group recorded €25 million of impairment losses primarily related to
the EMEA segment for certain powertrains that were abandoned. For the year ended December 31, 2013, speci?c
capitalized development costs of €65 million within the Maserati segment, €90 million within the EMEA segment and
€32 million of development costs within the LATAM segment were written off.
The following table sets forth all impairment charges recognized for non-current assets with de?nite useful lives during
the years ended December 31, 2014, 2013 and 2012.
Impairments to Property, plant and equipment:
Twelve Months Ended December 31,
2014 2013 2012
Note (€ million)
EMEA 25 55 40
Components 2 31 8
LATAM — — 1
Other 6 — 1
(15) 33 86 50
Recorded in the Consolidated income statement within:
Cost of sales 33 — 50
Other unusual expenses — 86 —
33 86 50
Impairments to Other intangible assets:
Twelve Months Ended December 31,
2014 2013 2012
Note (€ million)
Development costs
EMEA 47 151 33
NAFTA 28 — —
Components 3 2 21
Maserati — 65 —
LATAM — 32 2
APAC 4 — 1
82 250 57
Other intangible assets — — 1
(14) 82 250 58
Recorded in the Consolidated income statement within:
Cost of sales — — 1
Research and development costs 82 24 57
Other unusual expenses — 226 —
82 250 58
170 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Recoverability of Goodwill and Intangible assets with inde?nite useful lives
In accordance with IAS 36 – Impairment of Assets, Goodwill and intangible assets with inde?nite useful lives are not
amortized and are tested for impairment annually or more frequently if facts or circumstances indicate that the asset
may be impaired.
Goodwill and intangible assets with inde?nite useful lives are allocated to operating segments or to CGUs within the
operating segments, which represent the lowest level within the Group at which goodwill is monitored for internal
management purposes in accordance with IAS 36. The impairment test is performed by comparing the carrying
amount (which mainly comprises property, plant and equipment, goodwill, brands and capitalized development costs)
and the recoverable amount of each CGU or group of CGUs to which Goodwill has been allocated. The recoverable
amount of a CGU is the higher of its fair value less costs to sell and its value in use.
Goodwill and Intangible assets with inde?nite useful lives at December 31, 2014 includes €10,185 million of
Goodwill (€8,967 million at December 31, 2013) and €2,953 million of Intangible assets with inde?nite useful lives
(€2,600 million at December 31, 2013) resulting from the acquisition of interests in FCA US. Goodwill also includes
€786 million from the acquisition of interests in Ferrari (€786 million at December 31, 2013). The Group did not
recognize any impairment charges for Goodwill and Intangible assets with inde?nite useful lives during the years ended
December 31, 2014, 2013 and 2012.
For a discussion on impairment testing of Goodwill and intangible assets with inde?nite useful lives, see Note 13.
Recoverability of deferred tax assets
The carrying amount of deferred tax assets is reduced to the extent that it is not probable that suf?cient taxable pro?t
will be available to allow the bene?t of part or all of the deferred tax assets to be utilized.
At December 31, 2014, the Group had deferred tax assets on deductible temporary differences of €8,662 million
(€6,183 million at December 31, 2013), of which €480 million was not recognized (€435 million at December 31, 2013).
At the same date the Group had also theoretical tax bene?ts on losses carried forward of €4,696 million (€3,810 million
at December 31, 2013), of which €2,934 million was unrecognized (€2,891 million at December 31, 2013).
At December 31, 2013, in view of the results achieved by FCA US, of the continuous improvement of its product mix,
its trends in international sales and its implementation of new vehicles, together with the consolidation of the alliance
between FCA and FCA US, following FCA US’s acquisition of the remaining shareholding at the beginning of 2014, the
Group recorded previously unrecognized deferred tax assets for a total of €1,734 million, of which €1,500 million was
recognized in Income taxes and €234 million in Other comprehensive income/(loss).
The recoverability of deferred tax assets is dependent on the Group’s ability to generate suf?cient future taxable
income in the period in which it is assumed that the deductible temporary differences reverse and tax losses carried
forward can be utilized. In making this assessment, the Group considers future taxable income arising on the most
recent budgets and plans, prepared by using the same criteria described for testing the impairment of assets and
goodwill. Moreover, the Group estimates the impact of the reversal of taxable temporary differences on earnings and it
also considers the period over which these assets could be recovered.
These estimates and assumptions are subject to a high degree of uncertainty especially as it relates to future
performance in the Eurozone, particularly in Italy. Therefore changes in current estimates due to unanticipated events
could have a signi?cant impact on the Group’s Consolidated ?nancial statements.
Sales incentives
The Group records the estimated cost of sales incentive programs offered to dealers and consumers as a reduction to
revenue at the time of sale of the vehicle to the dealer. This estimated cost represents the incentive programs offered
to dealers and consumers, as well as the expected modi?cations to these programs in order to facilitate sales of the
dealer inventory. Subsequent adjustments to sales incentive programs related to vehicles previously sold to dealers
are recognized as an adjustment to net revenues in the period the adjustment is determinable.
2014
|
ANNUAL REPORT 171
The Group uses price discounts to adjust vehicle pricing in response to a number of market and product factors,
including pricing actions and incentives offered by competitors, economic conditions, the amount of excess industry
production capacity, the intensity of market competition, consumer demand for the product and the desire to support
promotional campaigns. The Group may offer a variety of sales incentive programs at any given point in time, including
cash offers to dealers and consumers and subvention programs offered to customers, or lease subsidies, which
reduce the retail customer’s monthly lease payment or cash due at the inception of the ?nancing arrangement, or
both. Sales incentive programs are generally brand, model and region speci?c for a de?ned period of time.
Multiple factors are used in estimating the future incentive expense by vehicle line including the current incentive
programs in the market, planned promotional programs and the normal incentive escalation incurred as the model
year ages. The estimated incentive rates are reviewed monthly and changes to the planned rates are adjusted
accordingly, thus impacting revenues. As there are a multitude of inputs affecting the calculation of the estimate for
sales incentives, an increase or decrease of any of these variables could have a signi?cant effect on revenues.
Product warranties and liabilities
The Group establishes reserves for product warranties at the time the sale is recognized. The Group issues various
types of product warranties under which the performance of products delivered is generally guaranteed for a certain
period or term. The reserve for product warranties includes the expected costs of warranty obligations imposed by
law or contract, as well as the expected costs for policy coverage, recall actions and buyback commitments. The
estimated future costs of these actions are principally based on assumptions regarding the lifetime warranty costs
of each vehicle line and each model year of that vehicle line, as well as historical claims experience for the Group’s
vehicles. In addition, the number and magnitude of additional service actions expected to be approved and policies
related to additional service actions are taken into consideration. Due to the uncertainty and potential volatility of these
estimated factors, changes in the assumptions used could materially affect the results of operations.
The Group periodically initiates voluntary service and recall actions to address various customer satisfaction and
safety and emissions issues related to vehicles sold. Included in the reserve is the estimated cost of these service and
recall actions. The estimated future costs of these actions are primarily based on historical claims experience for the
Group’s vehicles. Estimates of the future costs of these actions are inevitably imprecise due to some uncertainties,
including the number of vehicles affected by a service or recall action. It is reasonably possible that the ultimate cost
of these service and recall actions may require the Group to make expenditures in excess of (or less than) established
reserves over an extended period of time. The estimate of warranty and additional service and recall action obligations
is periodically reviewed during the year. Experience has shown that initial data for any given model year can be volatile.
The process therefore relies upon long-term historical averages until actual data is available. As actual experience
becomes available, it is used to modify the historical averages to ensure that the forecast is within the range of
likely outcomes. Resulting accruals are then compared with current spending rates to ensure that the balances are
adequate to meet expected future obligations.
Warranty costs incurred are generally recorded in the Consolidated income statement as Cost of sales. However,
depending on the speci?c nature of the recall, including the signi?cance and magnitude, the Group reports certain of
these costs as Other unusual expenses. The Group believes that this separate identi?cation allows the users of the
Consolidated ?nancial statements to better analyze the comparative year-on-year ?nancial performance of the Group.
In addition, the Group makes provisions for estimated product liability costs arising from property damage and
personal injuries including wrongful death, and potential exemplary or punitive damages alleged to be the result of
product defects. By nature, these costs can be infrequent, dif?cult to predict and have the potential to vary signi?cantly
in amount. The valuation of the reserve is actuarially determined on an annual basis based on, among other factors,
the number of vehicles sold and product liability claims incurred. Costs associated with these provisions are recorded
in the Consolidated income statement and any subsequent adjustments are recorded in the period in which the
adjustment is determined.
172 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Other contingent liabilities
The Group records provisions in connection with pending or threatened disputes or legal proceedings when it is
considered probable that there will be an out?ow of funds and when the amount can be reasonably estimated. If an
out?ow of funds becomes possible but the amount cannot be estimated, the matter is disclosed in the notes to the
Consolidated ?nancial statements. The Group is the subject of legal and tax proceedings covering a wide range of
matters in various jurisdictions. Due to the uncertainty inherent in such matters, it is dif?cult to predict the out?ow of
funds that could result from such disputes with any certainty. Moreover, the cases and claims against the Group are
often derived from complex legal issues which are subject to a differing degrees of uncertainty, including the facts
and circumstances of each particular case, the manner in which the applicable law is likely to be interpreted and
applied and the jurisdiction and the different laws involved. The Group monitors the status of pending legal procedures
and consults with experts on legal and tax matters on a regular basis. As such, the provisions for the Group’s legal
proceedings and litigation may vary as a result of future developments in pending matters.
Litigation
Various legal proceedings, claims and governmental investigations are pending against the Group on a wide range
of topics, including vehicle safety, emissions and fuel economy, dealer, supplier and other contractual relationships,
intellectual property rights, product warranties and environmental matters. Some of these proceedings allege defects
in speci?c component parts or systems (including airbags, seats, seat belts, brakes, ball joints, transmissions, engines
and fuel systems) in various vehicle models or allege general design defects relating to vehicle handling and stability,
sudden unintended movement or crashworthiness. These proceedings seek recovery for damage to property,
personal injuries or wrongful death and in some cases include a claim for exemplary or punitive damages. Adverse
decisions in one or more of these proceedings could require the Group to pay substantial damages, or undertake
service actions, recall campaigns or other costly actions.
Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. An
accrual is established in connection with pending or threatened litigation if a loss is probable and a reliable estimate
can be made. Since these accruals represent estimates, it is reasonably possible that the resolution of some of these
matters could require the Group to make payments in excess of the amounts accrued. It is also reasonably possible
that the resolution of some of the matters for which accruals could not be made may require the Group to make
payments in an amount or range of amounts that could not be reasonably estimated.
The term “reasonably possible” is used herein to mean that the chance of a future transaction or event occurring is
more than remote but less than probable. Although the ?nal resolution of any such matters could have a material effect
on the Group’s operating results for the particular reporting period in which an adjustment of the estimated reserve is
recorded, it is believed that any resulting adjustment would not materially affect the Consolidated statement of ?nancial
position or Consolidated statement of cash ?ows.
Environmental Matters
The Group is subject to potential liability under government regulations and various claims and legal actions that are
pending or may be asserted against the Group concerning environmental matters. Estimates of future costs of such
environmental matters are subject to numerous uncertainties, including the enactment of new laws and regulations,
the development and application of new technologies, the identi?cation of new sites for which the Group may have
remediation responsibility and the apportionment and collectability of remediation costs among responsible parties.
The Group establishes provisions for these environmental matters when a loss is probable and a reliable estimate
can be made. It is reasonably possible that the ?nal resolution of some of these matters may require the Group to
make expenditures, in excess of established provisions, over an extended period of time and in a range of amounts
that cannot be reliably estimated. Although the ?nal resolution of any such matters could have a material effect on
the Group’s operating results for the particular reporting period in which an adjustment to the estimated provision is
recorded, it is believed that any resulting adjustment would not materially affect the Consolidated statement of ?nancial
position or the Consolidated statement of cash ?ows.
2014
|
ANNUAL REPORT 173
Business combinations
As discussed below in the paragraph – Acquisition of the remaining ownership interest in FCA US, the consolidation of
FCA US was accounted for as a business combination achieved in stages using the acquisition method of accounting
required under IFRS 3. In accordance with the acquisition method, the Group remeasured its previously held equity
interest in FCA US at fair value. The acquired non-controlling interest in FCA US was also recognized at its acquisition
date fair value. Additionally, the Group recognized the acquired assets and assumed liabilities at their acquisition date
fair values, except for deferred income taxes and certain liabilities associated with employee bene?ts, which were
recorded according to other accounting guidance. These values were based on market participant assumptions,
which were based on market information available at the date of obtaining control and which affected the value at
which the assets, liabilities, non-controlling interests and goodwill were recognized as well as the amount of income
and expense for the period.
Share-based compensation
The Group accounts for share-based compensation plans in accordance with IFRS 2 - Share-based payments,
which requires measuring share-based compensation expense based on fair value. As described in Note 24, Fiat
had granted share-based payments for the years ended December 31, 2013 and 2012 to certain employees and
directors. There were no new Fiat share-based payments made for the year ended December 31, 2014. Also as
described in Note 24, FCA US had granted share-based payments for the years ended December 31, 2014, 2013
and 2012.
The fair value of Fiat share-based payments had been measured based on market prices of Fiat shares at the grant
date taking into account the terms and conditions upon which the instruments were granted. The fair value of FCA US
awards is measured by using a discounted cash ?ow methodology to estimate the price of the awards at the grant
date and subsequently for liability-classi?ed awards at each balance sheet date, until they are settled.
For FCA US awards, since there are no publicly observable market prices for FCA US’s membership interests, the
fair value was determined contemporaneously with each measurement using a discounted cash ?ow methodology.
The Group uses this approach, which is based on projected cash ?ows, to estimate FCA US’s enterprise value. The
Group then deducts the fair value of FCA US’s outstanding interest bearing debt at the measurement date from the
enterprise value to arrive at the fair value of FCA US’s equity.
The signi?cant assumptions used in the measurement of the fair value of these awards at each measurement date
include different assumptions. For example, the assumptions include four years of annual projections that re?ect the
estimated after-tax cash ?ows a market participant would expect to generate from FCA US’s operating business, an
estimated after-tax weighted average cost of capital and projected worldwide factory shipments.
The assumptions noted above used in the contemporaneous estimation of fair value at each measurement date
have not changed signi?cantly during the years ended December 31, 2014, 2013 and 2012 with the exception of the
weighted average cost of capital, which is directly in?uenced by external market conditions.
The Group updates the measurement of the fair value of these awards on a regular basis. It is therefore possible that
the amount of share-based payments reserve and liabilities for share-based payments may vary as the result of a
signi?cant change in the assumptions mentioned above.
174 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
SCOPE OF CONSOLIDATION
FCA is the parent company of the Group and it holds, directly and indirectly, interests in the Group’s main operating
companies. The Consolidated ?nancial statements at December 31, 2014, 2013 and 2012 include FCA and its
subsidiaries over which it has control.
At December 31, 2014 and December 31, 2013, FCA had the following signi?cant direct and indirect interests in the
following subsidiaries:
At December 31, 2014 At December 31, 2013
Name Country
Shares held
by the
Group
Shares
held by
NCI
Shares held
by the
Group
Shares
held by
NCI
(%)
Directly held interests
FCA Italy S.p.A. (previously Fiat Group Automobiles S.p.A.) Italy 100.0 — 100.0 —
Ferrari S.p.A. Italy 90.0 10.0 90.0 10.0
Maserati S.p.A. Italy 100.0 — 100.0 —
Magneti Marelli S.p.A. Italy 99.99 0.01 99.99 0.01
Teksid S.p.A. Italy 84.79 15.21 84.79 15.21
Comau S.p.A. Italy 100.00 — 100.00 —
Indirectly held interests
FCA US LLC (previously Chrysler Group LLC) USA 100.0 — 58.5 41.5
Each of these subsidiaries holds direct or indirect interests in other Group companies. The Consolidated
?nancial statements include 306 subsidiaries consolidated on a line-by-line basis at December 31, 2014 (303 at
December 31, 2013).
Certain minor subsidiaries (mainly dealership, captive service, dormant and companies under liquidation) are excluded
from consolidation on a line-by-line basis and are accounted for at cost or using the equity method. Their aggregate
assets and revenues represent less than 1.0 percent of the Group’s respective amounts for each period and at each
date presented within the Consolidated ?nancial statements.
Non-Controlling Interests
The total Non-controlling interest at December 31, 2014 of €313 million primarily relates to the 10.0 percent interest
held by third parties in Ferrari S.p.A. of €194 million. The total Non-controlling interest at December 31, 2013 of
€4,258 million primarily related to the 41.5 percent interest held by the International Union, United Automobile,
Aerospace, and Agricultural Implement Workers of America (“UAW”) Retiree Medical Bene?ts Trust (the “VEBA Trust”)
in FCA US of €3,944 million (see section —Acquisition of the remaining ownership in FCA US below) and to the 10.0
percent interest held for Ferrari S.p.A. of €215 million.
Financial information (before intra-group eliminations) for FCA US and Ferrari S.p.A. are summarized below. No ?nancial
information is presented as of and for the year ended December 31, 2014 for FCA US as a result of FCA US becoming a
wholly-owned subsidiary of the Group (see section —Acquisition of the remaining ownership in FCA US below).
As of December 31,
2013 2014 2013
FCA US Ferrari S.p.A.
(€ million)
Non-current assets 27,150 988 896
Current assets 16,870 2,835 2,217
Total assets 44,020 3,823 3,113
Debt 9,565 614 322
Other liabilities 24,943 1,490 1,264
Equity (100%) 9,512 1,719 1,527
2014
|
ANNUAL REPORT 175
For the years ended December 31,
2013 2012 2014 2013 2012
FCA US Ferrari S.p.A.
(€ million)
Net revenues 54,370 51,202 2,762 2,335 2,225
EBIT 3,160 3,217 389 364 336
Pro?t before income tax 2,185 2,149 393 366 335
Net pro?t 2,392 1,944 273 246 233
Other comprehensive income/(loss) 2,500 (1,893) (79) 29 46
Total comprehensive income/(loss) 4,892 (51) 194 275 279
Dividends paid to non-controlling interests — — 15 — —
Cash generated in operating activities 5,204 5,889 753 561 621
Cash used in investing activities (3,557) (4,214) (606) (314) (334)
Cash used in ?nancing activities (262) (113) (133) (223) (276)
Total change in cash and cash equivalents 873 1,383 20 15 7
Cash and cash equivalents at December 31, 9,676 8,803 136 116 101
Other commitments and important contractual rights relating to the Non-controlling interests
FCA is subject to a put contract with Renault relating to its original non-controlling investment of 33.5 percent in
Teksid, now 15.2 percent. In particular, Renault has the right to exercise a sale option to FCA on its interest in Teksid,
in the following cases:
in the event of non-ful?llment in the application of the protocol of the agreement and admission to receivership or
any other redressement procedure;
in the event Renault’s investment in Teksid falls below 15.0 percent or Teksid decides to diversify its activities
outside the foundry sector; or
should FCA be the object of the acquisition of control by another car manufacturer.
The exercise price of the option is established as follows:
for the ?rst 6.5 percent of the share capital of Teksid, the initial investment price as increased by a speci?ed
interest rate; and
for the remaining amount of share capital of Teksid, the share of the accounting net equity at the exercise date.
Planned separation of Ferrari
On October 29, 2014, the Board of Directors of FCA, in connection with FCA’s implementation of a capital plan
appropriate to support the Group’s long-term success, announced its intention to separate Ferrari from FCA. The
separation is expected to be effected through an initial public offering (“IPO”) of a portion of FCA’s interest in Ferrari
and a spin-off of FCA’s remaining Ferrari shares to FCA shareholders. The Board authorized FCA’s management to
take the steps necessary to complete these transactions during 2015.
As a result, the Group did not classify Ferrari as an asset held for sale at December 31, 2014. The criteria within IFRS
5 - Non-current Assets Held for Sale and Discontinued Operations were not met as the timing, structure, organization,
terms and ?nancing aspects of the transaction had not yet been ?nalized and are subject to ?nal approval by the
Board of Directors of FCA.
176 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
CHANGES IN THE SCOPE OF CONSOLIDATION
The following signi?cant changes in the scope of consolidation occurred in 2014, 2013 and 2012:
2014
There were no signi?cant changes in the scope of consolidation in 2014
2013
In October 2013, FCA acquired from General Motors the 50.0 percent residual interest of VM Motori Group.
In November 2013, the investment in the Brazilian company, CMP Componentes e Modulos Plasticos Industria e
Commercio Ltda, which was previously classi?ed as held for sale on acquisition, was consolidated on a line-by-line
basis as a result of changes in the plans for its sale.
In December 31, 2013, the assets and liabilities related to a subsidiary consolidated by the Components segment
(Fonderie du Poitou Fonte S.A.S.) were reclassi?ed as Asset and liabilities held for sale (Note 22); the subsidiary was
subsequently disposed of in May 2014.
2012
In April 2012, as a result of changes in the Fiat India Automobiles Limited (“FIAL”) shareholding agreements, this entity
was classi?ed as a Joint operation and its share of assets, liabilities, revenues and expenses were recognized in the
Consolidated ?nancial statements; the investment was no longer accounted for under equity method accounting.
In July 2012, FCA entered into an agreement with PSA Peugeot Citroën providing for the transfer of its interest in the joint
venture Sevelnord Société Anonyme at a symbolic value. In accordance with IFRS 5, from June 2012 the investment in
Sevelnord Société Anonyme was reclassi?ed within assets held for sale and was measured at fair value, resulting in an
unusual loss of €91 million. The joint venture was subsequently disposed of in the fourth quarter of 2012.
ACQUISITION OF THE REMAINING OWNERSHIP INTEREST IN FCA US
As of December 31, 2013, FCA held a 58.5 percent ownership interest in FCA US and the VEBA Trust held the
remaining 41.5 percent. On January 1, 2014, FCA ‘s 100.0 percent owned subsidiary FCA North America Holdings LLC,
(“FCA NA”), formerly known as Fiat North America LLC, and the VEBA Trust announced that they had entered into an
agreement (“the Equity Purchase Agreement”) under which FCA NA agreed to acquire the VEBA Trust’s 41.5 percent
interest in FCA US, which included an approximately 10 percent interest in FCA US subject to previously exercised
options that were subject to ongoing litigation, for cash consideration of U.S.$3,650 million (€2,691 million) as follows:
a special distribution of U.S.$1,900 million (€1,404 million) paid by FCA US to its members, which served to fund a
portion of the transaction, wherein FCA NA directed its portion of the special distribution to the VEBA Trust as part
of the purchase consideration; and
an additional cash payment by FCA NA to the VEBA Trust of U.S.$1,750 million (€1.3 billion).
The previously exercised options for the approximately 10 percent interest in FCA US that were settled in connection
with the Equity Purchase Agreement had an estimated fair value at the transaction date of U.S.$302 million (€223
million). These options were historically carried at cost, which was zero, in accordance with the guidance in
paragraphs AG80 and AG81 of IAS 39 - Financial Instruments: Recognition and Measurement as the options were on
shares that did not have a quoted market price in an active market and as the interpretation of the formula required to
calculate the exercise price on the options was disputed and was subject to ongoing litigation. Upon consummation
of the transactions contemplated by the Equity Purchase Agreement, the fair value of the underlying equity and the
estimated exercise price of the options, at that point, became reliably estimable. As such, on the transaction date, the
options were remeasured to their fair value of U.S.$302 million (€223 million at the transaction date), which resulted
in a corresponding non-taxable gain in Other unusual income/(expenses). The Group has classi?ed this item in Other
unusual income/(expenses) because it relates to options held in relation to the acquisition of a non-controlling interest
and is expected to occur infrequently.
2014
|
ANNUAL REPORT 177
The fair value of the options was calculated as the difference between the estimated exercise price for the disputed
options encompassed in the Equity Purchase Agreement of U.S.$650 million (€481 million) and the estimated fair
value for the underlying approximately 10 percent interest in FCA US of U.S.$952 million (€704 million). The exercise
price for the disputed options was originally calculated by FCA NA pursuant to the formula set out in the option
agreement between FCA NA and the VEBA Trust. The VEBA Trust disputed the calculation of the exercise price,
which ultimately led to the litigation between the two parties regarding the interpretation of the call option agreement.
The dispute primarily related to four elements of the calculation of the exercise price. During the ensuing litigation,
the court ruled in FCA NA’s favor on two of the four disputed elements of the calculation. The court requested an
additional factual record be developed on the other two elements, a process that was ongoing at the time the Equity
Purchase Agreement was executed and consummated.
The dispute between FCA NA and the VEBA Trust over the previously exercised options was settled pursuant to
the Equity Purchase Agreement, effectively resulting in the ful?llment of the previously exercised options. Given that
there was no amount explicitly agreed to by FCA NA and the VEBA Trust in the Equity Purchase Agreement for
the settlement of the previously exercised options, management estimated the exercise price encompassed in the
Equity Purchase Agreement taking into account the judgments rendered by the court to date on the litigation and
a settlement of the two unresolved elements. Based on the nature of the two unresolved elements, management
estimated the exercise price to be between U.S.$600 million (€444 million at the transaction date) and U.S.$700
million (€518 million at the transaction date). Given the uncertainty inherent in court decisions, it was not possible to
pick a point within that range that represented the most likely outcome. As such, management believed the mid-point
of this range, U.S.$650 million (€481 million at the transaction date), represented the appropriate point estimate of the
exercise price encompassed in the Equity Purchase Agreement.
Since there was no publicly observable market price for FCA US’s membership interests, the fair value as of the
transaction date of the approximately 10 percent non-controlling ownership interest in FCA US was determined
based on the range of potential values determined in connection with the IPO that FCA US was pursuing at the time
the Equity Purchase Agreement was negotiated and executed, which was corroborated by a discounted cash ?ow
valuation that estimated a value near the mid-point of the range of potential IPO values. Management concluded that
the mid-point of the range of potential IPO value provided the best evidence of the fair value of FCA US’s membership
interests at the transaction date as it re?ects market input obtained during the IPO process, thus providing better
evidence of the price at which a market participant would transact consistent with IFRS 13 - Fair Value Measurement.
The potential IPO values for 100.0 percent of FCA US’s equity on a fully distributed basis ranged from $10.5 billion to
U.S.$12.0 billion (€7.6 billion to €8.7 billion at December 31, 2013). Management concluded the mid-point of this range,
U.S.$11.25 billion (€8.16 billion at December 31, 2013), was the best point estimate of fair value. The IPO value range
was determined using earnings multiples observed in the market for publicly traded US-based automotive companies
using the key assumptions discussed below. This fully distributed value was then reduced by approximately 15.0 percent
for the expected discount that would have been realized in order to complete a successful IPO for the minority interest
being sold by the VEBA Trust. This discount was estimated based on the following factors that a market participant
would have considered and, therefore, would have affected the price of FCA US’s equity in an IPO transaction:
Fiat held a signi?cant controlling interest and had expressed the intention to remain and act as the majority owner
of FCA US. The fully diluted equity value, which is the starting point for the valuation discussed above, does not
contemplate the perpetual nature of the non-controlling interest that would have been offered in an IPO or the
signi?cant level of control that Fiat would have exerted over FCA US. This level of control creates risk to a non-
controlling shareholder since Fiat would be able to make decisions to maximize its value in a manner that would not
necessarily maximize value to non-controlling shareholders, which Fiat had indicated was its intention.
The fully distributed equity value contemplates an active market for Chrysler’s equity, which did not exist for FCA
US’s membership interests. The IPO price represents the creation of the public market, which would have taken
time to develop into an active market. The estimated price that would be received in an IPO transaction re?ects the
fact that FCA US’s equity was not yet traded in an active market.
As the expected discount that would have been realized in order to complete a successful IPO represented a market-
based discount that would have been re?ected in an IPO price, management concluded it should be included in the
measurement at the transaction date between a willing buyer and willing seller under the principles in IFRS 13.
178 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The other signi?cant assumptions management used in connection with the development of the fair value of FCA US’s
membership interests discussed above included the following:
Inputs derived from FCA US’s long-term business plans in place at the time the Equity Purchase Agreement was
negotiated and executed, including:
An estimated 2014 Earnings before interest, tax, depreciation, amortization, pension and OPEB payments
(EBITDAPO); and
An estimate of net debt, which is composed of debt, pension obligations and OPEB obligations of FCA US, offset
by any expected tax bene?t arising from payment of obligations and cash on hand; and
An EBITDAPO valuation multiple based on observed multiples for other US-based automotive manufacturers,
adjusted for differences between those manufacturers and FCA US.
The transaction under the Equity Purchase Agreement closed on January 21, 2014 and as a result, the Group now
holds a 100.0 percent equity interest in FCA US.
Concurrent with the closing of the acquisition under the Equity Purchase Agreement, FCA US and UAW executed
and delivered a contractually binding and legally enforceable Memorandum of Understanding (“MOU”) to supplement
FCA US’s existing collective bargaining agreement. Under the MOU, the UAW committed to (i) use the best efforts
to cooperate in the continued roll-out of FCA US’s World Class Manufacturing (“WCM”) programs, (ii) to actively
participate in benchmarking efforts associated with implementation of WCM programs across all FCA’s manufacturing
sites to ensure objective competitive assessments of operational performance and provide a framework for the proper
application of WCM principles, and (iii) to actively assist in the achievement of FCA US’s long-term business plan. In
consideration for these legally enforceable commitments, FCA US agreed to make payments to a UAW-organized
independent VEBA Trust totaling U.S.$700 million (€518 million at the transaction date) to be paid in four equal annual
installments. Considering FCA US’s non-performance risk over the payment period as of the transaction date and its
unsecured nature, this payment obligation had a fair value of U.S.$672 million (€497 million) as of the transaction date.
The Group considered the terms and conditions set forth in the above mentioned agreements and accounted for
the Equity Purchase Agreement and the MOU as a single commercial transaction with multiple elements. As such,
the fair value of the consideration paid discussed above, which amounts to U.S.$4,624 million (€3,411 million at the
transaction date), including the fair value of the previously exercised disputed options, was allocated to the elements
obtained by the Group. Due to the unique nature and inherent judgment involved in determining the fair value of
the UAW’s commitments under the MOU, a residual value methodology was used to determine the portion of the
consideration paid attributable to the UAW’s commitments as follows:
(€ million)
Special distribution from FCA US 1,404
Cash payment from FCA NA 1,287
Fair value of the previously exercised options 223
Fair value of ?nancial commitments under the MOU 497
Fair value of total consideration paid 3,411
Less the fair value of an approximately 41.5 percent non-controlling ownership interest in FCA US (2,916)
Consideration allocated to the UAW’s commitments 495
The fair value of the 41.5 percent non-controlling ownership interest in FCA US acquired by FCA from the VEBA Trust
(which includes the approximately 10 percent pursuant to the settlement of the previously exercised options discussed
above) was determined using the valuation methodology discussed above.
The residual of the fair value of the consideration paid of U.S.$670 million (€495 million) was allocated to the UAW’s
contractually binding and legally enforceable commitments to FCA US under the MOU.
2014
|
ANNUAL REPORT 179
The effects of changes in ownership interests in FCA US was as follows:
Transaction date
(€ million)
Carrying amount of non-controlling interest acquired 3,976
Less consideration allocated to the acquisition of the non-controlling interest (2,916)
Additional net deferred tax assets 251
Effect on the equity attributable to owners of the parent 1,311
In accordance with IFRS 10 – Consolidated Financial Statements, equity reserves were adjusted to re?ect the change
in the ownership interest in FCA US through a corresponding adjustment to Equity attributable to the parent. As
the transaction described above resulted in the elimination of the non-controlling interest in FCA US, all items of
comprehensive income previously attributed to the non-controlling interest were recognized in equity reserves.
Accumulated actuarial gains and losses from the remeasurement of the de?ned bene?t plans of FCA US totaling
€1,248 million has been recognized since the consolidation of FCA US in 2011. As of the transaction date,
€518 million, which is approximately 41.5 percent of this amount, had been recognized in non-controlling interest.
In connection with the acquisition of the non-controlling interest in FCA US, this amount was recognized as an
adjustment to the equity reserve for Remeasurement of de?ned bene?t plans.
With respect to the MOU entered into with the UAW, the Group recognized €495 million (U.S.$670 million) in Other
unusual expenses in the Consolidated income statement. The ?rst U.S.$175 million installment under the MOU
was paid on January 21, 2014, which was equivalent to €129 million at that date, and is re?ected in the operating
section of the Consolidated statement of cash ?ows. The remaining outstanding obligation pursuant to the MOU as of
December 31, 2014 of €417 million (U.S.$506 million), which includes €7 million (U.S.$9 million) of accreted interest,
is recorded in Other current liabilities in the Consolidated statement of ?nancial position. The second installment of
$175 million (approximately €151 million at that date) to the VEBA Trust was made on January 21, 2015.
The Equity Purchase Agreement also provided for a tax distribution from FCA US to its members under the terms of
FCA US Group’s Limited Liability Company Operating Agreement (as amended from time to time, the “LLC Operating
Agreement”) in the amount of approximately U.S.$60 million (€45 million) to cover the VEBA Trust’s tax obligation.
As this payment was made pursuant to a speci?c requirement in FCA US’s LLC Operating Agreement, it is not
considered part of the multiple element transaction.
Transactions with non-controlling interests in 2014, 2013 and 2012 were as follows:
Acquisition of the remaining 41.5 percent ownership in FCA US (described above) consummated in January 2014.
In accordance with IFRS 10 - Consolidated Financial Statements, non-controlling interest and equity reserves were
adjusted to re?ect the change in the ownership interest through a corresponding adjustment to equity attributable
to the parent.
In the context of the Merger described above, in April 2014, Fiat Investments N.V. was incorporated as a public
limited liability company under the laws of the Netherlands and was renamed FCA upon completion of the Merger.
This transaction did not have an effect on the Consolidated ?nancial statements.
In August 2014 Ferrari S.p.A. acquired an additional 21.0 percent in the share capital of the subsidiary Ferrari
Maserati Cars International Trading (Shanghai) Co. Ltd. increasing its interest from 59.0 percent to 80.0 percent
(the Group’s interests increased from 53.1 percent to 72.0 percent). In accordance with IFRS 10 - Consolidated
Financial Statements, non-controlling interest and equity reserves were adjusted to re?ect the change in the
ownership interest through a corresponding adjustment to Equity attributable to the parent.
On January 2012, FCA’s ownership interest in FCA US increased by an additional 5.0 percent on a fully-diluted basis.
On October 28, 2013, FCA acquired the remaining 50.0 percent interests in VM Motori Group.
180 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The effects of changes in ownership interests in 2013 for VM Motori Group and in 2012 for FCA US on the Equity
attributable to owners of the parent were as follows:
2013 2012
(€ million)
Carrying amount of non-controlling interest acquired 36 200
Consideration paid to non-controlling interests (34) —
Other ?nancial assets derecognized — (288)
Deferred tax liabilities recognized — —
Effect on the Equity attributable to owners of the parent 2 (88)
1. Net revenues
Net revenues were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Revenues from:
Sales of goods 91,869 82,815 80,101
Services provided 2,202 2,033 2,043
Contract revenues 1,150 1,038 1,078
Interest income of ?nancial services activities 275 239 277
Lease installments from assets under operating leases 308 238 244
Other 286 261 22
Total Net revenues 96,090 86,624 83,765
Net revenues were attributed as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Revenues in:
North America 54,602 47,552 45,171
Brazil 7,512 8,431 9,839
Italy 7,054 6,699 7,048
China 6,336 4,445 2,700
Germany 3,460 3,054 3,167
UK 1,927 1,453 1,429
France 1,837 1,956 2,042
Turkey 1,381 1,268 1,236
Australia 1,220 979 673
Argentina 1,181 1,439 1,179
Spain 1,162 1,015 873
Other countries 8,418 8,333 8,408
Total Net revenues 96,090 86,624 83,765
2014
|
ANNUAL REPORT 181
2. Cost of sales
Cost of sales in 2014, 2013 and 2012 amounted to €83,146 million, €74,326 million and €71,473 million,
respectively, comprised mainly of expenses incurred in the manufacturing and distribution of vehicles and parts, of
which, cost of materials and components are the most signi?cant. The remaining costs principally include labor costs,
consisting of direct and indirect wages, as well as depreciation of Property, plant and equipment and amortization of
Other intangible assets relating to production and transportation costs.
Cost of sales also includes warranty and product-related costs, estimated at the time of sale to dealer networks
or to the end customer. Depending on the speci?c nature of the recall, including the signi?cance and magnitude,
certain warranty expenses incurred are reported as Other unusual expenses. The Group believes that this separate
identi?cation allows the users of the Consolidated ?nancial statements to better analyze the comparative year-on-year
?nancial performance of the Group.
Cost of sales in 2014, 2013 and 2012 also includes €170 million, €190 million and €158 million, respectively, of
interest and other ?nancial expenses from ?nancial services companies.
3. Selling, general and administrative costs
Selling costs in 2014, 2013 and 2012 amounted to €4,565 million, €4,269 million and €4,367 million, respectively,
and mainly consisted of marketing, advertising, and sales personnel costs. Marketing and advertising expenses
consisted primarily of media campaigns, as well as marketing support in the form of trade and auto shows, events,
and sponsorship.
General and administrative costs in 2014, 2013 and 2012 amounted to €2,519 million, €2,433 million and
€2,408 million, respectively, and mainly consisted of administration expenses which are not attributable to sales,
manufacturing or research and development functions.
4. Research and development costs
Research and development costs were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Research and development costs expensed during the year 1,398 1,325 1,180
Amortization of capitalized development costs 1,057 887 621
Write-off of costs previously capitalized 82 24 57
Total Research and development costs 2,537 2,236 1,858
Refer to Note 14 in the Consolidated ?nancial statements for information on capitalized development costs.
5. Result from investments
The net gain in 2014, 2013 and 2012, amounting to €131 million, €84 million and €87 million, respectively, mainly
consisted of the Group’s share in the Net pro?t/(loss) of equity method investments for €117 million, €74 million and
€74 million, respectively and other income and expenses arising from investments measured at cost.
182 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
6. Gains/(losses) on the disposal of investments
In 2014, the Group recognized net gains on the disposal of investments of €12 million.
In 2013, the Group recognized net gains on the disposal of investments of €8 million.
In 2012, the Group recognized a write-down of €91 million of the interest in Sevelnord Société Anonyme following its
reclassi?cation to Assets held for sale and subsequent transfer during the ?rst quarter of 2013.
7. Restructuring costs
Net restructuring costs amounting to €50 million in 2014 primarily related to restructuring provisions recognized in the
LATAM, EMEA and Components segments.
Net restructuring costs in 2013 amounted to €28 million and primarily related to restructuring provisions in other minor
business aggregated within Other activities for the purpose of segment reporting for €38 million, partially offset by the
release of a restructuring provision previously made by the NAFTA segment for €10 million.
Restructuring costs in 2012 amounted to €15 million and related to the EMEA segment for €43 million, the
Components segment and Other activities for €20 million, partially offset by the release of restructuring provisions
previously made by the NAFTA segment for €48 million.
For a more detailed analysis of Restructuring provisions, reference should be made to Note 26.
8. Other unusual income/(expenses)
For the year ended December 31, 2014, Other unusual expenses amounted to expenses of €639 million and primarily
related to the €495 million expense recognized in connection with the execution of the UAW MOU entered into by
FCA US on January 21, 2014, as described in the section —Acquisition of the Remaining Ownership Interest in FCA
US, above. In addition, Other unusual expenses also included €15 million related to compensation costs as a result of
the resignation of the former chairman of Ferrari S.p.A. and included a €98 million remeasurement charge recognized
as a result of the Group’s change in the exchange rate used to remeasure its Venezuelan subsidiary’s net monetary
assets in U.S. Dollar.
Based on ?rst quarter 2014 developments related to the foreign exchange process in Venezuela, we changed the
exchange rate used to remeasure our Venezuelan subsidiary’s net monetary assets in U.S. Dollar as of March 31,
2014. As the of?cial exchange rate is increasingly reserved only for purchases of those goods and services deemed
“essential” by the Venezuelan government, the Group began to use the exchange rate determined by an auction
process conducted by Venezuela’s Supplementary Foreign Currency Administration System (“SICAD”), referred to
as the “SICAD I rate”, as of March 31, 2014. Previously, the Group utilized the of?cial exchange rate of 6.30 VEF
to U.S. Dollar. In late March 2014, the Venezuelan government introduced an additional auction-based foreign
exchange system, referred to as the “SICAD II rate”. The SICAD II rate had ranged from 49 to 51.9 VEF to U.S. Dollar
in the period since its introduction through December 31, 2014. The SICAD II rate is expected to be used primarily
for imports and has been limited to amounts of VEF that can be exchanged into other currencies, such as the U.S.
Dollar. As a result of the recent exchange agreement between the Central Bank of Venezuela and the Venezuelan
government and the limitations of the SICAD II rate, the Group believes any future remittances of dividends would be
transacted at the SICAD I rate. As a result, we determined that the SICAD I rate is the most appropriate rate to use. At
December 31, 2014, the SICAD I rate was 12.0 VEF to U.S. Dollar.
2014
|
ANNUAL REPORT 183
For the year ended December 31, 2013, Other unusual expenses amounted to €686 million and primarily related to
write-downs totaling €272 million as a result of the rationalization of architectures associated with the new product
strategy, particularly for the Alfa Romeo, Maserati and Fiat brands; speci?cally, €226 million related to development
costs and €46 million to tangible assets. In addition, in relation to the expected market trends, the assets of the
cast-iron business in the Components segment (Teksid) were written down by €57 million. Moreover, there was a
€56 million write-off of the book value of the Equity Recapture Agreement Right considering the agreement closed
on January 21, 2014 to purchase the remaining ownership interest in FCA US from the VEBA Trust (as described
above). Other unusual charges also included a €115 million charge related to the June 2013 voluntary safety recall for
the 1993-1998 Jeep Grand Cherokee and the 2002-2007 Jeep Liberty, as well as the customer satisfaction action
for the 1999-2004 Jeep Grand Cherokee. This item also includes a €59 million foreign currency translation loss
related to the February 2013 devaluation of the of?cial exchange rate of the Venezuelan Bolivar (“VEF”) relative to the
U.S. Dollar from 4.30 VEF per U.S. dollar to 6.30 VEF per U.S. Dollar. During the second and third quarter of 2013,
certain monetary liabilities, which had been submitted to the Commission for the Administration of Foreign Exchange
(“CADIVI”) for payment approval through the ordinary course of business prior to the devaluation date, were approved
to be paid at an exchange rate of 4.30 VEF per U.S. Dollar. As a result, €12 million in the second quarter of 2013 and
€4 million in the third quarter of 2013 of foreign currency transaction gains were recognized due to these monetary
liabilities being previously remeasured at the 6.30 VEF per U.S. Dollar at the devaluation date.
In 2012, Other unusual expenses, net were €138 million mainly including €145 million of costs arising from disputes
relating to operations terminated in prior years and costs related to the agreement with PSA Peugeot Citroën providing
for the transfer of the Group’s interest in the company Sevelnord Société Anonyme at a symbolic value.
In 2014, Other unusual income amounted to €249 million which primarily included €223 million related to the fair value
measurement of the previously exercised options for approximately 10 percent interest in FCA US that were settled in
connection with the acquisition of the remaining interest in FCA US as described in the section Changes in the Scope
of Consolidation, above.
In 2013, Other unusual income amounted to €187 million which primarily included the impacts of a curtailment gain
and plan amendments of €166 million with a corresponding net reduction to FCA US’s pension obligation. During the
second quarter of 2013, FCA US amended its U.S. and Canadian salaried de?ned bene?t pension plans. The U.S.
plans were amended in order to comply with Internal Revenue Service regulations, cease the accrual of future bene?ts
effective December 31, 2013, and enhanced the retirement factors. The Canada amendment ceased the accrual of
future bene?ts effective December 31, 2014, enhanced the retirement factors and continued to consider future salary
increases for the affected employees. An interim remeasurement was required for these plans, which resulted in an
additional €509 million net reduction to the pension obligation, a €7 million reduction to de?ned bene?t plan assets
and a corresponding €502 million increase in Total other comprehensive income/(loss).
184 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
9. Net ?nancial income/(expenses)
The following table sets out details of the Group’s ?nancial income and expenses, including the amounts reported in
the Consolidated income statement within the Financial income/(expenses) line item, as well as interest income from
?nancial services activities, recognized under Net revenues, and Interest cost and other ?nancial charges from ?nancial
services companies, recognized under Cost of sales.
For the years ended December 31,
2014 2013 2012
Financial income: (€ million)
Interest income and other ?nancial income: 226 201 266
Interest income from banks deposits 170 153 180
Interest income from securities 7 8 14
Other interest income and ?nancial income 49 40 72
Interest income of ?nancial services activities 275 239 277
Gains on disposal of securities 3 4 2
Total Financial income 504 444 545
Total Financial income relating to:
Industrial companies (A) 229 205 268
Financial services companies (reported within Net revenues) 275 239 277
Financial expenses:
Interest expense and other ?nancial expenses: 1,916 1,904 1,973
Interest expenses on bonds 1,204 959 921
Interest expenses on bank borrowing 427 367 382
Commission expenses 21 25 21
Other interest cost and ?nancial expenses 264 553 649
Write-downs of ?nancial assets 84 105 50
Losses on disposal of securities 6 3 9
Net interest expenses on employee bene?ts provisions 330 371 388
Total Financial expenses 2,336 2,383 2,420
Net expenses/(income) from derivative ?nancial instruments and
exchange rate differences 110 (1) (84)
Total Financial expenses and net expenses from derivative ?nancial
instruments and exchange rate differences 2,446 2,382 2,336
Total Financial expenses and net expenses from derivative ?nancial
instruments and exchange rate differences relating to:
Industrial companies (B) 2,276 2,192 2,178
Financial services companies (reported with Cost of sales) 170 190 158
Net ?nancial income expenses relating to industrial companies (A - B) 2,047 1,987 1,910
Other interest cost and ?nancial expenses includes interest expenses of €33 million (€326 million in 2013 and €342
million in 2012) related to the VEBA Trust Note and interest expenses of €50 million (€61 million in 2013 and €71
million in 2012) related to the Canadian Health Care Trust Note.
Net income/(expenses) from derivative ?nancial instruments and exchange rate differences include net income of €31
million in 2013 and net income of €34 million in 2012 arising from the equity swaps on FCA and CNH Industrial N.V.
(“CNHI”) shares relating to certain stock option plans. These equity swaps expired in 2013.
2014
|
ANNUAL REPORT 185
10. Tax expense/(income)
Income tax was as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Current tax expense 677 615 691
Deferred tax income (145) (1,570) (71)
Taxes relating to prior periods 12 19 8
Total Tax expense/(income) 544 (936) 628
For the year ended December 31, 2014 Total tax expense amounted to €544 million. In 2013, Total tax income was
€936 million and included a €1,500 million positive one-time recognition of net deferred tax assets related to tax loss
carry- forwards and temporary differences within the NAFTA segment.
In 2014, the Regional Italian Income Tax (“IRAP”) recognized within current taxes was €62 million (€58 million in 2013
and €64 million in 2012) and IRAP recognized within deferred tax costs was €18 million (€11 million in 2013 and €21
million in 2012).
The applicable tax rate used to determine the theoretical income taxes was 21.5 percent in 2014, which is the
statutory rate applicable in the United Kingdom, the tax jurisdiction in which FCA is resident. The applicable tax rate
used to determine the theoretical income taxes was 27.5 percent in 2013 and 2012, which was the statutory rate
applicable in Italy, the tax jurisdiction in which Fiat was resident. The change in the applicable tax rate is a result of
the change in tax jurisdiction in connection with the Merger. The reconciliation between the theoretical income taxes
calculated on the basis of the theoretical tax rate and income taxes recognized was as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Theoretical income taxes 253 279 419
Tax effect on:
Recognition and utilization of previously unrecognized deferred
tax assets (173) (1,745) (529)
Permanent differences (148) 8 (79)
Deferred tax assets not recognized and write-downs 379 380 472
Differences between foreign tax rates and the theoretical applicable tax
rate and tax holidays 66 24 164
Taxes relating to prior years 12 19 8
Unrecognized withholding tax 57 84 95
Other differences 18 (54) (7)
Total Tax expense/(income), excluding IRAP 464 (1,005) 543
Effective tax rate 39.5% n.a. 35.7%
IRAP (current and deferred) 80 69 85
Total Tax expense/(income) 544 (936) 628
Because the IRAP taxable basis differs from Pro?t before taxes, it is excluded from the above effective tax rate
calculation.
In 2014, the Group’s effective tax rate is equal to 39.5%. The difference between the theoretical and the effective
income taxes is primarily due to €379 million arising from the unrecognized deferred tax assets on temporary
differences and tax losses originating in the year in EMEA, which is partially offset by the recognition of non-recurring
deferred tax bene?ts of €173 million.
186 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
In 2013, the Group’s effective tax rate includes a signi?cant tax bene?t and is not comparable to prior periods
primarily due to FCA US recognizing previously unrecognized deferred tax assets of €1,500 million. Excluding this
effect, the effective tax rate of the Group in 2013 would have been 48.7 percent. The difference between the 2013
theoretical and effective income tax was primarily due to the above-mentioned recognition and utilization of previously
unrecognized deferred tax assets of €1,734 million (€1,500 million of which was recognized in income taxes and
€234 million in Other Comprehensive income/(loss). These bene?ts were partially offset by the negative impact of
€380 million arising from the unrecognized deferred tax assets on temporary differences and tax losses originating in
the year.
In 2012, the Group’s effective tax rate was 35.7 percent. The difference between the theoretical and the effective
income tax rate was due to the recognition and utilization of previously unrecognized deferred tax assets for €529
million, net of €472 million arising from the unrecognized deferred tax assets on temporary differences and tax losses
originating in the year.
The Group recognizes the amount of Deferred tax assets less the Deferred tax liabilities of the individual consolidated
companies in the Consolidated statement of ?nancial position within Deferred tax asset, where these may be offset.
Amounts recognized were as follows:
At December 31,
2014 2013
(€ million)
Deferred tax assets 3,547 2,903
Deferred tax liabilities (233) (278)
Net deferred tax assets 3,314 2,625
In 2014, net deferred tax assets increased by €689 million mainly due to the following:
€145 million increase for recognition of previously unrecognized Deferred tax assets and the recognition of Deferred
tax assets on temporary differences originating during the year, net of the reversal of deferred taxes relating to
previous years;
€102 million increase for recognition directly to Equity of net deferred tax assets;
€190 million increase due to exchange rate differences and other changes;
€252 million increase in Deferred tax assets due to acquisition of the remaining 41.5 percent interest in FCA US.
2014
|
ANNUAL REPORT 187
The signi?cant components of Deferred tax assets and liabilities and their changes during the years ended December
31, 2014 and 2013 were as follows:
At January 1,
2014
Recognized in
Consolidated
income
statement
Charged
to equity
Changes in
the scope of
consolidation
Translation
differences
and other
changes
At
December 31,
2014
(€ million)
Deferred tax assets arising on:
Provisions 2,938 533 — 4 1,092 4,567
Provision for employee bene?ts 1,131 101 35 — 145 1,412
Intangible assets 343 (31) — — 16 328
Impairment of ?nancial assets 191 (7) — — (10) 174
Inventories 261 41 — — 8 310
Allowances for doubtful accounts 110 — — — 1 111
Other 1,209 (947) 42 (4) 1,460 1,760
Total 6,183 (310) 77 — 2,712 8,662
Deferred tax liabilities arising on:
Accelerated depreciation (1,404) (80) — — (1,222) (2,706)
Capitalization of development costs (1,416) (155) — 2 (407) (1,976)
Other Intangible assets and
Intangible assets with inde?nite
useful lives (640) 23 — 16 (695) (1,296)
Provision for employee bene?ts (20) 2 (2) — (1) (21)
Other (562) (56) 27 (16) (24) (631)
Total (4,042) (266) 25 2 (2,349) (6,630)
Deferred tax asset arising on tax loss
carry-forward 3,810 777 — — 109 4,696
Unrecognized deferred tax assets (3,326) (56) — (2) (30) (3,414)
Total net Deferred tax assets 2,625 145 102 — 442 3,314
At January 1,
2013
Recognized in
Consolidated
income
statement
Charged
to equity
Changes in
the scope of
consolidation
Translation
differences
and other
changes
At
December
31, 2013
(€ million)
Deferred tax assets arising on:
Provisions 2,922 368 — 3 (355) 2,938
Provision for employee bene?ts 1,022 137 18 — (46) 1,131
Intangible assets 381 (38) — 1 (1) 343
Impairment of ?nancial assets 228 13 — — (50) 191
Inventories 264 (1) — 1 (3) 261
Allowances for doubtful accounts 90 18 — — 2 110
Other 1,456 (224) — 2 (25) 1,209
Total 6,363 273 18 7 (478) 6,183
Deferred tax liabilities arising on:
Accelerated depreciation (1,354) (128) — 1 77 (1,404)
Capitalization of development costs (1,211) (252) — — 47 (1,416)
Other Intangible assets and
Intangible assets with inde?nite
useful lives (784) 48 — (17) 113 (640)
Provision for employee bene?ts (22) — — (1) 3 (20)
Other (527) 54 (23) (2) (64) (562)
Total (3,898) (278) (23) (19) 176 (4,042)
Deferred tax asset arising on tax loss
carry-forward 3,399 437 — 7 (33) 3,810
Unrecognized deferred tax assets (4,918) 1,138 217 — 237 (3,326)
Total net Deferred tax assets 946 1,570 212 (5) (98) 2,625
188 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The decision to recognize deferred tax assets is made for each company in the Group by critically assessing
whether conditions exist for the future recoverability of such assets by taking into account recent forecasts from
budgets and plans. At December 31, 2014, following the Group’s reorganization of its subsidiaries in the U.S and in
consideration of the projected positive results in the U.S. and other countries, additional deferred tax assets of €226
million have been recognized. The additional recognized deferred tax assets were offset by a write-down of €232
million deferred tax assets related to the projected spin-off of Ferrari. Despite a tax loss in the Group’s wholly-owned
consolidated Italian subsidiaries, the Group continued to recognize deferred tax assets of €799 million (€1,016 million
at December 31, 2013) as the Group expects future taxable income in future periods and based on the fact that tax
losses can be carried forward inde?nitely.
At December 31, 2014, the Group had deferred tax assets on deductible temporary differences of €8,662 million
(€6,183 million at December 31, 2013), of which €480 million was not recognized (€435 million at December 31,
2013). At December 31, 2014, the Group also had theoretical tax bene?t on losses carried forward of €4,696 million
(€3,810 million at December 31, 2013), of which €2,934 million was unrecognized (€2,891 million at December 31,
2013). At December 31, 2014, net deferred tax assets included the amount of €1,762 million in respect of bene?ts on
unused tax losses carry-forwards (€919 million at December 31, 2013).
Deferred taxes on the undistributed earnings of subsidiaries have not been recognized, except in cases where it is
probable the distribution will occur in the foreseeable future.
Total deductible and taxable temporary differences and accumulated tax losses at December 31, 2014, together with
the amounts for which deferred tax assets have not been recognized, analyzed by year of expiration, are as follows:
Year of expiration
Total at
December
31, 2014 2015 2016 2017 2018
Beyond
2017
Unlimited/
indeterminable
(€ million)
Temporary differences and tax losses
relating to corporate taxation:
Deductible temporary differences 26,777 8,540 2,113 1,742 1,876 12,506 —
Taxable temporary differences (19,119) (757) (1,873) (1,793) (1,834) (9,933) (2,929)
Tax losses 15,852 58 163 154 113 3,695 11,669
Amounts for which deferred tax
assets were not recognized (12,064) (487) (317) (171) (2) (1,176) (9,911)
Temporary differences and tax
losses relating to corporate taxation 11,446 7,354 86 (68) 153 5,092 (1,171)
Temporary differences and tax losses
relating to local taxation (i.e. IRAP in
Italy):
Deductible temporary differences 18,007 4,665 1,622 1,556 1,568 8,596 —
Taxable temporary differences (17,494) (485) (1,905) (1,868) (1,881) (8,404) (2,951)
Tax losses 3,401 3 5 41 75 2,573 704
Amounts for which deferred tax
assets were not recognized (1,052) (84) (36) (19) (15) (354) (544)
Temporary differences and tax
losses relating to local taxation 2,862 4,099 (314) (290) (253) 2,411 (2,791)
11. Other information by nature
Personnel costs in 2014, 2013 and 2012 amounted to €10,099 million, €9,471 million and €9,256 million,
respectively, which included costs that were capitalized mainly in connection with product development activities.
In 2014, FCA had an average number of employees of 231,613 (223,658 employees in 2013 and 208,835 employees
in 2012).
2014
|
ANNUAL REPORT 189
12. Earnings per share
Basic earnings per share
The basic earnings per share for 2014 and 2013 was determined by dividing the Pro?t attributable to the equity
holders of the parent by the weighted average number of shares outstanding during the periods. In addition, the
weighted average number of shares outstanding for 2014 includes the minimum number of ordinary shares to be
converted as a result of the issuance of the mandatory convertible securities described in Note 23. For 2012, the basic
earnings per share takes into account the mandatory conversion of preference and savings shares by dividing the
Pro?t attributable to the equity holders of the parent by the weighted average number of ordinary shares outstanding
during the period (assuming conversion occurred at the beginning of the year).
The following table provides the amounts used in the calculation of basic earnings per share for the years ended
December 31, 2014, 2013 and 2012:
For the years ended December 31,
2014 2013 2012
Ordinary
shares
Ordinary
shares
Ordinary
shares
Pro?t attributable to owners of the parent € million 568 904 44
Weighted average number of shares outstanding thousand 1,222,346 1,215,921 1,215,828
Basic earnings per ordinary share € 0.465 0.744 0.036
Diluted earnings per share
In order to calculate the diluted earnings per share, the weighted average number of shares outstanding has been
increased to take into consideration the theoretical effect that would arise if all the share-based payment plans were
exercised and if the maximum number of ordinary shares related to the mandatory convertible securities (Note 23
in the Consolidated ?nancial statements) were converted. No other instruments could potentially dilute the basic
earnings per share in the future as all contingently issuable shares existing under the stock grant plan and the
mandatory convertible securities (Note 23 in the Consolidated ?nancial statements) were included in the calculation of
the diluted earnings per share. There were no instruments excluded from the calculation of diluted earnings per share
for the periods presented because of an anti-dilutive impact.
The following table provides the amounts used in the calculation of diluted earnings per share for the years ended
December 31, 2014, 2013 and 2012:
For the years ended December 31,
2014 2013 2012
Ordinary
shares
Ordinary
shares
Ordinary
shares
Pro?t attributable to owners of the parent € million 568 904 44
Weighted average number of shares outstanding thousand 1,222,346 1,215,921 1,215,828
Number of shares deployable for stock option plans
linked to FCA shares thousand 11,204 13,005 10,040
Mandatory Convertible Securities thousand 547 — —
Weighted average number of shares outstanding for
diluted earnings per share thousand 1,234,097 1,228,926 1,225,868
Diluted earnings per ordinary share € 0.460 0.736 0.036
190 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
13. Goodwill and intangible assets with inde?nite useful life
Goodwill and intangible assets with inde?nite useful life as at December 31, 2014 and at December 31, 2013 are
summarized below:
At
December 31,
2013
Change in the
scope of
consolidation
Impairment
losses
Translation
differences
and
other changes
At
December 31,
2014
(€ million)
Gross amount 10,283 — — 1,218 11,501
Accumulated impairment losses (443) — — 1 (442)
Goodwill 9,840 — — 1,219 11,059
Brands 2,600 — — 353 2,953
Total Goodwill and intangible assets with
inde?nite useful lives 12,440 — — 1,572 14,012
At
December 31,
2012
Change in the
scope of
consolidation
Impairment
losses
Translation
differences
and
other changes
At
December 31,
2013
(€ million)
Gross amount 10,645 15 — (377) 10,283
Accumulated impairment losses (413) — — (30) (443)
Goodwill 10,232 15 — (407) 9,840
Brands 2,717 — — (117) 2,600
Total Goodwill and intangible assets with
inde?nite useful lives 12,949 15 — (524) 12,440
Foreign exchange effects in 2014 and in 2013 amounted to €1,572 million and €524 million, respectively, and arose
mainly from changes in the U.S. Dollar/Euro rate.
Changes in the scope of consolidation in 2013 included the effects of the consolidation of the VM Motori group from
July 1, 2013 resulting from the acquisition of the remaining 50.0 per cent interest.
Brands
Brands arise from the NAFTA segment and are comprised of the Chrysler, Jeep, Dodge, Ram and Mopar brands.
These rights are protected legally through registration with government agencies and through the continuous use in
commerce. As these rights have no legal, contractual, competitive or economic term that limits their useful lives, they
are classi?ed as intangible assets with inde?nite useful lives, and are therefore not amortized.
For the purpose of impairment testing, the carrying value of Brands, which is allocated to the NAFTA segment, is
tested jointly with the Goodwill allocated to the NAFTA segment.
2014
|
ANNUAL REPORT 191
Goodwill
At December 31, 2014, goodwill includes €10,185 million for FCA US (€8,967 million at December 31, 2013) and
€786 million for Ferrari S.p.A (€786 million at December 31, 2013) which resulted from their respective acquisitions.
Goodwill is allocated to operating segments or to CGUs within the operating segments as appropriate, in accordance
with IAS 36 – Impairment of assets.
The following table presents the allocation of Goodwill across the segments:
At December 31,
2014 2013
(€ million)
NAFTA 8,350 7,330
APAC 1,085 968
LATAM 517 461
EMEA 233 208
Ferrari 786 786
Components 52 51
Other activities 36 36
Total Goodwill (net carrying amount) 11,059 9,840
In accordance with IAS 36, Goodwill is not amortized and is tested for impairment annually, or more frequently, if facts
or circumstances indicate that the asset may be impaired. Impairment testing is performed by comparing the carrying
amount and the recoverable amount of each CGU to which Goodwill has been allocated. The recoverable amount of a
CGU is the higher of its fair value less costs to sell and its value in use.
The assumptions used in this process represent management’s best estimate for the period under consideration.
Goodwill allocated to the NAFTA segment represents 75.5 percent of the Group’s total Goodwill, which also includes
the carrying amount of the Group’s Brands, as discussed above. The estimate of the value in use of the NAFTA
segment for purposes of performing the annual impairment test was based on the following assumptions:
The expected future cash ?ows covering the period from 2015 through 2018 have been derived from the Group
Business Plan presented on May 6, 2014. More speci?cally, in making the estimates, expected EBITDA for the
periods under consideration was adjusted to re?ect the expected capital expenditure and monetary contributions to
pension plans and other post-employment bene?t plans. These cash ?ows relate to the CGU in its condition when
preparing the ?nancial statements and exclude the estimated cash ?ows that might arise from restructuring plans or
other structural changes. Volumes and sales mix used for estimating the future cash ?ow are based on assumptions
that are considered reasonable and sustainable and represent the best estimate of expected conditions regarding
market trends and segment, brand and model share for the NAFTA segment over the period considered.
The expected future cash ?ows include a normalized terminal period used to estimate the future results beyond
the time period explicitly considered. This terminal period was calculated by applying an EBITDA margin of the
average of the expected EBITDA for 2015-2018 to the average 2015-2018 expected revenues used in calculating
the expected EBITDA. The terminal period was then adjusted by a normalized amount of investments determined
assuming a steady state business and by expected monetary contributions to pension plans and post-employment
bene?t plans.
192 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Pre-tax expected future cash ?ows have been estimated in U.S. Dollars, and discounted using a pre-tax
discount rate. The base WACC of 16.4 percent (16.0 percent in 2013, 15.1 percent in 2012) used re?ects the
current market assessment of the time value of money for the period being considered and the risks speci?c to
the segment under consideration. The WACC was calculated using the Capital Asset Pricing Model (“CAPM”)
technique in which the risk-free rate has been calculated by referring to the yield curve of long-term U.S.
government bonds and the beta coef?cient and the debt/equity ratio have been extrapolated by analyzing a
group of comparable companies operating in the automotive sector. Additionally, to re?ect the uncertainty of the
current economic environment and future market conditions, the cost of equity component of the WACC was
progressively increased by a 100 basis point risk premium for the years 2016 and 2017, 90 basis points for 2018
and by 100 basis points in the terminal period.
The value in use estimated as above was determined to be in excess of the book value of the net capital
employed (inclusive of Goodwill and Brands allocated to the NAFTA segment) by approximately €100 million at
December 31, 2014.
Impairment tests for Goodwill allocated to other segments were based on the expected future cash ?ows covering
the period from 2015 through 2018. The assumptions used to determine the pre-tax WACCs and the risk premiums
were consistent with those described above for the NAFTA segment. Discounted cash ?ows were measured using
a pre-tax base WACC of 16.6 percent (14.9 percent in 2013, 14.4 percent in 2012), 18.0 percent (22.3 percent in
2013, 17.2 percent in 2012) and 16.4 percent (17.9 percent in 2013, 16.4 percent in 2012) for the APAC, LATAM and
EMEA segments, respectively. The results of the impairment tests for APAC, LATAM and EMEA resulted in a positive
outcome re?ecting a surplus of the value in use over the book value. A sensitivity analysis was performed by increasing
the base WACC used above for each of the regions by 50 basis points, which resulted in a surplus of the carrying
amount over the value in use for the APAC, LATAM and EMEA segments.
In addition, the Goodwill recorded within the Ferrari operating segment was tested for impairment. The expected
future cash ?ows are the operating cash ?ows taken from the estimates included in the 2015 budget and the expected
business performance, taking account of the uncertainties of the global ?nancial and economic situation, extrapolated
for subsequent years by using the speci?c medium/long-term growth rate for the sector equal to 1.0 percent (1.0
percent in 2013, 2.0 percent in 2012). These cash ?ows were then discounted using a post-tax discount rate of
8.2 percent (8.4 percent in 2013, 8.1 percent in 2012). The recoverable amount of the CGU was signi?cantly higher
than its carrying amount. Furthermore, the exclusivity of the business, its historical pro?tability and its future earnings
prospects indicate that the carrying amount of the Goodwill within the Ferrari operating segment will continue to be
recoverable, even in the event of dif?cult economic and market condition.
2014
|
ANNUAL REPORT 193
14. Other intangible assets
Externally
acquired
development
costs
Development
costs
internally
generated
Patents,
concessions
and licenses
Other
intangible
assets Total
(€ million)
Gross carrying amount Balance at December 31, 2012 5,227 4,637 2,100 638 12,602
Additions 1,562 480 224 64 2,330
Change in the scope of consolidation 198 — 1 21 220
Divestitures (5) (304) (19) (2) (330)
Translation differences and other changes (123) (159) (21) (100) (403)
Balance at December 31, 2013 6,859 4,654 2,285 621 14,419
Additions 1,542 725 350 89 2,706
Change in the scope of consolidation — — — — —
Divestitures (8) (36) (38) (6) (88)
Translation differences and other changes 239 168 207 4 618
Balance at December 31, 2014 8,632 5,511 2,804 708 17,655
Accumulated amortization and impairment losses
Balance at December 31, 2012 2,436 2,516 875 430 6,257
Change in the scope of consolidation 142 — — 11 153
Amortization 479 408 213 48 1,148
Impairment losses 120 130 — — 250
Divestitures (1) (286) (18) (1) (306)
Translation differences and other changes (11) (90) 16 (72) (157)
Balance at December 31, 2013 3,165 2,678 1,086 416 7,345
Change in the scope of consolidation — — — — —
Amortization 648 409 225 49 1,331
Impairment losses 46 36 — — 82
Divestitures (6) (30) (33) (4) (73)
Translation differences and other changes (84) 152 59 8 135
Balance at December 31, 2014 3,769 3,245 1,337 469 8,820
Carrying amount at December 31, 2013 3,694 1,976 1,199 205 7,074
Carrying amount at December 31, 2014 4,863 2,266 1,467 239 8,835
Additions of €2,706 million in 2014 (€2,330 million in 2013) include development costs of €2,267 million (€2,042
million in 2013), consisting primarily of material costs and personnel related expenses relating to engineering, design and
development focused on content enhancement of existing vehicles, new models and powertrain programs in NAFTA and
EMEA segments. In 2014, the Group wrote-down certain internally generated development costs within the EMEA (€47
million) and NAFTA (€28 million) segments primarily in connection with changes in certain product developments.
In 2013, to re?ect the new product strategy the Group wrote-down certain development costs by €250 million. This
amount mainly includes €151 million for the EMEA segment, €32 million for the LATAM segment and €65 million
for Maserati in connection with development costs on new Alfa Romeo, Fiat and Maserati products, which had been
switched to new platforms considered technologically more appropriate. Write-downs of development costs have
been recognized as Other unusual expenses for €226 million and the remaining impairments of €24 million were
recognized in Research and development costs. In 2012, the write-down of development costs amounted to €57
million and it was recognized within Research and development costs, as this was not related to strategic factors.
Change in the scope of consolidation in 2013 mainly includes the effects of the consolidation of the VM Motori group
resulting from the acquisition of the remaining 50.0 percent interest for consideration of €34 million.
Translation differences principally re?ect foreign exchange gains of €482 million in 2014 related to changes in the U.S.
Dollar against the Euro. Translation differences of €243 million in 2013 principally re?ected foreign exchange losses
related to the changes in the U.S. Dollar and Brazilian Real against the Euro. Translation differences of €88 million in
2012 principally re?ected the foreign exchange losses related to the devaluation of the U.S. Dollar and Brazilian Real
against the Euro, partially offset by the appreciation of the Polish Zloty against the Euro.
194 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
15. Property, plant and equipment
Land
Industrial
buildings
Plant,
machinery
and
equipment
Other
assets
Advances
and
tangible
assets in
progress Total
(€ million)
Gross carrying amount
Balance at December 31, 2012 717 6,490 35,453 1,919 3,282 47,861
Additions 4 513 2,559 137 1,949 5,162
Divestitures (5) (29) (858) (56) (20) (968)
Change in the scope of consolidation 3 19 240 5 4 271
Impairment losses — — — — (2) (2)
Translation differences (55) (282) (1,362) (92) (177) (1,968)
Other changes 216 324 2,373 124 (2,752) 285
Balance at December 31, 2013 880 7,035 38,405 2,037 2,284 50,641
Additions 14 766 2,877 292 1,466 5,415
Divestitures (7) (94) (1,248) (37) (2) (1,388)
Change in the scope of consolidation — — — — — —
Impairment losses — — — — — —
Translation differences 35 316 1,586 168 132 2,237
Other changes 23 2 867 62 (969) (15)
Balance at December 31, 2014 945 8,025 42,487 2,522 2,911 56,890
Accumulated depreciation and
impairment losses
Balance at December 31, 2012 7 2,267 22,091 990 10 25,365
Depreciation — 261 3,048 178 — 3,487
Divestitures — (14) (818) (41) — (873)
Impairment losses — — 84 — — 84
Change in the scope of consolidation — 2 148 4 — 154
Translation differences — (82) (693) (43) — (818)
Other changes — (40) 58 (10) 1 9
Balance at December 31, 2013 7 2,394 23,918 1,078 11 27,408
Depreciation — 266 3,099 201 — 3,566
Divestitures (2) (87) (1,219) (33) — (1,341)
Impairment losses — 6 27 — — 33
Change in the scope of consolidation — — — — — —
Translation differences — 57 653 61 — 771
Other changes 2 10 19 9 5 45
Balance at December 31, 2014 7 2,646 26,497 1,316 16 30,482
Carrying amount at December 31, 2013 873 4,641 14,487 959 2,273 23,233
Carrying amount at December 31, 2014 938 5,379 15,990 1,206 2,895 26,408
Additions of €5,415 million in 2014 (€5,162 million in 2013) are primarily related to the car mass-market operations
in the NAFTA and EMEA segments, as well as to the ongoing construction of the new LATAM plant in Pernambuco
(Brazil) in 2014 and 2013.
2014
|
ANNUAL REPORT 195
In 2014, €33 million of impairment losses are primarily related to the EMEA segment for certain powertrains that were
abandoned. In 2013, approximately €30 million of impairment losses related to assets in the Cast Iron business unit of
the Components segment as a result of an expected reduction in these activities compared to previous expectations,
due to the increasing use of aluminum in the production of the automotive engine blocks rather than cast iron.
These impairments, which were due to a structural change in the market, were fully recognized within Other unusual
expenses. The remaining impairment losses (€55 million) related to the above mentioned streamlining of architectures
and models associated with the EMEA segment’s refocused product strategy.
In 2014, translation differences of €1,466 million mainly re?ect the strengthening of the U.S. Dollar against the Euro. In
2013, translation differences of €1,150 million primarily related to the changes of the U.S. Dollar and the Brazilian Real
against the Euro.
In 2014 and 2013, Other changes primarily consisted of the reclassi?cation of prior year balances for Advances and
tangible assets in progress to the respective categories when the assets were acquired and entered service. With
reference to Land, Other changes in 2013 also includes €214 million which is the fair value of the land donated to the
Group by the State of Pernambuco (Brazil) following the Group’s commitment to implement an industrial unit designed
to produce, assemble and sell vehicles.
In 2013, changes in the scope of consolidation mainly re?ect the consolidation of the VM Motori group resulting from
the acquisition of the remaining 50.0 per cent interest for consideration of €34 million.
The net carrying amount of assets leased under ?nance lease agreements included in Property, plant and equipment
were as follows:
At December 31,
2014 2013
(€ million)
Industrial buildings 84 87
Plant machinery and equipment 299 307
Property plant and equipment 383 394
Property, plant and equipment of the Group, excluding FCA US, reported as pledged as security for debt, assets that
are legally owned by suppliers but are recognized in the Consolidated ?nancial statements in accordance with IFRIC
4 - Determining Whether an Arrangement Contains a Lease with the corresponding recognition of a ?nancial lease
payable. They are as follows:
At December 31,
2014 2013
(€ million)
Land and industrial buildings pledged as security for debt 1,019 103
Plant and machinery pledged as security for debt and other commitments 648 310
Other assets pledged as security for debt and other commitments 3 5
Property plant and equipment pledged as security for debt 1,670 418
Information on the assets of FCA US subject to lien are set out in Note 27 in the Consolidated ?nancial statements.
At December 31, 2014, the Group had contractual commitments for the purchase of Property, plant and equipment
amounting to €2,263 million (€1,536 million at December 31, 2013).
196 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
16. Investments and other ?nancial assets
At December 31,
2014 2013
(€ million)
Interest in joint ventures 1,329 1,225
Interest in associates 105 123
Interests in unconsolidated subsidiaries 37 40
Equity method investments 1,471 1,388
Available-for-sale investments 124 148
Equity Investments at fair value — 151
Investments at fair value 124 299
Other Investments measured at cost 59 52
Total Investments 1,654 1,739
Non-current ?nancial receivables 296 257
Other securities and other ?nancial assets 70 56
Total Investments and other ?nancial assets 2,020 2,052
Investments in joint ventures
The Group’s interests in joint ventures, amounting to €1,329 million at December 31, 2014 (€1,225 million at
December 31, 2013) are all accounted for using the equity method of accounting and at December 31, 2014 mainly
include the Group’s interests in FCA Bank S.p.A. (“FCA Bank”) (formerly known as FGA Capital S.p.A) amounting to
€894 million (€839 million at December 31, 2013), the Group’s interest in Tofas-Turk Otomobil Fabrikasi A.S. (“Tofas”)
amounting to €299 million (€240 million at December 31, 2013) and the Group’s interest in GAC Fiat Chrysler
Automobiles Co.Ltd (previously known as GAC Fiat Automobiles Limited) amounting to €45 million (€85 million at
December 31, 2013).
Changes in interests in joint ventures in 2014 and 2013 are as follows:
Investments in
joint ventures
(€ million)
Balance at December 31, 2012 1,282
Share of the net pro?t 112
Acquisitions, Capitalizations (Refunds) 44
Change in the scope of consolidation (37)
Translations differences (69)
Other changes (107)
Balance at December 31, 2013 1,225
Share of the net pro?t 127
Acquisitions, Capitalizations (Refunds) 14
Change in the scope of consolidation 2
Translations differences 33
Other changes (72)
Balance at December 31, 2014 1,329
In 2014, Other changes consisting of a net decrease of €72 million mainly relates to dividends distributed by FCA
Bank for €41 million and by Tofas for €42 million, and to the positive change in the cash ?ow hedge reserve of Tofas
of €13 million.
In 2013, Other changes consisting of a net decrease of €107 million mainly relates to dividends distributed by FCA
Bank for €15 million and by Tofas for €72 million, and to the negative change in the cash ?ow hedge reserve of Tofas
of €17 million.
2014
|
ANNUAL REPORT 197
The only material joint venture for the Group is FCA Bank: a 50/50 joint venture with Crédit Agricole Consumer Finance
S.A. FCA Bank operates in 14 European countries including Italy, France, Germany, UK and Spain. In July 2013, the
Group reached an agreement with Crédit Agricole to extend the term of that joint venture through to December 31,
2021. Under the agreement, FCA Bank will continue to bene?t from the ?nancial support of the Crédit Agricole Group
while continuing to strengthen its position as an active player in the securitization and debt markets. FCA Bank
provides retail and dealer ?nancing and long-term rental services in the automotive sector, directly or through its
subsidiaries as a partner of the Group’s car mass-market brands and for Maserati.
Summarized ?nancial information relating to FCA Bank was as follows:
At December 31,
2014 2013
(€ million)
Financial assets 14,604 14,484
Of which: Cash and cash equivalents — —
Other assets 2,330 2,079
Financial liabilities 14,124 13,959
Other liabilities 896 802
Equity (100%) 1,914 1,802
Net assets attributable to owners of the parent 1,899 1,788
Group’s share of net assets 950 894
Elimination of unrealized pro?ts and other adjustments (56) (55)
Carrying amount of interest in the joint venture 894 839
For the years ended December 31,
2014 2013
(€ million)
Interest and similar income 737 752
Interest and similar expenses (373) (381)
Income tax expense (74) (76)
Pro?t from continuing operations 182 172
Net pro?t 182 172
Net pro?t attributable to owners of the parent (A) 181 170
Group’s share of net pro?t 91 85
Elimination of unrealized pro?ts — —
Group’s share of net pro?t in the joint venture 91 85
Other comprehensive income/(loss) attributable to owners of the parent (B) 12 (1)
Total comprehensive income attributable to owners of the parent (A+B) 193 169
Tofas, which is registered with the Turkish Capital Market Board (“CMB”) and listed on the Istanbul Stock Exchange
(“ISE”) since 1991, is classi?ed as a joint venture as the Group and the other partner each have a shareholding of 37.9
percent. As at December 31, 2014 the fair value of the Group’s interest in Tofas was €1,076 million (€857 million at
December 31, 2013).
198 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The aggregate amounts for the Group’s share in all individually immaterial Joint ventures that are accounted for using
the equity method were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Net Pro?t from continuing operations 36 27 65
Net pro?t 36 27 65
Other comprehensive income/(loss) 37 (90) 39
Total other comprehensive income/(loss) 73 (63) 104
There are no restrictions on the ability of joint ventures to transfer funds to the Group in the form of cash dividends, or
to repay loans or advances made by the entity, that have a material impact on the Group’s liquidity.
Investments in associates
The Group’s interests in associates, amounting to €105 million at December 31, 2014 (€123 million at December 31,
2013) are all accounted for using the equity method of accounting and include the Group’s interests in RCS
MediaGroup S.p.A. (“RCS”) amounting to €74 million at December 31, 2014 (€87 million at December 31, 2013).
As of December 31, 2014 the fair value of the Group’s interest in RCS, which is a company listed on the Italian Stock
exchange, was €81 million (€115 million at December 31, 2013).
The aggregate amounts for the Group’s share in all individually immaterial associates accounted for using the equity
method, including RCS were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Loss from continuing operations (20) (42) (72)
Net loss (20) (42) (72)
Other comprehensive income/(loss) 3 2 (1)
Total other comprehensive loss (17) (40) (73)
There are no restrictions on the ability of associates to transfer funds to the Group in the form of cash dividends, or to
repay loans or advances made by the entity, that have a material impact on the Group’s liquidity.
Investments at fair value
At December 31, 2014, Investments at fair value include the investment in CNHI for €107 million (€282 million at
December 31, 2013), the investment in Fin. Priv. S.r.l. for €14 million (€14 million at December 31, 2013) and the
investment in Assicurazioni Generali S.p.A. for €3 million (€3 million at December 31, 2013).
At January 1, 2011, FCA was allotted 38,568,458 ordinary shares in CNHI’s predecessor, Fiat Industrial S.p.A., without
consideration, following the de-merger of Fiat Industrial S.p.A. from Fiat, corresponding to the number of Treasury
shares it held. Following this allotment, the portion of the cost of Treasury shares recognized in equity and attributable to
the de-merged entity’s shares, amounting to €368 million, was reclassi?ed as an asset in the Consolidated statement
of ?nancial position. This initial allocation was calculated on the basis of the weighting of the stock market prices of
Fiat and Fiat Industrial S.p.A. shares on the ?rst day of quotation. At the same time, in accordance with IAS 39 and its
interpretations, the investment was measured at fair value (€347 million) with a corresponding entry made to Other
reserves. In addition, the de-merger of CNHI from Fiat also established that 23,021,250 shares would service the stock
option and stock grant plans outstanding at December 31, 2010. These shares were therefore considered linked to the
liability for share-based payments recognized by the Group as a result of changes to the plans made by the de-merger
and measured at fair value with changes recognized in pro?t and loss consistently with changes in fair value of the liability.
The remaining CNHI shares were classi?ed as Available-for-sale investments and were measured at fair value with
changes recognized directly in Other comprehensive income/(loss).
2014
|
ANNUAL REPORT 199
At December 31, 2014, the investment in CNHI consisted of 15,948,275 common shares for an amount of €107
million. The investment is classi?ed as Available-for-sale and is measured at fair value with changes recognized directly
in Other comprehensive income/loss. During 2014, 18,059,375 ordinary shares of the investment balance existing at
December 31, 2013 were sold following the exercise of the stock options and 100,625 shares of the residual CNHI
shares corresponding to options not exercised were reclassi?ed as Available-held-for-sale investments.
At December 31, 2013, the investment in CNHI consisted of 34,007,650 ordinary shares for an amount of €282
million. At December 31, 2013, 18,160,000 shares, for an amount of €151 million, were to service the stock option
plans and 15,847,650 shares, for an amount €131 million, were classi?ed as available-for-sale. In addition, at
December 31, 2014, the Group had 15,948,275 special voting shares (33,955,402 at December 31, 2013), which
cannot directly or indirectly be sold, disposed of or transferred, and over which the Group cannot create or permit to
exist any pledge, lien, ?xed or ?oating charge or other encumbrance.
The total investment in CNHI corresponded to 1.7 percent and 3.7 percent of voting rights at December 31, 2014 and
December 31, 2013, respectively.
17. Inventories
At December 31,
2014 2013
(€ million)
Raw materials, supplies and ?nished goods 10,294 8,910
Assets sold with a buy-back commitment 2,018 1,253
Gross amount due from customers for contract work 155 115
Total Inventories 12,467 10,278
In 2014, Inventories increased by €2,189 million from €10,278 million at December 31, 2013 as a result of a higher
level of ?nished products following volume growth in the NAFTA, EMEA and Maserati segments in addition to positive
translation differences primarily related to the strengthening of the US dollar against the Euro.
At December 31, 2014, Inventories include those measured at net realizable value (estimated selling price less the
estimated costs of completion and the estimated costs necessary to make the sale) amounting to €1,694 million
(€1,343 million at December 31, 2013).
The amount of inventory write-downs recognized as an expense, within cost of sales, during 2014 is €596 million
(€571 million in 2013).
The amount due from customers for contract work relates to the design and production of industrial automation
systems and related products for the automotive sector at December 31, 2014 and 2013 was as follows:
At December 31,
2014 2013
(€ million)
Aggregate amount of costs incurred and recognized pro?ts (less recognized losses) to date 1,817 1,506
Less: Progress billings (1,914) (1,600)
Construction contracts, net of advances on contract work (97) (94)
Gross amount due from customers for contract work as an asset 155 115
Less: Gross amount due to customers for contract work as a liability included
in Other current liabilities (252) (209)
Construction contracts, net of advances on contract work (97) (94)
200 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
18. Current receivables and Other current assets
The composition of the Current receivables and Other current assets was as follows:
At December 31,
2014 2013
(€ million)
Trade receivables 2,564 2,544
Receivables from ?nancing activities 3,843 3,671
Current tax receivables 328 312
Other current assets:
Other current receivables 2,246 1,881
Accrued income and prepaid expenses 515 442
Total Other current assets 2,761 2,323
Total Current receivables and Other current assets 9,496 8,850
The analysis by due date (excluding Accrued income and prepaid expenses) was as follows:
At December 31,
2014 2013
Due
within
one year
Due
between
one and
?ve years
Due
beyond
?ve years Total
Due
within
one year
Due
between
one and
?ve years
Due
beyond
?ve years Total
(€ million)
Trade Receivables 2,564 — — 2,564 2,527 15 2 2,544
Receivables from ?nancing activities 3,013 776 54 3,843 2,776 863 32 3,671
Current tax receivables 284 7 37 328 227 44 41 312
Other current receivables 2,076 156 14 2,246 1,658 184 39 1,881
Total current receivables 7,937 939 105 8,981 7,188 1,106 114 8,408
Trade receivables
Trade receivables, amounting to €2,564 million at December 31, 2014 (€2,544 million at December 31, 2013), are
shown net of allowances for doubtful accounts of €320 million at December 31, 2014 (€344 million at December 31,
2013). Changes in these allowances, which are calculated on the basis of historical losses on receivables, were as
follows in 2014:
At
December
31, 2013 Provision
Use and
other
changes
At
December
31, 2014
(€ million)
Allowances for doubtful accounts 344 33 (57) 320
At
December
31, 2012 Provision
Use and
other
changes
At
December
31, 2013
(€ million)
Allowances for doubtful accounts 347 47 (50) 344
2014
|
ANNUAL REPORT 201
Receivables from ?nancing activities
Receivables from ?nancing activities mainly relate to the business of ?nancial services companies fully consolidated by
the Group (primarily related to dealer and retail ?nancing).
At December 31,
2014 2013
(€ million)
Dealer ?nancing 2,313 2,286
Retail ?nancing 1,039 970
Finance leases 349 297
Other 142 118
Total Receivables from ?nancing activities 3,843 3,671
Receivables from ?nancing activities are shown net of an allowance for doubtful accounts determined on the basis of
speci?c insolvency risks. At December 31, 2014, the allowance amounts to €73 million (€119 million at December 31,
2013). Changes in the allowance accounts during the year were as follows:
At
December
31, 2013 Provision
Use and
other
changes
At
December
31, 2014
(€ million)
Allowance for Receivables from ?nancing activities 119 69 (115) 73
At
January 1,
2013 Provision
Use and
other
changes
At
December
31, 2013
(€ million)
Allowance for Receivables from ?nancing activities 101 89 (71) 119
Receivables for dealer ?nancing are typically generated by sales of vehicles, and are generally managed under dealer
network ?nancing programs as a component of the portfolio of the ?nancial services companies. These receivables are
interest bearing, with the exception of an initial limited, non-interest bearing period. The contractual terms governing
the relationships with the dealer networks vary from country to country, although payment terms range from two to six
months.
Finance lease receivables refer to vehicles leased out under ?nance lease arrangements, mainly by the Ferrari and
Maserati segments. This item may be analyzed as follows, gross of an allowance of €10 million at December 31, 2014
(€5 million at December 31, 2013):
At December 31,
2014 2013
Due
within
one year
Due
between
one and
?ve
years
Due
beyond
?ve
years Total
Due
within
one year
Due
between
one and
?ve
years
Due
beyond
?ve
years Total
(€ million)
Receivables for future minimum lease
payments 110 281 8 399 104 223 8 335
Less: unrealized interest income (16) (24) — (40) (14) (18) (1) (33)
Present value of future minimum
lease payments 94 257 8 359 90 205 7 302
202 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Other current assets
At December 31, 2014, Other current assets mainly consisted of Other tax receivables for VAT and other indirect taxes
of €1,430 million (€969 million at December 31, 2013), Receivables from employees of €151 million (€151 million at
December 31, 2013) and Accrued income and prepaid expenses of €515 million (€442 million at December 31, 2013).
Transfer of ?nancial assets
At December 31, 2014, the Group had receivables due after that date which had been transferred without
recourse and which were derecognized in accordance with IAS 39 amounting to €4,511 million (€3,603 million at
December 31, 2013). The transfers related to trade receivables and other receivables for €3,676 million (€2,891
million at December 31, 2013) and ?nancial receivables for €835 million (€712 million at December 31, 2013). These
amounts include receivables of €2,611 million (€2,177 million at December 31, 2013), mainly due from the sales
network, transferred to jointly controlled ?nancial services companies (FCA Bank).
At December 31, 2014 and 2013, the carrying amount of transferred ?nancial assets not derecognized and the related
liabilities were as follows:
At December 31,
2014 2013
Trade
receivables
Receivables
from
?nancing
activities
Current tax
receivables Total
Trade
receivables
Receivables
from
?nancing
activities
Current tax
receivables Total
(€ million)
Carrying amount of
assets transferred and
not derecognized 37 407 25 469 283 440 33 756
Carrying amount of the
related liabilities 37 407 25 469 283 440 33 756
19. Current securities
Current securities consist of short-term or marketable securities which represent temporary investments, but which do
not satisfy all the requirements to be classi?ed as cash equivalents.
At December 31,
2014 2013
(€ million)
Current securities available-for-sale 30 92
Current securities held-for-trading 180 155
Total current securities 210 247
2014
|
ANNUAL REPORT 203
20. Other ?nancial assets and Other ?nancial liabilities
These line items mainly consist of fair value measurement of derivative ?nancial instruments. They also include some
collateral deposits (held in connection with derivative transactions and debts).
At December 31,
2014 2013
Positive
fair value
Negative
fair value
Positive
fair value
Negative
fair value
(€ million)
Fair value hedges:
Interest rate risk - interest rate swaps 82 — 93 —
Interest rate and exchange rate risk - combined interest rate
and currency swaps — (41) 15 —
Total Fair value hedges 82 (41) 108 —
Cash ?ow hedge:
Currency risks - forward contracts, currency swaps and currency options 222 (467) 260 (59)
Interest rate risk - interest rate swaps 1 (4) 1 (3)
Interest rate and currency risk - combined interest rate and currency swaps 60 (7) 9 (22)
Commodity price risk – commodity swaps and commodity options 4 (16) 6 (5)
Total Cash ?ow hedges 287 (494) 276 (89)
Derivatives for trading 108 (213) 129 (48)
Fair value of derivative instruments 477 (748) 513 (137)
Collateral deposits 38 — 20 —
Other ?nancial assets/(liabilities) 515 (748) 533 (137)
The overall change in Other ?nancial assets (from €533 million at December 31, 2013 to €515 million at
December 31, 2014) and in Other ?nancial liabilities (from €137 million at December 31, 2013 to €748 million at
December 31, 2014) was mostly due to ?uctuations in exchange rates, interest rates, commodity prices during the
year and the settlement of the instruments which matured during the year.
As Other ?nancial assets and liabilities primarily consist of hedging derivatives, the change in their value is
compensated by the change in the value of the hedged items.
At December 31, 2014 and 2013, Derivatives for trading primarily consisted of derivative contracts entered for hedging
purposes which do not qualify for hedge accounting and one embedded derivative in a bond issue in which the yield is
determined as a function of trends in the in?ation rate and related hedging derivative, which converts the exposure to
?oating rate (the total value of the embedded derivative is offset by the value of the hedging derivative).
The following table provides an analysis by due date of outstanding derivative ?nancial instruments based on their
notional amounts:
At December 31,
2014 2013
Due
within
one year
Due
between
one and
?ve
years
Due
beyond
?ve
years Total
Due
within
one year
Due
between
one and
?ve
years
Due
beyond
?ve
years Total
(€ million)
Currency risk management 15,328 2,544 — 17,872 10,446 802 — 11,248
Interest rate risk management 172 1,656 — 1,828 764 1,782 — 2,546
Interest rate and currency risk management 698 1,513 — 2,211 — 1,455 — 1,455
Commodity price risk management 483 59 — 542 450 23 — 473
Other derivative ?nancial instruments — — 14 14 — — 14 14
Total notional amount 16,681 5,772 14 22,467 11,660 4,062 14 15,736
204 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Cash ?ow hedges
The effects recognized in the Consolidated income statement mainly relate to currency risk management and, to a
lesser extent, to hedges regarding commodity price risk management and the cash ?ows that are exposed to an
interest rate risk.
The Group’s policy for managing currency risk normally requires hedging of projected future cash ?ows from trading
activities which will occur within the following twelve months, and from orders acquired (or contracts in progress),
regardless of their due dates. The hedging effect arising from this and recorded in the cash ?ow hedge reserve will be
recognized in the Consolidated income statement, mainly during the following year.
Derivatives relating to interest rate and currency risk management are treated as cash ?ow hedges and are entered into
for the purpose of hedging bonds issued in foreign currencies. The amount recorded in the cash ?ow hedge reserve is
recognized in the Consolidated income statement according to the timing of the ?ows of the underlying bonds.
21. Cash and cash equivalents
Cash and cash equivalents consisted of:
At December 31,
2014 2013
(€ million)
Cash at banks 10,645 9,939
Money market securities 12,195 9,516
Total Cash and cash equivalents 22,840 19,455
These amounts include cash at banks, units in money market funds and other money market securities, comprising
commercial paper and certi?cates of deposit that are readily convertible into cash, with original maturities of three
months or less at the date of purchase. Cash and cash equivalents are subject to an insigni?cant risk of changes
in value, and consist of balances spread across various primary national and international banking institutions, and
money market instruments.
The item Cash at banks includes bank deposits which may be used exclusively by Group companies entitled to
perform speci?c operations (cash with a pre-determined use) amounting to €3 million at December 31, 2014 (€3
million at December 31, 2013).
22. Assets and Liabilities held for sale
The items included in Assets and liabilities held for sale were as follows:
At December 31,
2014 2013
(€ million)
Property, plant and equipment 8 1
Investments and other ?nancial assets 2 —
Inventories — 3
Trade and other receivables — 5
Total Assets held for sale 10 9
Provisions — 5
Trade and other payables — 16
Total Liabilities held for sale — 21
2014
|
ANNUAL REPORT 205
Assets and liabilities held for sale at December 31, 2014 consisted of buildings allocated to the LATAM and
Components segments as well as certain minor investments within the EMEA segment.
At December 31, 2013, Assets and liabilities held for sale primarily related to a subsidiary (Fonderie du Poitou Fonte
S.A.S.) within the Components segment for which the Group disposed of its interest in the subsidiary in May 2014.
The Group holds a subsidiary which operates in Venezuela whose functional currency is the U.S. Dollar. Pursuant
to certain Venezuelan foreign currency exchange control regulations, the Central Bank of Venezuela centralizes all
foreign currency transactions in the country. Under these regulations, the purchase and sale of foreign currency
must be made through the Centro Nacional de Comercio Exterior en Venezuela from January 1, 2014 (CADIVI until
December 31, 2013). The cash and cash equivalents denominated in VEF amounted to €123 million (VEF 1,785
million) at December 31, 2014 and €270 million (VEF 2,347 million) at December 31, 2013. The reduction, in Euro
terms, is largely due to the adoption of SICAD I rate at March 31, 2014 for the conversion of the VEF denominated
monetary items, as explained in more detail in Note 8, and in part to the payments made by the subsidiary during the
period. In addition, Cash and cash equivalents held in certain foreign countries (primarily, China and Argentina) are
subject to local exchange control regulations providing for restrictions on the amount of cash other than dividends that
can leave the country.
23. Equity
Consolidated shareholders’ equity at December 31, 2014 increased by €1,154 million from December 31, 2013,
mainly due to the issuance of mandatory convertible securities (described in more detail below) resulting in an increase
of €1,910 million, the placement of 100,000,000 common shares (described below) resulting in an aggregate
increase of € 994 million, net pro?t for the period of €632 million, the increase in cumulative exchange differences
on translating foreign operations of €782 million, partially offset by the decrease of €2,665 million arising from the
acquisition of the 41.5 percent non-controlling interest in FCA US and the disbursement to Fiat shareholders who
exercised cash exit rights.
Consolidated shareholders’ equity at December 31, 2013 increased by €4,215 million from December 31, 2012, mainly
due to an increase of €2,908 million in the remeasurement of de?ned bene?t plans reserve net of related tax impact, the
pro?t for the period of €1,951 million and an increase of €123 million in the cash ?ow hedge reserve partially offset by the
decrease of €796 million in the cumulative exchange differences on translating foreign operations.
Share capital
At December 31, 2014, fully paid-up share capital of FCA amounted to €17 million (€4,477 million at December 31,
2013) and consisted of 1,284,919,505 common shares and of 408,941,767 special voting shares, all with a par value
of €0.01 each (1,250,687,773 ordinary shares with a par value of €3.58 each of Fiat at December 31, 2013 - see
section Merger, below). On December 12, 2014, FCA issued 65,000,000 new common shares and sold 35,000,000
of treasury shares for aggregate net proceeds of $1,065 million (€849 million) comprised of gross proceeds of $1,100
million (€877 million) less $35 million (€28 million) of transaction costs.
On October 29, 2014, the Board of Directors of FCA resolved to authorize the issuance of up to a maximum of
90,000,000 common shares under the framework equity incentive plan which had been adopted before the closing
of the Merger. No grants have occurred under such framework equity incentive plan and any issuance of shares
thereunder in the period from 2014 to 2018 will be subject to the satisfaction of certain performance/retention
requirements. Any issuances to directors will be subject to shareholders approval.
Treasury shares
There were no treasury shares held by FCA at December 31, 2014 (34,577,867 Fiat ordinary shares for an amount of
€259 million at December 31, 2013) (see section - Merger, below).
206 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Merger
As a result of the merger described in the section Principle Activities—FCA Merger above becoming effective on
October 12, 2014:
60,002,027 Fiat ordinary shares were reacquired by Fiat with a disbursement of €464 million as a result of the
cash exit rights exercised by a number of Fiat shareholders following the Merger. Pursuant to the Italian law, these
shares were offered to Fiat shareholders not having exercised the cash exit rights. These Fiat shareholders elected
to purchase 6,085,630 shares with a cash disbursement of €47 million. As a result, concurrent with the Merger, on
October 12, 2014, 53,916,397 Fiat shares were cancelled with a net aggregate cash disbursement of €417 million.
As the Merger, which took the form of a reverse merger, resulted in FCA being the surviving entity, all Fiat ordinary
shares outstanding as of the Merger date (1,167,181,255 ordinary shares) were cancelled and exchanged. FCA
allotted one new FCA common share (each having a nominal value of €0.01) for each Fiat ordinary share (each
having a nominal value of €3.58). The original investment of FCA in Fiat which consisted of 35,000,000 common
shares was not cancelled resulting in 35,000,000 treasury shares in FCA. On December 12, 2014, FCA completed
the placement of these treasury shares on the market.
The following table provides the detail for the number of Fiat ordinary shares outstanding at December 31, 2013 and
the number of FCA common shares outstanding at December 31, 2014:
Fiat S.p.A. FCA
Thousand of shares
At
December
31, 2013
Share-
based
payments
and
exercise
of stock
options
Exit
Rights
Cancellation
of treasury
shares upon
the Merger
At the
date of the
Merger
FCA
share
capital
at the
Merger
Issuance
of FCA
Common
shares
and
sale of
treasury
shares
Exercise
of Stock
Options
At
December
31, 2014
Shares issued 1,250,688 320 (53,916) (29,911) 1,167,181 35,000 65,000 17,738 1,284,919
Less: treasury shares (34,578) 4,667 — 29,911 — (35,000) 35,000 — —
Shares issued and
outstanding 1,216,110 4,987 (53,916) — 1,167,181 — 100,000 17,738 1,284,919
Mandatory Convertible Securities
In December 2014, FCA issued an aggregate notional amount of U.S.$2,875 million (€2,293 million) of mandatory
convertible securities (the “Mandatory Convertible Securities”). Per the terms of the prospectus, the Mandatory
Convertible Securities will pay cash coupons at a rate of 7.875 percent per annum, which can be deferred at the option
of FCA. The Mandatory Convertible Securities will mature on December 15, 2016 (the “Mandatory Conversion Date”).
The purpose of the transaction was to provide additional ?nancing to the Group for general corporate purposes.
As part of the issuance of the Mandatory Convertible Securities, the underwriters had the option to purchase, within
30 days beginning on, and including, the date of initial issuance of U.S.$2,500 million (€1,994 million) of Mandatory
Convertible Securities, up to an additional U.S.$375 million of Mandatory Convertible Securities from FCA at
the same price as that sold to the public, less the underwriting discounts and commissions (the “over-allotment
option”). The underwriters exercised the over-allotment option concurrent with the issuance of the Mandatory
Convertible Securities and purchased an additional U.S.$375 million (€299 million) of Mandatory Convertible
Securities, resulting in the aggregate notional amount of U.S.$2,875 million (€2,293 million) of Mandatory
Convertible Securities that were issued.
2014
|
ANNUAL REPORT 207
The Mandatory Convertible Securities will automatically convert on the Mandatory Conversion Date into a number of
common shares equal to the conversion rate calculated based on the share price relative to the applicable market
value (“AMV”), as de?ned in the prospectus, as follows:
Maximum Conversion Rate: 261,363,375 shares if AMV ? Initial Price (U.S.$11), in aggregate the Maximum Number
of Shares
(1)
A number of shares equivalent to the value of U.S.$100 (i.e., U.S.$100 / AMV), if Initial Price (U.S.$11) ? AMV ?
Threshold Appreciation Price (U.S.$12.925)
(1)
Minimum Conversion Rate: 222,435,875 shares if AMV ? Threshold Appreciation Price (U.S.$12.925), in aggregate
the Minimum Number of Shares
(1)
Upon Mandatory Conversion: Holders receive: (i) any deferred coupon payments, (ii) accrued and unpaid coupon
payments in cash or in Shares at the election of the Group.
(1)
The Conversion Rates, the Initial Price and the Threshold Appreciation Price are each subject to adjustment related to dilutive events. In
addition, upon the occurrence of a Spin-Off (as defined), the Threshold Appreciation Price, the Initial Price and the Stated Amount are also
subject to adjustment.
Other features of the Mandatory Convertible Securities are outlined below:
Early Conversion at Option of the Group: FCA has the option to convert the Mandatory Convertible Securities and
deliver the Maximum Number of Shares prior to the Mandatory Conversion Date, subject to limitations around
timing of the planned Ferrari separation. Upon exercise of this option, holders receive cash equal to: (i) any deferred
coupon payments, (ii) accrued and unpaid coupon payments, and (iii) the present value of all remaining coupon
payments on the Mandatory Convertible Securities discounted at the Treasury Yield rate.
Early Conversion at Option of the Holder: holders have the option to convert their Mandatory Convertible Securities
early and receive the Minimum Number of Shares, subject to limitations around timing of the planned Ferrari
separation. Upon exercise of this option, holders receive any deferred coupon payments in cash or in common
shares at the election of FCA.
The Mandatory Convertible Securities also provide for the possibility of early conversion in limited situations upon
occurrence of de?ned events outlined in the prospectus.
Under IAS 32 - Financial Instruments: Presentation, the issuer of a ?nancial instrument shall classify the instrument,
or its component parts, on initial recognition in accordance with the substance of the contractual arrangement and
whether the components meet the de?nitions of a ?nancial asset, ?nancial liability or an equity instrument. As the
Mandatory Convertible Securities are a compound ?nancial instrument that is an equity contract combined with a
?nancial liability for the coupon payments, there are two units of account for this instrument.
The equity contract meets the de?nition of an equity instrument as described in paragraph 16 of IAS 32 as the equity
contract does not include a contractual obligation to (i) deliver cash or another ?nancial asset to another entity or (ii)
exchange ?nancial assets or ?nancial liabilities with another entity under conditions that are potentially unfavorable
to FCA. Additionally, the equity contract is a non-derivative that includes no contractual obligation for FCA to deliver
a variable number of its own equity, as FCA controls its ability to settle for a ?xed number of shares under the terms
of the contract. Management has determined that the terms of the contract are substantive as there are legitimate
corporate objectives that could cause FCA to seek early conversion of the Mandatory Convertible Securities. As a
result, the equity conversion feature has been accounted for as an equity instrument.
In regard to the obligation to pay coupons, FCA notes that this meets the de?nition of a ?nancial liability as it is a
contractual obligation to deliver cash to another entity. FCA has the right to, or in certain limited circumstances the
investors can force FCA to prepay the coupons, in addition to settling the equity conversion feature, before maturity.
Under IFRS, the early settlement features would be bifurcated from the ?nancial liability for the coupon payments since
they require the repayment of the coupon obligation at an amount other than fair value or the amortized cost of the
debt instrument as required by IAS 39.AG30(g).
208 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
As required by paragraph 31 of IAS 32, the initial carrying amount of a compound ?nancial instrument is allocated to
its equity and liability components. The equity component is assigned the residual amount after deducting the amount
separately determined for the liability component from the fair value of the instrument as a whole. The value of any
derivative features embedded in the compound ?nancial instrument other than the equity component is included in the
liability component. Therefore, the ?nancial liability for the coupon payments will be initially recognized at its fair value.
The derivative related to the early settlement conversion features de?ned in the Mandatory Convertible Securities
will be bifurcated from the ?nancial liability for the coupon payments and will be accounted for at fair value through
pro?t and loss. Subsequently, the ?nancial liability related to the coupon payments will be accounted for at amortized
cost using the effective interest method. The ?nancial liabilities related to the embedded derivative features will be
remeasured to their fair value at each reporting date with the remeasurement gains or losses being recorded in the
Consolidated statement of income. The residual amount of the proceeds received from the issuance of the Mandatory
Convertible Securities will be allocated to share reserves in Equity. The amount of proceeds recorded in equity will not
be remeasured subsequently.
Under IAS 32, transaction costs that relate to the issue of a compound ?nancial instrument are allocated to the liability
and equity components of the instrument in proportion to the allocation of proceeds. The portion allocated to the
equity component should be accounted for as a deduction from equity to the extent that they are incremental costs
directly attributable to the equity transaction. The portion allocated to the liability component (including third party
costs and creditor fees) are deducted from the liability component balance, are accounted for as a debt discount and
are amortized over the life of the coupon payments using the effective interest method.
Net proceeds of U.S.$2,814 million (€2,245 million), consisting of gross proceeds of U.S.$2,875 million (€2,293
million) less total transaction costs of U.S.$61 million (€48 million) directly related to the issuance, were received in
connection with the issuance of the Mandatory Convertible Securities. The fair value amount determined for the liability
component at issuance was U.S.$419 million (€335 million) which was calculated as the present value of the coupon
payments due, less allocated transaction costs of U.S.$9 million (€7 million) that are accounted for as a debt discount
(Note 27). The remaining net proceeds of U.S.$2,395 million (€1,910 million) (including allocated transaction costs of
U.S.$52 million (€41 million) was recognized within equity reserves.
Other reserves
Other reserves mainly include:
the legal reserve of €10,816 million at December 31, 2014 (€6,699 million at December 31, 2013) that were
determined in accordance to the Dutch law and mainly refers to development costs capitalized by subsidiaries and
their earnings subject to certain restrictions to distributions to the parent company. The legal reserve also includes
the reserve for the equity component of the Mandatory Convertible Securities of €1,910 million at December 31,
2014. Pursuant to Dutch law, limitations exist relating to the distribution of shareholders’ equity up to the total
amount of the legal reserve;
the capital reserves amounting to €3,472 million at December 31, 2014 and consisting mainly of the effects of the
Merger resulting in a different par value of FCA common shares (€0.01 each) as compared to Fiat S.p.A. ordinary
shares (€3.58 each) where the consequent difference between the share capital before and after the Merger was
recognized to increase the capital reserves;
retained earnings, that after separation of the legal reserve, are negative by €1,458 million;
the pro?t attributable to owners of the parent of €568 million at December 31, 2014 (a pro?t of €904 million for the
year ended December 31, 2013);
2014
|
ANNUAL REPORT 209
Other comprehensive income/(loss)
Other comprehensive income/(loss) was as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Items that will not be reclassi?ed to the Consolidated income statement:
(Losses)/gains on remeasurement of de?ned bene?t plans (333) 2,676 (1,846)
Shares of (losses)/gains on remeasurement of de?ned bene?t plans for equity
method investees (4) (7) 4
Total items that will not be reclassi?ed to the Consolidated income statement (B1) (337) 2,669 (1,842)
Items that may be reclassi?ed to the Consolidated income statement:
(Losses)/gains on cash ?ow hedging instruments arising during the period (396) 343 91
(Losses)/gains on cash ?ow hedging instruments reclassi?ed to the Consolidated
income statement 104 (181) 93
(Losses)/gains on cash ?ow hedging instruments (292) 162 184
(Losses)/gains on available-for-sale ?nancial assets arising during the period (24) 4 27
(Losses)/gains on available-for-sale ?nancial assets reclassi?ed to the Consolidated
income statement
— — —
(Losses)/gains on available-for-sale ?nancial assets (24) 4 27
Exchange differences on translating foreign operations arising during the period 1,282 (720) (285)
Exchange differences on translating foreign operations reclassi?ed to the
Consolidated income statement — — —
Exchange differences on translating foreign operations 1,282 (720) (285)
Share of Other comprehensive income/(loss) for equity method investees arising
during the period 35 (75) 19
Share of Other comprehensive income/(loss) for equity method investees reclassi?ed
to the Consolidated income statement 16 (13) 17
Share of Other comprehensive income/(loss) for equity method investees 51 (88) 36
Total items that may be reclassi?ed to the Consolidated income statement (B2) 1,017 (642) (38)
Total Other comprehensive income/(loss) (B1)+(B2)=(B) 680 2,027 (1,880)
Tax effect 102 212 (21)
Total Other comprehensive income/(loss), net of tax 782 2,239 (1,901)
With reference to the de?ned bene?t plans, the gains and losses arising from the remeasurement mainly include
actuarial gains and losses arising during the period, the return on plan assets (net of interest income recognized in the
Consolidated income statement) and any changes in the effect of the asset ceiling. These gains and losses are offset
against the related net liabilities or assets for de?ned bene?t plans (see Note 25 in the Consolidated ?nancial statements).
210 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The tax effect relating to Other comprehensive income/(loss) was as follows:
For the years ended December 31,
2014 2013 2012
Pre-tax
balance
Tax
income/
(expense)
Net
balance
Pre-tax
balance
Tax
income/
(expense)
Net
balance
Pre-tax
balance
Tax
income/
(expense)
Net
balance
(€ million)
Gains/(Losses) on
remeasurement of de?ned
bene?t plans (333) 29 (304) 2,676 239 2,915 (1,846) 3 (1,843)
Gains/(losses) on cash ?ow
hedging instruments (292) 73 (219) 162 (27) 135 184 (24) 160
Gains/(losses) on available-
for-sale ?nancial assets (24) — (24) 4 — 4 27 — 27
Exchange gains/(losses) on
translating foreign operations 1,282 — 1,282 (720) — (720) (285) — (285)
Share of Other comprehensive
income/(loss) for equity method
investees 47 — 47 (95) — (95) 40 — 40
Total Other comprehensive
income/(loss) 680 102 782 2,027 212 2,239 (1,880) (21) (1,901)
Non-controlling interest
Total non-controlling interest at December 31, 2014 of €313 million primarily related to the 10.0 percent interest held
in Ferrari S.p.A. of €194 million. Total non-controlling interest at December 31, 2013 of €4,258 million primarily related
to the 41.5 per cent interest held in FCA US of €3,944 million and to the 10.0 percent interest held in Ferrari S.p.A. of
€215 million.
Policies and processes for managing capital
For 2014, the Board of Directors has not recommended a dividend payment on FCA common shares in order to
further fund capital requirements of the Group’s ?ve-year business plan presented on May 6, 2014.
The objectives identi?ed by the Group for managing capital are to create value for shareholders as a whole, safeguard
business continuity and support the growth of the Group. As a result, the Group endeavors to maintain an adequate
level of capital that at the same time enables it to obtain a satisfactory economic return for its shareholders and
guarantee economic access to external sources of funds, including by means of achieving an adequate credit rating.
The Group constantly monitors the ratio between debt and equity, particularly the level of net debt and the generation
of cash from its industrial activities. In order to reach these objectives, the Group continues to aim for improvement in
the pro?tability of its operations. Furthermore, the Group may sell part of its assets to reduce the level of its debt, while
the Board of Directors may make proposals to Shareholders in the general meeting to reduce or increase share capital
or, where permitted by law, to distribute reserves. The Group may also make purchases of treasury shares, without
exceeding the limits authorized by Shareholders in the general meeting, under the same logic of creating value,
compatible with the objectives of achieving ?nancial equilibrium and an improvement in the Group’s rating.
2014
|
ANNUAL REPORT 211
The FCA loyalty voting structure
The purpose of the loyalty voting structure is to reward long-term ownership of FCA common shares and to promote
stability of the FCA shareholder base by granting long-term FCA shareholders with special voting shares to which
one voting right is attached additional to the one granted by each FCA common share that they hold. In connection
with the Merger, FCA issued 408,941,767 special voting shares, with a nominal value of €0.01 each, to those eligible
shareholders of Fiat who had elected to participate in the loyalty voting structure upon completion of the Merger in
addition to FCA common shares. After closing of the Merger, an FCA shareholder may at any time elect to participate
in the loyalty voting structure by requesting that FCA register all or some of the number of FCA common shares held by
such FCA shareholder in the Loyalty Register. Only a minimal dividend accrues to the special voting shares allocated to
a separate special dividend reserve, and they shall not carry any entitlement to any other reserve of FCA. Having only
immaterial economics entitlements, the special voting shares do not impact the FCA earnings per share calculation.
With respect to cash ?ow hedges, in 2014 the Group reclassi?ed losses of €106 million (gains of €190 million in 2013
and losses of €105 million in 2012), net of the tax effect, from Other comprehensive income/(loss) to Consolidated
income statement. These items are reported in the following lines:
For the years ended December 31,
2014 2013 2012
(€ million)
Currency risk
Increase/(Decrease) in Net revenues 53 126 (92)
Decrease in Cost of sales 11 44 25
Financial (expenses)/income (157) 22 32
Result from investments (13) 17 (12)
Interest rate risk
Increase in Cost of sales (2) (6) (6)
Result from investments (3) (4) (5)
Financial (expenses)/income (11) (10) (6)
Commodity price risk
Increase in Cost of sales (2) (1) (40)
Ineffectiveness - overhedge 4 5 (6)
Taxes expenses/(income) 14 (3) 5
Total recognized in the Consolidated income statement (106) 190 (105)
Fair value hedges
The gains and losses arising from the valuation of outstanding interest rate derivatives (for managing interest rate risk)
and currency derivatives (for managing currency risk) recognized in accordance with fair value hedge accounting and
the gains and losses arising from the respective hedged items are summarized in the following table:
For the years ended December 31,
2014 2013 2012
(€ million)
Currency risk
Net gains/(losses) on qualifying hedges (53) 19 14
Fair value changes in hedged items 53 (19) (14)
Interest rate risk
Net gains/(losses) on qualifying hedges (20) (28) (51)
Fair value changes in hedged items 20 29 53
Net gains/(losses) — 1 2
212 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
24. Share-based compensation
The following share-based compensation plans relating to managers of Group companies and the Chief Executive
Of?cer of FCA were in place.
Stock option plans linked to Fiat and CNHI ordinary shares
On July 26, 2004, the Board of Directors granted the Chief Executive Of?cer, as a part of his variable compensation
in that position, options to purchase 10,670,000 Fiat ordinary shares at a price of €6.583 per share. Following the
de-merger of CNHI, from Fiat, the bene?ciary had the right to receive one ordinary Fiat share and one ordinary CNHI
share for each original option, with the option exercise price remaining unchanged. The options were fully vested and
they were exercisable at any time until January 1, 2016. The options were exercised in total in November 2014 and
the bene?ciary received 10,670,000 shares of FCA since the options were exercised after the Merger, in addition to
10,670,000 CNHI shares.
On November 3, 2006, the Fiat Board of Directors approved (subject to the subsequent approval of Shareholders
obtained on April 5, 2007), the “November 2006 Stock Option Plan”, an eight year stock option plan, which granted
certain managers of the Group and the Chief Executive Of?cer of Fiat the right to purchase a speci?c number of Fiat
ordinary shares at a ?xed price of €13.37 each. More speci?cally, the 10,000,000 options granted to employees and
the 5,000,000 options granted to the Chief Executive Of?cer had a vesting period of four years, with an equal number
vesting each year, were subject to achieving certain predetermined pro?tability targets (Non-Market Conditions or
“NMC”) in the reference period and were exercisable from February 18, 2011. An additional 5,000,000 options were
granted to the Chief Executive Of?cer of Fiat that were not subject to performance conditions but also had a vesting
period of four years with an equal number vesting each year and were exercisable from November 2010. The ability
to exercise the options was also subject to speci?c restrictions regarding the duration of the employment relationship
or the continuation of the position held. Following the demerger of CNHI, the bene?ciaries had the right to receive
one ordinary Fiat share and one ordinary CNHI share for each original option, with the option exercise price remaining
unchanged.
The contractual terms of the plan were as follows:
Plan Recipient Expiry date
Strike
price
(€)
N° of
options
vested Vesting date
Vesting
portion
Stock Option - November 2006 Chief Executive Of?cer November 3, 2014 13.37 5,000,000 November 2007
November 2008
November 2009
November 2010
25%
25%
25%
25%
Stock Option - November 2006 Chief Executive Of?cer November 3, 2014 13.37 5,000,000 1st Quarter 2008
(*)
1st Quarter 2009
(*)
1st Quarter 2010
(*)
1st Quarter 2011
(*)
25%xNMC
25%xNMC
25%xNMC
25%xNMC
Stock Option - November 2006 Managers November 3, 2014 13.37 10,000,000 1st Quarter 2008
(*)
1st Quarter 2009
(*)
1st Quarter 2010
(*)
1st Quarter 2011
(*)
25%xNMC
25%xNMC
25%xNMC
25%xNMC
(*)
On approval of the prior year’s Consolidated financial statements; subject to continuation of the employment relationship.
With speci?c reference to the options under the November 2006 Stock Option Plan, for which vesting was subject
to the achievement of pre-established pro?tability targets, only the ?rst tranche of those rights had vested as the
pro?tability targets originally established for the 3-year period 2008-2010 were not met.
2014
|
ANNUAL REPORT 213
Changes during the years ended December 31, 2014, 2013 and 2012 were as follows:
Rights granted to managers
2014 2013 2012
Number of
options
Average
exercise
price (€)
Number of
options
Average
exercise
price (€)
Number of
options
Average
exercise
price (€)
Outstanding shares at the beginning of the year 1,240,000 13.37 1,576,875 13.37 1,636,875 13.37
Granted — — — — — —
Forfeited — — — — — —
Exercised (1,139,375) 13.37 (285,000) 13.37 — —
Expired (100,625) — (51,875) 13.37 (60,000) 13.37
Outstanding shares at the end of the year — — 1,240,000 13.37 1,576,875 13.37
Exercisable at the end of the year — — 1,240,000 13.37 1,576,875 13.37
Rights granted to the Chief Executive Of?cer
2014 2013 2012
Number of
options
Average
exercise
price (€)
Number of
options
Average
exercise
price (€)
Number of
options
Average
exercise
price (€)
Outstanding shares at the beginning of the year 6,250,000 13.37 6,250,000 13.37 6,250,000 13.37
Granted — — — — — —
Forfeited — — — — — —
Exercised (6,250,000) 13.37 — — — —
Expired — — — — — —
Outstanding shares at the end of the year — — 6,250,000 13.37 6,250,000 13.37
Exercisable at the end of the year — — 6,250,000 13.37 6,250,000 13.37
Stock Grant plans linked to Fiat shares
On April 4, 2012, the Shareholders resolved to approve the adoption of a Long Term Incentive Plan (the “Retention
LTI Plan”), in the form of stock grants. As a result, the Group granted the Chief Executive Of?cer 7 million rights, which
represented an equal number of Fiat ordinary shares. The rights vest ratably, one third on February 22, 2013, one third
on February 22, 2014 and one third on February 22, 2015, subject to the requirement that the Chief Executive Of?cer
remains in of?ce.
The Plan is to be serviced through the issuance of new shares. The Group has the right to replace, in whole or in part,
shares vested under the Retention LTI Plan with a cash payment calculated on the basis of the of?cial price of those
shares published by Borsa Italiana S.p.A. on the date of vesting.
Changes in the Retention LTI Plan were as follows:
2014 2013
Number
of Fiat
shares
Average fair
value at the
grant date
(€)
Number
of Fiat
shares
Average fair
value at the
grant date
(€)
Outstanding shares unvested at the beginning of the year 4,666,667 4.205 7,000,000 4.205
Granted — — — —
Forfeited — — — —
Vested 2,333,333 4.205 2,333,333 4.205
Outstanding shares unvested at the end of the year 2,333,334 4.205 4,666,667 4.205
Nominal costs of €2 million were recognized in 2014 for this plan (€6 million in 2013).
214 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Share-Based Compensation Plans Issued by FCA US
Four share-based compensation plans have been issued by FCA US: the FCA US Restricted Stock Unit Plan (“RSU
Plan”), the Amended and Restated FCA US Directors’ Restricted Stock Unit Plan (“Directors’ RSU Plan”), the FCA US
Deferred Phantom Share Plan (“DPS Plan”) and the FCA US 2012 Long-Term Incentive Plan (“2012 LTIP Plan”).
The fair value of each unit issued under the four share-based compensation plans is based on the fair value of FCA
US’s membership interests. Each unit represents an “FCA US Unit,” which is equal to 1/600th of the value of a FCA
US membership interest. Since there is no publicly observable trading price for FCA US membership interests, fair
value was determined using a discounted cash ?ow methodology. This approach, which is based on projected cash
?ows of FCA US, is used to estimate the FCA US enterprise value. The fair value of FCA US’s outstanding interest
bearing debt as of the measurement date is deducted from FCA US’s enterprise value to arrive at the fair value of
equity. This amount is then divided by the total number of FCA US Units, as determined above, to estimate the fair
value of a single FCA US Unit.
The signi?cant assumptions used in the contemporaneous calculation of fair value at each issuance date and for each
period included the following:
four years of annual projections prepared by management that re?ect the estimated after-tax cash ?ows a market
participant would expect to generate from operating the business;
a terminal value which was determined using a growth model that applied a 2.0 percent long-term growth rate to
projected after-tax cash ?ows of FCA US beyond the four year window. The long-term growth rate was based on
internal projections of FCA US, as well as industry growth prospects;
an estimated after-tax weighted average cost of capital of 16.0 percent in 2014, and ranging from 16.0 percent to
16.5 percent in both 2013 and 2012; and
projected worldwide factory shipments ranging from approximately 2.6 million vehicles in 2013 to approximately 3.4
million vehicles in 2018.
On January 21, 2014, FCA acquired the VEBA Trust’s remaining interest in FCA US, as described in the section
—Acquisition of the Remaining Ownership Interest in FCA US. The implied fair value of FCA US resulting from this
transaction, along with certain other factors, was used to corroborate the fair value determined at December 31, 2013
using a discounted cash ?ow methodology.
As of December 31, 2014, 29,400,000 units are authorized to be granted for the RSU Plan, Directors’ RSU Plan
and 2012 LTIP Plan. There is no limit on the number of phantom shares of FCA US (“Phantom Shares”) authorized
under the DPS Plan. Upon adoption of the 2012 LTIP Plan, there were no further grants made under the RSU Plan
and DPS Plan.
Anti-Dilution Adjustment
The documents governing FCA US’s share-based compensation plans contain anti-dilution provisions which provide
for an adjustment to the number of FCA US Units granted under the plans in order to preserve, or alternatively prevent
the enlargement of, the bene?ts intended to be made available to the holders of the awards should an event occur that
impacts the capital structure.
There were no capital structure changes in 2013 or 2012 that required an anti-dilution adjustment. During 2014, two
transactions occurred that diluted the fair value of equity and the per unit fair value of a FCA US Unit based on the
discounted cash ?ow methodology. These transactions were:
the $1,900 million (€1,404 million) distribution paid to its members, on January 21, 2014, which served to fund
a portion of the transaction whereby Fiat acquired the VEBA Trust’s remaining ownership interest in FCA US (as
described above in the section —Acquisition of the Remaining Ownership Interest in FCA US).
The prepayment of the VEBA Trust Note on February 7, 2014 that accelerated tax deductions that were being
passed through to the FCA US’s members.
2014
|
ANNUAL REPORT 215
As a result of these dilutive events and pursuant to the anti-dilution provisions in the share-based compensation
plans, the FCA US’s Compensation Committee approved an anti-dilution adjustment factor to increase the number
of outstanding FCA US Units (excluding performance share units granted under the 2012 LTIP Plan (“LTIP PSUs”))
in order to preserve the economic bene?t intended to be provided to each participant. The value of the outstanding
awards immediately prior to the dilutive events is equal to the value of the adjusted awards subsequent to the dilutive
events. No additional expense was recognized as a result of this modi?cation during 2014. For comparative purposes,
the number of FCA US Units and all December 31, 2013, and 2012 fair value references have been adjusted to re?ect
the impact of the dilutive transactions and the anti-dilution adjustment.
Restricted Stock Unit Plans issued by FCA US
During 2009, the U.S. Treasury’s Of?ce of the Special Master for Troubled Asset Relief Program Executive
Compensation (the “Special Master”) and FCA US’s Compensation Committee approved the FCA US Restricted
Stock Unit Plan (“RSU Plan”), which authorized the issuance of Restricted Stock Units (“RSUs”) to certain key
employees. RSUs represent a contractual right to receive a payment in an amount equal to the fair value of one FCA
US Unit, as de?ned in the RSU plan. Originally, RSUs granted to FCA US’s employees in 2009 and 2010 vested
in two tranches. In September 2012, FCA US’s Compensation Committee approved a modi?cation to the second
tranche of RSUs. The modi?cation removed the performance condition requiring an IPO to occur prior to the award
vesting. Prior to this modi?cation, the second tranche of the 2009 and 2010 RSUs were equity-classi?ed awards.
In connection with the modi?cation of these awards, FCA US determined that it was no longer probable that the
awards would be settled with FCA US’s company stock and accordingly reclassi?ed the second tranche of the
2009 and 2010 RSUs from equity-classi?ed awards to liability-classi?ed awards. As a result of this modi?cation,
additional compensation expense of €12 million was recognized during 2012. RSUs granted to employees
generally vest if the participant is continuously employed by FCA US through the third anniversary of the grant date.
The settlement of these awards is in cash.
In addition, during 2009, FCA US established the Directors’ RSU Plan. In April 2012, FCA US’s Compensation
Committee amended and restated the FCA US 2009 Directors’ RSU Plan to allow grants having a one-year
vesting term to be granted on an annual basis. Director RSUs are granted to FCA US non-employee members of
the FCA US Board of Directors. Prior to the change, Director RSUs were granted at the beginning of a three-year
performance period and vested in three equal tranches on the ?rst, second, and third anniversary of the date of
grant, subject to the participant remaining a member of the FCA US Board of Directors on each vesting date. Under
the plan, settlement of the awards is made within 60 days of the Director’s cessation of service on the Board of
Directors and awards are paid in cash; however, upon completion of an IPO, FCA US has the option to settle the
awards in cash or shares. The value of the awards is recorded as compensation expense over the requisite service
periods and is measured at fair value.
The liability resulting from these awards is measured and adjusted to fair value at each reporting date. The expense
recognized in total for both the RSU Plan and the Directors RSU plan for the years ended December 31, 2014, 2013
and 2012 was approximately €6 million, €14 million and €28 million, respectively. Total unrecognized compensation
expense at December 31, 2014 and at December 31, 2013 for both the RSU Plan and the Directors RSU plan was
less than €1 million.
216 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Changes during 2014, 2013 and 2012 for both the RSU Plan and the Directors RSU Plan were as follows:
Adjusted for Anti-Dilution
2014 2013 2012
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested
at the beginning of the year 4,792,279 3.64 6,143,762 3.35 7,722,554 1.94
Granted — — 209,258 5.75 1,902,667 4.52
Vested (3,361,366) 3.48 (1,268,303) 2.01 (3,355,154) 0.73
Forfeited (96,211) 4.46 (292,438) 4.05 (126,305) 3.66
Outstanding shares unvested
at the end of the year 1,334,702 4.84 4,792,279 3.64 6,143,762 3.35
As Previously Reported
2013 2012
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at the beginning of the year 4,735,442 4.34 5,952,331 2.51
Granted 161,290 7.46 1,466,523 5.87
Vested (977,573) 2.61 (2,586,060) 0.95
Forfeited (225,403) 5.25 (97,352) 4.76
Outstanding shares unvested at the end of the year 3,693,756 4.72 4,735,442 4.34
2014
|
ANNUAL REPORT 217
Deferred Phantom Shares issued by FCA US
During 2009, the Special Master approved the FCA US DPS Plan which authorized the issuance of Phantom Shares.
Under the DPS Plan, Phantom Shares were granted to certain key employees as well as to the Chief Executive Of?cer
in connection with his role as a member of the FCA US Board of Directors. The Phantom Shares vested immediately
on the grant date and were settled in cash in three equal annual installments. At December 31, 2014, there were no
outstanding awards under the DPS Plan.
Changes during 2014, 2013 and 2012 were as follows:
Adjusted for Anti-Dilution
2014 2013 2012
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Outstanding shares at the
beginning of the year 413,521 3.49 1,957,494 2.07 6,414,963 1.41
Granted and Vested — — — — — —
Settled (413,521) 3.61 (1,543,973) 1.64 (4,457,469) 1.11
Outstanding shares
at the end of the year — — 413,521 3.49 1,957,494 2.07
As Previously Reported
2013 2012
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Outstanding shares at the beginning of the year 1,508,785 2.68 4,944,476 1.83
Granted and Vested — — — —
Settled (1,190,054) 2.13 (3,435,691) 1.43
Outstanding shares at the end of the year 318,731 4.53 1,508,785 2.68
The expense recognized in connection with the DPS Plan in 2014 was less than €1 million and was approximately €2
million in 2013 and in 2012.
218 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
2012 Long-Term Incentive Plan of FCA US
In February 2012, the Compensation Committee of FCA US adopted the 2012 LTIP Plan. The 2012 LTIP Plan covers
senior FCA US executives (other than the Chief Executive Of?cer). It is designed to retain talented professionals and
reward their performance through grants of phantom equity in the form of restricted share units (“LTIP RSUs”) and
LTIP PSUs. LTIP RSUs may be granted annually, while LTIP PSUs are generally granted at the beginning of a three-
year performance period. The Compensation Committee of FCA US also has authority to grant additional LTIP PSUs
awards during the three-year performance period. The LTIP RSUs vest over three years in one-third increments on
the anniversary of their grant date, while the LTIP PSUs vest at the end of the three-year performance period only if
FCA US meets or exceeds certain three-year cumulative ?nancial performance targets. Concurrent with the adoption
of the 2012 LTIP Plan, the Compensation Committee of FCA US established ?nancial performance targets based on
FCA US’s consolidated ?nancial results for the three-year performance period, ending December 31, 2014. If FCA US
does not fully achieve these targets, the LTIP PSUs will be deemed forfeited. LTIP RSUs and LTIP PSUs represent a
contractual right to receive a payment in an amount equal to the fair value of one FCA US Unit, as de?ned in the LTIP
Plan. Once vested, LTIP RSUs and LTIP PSUs will be settled in cash or, in the event FCA US conducts an IPO, in cash
or shares of publicly traded stock, at the Compensation Committee’s discretion. Settlement will be made as soon as
practicable after vesting, however in any case no later than March 15 of the year following vesting. Vesting of the LTIP
RSUs and LTIP PSUs may be accelerated in certain circumstances, including upon the participant’s death, disability
or in the event of a change of control.
In light of the May 6, 2014 publication of the 2014-2018 FCA Business Plan and in recognition of FCA US’s
performance for the 2012 and 2013 performance years, the Compensation Committee, on May 12, 2014, approved
an amendment to outstanding LTIP PSU award agreements, subject to participant consent, to modify outstanding
LTIP PSUs by closing the performance period for such awards as of December 31, 2013. Participants were noti?ed
of this modi?cation on or about May 30, 2014, and all plan participants subsequently consented to the amendment.
The modi?cation provides for a payment of the LTIP PSUs granted under the 2012 LTIP Plan representing two-thirds
of the original LTIP PSU award based on the unadjusted December 31, 2013 per unit fair value of €7.62 ($10.47). To
receive the LTIP PSU payment, a participant must remain an employee up to the date the LTIP PSUs are paid, which
is expected to occur on or before March 15, 2015. As a result, compensation expense was reduced by approximately
€16 million ($21 million) during the year ended December 31, 2014.
2014
|
ANNUAL REPORT 219
Changes during 2014, 2013 and 2012 were as follows:
As Previously Reported
December 31, 2013
LTIP RSUs
Weighted
average fair
value at the
grant date (€) LTIP PSUs
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at the beginning of the year 1,805,123 5.78 8,419,684 5.78
Granted 1,628,822 6.89 587,091 7.15
Vested (615,315) 5.77 — —
Forfeited (120,423) 6.20 (589,264) 5.77
Outstanding shares unvested at the end of the year 2,698,207 6.13 8,417,511 5.64
As Previously Reported
December 31, 2012
LTIP RSUs
Weighted
average fair
value at the
grant date (€) LTIP PSUs
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at the beginning of the year — — — —
Granted 1,835,833 5.73 8,450,275 5.73
Vested (20,123) 5.91 — —
Forfeited (10,587) 5.91 (30,591) 5.91
Outstanding shares unvested at the end of the year 1,805,123 5.78 8,419,684 5.78
Adjusted for Anti-Dilution
2014 2013 2012
LTIP RSUs
Weighted
average fair
value at the
grant date (€) LTIP RSUs
Weighted
average fair
value at the
grant date (€) LTIP RSUs
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at
the beginning of the year 3,500,654 4.73 2,341,967 4.46 — —
Granted — — 2,113,234 5.32 2,381,810 4.41
Vested (1,407,574) 4.81 (798,310) 4.45 (26,108) 4.56
Forfeited (104,020) 4.91 (156,237) 4.78 (13,735) 4.56
Outstanding shares unvested
at the end of the year 1,989,060 5.41 3,500,654 4.73 2,341,967 4.46
Adjusted for Anti-Dilution
2014 2013 2012
LTIP PSUs
Weighted
average fair
value at the
grant date (€) LTIP PSUs
Weighted
average fair
value at the
grant date (€) LTIP PSUs
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at
the beginning of the year 8,417,511 5.64 8,419,684 5.78 — —
Granted 5,556,503 7.62 587,091 7.15 8,450,275 5.73
Vested — — — — — —
Forfeited (8,653,474) 5.89 (589,264) 5.77 (30,591) 5.91
Outstanding shares unvested
at the end of the year 5,320,540 8.62 8,417,511 5.64 8,419,684 5.78
The expense recognized in connection with these plans in 2014 was €6 million (€36 million in 2013 and €24 million
in 2012). Total unrecognized compensation expenses at December 31, 2014 were approximately €2 million. These
expenses will be recognized over the remaining service periods based upon the assessment of the performance
conditions being achieved.
220 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
25. Provisions for employee bene?ts
The Group’s provisions and net assets for employee bene?ts were as follows:
At December 31,
2014 2013
(€ million)
Present value of de?ned bene?t obligations:
Pension bene?ts 27,287 23,137
Health care and life insurance plans 2,276 1,945
Other post-employment bene?ts 1,074 1,023
Total present value of de?ned bene?t obligations (a) 30,637 26,105
Fair value of plan assets (b) 22,231 18,982
Asset ceiling (c) 6 3
Total net de?ned bene?t plans (a - b + c) 8,412 7,126
of which:
Net de?ned bene?t liability (d) 8,516 7,221
(De?ned bene?t plan asset) (104) (95)
Other provisions for employees and liabilities for share-based payments (e) 1,076 1,105
Total Provisions for employee bene?ts (d + e) 9,592 8,326
The Group provides post-employment bene?ts for certain of its active employees and retirees. The way these
bene?ts are provided varies according to the legal, ?scal and economic conditions of each country in which the
Group operates and may change periodically. The plans are classi?ed by the Group on the basis of the type of bene?t
provided as follows: pension bene?ts, health care and life insurance plans, and other post-employment bene?ts.
Moreover, Group companies provide post-employment bene?ts, such as pension or health care bene?ts, to their
employees under de?ned contribution plans. In this case, the Group pays contributions to public or private insurance
plans on a legally mandatory, contractual, or voluntary basis. By paying these contributions the Group ful?lls all of
its obligations. The Group recognizes the cost for de?ned contribution plans over the period in which the employee
renders service and classi?es this by function in Cost of sales, Selling, general and administrative costs and Research
and development costs. In 2014, this cost totaled €1,405 million (€1,314 million in 2013 and €1,114 million in 2012).
Pension bene?ts
Group companies in the United States and Canada sponsor both non-contributory and contributory de?ned bene?t
pension plans. The non-contributory pension plans cover certain hourly and salaried employees. Bene?ts are based
on a ?xed rate for each year of service. Additionally, contributory bene?ts are provided to certain salaried employees
under the salaried employees’ retirement plans. These plans provide bene?ts based on the employee’s cumulative
contributions, years of service during which the employee contributions were made and the employee’s average salary
during the ?ve consecutive years in which the employee’s salary was highest in the 15 years preceding retirement or
the freeze of such plans, as applicable.
In the United Kingdom, the Group participates, amongst others, in a pension plan ?nanced by various entities
belonging to the Group, called the “Fiat Group Pension Scheme” covering mainly deferred and retired employees.
2014
|
ANNUAL REPORT 221
Liabilities arising from these plans are usually funded by contributions made by Group subsidiaries and, at times by
their employees, into legally separate trusts from which the employee bene?ts are paid. The Group’s funding policy
for de?ned bene?t pension plans is to contribute the minimum amounts required by applicable laws and regulations.
Occasionally, additional discretionary contributions in excess of these legally required are made to achieve certain
desired funding levels. In the U.S. these excess amounts are tracked, and the resulting credit balance can be used to
satisfy minimum funding requirements in future years. As of December 31, 2014, the combined credit balances for the
U.S. and Canadian quali?ed pension plans was approximately €2.1 billion, the usage of the credit balances to satisfy
minimum funding requirements is subject to the plans maintaining certain funding levels. The Group contributions to
funded pension plans for 2015 are expected to be €284 million, of which €262 million relate to FCA US and more
speci?cally, €191 million are discretionary contributions and €71 million will be made to satisfy minimum funding
requirement. The expected bene?t payments for pension plans are as follows:
Expected bene?t
payments
(€ million)
2015 1,769
2016 1,733
2017 1,710
2018 1,688
2019 1,675
2020-2024 8,187
The following summarizes the changes in the pension plans:
2014 2013
Obligation
Fair value
of plan
assets
Asset
ceiling
Liability
(asset) Obligation
Fair value
of plan
assets
Asset
ceiling
Liability
(asset)
(€ million)
Amounts at January 1, 23,137 (18,982) 3 4,158 26,974 (20,049) — 6,925
Included in the Consolidated income
statement 1,290 (816) — 474 1,142 (712) — 430
Included in Other comprehensive
income/loss
Actuarial losses/(gains) from:
- Demographic assumptions (256) — — (256) (35) — — (35)
- Financial assumptions 1,916 (8) — 1,908 (1,943) (1) — (1,944)
- Other 2 — — 2 (2) 2 — —
Return on assets — (1,514) — (1,514) — (518) — (518)
Changes in the effect of limiting net assets — — 3 3 — — 3 3
Changes in exchange rates 2,802 (2,273) — 529 (1,352) 1,107 — (245)
Other
Employer contributions — (229) — (229) — (458) — (458)
Plan participant contributions 2 (2) — — 9 (9) — —
Bene?ts paid (1,611) 1,606 — (5) (1,673) 1,667 — (6)
Other changes 5 (13) — (8) 17 (11) — 6
Amounts at December 31, 27,287 (22,231) 6 5,062 23,137 (18,982) 3 4,158
During 2014, a decrease in discount rates resulted in actuarial losses for the year ended December 31, 2014, while an
increase in discount rates resulted in actuarial gains for the year ended December 31, 2013.
222 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Amounts recognized in the Consolidated income statement were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Current service cost 184 292 271
Interest expense 1,089 1,026 1,199
(Interest income) (878) (768) (942)
Other administration costs 62 42 44
Past service costs/(credits) and gains or losses arising from settlements 17 (162) 10
Total recognized in the Consolidated income statement 474 430 582
In 2014, following the release of new standards by the Canadian Institute of Actuaries, mortality assumptions used for
our Canadian bene?t plan valuations were updated to re?ect recent trends in the industry and the revised outlook for
future generational mortality improvements. Generational improvements represent decreases in mortality rates over
time based upon historical improvements in mortality and expected future improvements. The change increased the
Group’s Canadian pension obligations by approximately €41 million. Additionally, retirement rate assumptions used for
the Group’s U.S. bene?t plan valuations were updated to re?ect an ongoing trend towards delayed retirement for FCA
US employees. The change decreased the Group’s U.S. pension and other post-employment bene?t obligations by
approximately €261 million and €40 million, respectively.
During the second quarter of 2013, FCA US amended its U.S. and Canadian salaried de?ned bene?t pension plans. The U.S.
plans were amended in order to comply with U.S. regulations, cease the accrual of future bene?ts effective December 31,
2013, and enhance the retirement factors. The Canada amendment ceased the accrual of future bene?ts effective
December 31, 2014, enhanced the retirement factors and continued to consider future salary increases for the affected
employees. An interim remeasurement was performed for these plans, which resulted in a curtailment gain of €166 million
recognized in unusual income in the Consolidated income statement (see Note 8). In addition, the Group recognized a €509
million reduction to its pension obligation, a €7 million reduction to de?ned bene?t plan assets and a corresponding €502
million increase in accumulated Other comprehensive income/(loss) for the year ended December 31, 2013. There were no
signi?cant plan amendments or curtailments to the Group’s pension plans for the year ended December 31, 2014.
The fair value of plan assets by class was as follows:
At December 31, 2014 At December 31, 2013
Amount
of which have
a quoted market
price in an
active market Amount
of which have
a quoted market
price in an
active market
(€ million)
Cash and cash equivalents 713 614 532 401
U.S. equity securities 2,406 2,338 2,047 2,033
Non-U.S. equity securities 1,495 1,463 1,540 1,531
Commingled funds 2,009 186 1,518 195
Equity instruments 5,910 3,987 5,105 3,759
Government securities 2,948 780 2,545 729
Corporate bonds (including Convertible and high yield bonds) 6,104 4 5,049 38
Other ?xed income 892 7 635 —
Fixed income securities 9,944 791 8,229 767
Private equity funds 1,648 — 1,713 —
Commingled funds 5 5 — —
Mutual funds 4 — 4 —
Real estate funds 1,395 — 1,222 —
Hedge funds 1,841 — 1,759 —
Investment funds 4,893 5 4,698 —
Insurance contracts and other 771 91 418 46
Total fair value of plan assets 22,231 5,488 18,982 4,973
2014
|
ANNUAL REPORT 223
Non-U.S. Equity securities are invested broadly in developed international and emerging markets. Debt instruments
are ?xed income securities which comprise primarily of long-term U.S. Treasury and global government bonds, as well
as U.S., developed international and emerging market companies’ debt securities diversi?ed by sector, geography
and through a wide range of market capitalization. Commingled funds include common collective trust funds, mutual
funds and other investment entities. Private equity funds include those in limited partnerships that invest primarily
in operating companies that are not publicly traded on a stock exchange. Real estate investments includes those
in limited partnerships that invest in various commercial and residential real estate projects both domestically and
internationally. Hedge fund investments include those seeking to maximize absolute return using a broad range of
strategies to enhance returns and provide additional diversi?cation.
The investment strategies and objectives for pension assets primarily in the U.S. and Canada re?ect a balance of liability-
hedging and return-seeking investment considerations. The investment objectives are to minimize the volatility of the
value of the pension assets relative to the pension liabilities and to ensure assets are suf?cient to pay plan obligations.
The objective of minimizing the volatility of assets relative to liabilities is addressed primarily through asset diversi?cation,
partial asset–liability matching and hedging. Assets are broadly diversi?ed across many asset classes to achieve risk–
adjusted returns that, in total, lower asset volatility relative to the liabilities. Additionally, in order to minimize pension asset
volatility relative to the pension liabilities, a portion of the pension plan assets are allocated to ?xed income securities. The
Group policy for these plans ensures actual allocations are in line with target allocations as appropriate.
Assets are actively managed, primarily, by external investment managers. Investment managers are not permitted
to invest outside of the asset class or strategy for which they have been appointed. The Group uses investment
guidelines to ensure investment managers invest solely within the mandated investment strategy. Certain investment
managers use derivative ?nancial instruments to mitigate the risk of changes in interest rates and foreign currencies
impacting the fair values of certain investments. Derivative ?nancial instruments may also be used in place of physical
securities when it is more cost effective and/or ef?cient to do so. Plan assets do not include shares of FCA or
properties occupied by Group companies.
Sources of potential risk in the pension plan assets measurements relate to market risk, interest rate risk and
operating risk. Market risk is mitigated by diversi?cation strategies and as a result, there are no signi?cant
concentrations of risk in terms of sector, industry, geography, market capitalization, or counterparty. Interest rate
risk is mitigated by partial asset–liability matching. The ?xed income target asset allocation partially matches the
bond–like and long–dated nature of the pension liabilities. Interest rate increases generally will result in a decline
in the fair value of the investments in ?xed income securities and the present value of the obligations. Conversely,
interest rate decreases generally will increase the fair value of the investments in ?xed income securities and the
present value of the obligations.
The weighted average assumptions used to determine the de?ned bene?t obligations were as follows:
At December31,
2014 2013
U.S. Canada UK U.S. Canada UK
(%)
Discount rate 4.0 3.8 4.0 4.7 4.6 4.5
Future salary increase rate n/a 3.5 3.0 3.0 3.5 3.1
The discount rates are used in measuring the obligation and the interest expense/(income) of net period cost. The
Group selects these rates on the basis of the rate on return on high-quality (AA rated) ?xed income investments for
which the timing and amounts of payments match the timing and amounts of the projected pension and other post-
employment plan. The average duration of the U.S. and Canadian liabilities was approximately 11 and 13 years,
respectively. The average duration of the UK pension liabilities was approximately 21 years.
224 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Health care and life insurance plans
Liabilities arising from these plans comprise obligations for retiree health care and life insurance granted to employees
and to retirees in the U.S. and Canada by FCA US companies. Upon retirement from the Group, these employees may
become eligible for continuation of certain bene?ts. Bene?ts and eligibility rules may be modi?ed periodically. These
plans are unfunded. The expected bene?t payments for unfunded health care and life insurance plans are as follows:
Expected
bene?t payments
(€ million)
2015 136
2016 134
2017 133
2018 132
2019 131
2020-2024 651
Changes in the net de?ned bene?t obligations for healthcare and life insurance plans were as follows:
2014 2013
(€ million)
Present value of obligations at January 1, 1,945 2,289
Included in the Consolidated income statement 126 112
Included in OCI:
Actuarial losses (gains) from:
- Demographic assumptions (95) (21)
- Financial assumptions 187 (207)
- Other — 11
Effect of movements in exchange rates 244 (112)
Other changes
Bene?ts paid (128) (126)
Other (3) (1)
Present value of obligations at December 31, 2,276 1,945
Amounts recognized in the Consolidated income statement were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Current service cost 21 23 22
Interest expense 98 89 103
Past service costs (credits) and gains or losses arising from settlements 7 — (6)
Total recognized in the Consolidated income statement 126 112 119
Health care and life insurance plans are accounted for on an actuarial basis, which requires the selection of various
assumptions, in particular, it requires the use of estimates of the present value of the projected future payments to all
participants, taking into consideration the likelihood of potential future events such as health care cost increases and
demographic experience.
2014
|
ANNUAL REPORT 225
The weighted average assumptions used to determine the de?ned bene?t obligations were as follows:
At December 31,
2014 2013
U.S. Canada U.S. Canada
(%)
Discount rate 4.1 3.9 4.9 4.7
Salary growth — — n/a 2.7
Weighted average ultimate healthcare cost trend rate 5.0 3.6 5.0 3.6
The discount rates used for the measurement of these obligations are based on yields of high-quality (AA-rated) ?xed
income securities for which the timing and amounts of payments match the timing and amounts of the projected
bene?t payments. The average duration of the U.S. and Canadian liabilities was approximately 12 and 16 years,
respectively.
The annual rate of increase in the per capita cost of covered U.S. health care bene?ts assumed for next year and used
in the 2014 plan valuation was 6.5 percent (6.8 percent in 2013). The annual rate was assumed to decrease gradually
to 5.0 percent after 2021 and remain at that level thereafter. The annual rate of increase in the per capita cost of
covered Canadian health care bene?ts assumed for next year and used in the 2014 plan valuation was 3.3 percent
(3.3 percent in 2013). The annual rate was assumed to increase gradually to 3.6 percent in 2017 and remain at that
level thereafter.
Other post-employment bene?ts
Other post-employment bene?ts includes other employee bene?ts granted to Group employees in Europe and
comprises, amongst others, the Italian employee severance indemnity (TFR) obligation amounting to €886 million at
December 31, 2014 and €861 million at December 31, 2013. These schemes are required under Italian Law.
The amount of TFR to which each employee is entitled must be paid when the employee leaves the Group and is
calculated based on the period of employment and the taxable earnings of each employee. Under certain conditions
the entitlement may be partially advanced to an employee during their working life.
The legislation regarding this scheme was amended by Law 296 of December 27, 2006 and subsequent decrees
and regulations issued in the ?rst part of 2007. Under these amendments, companies with at least 50 employees are
obliged to transfer the TFR to the “Treasury fund” managed by the Italian state-owned social security body (INPS) or
to supplementary pension funds. Prior to the amendments, accruing TFR for employees of all Italian companies could
be managed by the company itself. Consequently, the Italian companies’ obligation to INPS and the contributions
to supplementary pension funds take the form, under IAS 19 - Employee Bene?ts, of de?ned contribution plans
whereas the amounts recorded in the provision for employee severance pay retain the nature of de?ned bene?t plans.
Accordingly, the provision for employee severance indemnity in Italy consists of the residual obligation for TFR until
December 31, 2006. This is an unfunded de?ned bene?t plan as the bene?ts have already been entirely earned, with
the sole exception of future revaluations. Since 2007 the scheme has been classi?ed as a de?ned contribution plan
and the Group recognizes the associated cost over the period in which the employee renders service.
226 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Changes in de?ned bene?t obligations for other post-employment bene?ts was as follows:
2014 2013
(€ million)
Present value of obligations at January 1, 1,023 997
Included in the Consolidated income statement: 31 24
Included in OCI:
Actuarial losses (gains) from:
Demographic assumptions (2) (2)
Financial assumptions 81 37
Other 14 23
Effect of movements in exchange rates 1 (4)
Other:
Bene?ts paid (77) (59)
Change in the scope of consolidation 15 21
Other (12) (14)
Present value of obligations at December 31, 1,074 1,023
Amounts recognized in the Consolidated income statement was as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Current service cost 20 9 8
Interest expense 11 15 25
Past service costs (credits) and gains or losses arising from settlements — — (3)
Total recognized in the Consolidated income statement 31 24 30
The main assumptions used in developing the required estimates for other post-employment bene?ts include the
discount rate, the retirement or employee leaving rate and the mortality rates.
The discount rates used for the measurement of the Italian TFR obligation are based on yields of high-quality (AA
rated) ?xed income securities for which the timing and amounts of payments match the timing and amounts of the
projected bene?t payments. For this plan, the single weighted average discount rate that re?ects the estimated timing
and amount of the scheme future bene?t payments for 2014 is equal to 1.7 percent (2.8 percent in 2013). The average
duration of the Italian TFR is approximately 7 years. Retirement or employee leaving rates are developed to re?ect
actual and projected Group experience and law requirements for retirement in Italy.
Other provisions for employees and liabilities for share-based payments
At December 31, 2014, Other provisions for employees and liabilities for share-based payments comprised other long
term bene?ts obligations for €376 million (€332 million at December 31, 2013), representing the expected obligation
for bene?ts as jubilee and long term disability granted to certain employees by the Group. At December 31, 2013 this
item also included liabilities for share-based payments amounting to €123 million.
2014
|
ANNUAL REPORT 227
26. Other provisions
Changes in Other provisions were as follows:
At
December 31,
2013
Additional
provisions Settlements
Unused
amounts
Translation
differences
Changes in
the scope of
consolidation
and other
changes
At
December 31,
2014
(€ million)
Warranty provision 3,656 2,909 (2,119) — 392 7 4,845
Sales incentives 2,993 9,292 (8,874) (20) 318 (14) 3,695
Legal proceedings and disputes 547 125 (85) (36) 15 9 575
Commercial risks 371 171 (109) (40) 6 (18) 381
Restructuring provision 191 52 (97) (8) 1 (8) 131
Indemnities 62 2 (4) — — — 60
Environmental risks 29 2 (2) — — — 29
Investment provision 12 — — — — (4) 8
Other risks 1,240 299 (256) (173) 41 (95) 1,056
Total Other provisions 9,101 12,852 (11,546) (277) 773 (123) 10,780
The effect of discounting these provisions was €2 million in 2014 (€21 million in 2013).
The warranty provision represents the best estimate of commitments given by the Group for contractual, legal, or
constructive obligations arising from product warranties given for a speci?ed period of time beginning at the date of
sale to the end customer. This estimate is principally based on assumptions regarding the lifetime warranty costs of
each vehicle and each model year of that vehicle line, as well as historical claims experience for vehicles. The Group
establishes provisions for product warranty obligations when the related sale is recognized. Warranty provisions
also include management’s best estimate of the costs that are expected to be incurred in connection with product
defects that could result in a general recall of vehicles, which are estimated by making an assessment of the historical
occurrence of defects on a case-by-case basis and are accrued when a reliable estimate of the amount of the
obligation can be made.
The following table sets forth total warranty costs recognized for the years ended December 31, 2014, 2013 and 2012:
For the years ended December 31,
2014 2013 2012
(€ million)
Warranty costs 2,909 2,011 1,759
Recorded in the Consolidated income statement within:
Cost of sales 2,909 1,896 1,759
Other unusual expenses — 115 —
2,909 2,011 1,759
Warranty provision increased by €1,189 million in the year ended December 31, 2014. The increase was primarily
driven by an increase in the overall warranty expenses relating to the recently approved recall campaigns in the NAFTA
segment. Additionally, there was an increase to the warranty provision of approximately €392 million with respect to
foreign exchange effects when translating from U.S. Dollar to Euro.
Sales incentives are offered on a contractual basis to the Group’s dealer networks, primarily on the basis of a speci?c
cumulative level of sales transactions during a certain period. The sales incentive provision also includes sales cash
incentives provided to retail customers.
228 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The Legal proceedings and disputes provision represents management’s best estimate of the liability to be recognized
by the Group with regard to legal proceedings arising in the ordinary course of business with dealers, customers,
suppliers or regulators (such as contractual or patent disputes), legal proceedings involving claims with active and
former employees and legal proceedings involving different tax authorities. None of these provisions are individually
signi?cant. Each Group company recognizes a provision for legal proceedings when it is deemed probable that
the proceedings will result in an out?ow of resources. In determining their best estimate of the liability, each Group
company evaluates their legal proceedings on a case-by-case basis to estimate the probable losses that typically arise
from events of the type giving rise to the liability. Their estimate takes into account, as applicable, the views of legal
counsel and other experts, the experience of the Group and others in similar situations and the Group’s intentions
with regard to further action in each proceeding. Group’s consolidated provision combines these individual provisions
established by each of the Group’s companies.
Commercial risks arise in connection with the sale of products and services such as maintenance contracts. An
accrual is recorded when the expected costs to complete the services under these contracts exceed the revenues
expected to be realized.
The Group’s restructuring programs primarily relate to restructuring and rationalization activities in the NAFTA and
EMEA segments. The restructuring provision at December 31, 2014 consists of termination bene?ts of €72 million
(€106 million at December 31, 2013) payable to employees in connection with restructuring plans, manufacturing
rationalization costs of €9 million (€15 million at December 31, 2013) and other costs of €50 million (€70 million at
December 31, 2013). These provisions are related to the EMEA segment €41 million (€53 million at December 31,
2013), the NAFTA segment €36 million (€41 million at December 31, 2013), the Components segment €15 million
(€28 million at December 31, 2013), publishing activities €13 million (€31 million at December 31, 2013) and other
minor activities €26 million (€38 million at December 31, 2013).
Indemnities are estimated by the Group in connection with divestitures. These liabilities primarily arise from indemnities
relating to contingent liabilities in existence at the time of the sale, as well as those covering any possible breach of the
representations and warranties provided in the contract and, in certain instances, environmental or tax matters. These
provisions were determined estimating the amount of the expected out?ow of resources, taking into consideration the
relevant level of probability of occurrence.
The environmental risks provision represents management’s best estimate of the Group’s probable environmental
obligations. Amounts included in the estimate include direct costs to be incurred by the Group in connection with
environmental obligations associated with current or formerly owned facilities and sites. This provision also includes
costs related to claims on environmental matters.
Other risks includes, among other items: provisions for disputes with suppliers related to supply contracts or other
matters that are not subject to legal proceedings, provisions for product liabilities arising from personal injuries
including wrongful death and potential exemplary or punitive damages alleged to be the result of product defects,
and disputes with other parties relating to contracts or other matters not subject to legal proceedings. The valuation
of these provisions is determined based on, among other factors, claims incurred and our historical experiences
regarding similar disputes.
2014
|
ANNUAL REPORT 229
27. Debt
Breakdown of debt by category and by maturity was as follows:
At December 31,
2014 2013
Due
within
one year
Due
between
one and
?ve years
Due
beyond
?ve years Total
Due
within
one year
Due
between
one and
?ve years
Due
beyond
?ve
years Total
(€ million)
Bonds 2,292 10,367 4,989 17,648 2,572 8,317 3,577 14,466
Borrowings from banks 3,670 8,131 950 12,751 2,584 5,639 607 8,830
Payables represented by securities 559 544 270 1,373 554 1,374 2,604 4,532
Asset-backed ?nancing 444 25 — 469 746 10 — 756
Other debt 745 424 314 1,483 1,019 353 327 1,699
Total Debt 7,710 19,491 6,523 33,724 7,475 15,693 7,115 30,283
Debt increased by €3,441 million at December 31, 2014. Net of foreign exchange translation effects and scope of
consolidation, the increase in Debt was €2,059 million: FCA issued new bonds for €4,629 million and repaid bonds
on maturity for €2,150 million; medium and long-term loans (those expiring after twelve months) obtained by FCA
amounted to €4,876 million, while medium and long-term borrowings repayments amounted to €5,838 million.
The annual effective interest rates and the nominal currencies of debt at December 31, 2014 and 2013 were as follows:
Interest rate Total at
December 31,
2014
less than
5%
from 5%
to 7.5%
from 7.5%
to 10%
from 10%
to 12.5%
more than
12.5%
(€ million)
Euro 6,805 7,500 1,003 87 — 15,395
U.S. Dollar 5,769 2,651 2,537 8 206 11,171
Brazilian Real 1,720 430 282 376 1,330 4,138
Swiss Franc 593 686 — — — 1,279
Canadian Dollar 31 229 393 — — 653
Mexican Peso — 164 233 — — 397
Chinese Renminbi 1 333 — — — 334
Other 197 20 37 24 79 357
Total Debt 15,116 12,013 4,485 495 1,615 33,724
Interest rate Total at
December 31,
2013
less than
5%
from 5%
to 7.5%
from 7.5%
to 10%
from 10%
to 12.5%
more than
12.5%
(€ million)
Euro 5,382 7,412 2,253 90 — 15,137
U.S. Dollar 2,962 122 5,744 12 169 9,009
Brazilian Real 1,271 431 256 1,190 — 3,148
Swiss Franc 378 672 — — — 1,050
Canadian Dollar 39 79 584 — — 702
Mexican Peso — — 414 — — 414
Chinese Renminbi 2 292 66 — — 360
Other 291 17 51 10 94 463
Total Debt 10,325 9,025 9,368 1,302 263 30,283
For further information on the management of interest rate and currency risk reference should be made to Note 35.
230 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Bonds
All outstanding bonds issued by Fiat Chrysler Finance Europe S.A. (formerly known as Fiat Finance and Trade Ltd
S.A.) and Fiat Chrysler Finance North America Inc. (formerly known as Fiat Finance North America Inc.) (both wholly-
owned subsidiaries of the Group) are governed by the terms and conditions of the Global Medium Term Note Program
(“GMTN Program”). A maximum of €20 billion may be used under this program, of which notes of approximately
€12.1 billion have been issued and are outstanding at December 31, 2014 (€11.6 billion at December 31, 2013). The
GMTN Program is guaranteed by the Group. The companies in the Group may from time to time buy back bonds in
the market that have been issued by FCA. Such buybacks, if made, depend upon market conditions, the ?nancial
situation of FCA and other factors which could affect such decisions.
The bonds issued by Fiat Chrysler Finance Europe S.A. and by Fiat Chrysler Finance North America Inc. impose
covenants on the issuer and, in certain cases, on FCA as guarantor, which include: (i) negative pledge clauses which
require that, in case any security interest upon assets of the issuer and/or FCA is granted in connection with other
bonds or debt securities having the same ranking, such security should be equally and ratably extended to the
outstanding bonds; (ii) pari passu clauses, under which the bonds rank and will rank pari passu with all other present
and future unsubordinated and unsecured obligations of the issuer and/or FCA; (iii) periodic disclosure obligations;
(iv) cross-default clauses which require immediate repayment of the bonds under certain events of default on other
?nancial instruments issued by FCA’s main entities; and (v) other clauses that are generally applicable to securities of
a similar type. A breach of these covenants may require the early repayment of the bonds. In addition, the agreements
for the bonds guaranteed by FCA contain clauses which could require early repayment if there is a change of the
controlling shareholder of FCA leading to a ratings downgrade by ratings agencies.
The bond issues outstanding at December 31, 2014 were as follows:
Face value of
outstanding
bonds (€ million)
Coupon
%
At December 31,
(€ million)
Currency Maturity 2014 2013
Global Medium Term Note Program:
Fiat Chrysler Finance Europe S.A.
(1)
EUR 900 6.125 July 8, 2014 — 900
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,250 7.625 September 15, 2014 — 1,250
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,500 6.875 February 13, 2015 1,500 1,500
Fiat Chrysler Finance Europe S.A.
(2)
CHF 425 5.000 September 7, 2015 353 346
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,000 6.375 April 1, 2016 1,000 1,000
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,000 7.750 October 17, 2016 1,000 1,000
Fiat Chrysler Finance Europe S.A.
(2)
CHF 400 5.250 November 23, 2016 333 326
Fiat Chrysler Finance Europe S.A.
(1)
EUR 850 7.000 March 23, 2017 850 850
Fiat Chrysler Finance North America Inc.
(1)
EUR 1,000 5.625 June 12, 2017 1,000 1,000
Fiat Chrysler Finance Europe S.A.
(2)
CHF 450 4.000 November 22, 2017 374 367
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,250 6.625 March 15, 2018 1,250 1,250
Fiat Chrysler Finance Europe S.A.
(1)
EUR 600 7.375 July 9, 2018 600 600
Fiat Chrysler Finance Europe S.A.
(2)
CHF 250 3.125 September 30, 2019 208 —
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,250 6.750 October 14, 2019 1,250 1,250
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,000 4.750 March 22, 2021 1,000 —
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,350 4.750 July 15, 2022 1,350 —
Others EUR 7 7 7
Total Global Medium Term Notes 12,075 11,646
Other bonds:
FCA US (Secured Senior Notes)
(3)
U.S.$ 2,875 8.000 June 15, 2019 2,368 1,088
FCA US (Secured Senior Notes)
(3)
U.S.$ 3,080 8.250 June 15, 2021 2,537 1,232
Total Other bonds 4,905 2,320
Hedging effect, accrued interest and amortized
cost valuation 668 500
Total Bonds 17,648 14,466
(1)
Bond for which a listing on the Irish Stock Exchange was obtained.
(2)
Bond for which a listing on the SIX Swiss Exchange was obtained.
(3)
Includes 2019 Notes and 2021 Notes (defined below).
2014
|
ANNUAL REPORT 231
Changes in Global Medium Term Notes during 2014 were mainly due to the:
Issuance of 4.75 percent notes at par in March 2014, having a principal of €1 billion and due March 2021 by Fiat
Chrysler Finance Europe S.A. The proceeds will be used for general corporate purposes. The notes have been
admitted to listing on the Irish Stock Exchange.
Issuance of 4.75 percent notes at par in July 2014, having a principal of €850 million and due July 2022 by Fiat
Chrysler Finance Europe S.A. The notes issuance was reopened in September 2014 for a further €500 million
principal value, priced at 103.265 percent of par value, increasing the total principal amount to €1.35 billion.
Issuance of 3.125 percent notes at par in September 2014 having a principal of CHF250 million and due September
2019 by Fiat Chrysler Finance Europe S.A.
Repayment at maturity of bonds having a nominal value of €900 million and of €1,250 million originally issued by
Fiat Chrysler Finance Europe S.A.
FCA US Secured Senior Notes
In May 2011, FCA US and certain of its U.S. subsidiaries, either as a co-issuer or guarantor, entered into the following
secured senior notes:
secured senior notes due 2019 - issuance of $1,500 million (€1,235 million at December 31, 2014) of 8.0 percent
secured senior notes due June 15, 2019; and
secured senior notes due 2021 - issuance of $1,700 million (€1,400 million at December 31, 2014) of 8.25 percent
secured senior notes due June 15, 2021.
In February 2014, FCA US and certain of its U.S. subsidiaries, either as a co-issuer or guarantor, issued additional
secured senior notes:
secured Senior Notes due 2019 – U.S.$1,375 million (€1,133 million at December 31, 2014) aggregate principal
amount of 8.0 percent secured senior notes (collectively with the May 2011 issuance of the secured senior notes
due 2019, the “2019 Notes”), due June 15, 2019, at an issue price of 108.25 percent of the aggregate principal
amount; and
secured Senior Notes due 2021 – U.S.$1,380 million (€1,137 million at December 31, 2014) aggregate principal
amount of 8.25 percent secured senior notes (collectively with the May 2011 issuance of the secured senior notes due
2021, the “2021 Notes”), due June 15, 2021 at an issue price of 110.50 percent of the aggregate principal amount.
The 2019 Notes and 2021 Notes are collectively referred to as the “Secured Senior Notes”.
FCA US may redeem, at any time, all or any portion of the Secured Senior Notes on not less than 30 and not more
than 60 days’ prior notice mailed to the holders of the Secured Senior Notes to be redeemed.
Prior to June 15, 2015, the 2019 Notes will be redeemable at a price equal to the principal amount of the 2019
Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make–whole” premium
calculated under the indenture governing the Secured Senior Notes. On and after June 15, 2015, the 2019 Notes
are redeemable at redemption prices speci?ed in the 2019 Notes, plus accrued and unpaid interest to the date of
redemption. The redemption price is initially 104.0 percent of the principal amount of the 2019 Notes being redeemed
for the twelve months beginning June 15, 2015, decreasing to 102.0 percent for the twelve months beginning
June 15, 2016 and to par on and after June 15, 2017.
Prior to June 15, 2016, the 2021 Notes will be redeemable at a price equal to the principal amount of the 2021
Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make–whole” premium
calculated under the indenture governing the Secured Senior Notes. On and after June 15, 2016, the 2021 Notes
are redeemable at redemption prices speci?ed in the 2021 Notes, plus accrued and unpaid interest to the date
of redemption. The redemption price is initially 104.125 percent of the principal amount of the 2021 Notes being
redeemed for the twelve months beginning June 15, 2016, decreasing to 102.750 percent for the twelve months
beginning June 15, 2017, to 101.375 percent for the twelve months beginning June 15, 2018 and to par on and after
June 15, 2019.
232 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The indenture governing the Secured Senior Notes issued by FCA US includes af?rmative covenants, including
the reporting of ?nancial results and other developments. The indenture also includes negative covenants which
limit FCA US’s ability and, in certain instances, the ability of certain of its subsidiaries to, (i) pay dividends or make
distributions of FCA US’s capital stock or repurchase FCA US’s capital stock; (ii) make restricted payments; (iii) create
certain liens to secure indebtedness; (iv) enter into sale and leaseback transactions; (v) engage in transactions with
af?liates; (vi) merge or consolidate with certain companies and (vii) transfer and sell assets. The indenture provides
for customary events of default, including but not limited to, (i) non-payment; (ii) breach of covenants in the indenture;
(iii) payment defaults or acceleration of other indebtedness; (iv) a failure to pay certain judgments and (v) certain events
of bankruptcy, insolvency and reorganization. If certain events of default occur and are continuing, the trustee or the
holders of at least 25.0 percent in aggregate of the principal amount of the Secured Senior Notes outstanding under
one of the series may declare all of the notes of that series to be due and payable immediately, together with accrued
interest, if any. As of December 31, 2014, FCA US was in compliance with all covenants.
Borrowings from banks
At December 31, 2014, Borrowings from banks includes €2,587 million (€2,119 million at December 31, 2013)
outstanding, which includes accrued interest, on the U.S.$3,250 million (€2,677 million) tranche B term loan maturing
May 24, 2017 of FCA US (“Tranche B Term Loan due 2017”) and €1,421 million outstanding, which includes accrued
interest, on the U.S.$1,750 million (€1,442 million) tranche B term loan maturing December 31, 2018 (“Tranche
B Term Loan due 2018”). The revolving credit facility (described below) was undrawn at December 31, 2014. The
Tranche B Term Loan due 2017, Tranche B Term Loan due 2018 and the revolving credit facility (described below),
are collectively referred to as the “Senior Credit Facilities”.
The Tranche B Term Loan due 2017 of FCA US consists of the existing U.S.$3.0 billion tranche B term loan (€2,471
million) that matures on May 24, 2017, (the “Original Tranche B Term Loan”), and an additional U.S.$250 million (€206
million at December 31, 2014) term loan entered into on February 7, 2014 under the Original Tranche B Term Loan
that also matures on May 24, 2017, collectively the “Tranche B Term Loan due 2017”. The outstanding principle
amount of the Tranche B Term Loan due 2017 is payable in equal quarterly installments of U.S.$8.1 million (€6.7
million) commencing March 2014, with the remaining balance due at maturity in May 2017. The Original Tranche B
Term Loan was re-priced in June and in December 2013 and subsequently, all amounts outstanding under Tranche B
Term Loan due 2017 will bear interest, at FCA’s option, at either a base rate plus 1.75 percent per annum or at LIBOR
plus 2.75 percent per annum, subject to a base rate ?oor of 1.75 percent per annum or a LIBOR ?oor of 0.75 percent
per annum. For the year ended December 31, 2014, interest was accrued based on LIBOR.
On February 7, 2014, FCA US entered into an agreement for the Tranche B Term Loan due 2018 for U.S.$1,750
million (€1,442 million). The outstanding principal amount for the Tranche B Term Loan due 2018 is payable in equal
quarterly installments of U.S.$4.4 million (€3.6 million), commencing June 30, 2014, with the remaining balance due
at maturity. The Tranche B Term Loan due 2018 bears interest, at FCA US’s option, either at a base rate plus 1.50
percent per annum or at LIBOR plus 2.5 percent per annum, subject to a base rate ?oor of 1.75 percent per annum or
a LIBOR ?oor of 0.75 percent per annum.
FCA US may pre-pay, re?nance or re-price the Tranche B Term Loan due 2017 and the Tranche B Term Loan due
2018 without premium or penalty. FCA US also has the option to extend the maturity date of all or a portion of the
aforementioned term loans with the consent of the lenders.
At December 31, 2014, FCA US had a secured revolving credit facility (“Revolving Credit Facility”) amounting to
US$1.3 billion (€1.1 billion), which remains undrawn and which matures in May 2016. All amounts outstanding under
the Revolving Credit Facility bear interest, at the option of FCA US, either at a base rate plus 2.25 percent per annum
or at LIBOR plus 3.25 percent per annum. Subject to the limitations in the credit agreements governing the Senior
Credit Facilities (“Senior Credit Agreements”) and the indenture governing our Secured Senior Notes, FCA US has
the option to increase the amount of the Revolving Credit Facility in an aggregate principal amount not to exceed
U.S.$700 million (approximately €577 million) at December 31, 2014, subject to certain conditions.
2014
|
ANNUAL REPORT 233
The Senior Credit Agreements include a number of af?rmative covenants, many of which are customary, including,
but not limited to, the reporting of ?nancial results and other developments, compliance with laws, payment of
taxes, maintenance of insurance and similar requirements. The Senior Credit Agreements also include negative
covenants, including but not limited to: (i) limitations on incurrence, repayment and prepayment of indebtedness;
(ii) limitations on incurrence of liens; (iii) limitations on making certain payments; (iv) limitations on transactions with
af?liates, swap agreements and sale and leaseback transactions; (v) limitations on fundamental changes, including
certain asset sales and (vi) restrictions on certain subsidiary distributions. In addition, the Senior Credit Agreements
require FCA US to maintain a minimum ratio of “borrowing base” to “covered debt” (as de?ned in the Senior Credit
Agreements), as well as a minimum liquidity of US$3.0 billion (€2.5 billion), which includes any undrawn amounts on
the Revolving Credit Facility.
The Senior Credit Agreements contain a number of events of default related to: (i) failure to make payments when due;
(ii) failure to comply with covenants; (iii) breaches of representations and warranties; (iv) certain changes of control;
(v) cross–default with certain other debt and hedging agreements and (vi) the failure to pay or post bond for certain
material judgments. As of December 31, 2014, FCA US was in compliance with all covenants under the Senior Credit
Agreements.
Medium/long term committed credit lines currently available to the treasury companies of the Group (excluding FCA
US) amount to approximately €3.3 billion at December 31, 2014 (€3.2 billion at December 31, 2013), of which €2.1
billion related to the 3-year syndicated revolving credit line due in July 2016 that was undrawn at December 31, 2014
and at December 31, 2013. The €2.1 billion syndicated credit facility of the Group contains typical covenants for
contracts of this type and size, such as ?nancial covenants (Net Debt/EBITDA and EBITDA/Net Interest ratios related
to industrial activities) and negative pledge, cross default and change of control clauses. The failure to comply with
these covenants, in certain cases, if not suitably remedied, can lead to the requirement for early repayment of the
outstanding loans. Similar covenants are included in the loans granted by the European Investment Bank for a total
of €1.1 billion used to fund the Group’s investments and research and development costs. In addition, the above
syndicated credit facility, currently includes limits on the ability to extend guarantees or loans to FCA US.
Additionally, the operating entities of the Group (excluding FCA US) have committed credit lines available, with residual
maturity after twelve months, to fund scheduled investments, of which approximately €0.9 billion was undrawn at
December 31, 2014 (€1.8 billion at December 31, 2013).
Payables represented by securities
At December 31, 2014, Group’s Payables represented by securities primarily included the unsecured Canadian Health
Care Trust Notes totaling €651 million, including accrued interest, (€703 million at December 31, 2013, including
accrued interest), which represents FCA US’s ?nancial liability to the Canadian Health Care Trust arising from the
settlement of its obligations for postretirement health care bene?ts for National Automobile, Aerospace, Transportation
and General Workers Union of Canada “CAW” (now part of Unifor), which represented employees, retirees and
dependents.
As described in more detail in Note 23, FCA issued aggregate notional amount of U.S.$2,875 million (€2,293 million)
of Mandatory Convertible Securities on December 16, 2014. The obligation to pay coupons as required by the
Mandatory Convertible Securities meets the de?nition of a ?nancial liability as it is a contractual obligation to deliver
cash to another entity. The fair value amount determined for the liability component at issuance of the Mandatory
Convertible Securities was U.S.$419 million (€335 million) calculated as the present value of the coupon payments
due less allocated transaction costs of U.S.$9 million (€7 million) that are accounted for as a debt discount.
Subsequent to issuance, the ?nancial liability for the coupon payments is accounted for at amortized cost. At
December 31, 2014, the ?nancial liability component was U.S.$420 million (€346 million).
234 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
At December 31, 2013 the item Payables represented by securities primarily related to the balance of FCA US’s
?nancial liability to the VEBA Trust (the “VEBA Trust Note”) of €3,575 million including accrued interest. The VEBA
Trust Note had been issued by FCA US in connection with the settlement of its obligations related to postretirement
healthcare bene?ts for certain UAW retirees. The VEBA Trust Note had an implied interest rate of 9.0 percent and
required annual payments of principal and interest through July 15, 2023. The proceeds of the February 7, 2014
issuances of the Secured Senior Notes were used to prepay all amounts outstanding of approximately $5.0 billion
(€3.6 billion) under the VEBA Trust Note, which included a principal payment of $4,715 million (€3,473 million) and
interest accrued through February 7, 2014. The $4,715 million (€3,473 million) principal payment consisted of $128
million (€94 million) of interest that was previously capitalized as additional debt with the remaining $4,587 million
(€3,379 million) representing the original face value of the note.
Asset-backed ?nancing
Asset-backed ?nancing represents the amount of ?nancing received through factoring transactions which do not
meet IAS 39 derecognition requirements and are recognized as assets in the Consolidated statement of ?nancial
position under Current receivables and other current assets (Note 18). Asset-backed ?nancing decreased by €287
million in 2014.
At December 31, 2014, debt secured by assets of the Group (excluding FCA US) amounts to €777 million (€432
million at December 31, 2013), of which €379 million (€386 million at December 31, 2013) was due to creditors
for assets acquired under ?nance leases and the remaining amount mainly related to subsidized ?nancing in Latin
America. The total carrying amount of assets acting as security for loans amounts to €1,670 million at December 31,
2014 (€418 million at December 31, 2013).
At December 31, 2014, debt secured by assets of FCA US amounts to €9,881 million (€5,180 million at
December 31, 2013), and includes €9,093 million (€4,448 million at December 31, 2013) relating to the Secured
Senior Notes and the Senior Credit Facilities and €251 million (€165 million at December 31, 2013) due to creditors
for assets acquired under ?nance leases and other debt and ?nancial commitments for €537 million (€567 million at
December 31, 2013).
In addition, at December 31, 2014 the Group’s assets include current receivables to settle Asset-backed ?nancing of
€469 million (€756 million at December 31, 2013).
Other debt
At December 31, 2014, payables for ?nance leases amount to €630 million and may be analyzed as follows:
At December 31,
2014 2013
Due
within
one
year
Due
between
one and
three
years
Due
between
three
and
?ve
years
Due
beyond
?ve
years Total
Due
within
one
year
Due
between
one and
three
years
Due
between
three
and
?ve
years
Due
beyond
?ve
years Total
(€ million)
Minimum future lease payments 114 209 188 243 754 82 151 133 270 636
Interest expense (33) (51) (31) (9) (124) (20) (31) (21) (13) (85)
Present value of minimum
lease payments 81 158 157 234 630 62 120 112 257 551
At December 31, 2014, the Group (excluding FCA US) had outstanding ?nancial lease agreements for certain
Property, plant and equipment whose overall net carrying amount totals €383 million (€394 million at December 31,
2013) (Note 15). As discussed in Note 15, ?nance lease payables also relate to suppliers’ assets recognized in the
Consolidated ?nancial statements in accordance with IFRIC 4.
2014
|
ANNUAL REPORT 235
Restrictions in Relation to the Group’s Interest in FCA US
The Group is subject to several restrictions that limit its ability to access and use assets or settle liabilities in relation to
its interest in FCA US. Financing arrangements outstanding may limit the Group’s ability to allocate capital between
Group entities or may restrict its ability to receive dividends or other restricted payments from FCA US. In particular,
FCA’s existing syndicated credit facility currently imposes restrictions, with certain exceptions, that limit FCA’s
capability to extend guarantees or loans to FCA US, or subscribe equity to FCA US.
FCA US’s Senior Credit Facilities, are secured by a senior priority security interest in substantially all of FCA US’s
assets and the assets of its U.S. subsidiary guarantors, subject to certain exceptions. The collateral includes 100.0
percent of the equity interests in FCA US’s U.S. subsidiaries and 65.0 percent of the equity interests in certain of its
non-U.S. subsidiaries held directly by FCA US and its U.S. subsidiary guarantors. In addition, FCA US’s Secured
Senior Notes are secured by security interests junior to the Senior Credit Facilities in substantially all of FCA US’s
assets and the assets of its U.S. subsidiary guarantors, including 100.0 percent of the equity interests in FCA US’s
U.S. subsidiaries and 65.0 percent of the equity interests in certain of its non U.S. subsidiaries held directly by FCA
US and its U.S. subsidiary guarantors. In addition, these debt instruments include covenants that restrict FCA US’s
ability to make certain distributions or purchase or redeem its capital stock, prepay certain other debt, encumber
assets, incur or guarantee additional indebtedness, incur liens, transfer and sell assets or engage in certain business
combinations, enter into certain transactions with af?liates or undertake various other business activities as well as the
requirement to maintain borrowing base collateral coverage and a minimum liquidity threshold.
While the Senior Credit Facilities and Secured Senior Notes are outstanding, further distributions to FCA US will be
limited to 50.0 percent of FCA US’s consolidated net income (as de?ned in the agreements) from January 2012, less
the amount of the January 2014 distribution that was used to pay the VEBA Trust for the acquisition of the remaining
41.5 percent interest in FCA US not previously owned by FCA.
28. Trade payables
Trade payables due within one year of €19,854 million at December 31, 2014 increased by €2,647 million from
December 31, 2013. Excluding the foreign exchange translation effects, the increase of Trade payables amounted
to €1,512 million and mainly related to the increased production in the NAFTA and EMEA segments as a result of
increased consumer demand for our vehicles and increased capital expenditures.
29. Other current liabilities
Other current liabilities consisted of the following:
At December 31,
2014 2013
(€ million)
Advances on buy-back agreements 2,571 1,583
Indirect tax payables 1,495 1,304
Accrued expenses and deferred income 2,992 2,370
Payables to personnel 932 781
Social security payables 338 349
Amounts due to customers for contract work 252 209
Other 2,915 2,367
Total Other current liabilities 11,495 8,963
236 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
An analysis of Other current liabilities (excluding Accrued expenses and deferred income) by due date was as follows:
At December 31,
2014 2013
Due
within
one year
Due
between
one
and ?ve
years
Due
beyond
?ve years Total
Due
within
one
year
Due
between
one
and ?ve
years
Due
beyond
?ve years Total
(€ million)
Total Other current liabilities (excluding
Accrued expenses and deferred income) 7,248 1,230 25 8,503 5,731 840 22 6,593
Advances on buy-back agreements refers to buy-back agreements entered into by the Group and includes the price
received for the product recognized as an advance at the date of the sale, and subsequently, the repurchase price
and the remaining lease installments yet to be recognized.
Indirect tax payables includes taxes on commercial transactions accrued by the Brazilian subsidiary, FIASA, for which
the company (as well as a number of important industrial groups which operate in Brazil) is awaiting the decision by
the Supreme Court regarding its claim alleging double taxation. In March 2007, FIASA received a preliminary trial
court decision allowing the payment of such tax on a taxable base consistent with the Group’s position. Since it is
a preliminary decision and the amount may be required to be paid to the tax authorities at any time, the difference
between the tax payments as preliminary allowed and the full amount determined as required by the legislation still in
force is recognized as a current liability due between one and ?ve years. Timing for the Supreme Court decision is not
predictable.
Included within Other current liabilities is the outstanding obligation of €417 million arising from the MOU signed
by FCA US and the UAW. For further information on the MOU refer to the section —Acquisition of the remaining
ownership interest in FCA US.
Deferred income includes the revenues not yet recognized in relation to separately-priced extended warranties and
service contracts offered by FCA US. These revenues will be recognized in the Consolidated income statement over
the contract period in proportion to the costs expected to be incurred based on historical information.
30. Fair value measurement
IFRS 13 - Fair Value Measurement establishes a hierarchy that categorizes into three levels the inputs to the valuation
techniques used to measure fair value by giving the highest priority to quoted prices (unadjusted) in active markets
for identical assets and liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs). In some
cases, the inputs used to measure the fair value of an asset or a liability might be categorized within different levels of
the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the
fair value hierarchy at the lowest level input that is signi?cant to the entire measurement.
Levels used in the hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities that the Group can
access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the assets or
liabilities, either directly or indirectly.
Level 3 inputs are unobservable inputs for the assets and liabilities.
2014
|
ANNUAL REPORT 237
Assets and liabilities that are measured at fair value on a recurring basis
The following table shows the fair value hierarchy for ?nancial assets and liabilities that are measured at fair value on a
recurring basis at December 31, 2014:
At December 31, 2014
Level 1 Level 2 Level 3 Total
Note (€ million)
Assets at fair value available-for-sale:
Investments at fair value with changes directly
in Other comprehensive income/(loss) (16) 110 14 — 124
Other non-current securities (16) 45 — 22 67
Current securities available-for-sale (19) 30 — — 30
Financial assets at fair value held-for-trading:
Current investments 36 — — 36
Current securities held for trading (19) 180 — — 180
Other ?nancial assets (20) 38 473 4 515
Cash and cash equivalents (21) 20,804 2,036 — 22,840
Total Assets 21,243 2,523 26 23,792
Other ?nancial liabilities (20) — 740 8 748
Total Liabilities — 740 8 748
In 2014, there were no transfers between Levels in the fair value hierarchy.
The fair value of Other ?nancial assets and liabilities, which mainly include derivatives ?nancial instruments, is
measured by taking into consideration market parameters at the balance sheet date and using valuation techniques
widely accepted in the ?nancial business environment. In particular:
the fair value of forward contracts and currency swaps is determined by taking the prevailing exchange rates and
interest rates at the balance sheet date;
the fair value of interest rate swaps and forward rate agreements is determined by taking the prevailing interest rates
at the balance sheet date and using the discounted expected cash ?ow method;
the fair value of combined interest rate and currency swaps is determined using the exchange and interest rates
prevailing at the balance sheet date and the discounted expected cash ?ow method;
the fair value of swaps and options hedging commodity price risk is determined by using suitable valuation
techniques and taking market parameters at the balance sheet date (in particular, underlying prices, interest rates
and volatility rates).
The par value of Cash and cash equivalents, which primarily consist of bank current accounts and time deposits,
certi?cates of deposit, commercial paper, bankers’ acceptances and money market funds, usually approximates fair
value due to the short maturity of these instruments. The fair value of money market funds is also based on available
market quotations. Where appropriate, the fair value of cash equivalents is determined with discounted expected cash
?ow techniques using observable market yields (represented in level 2).
238 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The following table provides a reconciliation for the changes in items measured at fair value and categorized as Level 3
in 2014:
Other non-current
securities
Other ?nancial
assets/(liabilities)
(€ million)
At December 31, 2013 12 2
Gains/(Losses) recognized in Consolidated income statement — 16
Gains/(Losses) recognized in Other comprehensive income/loss — (8)
Issues/Settlements 10 (14)
At December 31, 2014 22 (4)
The gains/losses included in the Consolidated income statement are recognized in Cost of sales for €16 million. The
gains and losses recognized in Other comprehensive income/(loss) have been included in Gains/(losses) on cash ?ow
hedging instruments for €8 million.
Assets and liabilities not measured at fair value on recurring basis
For ?nancial instruments represented by short-term receivables and payables, for which the present value of
future cash ?ows does not differ signi?cantly from carrying value, we assume that carrying value is a reasonable
approximation of the fair value. In particular, the carrying amount of Current receivables and Other current assets and
of Trade payables and Other current liabilities approximates their fair value.
Refer to Note 23 and Note 27 for a detailed discussion of the allocation of the fair value of the liability component of the
Mandatory Convertible Securities issued by FCA in December 2014.
Refer to section —Acquisition of the remaining ownership interest in FCA US for a discussion of the residual value
methodology used to determine the fair values of the acquired elements in connection with the transactions under the
Equity Recapture Agreement and MOU.
The following table represents carrying amount and fair value for the most relevant categories of ?nancial assets and
liabilities not measured at fair value on a recurring basis:
At December 31,
2014 2013
Carrying
amount
Fair
Value
Carrying
amount
Fair
Value
Note (€ million)
Dealer ?nancing 2,313 2,312 2,286 2,290
Retail ?nancing 1,039 1,032 970 957
Finance lease 349 351 297 296
Other receivables from ?nancing activities 142 142 118 118
Receivables from ?nancing activities (18) 3,843 3,837 3,671 3,661
Asset backed ?nancing 469 469 756 756
Bonds 17,648 18,794 14,466 15,464
Other debt 15,607 15,685 15,061 15,180
Debt (27) 33,724 34,948 30,283 31,400
The fair values of Receivables from ?nancing activities, which are categorized within the Level 3 of the fair value
hierarchy, have been estimated with discounted cash ?ows models. The most signi?cant inputs used for this
measurement are market discount rates that re?ect conditions applied in various reference markets on receivables
with similar characteristics, adjusted in order to take into account the credit risk of the counterparties.
2014
|
ANNUAL REPORT 239
Bonds that are traded in active markets for which close or last trade pricing is available are classi?ed within Level 1 of
the fair value hierarchy. Bonds for which such prices are not available (valued at the last available price or based on
quotes received from independent pricing services or from dealers who trade in such securities), which are primarily
the FCA US Secured Senior Notes (i.e. the 2019 Notes and 2021 Notes), are categorized as Level 2. At December 31,
2014, €13,433 million and €5,361 million of Bonds were classi?ed within Level 1 and Level 2, respectively.
The fair value of Other debt included in Level 2 of the fair value hierarchy has been estimated using discounted
cash ?ow models. The main inputs used are year-end market interest rates, adjusted for market expectations of the
Group’s non-performance risk implied in quoted prices of traded securities issued by the Group and existing credit
derivatives on Group liabilities. The fair value of the debt that requires signi?cant adjustments using unobservable
inputs is categorized in Level 3 of the fair value hierarchy. At December 31, 2014, €13,144 million and €2,541 million
of Other Debt were classi?ed within Level 2 and Level 3, respectively.
31. Related party transactions
Pursuant to IAS 24 - Related Party Disclosures, the related parties of the Group are entities and individuals capable
of exercising control, joint control or signi?cant in?uence over the Group and its subsidiaries. Related parties include
companies belonging to the Exor group (the largest shareholder of FCA through its 29.25 percent common shares
shareholding interest and 44.37% voting power at December 31, 2014) who also purchased U.S.$886 million (€730
million) in aggregate notional amount of mandatory convertible securities that were issued in December 2014 (Note
23). Related parties also include CNHI and other unconsolidated subsidiaries, associates or joint ventures of the
Group. In addition, at December 31, 2014, members of the FCA Board of Directors, Board of Statutory Auditors and
executives with strategic responsibilities and their families are also considered related parties.
The Group carries out transactions with unconsolidated subsidiaries, joint ventures, associates and other related
parties, on commercial terms that are normal in the respective markets, considering the characteristics of the goods or
services involved. Transactions carried out by the Group with unconsolidated subsidiaries, joint ventures, associates
and other related parties are primarily of those a commercial nature, which have had an effect on revenues, cost of
sales, and trade receivables and payables; these transactions primarily relate to:
the sale of motor vehicles to the joint ventures Tofas and FCA Bank leasing and renting subsidiaries;
the sale of engines, other components and production systems and the purchase of commercial vehicles with the
joint operation Sevel S.p.A. Amounts re?ected in the tables below represents amounts for FCA’s 50.0 percent
interest in 2012 and in 2013 when the interest in Sevel was accounted for as a joint operation;
the sale of engines, other components and production systems to companies of CNHI;
the provision of services and the sale of goods with the joint operation Fiat India Automobiles Limited. Amounts
re?ected in the tables below represents amounts for FCA’s 50.0 percent interest from 2012 when the entity became
a joint operation;
the provision of services and the sale of goods to the joint venture GAC Fiat Chrysler Automobiles Co. Ltd;
the provision of services (accounting, payroll, tax administration, information technology, purchasing and security) to
the companies of the CNHI;
the purchase of commercial vehicles from the joint venture Tofas;
the purchase of engines from the VM Motori group in 2012 and in the ?rst half of 2013;
the purchase of commercial vehicles under contract manufacturing agreement from CNHI.
240 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The most signi?cant ?nancial transactions with related parties generated Receivables from ?nancing activities of the
Group’s ?nancial services companies from joint ventures and Asset-backed ?nancing relating to amounts due to
FCA Bank for the sale of receivables which do not qualify for derecognition under IAS 39 – Financial Instruments:
Recognition and Measurement. At December 31, 2014 and at December 31, 2013, Receivables from ?nancing
activities due from related parties also included receivables due from CNHI mainly arising from customer factoring
provided by the Group’s ?nancial services companies. On the other hand, Debt due to related parties included certain
balances due to CNHI, mainly relating to factoring and dealer ?nancing in Latin America.
In accordance with IAS 24, transactions with related parties also include compensation payable to Directors, Statutory
Auditors and managers with strategic responsibilities.
The amounts of the transactions with related parties recognized in the Consolidated income statement were as follows:
For the years ended December 31,
2014 2013 2012
Net
Revenues
Cost of
sales
Selling,
general
and
adminis-
trative
costs
Financial
income/
(expenses)
Net
Revenues
Cost of
sales
Selling,
general
and
adminis-
trative
costs
Financial
income/
(expenses)
Net
Revenues
Cost of
sales
Selling,
general
and
adminis-
trative
costs
Financial
income/
(expenses)
(€ million)
Tofas 1,247 1,189 1 — 1,145 1,287 3 — 1,115 1,227 4 —
Sevel S.p.A. 274 — 4 — 237 — 3 — 235 — — —
FCA Bank 276 10 7 (29) 223 62 10 (24) 200 82 12 (28)
GAC Fiat Automobiles
Co Ltd 153 — — — 144 — 1 — 150 — — —
Fiat India Automobiles
Limited 17 — — — 14 — 2 1 19 — 1 —
Société Européenne
de Véhicules Légers
du Nord- Sevelnord
Société Anonyme
(*)
— — — — — — — — 24 218 — —
VM Motori Group — — — — — 121 — — — 215 — —
Other 18 22 — — 7 6 — — 6 4 — —
Total joint
arrangements 1,985 1,221 12 (29) 1,770 1,476 19 (23) 1,749 1,746 17 (28)
To-dis S.r.l. 46 2 — — 48 4 — — 48 2 — —
Arab American Vehicles
Company S.A.E. 28 — — — 15 — — — 24 — — —
Other 28 — 6 — 7 — 5 — 6 1 7 —
Total associates 102 2 6 — 70 4 5 — 78 3 7 —
CNHI 602 492 — — 703 500 — — 676 452 1 —
Directors, Statutory
Auditors and Key
Management — — 89 — — — 49 — — — 57 —
Other — 4 20 — — 24 13 — 1 36 7 —
Total CNHI, Directors
and others 602 496 109 — 703 524 62 — 677 488 65 —
Total unconsolidated
subsidiaries 52 7 21 (1) 45 15 28 1 38 99 27 3
Total transactions
with related parties 2,741 1,726 148 (30) 2,588 2,019 114 (22) 2,542 2,336 116 (25)
Total for the Group 96,090 83,146 7,084 (2,047) 86,624 74,326 6,702 (1,987) 83,765 71,473 6,775 (1,910)
(*)
At December 31, 2012, the Investment was classified as Asset held for sale, then transferred at the beginning of the 2013.
2014
|
ANNUAL REPORT 241
Non-?nancial assets and liabilities originating from related party transactions were as follows:
At December 31,
2014 2013
Trade
receivables
Trade
payables
Other
current
assets
Other
current
liabilities
Trade
receivables
Trade
payables
Other
current
assets
Other
current
liabilities
(€ million)
Tofas 48 160 — 1 50 232 — —
FCA Bank 65 234 6 92 49 165 1 93
GAC Fiat Automobiles Co Ltd 48 20 — 1 35 3 — 5
Sevel S.p.A. 12 — — 4 10 — 2 5
Fiat India Automobiles Limited 2 2 — — 5 1 — —
Other 9 2 — — 5 1 1 —
Total joint arrangements 184 418 6 98 154 402 4 103
Arab American Vehicles Company S.A.E. 16 9 — — 9 3 — —
Other 22 4 — 23 13 3 — 25
Total associates 38 13 — 23 22 6 — 25
CNHI 49 24 23 8 48 51 24 13
Directors, Statutory Auditors and Key
Management — — — — — — — 17
Other — 7 — — — 7 — 1
Total CNHI, Directors and others 49 31 23 8 48 58 24 31
Total unconsolidated subsidiaries 31 13 2 2 39 24 4 1
Total originating from related parties 302 475 31 131 263 490 32 160
Total for the Group 2,564 19,854 2,761 11,495 2,544 17,207 2,323 8,963
Financial assets and liabilities originating from related party transactions were as follows:
At December 31,
2014 2013
Current
receivables
from
?nancing
activities
Asset-
backed
?nancing Other debt
Current
receivables
from
?nancing
activities
Asset-
backed
?nancing Other debt
(€ million)
FCA Bank 73 100 4 54 85 270
Tofas 39 — — — — —
Sevel S.p.A. 5 — 13 14 — 10
Other 8 — — 18 — —
Total joint arrangements 125 100 17 86 85 280
Global Engine Alliance LLC — — — — — —
Other 7 — — 7 — —
Total associates 7 — — 7 — —
Total CNHI 6 — — 18 — 53
Total unconsolidated subsidiaries 24 — 30 38 — 20
Total originating from related parties 162 100 47 149 85 353
Total for the Group 3,843 469 33,255 3,671 756 29,527
242 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Commitments and Guarantees pledged in favor of related parties
Guarantees pledged in favor of related parties were as follows:
At December 31,
2014 2013
(€ million)
Joint ventures 11 6
Other related parties and CNHI — —
Unconsolidated subsidiaries 1 9
Total related parties guarantees 12 15
In addition, at December 31, 2014 and 2013, the Group had commitments for constitution, acquisition agreements
and capital increases in respect of Joint ventures for €3 million and €10 million, respectively. Additionally, with
reference to its interest in the joint venture Tofas, the Group had a take or pay commitment whose future minimum
expected obligations as of December 31, 2014 were as follows:
(€ million)
2015 82
2016 82
2017 85
2018 85
2019 80
2020 and thereafter 13
Emoluments to Directors, Statutory Auditors and Key Management
The fees of the Directors and Statutory Auditors of the Group for carrying out their respective functions, including
those in other consolidated companies, were as follows:
For the years ended December 31,
2014 2013 2012
(€ thousand)
Directors (a) 14,305 18,912 22,780
Statutory auditors of Fiat 186 230 229
Total emoluments 14,491 19,142 23,009
(a) This amount includes the notional compensation cost arising from stock grants granted to the Chief Executive Officer.
Additionally to the fees reported in the table above, in 2014 the Chief Executive Of?cer received a cash award of €24.7
million and was assigned a €12 million post-mandate award as a recognition he was instrumental in major strategic
and ?nancial accomplishments for the Group. Most notably, through his vision and guidance, FCA was formed,
creating enormous value for the Company, its shareholders and stakeholders.
In 2014, Ferrari S.p.A. booked a cost of €15 million in connection with the resignation of Mr. Luca Cordero di
Montezemolo, as Chairman of Ferrari S.p.A., former Director of Fiat.
The aggregate compensation payable to executives with strategic responsibilities was approximately €23 million for
2014 (€30 million in 2013 and €34 million in 2012). This is inclusive of the following:
an amount of approximately €9 million in 2014 (approximately €15 million in 2013 and approximately €19 million in
2012) for short-term employee bene?ts;
an amount of €2 million in 2014 (€3 million in 2013 and €5 million in 2012) as the FCA’s contribution to State and
employer de?ned contribution pension funds;
an amount of approximately €0 million in 2014 (€1 million in 2013 and approximately €0 million in 2012) for
termination bene?ts.
2014
|
ANNUAL REPORT 243
32. Explanatory notes to the Consolidated statement of cash ?ows
The Consolidated statement of cash ?ows sets out changes in Cash and cash equivalents during the year. As required
by IAS 7 – Statement of cash ?ows, cash ?ows are separated into operating, investing and ?nancing activities.
The effects of changes in exchange rates on cash and cash equivalents are shown separately under the line item
Translation exchange differences.
Cash ?ows provided by operating activities are mostly derived from the Group’s industrial activities.
The cash ?ows generated by the sale of vehicles under buy-back commitments and GDP vehicles, net of the amounts
included in Pro?t/(loss) for the year, are included under operating activities in a single line item which includes changes
in working capital arising from these transactions.
For the year ended December 31, 2014, Other non-cash items of €352 million mainly included (i) €381 million related
to the non-cash portion of the expense recognized in connection with the execution of the UAW MOU entered into by
FCA US on January 21, 2014, as described in the section —Acquisition of the remaining ownership interest in FCA
US, and (ii) €98 million remeasurement charge recognized as a result of the Group’s change in the exchange rate
used to remeasure its Venezuelan subsidiary’s net monetary assets in U.S. Dollars (Note 8) (reported, for the effect on
cash and cash equivalents, within “Translation exchange differences”) which were partially offset by (iii) the non-taxable
gain of €223 million on the remeasurement to fair value of the previously exercised options on approximately 10
percent of FCA US’s membership interest in connection with the Equity Purchase Agreement described above in the
section —Acquisition of the remaining ownership interest in FCA US.
For the year ended December 31, 2013, Other non-cash items of €535 million mainly included €336 million
impairment losses on tangible and intangible assets, €59 million loss related to the devaluation of the of?cial exchange
rate of the VEF relative to the U.S.$ (Note 8) and €56 million write-off of the book value of the Equity Recapture
Agreement Right. For 2012, Other non-cash items of €582 million mainly included impairment losses on ?xed assets,
the share of the net pro?t and loss of equity method investees and the effect of €515 million related to the adjustment
of the Consolidated income statement for 2012 following the retrospective adoption of IAS 19 revised from January 1,
2013, as if the amendment had always been applied.
Change in working capital generated cash of €965 million for the year ended December 31, 2014 primarily driven
by (a) €1,495 million increase in trade payables, mainly related to increased production in EMEA and NAFTA as a
result of increased consumer demand for vehicles, and increased capital expenditure, (b) €123 million decrease in
trade receivables in addition to (c) €21 million increase in net other current assets and liabilities, which were partially
offset by (d) €674 million increase in inventory (net of vehicles sold under buy-back commitments), mainly related to
increased ?nished vehicle and work in process levels at December 31, 2014 compared to December 31, 2013, in
part driven by higher production levels in late 2014 to meet anticipated consumer demand in the NAFTA, EMEA and
Maserati segments.
Change in working capital generated cash of €1,410 million for the year ended December 31, 2013 primarily driven
by (a) €1,328 million increase in trade payables, mainly related to increased production in NAFTA as a result of
increased consumer demand for vehicles, and increased production for Maserati and Ferrari (b) €817 million in net
other current assets and liabilities, mainly related to increases in accrued expenses and deferred income as well as
indirect taxes payables, (c) €213 million decrease in trade receivables, principally due to the contraction of sales
volumes in the EMEA and LATAM segments which were partially offset by (d) €948 million increase in inventory (net of
vehicles sold under buy-back commitments), mainly related to increased ?nished vehicle and work in process levels at
December 31, 2013 compared to December 31, 2012, in part driven by higher production levels in late 2013 to meet
anticipated consumer demand in the NAFTA, APAC, Maserati and Ferrari segments.
244 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Change in working capital generated cash of €689 million for the year ended December 31, 2012 primarily driven by
(a) €506 million increase in trade payables, mainly related to increased production in response to increased consumer
demand of vehicles especially in the NAFTA and APAC segments, partially offset by reduced production and sales
levels in the EMEA segment, (b) €961 million in other current assets and liabilities, primarily due to increases in
accrued expenses, deferred income and taxes which were partially offset by (c) €572 million increase in inventory (net
of vehicles sold under buy-back commitments), primarily due to increased ?nished vehicle and work in process levels
at December 31, 2012 versus December 31, 2011, driven by an increase in vehicle inventory levels in order to support
consumer demand in the NAFTA and APAC segments and (d) €206 million increase in trade receivables, primarily due
to an increase in receivables from third party international dealers and distributors due to increased sales at the end of
2012 as compared to 2011 due to consumer demand.
Cash ?ows for income tax payments net of refunds amount to €542 million in 2014 (€429 million in 2013 and €475
million in 2012).
In 2014, net cash provided by ?nancing activities was €2,137 million and was primarily the result of:
net proceeds from the issuance of the Mandatory Convertible Securities of €2,245 million, and the net proceeds
from the offering of the total 100 million common shares (65 million ordinary shares and 35 million of treasury
shares) of €849 million;
proceeds from bond issuances for a total amount of €4,629 million which includes (a) €2,556 million of notes
issued as part of the GMTN Program and (b) €2,073 million (for a total face value of U.S.$2,755 million) of Secured
Senior Notes issued by FCA US to facilitate the repayment of the VEBA Trust Note (see Note 27);
proceeds from new medium-term borrowings for a total of €4,876 million, which include (a) the incremental term
loan entered into by FCA US of U.S.$250 million (€181 million) under its existing tranche B term loan facility and
(b) the new U.S.$1,750 million tranche B (€1.3 billion), issued under a new term loan credit facility entered into by
FCA US as part of the re?nancing transaction to facilitate repayment of the VEBA Trust Note, and new medium term
borrowing in Brazil; and
a positive net contribution of €548 million from the net change in other ?nancial payables and other ?nancial assets/
liabilities
These positive items, were partially offset by:
the cash payment to the VEBA Trust for the acquisition of the remaining 41.5 percent ownership interest in FCA
US held by the VEBA Trust equal to U.S.$3,650 million (€2,691 million) and U.S.$60 million (€45 million) of tax
distribution by FCA US to cover the VEBA Trust’s tax obligation. The special distribution by FCA US and the cash
payment by FCA NA for an aggregate amount of €2,691 million is classi?ed as acquisition of non-controlling
interest on the Consolidated statement of cash ?ows while the tax distribution (€45 million) is classi?ed separately
(see Acquisition of the Remaining Ownership Interest in FCA US section above),
payment of medium-term borrowings for a total of €5,838 million, mainly related to the prepayment of all amounts
under the VEBA Trust Note amounting to approximately U.S.$5 billion (€3.6 billion), including accrued and unpaid
interest, and repayment of medium term borrowings primarily in Brazil;
the repayment on maturity of notes issued under the GMTN Program, for a total principal amount of €2,150 million;
and
the net cash disbursement of €417 million for the exercise of cash exit rights in connection with the Merger.
In 2013, net cash provided by ?nancing activities was €3,136 million and was primarily the result of:
proceeds from bond issuances for a total amount of €2,866 million, relating to notes issued as part of the GMTN
Program;
2014
|
ANNUAL REPORT 245
the repayment on maturity of notes issued under the GMTN Program in 2006, for a total principal amount of €1
billion; proceeds from new medium-term borrowings for a total of €3,188 million, which mainly include (a) medium
term borrowings in Brazil, (b) €400 million loan granted by the European Investment Bank in order to fund the
Group’s investments and research and development costs in Europe and (c) €595 million (U.S.$790 million) related
to the amendments and re-pricings in 2013 of the U.S.$3.0 billion tranche B term loan which matures May 24, 2017
and the Revolving Credit Facility.
repayment of medium-term borrowings on their maturity for a total of €2,258 million including the €595 million
(U.S.$790 million) relating to the amendments and re-pricings of the Senior Credit Facilities; and
a positive net contribution of €677 million from the net change in other ?nancial payables and other ?nancial assets/
liabilities.
Interest of €2,054 million in 2014 (€1,832 million in 2013 and €1,951 million in 2012) was paid and interest of €441
million (€398 million in 2013 and €647 million in 2012) was received in 2014. Amounts indicated are inclusive of
interest rate differentials paid or received on interest rate derivatives.
33. Guarantees granted, commitments and contingent liabilities
Guarantees granted
At December 31, 2014, the Group had pledged guarantees on the debt or commitments of third parties totaling €27
million (€31 million at December 31, 2013), as well as guarantees of €12 million on related party debt (€15 million at
December 31, 2013).
SCUSA Private-Label Financing Agreement
In February 2013, FCA US had entered into a private-label ?nancing agreement with Santander Consumer USA Inc.
(“SCUSA”), an af?liate of Banco Santander (the “SCUSA Agreement”). The new ?nancing arrangement launched
on May 1, 2013. Under the SCUSA Agreement, SCUSA provides a wide range of wholesale and retail ?nancing
services to FCA US’s dealers and consumers in accordance with its usual and customary lending standards, under
the Chrysler Capital brand name. The ?nancing services include credit lines to ?nance dealers’ acquisition of vehicles
and other products that FCA US sells or distributes, retail loans and leases to ?nance consumer acquisitions of new
and used vehicles at independent dealerships, ?nancing for commercial and ?eet customers, and ancillary services. In
addition, SCUSA will work with dealers to offer them construction loans, real estate loans, working capital loans and
revolving lines of credit.
The SCUSA Agreement has a ten-year term from February 2013, subject to early termination in certain circumstances,
including the failure by a party to comply with certain of its ongoing obligations under the SCUSA Agreement. In
accordance with the terms of the agreement, SCUSA provided an upfront, nonrefundable payment of €109 million
(U.S.$150 million) in May 2013, which was recognized as deferred revenue and is amortized over ten years. As of
December 31, 2014, €103 million (U.S. $125 million) remained in deferred revenue.
From time to time, FCA US works with certain lenders to subsidize interest rates or cash payments at the inception
of a ?nancing arrangement to incentivize customers to purchase its vehicles, a practice known as “subvention.” FCA
US has provided SCUSA with limited exclusivity rights to participate in speci?ed minimum percentages of certain of its
retail ?nancing rate subvention programs. SCUSA has committed to certain revenue sharing arrangements, as well as
to consider future revenue sharing opportunities. SCUSA bears the risk of loss on loans contemplated by the SCUSA
Agreement. The parties share in any residual gains and losses in respect of consumer leases, subject to speci?c
provisions in the SCUSA Agreement, including limitations on FCA US participation in gains and losses.
246 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Ally Auto Finance Operating Agreement and Repurchase Obligations
In April 2013, the Auto Finance Operating Agreement between FCA US and Ally Financial Inc. (“Ally”), referred as the
“Ally Agreement”, was terminated. Notwithstanding the termination of the Ally Agreement, Ally will continue to provide
wholesale and retail ?nancing to FCA US’s dealers and retail customers in the U.S. in accordance with its usual and
customary lending standards. Dealers and retail customers also obtain funding from other ?nancing sources.
In accordance with the terms of the Ally Agreement, FCA US remained obligated for one year to repurchase Ally-
?nanced U.S. dealer inventory that was acquired on or before April 30, 2013, upon certain triggering events and with
certain exceptions, in the event of an actual or constructive termination of a dealer’s franchise agreement, including
in certain circumstances when Ally forecloses on all assets of a dealer securing ?nancing provided by Ally. These
obligations excluded vehicles that had been damaged or altered, that were missing equipment or that had excessive
mileage or an original invoice date that was more than one year prior to the repurchase date. As of May 1, 2014, FCA
US was no longer obligated to repurchase dealer inventory acquired and ?nanced by Ally prior to April 30, 2013.
Other Repurchase Obligations
In accordance with the terms of other wholesale ?nancing arrangements in Mexico, FCA US is required to
repurchase dealer inventory ?nanced under these arrangements, upon certain triggering events and with certain
exceptions, including in the event of an actual or constructive termination of a dealer’s franchise agreement. These
obligations exclude certain vehicles including, but not limited to, vehicles that have been damaged or altered, that
are missing equipment or that have excessive mileage or an original invoice date that is more than one year prior to
the repurchase date.
As of December 31, 2014, the maximum potential amount of future payments required to be made in accordance
with these other wholesale ?nancing arrangements was approximately €258 million (U.S$313 million) and was based
on the aggregate repurchase value of eligible vehicles ?nanced through such arrangements in the respective dealer’s
stock. If vehicles are required to be repurchased through such arrangements, the total exposure would be reduced
to the extent the vehicles can be resold to another dealer. The fair value of the guarantee was less than €0.1 million
at December 31, 2014, which considers both the likelihood that the triggering events will occur and the estimated
payment that would be made net of the estimated value of inventory that would be reacquired upon the occurrence of
such events. These estimates are based on historical experience.
Arrangements with Key Suppliers
From time to time, in the ordinary course of our business, the Group enters into various arrangements with key third
party suppliers in order to establish strategic and technological advantages. A limited number of these arrangements
contain unconditional purchase obligations to purchase a ?xed or minimum quantity of goods and/or services with
?xed and determinable price provisions. Future minimum purchase obligations under these arrangements as of
December 31, 2014 were as follows:
(€ million)
2015 355
2016 301
2017 222
2018 215
2019 84
2020 and thereafter 168
2014
|
ANNUAL REPORT 247
Other commitments and important contractual rights
The Group has commitments and rights deriving from outstanding agreements which are summarized below.
Sevel S.p.A.
As part of the Sevel cooperation agreement with Peugeot-Citroen SA (“PSA”), the Group is party to a call agreement
with PSA whereby, from July 1, 2017 to September 30, 2017, the Group will have the right to acquire the residual
interest in the Joint operation Sevel with effect from December 31, 2017.
Operating lease contracts
The Group has entered operating lease contracts for the right to use industrial buildings and equipment with an
average term of 10-20 years and 3-5 years, respectively. At December 31, 2014, the total future minimum lease
payments under non-cancellable lease contracts are as follows:
At December 31, 2014
Due within
one year
Due
between
one and
three years
Due
between
three and
?ve years
Due
beyond
?ve years Total
(€ million)
Future minimum lease payments under operating lease agreements 161 263 173 218 815
During 2014, the Group recognized lease payments expenses of €195 million (€199 million in 2013).
Contingent liabilities
As a global group with a diverse business portfolio, the Group is exposed to numerous legal risks, particularly in the areas
of product liability, competition and antitrust law, environmental risks and tax matters, dealer and supplier relationships
and intellectual property rights. The outcome of any proceedings cannot be predicted with certainty. These proceedings
seek recovery for damage to property, personal injuries and in some cases include a claim for exemplary or punitive
damage. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully
covered, by insurers’ compensation payments and could affect the Group’s ?nancial position and results.
At December 31, 2014, contingent liabilities estimated by the Group for which no provisions have been recognized
since an out?ow of resources is not considered to be probable and contingent liabilities for which a reliable estimate
can be made amount to approximately €100 million at December 31, 2014 and 2013. Furthermore, contingent assets
and expected reimbursement in connection with these contingent liabilities for approximately €10 million (€12 million
at December 31, 2013) have been estimated but not recognized. The Group will recognize the related amounts when
it is probable that an out?ow of resources embodying economic bene?ts will be required to settle obligations and the
amounts can be reliably estimated.
Furthermore, in connection with signi?cant asset divestitures carried out in prior years, the Group provided indemnities
to purchasers with the maximum amount of potential liability under these contracts generally capped at a percentage
of the purchase price. These liabilities refer principally to potential liabilities arising from possible breaches of
representations and warranties provided in the contracts and, in certain instances, environmental or tax matters,
generally for a limited period of time. At December 31, 2014, potential obligations with respect to these indemnities
were approximately €240 million at December 31, 2014 and 2013. At December 31, 2014 provisions of €58
million (€62 million December 31, 2013) have been made related to these obligations which are classi?ed as Other
provisions. The Group has provided certain other indemni?cations that do not limit potential payment and as such, it
was not possible to estimate the maximum amount of potential future payments that could result from claims made
under these indemnities.
248 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
34. Segment reporting
The segments, as de?ned in the section - Segment reporting, re?ect the components of the Group that are regularly
reviewed by the Chief Executive Of?cer, who is the “chief operating decision maker”, for making strategic decisions,
allocating resources and assessing performance.
Transactions among car mass-market brand segments generally are presented on a “where-sold” basis, which
re?ects the pro?t/(loss) on the ultimate sale to the external customer within the segment. This presentation generally
eliminates the effect of the legal entity transfer price within the segments. For the segments which also provide
?nancial services activities, revenues and costs also include interest income and expense and other ?nancial income
and expense arising from those activities.
Revenues and EBIT of the other segments, aside from the car mass-market segments, are those directly generated by
or attributable to the segment as the result of its usual business activities and include revenues from transactions with
third parties as well as those arising from transactions with segments, recognized at normal market prices. For the
Ferrari and the Maserati segments, which also provide ?nancial services activities, revenues and costs include interest
income and expense, and other ?nancial income and expense arising from those activities.
Other activities include the results of the activities and businesses that are not operating segments under IFRS 8, the
Unallocated items and adjustments include consolidation adjustments and eliminations in addition to ?nancial income
and expense and income taxes that are not attributable to the performance of the segments and are subject to
separate assessment by the chief operating decision maker.
EBIT is the measure used by the chief operating decision maker to assess performance of and allocate resources to
our operating segments. Operating assets are not included in the data reviewed by the chief operating decision make,
and as a result and as permitted by IFRS 8, the related information is not provided.
Details of the Consolidated income statement by segment for the years ended December 31, 2014, 2013 and 2012
are as follows:
Car Mass-Market brands
Ferrari Maserati Components
Other
activities
Unallocated
items &
adjustments FCA 2014 NAFTA LATAM APAC EMEA
(€ million)
Revenues 52,452 8,629 6,259 18,020 2,762 2,767 8,619 831 (4,249) 96,090
Revenues from transactions
with other segments (271) (100) (10) (589) (264) (7) (2,559) (449) 4,249 —
Revenues from external
customers 52,181 8,529 6,249 17,431 2,498 2,760 6,060 382 — 96,090
Pro?t/(loss) from investments 1 — (50) 167 — — 7 6 — 131
Unusual income/(expenses)* (504) (112) — 4 (15) — (20) 7 212 (428)
EBIT 1,647 177 537 (109) 389 275 260 (114) 161 3,223
Net ?nancial income/
(expenses) (2,047)
Pro?t before taxes 1,176
Tax (income)/expenses 544
Pro?t 632
(*)
Includes Gains and (losses) on the disposal of investments, Restructuring costs/(income) and other unusual income/(expenses)
2014
|
ANNUAL REPORT 249
Car Mass-Market brands
Ferrari Maserati Components
Other
activities
Unallocated
items &
adjustments FCA 2013 NAFTA LATAM APAC EMEA
(€ million)
Revenues 45,777 9,973 4,668 17,335 2,335 1,659 8,080 929 (4,132) 86,624
Revenues from transactions
with other segments (173) (100) (2) (641) (198) (20) (2,544) (454) 4,132 —
Revenues from external
customers 45,604 9,873 4,666 16,694 2,137 1,639 5,536 475 — 86,624
Pro?t/(loss) from investments (1) — (46) 141 — — 5 (13) (2) 84
Unusual income/(expenses)* 71 (127) (1) (195) — (65) (60) (87) (55) (519)
EBIT 2,290 492 335 (506) 364 106 146 (167) (58) 3,002
Net ?nancial income/
(expenses) (1,987)
Pro?t before taxes 1,015
Tax (income)/expenses (936)
Pro?t 1,951
(*)
Includes Gains and (losses) on the disposal of investments, Restructuring costs/(income) and other unusual income/(expenses)
Car Mass-Market brands
Ferrari Maserati Components
Other
activities
Unallocated
items &
adjustments FCA 2012 NAFTA LATAM APAC EMEA
(€ million)
Revenues 43,521 11,062 3,173 17,717 2,225 755 8,030 979 (3,697) 83,765
Revenues from transactions
with other segments (27) (89) (2) (544) (82) (11) (2,489) (453) 3,697 —
Revenues from external
customers 43,494 10,973 3,171 17,173 2,143 744 5,541 526 — 83,765
Pro?t/(loss) from investments — — (20) 157 — — 2 (52) — 87
Unusual income/(expenses)* 48 (31) — (194) — — (11) (12) (44) (244)
EBIT 2,491 1,025 274 (725) 335 57 165 (149) (39) 3,434
Net ?nancial income/
(expenses) (1,910)
Pro?t before taxes 1,524
Tax (income)/expenses 628
Pro?t 896
(*)
Includes Gains and (losses) on the disposal of investments, Restructuring costs/(income) and other unusual income/(expenses)
Unallocated items, and in particular ?nancial income/(expenses), are not attributed to the segments as they do not fall
under the scope of their operational responsibilities and are therefore assessed separately. These items arise from the
management of treasury assets and liabilities by the treasuries of FCA and FCA US, which work independently and
separately within the Group.
Information about geographical area
At December 31,
2014 2013
(€ million)
Non-current assets (excluding ?nancial assets, deferred tax assets and post-employment
bene?ts assets) in:
North America 30,539 26,689
Italy 11,538 10,710
Brazil 4,638 2,955
Poland 1,183 1,277
Serbia 882 1,007
Other countries 2,129 1,848
Total Non-current assets (excluding ?nancial assets, deferred tax assets and post-
employment bene?ts assets) 50,909 44,486
250 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
35. Qualitative and quantitative information on ?nancial risks
The Group is exposed to the following ?nancial risks connected with its operations:
credit risk, arising both from its normal commercial relations with ?nal customers and dealers, and its ?nancing
activities;
liquidity risk, with particular reference to the availability of funds and access to the credit market and to ?nancial
instruments in general;
?nancial market risk (principally relating to exchange rates, interest rates and commodity prices), since the Group
operates at an international level in different currencies and uses ?nancial instruments which generate interests. The
Group is also exposed to the risk of changes in the price of certain commodities and of certain listed shares.
These risks could signi?cantly affect the Group’s ?nancial position and results, and for this reason the Group
systematically identi?es, and monitors these risks, in order to detect potential negative effects in advance and take the
necessary action to mitigate them, primarily through its operating and ?nancing activities and if required, through the
use of derivative ?nancial instruments in accordance with established risk management policies.
Financial instruments held by the funds that manage pension plan assets are not included in this analysis (see Note 25).
The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon the
Group. The quantitative data reported in the following does not have any predictive value, in particular the sensitivity
analysis on ?nance market risks does not re?ect the complexity of the market or the reaction which may result from
any changes that are assumed to take place.
Credit risk
Credit risk is the risk of economic loss arising from the failure to collect a receivable. Credit risk encompasses the
direct risk of default and the risk of a deterioration of the creditworthiness of the counterparty.
The Group’s credit risk differs in relation to the activities carried out. In particular, dealer ?nancing and operating and
?nancial lease activities that are carried out through the Group’s ?nancial services companies are exposed both to the
direct risk of default and the deterioration of the creditworthiness of the counterparty, while the sale of vehicles and
spare parts is mostly exposed to the direct risk of default of the counterparty. These risks are however mitigated by the
fact that collection exposure is spread across a large number of counterparties and customers.
Overall, the credit risk regarding the Group’s trade receivables and receivables from ?nancing activities is concentrated
in the European Union, Latin America and North American markets.
In order to test for impairment, signi?cant receivables from corporate customers and receivables for which collectability
is at risk are assessed individually, while receivables from end customers or small business customers are grouped
into homogeneous risk categories. A receivable is considered impaired when there is objective evidence that the
Group will be unable to collect all amounts due speci?ed in the contractual terms. Objective evidence may be provided
by the following factors: signi?cant ?nancial dif?culties of the counterparty, the probability that the counterparty will
be involved in an insolvency procedure or will default on its installment payments, the restructuring or renegotiation
of open items with the counterparty, changes in the payment status of one or more debtors included in a speci?c
risk category and other contractual breaches. The calculation of the amount of the impairment loss is based on the
risk of default by the counterparty, which is determined by taking into account all the information available as to the
customer’s solvency, the fair value of any guarantees received for the receivable and the Group’s historical experience.
The maximum credit risk to which the Group is theoretically exposed at December 31, 2014 is represented by the
carrying amounts of ?nancial assets in the ?nancial statements and the nominal value of the guarantees provided on
liabilities and commitments to third parties as discussed in Note 33.
2014
|
ANNUAL REPORT 251
Dealers and ?nal customers for which the Group provides ?nancing are subject to speci?c assessments of their
creditworthiness under a detailed scoring system; in addition to carrying out this screening process, the Group also
obtains ?nancial and non-?nancial guarantees for risks arising from credit granted. These guarantees are further
strengthened where possible by reserve of title clauses on ?nanced vehicle sales to the sales network made by Group
?nancial service companies and on vehicles assigned under ?nance and operating lease agreements.
Receivables for ?nancing activities amounting to €3,843 million at December 31, 2014 (€3,671 million at
December 31, 2013) contain balances totaling €3 million (€21 million at December 31, 2013), which have been
written down on an individual basis. Of the remainder, balances totaling €71 million are past due by up to one month
(€72 million at December 31, 2013), while balances totaling €31 million are past due by more than one month (€23
million at December 31, 2013). In the event of installment payments, even if only one installment is overdue, the entire
receivable balance is classi?ed as overdue.
Trade receivables and Other current receivables amounting to €4,810 million at December 31, 2014 (€4,425 million
at December 31, 2013) contain balances totaling €19 million (€19 million at December 31, 2013) which have been
written down on an individual basis. Of the remainder, balances totaling €248 million are past due by up to one month
(€243 million at December 31, 2013), while balances totaling €280 million are past due by more than one month
(€376 million at December 31, 2013).
Provided that Current securities and Cash and cash equivalents consist of balances spread across various primary
national and international banking institutions and money market instruments that are measured at fair value, there
was no exposure to sovereign debt securities at December 31, 2014 which might lead to signi?cant repayment risk.
Liquidity risk
Liquidity risk arises if the Group is unable to obtain the funds needed to carry out its operations under economic
conditions. Any actual or perceived limitations on the Group’s liquidity may affect the ability of counterparties to do
business with the Group or may require additional amounts of cash and cash equivalents to be allocated as collateral
for outstanding obligations.
The continuation of a dif?cult economic situation in the markets in which the Group operates and the uncertainties
that characterize the ?nancial markets, necessitate special attention to the management of liquidity risk. In that sense,
measures taken to generate funds through operations and to maintain a conservative level of available liquidity are
important factors for ensuring operational ?exibility and addressing strategic challenges over the next few years.
The two main factors that determine the Group’s liquidity situation are on the one hand the funds generated by or
used in operating and investing activities and on the other the debt lending period and its renewal features or the
liquidity of the funds employed and market terms and conditions.
The Group has adopted a series of policies and procedures whose purpose is to optimize the management of funds
and to reduce liquidity risk as follows:
centralizing the management of receipts and payments, where it may be economical in the context of the local civil,
currency and ?scal regulations of the countries in which the Group is present;
maintaining a conservative level of available liquidity;
diversifying the means by which funds are obtained and maintaining a continuous and active presence in the capital
markets;
obtaining adequate credit lines;
monitoring future liquidity on the basis of business planning.
252 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
From an operating point of view, the Group manages liquidity risk by monitoring cash ?ows and keeping an adequate
level of funds at its disposal. The operating cash ?ows, main funding operations and liquidity of the Group (excluding
FCA US) are centrally managed in the Group’s treasury companies with the aim of ensuring effective and ef?cient
management of the Group’s funds. These companies obtain funds in the ?nancial markets various funding sources.
FCA US currently manages its liquidity independently from the rest of the Group. Intercompany ?nancing from FCA US
to other Group entities is not restricted other than through the application of covenants requiring that transactions with
related parties be conducted at arm’s length terms or be approved by a majority of the “disinterested” members of the
Board of Directors of FCA US. In addition certain of FCA US ’s ?nance agreements restrict the distributions which it is
permitted to make. In particular, dividend distributions, other than certain exceptions including permitted distributions
and distributions with respect to taxes, are generally limited to an amount not to exceed 50.0 percent of cumulative
consolidated net income (as de?ned in the agreements) from January 1, 2012 less the amount of the January 2014
distribution that was used to pay the VEBA Trust for the acquisition of the remaining 41.5 percent interest in FCA US
not previously owned by FCA.
FCA has not provided any guarantee, commitment or similar obligation in relation to any of FCA US’s ?nancial
indebtedness, nor has it assumed any kind of obligation or commitment to fund FCA US. However, certain bonds
issued by FCA and its subsidiaries (other than FCA US and its subsidiaries) include covenants which may be affected
by circumstances related to FCA US, in particular in relation to cross-default clauses which may accelerate the
repayments in the event that FCA US fails to pay certain of its debt obligations.
Details of the repayment structure of the Group’s ?nancial assets and liabilities are provided in Note 18 and in Note 27.
Details of the repayment structure of derivative ?nancial instruments are provided in Note 20.
The Group believes that the funds currently available to the treasuries of the Group and FCA US, in addition to those
that will be generated from operating and ?nancing activities, will enable the Group to satisfy the requirements of its
investing activities and working capital needs, ful?ll its obligations to repay its debt at the natural due dates and ensure
an appropriate level of operating and strategic ?exibility.
Financial market risks
Due to the nature of our business, the Group is exposed to a variety of market risks, including foreign currency
exchange rate risk, commodity price risk and interest rate risk.
The Group’s exposure to foreign currency exchange rate risk arises both in connection with the geographical
distribution of the Group’s industrial activities compared to the markets in which it sells its products, and in relation to
the use of external borrowing denominated in foreign currencies.
The Group’s exposure to interest rate risk arises from the need to fund industrial and ?nancial operating activities and
the necessity to deploy surplus funds. Changes in market interest rates may have the effect of either increasing or
decreasing the Group’s net pro?t/(loss), thereby indirectly affecting the costs and returns of ?nancing and investing
transactions.
The Group’s exposure to commodity price risk arises from the risk of changes occurring in the price of certain raw
materials and energy used in production. Changes in the price of raw materials could have a signi?cant effect on the
Group’s results by indirectly affecting costs and product margins.
These risks could signi?cantly affect the Group’s ?nancial position and results, and for this reason these risks are
systematically identi?ed and monitored, in order to detect potential negative effects in advance and take the necessary
actions to mitigate them, primarily through its operating and ?nancing activities and if required, through the use of
derivative ?nancial instruments in accordance with its established risk management policies.
The Group’s policy permits derivatives to be used only for managing the exposure to ?uctuations in foreign currency
exchange rates and interest rates as well as commodities prices connected with future cash ?ows and assets and
liabilities, and not for speculative purposes.
2014
|
ANNUAL REPORT 253
The Group utilizes derivative ?nancial instruments designated as fair value hedges mainly to hedge:
the foreign currency exchange rate risk on ?nancial instruments denominated in foreign currency; and
the interest rate risk on ?xed rate loans and borrowings.
The instruments used for these hedges are mainly foreign currency forward contracts, interest rate swaps and
combined interest rate and foreign currency ?nancial instruments.
The Group uses derivative ?nancial instruments as cash ?ow hedges for the purpose of pre-determining:
the exchange rate at which forecasted transactions denominated in foreign currencies will be accounted for;
the interest paid on borrowings, both to match the ?xed interest received on loans (customer ?nancing activity), and
to achieve a targeted mix of ?oating versus ?xed rate funding structured loans; and
the price of certain commodities.
The foreign currency exchange rate exposure on forecasted commercial ?ows is hedged by foreign currency swaps
and forward contracts. Interest rate exposures are usually hedged by interest rate swaps and, in limited cases, by
forward rate agreements. Exposure to changes in the price of commodities is generally hedged by using commodity
swaps and commodity options.
Counterparties to these agreements are major ?nancial institutions.
Information on the fair value of derivative ?nancial instruments held at the balance sheet date is provided in Note 20.
The following section provides qualitative and quantitative disclosures on the effect that these risks may have. The
quantitative data reported below does not have any predictive value, in particular the sensitivity analysis on ?nancial
market risks does not re?ect the complexity of the market or the reaction which may result from any changes that are
assumed to take place.
Financial instruments held by the funds that manage pension plan assets are not included in this analysis.
Quantitative information on foreign currency exchange rate risk
The Group is exposed to risk resulting from changes in foreign currency exchange rates, which can affect its earnings
and equity. In particular:
where a Group company incurs costs in a currency different from that of its revenues, any change in exchange
rates can affect the operating results of that company. In 2014, the total trade ?ows exposed to foreign currency
exchange rate risk amounted to the equivalent of 15 percent of the Group’s turnover.
the principal exchange rates to which the Group is exposed are the following:
U.S. Dollar/CAD, primarily relating to FCA US’s Canadian manufacturing operations;
EUR/U.S. Dollar, relating to sales in U.S. Dollars made by Italian companies (in particular, companies belonging to
the Ferrari and Maserati segments) and to sales and purchases in Euro made by FCA US;
CNY, in relation to sales in China originating from FCA US and from Italian companies (in particular, companies
belonging to the Ferrari and Maserati segments);
GBP, AUD, MXN, CHF, ARS and VEF in relation to sales in the UK, Australian, Mexican, Swiss, Argentinean and
Venezuelan markets;
PLN and TRY, relating to manufacturing costs incurred in Poland and Turkey;
JPY mainly in relation to purchase of parts from Japanese suppliers and sales of vehicles in Japan;
U.S. Dollar/BRL, EUR/BRL, relating to Brazilian manufacturing operations and the related import and export ?ows.
Overall trade ?ows exposed to changes in these exchange rates in 2014 made up approximately 90.0 percent of
the exposure to currency risk from trade transactions.
254 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The Group’s policy is to use derivative ?nancial instruments to hedge a percentage of certain exposures subject
to foreign currency exchange rate risk for the upcoming 12 months (including such risk before or beyond that
date where it is deemed appropriate in relation to the characteristics of the business) and to hedge completely the
exposure resulting from ?rm commitments unless not deemed appropriate.
Group companies may have trade receivables or payables denominated in a currency different from the functional
currency of the company. In addition, in a limited number of cases, it may be convenient from an economic point of
view, or it may be required under local market conditions, for companies to obtain ?nancing or use funds in a currency
different from the functional currency of the respective company. Changes in exchange rates may result in exchange
gains or losses arising from these situations. The Group’s policy is to hedge fully, whenever deemed appropriate,
the exposure resulting from receivables, payables and securities denominated in foreign currencies different from the
company’s functional currency.
Certain of the Group’s subsidiaries are located in countries which are outside of the Eurozone, in particular the U.S.,
Brazil, Canada, Poland, Serbia, Turkey, Mexico, Argentina, the Czech Republic, India, China and South Africa. As the
Group’s reference currency is the Euro, the income statements of those entities are converted into Euros using the
average exchange rate for the period, and while revenues and margins are unchanged in local currency, changes in
exchange rates may lead to effects on the converted balances of revenues, costs and the result in Euro.
The monetary assets and liabilities of consolidated companies who have a reporting currency other than the Euro, are
translated into Euro at the period-end foreign exchange rate. The effects of these changes in foreign exchange rates are
recognized directly in the Cumulative Translation Adjustments reserve, included in other comprehensive income/(losses).
The Group monitors its principal exposure to conversion exchange risk, although there was no speci?c hedging in this
respect at the balance sheet dates.
There have been no substantial changes in 2014 in the nature or structure of exposure to foreign currency exchange
rate risk or in the Group’s hedging policies.
The potential loss in fair value of derivative ?nancial instruments held for foreign currency exchange rate risk
management (currency swaps/forwards, currency options, cross-currency interest rate and currency swaps) at
December 31, 2014 resulting from a hypothetical 10 percent change in the exchange rates would have been
approximately €1,402 million (€745 million at December 31, 2013). Compared to December 31, 2013, the increase
resulting from the change in exchange rates is due to the higher volumes of outstanding derivatives, mainly related to
increased exposures.
Receivables, payables and future trade ?ows whose hedging transactions have been analyzed were not considered in
this analysis. It is reasonable to assume that changes in exchange rates will produce the opposite effect, of an equal or
greater amount, on the underlying transactions that have been hedged.
Quantitative information on interest rate risk
The manufacturing companies and treasuries of the Group make use of external borrowings and invest in monetary
and ?nancial market instruments. In addition, Group companies sell receivables resulting from their trading activities
on a continuing basis. Changes in market interest rates can affect the cost of the various forms of ?nancing, including
the sale of receivables, or the return on investments, and the employment of funds, thus negatively impacting the net
?nancial expenses incurred by the Group.
In addition, the ?nancial services companies provide loans (mainly to customers and dealers), ?nancing themselves
using various forms of direct debt or asset-backed ?nancing (e.g. factoring of receivables). Where the characteristics
of the variability of the interest rate applied to loans granted differ from those of the variability of the cost of the
?nancing obtained, changes in the current level of interest rates can affect the operating result of those companies and
the Group as a whole.
In order to manage these risks, the Group uses interest rate derivative ?nancial instruments, mainly interest rate
swaps and forward rate agreements, when available in the market, with the object of mitigating, under economically
acceptable conditions, the potential variability of interest rates on net pro?t/(loss).
2014
|
ANNUAL REPORT 255
In assessing the potential impact of changes in interest rates, the Group segregates ?xed rate ?nancial instruments
(for which the impact is assessed in terms of fair value) from ?oating rate ?nancial instruments (for which the impact is
assessed in terms of cash ?ows).
The ?xed rate ?nancial instruments used by the Group consist principally of part of the portfolio of the ?nancial services
companies (basically customer ?nancing and ?nancial leases) and part of debt (including subsidized loans and bonds).
The potential loss in fair value of ?xed rate ?nancial instruments (including the effect of interest rate derivative ?nancial
instruments) held at December 31, 2014, resulting from a hypothetical 10.0 percent change in market interest rates,
would have been approximately €100 million (approximately €110 million at December 31, 2013).
Floating rate ?nancial instruments consist principally of cash and cash equivalents, loans provided by the ?nancial
services companies to the sales network and part of debt. The effect of the sale of receivables is also considered in
the sensitivity analysis as well as the effect of hedging derivative instruments.
A hypothetical 10.0 percent change in short-term interest rates at December 31, 2014, applied to ?oating rate ?nancial
assets and liabilities, operations for the sale of receivables and derivative ?nancial instruments, would have resulted
in increased net ?nancial expenses before taxes, on an annual basis, of approximately €12 million (€13 million at
December 31, 2013).
This analysis is based on the assumption that there is a general and instantaneous change of 10.0 percent in interest
rates across homogeneous categories. A homogeneous category is de?ned on the basis of the currency in which
the ?nancial assets and liabilities are denominated. In addition, the sensitivity analysis applied to ?oating rate ?nancial
instruments assumes that cash and cash equivalents and other short-term ?nancial assets and liabilities which expire
during the projected 12 month period will be renewed or reinvested in similar instruments, bearing the hypothetical
short-term interest rates.
Quantitative information on commodity price risk
The Group has entered into derivative contracts for certain commodities to hedge its exposure to commodity price risk
associated with buying raw materials and energy used in its normal operations.
In connection with the commodity price derivative contracts outstanding at December 31, 2014, a hypothetical
10.0 percent change in the price of the commodities at that date would have caused a fair value loss of €50 million
(€45 million at December 31, 2013). Future trade ?ows whose hedging transactions have been analyzed were not
considered in this analysis. It is reasonable to assume that changes in commodity prices will produce the opposite
effect, of an equal or greater amount, on the underlying transactions that have been hedged.
36. Subsequent events
The Group has evaluated subsequent events through March 5, 2015, which is the date the ?nancial statements were
authorized for issuance. There were no subsequent events.
Company
Financial Statements
AT DECEMBER 31, 2014
Income Statement ________________________________________________________________________________ 258
Statement of Financial Position ____________________________________________________________________ 259
Notes to the Company Financial Statements _________________________________________________________ 260
Other Information _________________________________________________________________________________ 272
258 2014
|
ANNUAL REPORT
Company Financial
Statements
Income Statement
Income Statement
for the years ended December 31, 2014 and 2013
For the years ended December 31,
2014 2013
Note (€ million)
Result from investments (1) 1,131 1,127
Other operating income (2) 63 83
Personnel costs (3) (28) (39)
Other operating costs (4) (132) (72)
Financial income/(expense) (5) (475) (210)
PROFIT BEFORE TAXES 559 889
Income taxes (6) 9 15
PROFIT FROM CONTINUING OPERATIONS 568 904
Pro?t from discontinued operations — —
PROFIT 568 904
The accompanying notes are an integral part of the Company Financial Statements.
2014
|
ANNUAL REPORT
Company Financial
Statements
259
Statement
of Financial Position
Statement of Financial Position
At December 31, 2014 and 2013
2014 2013
(€ million)
ASSETS
Property, plant and equipment (7) 29 30
Equity investments (8) 22,227 12,695
Other ?nancial assets (9) 1,329 14
Total Fixed Assets 23,585 12,739
Trade receivables (10) 14 7
Other current receivables (11) 326 191
Cash and cash equivalents (12) 11 1
Total current assets 351 199
TOTAL ASSETS 23,936 12,938
EQUITY AND LIABILITIES
Equity (13)
Share capital 17 4,477
Capital reserve 3,742 —
Legal reserves 10,556 6,081
Retained pro?t/(loss) (1,458) (3,136)
Pro?t/(loss) for the year 568 904
Total equity 13,425 8,326
Provisions for employee bene?ts and other provisions (14) 27 143
Non-current debt (15) 197 414
Other non-current liabilities (16) 15 16
Deferred tax liabilities (6) 8 12
Total non-current liabilities 247 585
Provisions for employee bene?ts and other current provisions (17) 2 11
Trade payables (18) 19 19
Current debt (19) 9,714 3,780
Other ?nancial liabilities (9) 135 —
Other debt (20) 394 217
Total current liabilities 10,264 4,027
TOTAL EQUITY AND LIABILITIES 23,936 12,938
The accompanying notes are an integral part of the Company Financial Statements.
260 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
Notes to the Company Financial Statements
PRINCIPAL ACTIVITIES
On January 29, 2014, the Board of Directors of Fiat approved a proposed corporate reorganization resulting in the
formation of Fiat Chrysler Automobiles N.V. (“FCA” or the “Company”) as a fully integrated global automaker. The
Board determined that a redomiciliation into the Netherlands with a listing on the NYSE and an additional listing on
the Mercato Telematico Azionario (“MTA”) would be the structure most suitable to Fiat’s pro?le and its strategic and
?nancial objectives. FCA principal executive of?ces were established in London - United Kingdom.
The principal steps in the reorganization were:
Fiat Chrysler Automobiles N.V. was incorporated as a public limited liability company (naamloze vennootschap)
under the laws of the Netherlands on April 1, 2014 under the name Fiat Investments N.V.,
on June 15, 2014 the Board of Directors of Fiat approved the merger plan and,
at the extraordinary general meeting held on August 1, 2014, the shareholders of Fiat SpA (“Fiat”) approved the
merger which became effective on October 12, 2014.
FCA ?nancial statements are prepared in euros, the Company’s functional currency.
The Statements of Income and of Financial Position and Notes to the Financial Statements are presented in million of
euros, except where otherwise stated.
As parent company, FCA has also prepared consolidated ?nancial statements for FCA Group for the year ended
December 31, 2014.
The FCA Merger
As reported above, on June 15, 2014, the Board of Directors of Fiat approved the terms of a cross-border legal
merger of Fiat into its 100 percent owned direct subsidiary Fiat Investments N.V. (the “Merger”), subject to several
conditions precedent. At that time, Fiat ordinary shares were listed on the Mercato Telematico Azionario (“MTA”)
organized and managed by Borsa Italiana S.p.A, as well as Euronext Paris and Frankfurt stock exchange. On October
7, 2014, Fiat announced that all conditions precedent for the completion of the Merger were satis?ed:
Fiat shareholders had voted and approved the Merger at their extraordinary general meeting held on August 1,
2014. The New York Stock Exchange (“NYSE”) had provided notice that the listing of Fiat Chrysler Automobiles
N.V. common shares was approved on October 6, 2014 subject to issuance of these shares upon effectiveness of
the Merger. On the same day Borsa Italiana S.p.A. had approved the listing of the common shares of Fiat Chrysler
Automobiles N.V. on the MTA,
the creditors’ opposition period provided under the Italian law had expired on October 4, 2014, and no creditors’
oppositions were ?led,
exercise of the Cash Exit Rights by Fiat shareholders resulted in a total exercise of 60,002,027 Fiat shares,
equivalent to an aggregate amount of €464 million at the €7.727 per share exit price, and
pursuant to the Italian Civil Code, a total of 60,002,027 Fiat shares (equivalent to an aggregate amount of €464
million at the €7.727 per share exit price) were offered to Fiat shareholders not having exercised the Cash Exit
Rights. On October 7, 2014, at the completion of the offer period, Fiat shareholders elected to purchase 6,085,630
shares out of the total of 60,002,027 shares for a total of €47 million; as a result, concurrent with the Merger,
on October 12, 2014, 53,916,397 Fiat shares were canceled in the Merger with a resulting net aggregate cash
disbursement of €417 million.
2014
|
ANNUAL REPORT 261
The Merger was completed and became effective on October 12, 2014. The Merger, which took the form of a reverse
merger resulted in Fiat Investments N.V. being the surviving entity which was then renamed Fiat Chrysler Automobiles
N.V.. On October 13, 2014, FCA common shares commenced trading on the NYSE and on the MTA. The last day of
trading of Fiat ordinary shares on the MTA, Euronext France and Deutsche Börse was October 10, 2014. The Merger is
recognized in FCA’s ?nancial statements from January 1, 2014 and FCA, as successor of Fiat, is the parent company.
As the Merger resulted in FCA being the surviving entity, all Fiat ordinary shares outstanding as of the Merger date
(1,167,181,255 ordinary shares) were canceled and exchanged. FCA allotted one new FCA common share (each having
a nominal value of €0.01) for each Fiat ordinary share (each having a nominal value of €3.58). FCA also issued special
voting shares (non-tradable) which were allotted to eligible Fiat shareholders who had elected to receive special voting
shares. On the base of the requests received, FCA issued a total of 408,941,767 special voting shares.
SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The 2014 Company ?nancial statements represent the separate ?nancial statements of the parent company, Fiat
Chrysler Automobiles N.V., and have been prepared in accordance with the legal requirements of Title 9, Book 2 of
the Dutch Civil Code. Section 362 (8), Book 2, Dutch Civil Code, allows companies that apply IFRS as adopted by the
European Union in their consolidated ?nancial statements to use the same measurement principles in their company
?nancial statements. The accounting policies are described in a speci?c section, Signi?cant accounting policies, of
the Consolidated Financial Statements included in this Annual Report. However, as allowed by the law, investments in
subsidiaries and associates are accounted for using the net equity value in the Company ?nancial statements.
With reference to the Merger, it has been accounted for using the “pooling of interest method”, therefore comparative
?gures for the year ended December 31, 2013 have been adjusted as if the companies had always been merged.
Format of the ?nancial statements
Given the activities carried out by FCA, presentation of the Company Income Statement is based on the nature of
revenues and expenses. The Consolidated Income Statement for FCA is classi?ed according to function (also referred
to as the “cost of sales” method), which is considered more representative of the format used for internal reporting and
management purposes and is in line with international practice in the industry.
262 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
COMPOSITION AND PRINCIPAL CHANGES
1. Result from investments
The following is a breakdown of the result of investments:
For the years ended December 31,
2014 2013
(€ million)
Share of the pro?t/(loss) of subsidiaries and associates 1,124 1,120
Dividends from other companies 7 7
Total result of investments 1,131 1,127
The item includes primarily the Company’s share in the net pro?t or loss of the subsidiaries and associates, in addition
to dividends received from CNH Industrial N.V.
2. Other operating income
The following is a breakdown of other operating income:
For the years ended December 31,
2014 2013
(€ million)
Revenues from services rendered to, and other income from, Group companies
and other related parties 61 80
Other revenues and income from third parties 2 3
Total Other operating income 63 83
Revenues from services rendered to Group companies consisted of services rendered by FCA and its managers to the
principal subsidiaries of the Group. The decrease from 2013 is due to the reduced scope of activities of the company
during the year as a consequence of the re-organization.
3. Personnel costs
Personnel costs consisted of the following:
For the years ended December 31,
2014 2013
(€ million)
Wages and salaries (16) (24)
De?ned contribution plans and social security contributions (7) (10)
Other personnel costs (5) (5)
Total personnel costs (28) (39)
The average number of employees decreased from 236 in 2013 to 140 in 2014 due to the reshape of the Company
functions following the reorganization. As described in Note 2, some of the Company’s managers carried out their
activities at the principal subsidiaries of the Group and the associated costs were charged back to the companies
concerned.
2014
|
ANNUAL REPORT 263
4. Other operating costs
The following is a breakdown of other operating costs:
For the years ended December 31,
2014 2013
(€ million)
Costs for services rendered by Group companies and other related parties (25) (25)
Costs for services rendered by third parties (34) (24)
Compensation component from stock grant plans (2) (6)
Depreciation and amortization (2) (2)
Leases and rentals (3) (4)
Other (66) (11)
Total other operating costs (132) (72)
Costs for services rendered by Group companies primarily consisted of support and consulting services in the
administrative area, as well as IT systems, public relations, payroll, security and facility management.
Costs for services rendered by third parties principally included legal, administrative, ?nancial and IT services. Increase
in 2014 primarily re?ects the costs incurred for the reorganization, including the Merger and the listing of the Company
to the NYSE and MTA in Milan.
The compensation component from stock grant plans represents the notional cost of the Long Term Incentive Plan
awarded to the Chief Executive Of?cer, which was recognized directly in the equity reserve.
Increase in other costs primarily refers to Directors compensations as reported in details into the section
“Remuneration of Directors” in the Report on Operations.
5. Net ?nancial income/(expenses)
The breakdown of ?nancial income and expense was as follows:
For the years ended December 31,
2014 2013
(€ million)
Financial income 85 8
Financial expense (564) (249)
Currency exchange gains/(losses) 143 —
Net gains/(losses) on derivative ?nancial instruments (139) 31
Total ?nancial income/(expense) (475) (210)
Financial income are most entirely related to the USD 1.5 billion loan extended in January 2014 to Fiat Chrysler
Automobiles North America Holdings LLC (previously named Fiat North America LLC) to fund partially the acquisition
of 41.5% of FCA US (previously named Chrysler Group LLC).
Increase in ?nancial expense is driven by increase in debt due to the acquisition of the whole capital of Fiat Chrysler
Automobiles North America Holdings LLC from FCA Italy S.p.A in October 2014 for a €7.25 billion consideration.
Currency exchange gains/(losses) and losses on derivatives are related to the USD 1.5 billion loan mentioned above
which is fully hedged into euro. Net gains on derivative ?nancial instruments of €31 million in 2013 essentially related
to the closure, in December 2013, of the equity swaps contracts entered into as hedges on stock options granted to
the Chief Executive Of?cer in 2004 and 2006.
264 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
6. Income taxes
Income taxes were a gain of €9 million in the current year (gain of €15 million in 2013) and relate to compensation
receivable for tax losses carried forward contributed to the Italian tax consolidation scheme.
The Company reported losses for tax purposes as the result from investments resulting from the adoption of the equity
method is tax neutral.
Deferred tax liabilities refer to the impact of Italian local tax on certain temporary differences.
7. Property, plant and equipment
At December 31, 2014, the gross carrying amount of property, plant and equipment was €68 million (€65 million as at
December 31, 2013) and accumulated depreciation was €39 million (€36 million as at December 31, 2013), of which
€24 million (€25 million as at December 31, 2013) was for land and buildings which mainly consists of the Company’s
property at Via Nizza 250, Turin.
No buildings were subject to liens, pledged as collateral or restricted in use.
Depreciation of property, plant and equipment is recognized in the income statement under other operating costs.
8. Equity investments
At December 31, 2014, Equity investments in subsidiaries and associates totaled €22,103 million and Other equity
investments totaled €124 million.
At December 31,
2014 2013 Change
(€ million)
Investments in subsidiaries and associates 22,103 12,397 9,706
Other equity investments 124 298 (174)
Total equity investments 22,227 12,695 9,532
Equity investments in subsidiaries and associates were subject to the following changes during the year:
2014
(€ million)
Balance at beginning of year 12,397
Acquisition of minorities 1,325
Net contributions made to subsidiaries 6,537
Result from investments 1,124
Cumulative translation adjustments and other OCI movements 738
Other (18)
Balance at end of year 22,103
Acquisition of minorities is primarily due to the transaction by which Chrysler became fully owned by the Group.
Net contributions made to subsidiaries refer almost entirely to the following intercompany transactions:
acquisition of 100% of Fiat Chrysler Automobiles North America Holdings LLC from FCA Italy S.p.A for a
consideration of €7,250 million;
acquisition of Magneti Marelli Inc., Comau Inc. and Alfa Romeo USA Inc. for an aggregate of €725 million;
sale of Fiat Partecipazioni S.p.A.to FCA Italy S.p.A. for an amount of €1,450 million.
2014
|
ANNUAL REPORT 265
At December 31, 2014, other equity investments include the investment in CNH Industrial N.V. for €107 million (€282
million at December 31, 2013), the investment in Fin. Priv. S.r.l. for €14 million (€14 million at December 31, 2013) and the
investment in Assicurazioni Generali S.p.A. for €3 million (€3 million at December 31, 2013). At December 31, 2014, the
investment in CNHI consisted of 15,948,275 common shares for an amount of €107 million. During 2014, 18,059,375
CNHI shares of the investment balance existing at December 31, 2013 were sold following the exercise of stock options.
9. Other ?nancial assets
At December 31, 2014, Other ?nancial assets amounted to €1,329 million, as represented below:
At December 31,
2014 2013 Change
(€ million)
Other ?nancial assets 1,313 — 1,313
Fees receivable for guarantees given 16 14 2
Total other ?nancial assets 1,329 14 1,315
Other ?nancial assets is represented by the USD 1.5 billion loan extended in January 2014 and expiring in September
2016, to Fiat Chrysler Automobiles North America Holdings LLC (previously named Fiat North America LLC) to fund
partially the acquisition of 41.5% of FCA US. The amount of €1,313 million includes principal of €1,236 million and
accrued interest of €77 million, both translated into euro at the year end exchange rate of 1.2141. The loan is hedged
into euro by a currency swap with Fiat Chrysler Finance Europe S.A. resulting in a €135 million intercompany payable
at December 31, 2014 reported under other ?nancial liabilities.
10. Trade receivables
At December 31, 2014, trade receivables totaled €14 million (of which €7 million from Group companies) a net
increase of €7 million over year-end 2013.
The carrying amount of trade receivables is deemed to approximate their fair value.
All trade receivables are due within one year and there are no overdue balances.
11. Other current receivables
At December 31, 2014, other current receivables amounted to €326 million, a net increase of €135 million compared
to December 31, 2013, and consisted of the following:
At December 31,
2014 2013 Change
(€ million)
Receivable from Group companies for consolidated Italian corporate tax 141 119 22
VAT receivables 136 22 114
Italian corporate tax receivables 38 42 (4)
Other 11 8 3
Total other current receivables 326 191 135
Receivables from Group companies for consolidated Italian corporate tax relate to tax calculated on the taxable
income contributed by Italian subsidiaries participating in the domestic tax consolidation program.
VAT receivables essentially relate to VAT credits for Italian subsidiaries participating in the VAT tax consolidation.
Italian corporate tax receivables include credits transferred to FCA. by Italian subsidiaries participating in the domestic
tax consolidation program in 2014 and prior years.
266 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
12. Cash and cash equivalents
At December 31, 2014, Cash and cash equivalents totaled €11 million (€1 million as at December 31, 2013) and are
almost entirely represented by amounts held in Euro. The carrying amount of cash and cash equivalents is deemed to
be in line with their fair value.
Credit risk associated with cash and cash equivalents is considered limited as the counterparties are leading national
and international banks.
13. Equity
Changes in shareholders’ equity during 2014 were as follows:
(€ million)
Share
Capital
Capital
Reserves
Legal
Reserves:
Cumulative
translation
adjustment
reserve /
OCI
Legal
Reserves:
Other
Retained
pro?t/
(loss)
Pro?t/
(loss) for
the year
Total
equity
At December 31, 2013 4,477 — (618) 6,699 (3,136) 904 8,326
Allocation of prior year result — — — — 904 (904) —
Capital increase 2 989 — — — — 991
Merger (4,269) 4,269 — — — — —
Mandatory convertible — — — 1,910 — — 1,910
Exit Rights (193) (224) — — — — (417)
Share-based payment — 35 — — (31) — 4
Purchase of shares in subsidiaries from non-
controlling interests — — (308) 880 753 — 1,325
Net pro?t for the year — — — — — 568 568
Current period change in OCI, net of taxes — — 666 — 52 — 718
Legal Reserve — (1,327) — 1,327 — — —
At December 31, 2014 17 3,742 (260) 10,816 (1,458) 568 13,425
Shareholders’ equity increased by €5,099 million in 2014 primarily due to: the issuance of mandatory convertible
securities (see notes to the consolidated ?nancial statements) resulting in an increase of €1,910 million, the placement
of 100 million common shares and the exercise of stock options resulting in an aggregate increase of €991 million, the
positive impact of €1,325 million from the acquisition of the remaining 41.5% of FCA US, the increase in OCI (mainly
driven by cumulative exchange differences on translating foreign operations of €782 million) and pro?t for the year of
€568 million, net of the €417 million reduction for the reimbursement to Fiat shareholders who exercised the cash exit
rights upon the Merger.
Share capital
At December 31, 2014, fully paid-up share capital of FCA amounted to €17 million (€4,477 million of Fiat at December
31, 2013) and consisted of 1,284,919,505 common shares and of 408,941,767 special voting shares, all with a par
value of €0.01 each (1,250,687,773 ordinary shares with a par value of €3.58 each of Fiat at December 31, 2013).
On December 12, 2014, FCA issued 65,000,000 new common shares and sold 35,000,000 of treasury shares for
aggregate net proceeds of $1,065 million (€849 million) comprised of gross proceeds of $1,100 million (€877 million)
less $35 million (€28 million) of transaction costs.
Upon the completion of the Merger, which took the form of a reverse merger, resulted in FCA being the surviving
entity, all Fiat ordinary shares outstanding as of the Merger date (1,167,181,255 ordinary shares) were canceled and
exchanged. FCA allotted one new FCA common share (each having a nominal value of €0.01) for each Fiat ordinary
share (each having a nominal value of €3.58). The original investment of FCA in Fiat which consisted of 35,000,000
common shares was not canceled resulting in 35,000,000 treasury shares in FCA. On December 12, 2014, FCA
completed the placement of these treasury shares on the market.
2014
|
ANNUAL REPORT 267
The following table provides the detail for the number of Fiat ordinary shares outstanding at December 31, 2013 and
the number of FCA common shares outstanding at December 31, 2014:
Fiat S.p.A. FCA
Thousand of shares
At
December
31, 2013
Share-
based
payments
and
exercise
of stock
options
Exit
Rights
Cancellation
of treasury
shares upon
the Merger
At the
date of the
Merger
FCA
share
capital
at the
Merger
Issuance
of FCA
Common
shares
and
sale of
treasury
shares
Exercise
of Stock
Options
At
December
31, 2014
Shares issued 1,250,688 320 (53,916) (29,911) 1,167,181 35,000 65,000 17,738 1,284,919
Less: treasury shares (34,578) 4,667 — 29,911 — (35,000) 35,000 — —
Shares issued and
outstanding 1,216,110 4,987 (53,916) — 1,167,181 — 100,000 17,738 1,284,919
On October 29, 2014, the Board of Directors of FCA resolved to authorize the issuance of up to a maximum of
90,000,000 common shares under the framework equity incentive plan which had been adopted before the closing
of the Merger. No grants have occurred under such framework equity incentive plan and any issuance of shares
thereunder in the period from 2014 to 2018 will be subject to the satisfaction of certain performance/retention
requirements. Any issuances to directors will be subject to shareholders approval.
Capital reserves
At December 31, 2014, capital reserves amounting to €3,742 million consisted mainly of the effects of the Merger
resulting in a different par value of FCA common shares (€0.01 each) as compared to Fiat S.p.A. ordinary shares
(€3.58 each) where the consequent difference between the share capital before and after the Merger was recognized
to increase the capital reserves.
Legal reserve
At December 31, 2014, legal reserve amounted to €10,816 million (€6,699 million at December 31, 2013) and
mainly refers to development costs capitalized by subsidiaries and their earnings subject to certain restrictions to
distributions to the parent company. Legal reserve also refers to unrealized currencies translation gain and losses and
other OCI components for a net negative amount of €260 million. The legal reserve includes the reserve for the equity
component of the Mandatory Convertible Securities of €1,910 million at December 31, 2014.
Pursuant to Dutch law, limitations exist relating to the distribution of shareholders’ equity up to at least the total
amount of the legal reserve. By their nature, unrealized losses relating to OCI components reduce shareholders’ equity
and thereby distributable amounts.
Share-based compensation
In connection with the Merger, FCA assumed the obligation of the former Fiat Stock option plans and Stock
Grant plans. On the effective date of the Merger, the unvested equity rewards under the former Fiat plans became
convertible for common shares of FCA on a one-for-one basis. (See notes to the Consolidated Financial Statements
for details on the stock option and stock grant plans).
14. Provisions for employee bene?ts and other provisions
At December 31, 2014, provisions for employee bene?ts and other provisions totaled €27 million, a €116 million
decrease over year-end 2013, relating primarily to the exercise of stock options granted in previous years. At
31 December 2014, provisions consisted primarily of post-employment bene?ts accruing to employees, former
employees and Directors under supplemental company or individual agreements. Those plans are unfunded.
268 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
15. Non-current debt
At December 31, 2014, non-current debt totaled €197 million, representing a decrease of €217 million over
December 31, 2013, and consisted of the following:
At December 31,
2014 2013 Change
(€ million)
Intercompany ?nancial payable 181 400 219
Financial guarantees 16 14 (2)
Total Non-current debt 197 414 217
Intercompany ?nancial payable relate to the euro-denominated loans due December 30, 2017, entered into with
Magneti Marelli S.p.A. (€162 million), Comau S.p.A. (€19 million) and FCA Italy S.p.A. (€0.2 million) following the
acquisition of certain subsidiaries based in the US on December 30, 2014.
Financial guarantees represent the fair value of the liabilities assumed in relation to guarantees issued. Following an
assessment of potential risks requiring recognition of contingent liabilities and given that those liabilities essentially
related to guarantees provided on loans to Group companies, the present value of fees receivable is considered the
best estimate of the fair value of those guarantees.
16. Other non-current liabilities
At December 31, 2014, other non-current liabilities totaled €15 million, representing a net decrease of €1 million over
December 31, 2013.
At December 31,
2014 2013 Change
(€ million)
Other non-current liabilities 15 16 (1)
Total Other non-current liabilities 15 16 (1)
Other non-current liabilities relate to non-current post-employment bene?ts, being the present value of future bene?ts
payable to a former CEO and management personnel that have left the Company.
17. Provisions for employee bene?ts and other current provisions
This item re?ects the best estimate for variable components of compensation:
At December 31,
2014 2013 Change
(€ million)
Provisions for employee bonuses and similar provisions 2 11 (9)
Provisions for employee bonuses and similar provisions 2 11 (9)
2014
|
ANNUAL REPORT 269
18. Trade payables
At December 31, 2014, trade payables totaled €19 million, in line with December 31, 2013, and consisted of the
following:
At December 31,
2014 2013 Change
(€ million)
Trade payables to third parties 14 13 1
Intercompany trade payables 5 6 (1)
Total trade payables 19 19 —
Trade payables are due within one year and their carrying amount at the reporting date is deemed to approximate their
fair value.
19. Current debt
At December 31, 2014, current debt totaled €9,714 million, a €5,934 million increase over December 31, 2013 and
related to:
At December 31,
2014 2013 Change
(€ million)
Intercompany debt:
- Current account with Fiat Chrysler Finance S.p.A. 6,662 739 5,923
- Short term loans from Fiat Chrysler Finance Europe S.A. 2,682 — 2,682
- Short term loans from Fiat Chrysler Finance S.p.A. — 3,000 (3,000)
- Other intercompany loans — 17 (17)
Total intercompany debt 9,344 3,756 5,588
Third party debt:
- Mandatory Convertible Securities liability component 346 — 346
- Advances on factored receivables 24 24 —
Total third party debt 370 24 346
Total current debt 9,714 3,780 5,934
Current account with Fiat Chrysler Finance S.p.A. represents the overdraft as part of the Group’s centralized treasury
management.
Loans from Fiat Chrysler Finance Europe S.A. consists of euro-denominated ?nancing due within 12 months.
As described in more detail in the notes to the consolidated ?nancial statements, FCA issued aggregate notional
amount of U.S.$2,875 million (€2,293 million) of mandatory convertible securities on December 16, 2014. The
obligation to pay coupons as required by the mandatory convertible securities meets the de?nition of a ?nancial liability
as it is a contractual obligation to deliver cash to another entity. The fair value amount determined for the liability
component at issuance of the mandatory convertible securities was U.S.$419 million (€335 million) calculated as
the present value of the coupon payments due less allocated transaction costs of U.S.$9 million (€7 million) that are
accounted for as a debt discount. Subsequent to issuance, the ?nancial liability for the coupon payments is accounted
for at amortized cost. At December 31, 2014 the ?nancial liability component was U.S.$420 million (€346 million).
Advances on factored receivables relate to advances on income tax receivables in Italy totaling €25 million.
Current intercompany debt of €9,344 million is denominated in euros and the carrying amount is deemed to be in line
with fair value.
270 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
20. Other debt
At December 31, 2014, Other debt totaled €394 million, a net increase of €177 million over December 31, 2013, and
included the following:
At December 31,
2014 2013 Change
(€ million)
Intercompany other debt:
- Consolidated Italian corporate tax 124 107 17
- Consolidated VAT 222 92 130
- Other 27 — 27
Total intercompany other debt 373 199 174
Other debt and taxes payable:
- Taxes payable — 5 (5)
- Accrued expenses 9 2 7
- Other payables 12 11 1
Total Other debt and taxes payable 21 18 3
Total current debt 394 217 177
At December 31, 2014, intercompany debt for consolidated VAT of €222 million consisted of VAT credits of Italian
subsidiaries transferred to FCA as part of the consolidated VAT regime.
Intercompany debt for consolidated Italian corporate tax of €124 million (€107 million at December 31, 2013)
consisted of compensation payable for tax losses and Italian corporate tax credits contributed by Italian subsidiaries
participating in the domestic tax consolidation program for 2014 in relation to which the Italian branch of FCA is the
consolidating entity.
Other debt and taxes payable are all due within one year and their carrying amount is deemed to approximate their fair
value.
21. Guarantees granted, commitments and contingent liabilities
Guarantees granted
At December 31, 2014, guarantees issued totaled €16,380 million wholly provided on behalf of Group companies.
The increase of €1,358 million over December 31, 2013 related principally to the increase in borrowings in Brazil to
fund the construction of the new plant in Pernambuco and new bonds issued by the subsidiary Fiat Chrysler Finance
Europe S.A. net of repayments.
Main guarantees outstanding at 31 December 2014 were as follows:
€12,531 million for bonds issued;
€1,898 million for borrowings, of which €822 million in favor of the subsidiaries in Brasil mainly related to the
construction of the new plant in Pernambuco and the remaining primarily to Fiat Chrysler Finance S.p.A
€755 million for credit lines, primarily to Fiat Chrysler Finance Europe S.A. and Fiat Chrysler Finance S.p.A.
€984 million for VAT receivables related to the VAT consolidation in Italy.
In addition, in 2005, in relation to the advance received by Fiat Partecipazioni S.p.A. on the consideration for the sale
of the aviation business, FCA as he successor of Fiat S.p.A. is jointly and severally liable with the fully owned subsidiary
Fiat Partecipazioni S.p.A. to the purchaser, Avio Holding S.p.A., should Fiat Partecipazioni S.p.A. fail to honor
(following either an arbitration award or an out-of-court settlement) undertakings provided in relation to the sale and
purchase agreement signed in 2003. Similarly, in connection with sale of a controlling interest in its rail business, Fiat
S.p.A. provided guarantees to the purchaser, Alstom N.V., for any failure of the seller (now Fiat Partecipazioni S.p.A.)
to meet its contractual obligations.
2014
|
ANNUAL REPORT 271
Other commitments, contractual rights and contingent liabilities
FCA has important commitments and rights derived from outstanding agreements in addition to contingent liabilities
that are described in the notes to the Consolidated Financial Statements at December 31, 2014, to which reference
should be made.
22. Audit fees
The following table reports fees paid to the independent auditor Ernst & Young or entities in their network for audit and
other services:
For the years ended December 31,
(€ thousand) 2014 2013
Audit fees 22,518 16,093
Audit-related fees 492 884
Tax fees 247 520
All other fees — —
TOTAL 23,257 17,497
In 2014, approximately €2.0 million audit fees related to the Merger transaction and approximately €0.9 million audit
fees related to the attestation activities regarding the issue of ordinary shares and the mandatory convertible bond.
Audit fees of Ernst & Young Accountants LLP amount to €100 thousand. No other services were performed by Ernst
& Young Accountants LLP.
23. Board remuneration
Detailed information on Board of Directors compensation (including their shares and share options) is included in the
Remuneration of Directors section of this Annual Report.
24. Subsequent Events
The Group has evaluated subsequent events through March 5, 2015, which is the date the ?nancial statements were
authorized for issuance. There were no subsequent events.
March 5, 2015
The Board of Directors
John P. Elkann
Sergio Marchionne
Andrea Agnelli
Tiberto Brandolini D’Adda
Glenn Earle
Valerie Mars
Ruth J. Simmons
Ronald L. Thompson
Patience Wheatcroft
Stephen M. Wolf
Ermenegildo Zegna
272 2014
|
ANNUAL REPORT
Company Financial
Statements
Other Information
Other Information
Independent Auditor’s Report
The report of the Company’s independent auditor, Ernst & Young Accountants LLP, the Netherlands is set forth
following this Annual Report.
Dividends
Dividends will be determined in accordance with the articles 23 of the Articles of Association of Fiat Chrysler
Automobiles N.V. The relevant provisions of the Articles of Association read as follows:
1. The Company shall maintain a special capital reserve to be credited against the share premium exclusively for the
purpose of facilitating any issuance or cancellation of special voting shares. The special voting shares shall not
carry any entitlement to the balance of the special capital reserve. The Board of Directors shall be authorized to
resolve upon (i) any distribution out of the special capital reserve to pay up special voting shares or (ii) re-allocation
of amounts to credit or debit the special capital reserve against or in favor of the share premium reserve.
2. The Company shall maintain a separate dividend reserve for the special voting shares. The special voting shares
shall not carry any entitlement to any other reserve of the Company. Any distribution out of the special voting rights
dividend reserve or the partial or full release of such reserve will require a prior proposal from the Board of Directors
and a subsequent resolution of the meeting of holders of special voting shares.
3. From the pro?ts, shown in the annual accounts, as adopted, such amounts shall be reserved as the Board of
Directors may determine.
4. The pro?ts remaining thereafter shall ?rst be applied to allocate and add to the special voting shares dividend
reserve an amount equal to one percent (1%) of the aggregate nominal value of all outstanding special voting
shares. The calculation of the amount to be allocated and added to the special voting shares dividend reserve
shall occur on a time-proportionate basis. If special voting shares are issued during the ?nancial year to which the
allocation and addition pertains, then the amount to be allocated and added to the special voting shares dividend
reserve in respect of these newly issued special voting shares shall be calculated as from the date on which such
special voting shares were issued until the last day of the ?nancial year concerned. The special voting shares shall
not carry any other entitlement to the pro?ts.
5. Any pro?ts remaining thereafter shall be at the disposal of the general meeting of Shareholders for distribution of
pro?ts on the common shares only, subject to the provision of paragraph 8 of this article.
6. Subject to a prior proposal of the Board of Directors, the general meeting of Shareholders may declare and pay
distribution of pro?ts and other distributions in United States Dollars. Furthermore, subject to the approval of the
general meeting of Shareholders and the Board of Directors having been designated as the body competent
to pass a resolution for the issuance of shares in accordance with Article 6, the Board of Directors may decide
that a distribution shall be made in the form of shares or that Shareholders shall be given the option to receive a
distribution either in cash or in the form of shares.
7. The Company shall only have power to make distributions to Shareholders and other persons entitled to
distributable pro?ts to the extent the Company’s equity exceeds the sum of the paid in and called up part of the
share capital and the reserves that must be maintained pursuant to Dutch law and the Company’s Articles of
Association. No distribution of pro?ts or other distributions may be made to the Company itself for shares that the
Company holds in its own share capital.
8. The distribution of pro?ts shall be made after the adoption of the annual accounts, from which it appears that the
same is permitted.
2014
|
ANNUAL REPORT 273
9. The Board of Directors shall have power to declare one or more interim distributions of pro?ts, provided that
the requirements of paragraph 7 hereof are duly observed as evidenced by an interim statement of assets and
liabilities as referred to in Section 2:105 paragraph 4 of the Dutch Civil Code and provided further that the policy of
the Company on additions to reserves and distributions of pro?ts is duly observed. The provisions of paragraphs 2
and 3 hereof shall apply mutatis mutandis.
10. The Board of Directors may determine that distributions are made from the Company’s share premium reserve
or from any other reserve, provided that payments from reserves may only be made to the Shareholders that are
entitled to the relevant reserve upon the dissolution of the Company.
11. Distributions of pro?ts and other distributions shall be made payable in the manner and at such date(s) - within four
weeks after declaration thereof - and notice thereof shall be given, as the general meeting of Shareholders, or in
the case of interim distributions of pro?ts, the Board of Directors shall determine.
12. Distributions of pro?ts and other distributions, which have not been collected within ?ve years and one day after
the same have become payable, shall become the property of the Company.
On January 28, 2015 the Board of Directors has declined to recommend a dividend payment on FCA common shares
in order to further fund capital requirements of the Group’s ?ve-year business plan presented on May 6, 2014.
Disclosures pursuant to Decree Article 10 EU-Directive on Takeovers
In accordance with the Dutch Besluit artikel 10 overnamerichtlijn (the Decree), the Company makes the following
disclosures:
a. For information on the capital structure of the Company, the composition of the issued share capital and the
existence of the two classes of shares, please refer to Note 13 to the Company ?nancial statements in this Annual
Report. For information on the rights attached to the common shares, please refer to the Articles of Association
which can be found on the Company’s website. To summarize, the rights attached to common shares comprise
pre-emptive rights upon issue of common shares, the entitlement to attend the general meeting of Shareholders
and to speak and vote at that meeting and the entitlement to distributions of such amount of the Company’s pro?t
as remains after allocation to reserves. For information on the rights attached to the special voting shares, please
refer to the Articles of Association and the Terms and Conditions for the Special Voting Shares which can both be
found on the Company’s website and more in particular to the paragraph “Loyalty Voting Structure” of this Annual
Report in the chapter “Corporate Governance”. As at 31 December 2014, the issued share capital of the Company
consisted of 1,284,919,505 common shares, representing 76 per cent. of the aggregate issued share capital and
408,941,767 special voting shares, representing 24 per cent. of the aggregate issued share capital.
b. The Company has imposed no limitations on the transfer of common shares. The Articles of Association provide in
Article 13 for transfer restrictions for special voting shares.
c. For information on participations in the Company’s capital in respect of which pursuant to Sections 5:34, 5:35 and
5:43 of the Dutch Financial Supervision Acts (Wet op het ?nancieel toezicht) noti?cation requirements apply, please
refer to the chapter “Major Shareholders” of this Annual Report. There you will ?nd a list of Shareholders who are
known to the Company to have holdings of 3% or more at the stated date.
d. No special control rights or other rights accrue to shares in the capital of the Company.
e. No restrictions apply to voting rights attached to shares in the capital of the Company, nor are there any deadlines
for exercising voting rights. The Articles of Association allow the Company to cooperate in the issuance of
registered depositary receipts for common shares, but only pursuant to a resolution to that effect of the Board of
Directors. The Company is not aware of any depository receipts having been issued for shares in its capital.
274 2014
|
ANNUAL REPORT
Company Financial
Statements
Other Information
f. The Company is not aware of the existence of any agreements with Shareholders which may result in restrictions
on the transfer of shares or limitation of voting rights except the Lock-Up Agreements that the Company’s
Directors, members of the Company’s GEC and Exor have entered into with the underwriters for a period of 90
days after the date of the Prospectus dated December 4, 2014 and concerning the public offering of 87,000,000
common shares of the Company concurrently with the offering of $ 2,500,000,000 in aggregate notional amount
of the “Mandatory Convertible Securities”. The rules governing the appointment and dismissal of members of the
Board of Directors are stated in the Articles of Association of the Company. All members of the Board of Directors
are appointed by the general meeting of Shareholders. The term of of?ce of all members of the Board of Directors
is for a period of approximately one year after appointment, such period expiring on the day the ?rst Annual
General Meeting of Shareholders is held in the following calendar year. The general meeting of Shareholders has
the power to suspend or dismiss any member of the Board of Directors at any time.
g. The rules governing an amendment of the Articles of Association are stated in the Articles of Association and
require a resolution of the general meeting of Shareholders which can only be passed pursuant to a prior proposal
of the Board of Directors.
h. The general powers of the Board of Directors are stated in the Articles of Association of the Company. For a period
of ?ve years from October 12, 2014, the Board of Directors has been irrevocably authorized to issue shares and
rights to subscribe for shares up to the maximum aggregate amount of shares as provided for in the Company’s
authorized share capital as set out in Article 4.1 of the Articles of Association, as amended from time to time. The
Board of Directors has also been designated for the same period as the authorized body to limit or exclude the
rights of pre-emption of shareholders in connection with the authority of the Board of Directors to issue common
shares and grant rights to subscribe for common shares as referred to above. In the event of an issuance of
special voting shares, shareholders have no right of pre-emptions. The Company has the authority to acquire fully
paid-up shares in its own share capital, provided that such acquisition is made for no consideration. Further rules
governing the acquisition of shares by the Company in its own share capital are set out in article 8 of the Articles of
Association.
i. The Company is not a party to any signi?cant agreements which will take effect, will be altered or will be terminated
upon a change of control of the Company as a result of a public offer within the meaning of Section 5:70 of the
Dutch Financial Supervision Acts (Wet ophet ?nancieel toezicht), provided that some of the loan agreements
guaranteed by the Company and certain bonds guaranteed by the Company contain clauses that, as it is
customary for such ?nancial transactions, may require early repayment or termination in the event of a change of
control of the guarantor or the borrower. In certain cases, that requirement may only be triggered if the change of
control event coincides with other conditions, such as a rating downgrade.
2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
275
Appendix -
FCA Companies
AT DECEMBER 31, 2014
276 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Controlling company
Parent Company
Fiat Chrysler Automobiles N.V. Amsterdam Netherlands 16,938,613 EUR -- -- -- --
Subsidiaries consolidated on a line-by-line basis
Business Auto: Car Mass-Market brands
NAFTA
0847574 B.C. Unlimited Liability
Company Vancouver Canada
1 CAD
100.00 New CarCo Acquisition Canada Ltd.
100.000
Auburn Hills Mezzanine LLC Wilmington U.S.A. 100 USD 100.00 CHRYSLER GROUP REALTY
COMPANY LLC 100.000
Auburn Hills Owner LLC Wilmington U.S.A. 100 USD 100.00 Auburn Hills Mezzanine LLC 100.000
Autodie LLC Wilmington U.S.A. 10,000,000 USD 100.00 FCA US LLC 100.000
CG MID LLC Wilmington U.S.A. 2,700,000 USD 100.00 FCA US LLC 100.000
Chrysler Canada Cash Services Inc. Toronto Canada 1,000 CAD 100.00 FCA US LLC 100.000
Chrysler Canada Inc. Windsor Canada 0 CAD 100.00 0847574 B.C. Unlimited Liability
Company
100.000
Chrysler de Mexico S.A. de C.V. Santa Fe Mexico 238,621,186 MXN 100.00 Chrysler Mexico Holding, S. de R.L.
de C.V.
FCA MINORITY LLC
99.996
0.004
CHRYSLER GROUP AUTO
TRANSPORT LLC Wilmington U.S.A. 100 USD 100.00 FCA US LLC 100.000
CHRYSLER GROUP DEALER
CAPITAL LLC Wilmington U.S.A.
0 USD 100.00 FCA US LLC
100.000
CHRYSLER GROUP INTERNATIONAL
LLC Wilmington U.S.A. 0 USD
100.00 FCA US LLC 100.000
CHRYSLER GROUP INTERNATIONAL
SERVICES LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
CHRYSLER GROUP REALTY
COMPANY LLC Wilmington U.S.A. 168,769,528 USD 100.00 FCA US LLC 100.000
Chrysler Group Service Contracts LLC Wilmington U.S.A. 100,000,000 USD 100.00 FCA US LLC 100.000
CHRYSLER GROUP TRANSPORT LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
CHRYSLER GROUP VANS LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
Chrysler Investment Holdings LLC Wilmington U.S.A. 173,350,999 USD 100.00 FCA US LLC 100.000
Chrysler Lease Receivables 1 Inc. Windsor Canada 100 CAD 100.00 Chrysler Canada Inc. 100.000
Chrysler Lease Receivables 2 Inc. Windsor Canada 100 CAD 100.00 Chrysler Canada Inc. 100.000
Chrysler Lease Receivables Limited
Partnership Windsor Canada 0 CAD
100.00 Chrysler Canada Inc.
Chrysler Lease Receivables 1 Inc.
Chrysler Lease Receivables 2 Inc.
99.990
0.005
0.005
Chrysler Mexico Holding, S. de R.L.
de C.V. Santa Fe Mexico 3,377,922,033 MXN 100.00 Chrysler Mexico Investment Holdings
Cooperatie U.A.
CarCo Intermediate Mexico LLC
99.900
0.100
CPK Interior Products Inc. Windsor Canada 1,000 CAD 100.00 Chrysler Canada Inc. 100.000
Extended Vehicle Protection LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
FCA MINORITY LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
FCA US LLC Wilmington U.S.A. 1,632,654 USD 100.00 FCA North America Holdings LLC
FNA HOLDCO 12 LLC
98.342
1.658
Global Engine Manufacturing Alliance
LLC Wilmington U.S.A. 300,000 USD 100.00 FCA US LLC 100.000
New CarCo Acquisition Canada Ltd. Toronto Canada 1,000 CAD 100.00 New CarCo Acquisition Holdings
Canada Ltd.
100.000
New CarCo Acquisition Holdings
Canada Ltd. Toronto Canada 1,000 CAD 100.00 FCA US LLC 100.000
2014
|
ANNUAL REPORT 277
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
LATAM
Banco Fidis S.A. Betim Brazil 473,669,238 BRL 100.00 Fidis S.p.A.
FCA FIAT CHRYSLER AUTOMOVEIS
BRASIL LTDA.
75.000
25.000
Chrysler Argentina S.R.L. Buenos Aires Argentina 29,335,170 ARS 100.00 FCA US LLC
FCA MINORITY LLC
98.000
2.000
Chrysler Chile Importadora Ltda Santiago Chile 41,800,000 CLP 100.00 FCA US LLC
FCA MINORITY LLC
99.990
0.010
Chrysler de Venezuela LLC Wilmington U.S.A. 132,474,694 USD 100.00 CG Venezuela UK Holdings Limited 100.000
CMP Componentes e Modulos
Plasticos Industria e Comercio Ltda. Contagem Brazil 77,021,334 BRL
100.00 FCA FIAT CHRYSLER AUTOMOVEIS
BRASIL LTDA.
100.000
FCA FIAT CHRYSLER AUTOMOVEIS
BRASIL LTDA. Betim Brazil 1,140,046,985 BRL 100.00 FCA Italy S.p.A. 100.000
Fiat Auto Argentina S.A. Buenos Aires Argentina 476,464,366 ARS 100.00 FCA FIAT CHRYSLER AUTOMOVEIS
BRASIL LTDA.
100.000
Fiat Auto S.A. de Ahorro para Fines
Determinados Buenos Aires Argentina 109,535,149 ARS 100.00 Fiat Auto Argentina S.A. 100.000
Fiat Credito Compania Financiera S.A. Buenos Aires Argentina 372,911,891 ARS 100.00 Fidis S.p.A. 100.000
FPT Powertrain Technologies do Brasil
- Industria e Comércio de Motores Ltda Campo Largo Brazil 197,792,500 BRL 100.00 Fiat do Brasil S.A. 100.000
APAC
Chrysler (Hong Kong) Automotive
Limited Hong Kong
People’s Rep.
of China 10,000,000 EUR 100.00 FCA US LLC
100.000
Chrysler Asia Paci?c Investment Co. Ltd. Shanghai People’s Rep.
of China
4,500,000 CNY 100.00 Chrysler (Hong Kong) Automotive
Limited
100.000
Chrysler Australia Pty. Ltd. Mulgrave Australia 143,629,774 AUD 100.00 FCA US LLC 100.000
Chrysler Group (China) Sales Ltd. Beijing People’s Rep.
of China
10,000,000 EUR 100.00 Chrysler (Hong Kong) Automotive
Limited
100.000
Chrysler India Automotive Private
Limited Chennai India 99,990 INR
100.00 Chrysler Netherlands Distribution B.V.
CHRYSLER GROUP DUTCH
OPERATING LLC
99.990
0.010
Chrysler Japan Co., Ltd. Tokyo Japan 104,789,875 JPY 100.00 FCA US LLC
Fiat Group Automobiles Japan K.K.
60.000
40.000
Chrysler South East Asia Pte. Ltd. Singapore Singapore 3,010,513 SGD 100.00 FCA US LLC 100.000
FCA Korea, Ltd. Seoul South Korea 32,639,200,000 KRW 100.00 FCA US LLC 100.000
Fiat Automotive Finance Co. Ltd. Shanghai People’s Rep.
of China
750,000,000 CNY 100.00 Fidis S.p.A. 100.000
FIAT GROUP AUTOMOBILES INDIA
Private Limited Mumbai India 1,789,900,000 INR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Japan K.K. Minatu-Ku.
Tokyo
Japan 420,000,000 JPY 100.00 FCA Italy S.p.A. 100.000
Fiat Powertrain Technologies (Shanghai)
R&D Co. Ltd. Shanghai
People’s Rep.
of China 10,000,000 EUR 100.00 Fiat Powertrain Technologies SpA 100.000
Mopar (Shanghai) Auto Parts Trading
Co. Ltd. Shanghai
People’s Rep.
of China 5,000,000 USD 100.00 Chrysler Asia Paci?c Investment Co. Ltd.
100.000
EMEA
Abarth & C. S.p.A. Turin Italy 1,500,000 EUR 100.00 FCA Italy S.p.A. 100.000
Alfa Romeo S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
Alfa Romeo U.S.A. S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
C.F. GOMMA NEDERLAND B.V. in
liquidation Amsterdam Netherlands 18,100 EUR 100.00 FCA Partec S.p.A. 100.000
C.R.F. Società Consortile per Azioni Orbassano Italy 45,000,000 EUR 100.00 FCA Italy S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Powertrain Technologies SpA
75.000
20.000
5.000
CF GOMMA DEUTSCHLAND GmbH Düsseldorf Germany 26,000 EUR 100.00 FCA Partec S.p.A. 100.000
CG EU NSC LIMITED Cardiff United
Kingdom
1 GBP 100.00 FCA US LLC 100.000
278 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
CG Italia Operations S.r.l. Rome Italy 53,022 EUR 100.00 Chrysler Italia S.r.l. 100.000
CG Venezuela UK Holdings Limited Slough
Berkshire
United
Kingdom
100 GBP 100.00 CG EU NSC LIMITED 100.000
Chrysler Austria GmbH Vienna Austria 4,300,000 EUR 100.00 Chrysler Deutschland GmbH 100.000
CHRYSLER BALKANS d.o.o. Beograd Beograd Serbia 500 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Belgium Luxembourg NV/SA Brussels Belgium 28,262,700 EUR 100.00 CG EU NSC LIMITED
FCA MINORITY LLC
99.998
0.002
Chrysler Czech Republic s.r.o. Prague Czech
Republic
55,932,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Danmark ApS Glostrup Denmark 1,000,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Deutschland GmbH Berlin Germany 20,426,200 EUR 100.00 FCA US LLC 100.000
Chrysler Espana S.L. Alcalá De
Henares
Spain 16,685,690 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler France S.A.S. Trappes France 460,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Group Egypt Limited New Cairo Egypt 240,000 EGP 100.00 FCA US LLC
FCA MINORITY LLC
99.000
1.000
Chrysler Group Middle East FZ-LLC Dubai United Arab
Emirates
300,000 AED 100.00 CHRYSLER GROUP INTERNATIONAL
LLC 100.000
Chrysler International GmbH Stuttgart Germany 25,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Italia S.r.l. Rome Italy 100,000 EUR 100.00 FCA US LLC 100.000
Chrysler Jeep International S.A. Brussels Belgium 1,860,000 EUR 100.00 CG EU NSC LIMITED
FCA MINORITY LLC
99.998
0.002
Chrysler Management Austria GmbH Gossendorf Austria 75,000 EUR 100.00 Chrysler Austria GmbH 100.000
Chrysler Mexico Investment Holdings
Cooperatie U.A. Amsterdam Netherlands
0 EUR 100.00 Chrysler Investment Holdings LLC
FCA MINORITY LLC
99.990
0.010
Chrysler Nederland B.V. Utrecht Netherlands 19,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Netherlands Distribution B.V. Amsterdam Netherlands 90,000 EUR 100.00 Chrysler Netherlands Holding
Cooperatie U.A.
100.000
Chrysler Polska Sp. z o.o. Warsaw Poland 30,356,000 PLN 100.00 CG EU NSC LIMITED 100.000
Chrysler Russia SAO Moscow Russia 574,665,000 RUB 100.00 FCA US LLC
FCA MINORITY LLC
99.999
0.001
Chrysler South Africa (Pty) Limited Centurion South Africa 200 ZAR 100.00 FCA US LLC 100.000
Chrysler Sweden AB Kista Sweden 100,000 SEK 100.00 CG EU NSC LIMITED 100.000
Chrysler Switzerland GmbH Schlieren Switzerland 2,000,000 CHF 100.00 CG EU NSC LIMITED 100.000
Chrysler UK Limited Slough
Berkshire
United
Kingdom
46,582,132 GBP 100.00 CG EU NSC LIMITED 100.000
Customer Services Centre S.r.l. Turin Italy 2,500,000 EUR 100.00 FCA Italy S.p.A. 100.000
Easy Drive S.r.l. Turin Italy 10,400 EUR 100.00 FCA Italy S.p.A.
Fiat Center Italia S.p.A.
99.000
1.000
Fabbrica Italia Pomigliano S.p.A.
Pomigliano
d’Arco
Italy 1,000,000 EUR 100.00 FGA Real Estate Services S.p.A. 100.000
FCA Fleet & Tenders S.R.L. Turin Italy 7,370,000 EUR 100.00 FCA Italy S.p.A. 100.000
FCA Italy S.p.A. Turin Italy 800,000,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
FCA Partec S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
FGA Austro Car GmbH Vienna Austria 35,000 EUR 100.00 Fiat Group Automobiles Austria GmbH 100.000
FGA Investimenti S.p.A. Turin Italy 2,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
FGA Real Estate Services S.p.A. Turin Italy 150,679,554 EUR 100.00 FCA Italy S.p.A. 100.000
FGA Versicherungsservice GmbH Heilbronn Germany 26,000 EUR 100.00 Fiat Group Automobiles Germany AG
Rimaco S.A.
51.000
49.000
Fiat Auto Poland S.A. Bielsko-Biala Poland 660,334,600 PLN 100.00 FCA Italy S.p.A. 100.000
Fiat Automobil Vertriebs GmbH Frankfurt Germany 8,700,000 EUR 100.00 Fiat Group Automobiles Germany AG 100.000
Fiat Automobiles S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
2014
|
ANNUAL REPORT 279
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
FIAT AUTOMOBILES SERBIA DOO
KRAGUJEVAC Kragujevac Serbia 30,707,843,314 RSD
66.67 FCA Italy S.p.A.
66.670
Fiat Center (Suisse) S.A. Meyrin Switzerland 13,000,000 CHF 100.00 Fiat Group Automobiles Switzerland
S.A. 100.000
Fiat Center Italia S.p.A. Turin Italy 2,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat CR Spol. S.R.O. Prague Czech
Republic
1,000,000 CZK 100.00 FCA Italy S.p.A. 100.000
Fiat France Trappes France 235,480,520 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Austria GmbH Vienna Austria 37,000 EUR 100.00 FCA Italy S.p.A.
FGA Investimenti S.p.A.
98.000
2.000
Fiat Group Automobiles Belgium S.A. Auderghem Belgium 7,000,000 EUR 100.00 FCA Italy S.p.A.
Fiat Group Automobiles Switzerland
S.A.
99.998
0.002
Fiat Group Automobiles Central and
Eastern Europe KFT. Budapest Hungary 150,000,000 HUF 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Denmark A/S Glostrup Denmark 55,000,000 DKK 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Germany AG Frankfurt Germany 82,650,000 EUR 100.00 FCA Italy S.p.A.
Fiat Group Automobiles Switzerland
S.A.
99.000
1.000
Fiat Group Automobiles Hellas S.A. Argyroupoli Greece 62,783,499 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Ireland Ltd. Dublin Ireland 5,078,952 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Maroc S.A. Casablanca Morocco 1,000,000 MAD 99.95 FCA Italy S.p.A. 99.950
Fiat Group Automobiles Netherlands
B.V. Lijnden Netherlands 5,672,250 EUR 100.00 FCA Italy S.p.A.
100.000
Fiat Group Automobiles Portugal, S.A. Alges Portugal 1,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles South Africa
(Proprietary) Ltd Bryanston South Africa 640 ZAR
100.00 FCA Italy S.p.A.
100.000
Fiat Group Automobiles Spain S.A. Alcalá De
Henares
Spain 8,079,280 EUR 100.00 FCA Italy S.p.A.
Fiat Group Automobiles Switzerland
S.A.
99.998
0.002
Fiat Group Automobiles Sweden AB Kista Sweden 10,000,000 SEK 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Switzerland S.A. Schlieren Switzerland 21,400,000 CHF 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles UK Ltd Slough
Berkshire
United
Kingdom
44,600,000 GBP 100.00 FCA Italy S.p.A. 100.000
Fiat Group Marketing & Corporate
Communication S.p.A. Turin Italy 100,000,000 EUR
100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Partecipazioni France Société par
actions simpli?ée Trappes France 37,000 EUR 100.00 FGA Real Estate Services S.p.A. 100.000
Fiat Powertrain Technologies Poland
Sp. z o.o. Bielsko-Biala Poland 269,037,000 PLN 100.00 Fiat Powertrain Technologies SpA 100.000
Fiat Powertrain Technologies SpA Turin Italy 525,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Professional S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Real Estate Germany GmbH Frankfurt Germany 25,000 EUR 100.00 Fiat Automobil Vertriebs GmbH 100.000
Fiat SR Spol. SR.O. Bratislava Slovack
Republic
33,194 EUR 100.00 FCA Italy S.p.A. 100.000
Fidis S.p.A. Turin Italy 250,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
i-FAST Automotive Logistics S.r.l. Turin Italy 1,250,000 EUR 100.00 FCA Italy S.p.A. 100.000
i-FAST Container Logistics S.p.A. Turin Italy 2,500,000 EUR 100.00 FCA Italy S.p.A. 100.000
International Metropolitan Automotive
Promotion (France) S.A. Trappes France 2,977,680 EUR 100.00 Fiat France
99.997
Italian Automotive Center S.A. Auderghem Belgium 3,000,000 EUR 100.00 Fiat Group Automobiles Belgium S.A.
FCA Italy S.p.A.
99.988
0.012
Italian Motor Village Ltd. Slough
Berkshire
United
Kingdom
1,500,000 GBP 100.00 Fiat Group Automobiles UK Ltd 100.000
Italian Motor Village S.A. Alges Portugal 50,000 EUR 100.00 Fiat Group Automobiles Portugal, S.A. 100.000
Italian Motor Village, S.L.
Alcalá De
Henares
Spain 1,454,420 EUR 100.00 Fiat Group Automobiles Spain S.A. 100.000
280 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Lancia Automobiles S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
Mecaner S.A. Urdùliz Spain 3,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
Motor Village Austria GmbH Vienna Austria 37,000 EUR 100.00 Fiat Group Automobiles Austria GmbH 100.000
Of?cine Maserati Grugliasco S.p.A. Turin Italy 500,000 EUR 100.00 FCA Italy S.p.A. 100.000
Sata-Società Automobilistica
Tecnologie Avanzate S.p.A. Mel? Italy
276,640,000 EUR
100.00 FCA Italy S.p.A.
100.000
SBH EXTRUSION REAL ESTATE S.r.l. Turin Italy 110,000 EUR 100.00 FCA Partec S.p.A. 100.000
Società di Commercializzazione
e Distribuzione Ricambi S.p.A. in
liquidation Turin Italy 100,000 EUR 100.00 FCA Italy S.p.A. 100.000
VM Motori S.p.A. Cento Italy 21,008,000 EUR 100.00 Fiat Powertrain Technologies SpA 100.000
Business Auto: Luxury and Performance Brands
Ferrari
Ferrari S.p.A. Modena Italy 20,260,000 EUR 90.00 Fiat Chrysler Automobiles N.V. 90.000
410 Park Display Inc. Englewood
Cliffs
U.S.A. 100 USD 90.00 Ferrari N.America Inc. 100.000
Ferrari Australasia Pty Limited Sydney Australia 2,000,100 AUD 90.00 Ferrari S.p.A. 100.000
Ferrari Cars International Trading
(Shanghai) Co. Ltd. Shanghai
People’s Rep.
of China 2,212,500 USD
72.00 Ferrari S.p.A.
80.000
Ferrari Central / East Europe GmbH Wiesbaden Germany 1,000,000 EUR 90.00 Ferrari S.p.A. 100.000
FERRARI FAR EAST PTE LTD Singapore Singapore 1,000,000 SGD 90.00 Ferrari S.p.A. 100.000
Ferrari Financial Services AG Munich Germany 1,777,600 EUR 81.00 Ferrari Financial Services S.p.A. 100.000
Ferrari Financial Services Japan KK Tokyo Japan 199,950,000 JPY 81.00 Ferrari Financial Services S.p.A. 100.000
Ferrari Financial Services S.p.A. Modena Italy 5,100,000 EUR 81.00 Ferrari S.p.A. 90.000
Ferrari Financial Services, Inc. Wilmington U.S.A. 1,000 USD 81.00 Ferrari Financial Services S.p.A. 100.000
Ferrari GE.D. S.p.A. Modena Italy 11,570,000 EUR 90.00 Ferrari S.p.A. 100.000
Ferrari Japan KK Tokyo Japan 160,050,000 JPY 90.00 Ferrari S.p.A. 100.000
Ferrari Management Consulting
(Shanghai) CO., LTD Shanghai
People’s Rep.
of China 2,100,000 USD 90.00 Ferrari S.p.A. 100.000
Ferrari N.America Inc. Englewood
Cliffs
U.S.A. 200,000 USD 90.00 Ferrari S.p.A. 100.000
Ferrari North Europe Limited Slough
Berkshire
United
Kingdom
50,000 GBP 90.00 Ferrari S.p.A. 100.000
Ferrari South West Europe S.A.R.L. Levallois-
Perret
France 172,000 EUR 90.00 Ferrari S.p.A. 100.000
GSA-Gestions Sportives Automobiles
S.A. Meyrin Switzerland 1,000,000 CHF 90.00 Ferrari S.p.A. 100.000
Mugello Circuit S.p.A. Scarperia e
San Piero
Italy 10,000,000 EUR 90.00 Ferrari S.p.A.
Ferrari GE.D. S.p.A.
90.000
10.000
Maserati
Maserati S.p.A. Modena Italy 40,000,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
Maserati (China) Cars Trading Co., Ltd. Shanghai People’s Rep.
of China
10,000,000 USD 100.00 Maserati S.p.A. 100.000
Maserati (Suisse) S.A. Schlieren Switzerland 1,000,000 CHF 100.00 Maserati S.p.A. 100.000
Maserati Deutschland GmbH Wiesbaden Germany 500,000 EUR 100.00 Maserati S.p.A. 100.000
Maserati GB Limited Slough
Berkshire
United
Kingdom
20,000 GBP 100.00 Maserati S.p.A. 100.000
Maserati Japan KK Tokyo Japan 18,000,000 JPY 100.00 Maserati S.p.A. 100.000
Maserati North America Inc. Englewood
Cliffs
U.S.A. 1,000 USD 100.00 Maserati S.p.A. 100.000
Maserati West Europe societé par
actions simpli?ée Paris France 37,000 EUR 100.00 Maserati S.p.A. 100.000
2014
|
ANNUAL REPORT 281
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Components and Production Systems
Magneti Marelli
Magneti Marelli S.p.A. Corbetta Italy 254,325,965 EUR 99.99 Fiat Chrysler Automobiles N.V. 99.990 100.000
Administracion Magneti Marelli Sistemi
Sospensioni Mexicana S.R.L. de C.V. Mexico City Mexico 3,000 MXN 51.49 Magneti Marelli Promatcor Sistemi
Sospensioni Mexicana S.R.L. de C.V.
Automotive Lighting Rear Lamps
Mexico S. de r.l. de C.V.
99.000
1.000
Automotive Lighting Brotterode GmbH Brotterode Germany 7,270,000 EUR 99.99 Automotive Lighting Reutlingen GmbH 100.000
Automotive Lighting Italia S.p.A. Venaria Reale Italy 12,000,000 EUR 99.99 Automotive Lighting Reutlingen GmbH 100.000
Automotive Lighting LLC Farmington
Hills
U.S.A. 25,001,000 USD 100.00 Magneti Marelli Holding U.S.A. Inc. 100.000
Automotive Lighting o.o.o. Rjiasan Russia 386,875,663 RUB 99.99 Automotive Lighting Reutlingen GmbH 100.000
Automotive Lighting Rear Lamps
France S.a.s.
Saint Julien
du Sault France 5,134,480 EUR 99.99 Automotive Lighting Italia S.p.A. 100.000
Automotive Lighting Rear Lamps
Mexico S. de r.l. de C.V.
El Marques
Queretaro Mexico 50,000 MXN 100.00 Magneti Marelli Holding U.S.A. Inc. 100.000
Automotive Lighting Reutlingen GmbH Reutlingen Germany 1,330,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Automotive Lighting S.R.O. Jihlava Czech
Republic
927,637,000 CZK 99.99 Automotive Lighting Reutlingen GmbH 100.000
Automotive Lighting UK Limited Chadwell
Heath
United
Kingdom
40,387,348 GBP 99.99 Magneti Marelli S.p.A. 100.000
Centro Ricerche Plast-Optica S.p.A. Amaro Italy 1,033,000 EUR 75.49 Automotive Lighting Italia S.p.A. 75.500
CHANGCHUN MAGNETI MARELLI
POWERTRAIN COMPONENTS Co.Ltd. Changchun
People’s Rep.
of China
5,600,000 EUR
51.00 Magneti Marelli S.p.A.
51.000
Fiat CIEI S.p.A. in liquidation Corbetta Italy 220,211 EUR 99.99 Magneti Marelli S.p.A. 100.000
FMM Pernambuco Componentes
Automotivos Ltda Nova Goiana Brazil 37,984,800 BRL 64.99 Plastic Components and Modules
Automotive S.p.A.
65.000
Hefei Magneti Marelli Exhaust Systems
Co.Ltd. Hefei
People’s Rep.
of China 3,900,000 EUR
51.00 Magneti Marelli S.p.A. 51.000
Industrias Magneti Marelli Mexico S.A.
de C.V. Tepotzotlan Mexico 50,000 MXN 99.99 Magneti Marelli Sistemas Electronicos
Mexico S.A.
Servicios Administrativos Corp. IPASA
S.A.
99.998
0.002
JCMM Automotive d.o.o. Kragujevac Serbia 1,223,910,473 RSD 50.00 Plastic Components and Modules
Automotive S.p.A. 50.000
Magneti Marelli (China) Co. Ltd. Shanghai People’s Rep.
of China
17,500,000 USD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli After Market Parts and
Services S.p.A. Corbetta Italy 7,000,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Aftermarket GmbH Heilbronn Germany 100,000 EUR 99.99 Magneti Marelli After Market Parts and
Services S.p.A.
100.000
Magneti Marelli Aftermarket Sp. z o.o. Katowice Poland 2,000,000 PLN 99.99 Magneti Marelli After Market Parts and
Services S.p.A.
100.000
Magneti Marelli Argentina S.A. Buenos Aires Argentina 700,000 ARS 99.99 Magneti Marelli S.p.A.
Magneti Marelli France S.a.s.
95.000
5.000
Magneti Marelli Automotive
Components (Changsha) Co. Ltd Changsha
People’s Rep.
of China
5,400,000 USD
99.99 Magneti Marelli S.p.A.
100.000
Magneti Marelli Automotive
Components (WUHU) Co. Ltd. Wuhu
People’s Rep.
of China 32,000,000 USD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Automotive d.o.o.
Kragujevac Kragujevac Serbia 154,200,876 RSD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Automotive Electronics
(Guangzhou) Co. Limited Guangzhou
People’s Rep.
of China 16,100,000 USD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Automotive Lighting
(Foshan) Co. Ltd Guangzhou
People’s Rep.
of China 10,800,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
282 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Magneti Marelli Cofap Fabricadora de
Pecas Ltda Santo Andre Brazil 106,831,302 BRL 99.99 Magneti Marelli After Market Parts and
Services S.p.A. 100.000
Magneti Marelli Comandos Mecanicos
Industria e Comercio Ltda Itauna Brazil 1,000 BRL 99.99 Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda
Fiat do Brasil S.A.
99.900
0.100
Magneti Marelli Componentes
Plasticos Ltda Itauna Brazil 6,402,500 BRL 99.99 Plastic Components and Modules
Automotive S.p.A.
100.000
Magneti Marelli Conjuntos de Escape
S.A. Buenos Aires Argentina 7,480,071 ARS
99.99 Magneti Marelli S.p.A.
Magneti Marelli Argentina S.A.
95.000
5.000
Magneti Marelli d.o.o. Kragujevac Kragujevac Serbia 1,363,504,543 RSD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli do Brasil Industria e
Comercio SA Hortolandia Brazil 100,000 BRL
99.99 Magneti Marelli S.p.A.
100.000
Magneti Marelli Espana S.A. Llinares del
Valles
Spain 781,101 EUR 99.99 Magneti Marelli Iberica S.A. 100.000
Magneti Marelli France S.a.s. Trappes France 19,066,824 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli GmbH Russelsheim Germany 200,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Holding U.S.A. Inc. Wixom U.S.A. 10 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
Magneti Marelli Iberica S.A. Santpedor Spain 389,767 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli India Private Ltd Haryana India 20,000,000 INR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli International Trading
(Shanghai) Co. LTD Shanghai
People’s Rep.
of China 200,000 USD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Japan K.K. KohoKu-Ku-
Yokohama-
Kanagawa
Japan 360,000,000 JPY 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Mako Elektrik Sanayi
Ve Ticaret Anonim Sirketi Bursa Turkey
50,005 TRY
99.94 Automotive Lighting Reutlingen GmbH
PLASTIFORM PLASTIK SANAY ve
TICARET A.S.
Sistemi Comandi Meccanici Otomotiv
Sanayi Ve Ticaret A.S.
99.842
0.052
0.052
Magneti Marelli Motopropulsion France
SAS Argentan France
37,002 EUR 99.99 Magneti Marelli S.p.A.
100.000
Magneti Marelli North America Inc. Wilmington U.S.A. 7,491,705 USD 99.99 Magneti Marelli Cofap Fabricadora de
Pecas Ltda 100.000
Magneti Marelli of Tennessee LLC Auburn Hills U.S.A. 1,300,000 USD 100.00 Magneti Marelli Holding U.S.A. Inc. 100.000
Magneti Marelli Poland Sp. z o.o. Sosnowiec Poland 83,500,000 PLN 99.99 Automotive Lighting Reutlingen GmbH 100.000
Magneti Marelli Powertrain India Private
Limited Haryana India 450,000,000 INR 51.00 Magneti Marelli S.p.A. 51.000
Magneti Marelli Powertrain Mexico S.
de r.l. de c.v. Mexico City Mexico 3,000 MXN 99.99 Magneti Marelli S.p.A.
Automotive Lighting Rear Lamps
Mexico S. de r.l. de C.V.
99.967
0.033
Magneti Marelli Powertrain Slovakia
s.r.o. Kechnech
Slovack
Republic 7,000,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Powertrain U.S.A. LLC Sanford U.S.A. 25,000,000 USD 100.00 Magneti Marelli Holding U.S.A. Inc. 100.000
Magneti Marelli Promatcor Sistemi
Sospensioni Mexicana S.R.L. de C.V. Mexico City Mexico 3,000 MXN 51.00 Sistemi Sospensioni S.p.A. 51.000
Magneti Marelli Repuestos S.A. Buenos Aires Argentina 2,012,000 ARS 99.99 Magneti Marelli After Market Parts and
Services S.p.A.
Magneti Marelli Cofap Fabricadora de
Pecas Ltda
52.000
48.000
Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda Contagem Brazil
206,834,874 BRL 99.99 Magneti Marelli S.p.A.
Automotive Lighting Reutlingen GmbH
66.111
33.889
Magneti Marelli Sistemas Electronicos
Mexico S.A. Tepotzotlan Mexico 50,000 MXN 99.99 Magneti Marelli S.p.A.
Servicios Administrativos Corp. IPASA
S.A.
99.998
0.002
2014
|
ANNUAL REPORT 283
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Magneti Marelli Slovakia s.r.o. Kechnech Slovack
Republic
98,006,639 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli South Africa
(Proprietary) Limited Johannesburg South Africa 7,550,000 ZAR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Suspension Systems
Bielsko Sp. z.o.o. Bielsko-Biala Poland 70,050,000 PLN 99.99 Sistemi Sospensioni S.p.A. 100.000
Magneti Marelli Um Electronic Systems
Private Limited Haryana India 420,000,000 INR 51.00 Magneti Marelli S.p.A. 51.000
Malaysian Automotive Lighting SDN.
BHD
Simpang
Ampat Malaysia 6,000,000 MYR 79.99 Automotive Lighting Reutlingen GmbH 80.000
MM I&T Sas Valbonne
Sophia
Antipolis France 607,000 EUR 99.99 Magneti Marelli S.p.A.
100.000
MMH Industria e Comercio De
Componentes Automotivos Ltda Nova Goiana Brazil 1,000 BRL 99.99 Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda
Magneti Marelli Cofap Fabricadora de
Pecas Ltda
99.900
0.100
Plastic Components and Modules
Automotive S.p.A. Grugliasco Italy 10,000,000 EUR 99.99 Plastic Components and Modules
Holding S.p.A.
100.000
Plastic Components and Modules
Holding S.p.A. Grugliasco Italy 10,000,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Plastic Components and Modules
Poland S.A. Sosnowiec Poland
21,000,000 PLN
99.99 Plastic Components and Modules
Automotive S.p.A. 100.000
Plastic Components Fuel Systems
Poland Sp. z o.o. Sosnowiec Poland 29,281,500 PLN 99.99 Plastic Components and Modules
Poland S.A. 100.000
PLASTIFORM PLASTIK SANAY ve
TICARET A.S. Bursa Turkey 715,000 TRY 99.94 Magneti Marelli Mako Elektrik Sanayi
Ve Ticaret Anonim Sirketi
100.000
Servicios Administrativos Corp. IPASA
S.A. Col.
Chapultepec
Mexico 1,000 MXN
99.99 Magneti Marelli Sistemas Electronicos
Mexico S.A.
Industrias Magneti Marelli Mexico S.A.
de C.V.
99.990
0.010
Sistemi Comandi Meccanici Otomotiv
Sanayi Ve Ticaret A.S. Bursa Turkey 90,000 TRY 99.89 Magneti Marelli Mako Elektrik Sanayi
Ve Ticaret Anonim Sirketi 99.956
Sistemi Sospensioni S.p.A. Corbetta Italy 37,622,179 EUR 99.99 Magneti Marelli S.p.A. 100.000
Sof?aggio Polimeri S.r.l. Leno Italy 45,900 EUR 84.99 Plastic Components and Modules
Automotive S.p.A.
85.000
Tecnologia de Iluminacion Automotriz
S.A. de C.V. Juarez Mexico 50,000 MXN 100.00 Automotive Lighting LLC
Automotive Lighting Rear Lamps
Mexico S. de r.l. de C.V.
99.998
0.002
U?ma S.A.S. Trappes France 44,940 EUR 99.99 Magneti Marelli S.p.A.
Fiat Partecipazioni S.p.A.
65.020
34.980
Teksid
Teksid S.p.A. Turin Italy 71,403,261 EUR 84.79 Fiat Chrysler Automobiles N.V. 84.791
Compania Industrial Frontera S.A.
de C.V. Frontera Mexico 50,000 MXN 84.79 Teksid Hierro de Mexico S.A. de C.V.
Teksid Inc.
99.800
0.200
Funfrap-Fundicao Portuguesa S.A. Cacia Portugal 13,697,550 EUR 70.89 Teksid S.p.A. 83.607
Teksid Aluminum S.r.l. Carmagnola Italy 5,000,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
Teksid do Brasil Ltda Betim Brazil 233,679,013 BRL 84.79 Teksid S.p.A. 100.000
Teksid Hierro de Mexico S.A. de C.V. Frontera Mexico 716,088,300 MXN 84.79 Teksid S.p.A. 100.000
Teksid Inc. Wilmington U.S.A. 100,000 USD 84.79 Teksid S.p.A. 100.000
Teksid Iron Poland Sp. z o.o. Skoczow Poland 115,678,500 PLN 84.79 Teksid S.p.A. 100.000
284 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Comau
Comau S.p.A. Grugliasco Italy 48,013,959 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
COMAU (KUNSHAN) Automation
Co. Ltd. Kunshan
People’s Rep.
of China 3,000,000 USD 100.00 Comau S.p.A. 100.000
Comau (Shanghai) Engineering Co.
Ltd. Shanghai
People’s Rep.
of China 5,000,000 USD 100.00 Comau S.p.A. 100.000
Comau (Shanghai) International Trading
Co. Ltd. Shanghai
People’s Rep.
of China
200,000 USD 100.00 Comau S.p.A. 100.000
Comau Argentina S.A. Buenos Aires Argentina 500,000 ARS 100.00 Comau S.p.A.
Comau do Brasil Industria e Comercio
Ltda.
Fiat Argentina S.A.
55.280
44.690
0.030
Comau Automatizacion S.de R.L. C.V. Cuautitlan
Izcalli
Mexico 62,204,118 MXN 100.00 Comau Mexico S.de R.L. de C.V. 100.000
Comau Canada Inc. Windsor Canada 100 CAD 100.00 Comau Inc. 100.000
Comau Deutschland GmbH Boblingen Germany 1,330,000 EUR 100.00 Comau S.p.A. 100.000
Comau do Brasil Industria e Comercio
Ltda. Betim Brazil
102,742,653 BRL
100.00 Comau S.p.A.
100.000
Comau Estil Unl. Luton
United
Kingdom
107,665,056 USD 100.00 Comau S.p.A. 100.000
Comau France S.A.S. Trappes France 6,000,000 EUR 100.00 Comau S.p.A. 100.000
Comau Iaisa S.de R.L. de C.V. Cuautitlan
Izcalli
Mexico 17,181,062 MXN 100.00 Comau Mexico S.de R.L. de C.V. 100.000
Comau Inc. South?eld U.S.A. 100 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
Comau India Private Limited Pune India 239,935,020 INR 100.00 Comau S.p.A.
Comau Deutschland GmbH
99.990
0.010
Comau Mexico S.de R.L. de C.V. Cuautitlan
Izcalli
Mexico 99,349,172 MXN 100.00 Comau S.p.A. 100.000
Comau Poland Sp. z o.o. Bielsko-Biala Poland 3,800,000 PLN 100.00 Comau S.p.A. 100.000
Comau Romania S.R.L. Oradea Romenia 23,673,270 RON 100.00 Comau S.p.A. 100.000
Comau Russia OOO Moscow Russia 4,770,225 RUB 100.00 Comau S.p.A.
Comau Deutschland GmbH
99.000
1.000
Comau Service Systems S.L. Madrid Spain 250,000 EUR 100.00 Comau S.p.A. 100.000
Comau Trebol S.de R.L. de C.V. Tepotzotlan Mexico 16,168,211 MXN 100.00 Comau Mexico S.de R.L. de C.V. 100.000
Comau U.K. Limited Rugby United
Kingdom
2,502,500 GBP 100.00 Comau S.p.A. 100.000
Other Activities: Holding companies and Other companies
BMI S.p.A. Turin Italy 124,820 EUR 100.00 Editrice La Stampa S.p.A. 100.000
Deposito Avogadro S.p.A. Turin Italy 5,100,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Editrice La Stampa S.p.A. Turin Italy 5,700,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
FCA North America Holdings LLC Wilmington U.S.A. 0 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
Fiat Argentina S.A. Buenos Aires Argentina 5,292,117 ARS 100.00 Fiat Services S.p.A.
Fiat do Brasil S.A.
SGR-Sociedad para la Gestion de
Riesgos S.A.
Fiat Auto Argentina S.A.
90.961
9.029
0.009
0.001
Fiat Chrysler Finance Canada Ltd. Calgary Canada 10,099,885 CAD 100.00 Fiat Chrysler Finance Europe S.A. 100.000
Fiat Chrysler Finance Europe S.A. Luxembourg Luxembourg 251,494,000 EUR 100.00 Fiat Chrysler Finance S.p.A.
Fiat Chrysler Automobiles N.V.
60.003
39.997
Fiat Chrysler Finance North America Inc. Wilmington U.S.A. 190,090,010 USD 100.00 Fiat Chrysler Finance Europe S.A. 100.000
Fiat Chrysler Finance S.p.A. Turin Italy 224,440,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
Fiat do Brasil S.A. Nova Lima Brazil 992,030,675 BRL 100.00 FCA Italy S.p.A.
FGA Real Estate Services S.p.A.
95.667
4.333
Fiat Financas Brasil Ltda Nova Lima Brazil 2,469,701 BRL 100.00 Fiat Chrysler Finance S.p.A.
Fiat do Brasil S.A.
99.994
0.006
Fiat Finance et Services S.A. Trappes France 3,700,000 EUR 100.00 Fiat Services S.p.A. 99.997
2014
|
ANNUAL REPORT 285
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Fiat GmbH Ulm Germany 200,000 EUR 100.00 Fiat Services S.p.A. 100.000
Fiat Group Purchasing France S.a.r.l. Trappes France 7,700 EUR 100.00 Fiat Group Purchasing S.r.l. 100.000
Fiat Group Purchasing Poland Sp.
z o.o. Bielsko-Biala Poland 300,000 PLN 100.00 Fiat Group Purchasing S.r.l. 100.000
Fiat Group Purchasing S.r.l. Turin Italy 600,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Iberica S.A. Madrid Spain 2,797,054 EUR 100.00 Fiat Services S.p.A. 100.000
Fiat Information Technology, Excellence
and Methods S.p.A. Turin Italy 500,000 EUR 100.00 Fiat Services S.p.A. 100.000
Fiat Partecipazioni S.p.A. Turin Italy 614,071,587 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Polska Sp. z o.o. Warsaw Poland 25,500,000 PLN 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Services Belgium N.V. Zedelgem Belgium 62,000 EUR 100.00 Fiat Services S.p.A.
Servizi e Attività Doganali per l’Industria
S.p.A.
99.960
0.040
Fiat Services d.o.o. Kragujevac Kragujevac Serbia 15,047,880 RSD 100.00 Fiat Services S.p.A. 100.000
Fiat Services Polska Sp. z o.o. Bielsko-Biala Poland 3,600,000 PLN 100.00 Fiat Services S.p.A. 100.000
Fiat Services S.p.A. Turin Italy 3,600,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Services Support Mexico S.A.
de C.V. Mexico City Mexico 100 MXN
100.00 Fiat Services S.p.A.
Servizi e Attività Doganali per l’Industria
S.p.A.
99.000
1.000
Fiat Services U.S.A., Inc. Wilmington U.S.A. 500,000 USD 100.00 Fiat Services S.p.A. 100.000
Fiat Servizi per l’Industria S.c.p.a.
Turin Italy
1,652,669
EUR
90.31
FCA Italy S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Chrysler Automobiles N.V.
Teksid S.p.A.
Abarth & C. S.p.A.
C.R.F. Società Consortile per Azioni
Comau S.p.A.
Editrice La Stampa S.p.A.
Ferrari S.p.A.
Fiat Chrysler Finance S.p.A.
Fiat Group Marketing & Corporate
Communication S.p.A.
Fiat Information Technology, Excellence
and Methods S.p.A.
Fiat Services S.p.A.
Fidis S.p.A.
Magneti Marelli S.p.A.
Maserati S.p.A.
Orione-Società Industriale per la
Sicurezza e la Vigilanza Consortile per
Azioni
SIRIO - Sicurezza Industriale Società
consortile per azioni
Deposito Avogadro S.p.A.
51.000
11.500
5.000
2.000
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
0.500
Fiat U.K. Limited Basildon United
Kingdom
750,000 GBP 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat U.S.A. Inc. New York U.S.A. 16,830,000 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
FNA HOLDCO 12 LLC Detroit U.S.A. 0 USD 100.00 FCA North America Holdings LLC 100.000
Neptunia Assicurazioni Marittime S.A. Lugano Switzerland 10,000,000 CHF 100.00 Rimaco S.A. 100.000
Nexta Srl Turin Italy 50,000 EUR 100.00 Editrice La Stampa S.p.A. 100.000
Publikompass S.p.A. Turin Italy 3,068,000 EUR 100.00 Editrice La Stampa S.p.A. 100.000
Rimaco S.A. Lugano Switzerland 350,000 CHF 100.00 Fiat Partecipazioni S.p.A. 100.000
Risk Management S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Sadi Polska-Agencja Celna Sp. z o.o. Bielsko-Biala Poland 500,000 PLN 100.00 Servizi e Attività Doganali per l’Industria
S.p.A.
100.000
Servizi e Attività Doganali per l’Industria
S.p.A. Turin Italy
520,000 EUR
100.00 Fiat Services S.p.A.
100.000
286 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
SIRIO - Sicurezza Industriale Società
consortile per azioni
Turin
Italy
120,000
EUR
86.59
Fiat Partecipazioni S.p.A.
FCA Italy S.p.A.
Magneti Marelli S.p.A.
Fiat Powertrain Technologies SpA
Sata-Società Automobilistica
Tecnologie Avanzate S.p.A.
C.R.F. Società Consortile per Azioni
Fiat Chrysler Automobiles N.V.
Comau S.p.A.
Ferrari S.p.A.
Teksid S.p.A.
Fiat Services S.p.A.
Sistemi Sospensioni S.p.A.
Teksid Aluminum S.r.l.
Fiat Servizi per l’Industria S.c.p.a.
Fiat Chrysler Finance S.p.A.
Fidis S.p.A.
Editrice La Stampa S.p.A.
Automotive Lighting Italia S.p.A.
FGA Real Estate Services S.p.A.
Fiat Group Marketing & Corporate
Communication S.p.A.
Fiat Group Purchasing S.r.l.
Servizi e Attività Doganali per l’Industria
S.p.A.
Plastic Components and Modules
Automotive S.p.A.
Fiat Center Italia S.p.A.
Abarth & C. S.p.A.
Maserati S.p.A.
Orione-Società Industriale per la
Sicurezza e la Vigilanza Consortile per
Azioni
Risk Management S.p.A.
Sisport Fiat S.p.A. - Società sportiva
dilettantistica
Magneti Marelli After Market Parts and
Services S.p.A.
Customer Services Centre S.r.l.
Deposito Avogadro S.p.A.
Easy Drive S.r.l.
FCA Fleet & Tenders S.R.L.
Fiat Information Technology, Excellence
and Methods S.p.A.
i-FAST Automotive Logistics S.r.l.
i-FAST Container Logistics S.p.A.
58.230
16.600
1.841
1.314
0.833
0.768
0.751
0.729
0.729
0.664
0.593
0.551
0.540
0.503
0.406
0.325
0.273
0.255
0.103
0.103
0.103
0.103
0.065
0.045
0.039
0.039
0.039
0.039
0.039
0.037
0.022
0.022
0.022
0.022
0.022
0.020
0.020
Sisport Fiat S.p.A. - Società sportiva
dilettantistica Turin Italy 889,049 EUR
100.00 Fiat Partecipazioni S.p.A.
100.000
Joint arrangements
Business Auto: Car Mass-Market brands
APAC
Fiat India Automobiles Limited Ranjangaon India 24,451,596,600 INR 50.00 FCA Italy S.p.A. 50.000
EMEA
Società Europea Veicoli Leggeri-Sevel
S.p.A. Atessa Italy 68,640,000 EUR 50.00 FCA Italy S.p.A. 50.000
Jointly-controlled entities accounted for using the equity method
Business Auto: Car Mass-Market brands
NAFTA
United States Council for Automotive
Research LLC South?eld U.S.A. 100 USD 33.33 FCA US LLC 33.330
APAC
GAC FIAT Automobiles Co. Ltd. Changsha People’s Rep.
of China
2,400,000,000 CNY 50.00 FCA Italy S.p.A. 50.000
2014
|
ANNUAL REPORT 287
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Jointly-controlled entities accounted for using the equity method (continued)
EMEA
FGA CAPITAL S.p.A. Turin Italy 700,000,000 EUR 50.00 FCA Italy S.p.A. 50.000
FAL Fleet Services S.A.S. Trappes France 3,000,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FC France S.A. Trappes France 11,360,000 EUR 50.00 FGA CAPITAL S.p.A. 99.999
FGA Bank G.m.b.H. Vienna Austria 5,000,000 EUR 50.00 FGA CAPITAL S.p.A.
Fidis S.p.A.
50.000
25.000
FGA Bank Germany GmbH Heilbronn Germany 39,600,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL BELGIUM S.A. Auderghem Belgium 3,718,500 EUR 50.00 FGA CAPITAL S.p.A. 99.999
FGA Capital Danmark A/S Glostrup Denmark 14,154,000 DKK 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL HELLAS S.A. Argyroupoli Greece 1,200,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL IFIC SA Alges Portugal 10,000,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL IRELAND Public Limited
Company Dublin Ireland 132,562 EUR 50.00 FGA CAPITAL S.p.A. 99.994
FGA Capital Netherlands B.V. Lijnden Netherlands 3,085,800 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL RE Limited Dublin Ireland 1,000,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA Capital Services Spain S.A. Alcalá De
Henares Spain
25,145,299 EUR
50.00 FGA CAPITAL S.p.A.
100.000
FGA Capital Spain E.F.C. S.A. Alcalá De
Henares Spain
26,671,557 EUR
50.00 FGA CAPITAL S.p.A.
100.000
FGA CAPITAL UK LTD. Slough
Berkshire
United
Kingdom 50,250,000 GBP 50.00 FGA CAPITAL S.p.A.
100.000
FGA CONTRACTS UK LTD. Slough
Berkshire
United
Kingdom
19,000,000 GBP
50.00 FGA CAPITAL S.p.A. 100.000
FGA Distribuidora Portugal S.A. Alges Portugal 500,300 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA INSURANCE HELLAS S.A. Argyroupoli Greece 60,000 EUR 49.99 FGA CAPITAL HELLAS S.A. 99.975
FGA Leasing GmbH Vienna Austria 40,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA Leasing Polska Sp. z o.o. Warsaw Poland 24,384,000 PLN 50.00 FGA CAPITAL S.p.A. 100.000
FGA WHOLESALE UK LTD. Slough
Berkshire
United
Kingdom
20,500,000 GBP 50.00 FGA CAPITAL S.p.A. 100.000
Fiat Bank Polska S.A. Warsaw Poland 125,000,000 PLN 50.00 FGA CAPITAL S.p.A. 100.000
Fidis Finance (Suisse) S.A. Schlieren Switzerland 24,100,000 CHF 50.00 FGA CAPITAL S.p.A. 100.000
FL Auto Snc Trappes France 8,954,581 EUR 50.00 FC France S.A. 99.998
FL Location SNC Trappes France 76,225 EUR 49.99 FC France S.A. 99.980
Leasys S.p.A. Turin Italy 77,979,400 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FER MAS Oto Ticaret A.S. Istanbul Turkey 5,500,000 TRY 37.64 Tofas-Turk Otomobil Fabrikasi A.S. 99.418
Koc Fiat Kredi Tuketici Finansmani A.S. Istanbul Turkey 30,000,000 TRY 37.86 Tofas-Turk Otomobil Fabrikasi A.S. 100.000
Tofas-Turk Otomobil Fabrikasi A.S. Levent Turkey 500,000,000 TRY 37.86 FCA Italy S.p.A. 37.856
Components and Production Systems
Magneti Marelli
Hubei Huazhoung Magneti Marelli
Automotive Lighting Co. Ltd
Hubei
Province
People’s Rep.
of China
138,846,000 CNY 50.00 Automotive Lighting Reutlingen GmbH 50.000
Magneti Marelli Motherson Auto
System Limited
New Delhi India 1,400,000,000 INR 50.00 Magneti Marelli S.p.A.
Magneti Marelli Motherson India
Holding B.V.
36.429
27.143
0.000
100.000
Magneti Marelli Motherson India
Holding B.V. Lijnden Netherlands 2,000,000 EUR 50.00 Magneti Marelli S.p.A. 50.000
Magneti Marelli Motherson Shock
Absorbers (India) Private Limited Pune India 1,539,000,000 INR
50.00 Magneti Marelli S.p.A.
50.000
Magneti Marelli SKH Exhaust Systems
Private Limited New Delhi India 274,190,000 INR 50.00 Magneti Marelli S.p.A. 50.000
Magneti Marelli Talbros Chassis
Systems Pvt. Ltd. Haryana India 120,600,000 INR
50.00 Sistemi Sospensioni S.p.A.
50.000
288 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Jointly-controlled entities accounted for using the equity method (continued)
SAIC MAGNETI MARELLI Powertrain
Co. Ltd Shanghai
People’s Rep.
of China
23,000,000 EUR
50.00 Magneti Marelli S.p.A.
50.000
SKH Magneti Marelli Exhaust Systems
Private Limited New Delhi India
95,450,000 INR
46.62 Magneti Marelli S.p.A.
46.621
50.000
Zhejiang Wanxiang Magneti Marelli
Shock Absorbers Co. Ltd.
Zhenjiang-
Jangsu
People’s Rep.
of China 100,000,000 CNY 50.00 Magneti Marelli S.p.A. 50.000
Teksid
Hua Dong Teksid Automotive Foundry
Co. Ltd.
Zhenjiang-
Jangsu
People’s Rep.
of China 385,363,500 CNY
42.40 Teksid S.p.A.
50.000
Subsidiaries accounted for using the equity method
Business Auto: Car Mass-Market brands
NAFTA
Alhambra Chrysler Jeep Dodge, Inc. Wilmington U.S.A. 1,272,700 USD 100.00 FCA US LLC 100.000
Downriver Dodge, Inc. Wilmington U.S.A. 604,886 USD 100.00 FCA US LLC 100.000
Gwinnett Automotive Inc. Wilmington U.S.A. 3,505,019 USD 100.00 FCA US LLC 100.000
La Brea Avenue Motors, Inc. Wilmington U.S.A. 7,373,800 USD 100.00 FCA US LLC 100.000
North Tampa Chrysler Jeep Dodge, Inc. Wilmington U.S.A. 1,014,700 USD 100.00 FCA US LLC 100.000
Superstition Springs Chrysler Jeep, Inc. Wilmington U.S.A. 675,400 USD 100.00 FCA US LLC 100.000
Superstition Springs MID LLC Wilmington U.S.A. 3,000,000 USD 100.00 CG MID LLC 100.000
EMEA
AC Austro Car Handelsgesellschaft
m.b.h. & Co. OHG Vienna Austria 0 EUR 100.00 FGA Austro Car GmbH 100.000
ALFA ROMEO INC. Auburn Hills U.S.A. 0 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
Chrysler Jeep Ticaret A.S. Istanbul Turkey 5,357,000 TRY 99.96 CG EU NSC LIMITED 99.960
Fabbrica Italia Mira?ori S.p.A. Turin Italy 200,000 EUR 100.00 FGA Real Estate Services S.p.A. 100.000
GESTIN POLSKA Sp. z o.o. Bielsko-Biala Poland 500,000 PLN 100.00 Fiat Auto Poland S.A. 100.000
Italcar SA Casablanca Morocco 4,000,000 MAD 99.85 Fiat Group Automobiles Maroc S.A. 99.900
Sirio Polska Sp. z o.o. Bielsko-Biala Poland 1,350,000 PLN 100.00 Fiat Auto Poland S.A. 100.000
Components and Production Systems
Magneti Marelli
Cofap Fabricadora de Pecas Ltda Santo Andre Brazil 75,720,716 BRL 68.34 Magneti Marelli do Brasil Industria e
Comercio SA
68.350
Comau
COMAU Czech s.r.o. Ostrava Czech
Republic
5,400,000 CZK 100.00 Comau S.p.A. 100.000
Other Activities: Holding companies and Other companies
Fiat (China) Business Co., Ltd. Beijing People’s Rep.
of China
3,000,000 USD 100.00 Fiat Partecipazioni S.p.A. 100.000
SGR-Sociedad para la Gestion de
Riesgos S.A. Buenos Aires Argentina
150,000 ARS 99.96 Rimaco S.A.
99.960
Subsidiaries valued at cost
Business Auto: Car Mass-Market brands
NAFTA
CarCo Intermediate Mexico LLC Wilmington U.S.A. 1 USD 100.00 Chrysler Mexico Investment Holdings
Cooperatie U.A.
100.000
CHRYSLER GROUP DUTCH
OPERATING LLC Wilmington U.S.A. 0 USD
100.00 CNI CV
100.000
Chrysler Receivables 1 Inc. Windsor Canada 100 CAD 100.00 Chrysler Canada Inc. 100.000
2014
|
ANNUAL REPORT 289
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Subsidiaries valued at cost (continued)
Chrysler Receivables 2 Inc. Windsor Canada 100 CAD 100.00 Chrysler Canada Inc. 100.000
Chrysler Receivables Limited
Partnership Windsor Canada 0 CAD 100.00 Chrysler Canada Inc.
Chrysler Receivables 1 Inc.
Chrysler Receivables 2 Inc.
99.990
0.005
0.005
FCA Co-Issuer Inc. Wilmington U.S.A. 100 USD 100.00 FCA US LLC 100.000
Fundacion Chrysler, I.A.P. Santa Fe Mexico 0 MXN 100.00 Chrysler de Mexico S.A. de C.V. 100.000
The Chrysler Foundation Bingham
Farms
U.S.A. 0 USD 100.00 FCA US LLC 100.000
LATAM
(*) SBH EXTRUSAO DO BRASIL LTDA. Betim Brazil 15,478,371 BRL 100.00 SBH Extrusion Srl 100.000
EMEA
Banbury Road Motors Limited Slough
Berkshire
United
Kingdom
100 GBP 100.00 Fiat Group Automobiles UK Ltd 100.000
Chrysler Netherlands Holding Cooperatie
U.A. Amsterdam Netherlands
0 EUR
100.00 CNI CV
CHRYSLER GROUP DUTCH
OPERATING LLC
99.000
1.000
Chrysler UK Pension Trustees Limited Slough
Berkshire
United
Kingdom
1 GBP 100.00 Chrysler UK Limited 100.000
CNI CV Amsterdam Netherlands 0 EUR 100.00 FCA US LLC
FCA MINORITY LLC
99.000
1.000
CODEFIS Società consortile per azioni Turin Italy 120,000 EUR 51.00 FCA Italy S.p.A. 51.000
CONSORZIO FIAT ENERGY Turin Italy 7,000 EUR 54.97 Comau S.p.A.
FCA Italy S.p.A.
Plastic Components and Modules
Automotive S.p.A.
Teksid S.p.A.
14.286
14.286
14.286
14.286
Consorzio Servizi Balocco Turin Italy 10,000 EUR 91.37 FCA Italy S.p.A.
Ferrari S.p.A.
Fiat Powertrain Technologies SpA
Maserati S.p.A.
Abarth & C. S.p.A.
77.800
5.300
4.500
2.800
1.500
FAS FREE ZONE Ltd. Kragujevac Kragujevac Serbia 2,281,603 RSD 66.67 FIAT AUTOMOBILES SERBIA DOO
KRAGUJEVAC
100.000
FGA Russia S.r.l. Turin Italy 1,682,028 EUR 100.00 FCA Italy S.p.A. 100.000
FIAT GROUP AUTOMOBILES
FINLAND Oy Helsinki Finland
50,000 EUR
100.00 FCA Italy S.p.A.
100.000
Fiat Motor Sales Ltd Slough
Berkshire
United
Kingdom
1,500,000 GBP 100.00 Fiat Group Automobiles UK Ltd 100.000
OOO “CABEKO” Nizhniy
Novgorod
Russia 181,869,062 RUB 100.00 FGA Russia S.r.l.
FCA Italy S.p.A.
99.591
0.409
(*) SBH Extrusion Srl Turin Italy 30,000 EUR 100.00 FCA Partec S.p.A. 100.000
VM North America Inc. Auburn Hills U.S.A. 1,000 USD 100.00 FCA Italy S.p.A. 100.000
Business Auto: Luxury and Performance Brands
Ferrari
Scuderia Ferrari Club S.c. a r.l. Maranello Italy 105,000 EUR 84.99 Ferrari S.p.A. 94.438
Components and Production Systems
Magneti Marelli
Magneti Marelli Stamping & Welding
Industria e Comercio Automotivos Ltda Nova Goiana Brazil
1,000 BRL 99.99 Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda
Magneti Marelli Cofap Fabricadora de
Pecas Ltda
99.900
0.100
Magneti Marelli Suspansiyon Sistemleri
Limited Sirketi Bursa Turkey
520,000 TRY
99.99 Sistemi Sospensioni S.p.A.
100.000
(*) Asset held for sale.
290 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Subsidiaries valued at cost (continued)
Magneti Marelli Trim Parts Industria e
Comercio Ltda Nova Goiana Brazil
1,000 BRL
99.99 Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda
Magneti Marelli Cofap Fabricadora de
Pecas Ltda
99.900
0.100
New Business 34 S.r.l. Turin Italy 50,000,000 EUR 99.99 Plastic Components and Modules
Automotive S.p.A.
100.000
Comau
Consorzio Fermag in liquidation Bareggio Italy 144,608 EUR 68.00 Comau S.p.A. 68.000
Other Activities: Holding companies and Other companies
Fiat Chrysler Finance Netherlands B.V. Amsterdam Netherlands 1 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
Fiat Common Investment Fund Limited London United Kingdom 2 GBP 100.00 Fiat U.K. Limited 100.000
Fiat Investimenti S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Investments S.p.A. Turin Italy 120,000 EUR 100.00 New Business Netherlands N.V. 100.000
Fiat Oriente S.A.E. in liquidation Cairo Egypt 50,000 EGP 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Partecipazioni India Private Limited New Delhi India 28,605,400 INR 100.00 Fiat Partecipazioni S.p.A.
Fiat Group Purchasing S.r.l.
99.825
0.175
Fides Corretagens de Seguros Ltda Belo Horizonte Brazil 365,525 BRL 100.00 Rimaco S.A. 99.998
Isvor Fiat India Private Ltd. in liquidation New Delhi India 1,750,000 INR 100.00 Fiat Partecipazioni S.p.A. 100.000
New Business 29 S.c.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A.
Fiat Chrysler Automobiles N.V.
80.000
20.000
New Business 30 S.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
New Business 35 s.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
New Business 36 s.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
New Business Netherlands N.V. Amsterdam Netherlands 50,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
OOO Sadi Rus Moscow Russia 2,700,000 RUB 100.00 Sadi Polska-Agencja Celna Sp. z o.o.
Fiat Services Polska Sp. z o.o.
90.000
10.000
Orione-Società Industriale per la Sicurezza
e la Vigilanza Consortile per Azioni Turin Italy
120,000 EUR
97.73 Fiat Partecipazioni S.p.A.
Fiat Chrysler Automobiles N.V.
Editrice La Stampa S.p.A.
FCA Italy S.p.A.
Comau S.p.A.
Ferrari S.p.A.
Fiat Chrysler Finance S.p.A.
Fiat Group Marketing & Corporate
Communication S.p.A.
Fiat Powertrain Technologies SpA
Fiat Services S.p.A.
Fiat Servizi per l’Industria S.c.p.a.
Magneti Marelli S.p.A.
Sisport Fiat S.p.A. - Società sportiva
dilettantistica
Teksid S.p.A.
76.722
18.003
0.439
0.439
0.220
0.220
0.220
0.220
0.220
0.220
0.220
0.220
0.220
0.220
Associated companies accounted for using the equity method
Business Auto: Car Mass-Market brands
APAC
Hangzhou IVECO Automobile
Transmission Technology Co., Ltd. Hangzhou
People’s Rep.
of China 555,999,999 CNY
33.33 Fiat Partecipazioni S.p.A.
33.333
Haveco Automotive Transmission
Co. Ltd. Zhajiang
People’s Rep.
of China
200,010,000 CNY
33.33 Fiat Partecipazioni S.p.A.
33.330
EMEA
Arab American Vehicles Company S.A.E. Cairo Egypt 6,000,000 USD 49.00 FCA US LLC 49.000
Components and Production Systems
Magneti Marelli
HMC MM Auto Ltd New Delhi India 214,500,000 INR 40.00 Magneti Marelli S.p.A. 40.000
2014
|
ANNUAL REPORT 291
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Associated companies accounted for using the equity method (continued)
Other Activities: Holding companies and Other companies
Iveco-Motor Sich, Inc. Zaporozhye Ukraine 26,568,000 UAH 38.62 Fiat Partecipazioni S.p.A. 38.618
Otoyol Sanayi A.S. in liquidation Samandira-
Kartal/
Istanbul
Turkey 52,674,386 TRY 27.00 Fiat Partecipazioni S.p.A. 27.000
RCS MediaGroup S.p.A. Milan Italy 475,134,602 EUR 16.73 Fiat Chrysler Automobiles N.V. 16.734
Associated companies valued at cost
Business Auto: Car Mass-Market brands
EMEA
Consorzio ATA - FORMAZIONE Pomigliano
d’Arco
Italy 16,670 EUR 40.01 C.R.F. Società Consortile per Azioni 40.012
Consorzio per la Reindustrializzazione
Area di Arese S.r.l. in liquidation Arese Italy
20,000 EUR
30.00 FCA Italy S.p.A.
30.000
Consorzio Prode Naples Italy 51,644 EUR 20.00 C.R.F. Società Consortile per Azioni 20.000
Innovazione Automotive e
Metalmeccanica Scrl Santa Maria
Imbaro
Italy
115,000 EUR
24.52 FCA Italy S.p.A.
C.R.F. Società Consortile per Azioni
Sistemi Sospensioni S.p.A.
17.391
6.957
0.174
New Holland Fiat (India) Private Limited Mumbai India 12,485,547,400 INR 3.59 FCA Italy S.p.A. 3.593 51.035
Tecnologie per il Calcolo Numerico-
Centro Superiore di Formazione S.c. a r.l. Trento Italy
100,000 EUR
25.00 C.R.F. Società Consortile per Azioni
25.000
Turin Auto Private Ltd. in liquidation Mumbai India 43,300,200 INR 50.00 FGA Investimenti S.p.A. 50.000
Business Auto: Luxury and Performance Brands
Ferrari
Senator Software Gmbh Munich Germany 25,565 EUR 39.69 Ferrari Financial Services AG 49.000
Components and Production Systems
Magneti Marelli
Auto Componentistica Mezzogiorno
- A.C.M. Mel? Società Consortile a
responsabilità limitata Turin Italy
40,000 EUR
28.25 Plastic Components and Modules
Automotive S.p.A.
Sistemi Sospensioni S.p.A.
16.500
11.750
Bari Servizi Industriali S.c.r.l. Modugno Italy 24,000 EUR 25.00 Magneti Marelli S.p.A. 25.000
CF Gomma S.r.l. Passirano Italy 1,000,000 EUR 40.00 Magneti Marelli S.p.A. 40.000
Flexider S.p.A. Orbassano Italy 4,080,000 EUR 25.00 Magneti Marelli S.p.A. 25.000
Mars Seal Private Limited Mumbai India 400,000 INR 24.00 Magneti Marelli France S.a.s. 24.000
Matay Otomotiv Yan Sanay Ve Ticaret
A.S. Bursa Turkey 3,800,000 TRY
28.00 Magneti Marelli S.p.A.
28.000
Other Activities: Holding companies and Other companies
ANFIA Automotive S.c.r.l. Turin Italy 20,000 EUR 20.00 C.R.F. Società Consortile per Azioni
FCA Italy S.p.A.
Fiat Information Technology, Excellence
and Methods S.p.A.
Magneti Marelli S.p.A.
5.000
5.000
5.000
5.000
FMA-Consultoria e Negocios Ltda São Paulo Brazil 1 BRL 50.00 Fiat do Brasil S.A. 50.000
Maxus MC2 S.p.A. Turin Italy 219,756 EUR 20.00 Fiat Partecipazioni S.p.A. 20.000
Parco Industriale di Chivasso Società
Consortile a responsabilità limitata Chivasso Italy
10,000 EUR
30.40 Fiat Partecipazioni S.p.A.
Plastic Components and Modules
Automotive S.p.A.
25.800
4.600
To-dis S.r.l. Milan Italy 510,000 EUR 45.00 Editrice La Stampa S.p.A. 45.000
Independent
Auditor’s Report
294 2014
|
ANNUAL REPORT
Independent auditor’s report
Independent Auditor’s Report
To: the shareholders and the audit committee of Fiat Chrysler Automobiles N.V.
Opinion
We have audited the accompanying ?nancial statements 2014 of Fiat Chrysler Automobiles N.V. (the Company),
based in Amsterdam. The ?nancial statements include the consolidated ?nancial statements and the company
?nancial statements.
In our opinion:
The consolidated ?nancial statements give a true and fair view of the ?nancial position of Fiat Chrysler Automobiles
N.V. as at December 31, 2014, and of its result and its cash ?ows for 2014 in accordance with International
Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch
Civil Code.
The company ?nancial statements give a true and fair view of the ?nancial position of Fiat Chrysler Automobiles N.V.
as at December 31, 2014 and of its result for 2014 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The consolidated ?nancial statements comprise:
1 the consolidated statement of ?nancial position as at December 31, 2014;
2 the following statements for 2014: consolidated income statement and consolidated statements of comprehensive
income, cash ?ows and changes in equity; and
3 the notes, comprising a summary of the signi?cant accounting policies and other explanatory information.
The company ?nancial statements comprise:
1 the company balance sheet as at December 31, 2014;
2 the company income statement for 2014; and
3 the notes comprising a summary of the signi?cant accounting policies and other explanatory information.
Basis for Opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities
under those standards are further described in the “Our Responsibilities for the Audit of the Financial Statements”
section of our report.
We are independent of Fiat Chrysler Automobiles N.V. in accordance with the “Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten” (ViO) and other relevant independence regulations in the
Netherlands. Furthermore we have complied with the “Verordening gedrags- en beroepsregels accountants” (VGBA).
We believe that the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our opinion.
2014
|
ANNUAL REPORT 295
Materiality
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to in?uence the economic decisions of users taken on the basis of the ?nancial statements.
The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of
identi?ed misstatements on our opinion.
Based on our professional judgment we determined the materiality for the consolidated ?nancial statements as a
whole at €400 million. The materiality is based on approximately 0.5% of the consolidated revenues. We have also
taken into account misstatements and/or possible misstatements that in our opinion are material to the users of the
consolidated ?nancial statements for qualitative reasons.
We agreed with the audit committee that misstatements in excess of €20 million, which are identi?ed during the audit,
would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of our group audit
Fiat Chrysler Automobiles N.V. is head of a group of entities. The ?nancial information of this group is included in the
consolidated ?nancial statements of Fiat Chrysler Automobiles N.V.
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and
performing the group audit. In this respect we have determined the nature and extent of the audit procedures carried
out for group entities. Group entities are considered signi?cant components either because of their individual ?nancial
signi?cance or because they are likely to include signi?cant risks of material misstatement due to their speci?c nature
or circumstances. On this basis, we selected group entities for which an audit or review had to be carried out on
the complete set of ?nancial information or speci?c items. Fiat Chrysler Automobiles N.V. is organized along seven
reportable segments, being NAFTA, EMEA, LATAM, APAC, Ferrari, Maserati and Components, along with certain
other corporate functions which are not included within the reportable segments.
In establishing the overall approach to the audit, we determined the type of work that needed to be performed at
the group entities level by us, as the group engagement team, or component auditors from other EY network ?rms
operating under our instruction. Where the work was performed by component auditors, we determined the level of
involvement we needed to have in the audit work at those group entities to be able to conclude whether suf?cient
appropriate audit evidence had been obtained as a basis for our opinion on the Consolidated Financial Statements as
a whole.
Accordingly, we identi?ed 106 of Fiat Chrysler Automobiles N.V.’s group entities, which, in our view, required an
audit of their complete ?nancial information, either due to their overall size or their risk characteristics. Speci?c audit
procedures on certain balances and transactions were performed on a further 8 entities.
Of the remaining group entities, 27 were subject to analytical procedures, with a focus on higher risk balances and
additional audit procedures over speci?c transactions (for example, certain acquisitions and divestments). This,
together with additional procedures performed on consolidated level, provided us with the evidence we needed for our
opinion on the Consolidated Financial Statements as a whole.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most signi?cance in our audit of the
consolidated ?nancial statements. We have communicated the key audit matters to the audit committee. The key
audit matters are not a comprehensive re?ection of all matters discussed.
These matters were addressed in the context of our audit of the consolidated ?nancial statements as a whole and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
296 2014
|
ANNUAL REPORT
Independent auditor’s report
Valuation of non-current assets with de?nite and inde?nite useful lives
At December 31, 2014 the recorded amount of goodwill and other intangible assets with inde?nite useful lives was
€14,012 million; the majority of these assets relate to the NAFTA segment. Non-current assets with de?nite useful
lives include property, plant and equipment, intangible assets and assets held for sale. Intangible assets with de?nite
useful lives mainly consist of capitalized development costs related to the EMEA and NAFTA segments.
The Company reviews the carrying amounts of these non-current assets annually or more frequently if impairment
indicators are present. Estimating the recoverable amount of the assets requires critical management judgment
including estimates of future sales, gross margins, operating costs, terminal value growth rates, capital expenditures
and the discount rate and the assumptions inherent in those estimates. The annual impairment test is signi?cant to our
audit because the assessment process is complex and requires signi?cant judgment.
The Company disclosed the nature and value of the assumptions used in the impairment analyses on pages 168 till
170 and 190 till 192.
We designed our audit procedures to be responsive to this risk. We obtained an understanding of the impairment
assessment processes and evaluated the design and tested the effectiveness of controls in this area relevant to our
audit. Our focus included evaluating the work of the management specialists used for the valuation, evaluating and
testing key assumptions used in the valuation including projected future income and earnings, performing sensitivity
analyses, and testing the allocation of the assets, liabilities, revenues and expenses.
Income taxes – recoverability of deferred tax assets
At December 31, 2014, the Group had deferred tax assets on deductible temporary differences of €8,182 million
which were recognized and €480 million which were not recognized. At the same date the Group also had deferred
tax assets on tax losses carried forward of €1,762 million which were recognized and €2,934 million which were
not recognized. The analysis of the recoverability of deferred tax assets was signi?cant to our audit because the
assessment process is complex and judgmental and is based on assumptions that are affected by expected future
market or economic conditions.
The disclosures in relation to income taxes are included in note 10 on pages 185 till 188.
We obtained an understanding of the income taxes process, and evaluated the design and tested the effectiveness of
controls in this area relevant to our audit. We performed substantive audit procedures on the recognition of deferred
tax balances based on different local tax regulations, and on the analysis of the recoverability of the deferred tax assets
based on the estimated future taxable income, on which we performed our audit procedures, principally by performing
sensitivity analyses and evaluating and testing the key assumptions used to determine the amounts recognized.
Provisions for product warranties
At December 31, 2014 the provisions for product warranties amounted to €4,845 million. The Group issues various
types of product warranties under which the performance of products delivered is generally guaranteed for a certain
period or term; the reserve for product warranties includes the expected costs of warranty obligations imposed by law
or contract, as well as the expected costs for policy coverage, recall actions and buyback commitments.
In addition, the Group periodically initiates voluntary service and recall actions to address various customer
satisfaction, safety and emissions issues related to vehicles sold; the estimated future costs of the service and recall
actions are based primarily on historical claims experience for the Group’s vehicles.
We focused on this area because changes in the assumptions can materially affect the levels of provisions recorded in
the ?nancial statements.
The disclosures on warranty provisions are included in note 26 on pages 227 and 228.
We obtained an understanding of the warranty process, evaluated the design of, and performed tests of, controls
in this area. Our focus included evaluating the appropriateness of the Group’s methodology, evaluating and testing
assumptions used in the determination of the warranty provisions, performing sensitivity analyses, and testing the
validity of the data used in the calculations.
2014
|
ANNUAL REPORT 297
Responsibilities of management and the audit committee for ?nancial statements
Management is responsible for:
the preparation and fair presentation of the ?nancial statements in accordance with EU-IFRS and Part 9 of Book 2
of the Dutch Civil Code, and for the preparation of the report on operations in accordance with Part 9 of Book 2 of
the Dutch Civil Code, and for
such internal control as management determines is necessary to enable the preparation of ?nancial statements that
are free from material misstatement, whether due to fraud or error.
As part of the preparation of the ?nancial statements, management is responsible for assessing the Company’s ability
to continue as a going concern. Based on the ?nancial reporting frameworks mentioned, management should prepare
the ?nancial statements using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so. Management should disclose events
and circumstances that may cast signi?cant doubt on the Company’s ability to continue as a going concern in the
?nancial statements.
The audit committee is responsible for overseeing the Company’s ?nancial reporting process.
Our responsibilities for the audit of the ?nancial statements
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain suf?cient and
appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may have not
uncovered all errors and fraud.
We have exercised professional judgment and have maintained professional scepticism throughout the audit, in
accordance with Dutch Standards on Auditing, ethical requirements and independence requirements.
Our audit included e.g.:
Identifying and assessing the risks of material misstatement of the ?nancial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suf?cient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
Concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on
the audit evidence obtained, whether a material uncertainty exists related to events and or conditions that may cast
signi?cant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the ?nancial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluating the overall presentation, structure and content of the ?nancial statements, including the disclosures, and
whether the ?nancial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit
and signi?cant audit ?ndings, including any signi?cant ?ndings in internal control that we identify during our audit.
298 2014
|
ANNUAL REPORT
Independent auditor’s report
We provide the audit committee with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with the audit committee, we determine those matters that were of most signi?cance
in the audit of the ?nancial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, not communicating the matter is in the public interest.
Report on other legal and regulatory requirements
Report on the report on operations and the other information
Pursuant to legal requirements of Part 9 of Book 2 of the Dutch Civil Code (concerning our obligation to report about
the report on operations and other data),:
We have no de?ciencies to report as a result of our examination whether the report on operations, to the extent we
can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as
required by Part 9 of Book 2 of the Dutch Civil Code has been annexed.
Further we report that the report on operations, to the extent we can assess, is consistent with the ?nancial
statements.
Appointment
We were appointed by the audit committee as auditor of Fiat Chrysler Automobiles N.V. on October 28, 2014, as of
the audit for the year 2014 and have operated as statutory auditor ever since that date.
Rotterdam, March 5, 2015
/s/ Ernst & Young Accountants LLP
Sander Arkesteijn
2014
|
ANNUAL REPORT 299
Contact
Corporate Of?ce:
25 St James’s Street, London SW1A 1HA - U.K.
Tel. ++44 (0) 207 7660311
Printing
This document is printed on eco-responsible CyclusPrint, a 100% recycled paper produced by Arjowiggins Graphic.
The internal pages are printed on 100 gsm paper and the cover is 300 gsm.
By using this paper, rather than a non-recycled paper, the environmental impact was reduced by:
9,373
liters of water
301
kg of land?ll
604
km travel in the average
European car
489
kg of wood
60
kg of CO
2
871
kWh of energy
Graphic design and editorial coordination
Sunday
Turin, Italy
Printing
Stamperia Artistica Nazionale S.p.A.
Trofarello (TO) Italy
Printed in Italy
April 2015
CO
2
2014 ANNUAL REPORT
FCA
ANNUAL REPORT
AT 31 DECEMBER 2014
F
C
A
A
n
n
u
a
l
R
e
p
o
r
t
a
t
3
1
D
e
c
e
m
b
e
r
2
0
1
4
Fiat Chrysler Automobiles N.V.
Registered Office: Amsterdam, The Netherlands
Amsterdam Chamber of Commerce: 60372958
Corporate Office: 25 St James’s Street, London SW1A 1HA U.K.
doc_966476571.pdf
2014 was a major turning point in our history. With the decision announced on the first of January, we gave life to Fiat Chrysler Automobiles, a new global automotive player with the necessary resources to achieve solid, responsible and sustainable long-term growth.
2014 ANNUAL REPORT
FCA
ANNUAL REPORT
AT 31 DECEMBER 2014
F
C
A
A
n
n
u
a
l
R
e
p
o
r
t
a
t
3
1
D
e
c
e
m
b
e
r
2
0
1
4
Fiat Chrysler Automobiles N.V.
Registered Office: Amsterdam, The Netherlands
Amsterdam Chamber of Commerce: 60372958
Corporate Office: 25 St James’s Street, London SW1A 1HA U.K.
2014 ANNUAL REPORT
2014
|
ANNUAL REPORT 3
Consolidated Financial Statements
at December 31, 2014 ............................... 141
n
Consolidated Income Statement ....................... 142
n
Consolidated Statement
of Comprehensive Income/(Loss) ..................... 143
n
Consolidated Statement of Financial Position .... 144
n
Consolidated Statement of Cash Flows ............ 145
n
Consolidated Statements of Changes in Equity .... 146
n
Notes to the Consolidated Financial Statements .... 147
Company Financial Statements
at December 31, 2014 ............................... 257
n
Income Statement ............................................ 258
n
Statement of Financial Position ......................... 259
n
Notes to the Company Financial Statements .... 260
n
Other Information ............................................. 272
Appendix - FCA Companies
at December 31, 2014 ............................... 275
Independent Auditor’s Report .................. 293
Table of contents
Board of Directors and Auditors .................. 5
Letter from the Chairman ............................. 7
Letter from the Chief Executive Of?cer ....... 8
Certain De?ned Terms ................................ 10
Selected Financial Data .............................. 11
Sustainability Highlights ............................. 14
Creating Value for Our Shareholders ......... 15
Risk Factors ................................................ 17
Overview ..................................................... 36
Our Strategic Business Plan ...................... 38
Industry Overview ....................................... 40
Overview of Our Business .......................... 42
Operating Results ....................................... 56
Subsequent Events and 2015 Outlook ...... 93
Major Shareholders .................................... 94
Corporate Governance ............................... 95
Sustainability Disclosure .......................... 114
Remuneration of Directors ....................... 134
Table of contents
2014
|
ANNUAL REPORT 5
Board of Directors and Auditors
Board of Directors and Auditors
BOARD OF DIRECTORS
Chairman
John Elkann
(3)
Chief Executive Of?cer
Sergio Marchionne
Directors
Andrea Agnelli
Tiberto Brandolini d’Adda
Glenn Earle
(1)
Valerie A. Mars
(2)
Ruth J. Simmons
(3)
Ronald L. Thompson
(1)
Patience Wheatcroft
(1)(3)
Stephen M. Wolf
(2)
Ermenegildo Zegna
(2)
INDEPENDENT AUDITORS
Ernst & Young Accountants LLP
(1)
Member of the Audit Committee.
(2)
Member of the Compensation Committee.
(3)
Member of the Governance and Sustainability Committee.
6 2014
|
ANNUAL REPORT
2014
|
ANNUAL REPORT 7
Letter from the Chairman
Letter from the Chairman
Shareholders,
2014 was a major turning point in our history. With the decision announced on the ?rst of January, we gave life to Fiat
Chrysler Automobiles, a new global automotive player with the necessary resources to achieve solid, responsible and
sustainable long-term growth.
The targets set out in the strategic plan that was presented to analysts and investors by FCA’s management team
in Auburn Hills last May clearly demonstrate the level of our determination. To some, they may seem dif?cult if not
impossible to achieve. But, as in the past, we are prepared to embrace this challenge and measure ourselves by the
results.
One of the ?rst results we are pleased to report is that worldwide shipments in 2014 increased to a total of more than
4.6 million vehicles. Of particular note were the results achieved by Jeep, which posted an all-time annual sales record
of more than 1 million vehicles, and Maserati, which celebrated its 100th anniversary with the best results in its history.
In the pages of this annual report, you will ?nd another major result. In the fourth quarter, we posted a positive EBIT
for our European activities: something we have been working toward for seven and a half years. We fully intend to
continue building on this turnaround, which demonstrates the far-sightedness of the strategies we set in motion some
time ago.
Sharing technologies and architectures across brands and models has also proven to be one of our greatest
strengths. The new Jeep Renegade and Fiat 500X are the most concrete examples. Two very different models made
for customers with different requirements and produced alongside each other at the same plant and on the same
platform. They have already proven such a success with customers that the new plant in Pernambuco, Brazil, will soon
join our plant in Mel?, Italy in producing the innovative, compact Jeep.
During the year, we launched several major investment programs aimed at improving our product offering and
increasing the ef?ciency of our production processes. We also successfully completed a series of ?nancing
transactions that will provide us the necessary funding to move forward with our projects. FCA’s debut on the NYSE
on October 13th represents a major milestone in our strategic development, because it gives us access to the
enormous potential of the world’s largest ?nancial market.
We are proud of how much FCA has achieved in its ?rst year, but it is not time to celebrate yet because for us this is
just the beginning. We are working to bring many innovative new models to market that will not only meet the mobility
needs of customers around the world, but also have enormous appeal.
Whether you have been a shareholder for many years or just a few months, I would like to express my gratitude for
your support. Your trust is fundamental and it will enable FCA to deliver on its founding commitment: to continue with
the same energy and enthusiasm that marked our ?rst year and to achieve our ambitious development plans.
5 March 2015
/s/ John Elkann
John Elkann
CHAIRMAN
8 2014
|
ANNUAL REPORT
Letter from the
Chief Executive Of?cer
Letter from the Chief Executive Of?cer
Shareholders,
Our Group has just closed a truly momentous year that included: the acquisition of the remaining non-controlling
interest in Chrysler; the formation of Fiat Chrysler Automobiles – the world’s seventh-largest automaker; the debut
of our shares on the NYSE; our return to the U.S. equity markets; record sales for both Jeep and Maserati; and Alfa
Romeo’s return to North America after a 20-year absence.
We presented an ambitious ?ve-year plan to grow our business and continue building an extraordinary enterprise with
even greater potential to deliver sustainable long-term value.
To further enhance shareholder value, we also announced our plan to spin Ferrari off from FCA, list it on the stock
exchange and distribute FCA’s remaining Ferrari shares to FCA shareholders. We believe this course will give Ferrari
the necessary independence, as well as ensuring it a solid platform for future growth opportunities.
Our strong operating results in 2014 are testimony to our commitment to our values, our ability to remain focused on
our key objectives and our determination to continue building a truly unique organization. In fact, the Group was able
to post a pro?t in all regions for the fourth quarter of the year.
Worldwide vehicle shipments were up 6% over the prior year to 4.6 million units, driving revenues 11% higher to
€96.1 billion.
Adjusted for unusual items, EBIT was €3.7 billion and net pro?t was €955 million.
Available liquidity at year end totaled €26.2 billion.
In order to further fund the capital requirements of the Group’s ?ve-year business plan, the Board of Directors has
decided not to recommend a dividend on FCA common shares for 2014.
Looking at the performance of our mass-market operations by region, in NAFTA we continued to outperform the
market, with sales up 15% over the prior year.
In the U.S., we closed the year posting our 57th consecutive month of year-over-year sales gains and our best annual
sales since 2006. In addition, our market share was up 100 basis points which was the highest share growth of any
OEM. In Canada, we recorded 61 straight months of growth and the strongest annual sales performance in our
history.
In LATAM, results were positive, although below the prior year’s level primarily as a result of weaker demand in the
region’s main markets. Despite those conditions, FCA maintained its leadership in Brazil, a position we have held for
13 years, increasing the lead over our nearest competitor to 350 basis points. In Argentina, market share increased
140 basis points.
In APAC, we posted strong earnings on the back of signi?cant volume growth. Retail sales in the region, including JVs,
were up 34% and we signi?cantly outperformed the industry in each major market.
In EMEA, there were initial signs of a recovery in Europe with the industry registering a 5% increase – the ?rst after six
straight years of decline.
On the back of a more favorable product mix, increased volumes and industrial ef?ciencies, EMEA reduced losses
signi?cantly. EBIT adjusted for unusual items improved by €198 million for the full year, with a return to pro?tability in
the fourth quarter indicating that we are turning the corner in the region as our focus on producing premium vehicles
for export begins to pay off.
2014
|
ANNUAL REPORT 9
Both Ferrari and Maserati posted strong growth and Components also made a positive contribution.
With regard to the near-term outlook, we have already given guidance for the current year, with expected worldwide
shipments in the 4.8 to 5.0 million unit range, revenues of around €108 billion, EBIT in the €4.1to €4.5 billion range,
net pro?t of €1.0 to €1.2 billion and net industrial debt in the €7.5 billion to €8.0 billion range.
We will work towards the achievement of these targets with the same spirit that has brought us this far and with
respect for the diversity of experiences and cultures that coexist, both inside and outside the Group. That commitment
extends to the needs of local communities and the environment, as well as the legacy that we intend to leave future
generations.
For the sixth consecutive year, the Group was included in the prestigious DJSI World, with an overall result that places
FCA among the world’s leading companies in terms of economic, environmental and social performance.
For the third consecutive year, we were recognized as a leader for our commitment to addressing climate change.
On the basis of transparency in disclosure and performance, FCA was named among the top ranked companies in the
Climate Performance Leadership Index (CPLI).
These recognitions are the result of a business philosophy involving some 300,000 people throughout the
organization, each taking accountability for achieving our targets, striving for excellence and acting responsibly.
I’d like to take this opportunity to thank everyone in the FCA organization for embracing the culture of sustainability
and making a concrete contribution so that every year we, as a team, can look back with pride at the progress we
have made.
Thank you also to all of our shareholders for standing by us as we have grown and transformed the business and for
supporting us as we continue on this new global venture together.
5 March 2015
/s/ Sergio Marchionne
Sergio Marchionne
CHIEF EXECUTIVE OFFICER
10 2014
|
ANNUAL REPORT
Certain De?ned Terms
Certain De?ned Terms
In this report, unless otherwise speci?ed, the terms “we,” “our,” “us,” the “Group,”, “Fiat Group,”, the “Company” and
“FCA” refer to Fiat Chrysler Automobiles N.V., together with its subsidiaries and its predecessor prior to the completion
of the merger of Fiat S.p.A. with and into Fiat Investments N.V. on October 12, 2014 (at which time Fiat Investments
N.V. was renamed Fiat Chrysler Automobiles N.V., or FCA), the “Merger”, or any one or more of them, as the context
may require. References to “Fiat” refer solely to Fiat S.p.A., the predecessor of FCA prior to the Merger. References
to “FCA US” refers to FCA US LLC, formerly known as Chrysler Group LLC, together with its direct and indirect
subsidiaries.
In addition, all references to “U.S. Dollars”, “U.S. Dollar”, “U.S.$” and “$” refer to the currency of the United States of
America (or “U.S.”).
2014
|
ANNUAL REPORT 11
Selected Financial Data
The following tables set forth selected historical consolidated ?nancial and other data of FCA and has been derived, in
part, from:
the Consolidated ?nancial statements of FCA for the years ended December 31, 2014, 2013 and 2012, included
elsewhere in this document; and
the Consolidated ?nancial statements of the Fiat Group for the years ended December 31, 2011 and 2010, which
are not included in this document.
This data should be read in conjunction with Risk Factors, Operating Results and the Consolidated ?nancial
statements and related notes included elsewhere in this report.
Effective January 1, 2011, Fiat transferred a portion of its assets and liabilities to Fiat Industrial S.p.A., or Fiat Industrial,
now known as CNH Industrial N.V., or CNH Industrial, or CNHI, in the form of a scissione parziale proporzionale
(“partial proportionate demerger”) in accordance with Article 2506 of the Italian Civil Code.
On May 24, 2011, the Group acquired an additional 16 percent (on a fully-diluted basis) of FCA US, increasing its
interest to 46 percent (on a fully-diluted basis). As a result of the potential voting rights associated with options
that became exercisable on that date, the Group was deemed to have obtained control of FCA US for purposes of
consolidation. The operating activities from this acquisition date through May 31, 2011 were not material to the Group.
As such, FCA US was consolidated on a line-by-line basis by FCA with effect from June 1, 2011. Therefore the results
of operations and cash ?ows for the years ended December 31, 2014, 2013 and 2012 are not directly comparable
with those for the year ended December 31, 2011.
The Group adopted IAS 19 revised from January 1, 2013 and retrospectively applied those amendments from January
1, 2012. The Group also adopted IFRS 11 from January 1, 2014 and also retrospectively applied those amendments
from January 1, 2012. These amendments were not applied to the Consolidated income statement or to the
Consolidated Statement of Financial position for the years ended December 31, 2011 and 2010. Accordingly, these
statements are not directly comparable with those for the years ended and as of December 31, 2014, 2013 and 2012.
Selected Financial Data
12 2014
|
ANNUAL REPORT
Selected Financial Data
CONSOLIDATED INCOME STATEMENT DATA
2014 2013 2012 2011
(1)
2010
(2)
(€ million)
Net revenues 96,090 86,624 83,765 59,559 35,880
EBIT 3,223 3,002 3,434 3,291 1,106
Pro?t before taxes 1,176 1,015 1,524 1,932 706
Pro?t from continuing operations 632 1,951 896 1,398 222
Pro?t/(loss) from discontinued operations — — — — 378
Net pro?t 632 1,951 896 1,398 600
Attributable to:
Owners of the parent 568 904 44 1,199 520
Non-controlling interest 64 1,047 852 199 80
Earnings/(loss) per share from continuing operations (in Euro)
Basic per ordinary share 0.465 0.744 0.036 0.962 0.130
Diluted per ordinary share 0.460 0.736 0.036 0.955 0.130
Basic per preference share — — — 0.962 0.217
Diluted per preference share — — — 0.955 0.217
Basic per savings share — — — 1.071 0.239
Diluted per savings share — — — 1.063 0.238
Earnings/(loss) per share (in Euro)
Basic per ordinary share 0.465 0.744 0.036 0.962 0.410
Diluted per ordinary share 0.460 0.736 0.036 0.955 0.409
Basic per preference share — — — 0.962 0.410
Diluted per preference share — — — 0.955 0.409
Basic per savings share — — — 1.071 0.565
Diluted per savings share — — — 1.063 0.564
Dividends paid per share (in Euro)
(3)
Ordinary share — — — 0.090 0.170
Preference share
(4)
— — 0.217 0.310 0.310
Savings share
(4)
— — 0.217 0.310 0.325
Other Statistical Information (unaudited):
Shipments (in thousands of units) 4,608 4,352 4,223 3,175 2,094
Number of employees at period end 232,165 229,053 218,311 197,021 137,801
(1)
Upon obtaining control of FCA US on May 24, 2011, FCA US’s financial results were consolidated beginning June 1, 2011.
(2)
CNHI was reported as discontinued operations in 2010 as a result of its demerger from Fiat effective January 1, 2011.
(3)
Dividends paid represent cash payments in the applicable year that generally relates to earnings of the previous year.
(4)
In accordance with the resolution adopted by the shareholders’ meeting on April 4, 2012, Fiat’s preference and savings shares were
mandatorily converted into ordinary shares.
2014
|
ANNUAL REPORT 13
CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATA
At December 31,
2014 2013 2012 2011
(1)(2)
2010
(€ million)
Cash and cash equivalents 22,840 19,455 17,666 17,526 11,967
Total assets 100,510 87,214 82,633 80,379 73,442
Debt 33,724 30,283 28,303 27,093 20,804
Total equity 13,738 12,584 8,369 9,711 12,461
Equity attributable to owners of the parent 13,425 8,326 6,187 7,358 11,544
Non-controlling interests 313 4,258 2,182 2,353 917
Share capital 17 4,477 4,476 4,466 6,377
Shares issued (in thousands of shares):
Fiat S.p.A
Ordinary — 1,250,688 1,250,403 1,092,681 1,092,247
Preference
(4)
— — — 103,292 103,292
Savings
(4)
— — — 79,913 79,913
FCA
Common
(3)
1,284,919
Special Voting 408,942
(1)
The amounts at December 31, 2011 are equivalent to those at January 1, 2012 derived from the Consolidated financial statements.
(2)
The amounts at December 31, 2011 include the consolidation of FCA US.
(3)
Book value per common share at December 31, 2014 amounted to €10.45.
(4)
In accordance with the resolution adopted by the shareholders’ meeting on April 4, 2012, Fiat’s preference and savings shares were
mandatorily converted into ordinary shares.
14 2014
|
ANNUAL REPORT
Sustainability Highlights
Sustainability Highlights
2014 2013 2012
Employees
(1)
(no.) 228,690 225,587 214,836
of which are women (%) 20.3 19.6 19.2
Hours of training (thousand) 4,297 4,232 4,206
Employees participating in
performance evaluation process
(2)
(no.) 60,700 54,500 52,700
Frequency rate of accidents (no. accidents per 100,000 hours worked) 0.15 0.19 0.22
Severity rate of accidents (no. days of absence due to accidents per 1,000 hours worked) 0.05 0.06 0.07
Energy consumption by plants (terajoules) 48,645 48,322 45,692
CO
2
emissions by plants (thousands of tons) 4,283 4,178 3,965
Water withdrawal by plants (thousands of m
3
) 24,653 24,936 25,874
Waste generated by plants (thousands of tons) 1,744 1,809 1,761
Contributions to local communities
(3)
(€ million) 24.2 19.7 20.8
Note: all data audited is by SGS, an independent certification body. The scope, methodology, limitations and conclusions of the audit are provided
in the Assurance Statement issued by SGS The Netherlands and published in the FCA 2014 interactive Sustainability Report.
(1)
Employee workforce figures reported in this section do not include the 50% Sevel JV in EMEA or the 50% Fial JV in APAC.
(2)
Includes all employees participating in the PLM (Performance and Leadership Management) and PBF (Performance & Behavior Feedback)
evaluation processes.
(3)
Includes initiatives undertaken by the Group worldwide in support of local communities. Calculation based on London Benchmarking Group
(LBG) method.
2014
|
ANNUAL REPORT 15
Creating Value for Our Shareholders
Responsible Management across the Value Chain
Fiat Chrysler Automobiles (FCA) is a leading player in the global automotive landscape with unique, world-class
capabilities, and a vision built on the historic foundations and strengths inherited from Fiat and Chrysler.
Our guiding values and commitment to excellence - not only in terms of our products, but also for the integrity,
transparency and the sense of responsibility with which we conduct our activities - are essential to achieving this vision.
At FCA, sustainability is a way of conducting business that relies on an interconnected and integrated approach to
responsibility.
The foundation of a responsible company depends on full awareness of the nature and extent of this interconnection. It
lies at the heart of our understanding of how the potential effects of our activities can be mitigated through responsible
management and through the transformation of our ?nancial, manufactured, intellectual, social and natural capitals.
Managing our business responsibly requires that we consider all potential implications of our strategic decisions
and projects. This approach takes on even greater importance in today’s increasingly competitive landscape, where
market conditions are challenging and the mobility needs of customers are changing rapidly.
Over the years, sustainability at FCA has evolved in parallel with the organization, resulting in a well-developed model
that is integrated into every aspect of the Group’s activities. The sustainability management process is based on
shared responsibility that, beginning with the highest level of management, involves every area of activity and every
employee in each of the 40 countries where the Group has a presence.
To ensure tangible long-term value is created for stakeholders, the Group places particular emphasis on the following:
a governance model based on transparency and integrity
safe and eco-friendly products
a full-line product offering
competitive and innovative mobility solutions
promoting awareness and effective communication with consumers
proper management and professional development of employees
promotion of fair working conditions and respect for human rights
mutually bene?cial relationships with business partners and local communities
mitigation of environmental impacts from manufacturing and non-manufacturing processes
The Group uses multiple channels, including the corporate website and social networks, to provide up-to-date and
transparent information on its sustainability commitments and results.
Sustainability contents of the 2014 Annual Report address aspects identi?ed as being of greatest importance to the
Group’s internal and external stakeholders and reports on a selection of key long-term sustainability targets. Additional
information relating to the Group’s sustainability commitments is provided in the interactive 2014 Sustainability Report
available on the corporate website.
Creating Value
for Our Shareholders
16 2014
|
ANNUAL REPORT
Creating Value
for Our Shareholders
Sustainability Leadership
Our Group’s commitment to sustainability has received recognition at the global level from several leading
organizations and indices.
In 2014, FCA was included in the prestigious Dow Jones Sustainability Index World for the sixth time with a score of
87/100. The average for all Automobiles sector companies evaluated by RobecoSAM, the specialists in sustainability
investment, was 58/100. This result places FCA ?rmly among the world’s leading companies in terms of combined
economic, environmental and social performance.
For the third consecutive year, the Group was recognized as a leader for its commitment and results in addressing
climate change. On the basis of transparency in disclosure and performance, FCA was named as a leader in the
CDP Italy 100 Climate Disclosure Leadership Index (CDLI) and among the top ranked companies in the Climate
Performance Leadership Index (CPLI) 2014. FCA scored 98/100 for transparency in disclosure and was included in
The A List: the CDP Climate Performance Leadership Index 2014, which includes companies that have demonstrated
a superior approach to climate change mitigation.
During the year, the Group’s position was also con?rmed in the Euronext Vigeo Europe 120 and the Euronext Vigeo
Eurozone 120 indices, both established in collaboration with NYSE Euronext, which include the top ESG performers
based on an analysis of approximately 330 indicators.
FCA is also a member of numerous other leading indices including: ESI Excellence Europe, STOXX Global ESG
Leaders, STOXX Global ESG Environmental Leaders, STOXX Global ESG Social Leaders, STOXX Global ESG
Governance Leaders, ECPI Euro Ethical Equity, ECPI Emu Ethical Equity, ECPI Global Developed ESG Best in Class
Equity, FTSE ECPI Italia SRI Benchmark, FTSE ECPI Italia SRI Leaders, and Parks GLBT Diversity Index.
2014
|
ANNUAL REPORT 17
Risk Factors
We face a variety of risks in our business. The risks and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties that we are unaware of or that we currently believe to be immaterial, may also
become important factors that affect us.
Risks Related to Our Business, Strategy and Operations
Our pro?tability depends on reaching certain minimum vehicle sales volumes. If our vehicle sales deteriorate,
particularly sales of our minivans, larger utility vehicles and pick-up trucks, our results of operations and ?nancial
condition will suffer.
Our success requires us to achieve certain minimum vehicle sales volumes. As is typical for an automotive manufacturer,
we have signi?cant ?xed costs and, therefore, changes in vehicle sales volume can have a disproportionately large effect on
our pro?tability. For example, assuming constant pricing, mix and cost of sales per vehicle, that all results of operations were
attributable to vehicle shipments and that all other variables remain constant, a ten percent decrease in our 2014 vehicle
shipments would reduce our Earnings Before Interest and Taxes, or EBIT, by approximately 40 percent for 2014, without
accounting for actions and cost containment measures we may take in response to decreased vehicle sales.
Further, a shift in demand away from our minivans, larger utility vehicles and pick-up trucks in the U.S., Canada,
Mexico and Caribbean islands, or NAFTA, region towards passenger cars, whether in response to higher fuel prices
or other factors, could adversely affect our pro?tability in the NAFTA region. Our minivans, larger utility vehicles and
pick-up trucks accounted for approximately 44 percent of our total U.S. retail vehicle sales in 2014 (not including vans
and medium duty trucks) and the pro?tability of this portion of our portfolio is approximately 33 percent higher than
that of our overall U.S. retail portfolio on a weighted average basis. A shift in demand such that U.S. industry market
share for minivans, larger utility vehicles and pick-up trucks deteriorated by 10 percentage points and U.S. industry
market share for cars and smaller utility vehicles increased by 10 percentage points, whether in response to higher fuel
prices or other factors, holding other variables constant, including our market share of each vehicle segment, would
have reduced the Group’s EBIT by approximately 4 percent for 2014. This estimate does not take into account any
other changes in market conditions or actions that the Group may take in response to shifting consumer preferences,
including production and pricing changes.
Moreover, we tend to operate with negative working capital as we generally receive payments from vehicle sales
to dealers within a few days of shipment, whereas there is a lag between the time when parts and materials are
received from suppliers and when we pay for such parts and materials; therefore, if vehicle sales decline we will suffer
a signi?cant negative impact on cash ?ow and liquidity as we continue to pay suppliers during a period in which
we receive reduced proceeds from vehicle sales. If vehicle sales do not increase, or if they were to fall short of our
assumptions, due to ?nancial crisis, renewed recessionary conditions, changes in consumer con?dence, geopolitical
events, inability to produce suf?cient quantities of certain vehicles, limited access to ?nancing or other factors, our
?nancial condition and results of operations would be materially adversely affected.
Risk Factors
18 2014
|
ANNUAL REPORT
Risk Factors
Our businesses are affected by global ?nancial markets and general economic and other conditions over which we
have little or no control.
Our results of operations and ?nancial position may be in?uenced by various macroeconomic factors—including
changes in gross domestic product, the level of consumer and business con?dence, changes in interest rates for or
availability of consumer and business credit, energy prices, the cost of commodities or other raw materials, the rate of
unemployment and foreign currency exchange rates—within the various countries in which we operate.
Beginning in 2008, global ?nancial markets have experienced severe disruptions, resulting in a material deterioration
of the global economy. The global economic recession in 2008 and 2009, which affected most regions and business
sectors, resulted in a sharp decline in demand for automobiles. Although more recently we have seen signs of
recovery in certain regions, the overall global economic outlook remains uncertain.
In Europe, in particular, despite measures taken by several governments and monetary authorities to provide ?nancial
assistance to certain Eurozone countries and to avoid default on sovereign debt obligations, concerns persist regarding
the debt burden of several countries. These concerns, along with the signi?cant ?scal adjustments carried out in several
countries, intended to manage actual or perceived sovereign credit risk, led to further pressure on economic growth and to
new periods of recession. Prior to a slight improvement in 2014, European automotive industry sales declined over several
years following a period in which sales were supported by government incentive schemes, particularly those designed
to promote sales of more fuel ef?cient and low emission vehicles. Prior to the global ?nancial crisis, industry-wide sales of
passenger cars in Europe were 16 million units in 2007. In 2014, following six years of sales declines, sales in that region
rose 5 percent over 2013 to 13 million passenger cars. From 2011 to 2014, our market share of the European passenger
car market decreased from 7.0 percent to 5.8 percent, and we have reported losses and negative EBIT in each of the
past four years in the Europe, Middle East and Africa, or EMEA, segment. See Overview—Overview of Our Business
for a description of our reportable segments. These ongoing concerns could have a detrimental impact on the global
economic recovery, as well as on the ?nancial condition of European ?nancial institutions, which could result in greater
volatility, reduced liquidity, widening of credit spreads and lack of price transparency in credit markets. Widespread austerity
measures in many countries in which we operate could continue to adversely affect consumer con?dence, purchasing
power and spending, which could adversely affect our ?nancial condition and results of operations.
A majority of our revenues have been generated in the NAFTA segment, as vehicle sales in North America have experienced
signi?cant growth from the low vehicle sales volumes in 2009-2010. However, this recovery may not be sustained or may
be limited to certain classes of vehicles. Since the recovery may be partially attributable to the pent-up demand and average
age of vehicles in North America following the extended economic downturn, there can be no assurances that continued
improvements in general economic conditions or employment levels will lead to additional increases in vehicle sales. As a
result, North America may experience limited growth or decline in vehicle sales in the future.
In addition, slower expansion or recessionary conditions are being experienced in major emerging countries, such
as China, Brazil and India. In addition to weaker export business, lower domestic demand has also led to a slowing
economy in these countries. These factors could adversely affect our ?nancial condition and results of operations.
In general, the automotive sector has historically been subject to highly cyclical demand and tends to re?ect the
overall performance of the economy, often amplifying the effects of economic trends. Given the dif?culty in predicting
the magnitude and duration of economic cycles, there can be no assurances as to future trends in the demand for
products sold by us in any of the markets in which we operate.
In addition to slow economic growth or recession, other economic circumstances—such as increases in energy
prices and ?uctuations in prices of raw materials or contractions in infrastructure spending—could have negative
consequences for the industry in which we operate and, together with the other factors referred to previously, could
have a material adverse effect on our ?nancial condition and results of operations.
2014
|
ANNUAL REPORT 19
We may be unsuccessful in efforts to expand the international reach of some of our brands that we believe have global
appeal and reach.
The growth strategies re?ected in our 2014-2018 Strategic Business Plan, or Business Plan, will require us to make
signi?cant investments, including to expand several brands that we believe to have global appeal into new markets.
Such strategies include expanding sales of the Jeep brand globally, most notably through localized production in Asia
and Latin America and reintroduction of the Alfa Romeo brand in North America and other markets throughout the
world. Our plans also include a signi?cant expansion of our Maserati brand vehicles to cover all segments of the luxury
vehicle market. This will require signi?cant investments in our production facilities and in distribution networks in these
markets. If we are unable to introduce vehicles that appeal to consumers in these markets and achieve our brand
expansion strategies, we may be unable to earn a suf?cient return on these investments and this could have a material
adverse effect on our ?nancial condition and results of operations.
Product recalls and warranty obligations may result in direct costs, and loss of vehicle sales could have material
adverse effects on our business.
We, and the U.S. automotive industry in general, have recently experienced a signi?cant increase in recall activity to
address performance, compliance or safety-related issues. The costs we incur to recall vehicles typically include the
cost of replacement parts and labor to remove and replace parts, substantially depend on the nature of the remedy
and the number of vehicles affected, and may arise many years after a vehicle’s sale. Product recalls may also harm
our reputation and may cause consumers to question the safety or reliability of our products.
Any costs incurred, or lost vehicle sales, resulting from product recalls could materially adversely affect our ?nancial
condition and results of operations. Moreover, if we face consumer complaints, or we receive information from vehicle
rating services that calls into question the safety or reliability of one of our vehicles and we do not issue a recall, or if we
do not do so on a timely basis, our reputation may also be harmed and we may lose future vehicle sales.
We are also obligated under the terms of our warranty agreements to make repairs or replace parts in our vehicles
at our expense for a speci?ed period of time. Therefore, any failure rate that exceeds our assumptions may result in
unanticipated losses.
Our future performance depends on our ability to expand into new markets as well as enrich our product portfolio and
offer innovative products in existing markets.
Our success depends, among other things, on our ability to maintain or increase our share in existing markets and/
or to expand into new markets through the development of innovative, high-quality products that are attractive to
customers and provide adequate pro?tability. Following our January 2014 acquisition of the approximately 41.5
percent interest in FCA US that we did not already own, we announced our Business Plan in May 2014. Our Business
Plan includes a number of product initiatives designed to improve the quality of our product offerings and grow sales in
existing markets and expand in new markets.
It generally takes two years or more to design and develop a new vehicle, and a number of factors may lengthen that
schedule. Because of this product development cycle and the various elements that may contribute to consumers’
acceptance of new vehicle designs, including competitors’ product introductions, fuel prices, general economic
conditions and changes in styling preferences, an initial product concept or design that we believe will be attractive
may not result in a vehicle that will generate sales in suf?cient quantities and at high enough prices to be pro?table.
A failure to develop and offer innovative products that compare favorably to those of our principal competitors, in
terms of price, quality, functionality and features, with particular regard to the upper-end of the product range, or
delays in bringing strategic new models to the market, could impair our strategy, which would have a material adverse
effect on our ?nancial condition and results of operations. Additionally, our high proportion of ?xed costs, both due to
our signi?cant investment in property, plant and equipment as well as the requirements of our collective bargaining
agreements, which limit our ?exibility to adjust personnel costs to changes in demand for our products, may further
exacerbate the risks associated with incorrectly assessing demand for our vehicles.
20 2014
|
ANNUAL REPORT
Risk Factors
Further, if we determine that a safety or emissions defect, a mechanical defect or a non-compliance with regulation
exists with respect to a vehicle model prior to the retail launch, the launch of such vehicle could be delayed until
we remedy the defect or non-compliance. The costs associated with any protracted delay in new model launches
necessary to remedy such defect, and the cost of providing a free remedy for such defects or non-compliance in
vehicles that have been sold, could be substantial.
The automotive industry is highly competitive and cyclical and we may suffer from those factors more than some of
our competitors.
Substantially all of our revenues are generated in the automotive industry, which is highly competitive, encompassing the
production and distribution of passenger cars, light commercial vehicles and components and production systems.
We face competition from other international passenger car and light commercial vehicle manufacturers and distributors
and components suppliers in Europe, North America, Latin America and the Asia Paci?c region. These markets are all
highly competitive in terms of product quality, innovation, pricing, fuel economy, reliability, safety, customer service and
?nancial services offered, and many of our competitors are better capitalized with larger market shares.
Competition, particularly in pricing, has increased signi?cantly in the automotive industry in recent years. Global vehicle
production capacity signi?cantly exceeds current demand, partly as a result of lower growth in demand for vehicles.
This overcapacity, combined with high levels of competition and weakness of major economies, has intensi?ed and
may further intensify pricing pressures.
Our competitors may respond to these conditions by attempting to make their vehicles more attractive or less
expensive to customers by adding vehicle enhancements, providing subsidized ?nancing or leasing programs, or
by reducing vehicle prices whether directly or by offering option package discounts, price rebates or other sales
incentives in certain markets. These actions have had, and could continue to have, a negative impact on our vehicle
pricing, market share, and results of operations.
In the automotive business, sales to end-customers are cyclical and subject to changes in the general condition of
the economy, the readiness of end-customers to buy and their ability to obtain ?nancing, as well as the possible
introduction of measures by governments to stimulate demand. The automotive industry is also subject to the
constant renewal of product offerings through frequent launches of new models. A negative trend in the automotive
industry or our inability to adapt effectively to external market conditions coupled with more limited capital than many
of our principal competitors could have a material adverse impact on our ?nancial condition and results of operations.
Our current credit rating is below investment grade and any further deterioration may signi?cantly affect our funding
and prospects.
The ability to access the capital markets or other forms of ?nancing and the related costs depend, among other things,
on our credit ratings. Following downgrades by the major rating agencies, we are currently rated below investment
grade. The rating agencies review these ratings regularly and, accordingly, new ratings may be assigned to us in the
future. It is not currently possible to predict the timing or outcome of any ratings review. Any downgrade may increase
our cost of capital and potentially limit our access to sources of ?nancing, which may cause a material adverse effect
on our business prospects, earnings and ?nancial position. Since the ratings agencies may separately review and rate
FCA US on a stand-alone basis, it is possible that our credit ratings may not bene?t from any improvements in FCA
US’s credit ratings or that a deterioration in FCA US’s credit ratings could result in a negative rating review of us. See
Liquidity and Capital Resources for more information on our ?nancing arrangements.
2014
|
ANNUAL REPORT 21
We may not be able to realize anticipated bene?ts from any acquisitions and challenges associated with strategic
alliances may have an adverse impact on our results of operations.
We may engage in acquisitions or enter into, expand or exit from strategic alliances which could involve risks that may
prevent us from realizing the expected bene?ts of the transactions or achieving our strategic objectives. Such risks
could include:
technological and product synergies, economies of scale and cost reductions not occurring as expected;
unexpected liabilities;
incompatibility in processes or systems;
unexpected changes in laws or regulations;
inability to retain key employees;
inability to source certain products;
increased ?nancing costs and inability to fund such costs;
signi?cant costs associated with terminating or modifying alliances; and
problems in retaining customers and integrating operations, services, personnel, and customer bases.
If problems or issues were to arise among the parties to one or more strategic alliances for managerial, ?nancial or
other reasons, or if such strategic alliances or other relationships were terminated, our product lines, businesses,
?nancial position and results of operations could be adversely affected.
We may not achieve the expected bene?ts from our integration of the Group’s operations.
The January 2014 acquisition of the approximately 41.5 percent interest in FCA US we did not already own and the
related integration of the two businesses is intended to provide us with a number of long-term bene?ts, including
allowing new vehicle platforms and powertrain technologies to be shared across a larger volume, as well as
procurement bene?ts and global distribution opportunities, particularly the extension of brands into new markets.
The integration is also intended to facilitate penetration of key brands in several international markets where we believe
products would be attractive to consumers, but where we currently do not have signi?cant market penetration.
The ability to realize the bene?ts of the integration is critical for us to compete with other automakers. If we are unable
to convert the opportunities presented by the integration into long-term commercial bene?ts, either by improving
sales of vehicles and service parts, reducing costs or both, our ?nancial condition and results of operations may be
materially adversely affected.
We may be exposed to shortfalls in our pension plans.
Our de?ned bene?t pension plans are currently underfunded. As of December 31, 2014, our de?ned bene?t
pension plans were underfunded by approximately €5.1 billion (€4.8 billion of which relates to FCA US’s de?ned
bene?t pension plans). Our pension funding obligations may increase signi?cantly if the investment performance
of plan assets does not keep pace with bene?t payment obligations. Mandatory funding obligations may increase
because of lower than anticipated returns on plan assets, whether as a result of overall weak market performance
or particular investment decisions, changes in the level of interest rates used to determine required funding levels,
changes in the level of bene?ts provided for by the plans, or any changes in applicable law related to funding
requirements. Our de?ned bene?t plans currently hold signi?cant investments in equity and ?xed income securities,
as well as investments in less liquid instruments such as private equity, real estate and certain hedge funds. Due
to the complexity and magnitude of certain investments, additional risks may exist, including signi?cant changes in
investment policy, insuf?cient market capacity to complete a particular investment strategy and an inherent divergence
in objectives between the ability to manage risk in the short term and the ability to quickly rebalance illiquid and long-
term investments.
22 2014
|
ANNUAL REPORT
Risk Factors
To determine the appropriate level of funding and contributions to our de?ned bene?t plans, as well as the investment
strategy for the plans, we are required to make various assumptions, including an expected rate of return on plan
assets and a discount rate used to measure the obligations under de?ned bene?t pension plans. Interest rate
increases generally will result in a decline in the value of investments in ?xed income securities and the present value
of the obligations. Conversely, interest rate decreases will generally increase the value of investments in ?xed income
securities and the present value of the obligations.
Any reduction in the discount rate or the value of plan assets, or any increase in the present value of obligations, may
increase our pension expenses and required contributions and, as a result, could constrain liquidity and materially
adversely affect our ?nancial condition and results of operations. If we fail to make required minimum funding
contributions, we could be subject to reportable event disclosure to the U.S. Pension Bene?t Guaranty Corporation, as
well as interest and excise taxes calculated based upon the amount of any funding de?ciency. With our ownership in
FCA US now equal to 100 percent, we may become subject to certain U.S. legal requirements making us secondarily
responsible for a funding shortfall in certain of FCA US’s pension plans in the event these pension plans were
terminated and FCA US were to become insolvent.
We may not be able to provide adequate access to ?nancing for our dealers and retail customers.
Our dealers enter into wholesale ?nancing arrangements to purchase vehicles from us to hold in inventory and facilitate
retail sales, and retail customers use a variety of ?nance and lease programs to acquire vehicles.
Unlike many of our competitors, we do not own and operate a controlled ?nance company dedicated solely to our
mass-market operations in the U.S. and certain key markets in Europe. Instead we have elected to partner with
specialized ?nancial services providers through joint ventures and commercial agreements. Our lack of a controlled
?nance company in these key markets may increase the risk that our dealers and retail customers will not have access
to suf?cient ?nancing on acceptable terms which may adversely affect our vehicle sales in the future. Furthermore,
many of our competitors are better able to implement ?nancing programs designed to maximize vehicle sales in a
manner that optimizes pro?tability for them and their ?nance companies on an aggregate basis. Since our ability
to compete depends on access to appropriate sources of ?nancing for dealers and retail customers, our lack of a
controlled ?nance company in those markets could adversely affect our results of operations.
In other markets, we rely on controlled ?nance companies, joint ventures and commercial relationships with third
parties, including third party ?nancial institutions, to provide ?nancing to our dealers and retail customers. Finance
companies are subject to various risks that could negatively affect their ability to provide ?nancing services at
competitive rates, including:
the performance of loans and leases in their portfolio, which could be materially affected by delinquencies, defaults
or prepayments;
wholesale auction values of used vehicles;
higher than expected vehicle return rates and the residual value performance of vehicles they lease; and
?uctuations in interest rates and currency exchange rates.
Any ?nancial services provider, including our joint ventures and controlled ?nance companies, will face other demands
on its capital, including the need or desire to satisfy funding requirements for dealers or customers of our competitors
as well as liquidity issues relating to other investments. Furthermore, they may be subject to regulatory changes that
may increase their costs, which may impair their ability to provide competitive ?nancing products to our dealers and
retail customers.
To the extent that a ?nancial services provider is unable or unwilling to provide suf?cient ?nancing at competitive rates
to our dealers and retail customers, such dealers and retail customers may not have suf?cient access to ?nancing
to purchase or lease our vehicles. As a result, our vehicle sales and market share may suffer, which would adversely
affect our ?nancial condition and results of operations.
2014
|
ANNUAL REPORT 23
Vehicle sales depend heavily on affordable interest rates for vehicle ?nancing.
In certain regions, ?nancing for new vehicle sales has been available at relatively low interest rates for several years
due to, among other things, expansive government monetary policies. To the extent that interest rates rise generally,
market rates for new vehicle ?nancing are expected to rise as well, which may make our vehicles less affordable
to retail customers or steer consumers to less expensive vehicles that tend to be less pro?table for us, adversely
affecting our ?nancial condition and results of operations. Additionally, if consumer interest rates increase substantially
or if ?nancial service providers tighten lending standards or restrict their lending to certain classes of credit, our
retail customers may not desire to or be able to obtain ?nancing to purchase or lease our vehicles. Furthermore,
because our customers may be relatively more sensitive to changes in the availability and adequacy of ?nancing and
macroeconomic conditions, our vehicle sales may be disproportionately affected by changes in ?nancing conditions
relative to the vehicle sales of our competitors.
Limitations on our liquidity and access to funding may limit our ability to execute our Business Plan and improve our
?nancial condition and results of operations.
Our future performance will depend on, among other things, our ability to ?nance debt repayment obligations and
planned investments from operating cash ?ow, available liquidity, the renewal or re?nancing of existing bank loans
and/or facilities and possible access to capital markets or other sources of ?nancing. Although we have measures in
place that are designed to ensure that adequate levels of working capital and liquidity are maintained, declines in sales
volumes could have a negative impact on the cash-generating capacity of our operating activities. For a discussion
of these factors, see Liquidity and Capital Resources. We could, therefore, ?nd ourselves in the position of having to
seek additional ?nancing and/or having to re?nance existing debt, including in unfavorable market conditions, with
limited availability of funding and a general increase in funding costs. Any limitations on our liquidity, due to decreases
in vehicle sales, the amount of or restrictions in our existing indebtedness, conditions in the credit markets, general
economic conditions or otherwise, may adversely impact our ability to execute our Business Plan and impair our
?nancial condition and results of operations. In addition, any actual or perceived limitations of our liquidity may limit the
ability or willingness of counterparties, including dealers, customers, suppliers and ?nancial service providers, to do
business with us, which may adversely affect our ?nancial condition and results of operations.
Our ability to achieve cost reductions and to realize production ef?ciencies is critical to maintaining our
competitiveness and long-term pro?tability.
We are continuing to implement a number of cost reduction and productivity improvement initiatives in our operations,
for example, by increasing the number of vehicles that are based on common platforms, reducing dependence on sales
incentives offered to dealers and consumers, leveraging purchasing capacity and volumes and implementing World
Class Manufacturing, or WCM, principles. WCM principles are intended to eliminate waste of all types, and improve
worker ef?ciency, productivity, safety and vehicle quality as well as worker ?exibility and focus on removing capacity
bottlenecks to maximize output when market demand requires without having to resort to signi?cant capital investments.
As part of our Business Plan, we plan to continue our efforts to extend our WCM programs into all of our production
facilities and benchmark across all of our facilities around the world. Our future success depends upon our ability to
implement these initiatives successfully throughout our operations. While some productivity improvements are within our
control, others depend on external factors, such as commodity prices, supply capacity limitations, or trade regulation.
These external factors may make it more dif?cult to reduce costs as planned, and we may sustain larger than expected
production expenses, materially affecting our business and results of operations. Furthermore, reducing costs may prove
dif?cult due to the need to introduce new and improved products in order to meet consumer expectations.
24 2014
|
ANNUAL REPORT
Risk Factors
Our business operations may be impacted by various types of claims, lawsuits, and other contingent obligations.
We are involved in various product liability, warranty, product performance, asbestos, personal injury, environmental
claims and lawsuits, governmental investigations, antitrust, intellectual property, tax and other legal proceedings
including those that arise in the ordinary course of our business. We estimate such potential claims and contingent
liabilities and, where appropriate, record provisions to address these contingent liabilities. The ultimate outcome of
the legal matters pending against us is uncertain, and although such claims, lawsuits and other legal matters are not
expected individually to have a material adverse effect on our ?nancial condition or results of operations, such matters
could have, in the aggregate, a material adverse effect on our ?nancial condition or results of operations. Furthermore,
we could, in the future, be subject to judgments or enter into settlements of lawsuits and claims that could have a
material adverse effect on our results of operations in any particular period. While we maintain insurance coverage with
respect to certain claims, we may not be able to obtain such insurance on acceptable terms in the future, if at all, and
any such insurance may not provide adequate coverage against any such claims. See also Notes 26 and 33 of the
Consolidated ?nancial statements included elsewhere in this report for additional information.
Failure to maintain adequate ?nancial and management processes and controls could lead to errors in our ?nancial
reporting, which could harm our business reputation and cause a default under certain covenants in our credit
agreements and other debt.
We continuously monitor and evaluate changes in our internal controls over ?nancial reporting. In support of our
drive toward common global systems, we are extending the current ?nance, procurement, and capital project and
investment management systems to new areas of operations. As appropriate, we continue to modify the design and
documentation of internal control processes and procedures relating to the new systems to simplify and automate
many of our previous processes. Our management believes that the implementation of these systems will continue to
improve and enhance internal controls over ?nancial reporting. Failure to maintain adequate ?nancial and management
processes and controls could lead to errors in our ?nancial reporting, which could harm our business reputation.
In addition, if we do not maintain adequate ?nancial and management personnel, processes and controls, we may
not be able to accurately report our ?nancial performance on a timely basis, which could cause a default under certain
covenants in the indentures governing certain of our public indebtedness, and other credit agreements.
A disruption in our information technology could compromise con?dential and sensitive information.
We depend on our information technology and data processing systems to operate our business, and a signi?cant
malfunction or disruption in the operation of our systems, or a security breach that compromises the con?dential and
sensitive information stored in those systems, could disrupt our business and adversely impact our ability to compete.
Our ability to keep our business operating effectively depends on the functional and ef?cient operation of our
information, data processing and telecommunications systems, including our vehicle design, manufacturing,
inventory tracking and billing and payment systems. We rely on these systems to make a variety of day-to-day
business decisions as well as to track transactions, billings, payments and inventory. Such systems are susceptible to
malfunctions and interruptions due to equipment damage, power outages, and a range of other hardware, software
and network problems. Those systems are also susceptible to cybercrime, or threats of intentional disruption, which
are increasing in terms of sophistication and frequency. For any of these reasons, we may experience systems
malfunctions or interruptions. Although our systems are diversi?ed, including multiple server locations and a range
of software applications for different regions and functions, and we are currently undergoing an effort to assess and
ameliorate risks to our systems, a signi?cant or large-scale malfunction or interruption of any one of our computer or
data processing systems could adversely affect our ability to manage and keep our operations running ef?ciently, and
damage our reputation if we are unable to track transactions and deliver products to our dealers and customers.
A malfunction that results in a wider or sustained disruption to our business could have a material adverse effect on
our business, ?nancial condition and results of operations.
2014
|
ANNUAL REPORT 25
In addition to supporting our operations, we use our systems to collect and store con?dential and sensitive data,
including information about our business, our customers and our employees. As our technology continues to evolve,
we anticipate that we will collect and store even more data in the future, and that our systems will increasingly use
remote communication features that are sensitive to both willful and unintentional security breaches. Much of our
value is derived from our con?dential business information, including vehicle design, proprietary technology and
trade secrets, and to the extent the con?dentiality of such information is compromised, we may lose our competitive
advantage and our vehicle sales may suffer. We also collect, retain and use personal information, including data we
gather from customers for product development and marketing purposes, and data we obtain from employees. In the
event of a breach in security that allows third parties access to this personal information, we are subject to a variety
of ever-changing laws on a global basis that require us to provide noti?cation to the data owners, and that subject us
to lawsuits, ?nes and other means of regulatory enforcement. Our reputation could suffer in the event of such a data
breach, which could cause consumers to purchase their vehicles from our competitors. Ultimately, any signi?cant
compromise in the integrity of our data security could have a material adverse effect on our business.
We may not be able to adequately protect our intellectual property rights, which may harm our business.
Our success depends, in part, on our ability to protect our intellectual property rights. If we fail to protect our intellectual
property rights, others may be able to compete against us using intellectual property that is the same as or similar to
our own. In addition, there can be no guarantee that our intellectual property rights are suf?cient to provide us with
a competitive advantage against others who offer products similar to ours. Despite our efforts, we may be unable to
prevent third parties from infringing our intellectual property and using our technology for their competitive advantage.
Any such infringement and use could adversely affect our business, ?nancial condition or results of operations.
The laws of some countries in which we operate do not offer the same protection of our intellectual property rights as do the
laws of the U.S. or Europe. In addition, effective intellectual property enforcement may be unavailable or limited in certain
countries, making it dif?cult for us to protect our intellectual property from misuse or infringement there. Our inability to
protect our intellectual property rights in some countries may harm our business, ?nancial condition or results of operations.
We are subject to risks relating to international markets and exposure to changes in local conditions.
We are subject to risks inherent to operating globally, including those related to:
exposure to local economic and political conditions;
import and/or export restrictions;
multiple tax regimes, including regulations relating to transfer pricing and withholding and other taxes on
remittances and other payments to or from subsidiaries;
foreign investment and/or trade restrictions or requirements, foreign exchange controls and restrictions on the
repatriation of funds. In particular, current regulations limit our ability to access and transfer liquidity out of Venezuela
to meet demands in other countries and also subject us to increased risk of devaluation or other foreign exchange
losses. See Subsequent events and 2015 outlook for more information regarding our Venezuela operations; and
the introduction of more stringent laws and regulations.
Unfavorable developments in any one or a combination of these areas (which may vary from country to country) could
have a material adverse effect on our ?nancial condition and results of operations.
26 2014
|
ANNUAL REPORT
Risk Factors
Our success largely depends on the ability of our current management team to operate and manage effectively.
Our success largely depends on the ability of our senior executives and other members of management to effectively
manage the Group and individual areas of the business. In particular, our Chief Executive Of?cer, Sergio Marchionne,
is critical to the execution of our new strategic direction and implementation of the Business Plan. Although
Mr. Marchionne has indicated his intention to remain as our Chief Executive Of?cer through the period of our Business
Plan, if we were to lose his services or those of any of our other senior executives or key employees it could have a
material adverse effect on our business prospects, earnings and ?nancial position. We have developed succession
plans that we believe are appropriate in the circumstances, although it is dif?cult to predict with any certainty that we
will replace these individuals with persons of equivalent experience and capabilities. If we are unable to ?nd adequate
replacements or to attract, retain and incentivize senior executives, other key employees or new quali?ed personnel
our business, ?nancial condition and results of operations may suffer.
Developments in emerging market countries may adversely affect our business.
We operate in a number of emerging markets, both directly (e.g., Brazil and Argentina) and through joint ventures and
other cooperation agreements (e.g., Turkey, India, China and Russia). Our Business Plan provides for expansion of
our existing sales and manufacturing presence in our South and Central America, or LATAM, and Asia and Paci?c
countries, or APAC, regions. In recent years we have been the market leader in Brazil, which has provided a key
contribution to our ?nancial performance. Our exposure to other emerging countries has increased in recent years,
as have the number and importance of such joint ventures and cooperation agreements. Economic and political
developments in Brazil and other emerging markets, including economic crises or political instability, have had and
could have in the future material adverse effects on our ?nancial condition and results of operations. Further, in certain
markets in which we or our joint ventures operate, government approval may be required for certain activities, which
may limit our ability to act quickly in making decisions on our operations in those markets.
Maintaining and strengthening our position in these emerging markets is a key component of our global growth
strategy in our Business Plan. However, with competition from many of the largest global manufacturers as well as
numerous smaller domestic manufacturers, the automotive market in these emerging markets is highly competitive.
As these markets continue to grow, we anticipate that additional competitors, both international and domestic, will
seek to enter these markets and that existing market participants will try to aggressively protect or increase their
market share. Increased competition may result in price reductions, reduced margins and our inability to gain or hold
market share, which could have a material adverse effect on our ?nancial condition and results of operations.
Our reliance on joint ventures in certain emerging markets may adversely affect the development of our business in
those regions.
We intend to expand our presence in emerging markets, including China and India, through partnerships and joint
ventures. For instance, we have entered into a joint venture with Guangzhou Automobile Group Co., Ltd, or GAC
Group, which will localize production of three new Jeep vehicles for the Chinese market and expand the portfolio of
Jeep Sport Utility Vehicles, or SUVs, currently available to Chinese consumers as imports. We have also entered into a
joint venture with TATA Motors Limited for the production of certain of our vehicles, engines and transmissions in India.
Our reliance on joint ventures to enter or expand our presence in these markets may expose us to risk of con?ict
with our joint venture partners and the need to divert management resources to overseeing these shareholder
arrangements. Further, as these arrangements require cooperation with third party partners, these joint ventures may
not be able to make decisions as quickly as we would if we were operating on our own or may take actions that are
different from what we would do on a standalone basis in light of the need to consider our partners’ interests.
As a result, we may be less able to respond timely to changes in market dynamics, which could have an adverse effect
on our ?nancial condition and results of operations.
2014
|
ANNUAL REPORT 27
Laws, regulations and governmental policies, including those regarding increased fuel economy requirements and
reduced greenhouse gas emissions, may have a signi?cant effect on how we do business and may adversely affect
our results of operations.
In order to comply with government regulations related to fuel economy and emissions standards, we must devote
signi?cant ?nancial and management resources, as well as vehicle engineering and design attention, to these legal
requirements. We expect the number and scope of these regulatory requirements, along with the costs associated
with compliance, to increase signi?cantly in the future and these costs could be dif?cult to pass through to customers.
As a result, we may face limitations on the types of vehicles we produce and sell and where we can sell them, which
could have a material adverse impact on our ?nancial condition and results of operations.
Government initiatives to stimulate consumer demand for products sold by us, such as changes in tax treatment or purchase
incentives for new vehicles, can substantially in?uence the timing and level of our revenues. The size and duration of such
government measures are unpredictable and outside of our control. Any adverse change in government policy relating to those
measures could have material adverse effects on our business prospects, ?nancial condition and results of operations.
The ?nancial resources required to develop and commercialize vehicles incorporating sustainable technologies for the
future are signi?cant, as are the barriers that limit the mass-market potential of such vehicles.
Our product strategy is driven by the objective of achieving sustainable mobility by reducing the environmental impact
of vehicles over their entire life cycle. We therefore intend to continue investing capital resources to develop new
sustainable technology. We aim to increase the use of alternative fuels, such as natural gas, by continuing to offer a
range of dual-fuel passenger cars and commercial vehicles. Additionally, we plan to continue developing alternative
propulsion systems, particularly for vehicles driven in urban areas (such as the zero-emission Fiat 500e).
In many cases, technological and cost barriers limit the mass-market potential of sustainable natural gas and electric
vehicles. In certain other cases the technologies that we plan to employ are not yet commercially practical and depend
on signi?cant future technological advances by us and by suppliers. There can be no assurance that these advances
will occur in a timely or feasible manner, that the funds we have budgeted or expended for these purposes will be
adequate, or that we will be able to obtain rights to use these technologies. Further, our competitors and others are
pursuing similar technologies and other competing technologies and there can be no assurance that they will not
acquire similar or superior technologies sooner than we will or on an exclusive basis or at a signi?cant price advantage.
Labor laws and collective bargaining agreements with our labor unions could impact our ability to increase the
ef?ciency of our operations.
Substantially all of our production employees are represented by trade unions, are covered by collective bargaining
agreements and/or are protected by applicable labor relations regulations that may restrict our ability to modify
operations and reduce costs quickly in response to changes in market conditions. These and other provisions in our
collective bargaining agreements may impede our ability to restructure our business successfully to compete more
effectively, especially with those automakers whose employees are not represented by trade unions or are subject to less
stringent regulations, which could have a material adverse effect on our ?nancial condition and results of operations.
We depend on our relationships with suppliers.
We purchase raw materials and components from a large number of suppliers and depend on services and products
provided by companies outside the Group. Close collaboration between an original equipment manufacturer, or OEM,
and its suppliers is common in the automotive industry, and although this offers economic bene?ts in terms of cost
reduction, it also means that we depend on our suppliers and are exposed to the possibility that dif?culties, including
those of a ?nancial nature, experienced by those suppliers (whether caused by internal or external factors) could have
a material adverse effect on our ?nancial condition and results of operations.
28 2014
|
ANNUAL REPORT
Risk Factors
We face risks associated with increases in costs, disruptions of supply or shortages of raw materials.
We use a variety of raw materials in our business including steel, aluminum, lead, resin and copper, and precious
metals such as platinum, palladium and rhodium, as well as energy. The prices for these raw materials ?uctuate, and
market conditions can affect our ability to manage our cost of sales over the short term. We seek to manage this
exposure, but we may not be successful in managing our exposure to these risks. Substantial increases in the prices
for raw materials would increase our operating costs and could reduce pro?tability if the increased costs cannot be
offset by changes in vehicle prices or countered by productivity gains. In particular, certain raw materials are sourced
from a limited number of suppliers and from a limited number of countries. We cannot guarantee that we will be able to
maintain arrangements with these suppliers that assure access to these raw materials, and in some cases this access
may be affected by factors outside of our control and the control of our suppliers. For instance, natural or man-made
disasters or civil unrest may have severe and unpredictable effects on the price of certain raw materials in the future.
As with raw materials, we are also at risk for supply disruption and shortages in parts and components for use in our
vehicles for many reasons including, but not limited to, tight credit markets or other ?nancial distress, natural or man-
made disasters, or production dif?culties. We will continue to work with suppliers to monitor potential disruptions and
shortages and to mitigate the effects of any emerging shortages on our production volumes and revenues.
However, there can be no assurances that these events will not have an adverse effect on our production in the future,
and any such effect may be material.
Any interruption in the supply or any increase in the cost of raw materials, parts, components and systems could
negatively impact our ability to achieve our vehicle sales objectives and pro?tability. Long-term interruptions in supply
of raw materials, parts, components and systems may result in a material impact on vehicle production, vehicle
sales objectives, and pro?tability. Cost increases which cannot be recouped through increases in vehicle prices, or
countered by productivity gains, may result in a material impact on our ?nancial condition and/or results of operations.
We are subject to risks associated with exchange rate ?uctuations, interest rate changes, credit risk and other market risks.
We operate in numerous markets worldwide and are exposed to market risks stemming from ?uctuations in currency
and interest rates. The exposure to currency risk is mainly linked to the differences in geographic distribution of our
manufacturing activities and commercial activities, resulting in cash ?ows from sales being denominated in currencies
different from those connected to purchases or production activities.
We use various forms of ?nancing to cover funding requirements for our industrial activities and for providing ?nancing
to our dealers and customers. Moreover, liquidity for industrial activities is also principally invested in variable-rate
or short-term ?nancial instruments. Our ?nancial services businesses normally operate a matching policy to offset
the impact of differences in rates of interest on the ?nanced portfolio and related liabilities. Nevertheless, changes in
interest rates can affect net revenues, ?nance costs and margins.
We seek to manage risks associated with ?uctuations in currency and interest rates through ?nancial hedging
instruments. Despite such hedges being in place, ?uctuations in currency or interest rates could have a material adverse
effect on our ?nancial condition and results of operations. For example, the weakening of the Brazilian Real against the
Euro in 2014 impacted the results of operations of our LATAM segment. See Operating Results—Results of Operations.
Our ?nancial services activities are also subject to the risk of insolvency of dealers and retail customers, as well as
unfavorable economic conditions in markets where these activities are carried out. Despite our efforts to mitigate such
risks through the credit approval policies applied to dealers and retail customers, there can be no assurances that we
will be able to successfully mitigate such risks, particularly with respect to a general change in economic conditions.
2014
|
ANNUAL REPORT 29
We are a Dutch public company with limited liability, and our shareholders may have rights different from those of
shareholders of companies organized in the U.S.
The rights of our shareholders may be different from the rights of shareholders governed by the laws of U.S.
jurisdictions. We are a Dutch public company with limited liability (naamloze vennootsehap). Our corporate affairs are
governed by our articles of association and by the laws governing companies incorporated in the Netherlands.
The rights of shareholders and the responsibilities of members of our board of directors may be different from the
rights of shareholders and the responsibilities of members of our board of directors in companies governed by the
laws of other jurisdictions including the U.S. In the performance of its duties, our board of directors is required by
Dutch law to consider our interests and the interests of our shareholders, our employees and other stakeholders, in all
cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties
will have interests that are different from, or in addition to, your interests as a shareholder.
It may be dif?cult to enforce U.S. judgments against us.
We are organized under the laws of the Netherlands, and a substantial portion of our assets are outside of the U.S.
Most of our directors and senior management and our independent auditors are resident outside the U.S., and all or
a substantial portion of their respective assets may be located outside the U.S. As a result, it may be dif?cult for U.S.
investors to effect service of process within the U.S. upon these persons. It may also be dif?cult for U.S. investors to
enforce within the U.S. judgments predicated upon the civil liability provisions of the securities laws of the U.S. or any
state thereof. In addition, there is uncertainty as to whether the courts outside the U.S. would recognize or enforce
judgments of U.S. courts obtained against us or our directors and of?cers predicated upon the civil liability provisions
of the securities laws of the U.S. or any state thereof. Therefore, it may be dif?cult to enforce U.S. judgments against
us, our directors and of?cers and our independent auditors.
We operate so as to be treated as exclusively resident in the United Kingdom for tax purposes, but the relevant tax
authorities may treat us as also being tax resident elsewhere.
We are not a company incorporated in the United Kingdom, or U.K. Therefore, whether we are resident in the U.K. for
tax purposes will depend on whether our “central management and control” is located (in whole or in part) in the U.K.
The test of “central management and control” is largely a question of fact and degree based on all the circumstances,
rather than a question of law. Nevertheless, the decisions of the U.K. courts and the published practice of Her
Majesty’s Revenue & Customs, or HMRC, suggest that we, a group holding company, are likely to be regarded as
having become U.K.-resident on this basis from incorporation and remaining so if, as we intend, (i) at least half of
the meetings of our Board of Directors are held in the U.K. with a majority of directors present in the U.K. for those
meetings; (ii) at those meetings there are full discussions of, and decisions are made regarding, the key strategic
issues affecting us and our subsidiaries; (iii) those meetings are properly minuted; (iv) at least some of our directors,
together with supporting staff, are based in the U.K.; and (v) we have permanent staffed of?ce premises in the U.K.
Even if we are resident in the U.K. for tax purposes on this basis, as expected, we would nevertheless not be treated
as U.K.-resident if (a) we were concurrently resident in another jurisdiction (applying the tax residence rules of that
jurisdiction) that has a double tax treaty with the U.K. and (b) there is a tie-breaker provision in that tax treaty which
allocates exclusive residence to that other jurisdiction.
Our residence for Italian tax purposes is largely a question of fact based on all circumstances. A rebuttable
presumption of residence in Italy may apply under Article 73(5-bis) of the Italian Consolidated Tax Act, or CTA.
However, we have set up and thus far maintained, and intend to continue to maintain, our management and
organizational structure in such a manner that we should be deemed resident in the U.K. from our incorporation for the
purposes of the Italy-U.K. tax treaty. The result of this is that we should not be regarded as an Italian tax resident either
for the purposes of the Italy-U.K. tax treaty or for Italian domestic law purposes. Because this analysis is highly factual
and may depend on future changes in our management and organizational structure, there can be no assurance
regarding the ?nal determination of our tax residence. Should we be treated as an Italian tax resident, we would
be subject to taxation in Italy on our worldwide income and may be required to comply with withholding tax and/or
reporting obligations provided under Italian tax law, which could result in additional costs and expenses.
30 2014
|
ANNUAL REPORT
Risk Factors
Even if our “central management and control” is in the U.K. as expected, we will be resident in the Netherlands for
Dutch corporate income tax and Dutch dividend withholding tax purposes on the basis that we are incorporated there.
Nonetheless, we will be regarded as solely resident in either the U.K. or the Netherlands under the Netherlands-U.K.
tax treaty if the U.K. and Dutch competent authorities agree that this is the case. We have applied for a ruling from the
U.K. and Dutch competent authorities that we should be treated as resident solely in the U.K. for the purposes of the
treaty. The outcome of that application cannot be guaranteed and it is possible that the U.K. and Dutch competent
authorities may fail to reach an agreement. We anticipate, however, that, so long as the factors listed in the third
preceding paragraph are present at all material times, the possibility that the U.K. and Dutch competent authorities will
rule that we should be treated as solely resident in the Netherlands is remote. If there is a change over time to the facts
upon which a ruling issued by the competent authorities is based, the ruling may be withdrawn or cease to apply.
We therefore expect to continue to be treated as resident in the U.K. and subject to U.K. corporation tax.
Unless and until the U.K. and the Dutch competent authorities rule that we should be treated as solely resident in the
U.K. for the purposes of the Netherlands-U.K. double tax treaty, the Netherlands will be allowed to levy tax on us as a
Dutch-tax-resident taxpayer.
The U.K.’s controlled foreign company taxation rules may reduce net returns to shareholders.
On the assumption that we are resident for tax purposes in the U.K., we will be subject to the U.K. controlled foreign
company, or CFC, rules. The CFC rules can subject U.K.-tax-resident companies (in this case, us) to U.K. tax on the
pro?ts of certain companies not resident for tax purposes in the U.K. in which they have at least a 25 percent direct
or indirect interest. Interests of connected or associated persons may be aggregated with those of the U.K.-tax-
resident company when applying this 25 percent threshold. For a company to be a CFC, it must be treated as directly
or indirectly controlled by persons resident for tax purposes in the U.K. The de?nition of control is broad (it includes
economic rights) and captures some joint ventures.
Various exemptions are available. One of these is that a CFC must be subject to tax in its territory of residence at
an effective rate not less than 75 percent of the rate to which it would be subject in the U.K., after making speci?ed
adjustments. Another of the exemptions (the “excluded territories exemption”) is that the CFC is resident in a
jurisdiction speci?ed by HMRC in regulations (several jurisdictions in which our group has signi?cant operations,
including Brazil, Italy and the U.S., are so speci?ed). For this exemption to be available, the CFC must not be involved
in an arrangement with a main purpose of avoiding U.K. tax and the CFC’s income falling within certain categories
(often referred to as the CFC’s “bad income”) must not exceed a set limit. In the case of the U.S. and certain other
countries, the “bad income” test need not be met if the CFC does not have a permanent establishment in any other
territory and the CFC or persons with an interest in it are subject to tax in its home jurisdiction on all its income (other
than non-deductible distributions). We expect that our principal operating activities should fall within one or more of the
exemptions from the CFC rules, in particular the excluded territories exemption.
Where the entity exemptions are not available, pro?ts from activities other than ?nance or insurance will only be subject
to apportionment under the CFC rules where:
some of the CFC’s assets or risks are acquired, managed or controlled to any signi?cant extent in the U.K. (a) other
than by a U.K. permanent establishment of the CFC and (b) other than under arm’s length arrangements;
the CFC could not manage the assets or risks itself; and
the CFC is party to arrangements which increase its pro?ts while reducing tax payable in the U.K. and the
arrangements would not have been made if they were not expected to reduce tax in some jurisdiction.
Pro?ts from ?nance activities (whether considered trading or non-trading pro?ts for U.K. tax purposes) or from
insurance may be subject to apportionment under the CFC rules if they meet the tests set out above or speci?c tests
for those activities. A full or 75 percent exemption may also be available for some non-trading ?nance pro?ts.
Although we do not expect the U.K.’s CFC rules to have a material adverse impact on our ?nancial position, the effect
of the new CFC rules on us is not yet certain. We will continue to monitor developments in this regard and seek to
mitigate any adverse U.K. tax implications which may arise. However, the possibility cannot be excluded that the CFC
rules may have a material adverse impact on our ?nancial position, reducing net returns to our shareholders.
2014
|
ANNUAL REPORT 31
The existence of a permanent establishment in Italy for us after the Merger is a question of fact based on all the
circumstances.
Whether we have maintained a permanent establishment in Italy after the Merger, or an Italian P.E., is largely a question of
fact based on all the circumstances. We believe that, on the understanding that we should be a U.K.-resident company
under the Italy-U.K. tax treaty, we are likely to be treated as maintaining an Italian P.E. because we have maintained and
intend to continue to maintain suf?cient employees, facilities and activities in Italy to qualify as maintaining an Italian P.E.
Should this be the case (i) the embedded gains on our assets connected with the Italian P.E. cannot be taxed as a result
of the Merger; (ii) our tax-deferred reserves cannot be taxed, inasmuch as they have been recorded in the Italian P.E.’s
?nancial accounts; and (iii) the Italian ?scal unit that was headed by Fiat before the Merger, or Fiscal Unit, continues with
respect to our Italian subsidiaries whose shareholdings are part of the Italian P.E.’s net worth.
According to Article 124(5) of the CTA, a mandatory ruling request should be submitted to the Italian tax authorities,
in order to ensure the continuity, via the Italian P.E., of the Fiscal Unit that was previously in place between Fiat and its
Italian subsidiaries. We ?led a ruling request with the Italian tax authorities in respect of the continuation of the Fiscal
Unit via the Italian P.E. on April 16, 2014. The Italian tax authorities issued the ruling on December 10, 2014, or the
Ruling, con?rming that the Fiscal Unit may continue via the Italian P.E. However, the Ruling is an interpretative ruling.
It is not an assessment of a certain set of facts and circumstances. Therefore, even though the Ruling con?rms that
the Fiscal Unit may continue via the Italian P.E., this does not rule out that the Italian tax authorities may in the future
verify whether we actually have a P.E. in Italy and potentially challenge the existence of such P.E. Because the analysis
is highly factual, there can be no assurance regarding our maintenance of an Italian P.E. after the Merger.
Risks Related to Our Indebtedness
We have signi?cant outstanding indebtedness, which may limit our ability to obtain additional funding on competitive
terms and limit our ?nancial and operating ?exibility.
The extent of our indebtedness could have important consequences on our operations and ?nancial results, including:
we may not be able to secure additional funds for working capital, capital expenditures, debt service requirements
or general corporate purposes;
we may need to use a portion of our projected future cash ?ow from operations to pay principal and interest on our
indebtedness, which may reduce the amount of funds available to us for other purposes;
we may be more ?nancially leveraged than some of our competitors, which may put us at a competitive
disadvantage; and
we may not be able to adjust rapidly to changing market conditions, which may make us more vulnerable to a
downturn in general economic conditions or our business.
These risks may be exacerbated by volatility in the ?nancial markets, particularly those resulting from perceived strains
on the ?nances and creditworthiness of several governments and ?nancial institutions, particularly in the Eurozone.
Even after the January 2014 acquisition of the approximately 41.5 percent interest in FCA US that we did not
already own, FCA US continues to manage ?nancial matters, including funding and cash management, separately.
Additionally, we have not provided guarantees or security or undertaken any other similar commitment in relation to
any ?nancial obligation of FCA US, nor do we have any commitment to provide funding to FCA US in the future.
Furthermore, certain of our bonds include covenants that may be affected by FCA US’s circumstances. In particular,
these bonds include cross-default clauses which may accelerate the relevant issuer’s obligation to repay its bonds
in the event that FCA US fails to pay certain debt obligations on maturity or is otherwise subject to an acceleration in
the maturity of any of those obligations. Therefore, these cross-default provisions could require early repayment of
those bonds in the event FCA US’s debt obligations are accelerated or are not repaid at maturity. There can be no
assurance that the obligation to accelerate the repayment by FCA US of its debts will not arise or that it will be able to
pay its debt obligations when due at maturity.
In addition, one of our existing revolving credit facilities, expiring in July 2016, provides some limits on our ability to
provide ?nancial support to FCA US.
32 2014
|
ANNUAL REPORT
Risk Factors
Restrictive covenants in our debt agreements could limit our ?nancial and operating ?exibility.
The indentures governing certain of our outstanding public indebtedness, and other credit agreements to which
companies in the Group are a party, contain covenants that restrict the ability of companies in the Group to, among
other things:
incur additional debt;
make certain investments;
enter into certain types of transactions with af?liates;
sell certain assets or merge with or into other companies;
use assets as security in other transactions; and
enter into sale and leaseback transactions.
For more information regarding our credit facilities and debt, see Liquidity and Capital Resources.
Restrictions arising out of FCA US’s debt instruments may hinder our ability to manage our operations on a
consolidated, global basis.
FCA US is party to credit agreements for certain senior credit facilities and an indenture for two series of secured
senior notes. These debt instruments include covenants that restrict FCA US’s ability to pay dividends or enter into
sale and leaseback transactions, make certain distributions or purchase or redeem capital stock, prepay other debt,
encumber assets, incur or guarantee additional indebtedness, incur liens, transfer and sell assets or engage in certain
business combinations, enter into certain transactions with af?liates or undertake various other business activities.
In particular, in January 2014 and February 2015, FCA US paid distributions of U.S.$1.9 billion and U.S.$1.3 billion,
respectively, to its members. Further distributions will be limited to 50 percent of FCA US’s cumulative consolidated
net income (as de?ned in the agreements) from the period from January 1, 2012 until the end of the most recent ?scal
quarter, less the amounts of the January 2014 and February 2015 distributions. See Liquidity and Capital Resources.
These restrictive covenants could have an adverse effect on our business by limiting our ability to take advantage of
?nancing, mergers and acquisitions, joint ventures or other corporate opportunities. In particular, the senior credit
facilities contain, and future indebtedness may contain, other and more restrictive covenants. These agreements also
restrict FCA US from prepaying certain of its indebtedness or imposing limitations that make prepayment impractical.
The senior credit facilities require FCA US to maintain borrowing base collateral coverage and a minimum liquidity
threshold. A breach of any of these covenants or restrictions could result in an event of default on the indebtedness
and the other indebtedness of FCA US or result in cross-default under certain of its or our indebtedness.
If FCA US is unable to comply with these covenants, its outstanding indebtedness may become due and payable and
creditors may foreclose on pledged properties. In this case, FCA US may not be able to repay its debt and it is unlikely
that it would be able to borrow suf?cient additional funds. Even if new ?nancing is made available to FCA US in such
circumstances, it may not be available on acceptable terms.
Compliance with certain of these covenants could also restrict FCA US’s ability to take certain actions that its
management believes are in FCA US’s and our best long-term interests.
Should FCA US be unable to undertake strategic initiatives due to the covenants provided for by the above-referenced
instruments, our business prospects, ?nancial condition and results of operations could be impacted.
No assurance can be given that restrictions arising out of FCA US’s debt instruments will be eliminated.
In connection with our capital planning to support the Business Plan, we have announced our intention to eliminate
existing contractual terms limiting the free ?ow of capital among Group companies, including through the redemption of
each series of FCA US’s outstanding secured senior notes no later than their optional redemption dates in June 2015
and 2016, as well as the re?nancing of outstanding FCA US term loans and its revolving credit facility at or before this
time. No assurance can be given regarding the timing of such transactions or that such transactions will be completed.
2014
|
ANNUAL REPORT 33
Substantially all of the assets of FCA US and its U.S. subsidiary guarantors are unconditionally pledged as security
under its senior credit facilities and secured senior notes and could become subject to lenders’ contractual rights if an
event of default were to occur.
FCA US and several of its U.S. subsidiaries are obligors or guarantors under FCA US’s senior credit facilities and
secured senior notes. The obligations under the senior credit facilities and secured senior notes are secured by senior
and junior priority, respectively, security interests in substantially all of the assets of FCA US and its U.S. subsidiary
guarantors. The collateral includes 100 percent of the equity interests in FCA US’s U.S. subsidiaries, 65 percent of
the equity interests in its non-U.S. subsidiaries held directly by FCA US and its U.S. subsidiary guarantors, all personal
property and substantially all of FCA US’s U.S. real property other than its Auburn Hills, Michigan headquarters.
An event of default under FCA US’s senior credit facilities and/or secured senior notes could trigger its lenders’ or
noteholders’ contractual rights to enforce their security interest in these assets.
Risks Relating to the Proposed Separation of Ferrari
No assurance can be given that the Ferrari separation will occur.
No assurance can be given as to whether and when the separation of Ferrari will occur. We may determine to delay or
abandon the separation at any time for any reason or for no reason.
The terms of the proposed separation of Ferrari and Ferrari’s stand-alone capital structure have not been determined.
The terms of the proposed separation of Ferrari and Ferrari’s stand-alone capital structure have not yet been determined.
However, the ?nal structure and terms of the separation may not coincide with the terms set forth in this report. No
assurance can be given as to the terms of the prospective interest in Ferrari or the terms of how it will be distributed.
We may be unable to achieve some or all of the bene?ts that we expect to achieve from our separation from Ferrari.
We may not be able to achieve the ?nancial and other bene?ts that we expect will result from the separation of Ferrari.
The anticipated bene?ts of the separation are based on a number of assumptions, some of which may prove incorrect.
For example, there can be no assurance that the separation of Ferrari will enable us to strengthen our capital base
suf?ciently to offset the loss of the earnings and potential earnings of Ferrari.
Following the Ferrari separation, the price of our common shares may ?uctuate signi?cantly.
We cannot predict the prices at which our common shares may trade after the separation, the effect of the separation
on the trading prices of our common shares or whether the market value of our common shares and the common
shares of Ferrari held by a shareholder after the separation will be less than, equal to or greater than the market value
of our common shares held by such shareholder prior to the separation.
We intend for the Ferrari separation to qualify as a generally tax-free distribution for our shareholders from a U.S.
federal income tax perspective, and as a tax-free transaction from an Italian income tax perspective, but no assurance
can be given that the separation will receive such tax-free treatment in the United States or in other jurisdictions.
It is our intention to structure the Ferrari separation and any spin-off to our shareholders in a tax ef?cient manner
from a U.S. federal income tax perspective, taking appropriate account of the potential impact on shareholders, but
no assurance can be given that the intended tax treatment will be achieved, or that shareholders, and/or persons
that receive the bene?t of Ferrari shares, will not incur substantial tax liabilities in connection with the separation and
distribution. In particular, the requirements for favorable treatment differ (and may con?ict) from jurisdiction to jurisdiction
and the relevant requirements are often complex, and no assurance can be given that any ruling (or similar guidance)
from any taxing authority would be sought or, if sought, granted. Following an initial public offering of a portion of our
equity interest in Ferrari, we currently intend to spin-off our remaining equity interest in Ferrari to holders of our common
shares and mandatory convertible securities (which we intend to treat as our stock for U.S. federal income tax purposes),
and we currently intend for such spin-off to qualify as a generally tax-free distribution for holders of our stock for U.S.
federal income tax purposes. However, the structure and terms of any distribution have not been determined and there
34 2014
|
ANNUAL REPORT
Risk Factors
can be no assurance that a distribution of Ferrari or any other spin-off would qualify as a tax-free distribution or that
holders of our shares or mandatory convertible securities would not recognize gain for U.S. federal income tax purposes
in connection with any such distribution or spin-off.
In addition, no assurance can be given that the Ferrari separation will not give rise to additional taxable income in Italy
in the hands of the Italian P.E. of FCA. Depending on how large this additional taxable income is, it may or may not be
fully offset by the current year or carried forward losses that the Fiscal Unit may use based on the Ruling.
In addition, no assurance can be given that our shareholders subject to Italian tax will not incur substantial Italian tax
liabilities in connection with the Ferrari separation.
Risks Related to our Common Shares
Our maintenance of two exchange listings may adversely affect liquidity in the market for our common shares and
could result in pricing differentials of our common shares between the two exchanges.
Shortly following the closing of the Merger and the listing of our common shares on the New York Stock Exchange, or
NYSE, we listed our common shares on the Mercato Telematico Azionario, or MTA. The dual listing of our common
shares may split trading between the two markets and adversely affect the liquidity of the shares in one or both
markets and the development of an active trading market for our common shares on the NYSE and may result in price
differentials between the exchanges. Differences in the trading schedules, as well as volatility in the exchange rate of
the two trading currencies, among other factors, may result in different trading prices for our common shares on the
two exchanges.
The loyalty voting structure may affect the liquidity of our common shares and reduce our common share price.
The implementation of the loyalty voting structure could reduce the liquidity of our common shares and adversely
affect the trading prices of our common shares. The loyalty voting structure was intended to reward shareholders
for maintaining long-term share ownership by granting initial shareholders and persons holding our common shares
continuously for at least three years at any time following the effectiveness of the Merger the option to elect to receive
our special voting shares. Our special voting shares cannot be traded and, immediately prior to the deregistration of
common shares from the FCA Loyalty Register, any corresponding special voting shares shall be transferred to us
for no consideration (om niet). This loyalty voting structure is designed to encourage a stable shareholder base and,
conversely, it may deter trading by those shareholders who are interested in gaining or retaining our special voting
shares. Therefore, the loyalty voting structure may reduce liquidity in our common shares and adversely affect their
trading price.
The loyalty voting structure may make it more dif?cult for shareholders to acquire a controlling interest, change our
management or strategy or otherwise exercise in?uence over us, and the market price of our common shares may be
lower as a result.
The provisions of our articles of association which establish the loyalty voting structure may make it more dif?cult for
a third party to acquire, or attempt to acquire, control of our company, even if a change of control were considered
favorably by shareholders holding a majority of our common shares. As a result of the loyalty voting structure, a
relatively large proportion of our voting power could be concentrated in a relatively small number of shareholders who
would have signi?cant in?uence over us. As of February 27, 2015, Exor had a voting interest in FCA of approximately
44.31 percent due to its participation in the loyalty voting structure and as a result will have the ability to exercise
signi?cant in?uence on matters involving our shareholders. Such shareholders participating in the loyalty voting
structure could effectively prevent change of control transactions that may otherwise bene?t our shareholders.
The loyalty voting structure may also prevent or discourage shareholders’ initiatives aimed at changing our
management or strategy or otherwise exerting in?uence over us.
The loyalty voting structure may also prevent or discourage shareholders’ initiatives aimed at changes in our
management.
2014
|
ANNUAL REPORT 35
There may be potential Passive Foreign Investment Company tax considerations for U.S. Shareholders.
Shares of our stock held by a U.S. holder would be stock of a passive foreign investment company, or a PFIC, for U.S.
federal income tax purposes with respect to a U.S. Shareholder if for any taxable year in which such U.S. Shareholder
held our common shares, after the application of applicable look-through rules (i) 75 percent or more of our gross
income for the taxable year consists of passive income (including dividends, interest, gains from the sale or exchange
of investment property and rents and royalties other than rents and royalties which are received from unrelated
parties in connection with the active conduct of a trade or business, as de?ned in applicable Treasury Regulations),
or (ii) at least 50 percent of its assets for the taxable year (averaged over the year and determined based upon value)
produce or are held for the production of passive income. U.S. persons who own shares of a PFIC are subject to a
disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the dividends they
receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
While we believe that shares of our stock are not stock of a PFIC for U.S. federal income tax purposes, this conclusion
is based on a factual determination made annually and thus is subject to change. Moreover, shares of our stock may
become stock of a PFIC in future taxable years if there were to be changes in our assets, income or operations.
Tax consequences of the loyalty voting structure are uncertain.
No statutory, judicial or administrative authority directly discusses how the receipt, ownership, or disposition of special
voting shares should be treated for Italian, U.K. or U.S. tax purposes and as a result, the tax consequences in those
jurisdictions are uncertain.
The fair market value of our special voting shares, which may be relevant to the tax consequences, is a factual
determination and is not governed by any guidance that directly addresses such a situation. Because, among other
things, the special voting shares are not transferable (other than, in very limited circumstances, together with our
associated common shares) and a shareholder will receive amounts in respect of the special voting shares only if
we are liquidated, we believe and intend to take the position that the fair market value of each special voting share is
minimal. However, the relevant tax authorities could assert that the value of the special voting shares as determined by
us is incorrect.
The tax treatment of the loyalty voting structure is unclear and shareholders are urged to consult their tax advisors in
respect of the consequences of acquiring, owning and disposing of special voting shares.
Tax may be required to be withheld from dividend payments.
Unless and until the U.K. and the Dutch competent authorities rule that we should be treated as solely resident in the
U.K. for the purposes of the Netherlands-U.K. double tax treaty, dividends distributed by us will be subject to Dutch
dividend withholding tax (subject to any relief which may be available under Dutch law or the terms of any applicable
double tax treaty) and we will be under no obligation to pay additional amounts in respect thereof.
In addition, even if the U.K. and Dutch competent authorities rule that we should be treated as solely resident in the
U.K. for the purposes of the Netherlands-U.K. double tax treaty, under Dutch domestic law dividend payments made
by us to Dutch residents may still be required to be paid subject to Dutch dividend withholding tax and we would have
no obligation to pay additional amounts in respect of such payments. We intend to seek con?rmation from the Dutch
tax authorities that such withholding will not be required, but no assurances can be given.
Should Dutch or Italian withholding taxes be imposed on future dividends or distributions with respect to our common
shares, whether such withholding taxes are creditable against a tax liability to which a shareholder is otherwise subject
depends on the laws of such shareholder’s jurisdiction and such shareholder’s particular circumstances. Shareholders
are urged to consult their tax advisors in respect of the consequences of the potential imposition of Dutch and/or
Italian withholding taxes.
See “We operate so as to be treated as exclusively resident in the United Kingdom for tax purposes, but the relevant
tax authorities may treat it as also being tax resident elsewhere.” in the section —Risks Related to Our Business,
Strategy and Operations.
36 2014
|
ANNUAL REPORT
Overview
Overview
We are an international automotive group engaged in designing, engineering, manufacturing, distributing and selling
vehicles, components and production systems. We are the seventh largest automaker in the world based on total
vehicle sales in 2014. We have operations in approximately 40 countries and sell our vehicles directly or through
distributors and dealers in more than 150 countries. We design, engineer, manufacture, distribute and sell vehicles
for the mass market under the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia and Ram
brands and the SRT performance vehicle designation. We support our vehicle sales by after-sales services and
parts worldwide using the Mopar brand for mass market vehicles. We make available retail and dealer ?nancing,
leasing and rental services through our subsidiaries, joint ventures and commercial arrangements. In addition, we
design, engineer, manufacture, distribute and sell luxury vehicles under the Ferrari and Maserati brands, which we
support with ?nancial services provided to our dealers and retail customers. We also operate in the components and
production systems sectors under the Magneti Marelli, Teksid and Comau brands.
Our activities are carried out through seven reportable segments: four regional mass-market vehicle segments
(NAFTA, LATAM, APAC and EMEA), Ferrari and Maserati, our two global luxury brand segments, and a global
Components segment (see Overview of Our Business for a description of these reportable segments).
On October 29, 2014 our Board of Directors announced that it had authorized the separation of Ferrari from FCA.
The separation is expected to be effected through a public offering of a portion of our interest in Ferrari and a spin-off
of our remaining equity interest in Ferrari to our shareholders.
In 2014, we shipped 4.6 million vehicles. For the year ended December 31, 2014, we reported net revenues of €96.1
billion, EBIT of €3.2 billion and net pro?t of €0.6 billion. At December 31, 2014 we had available liquidity of €26.2
billion (including €3.2 billion available under undrawn committed credit lines). At December 31, 2014 we had net
industrial debt of €7.7 billion.
History of FCA
FCA was incorporated as a public limited liability company (naamloze vennotschap) under the laws of the Netherlands
on April 1, 2014. Its principal of?ce is located at 25 St. James’s Street, London SW1A 1HA, United Kingdom
(telephone number: +44 (0)20 7766 0311).
Fiat, the predecessor to FCA, was founded as Fabbrica Italiana Automobili Torino, on July 11, 1899 in Turin, Italy as an
automobile manufacturer. Fiat opened its ?rst factory in 1900 in Corso Dante in Turin with 150 workers producing 24
cars. In 1902 Giovanni Agnelli, Fiat’s founder, became the Managing Director of the company.
Beginning in 2008, Fiat pursued a process of transformation in order to meet the challenges of a changing
marketplace characterized by global overcapacity in automobile production and the consequences of economic
recession that has persisted particularly in the European markets on which it had historically depended. As part
of its efforts to restructure operations, Fiat worked to expand the scope of its automotive operations, having
concluded that signi?cantly greater scale was necessary to enable it to be a competitive force in the increasingly
global automotive markets.
In April 2009, Fiat and Old Carco LLC, formerly known as Chrysler LLC, or Old Carco, entered into a master
transaction agreement, pursuant to which FCA US LLC, formerly known as Chrysler Group LLC, or FCA US, agreed to
purchase the principal operating assets of Old Carco and to assume certain of Old Carco’s liabilities. Old Carco traced
its roots to the company originally founded by Walter P. Chrysler in 1925 that, since that time, expanded through the
acquisition of the Dodge and Jeep brands.
Following the closing of that transaction on June 10, 2009, Fiat held an initial 20 percent ownership interest in FCA
US, with the UAW Retiree Medical Bene?ts Trust, or the VEBA Trust, the U.S. Treasury and the Canadian government
holding the remaining interests. FCA US’s operations were funded with ?nancing from the U.S. Treasury and Canadian
government. In addition, Fiat held several options to acquire additional ownership interests in FCA US.
2014
|
ANNUAL REPORT 37
Over the following years, Fiat acquired additional ownership interests in FCA US, leading to majority ownership and
full consolidation of FCA US’s results into our ?nancial statements from June 1, 2011. On May 24, 2011, FCA US
re?nanced the U.S. and Canadian government loans, and, in July 2011, Fiat acquired the ownership interests in FCA
US held by the U.S. Treasury and Canadian government.
In January 2014, Fiat purchased all of the VEBA Trust’s equity interests in FCA US, which represented the
approximately 41.5 percent of FCA US interest not then held by us. The transaction was completed on January 21,
2014, resulting in FCA US becoming an indirect 100 percent owned subsidiary of FCA.
On October 29, 2014, FCA’s Board of Directors announced that it had authorized the separation of Ferrari from FCA.
The separation is expected to be effected through a public offering of a portion of FCA’s interest in Ferrari and a spin-
off of FCA’s remaining equity interest in Ferrari shares to FCA’s shareholders.
The FCA Merger
On January 29, 2014, the Board of Directors of Fiat approved a proposed corporate reorganization resulting in the
formation of FCA and decided to establish FCA, organized in the Netherlands, as the parent company of the Group
with its principal executive of?ces in the United Kingdom.
On June 15, 2014, the Board of Directors of Fiat. approved the terms of a cross-border legal merger of Fiat, the
parent of the Group, into its 100 percent owned direct subsidiary, FCA, or the Merger. Fiat shareholders received
in the Merger one (1) FCA common share for each Fiat ordinary share that they held. Moreover, under the Articles
of Association of FCA, FCA shareholders received, if they so elected and were otherwise eligible to participate in
the loyalty voting structure, one (1) FCA special voting share for each FCA common share received in the Merger.
The loyalty voting structure is designed to provide eligible long-term FCA shareholders with two votes for each FCA
common share held.
FCA was incorporated under the name Fiat Investments N.V. with issued share capital of €200,000, fully paid and
divided into 20,000,000 common shares having a nominal value of €0.01 each. Capital increased to €350,000 on
May 13, 2014.
Fiat shareholders voted and approved the Merger at their extraordinary general meeting held on August 1, 2014. After
this approval, Fiat shareholders not voting in favor of the Merger were entitled to exercise cash exit rights (the “Cash
Exit Rights”) by August 20, 2014. The redemption price payable to these shareholders was €7.727 per share (the “Exit
Price”), equivalent to the average daily closing price published by Borsa Italiana for the six months prior to the date of
the notice calling the meeting).
On October 7, 2014, Fiat announced that all conditions precedent to completion of the Merger were satis?ed.
The Cash Exit Rights were exercised for a total of 60,002,027 Fiat shares equivalent to an aggregate amount of €464
million at the Exit Price. Pursuant to the Italian Civil Code, these shares were offered to Fiat shareholders not having
exercised the Cash Exit Rights. On October 7, 2014, at the completion of the offer period Fiat shareholders elected
to purchase 6,085,630 shares out of the total of 60,002,027 for a total of €47 million; as a result, concurrent with
the Merger, on October 12, 2014, a total of 53,916,397 Fiat shares were canceled in the Merger with a resulting net
aggregate cash disbursement of €417 million.
As a consequence, the Merger became effective on October 12, 2014. On October 13, 2014 FCA common shares
commenced trading on the NYSE and on the MTA. The Merger is recognized in FCA’s annual accounts from January
1, 2014. FCA, as successor of Fiat is now therefore the parent company of the Group. There were no accounting
effects as a direct result of the Merger.
38 2014
|
ANNUAL REPORT
Our Strategic Business Plan
Our Strategic Business Plan
Following our January 2014 acquisition of the remaining 41.5 percent interest in FCA US we did not already own, in May
2014, we announced our 2014–2018 Business Plan. Our Business Plan sets forth a number of clearly de?ned strategic
initiatives designed to capitalize on our position as a single, integrated company to become a leading global automaker,
including:
Premium and Luxury Brand Strategy. We intend to continue to execute on our premium and luxury brand strategy by
developing the Alfa Romeo and Maserati brands to service global markets. We believe these efforts will help us address
the issue of industry overcapacity in the European market, as well as our own excess production capacity in the EMEA
region, by leveraging the strong heritage and historical roots of these brands to grow the reach of these brands in all of
the regions in which we operate.
Recently, we have successfully expanded in the luxury end of the market through our introduction of two new Maserati
vehicles. We intend to replicate this on a larger scale with Alfa Romeo by introducing several new vehicles being
developed as part of an extensive product plan to address the premium market worldwide. In addition, we intend
to continue our development of the Maserati brand as a larger scale luxury vehicle brand capitalizing on the recent
successful launches of the next generation Quattroporte and the all new Ghibli. We also intend to introduce additional
new vehicles, including an all new luxury SUV in 2015, the Levante, that will allow Maserati to cover the full range of the
luxury vehicle market and position it to substantially expand volumes.
Building Brand Equity. As part of our Business Plan, we intend to further develop our brands to expand sales in markets
throughout the world with particular focus on our Jeep and Alfa Romeo brands, which we believe have global appeal and
are best positioned to increase volumes substantially in the regions in which we operate.
In particular, our Business Plan highlights our intention to leverage the global recognition of the Jeep brand and extend
the range of Jeep vehicles to meet global demand through localized production, particularly in APAC and LATAM.
We are also developing a range of vehicles that are expected to re-establish the Alfa Romeo brand, particularly in NAFTA,
APAC and EMEA, as a premier driver-focused automotive brand with distinctive Italian styling and performance.
In addition, we expect to take further steps to strengthen and differentiate our brand identities in order to address
differing market and customer preferences in each of the regions in which we operate. We believe that we can increase
sales and improve pricing by ensuring that all of our vehicles are more closely aligned with a brand identity established
in the relevant regional markets. For example, we announced as part of the Business Plan that Chrysler would be
our mainstream North American brand, with a wider range of models, including crossovers and our primary minivan
offering. Dodge will be restored to its performance heritage, which is expected to enhance brand identity and minimize
overlapping product offerings which tend to cause consumer confusion. We also intend to continue our repositioning
strategy of the Fiat brand in the EMEA region, leveraging the image of the Fiat 500 family, while positioning Lancia as an
Italy-focused brand. We will also continue to develop our pick-up truck and light commercial vehicle brands leveraging
our wide range of product offerings to expand further in EMEA as Fiat Professional, in LATAM as Fiat and in NAFTA as
Ram. For a description of our vehicle brands, see Mass Market Vehicle Brands section below.
Global Growth. As part of our Business Plan, we intend to expand vehicle sales in key markets throughout the world. In
order to achieve this objective, we intend to continue our efforts to localize production of Fiat brand vehicles through our
joint ventures in China and India, while increasing sales of Jeep vehicles in LATAM and APAC by localizing production
through our new facility in Brazil and the extension of the joint venture agreement in China. Local production will enable
us to expand the product portfolio we can offer in these important markets and importantly position our vehicles to better
address the local market demand by offering vehicles that are competitively priced within the largest segments of these
markets without the cost of transportation and import duties. We also intend to increase our vehicle sales in NAFTA,
continuing to build market share in the U.S. by offering more competitive products under our distinctive brands as well
as offering new products in segments we do not currently compete in. Further, we intend to leverage manufacturing
capacity in EMEA to support growth in all regions in which we operate by producing vehicles for export from EMEA,
including Jeep brand vehicles.
2014
|
ANNUAL REPORT 39
Continue convergence of platforms. We intend to continue to rationalize our vehicle architectures and standardize
components, where practicable, to more ef?ciently deliver the range of products we believe necessary to increase
sales volumes and pro?tability in each of the regions in which we operate. We seek to optimize the number of global
vehicle architectures based on the range of ?exibility of each architecture while ensuring that the products at each
end of the range are not negatively impacted, taking into account unique brand attributes and market requirements.
We believe that continued architectural convergence within these guidelines will facilitate speed to market, quality
improvement and manufacturing ?exibility allowing us to maximize product functionality and differentiation and
to meet diversi?ed market and customer needs. Over the course of the period covered by our Business Plan, we
intend to reduce the number of architectures in our mass market brands by approximately 25.0 percent.
Continue focus on cost ef?ciencies. An important part of our Business Plan is our continued commitment to
maintain cost ef?ciencies necessary to compete as a global automaker in the regions we operate. We intend to
continue to leverage our increased combined annual purchasing power to drive savings. Further, our efforts on
powertrain and engine research are intended to achieve the greatest cost-to-environmental impact return, with a
focus on new global engine families and an increase in use of the 8 and 9-speed transmissions to drive increased
ef?ciency and performance and re?nement. We also plan to continue our efforts to extend WCM principles into all
of our production facilities and benchmark our efforts across all facilities around the world, which is supported by
FCA US’s January 2014 legally binding memorandum of understanding, or MOU, with the UAW. We believe that the
continued extension of our WCM principles will lead to further meaningful progress to eliminate waste of all types
in the manufacturing process, which will improve worker ef?ciency, productivity, safety and vehicle quality. Finally,
we intend to drive growth in our components and production systems businesses by designing and producing
innovative systems and components for the automotive sector and innovative automation products, each of which
will help us focus on cost ef?ciencies in the manufacturing of our vehicles.
Continue to enhance our margins and strengthen our capital structure. Through the product and manufacturing
initiatives described above, we also expect to improve our pro?tability. We believe our product development and
repositioning of our vehicle offerings, along with increasing the number of vehicles manufactured on standardized
global platforms will provide an opportunity for us to improve our margins. We are also committed to improving our
capital position so we are able to continue to invest in our business throughout economic cycles. We believe we are
taking material steps toward achieving investment grade metrics and that we have substantial liquidity to undertake
our operations and implement our Business Plan. The proposed capital raising actions, along with our anticipated
re?nancing of certain FCA US debt, which will give us the ability to more fully manage our cash resources globally,
will allow us to further improve our liquidity and optimize our capital structure. Furthermore, we intend to reduce
our outstanding indebtedness, which will provide us with greater ?nancial ?exibility and enhance earnings and
cash ?ow through reducing our interest burden. Our goal is to achieve a positive net industrial cash balance by the
completion of our Business Plan. In light of this, and to further strengthen and support the Group’s capital structure,
we completed signi?cant capital transactions in December 2014 and we have announced our intent to and have
announced our intent to execute certain transactions in connection with our plan to separate Ferrari from FCA.
We believe that these improvements in our capital position will enable us to reduce substantially the liquidity we
need to maintain to operate our businesses, including through any reasonably likely cyclical downturns.
40 2014
|
ANNUAL REPORT
Industry Overview
Industry Overview
Vehicle Segments and Descriptions
We manufacture and sell passenger cars, light trucks and light commercial vehicles covering all market segments.
Passenger cars can be divided among seven main groups, whose de?nition could slightly vary by region. Mini cars,
known as “A segment” vehicles in Europe and often referred to as “city cars,” are between 2.7 and 3.7 meters in
length and include three- and ?ve-door hatchbacks. Small cars, known as “B segment” vehicles in Europe and “
sub-compacts” in the U.S., range in length from 3.7 meters to 4.4 meters and include three- and ?ve-door
hatchbacks and sedans. Compact cars, known as “C segment” vehicles in Europe, range in length from 4.3 meters
to 4.7 meters, typically have a sedan body and mostly include three- and ?ve-door hatchback cars. Mid-size cars,
known as “D segment” vehicles in Europe, range between 4.7 meters to 4.9 meters, typically have a sedan body or
are station wagons. Full-size cars range in length from 4.9 meters to 5.1 meters and are typically sedan cars or, in
Europe, station wagons. Minivans, also known as multi-purpose vehicles, or MPVs, typically have seating for up to
eight passengers. Utility vehicles include SUVs, which are four-wheel drive with true off-road capabilities, and cross
utility vehicles, or CUVs, which are not designed for heavy off-road use, but offer better on-road ride comfort and
handling compared to SUVs.
Light trucks may be divided between vans (also known as light commercial vehicles), which typically are used for
the transportation of goods or groups of people and have a payload capability up to 4.2 tons, and pick-up trucks,
which are light motor vehicles with an open-top rear cargo area and which range in length from 4.8 meters to 5.2
meters (in North America, the length of pick-up trucks typically ranges from 5.5 meters to 6 meters). In North America,
minivans and utility vehicles are categorized within trucks. In Europe, vans and pick-up trucks are categorized as light
commercial vehicles.
We characterize a vehicle as “new” if its vehicle platform is signi?cantly different from the platform used in the prior
model year and/or has had a full exterior renewal. We characterize a vehicle as “signi?cantly refreshed” if it continues
its previous vehicle platform but has extensive changes or upgrades from the prior model.
Our Industry
Designing, engineering, manufacturing, distributing and selling vehicles require signi?cant investments in product
design, engineering, research and development, technology, tooling, machinery and equipment, facilities and
marketing in order to meet both consumer preferences and regulatory requirements. Automotive original equipment
manufacturers, or OEMs, are able to bene?t from economies of scale by leveraging their investments and activities
on a global basis across brands and models. The automotive industry has also historically been highly cyclical,
and to a greater extent than many industries, is impacted by changes in the general economic environment. In
addition to having lower leverage and greater access to capital, larger OEMs that have a more diversi?ed revenue
base across regions and products tend to be better positioned to withstand industry downturns and to bene?t from
industry growth.
Most automotive OEMs produce vehicles for the mass market and some of them also produce vehicles for the luxury
market. Vehicles in the mass market are typically intended to appeal to the largest number of consumers possible.
Intense competition among manufacturers of mass market vehicles, particularly for non-premium brands, tends to
compress margins, requiring signi?cant volumes to be pro?table. As a result, success is measured in part by vehicle
unit sales relative to other automotive OEMs. Luxury vehicles on the other hand are designed to appeal to consumers
with higher levels of disposable income, and can therefore more easily achieve much higher margins. This allows
luxury vehicle OEMs to produce lower volumes, enhancing brand appeal and exclusivity, while maintaining pro?tability.
In 2014, 84 million automobiles were sold around the world. Although China is the largest single automotive sales
market, with approximately 18 million vehicles sold, the majority of automobile sales are still in the developed
markets, including North America, Western Europe and Japan. Growth in other emerging markets has also played an
increasingly important part in global automotive demand in recent years.
2014
|
ANNUAL REPORT 41
The automotive industry is highly competitive, especially in our key markets, such as the U.S., Brazil and Europe.
Vehicle manufacturers must continuously improve vehicle design, performance and content to meet consumer
demands for quality, reliability, safety, fuel ef?ciency, comfort, driving experience and style. Historically, manufacturers
relied heavily upon dealer, retail and ?eet incentives, including cash rebates, option package discounts, guaranteed
depreciation programs, and subsidized or subvented ?nancing or leasing programs to compete for vehicle sales.
Since 2009, manufacturers generally have worked to reduce reliance on pricing-related incentives as competitive
tools in the North American market, while pricing pressure, under different forms, is still affecting sales in the European
market since the inception of the ?nancial crisis. However, an OEM’s ability to increase or maintain vehicle prices and
reduce reliance on incentives is limited by the competitive pressures resulting from the variety of available competitive
vehicles in each segment of the new vehicle market as well as continued global manufacturing overcapacity in the
automotive industry. At the same time, OEMs generally cannot effectively lower prices as a means to increase vehicle
sales without adversely affecting pro?tability, since the ability to reduce costs is limited by commodity market prices,
contract terms with suppliers, evolving regulatory requirements and collective bargaining agreements and other
factors that limit the ability to reduce labor expenses.
OEMs generally sell vehicles to dealers and distributors, which then resell vehicles to retail and ?eet customers.
Retail customers purchase vehicles directly from dealers, while ?eet customers purchase vehicles from dealers or directly
from OEMs. Fleet sales comprise three primary channels: (i) daily rental, (ii) commercial and (iii) government. Vehicle sales
in the daily rental and government channels are extremely competitive and often require signi?cant discounts. Fleet sales
are an important source of revenue and can also be an effective means for marketing vehicles. Fleet orders can also help
normalize plant production as they typically involve the delivery of a large, pre-determined quantity of vehicles over several
months. Fleet sales are also a source of aftermarket service parts revenue for OEMs and service revenue for dealers.
Financial Services
Because dealers and retail customers ?nance the purchase of a signi?cant percentage of the vehicles sold worldwide,
the availability and cost of ?nancing is one of the most signi?cant factors affecting vehicle sales volumes. Most dealers
use wholesale or inventory ?nancing arrangements to purchase vehicles from OEMs in order to maintain necessary
vehicle inventory levels. Financial services companies may also provide working capital and real estate loans to facilitate
investment in expansion or restructuring of the dealers’ premises. Financing may take various forms, based on the nature
of creditor protection provided under local law, but ?nancial institutions tend to focus on maximizing credit protection
on any ?nancing originated in conjunction with a vehicle sale. Financing to retail customers takes a number of forms,
including simple installment loans and ?nance leases. These ?nancial products are usually distributed directly by the
dealer and have a typical duration of three to ?ve years. OEMs often use retail ?nancing as a promotional tool, including
through campaigns offering below market rate ?nancing, known as subvention programs. In such situations, an OEM
typically compensates the ?nancial services company up front for the difference between the ?nancial return expected
under standard market rates and the rates offered to the customer within the promotional campaign.
Many automakers rely on wholly-owned or controlled ?nance companies to provide this ?nancing. In other situations,
OEMs have relied on joint ventures or commercial relationships with banks and other ?nancial institutions in order to
provide access to ?nancing for dealers and retail customers. The model adopted by any particular OEM in a particular
market depends upon, among other factors, its sales volumes and the availability of stable and cost-effective funding
sources in that market, as well as regulatory requirements.
Financial services companies controlled by OEMs typically receive funding from the OEM’s central treasury or from
industrial and commercial operations of the OEM that have excess liquidity, however, they also access other forms
of funding available from the banking system in each market, including sales or securitization of receivables either
in negotiated sales or through securitization programs. Financial services companies controlled by OEMs compete
primarily with banks, independent ?nancial services companies and other ?nancial institutions that offer ?nancing to
dealers and retail customers. The long-term pro?tability of ?nance companies also depends on the cyclical nature of
the industry, interest rate volatility and the ability to access funding on competitive terms and to manage risks with
particular reference to credit risks. OEMs within their global strategy aimed to expand their business, may provide
access to ?nancial services to their dealers and retail customers, for the ?nancing of parts and accessories, as well as
pre-paid service contracts.
42 2014
|
ANNUAL REPORT
Overview of Our Business
Overview of Our Business
We design, engineer, develop and manufacture vehicles, components and production systems worldwide through
165 manufacturing facilities around the world and 85 research and development centers.
Our activities are carried out through seven reportable segments: four regional mass-market vehicle segments, the
Ferrari and Maserati luxury brand segments and a global Components segment, as discussed below.
Our four regional mass-market vehicle reportable segments deal with the design, engineering, development,
manufacturing, distribution and sale of passenger cars, light commercial vehicles and related parts and services in
speci?c geographic areas: NAFTA (U.S., Canada, Mexico and the Caribbean islands), LATAM (South and Central
America), APAC (Asia and Paci?c countries) and EMEA (Europe, Middle East and Africa). We also operate on a global
basis in the luxury vehicle and components sectors. In the luxury vehicle sector, we have the operating segments
Ferrari and Maserati, while in the components sector we have the operating segments Magneti Marelli, Teksid and
Comau. The operating segments in the components sector did not meet the quantitative thresholds required in IFRS
8 – Operating segments for separate disclosure, consequently, based on their characteristics and similarities, they
are presented as one reportable segment: “Components”. We support our mass-market vehicle sales with the sale
of related service parts and accessories, as well as service contracts, under the Mopar brand name. In support of
our vehicle sales efforts, we make available dealer and retail customer ?nancing either through subsidiaries or joint
ventures and through strategic commercial arrangements with third party ?nancial institutions.
For our mass-market brands, we have centralized design, engineering, development and manufacturing operations,
which allow us to ef?ciently operate on a global scale.
The following list sets forth our reportable segments:
(i) NAFTA: our operations to support distribution and sales of mass-market vehicles in the United States, Canada,
Mexico and Caribbean islands, the segment that we refer to as NAFTA, primarily through the Chrysler, Dodge, Fiat,
Jeep and Ram brands.
(ii) LATAM: our operations to support the distribution and sale of mass-market vehicles in South and Central America,
the segment that we refer to as LATAM, primarily under the Chrysler, Dodge, Fiat, Jeep and Ram brands, with the
largest focus of our business in the LATAM segment in Brazil and Argentina.
(iii) APAC: our operations to support the distribution and sale of mass-market vehicles in the Asia Paci?c region
(mostly in China, Japan, Australia, South Korea and India), the segment we refer to as APAC, carried out in the
region through both subsidiaries and joint ventures, primarily under the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat
and Jeep brands.
(iv) EMEA: our operations to support the distribution and sale of mass-market vehicles in Europe (which includes
the 28 members of the European Union and the members of the European Free Trade Association), the Middle
East and Africa, the segment we refer to as EMEA, primarily under the Abarth, Alfa Romeo, Chrysler, Fiat, Fiat
Professional, Jeep and Lancia brand names.
(v) Ferrari: the design, engineering, development, manufacturing, worldwide distribution and sale of luxury vehicles
under the Ferrari brand. On October 29, 2014, we announced our intention to separate Ferrari from FCA.
(vi) Maserati: the design, engineering, development, manufacturing, worldwide distribution and sale of luxury vehicles
under the Maserati brand.
(vii) Components: production and sale of lighting components, engine control units, suspensions, shock absorbers,
electronic systems, and exhaust systems and activities in powertrain (engine and transmissions) components,
engine control units, plastic molding components and in the after-market carried out under the Magneti Marelli
brand name; cast iron components for engines, gearboxes, transmissions and suspension systems, and aluminum
cylinder heads under the Teksid brand name; and design and production of industrial automation systems and
related products for the automotive industry under the Comau brand name.
2014
|
ANNUAL REPORT 43
The following chart sets forth the vehicle brands we sell in each mass-market regional segment:
NAFTA LATAM APAC EMEA
Abarth X
Alfa Romeo X X X
Chrysler X X X X
Dodge X X X
Fiat X X X X
Fiat Professional X X
Jeep X X X X
Lancia X
Ram X X
Note: Presence determined by sales in the regional segment, if material, through dealer entities of our dealer network.
We also hold interests in companies operating in other activities and businesses that are not considered part of our seven
reportable segments. These activities are grouped under “Other Activities,” which primarily consists of companies that
provide services, including accounting, payroll, tax, insurance, purchasing, information technology, facility management
and security, to our Group as well as CNHI, manage central treasury activities (excluding treasury activities for FCA US,
which are handled separately) and operate in media and publishing (La Stampa daily newspaper).
Mass-Market Vehicle Brands
We design, engineer, develop, manufacture, distribute and sell vehicles and service parts under 11 mass-market brands
and designations. We believe that we can continue to increase our vehicle sales by building the value of our mass-market
brands in particular by ensuring that each of our brands has a clear identity and market focus. In connection with our
multi-year effort to clearly de?ne each of our brands’ identities, we have launched several advertising campaigns that
have received industry accolades. We are reinforcing our effort to build brand value by ensuring that we introduce new
vehicles with individualized characteristics that remain closely aligned with the unique identity of each brand.
Abarth: Abarth, named after the company founded by Carlo Abarth in 1949, specializes
in performance modi?cation for on-road sports cars since the brand’s re-launch in 2007
through performance modi?cations on classic Fiat models such as the 500 (including
the 2012 launch of the Fiat 500 Abarth) and Punto, as well as limited edition models that
combine design elements from luxury brands such as the 695 Edizione Maserati and 695
Tributo Ferrari, for consumers seeking customized vehicles with steering and suspension
geared towards racing.
Alfa Romeo: Alfa Romeo, founded in 1910, and part of the Group since 1986, is known
for a long, sporting tradition and Italian design. Vehicles currently range from the three door
premium MiTo and the lightweight sports car, the 4c, to the compact car, the Giulietta.
The Alfa Romeo brand is intended to appeal to drivers seeking high-level performance and
handling combined with attractive and distinctive appearance.
Chrysler: Chrysler, named after the company founded by Walter P. Chrysler in 1925,
aims to create vehicles with distinctive design, craftsmanship, intuitive innovation and
technology standing as a leader in design, engineering and value, with a range of vehicles
from mid-size sedans (Chrysler 200) to full size sedans (Chrysler 300) and minivans
(Town & Country).
Dodge: With a traditional focus on “muscle car” performance vehicles, the Dodge
brand, which began production in 1914, offers a full line of cars, CUVs and minivans,
mainly in the mid-size and large size vehicle market, that are sporty, functional and
innovative, intended to offer an excellent value for families looking for high performance,
dependability and functionality in everyday driving situations.
44 2014
|
ANNUAL REPORT
Overview of Our Business
Fiat: Fiat brand cars have been produced since 1899. The brand has historically been strong
in Europe and the LATAM region and is currently primarily focused on the mini and small
vehicle segments. Current models include the mini-segment 500 and Panda and the
small-segment Punto. The brand aims to make cars that are ?exible, easy to drive, affordable
and energy ef?cient. The brand reentered the U.S. market in 2011 with the 500 model and, in
2013, the 500L model. Fiat continued expansion of the 500 family, with the introduction of the
500X crossover, which debuted at the Paris Motor Show in October 2014. Fiat also recently
launched the new Uno and the new Palio in the LATAM region.
Fiat Professional: Fiat Professional, launched in 2007 to replace the “Fiat Veicoli
Commerciali” brand, offers light commercial vehicles and MPVs ranging from large vans
(capable of carrying up to 4.2 tons) such as the Ducato, to panel vans such as the Doblò
and Fiorino for commercial use by small to medium size business and public institutions.
Fiat Professional vehicles are often readily ?tted as ambulances, tow trucks, school buses
and people carriers (especially suitable for narrow streets) and as recreational vehicles
such as campers and motor homes, where Fiat Professional is the market leader.
Jeep: Jeep, founded in 1941, is a globally recognized brand focused exclusively on
the SUV and off-road vehicles market. The Jeep Grand Cherokee is the most awarded
SUV ever. The brand’s appeal builds on its heritage associated with the outdoors and
adventurous lifestyles, combined with the safety and versatility features of the brand’s
modern vehicles. Jeep introduced the all-new 2014 Jeep Cherokee in October 2013
and recently unveiled the Jeep Renegade, a small segment SUV designed in the U.S.
and manufactured in Italy. Jeep set an all-time brand record in 2014 with over one million
vehicles sold.
Lancia: Lancia, founded in 1906, and part of the Fiat Group since 1969, covers the
spectrum of small segment cars and is targeted towards the Italian market.
Ram: Ram, established as a standalone brand separate from Dodge in 2009, offers a line
of full-size trucks, including light- and heavy-duty pick-up trucks such as the Ram 1500
pick-up truck, which recently became the ?rst truck to be named Motor Trend’s “Truck
of the Year” for two consecutive years, and cargo vans. By investing substantially in new
products, infusing them with great looks, re?ned interiors, durable engines and features
that further enhance their capabilities, we believe Ram has emerged as a market leader in
full size pick-up trucks. Ram customers, from half-ton to commercial, have a demanding
range of needs and require their vehicles to provide high levels of capability.
We also leverage the more than 75-year history of the Mopar brand to provide a full line of service parts and
accessories for our mass-market vehicles worldwide. As of December 31, 2014, we had 50 parts distribution centers
throughout the world to support our customer care efforts in each of our regions. Our Mopar brand accessories allow
our customers to customize their vehicles by including after-market sales of products from side steps and lift-kits,
to graphics packages, such as racing stripes, and custom leather interiors. Further, through the Mopar brand, we
offer vehicle service contracts to our retail customers worldwide under the “Mopar Vehicle Protection” brand, with
the majority of our service contract sales in 2014 in the U.S. and Europe. Finally, our Mopar customer care initiatives
support our vehicle distribution and sales efforts in each of our mass-market segments through 27 call centers located
around the world.
2014
|
ANNUAL REPORT 45
Vehicle Sales Overview
We are the seventh largest automotive OEM in the world based on worldwide new vehicle sales for the year ended
December 31, 2014. We compete with other large OEMs to attract vehicle sales and market share. Many of these
OEMs have more signi?cant ?nancial or operating resources and liquidity at their disposal, which may enable them to
invest more heavily on new product designs and manufacturing or in sales incentives.
Our new vehicle sales represent sales of vehicles primarily through dealers and distributors, or in some cases, directly
by us, to retail customers and ?eet customers. Our sales include mass-market and luxury vehicles manufactured at our
plants, as well as vehicles manufactured by our joint ventures and third party contract manufacturers. Our sales ?gures
exclude sales of vehicles that we contract manufactured for other OEMs. While our vehicle sales are illustrative of our
competitive position and the demand for our vehicles, sales are not directly correlated to our revenues, cost of sales or
other measures of ?nancial performance, as such results are primarily driven by our vehicle shipments to dealers and
distributors. The following table shows our new vehicle sales by geographic market for the periods presented.
For the Years Ended December 31,
Segment 2014 2013 2012
Millions of units
NAFTA 2.5 2.1 2.0
LATAM 0.8 0.9 1.0
APAC 0.3 0.2 0.1
EMEA 1.2 1.1 1.2
Total Mass-Market Brands 4.8 4.4 4.3
Ferrari — — —
Maserati 0.04 0.02 0.01
Total Worldwide 4.8 4.4 4.3
NAFTA
NAFTA Sales and Competition
The following table presents our mass-market vehicle sales and market share in the NAFTA segment for the periods
presented:
For the Years Ended December 31,
2014
(1)(2)
2013
(1)(2)
2012
(1)(2)
NAFTA Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
U.S. 2,091 12.4% 1,800 11.4% 1,652 11.2%
Canada 290 15.4% 260 14.6% 244 14.2%
Mexico 78 6.7% 87 7.9% 93 9.1%
Total 2,459 12.4% 2,148 11.5% 1,989 11.3%
(1)
Certain fleet sales that are accounted for as operating leases are included in vehicle sales.
(2)
Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided by
third-party sources, including IHS Global Insight and Ward’s Automotive.
46 2014
|
ANNUAL REPORT
Overview of Our Business
The following table presents our new vehicle market share information and our principal competitors in the U.S.,
our largest market in the NAFTA segment (certain totals in the tables included in this document may not add due to
rounding):
For the Years Ended December 31,
U.S. 2014 2013 2012
Automaker Percentage of industry
GM 17.4% 17.6% 17.6%
Ford 14.7% 15.7% 15.2%
Toyota 14.1% 14.1% 14.1%
FCA 12.4% 11.4% 11.2%
Honda 9.2% 9.6% 9.6%
Nissan 8.2% 7.9% 7.7%
Hyundai/Kia 7.8% 7.9% 8.6%
Other 16.2% 15.9% 16.0%
Total 100.0% 100.0% 100.0%
U.S. automotive market sales have steadily improved after a sharp decline from 2007 to 2010. U.S. industry sales,
including medium- and heavy-duty vehicles, increased from 10.6 million units in 2009 to 16.8 million units in 2014,
an increase of approximately 58.5 percent. Both macroeconomic factors, such as growth in per capita disposable
income and improved consumer con?dence, and automotive speci?c factors, such as the increasing age of vehicles in
operation, improved consumer access to affordably priced ?nancing and higher prices of used vehicles, contributed to
the strong recovery.
Our vehicle line-up in the NAFTA segment leverages the brand recognition of the Chrysler, Dodge, Jeep and
Ram brands to offer cars, utility vehicles, pick-up trucks and minivans under those brands, as well as vehicles in
smaller segments, such as the mini-segment Fiat 500 and the small & compact MPV segment Fiat 500L. With the
reintroduction of the Fiat brand in 2011 and the launch of the Dodge Dart in 2012, we now sell vehicles in all vehicle
segments. Our vehicle sales and pro?tability in the NAFTA segment are generally weighted towards larger vehicles
such as utility vehicles, trucks and vans, while overall industry sales in the NAFTA segment generally are more
evenly weighted between smaller and larger vehicles. In recent years, we have increased our sales of mini, small and
compact cars in the NAFTA segment.
NAFTA Distribution
In the NAFTA segment, our vehicles are sold primarily to dealers in our dealer network for sale to retail customers and
?eet customers. The following table sets forth the number of independent entities in our dealer and distributor network
in the NAFTA segment. The table counts each independent dealer entity, regardless of the number of contracts or
points of sale the dealer operates. Where we have a relationship with a general distributor, this table re?ects that
general distributor as one distribution relationship:
Distribution Relationships At December 31,
2014 2013 2012
NAFTA 3,251 3,204 3,156
In the NAFTA segment, ?eet sales in the commercial channel are typically more pro?table than sales in the government
and daily rental channels since they more often involve customized vehicles with more optional features and
accessories; however, vehicle orders in the commercial channel are usually smaller in size than the orders made in
the daily rental channel. Fleet sales in the government channel are generally more pro?table than ?eet sales in the
daily rental channel primarily due to the mix of products included in each respective channel. Rental car companies,
for instance, place larger orders of small and mid-sized cars and minivans with minimal options, while sales in the
government channel often involve a higher mix of relatively more pro?table vehicles such as pick-up trucks, minivans
and large cars with more options.
2014
|
ANNUAL REPORT 47
NAFTA Segment Mass-Market Dealer and Customer Financing
In the NAFTA segment, we do not have a captive ?nance company or joint venture and instead rely upon
independent ?nancial service providers, primarily our strategic relationship with Santander Consumer USA Inc.,
or SCUSA, to provide ?nancing for dealers and retail customers in the U.S. Prior to the agreement with SCUSA,
we principally relied on Ally Financial Inc., or Ally, for dealer and retail ?nancing and support. Additionally, we have
arrangements with a number of ?nancial institutions to provide a variety of dealer and retail customer ?nancing
programs in Canada. There are no formal retail ?nancing arrangements in Mexico at this time, although CF Credit
Services, S.A. de C.V. SOFOM E.R., or CF Credit, provides nearly all dealer ?nancing and about half of all retail
?nancing of our products in Mexico.
In February 2013, we entered into a private label ?nancing agreement with SCUSA, or the SCUSA Agreement, under
which SCUSA provides a wide range of wholesale and retail ?nancial services to our dealers and retail customers
in the U.S., under the Chrysler Capital brand name. The ?nancial services include credit lines to ?nance dealers’
acquisition of vehicles and other products that we sell or distribute, retail loans and leases to ?nance retail customer
acquisitions of new and used vehicles at dealerships, ?nancing for commercial and ?eet customers, and ancillary
services. In addition, SCUSA offers dealers construction loans, real estate loans, working capital loans and revolving
lines of credit.
The SCUSA Agreement has a ten year term from February 2013, subject to early termination in certain circumstances,
including the failure by a party to comply with certain of its ongoing obligations under the SCUSA Agreement. In
accordance with the terms of the agreement, SCUSA provided us an upfront, nonrefundable payment in May 2013
which is being amortized over ten years.
Under the SCUSA Agreement, SCUSA has certain rights, including limited exclusivity to participate in speci?ed
minimum percentages of certain retail ?nancing rate subvention programs. SCUSA’s exclusivity rights are subject to
SCUSA maintaining price competitiveness based on market benchmark rates to be determined through a steering
committee process as well as minimum approval rates.
The SCUSA Agreement replaced an auto ?nance relationship with Ally, which was terminated in 2013. As of
December 31, 2014, Ally was providing wholesale lines of credit to approximately 39 percent of our dealers in the U.S.
For the year ended December 31, 2014, we estimate that approximately 82 percent of the vehicles purchased by our
U.S. retail customers were ?nanced or leased through our dealer network, of which approximately 48 percent were
?nanced or leased through Ally and SCUSA.
LATAM
LATAM Sales and Competition
The following table presents our mass-market vehicle sales and market share in the LATAM segment for the periods
presented:
For the Years Ended December 31,
2014
(1)
2013
(1)
2012
(1)
LATAM Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
Brazil 706 21.2% 771 21.5% 845 23.3%
Argentina 88 13.4% 111 12.0% 85 10.6%
Other LATAM 37 3.0% 51 3.6% 51 3.7%
Total 830 16.0% 933 15.8% 982 16.8%
(1)
Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided
by third-party sources, including IHS Global Insight, National Organization of Automotive Vehicles Distribution and Association of Automotive
Producers.
48 2014
|
ANNUAL REPORT
Overview of Our Business
The following table presents our mass-market vehicle market share information and our principal competitors in Brazil,
our largest market in the LATAM segment:
For the Years Ended December 31,
Brazil 2014
(1)
2013
(1)
2012
(1)
Automaker Percentage of industry
FCA 21.2% 21.5% 23.3%
Volkswagen
(*)
17.7% 18.8% 21.2%
GM 17.4% 18.1% 17.7%
Ford 9.2% 9.4% 8.9%
Other 34.5% 32.2% 28.9%
Total 100.0% 100.0% 100.0%
(1)
Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided
by third-party sources, including IHS Global Insight, National Organization of Automotive Vehicles Distribution and Association of Automotive
Producers.
(*)
Including Audi.
The LATAM segment automotive industry decreased 12.5 percent from 2013, to 5.2 million vehicles (cars and light
commercial vehicles) in 2014. The decrease was mainly due to Brazil and Argentina with 6.9 percent and 28.7 percent
decreases, respectively. Over the past four years industry sales in the LATAM segment grew by 1.4 percent, mainly
due to Argentina and Other countries while Brazilian market remained substantially stable driven by economic factors
such as greater development of gross domestic product, increased access to credit facilities and incentives adopted
by Brazil in 2009 and 2012.
Our vehicle sales in the LATAM segment leverage the name recognition of Fiat and the relatively urban population
of countries like Brazil to offer Fiat brand mini and small vehicles in our key markets in the LATAM segment. We are
the leading automaker in Brazil, due in large part to our market leadership in the mini and small segments (which
represent almost 60 percent of Brazilian market vehicle sales). Fiat also leads the pickup truck market in Brazil (with
the Fiat Strada, 56.2 percent of segment share), although this segment is small as a percentage of total industry and
compared to other countries in the LATAM segment.
In Brazil, the automotive industry bene?ted from tax incentives in 2012, which helped our strong performance in that
year as we were able to leverage our operational ?exibility in responding to the sharp increase in market demand.
However, tax incentives have limited the ability of OEMs to recover cost increases associated with in?ation by
increasing prices, a problem that has been exacerbated by the weakening of the Brazilian Real. Increasing competition
over the past several years has further reduced our overall pro?tability in the region. Import restrictions in Brazil have
also limited our ability to bring new vehicles to Brazil. We plan to start production in our new assembly plant in Brazil in
2015, which we believe will enhance our ability to introduce new locally-manufactured vehicles that are not subject to
such restrictions.
LATAM Distribution
The following table presents the number of independent entities in our dealer and distributor network. In the LATAM
segment, we generally enter into multiple dealer agreements with a single dealer, covering one or more points of sale.
Outside Brazil and Argentina, our major markets, we distribute our vehicles mainly through general distributors and
their dealer networks. This table counts each independent dealer entity, regardless of the number of contracts or
points of sale the dealer operates. Where we have relationships with a general distributor in a particular market, this
table re?ects that general distributor as one distribution relationship:
Distribution Relationships At December 31,
2014 2013 2012
LATAM 441 450 436
2014
|
ANNUAL REPORT 49
LATAM Dealer and Customer Financing
In the LATAM segment, we provide access to dealer and retail customer ?nancing through both wholly-owned captive
?nance companies and through strategic relationships with ?nancial institutions.
We have two wholly-owned captive ?nance companies in the LATAM segment: Banco Fidis S.A. in Brazil and Fiat
Credito Compañia Financiera S.A. in Argentina. These captive ?nance companies offer dealer and retail customer
?nancing. In addition, in Brazil we have a signi?cant commercial partnership with Banco Itaù, a leading vehicle retail
?nancing company in Brazil, to provide ?nancing to retail customers purchasing Fiat brand vehicles. This partnership
was renewed in August 2013 for a ten-year term ending in 2023. Under this agreement, Banco Itaù has exclusivity
on our promotional campaigns and preferential rights on non-promotional ?nancing. We receive commissions in
connection with each vehicle ?nancing above a certain threshold. This agreement applies only to our retail customers
purchasing Fiat branded vehicles and excludes Chrysler, Jeep, Dodge and Ram brand vehicles, which are directly
?nanced by Banco Fidis S.A.
APAC Vehicle Sales, Competition and Distribution
APAC Sales and Competition
The following table presents our vehicle sales in the APAC segment for the periods presented:
For the Years Ended December 31,
2014
(1)(2)
2013
(1)(2)
2012
(1)(2)
APAC Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
China 182 1.0% 129 0.8% 57 0.4%
India
(3)
12 0.5% 10 0.4% 11 0.4%
Australia 44 4.0% 34 3.1% 23 2.1%
Japan 18 0.4% 16 0.4% 15 0.3%
South Korea 6 0.5% 5 0.4% 4 0.3%
APAC 5 major Markets 262 0.9% 194 0.7% 109 0.5%
Other APAC 5 — 6 — 6 —
Total 267 — 199 — 115 —
(1)
Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided by
third-party sources, including R.L. Polk Data, and National Automobile Manufacturing Associations.
(2)
Sales data include vehicles sold by certain of our joint ventures within the Chinese and, until 2012, the Indian market. Beginning in 2013, we
took over the distribution from the joint venture partner and we started distributing vehicles in India through wholly-owned subsidiaries.
(3)
India market share is based on wholesale volumes.
The automotive industry in the APAC segment has shown strong year-over-year growth. Industry sales in the ?ve
key markets (China, India, Japan, Australia and South Korea) where we compete increased from 16.3 million in 2009
to 28.2 million in 2014, a compound annual growth rate, or CAGR, of approximately 12 percent. Industry sales in
the ?ve key markets for 2013, 2012, 2011 and 2010 were 26.1 million, 23.8 million, 21.3 million and 20.3 million,
respectively. China was the driving force behind the signi?cant growth in the region. China’s industry volume increased
from 8.5 million passenger cars in 2009 to 18.4 million passenger cars in 2014, representing a CAGR of 17 percent.
Industry volumes in China for 2013, 2012, 2011 and 2010 were 16.7 million, 14.2 million, 13.1 million and 11.5 million
passenger cars, respectively. In 2014, the ?ve key markets grew by 8 percent over 2013, primarily driven by a 10
percent increase in China.
50 2014
|
ANNUAL REPORT
Overview of Our Business
We sell a range of vehicles in the APAC segment, including small and compact cars and utility vehicles.
Although our smallest mass-market segment by vehicle sales, we believe the APAC segment represents a signi?cant
growth opportunity and we have invested in building relationships with key joint venture partners in China and India in
order to increase our presence in the region. In 2010, the demand for mid-size vehicles in China led us to begin a joint
venture with Guangzhou Automobile Group Co. for the production of Fiat brand passenger cars. Currently the Fiat Ottimo
and Fiat Viaggio, along with our other Fiat-branded vehicles imported from Europe and North America, are distributed
through the joint venture’s local dealer network in that country. In addition, in 2014, we and GAC group announced that
together we will produce Jeep and Chrysler branded vehicles in China. We also work with a joint venture partner in India
to manufacture Fiat branded vehicles that we distribute through our wholly-owned subsidiary. In other parts of the APAC
segment, we distribute vehicles that we manufacture in the U.S. and Europe through our dealers and distributors.
APAC Distribution
In the key markets in the APAC segment (China, Australia, India, Japan and South Korea), we sell our vehicles through
a wholly-owned subsidiary or through our joint ventures to local independent dealers. In other markets where we
do not have a substantial presence, we have agreements with general distributors for the distribution of our vehicles
through their networks. The following table presents the number of independent entities in our dealer and distributor
network. The table counts each independent dealer entity, regardless of the number of contracts or points of sale the
dealer operates. Where we have relationships with a general distributor in a particular market, this table re?ects that
general distributor as one distribution relationship:
Distribution Relationships At December 31,
2014 2013 2012
APAC 729 671 470
APAC Dealer and Customer Financing
In the APAC segment, we operate a wholly-owned captive ?nance company, Fiat Automotive Finance Co., Ltd, which
supports, on a non-exclusive basis, our sales activities in China through dealer and retail customer ?nancing and
provides similar services to dealers and customers of CNHI. Vendor programs are also in place with different ?nancial
partners in India, Japan, South Korea and Australia.
EMEA Vehicle Sales, Competition and Distribution
EMEA Sales and Competition
The following table presents our passenger car and light commercial vehicle sales in the EMEA segment for the
periods presented:
For the Years Ended December 31,
2014
(1)(2)(3)
2013
(1)(2)(3)
2012
(1)(2)(3)
EMEA Passenger Cars Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
Italy 377 27.7% 374 28.7% 415 29.6%
Germany 84 2.8% 80 2.7% 90 2.9%
UK 80 3.2% 72 3.2% 64 3.1%
France 62 3.5% 62 3.5% 62 3.3%
Spain 36 4.3% 27 3.7% 23 3.3%
Other Europe 121 3.5% 123 3.7% 141 4.1%
Europe* 760 5.8% 738 6.0% 795 6.3%
Other EMEA** 126 — 137 — 122 —
Total 886 — 875 — 917 —
* 28 members of the European Union and members of the European Free Trade Association (other than Italy, Germany, UK, France, and Spain).
** Market share not included in Other EMEA because our presence is less than one percent.
(1)
Certain fleet sales accounted for as operating leases are included in vehicle sales.
(2)
Our estimated market share data is presented based on the European Automobile Manufacturers Association (ACEA) Registration Databases
and national Registration Offices databases.
(3)
Sale data includes vehicle sales by our joint venture in Turkey.
2014
|
ANNUAL REPORT 51
For the Years Ended December 31,
EMEA Light Commercial
Vehicles
2014
(1)(2)(3)
2013
(1)(2)(3)
2012
(1)(2)(3)
Group Sales Market Share Group Sales Market Share Group Sales Market Share
Thousands of units (except percentages)
Europe* 197 11.5% 182 11.6% 185 11.7%
Other EMEA** 68 — 68 — 72 —
Total 265 — 250 — 257 —
* 28 members of the European Union and members of the European Free Trade Association.
** Market share not included in Other EMEA because our presence is less than one percent.
(1)
Certain fleet sales accounted for as operating leases are included in vehicle sales.
(2)
Our estimated market share data is presented based on the national Registration Offices databases on products categorized under light
commercial vehicles.
(3)
Sale data includes vehicle sales by our joint venture in Turkey.
The following table summarizes our new vehicle market share information and our principal competitors in Europe, our
largest market in the EMEA segment:
For the Years Ended December 31,
Europe-Passenger Cars* 2014
(*)
2013
(*)
2012
(**)
Automaker Percentage of industry
Volkswagen 25.5% 25.1% 24.8%
PSA 10.7% 10.9% 11.7%
Renault 9.5% 8.9% 8.4%
GM 7.1% 7.9% 8.1%
Ford 7.3% 7.3% 7.5%
BMW 6.4% 6.4% 6.4%
FCA 5.9% 6.0% 6.4%
Daimler 5.4% 5.5% 5.2%
Toyota 4.3% 4.4% 4.3%
Other 17.9% 17.6% 17.2%
Total 100.0% 100.0% 100.0%
* Including all 28 European Union (EU) Member States and the 4 European Free Trade Association, or EFTA member states.
** Including all 27 European Union (EU) Member States and the 4 European Free Trade Association, or EFTA member states.
(1)
Market share data is presented based on the European Automobile Manufacturers Association, or ACEA Registration Databases, which also
includes Ferrari and Maserati within our Group.
In 2014, there was an improvement in passenger car industry volumes in Europe (EU28+EFTA), with unit sales
increasing 5.4 percent over the prior year to a total of 13 million, although still well below the pre-crisis level of
approximately 16 million units in 2007. As a result of production over-capacity, however, signi?cant price competition
among automotive OEMs continues to be a factor, particularly in the small and mid-size segments. Volumes were also
higher in the light commercial vehicle, or LCV, segment, with industry sales up 9.6 percent year-over-year to about
1.72 million units, following two consecutive years with industry volumes stable at around 1.6 million units. In 2014,
Fiat Professional, FCA’s LCV brand in Europe, introduced the sixth generation of its highly successful
Fiat Ducato, which has sold 2.7 million units since the nameplate was launched in 1981. The Ducato continued its
strong performance in 2014, taking the lead in the OEM ranking in its segment in Europe for the ?rst year ever, and
registering a further increase in market share - which has grown steadily since 2008 - to an all-time record of 20.9
percent. Fiat Professional also operates in Russia through wholly-owned subsidiaries. We also operate through joint
ventures and other cooperation agreements.
52 2014
|
ANNUAL REPORT
Overview of Our Business
During the year, FCA maintained its focus on production of a select number of models as it implemented a strategic
re-focus and realignment of the Fiat brand. Central to this strategy has been the expansion of the Fiat 500 family and
other selected economy models. This has resulted in FCA achieving a leading position in the “mini” and “compact
MPV” segments in Europe. We continued expansion of the 500 family in 2014, with the introduction of the 500X
crossover, which was debuted at the Paris Motor Show in October. Building on the history of Alfa Romeo, Fiat
and Lancia, we sell mini, small and compact passenger cars in the EMEA region under these brands. We are also
leveraging Jeep’s global brand recognition to offer Jeep brand SUVs, all of which the EMEA segment categorizes as
passenger cars. In September 2014, the Group launched the Jeep Renegade, FCA’s ?rst model designed in the U.S.
and produced in Italy. In addition, we sell LCV’s under the Fiat Professional brand, which mainly include half-ton pick-
up trucks and commercial vans.
In Europe, FCA’s sales are largely weighted to passenger cars, with approximately 53 percent of our total vehicle
sales in Europe in 2014 in the small car segment, re?ecting demand for smaller vehicles driven by driving conditions
prevalent in many European cities and stringent environmental regulations.
EMEA Distribution
In certain markets, such as Europe, our relationship with individual dealer entities can be represented by a number
of contracts (typically, we enter into one agreement per brand of vehicles to be sold), and the dealer can sell those
vehicles through one or more points of sale. In those markets, points of sale tend to be physically small and carry
limited inventory.
In Europe, we sell our vehicles directly to independent and our own dealer entities located in most European markets.
In other markets in the EMEA segment in which we do not have a substantial presence, we have agreements with
general distributors for the distribution of our vehicles through their existing distribution networks.
The following table summarizes the number of independent entities in our dealer and distributor network. The table
counts each independent dealer entity, regardless of the number of contracts or points of sale the dealer operates.
Where we have relationships with a general distributor in a particular market, this table re?ects that general distributor
as one distribution relationship:
Distribution Relationships At December 31,
2014 2013 2012
EMEA 2,143 2,300 2,495
EMEA Dealer and Customer Financing
In the EMEA segment, dealer and retail customer ?nancing is primarily managed by FCA Bank, our 50/50 joint
venture with Crédit Agricole Consumer Finance S.A., or Crédit Agricole. FCA Bank operates in 14 European countries
including Italy, France, Germany, the U.K. and Spain. We began this joint venture in 2007, and in July 2013, we
reached an agreement with Crédit Agricole to extend its term through December 31, 2021. Under the agreement, FCA
Bank will continue to bene?t from the ?nancial support of the Crédit Agricole Group while continuing to strengthen its
position as an active player in the securitization and debt markets. FCA Bank provides retail and dealer ?nancing to
support our mass-market brands and Maserati, as well as certain other OEMs.
Fidis S.p.A., our wholly-owned captive ?nance company, provides dealer and other wholesale customer ?nancing in
certain markets in the EMEA segment in which FCA Bank does not operate. We also operate a joint venture providing
?nancial services to retail customers in Turkey, and operate vendor programs with bank partners in other markets to
provide access to ?nancing in those markets.
2014
|
ANNUAL REPORT 53
Ferrari
Ferrari, a racing and sports car manufacturer founded in 1929 by Enzo Ferrari, began producing street cars in 1947,
beginning with the 125 S. Fiat acquired 50 percent of Ferrari in 1969, then expanding its stake to the current 90
percent. Scuderia Ferrari, the brand’s racing team division, has achieved enormous success, winning numerous
Formula One titles, including 16 constructors’ championships and 15 drivers’ championships. The street car division
currently produces vehicles ranging from sports cars (such as the 458 Italia, the 458 Spider and the F12 Berlinetta), to
the gran turismo models (such as the California and the FF), designed for long-distance, high-speed journeys.
We believe that Ferrari customers are seeking the state-of-the-art in luxury sports cars, with a special focus on the
very best Italian design and craftsmanship, along with unparalleled performance both on the track and on the road.
Ferrari recently presented the California T, which brings turbocharging back to its street cars for the ?rst time since
1992. We also launched the exclusive limited edition LaFerrari, which attracted orders for more than the production
run before its of?cial debut at the 2013 Geneva Motor Show. We believe LaFerrari sets a new benchmark for the
sector, incorporating the latest technological innovations that Ferrari will apply to future models. On October 29, 2014,
we announced our intention to separate Ferrari from FCA through a public offering of a portion of our shareholding in
Ferrari from our current shareholding and a spin-off of our remaining equity interest in Ferrari to our shareholders.
The following table shows the distribution of our Ferrari sales by geographic regions as a percentage of total sales for
each year ended December 31, 2014, 2013 and 2012:
As a percentage
of 2014 sales
As a percentage
of 2013 sales
As a percentage
of 2012 sales
Europe Top 5 countries
(1)
30% 30% 34%
U.S. 30% 29% 25%
Japan 6% 5% 5%
China, Hong Kong & Taiwan 9% 10% 10%
Other countries 25% 26% 26%
Total 100% 100% 100%
(1)
Europe Top 5 Countries by sales, includes Italy, UK, Germany, France and Switzerland.
In 2014, a total of 7.2 thousand Ferrari street cars were sold to retail customers, growth driven by the performance
of the limited edition LaFerrari. Ferrari experienced solid growth in North America, Ferrari’s largest market, Japan and
China, with European market substantially ?at year over year.
Ferrari vehicles are designed to maintain exclusivity and appeal to a customer looking for such rare vehicles, and as
a result, we deliberately limit the number of Ferrari vehicles produced each year in order to preserve the exclusivity of
the brand. Our efforts in designing, engineering and manufacturing our luxury vehicles focus on use of state-of-the-art
technology and luxury ?nishes to appeal to our luxury vehicle customers.
We sell our Ferrari vehicles through a worldwide distribution network of approximately 180 Ferrari dealers as of
December 31, 2014, that is separate from our mass-market distribution network.
Ferrari Financial Services, a ?nancial services company 90 percent owned by Ferrari, offers ?nancial services for
the purchase of all types of Ferrari vehicles. Ferrari Financial Services operates in Ferrari’s major markets, including,
Germany, U.K., France, Belgium, Switzerland, Italy, U.S. and Japan.
54 2014
|
ANNUAL REPORT
Overview of Our Business
Maserati
Maserati, a luxury vehicle manufacturer founded in 1914, became part of our business in 1993. We believe
that Maserati customers typically seek a combination of style, both in high quality interiors and external design,
performance, sports handling and comfort that come with a top of the line luxury vehicle. In 2013 the Maserati brand
has been re-launched by the introduction of the Quattroporte and Ghibli (luxury four door sedans), the ?rst addressed
to the ?agship large sedan segment and the second designed to address the luxury full-size sedan vehicle segment.
Maserati’s current vehicles also include the GranTurismo, the brand’s ?rst modern two door, four seat coupe, also
available in a convertible version. In 2014 we showcased the Ermenegildo Zegna version of the Quattroporte, which
will be produced in a limited run of 100 vehicles to commemorate the brand’s 100th anniversary. In addition, we
expect to launch a luxury SUV in 2016. This luxury SUV has been designed on the same platform as the Quattroporte
and the Ghibli and will complete the Maserati’s product portfolio with full coverage of the global luxury vehicle market.
Further, we recently presented a sports car concept (the Maserati Al?eri) expected to be put into production in the
coming years.
The following tables show the distribution of Maserati sales by geographic regions as a percentage of total sales for
each year ended December 31, 2014, 2013 and 2012:
As a percentage
of 2014 sales
As a percentage
of 2013 sales
As a percentage
of 2012 sales
Europe Top 4 countries
(1)
13% 9% 12%
U.S. 39% 41% 43%
Japan 4% 4% 5%
China 25% 26% 15%
Other countries 19% 20% 25%
Total 100% 100% 100%
(1)
Europe Top 4 Countries by sales, includes Italy, UK, and Switzerland.
In 2014, a total of 32.8 thousand Maserati vehicles were sold to retail customers, an increase of 183 percent
compared to 2013, on the back of continued strong performance for the Quattroporte and Ghibli, resulting in an
increase of approximately 170 percent in the U.S., the brand’s number one market, and in China, the brand’s second
largest market, combined with a fourfold increase in Europe.
We sell our Maserati vehicles through a worldwide distribution network of approximately 364 Maserati dealers as of
December 31, 2014, that is separate from our mass-market distribution network.
FCA Bank provides access to retail customer ?nancing for Maserati brand vehicles in Europe. In other regions, we rely
on local agreements with ?nancial services providers for ?nancing of Maserati brand vehicles.
2014
|
ANNUAL REPORT 55
Components Segment
We sell components and production systems under the following brands:
Magneti Marelli. Founded in 1919 as a joint venture between Fiat and Ercole Marelli, Magneti Marelli is an international
leader in the design and production of state-of-the-art automotive systems and components. Through Magneti
Marelli, we design and manufacture automotive lighting systems, powertrain (engines and transmissions) components
and engine control unit, electronic systems, suspension systems and exhaust systems, and plastic components
and modules. The Automotive Lighting business line, headquartered in Reutlingen, Germany, is dedicated to the
development, production and sale of automotive exterior lighting products for all major OEMs worldwide.
The Powertrain business line is dedicated to the production of engine and transmission components for automobiles,
motorbikes and light commercial vehicles and has a global presence due to its own research and development
centers, applied research centers and production plants. The Electronic Systems business line provides know-
how in the development and production of hardware and software in mechatronics, instrument clusters, telematics
and satellite navigation. We also provide aftermarket parts and services and operate in the motorsport business, in
particular electronic and electro-mechanical systems for championship motorsport racing, under the Magneti Marelli
brand. We believe the Magneti Marelli brand is characterized by key technologies available to its ?nal customers
at a competitive price compared to other component manufacturers, with high quality and competitive offerings,
technology and ?exibility.
Magneti Marelli provides wide-ranging expertise in electronics, through a process of ongoing innovation and
environmental sustainability in order to develop intelligent systems for active and passive vehicle safety, onboard
comfort and powertrain technologies. With 89 production facilities (including joint ventures) and 39 research and
development centers, Magneti Marelli has a presence in 19 countries and supplies all the major OEMs across the
globe. In several countries, Magneti Marelli’s activities are carried out through a number of joint ventures with local
partners with the goal of entering more easily into new markets by leveraging the partner’s local relationships.
Thirty-?ve percent of Magneti Marelli’s 2014 revenue is derived from sales to the Group.
Teksid. Originating from Fiat’s 1917 acquisition of Ferriere Piemontesi, the Teksid brand was established in 1978 and
today is specialized in grey and nodular iron castings production. Teksid produces engine blocks, cylinder heads,
engine components, transmission parts, gearboxes and suspensions. Teksid Aluminum, produces, aluminum cylinder
heads. Thirty-nine percent of Teksid’s 2014 revenue is derived from sales to the Group.
Comau. Founded in 1973, Comau, which originally derived its name from the acronyms of COnsorzio MAcchine
Utensili (consortium of machine tools), produces advanced manufacturing systems through an international network.
Comau operates primarily in the ?eld of integrated automation technology, delivering advanced turnkey systems to its
customers. Through Comau, we develop and sell a wide range of industrial applications, including robotics, while we
provide support service and training to customers. Comau’s main activities include powertrain metalcutting systems;
mechanical assembly systems and testing; innovative and high performance body welding and assembly systems;
and robotics. Comau’s automation technology is used in a variety of industries, including automotive and aerospace.
Comau also provides maintenance service in Latin America. Twenty-six percent of Comau’s 2014 revenue is derived
from sales to the Group.
56 2014
|
ANNUAL REPORT
Operating Results
Operating Results
Results of Operations
The following is a discussion of the results of operations for the year ended December 31, 2014 as compared to
the year ended December 31, 2013 and for the year ended December 31, 2013 as compared to the year ended
December 31, 2012. The discussion of certain line items (cost of sales, selling, general and administrative costs and
research and development costs) includes a presentation of such line items as a percentage of net revenues for the
respective periods presented, to facilitate the year-on-year comparisons.
For the Years Ended December 31,
(€ million) 2014 2013 2012
Net revenues 96,090 86,624 83,765
Cost of sales 83,146 74,326 71,473
Selling, general and administrative costs 7,084 6,702 6,775
Research and development costs 2,537 2,236 1,858
Other income/(expenses) 197 77 (68)
Result from investments 131 84 87
Gains/(losses) on the disposal of investments 12 8 (91)
Restructuring costs 50 28 15
Other unusual income/(expenses) (390) (499) (138)
EBIT 3,223 3,002 3,434
Net ?nancial expenses (2,047) (1,987) (1,910)
Pro?t before taxes 1,176 1,015 1,524
Tax expense/(income) 544 (936) 628
Net pro?t 632 1,951 896
Net pro?t attributable to:
Owners of the parent 568 904 44
Non-controlling interests 64 1,047 852
Net revenues
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Net revenues 96,090 86,624 83,765 9,466 10.9% 2,859 3.4%
2014 compared to 2013
Net revenues for the year ended December 31, 2014 were €96.1 billion, an increase of €9.5 billion, or 10.9 percent
(11.9 percent on a constant currency basis), from €86.6 billion for the year ended December 31, 2013.
The increase in net revenues was primarily attributable to (i) a €6.7 billion increase in NAFTA net revenues, related to
an increase in shipments and improved vehicle and distribution channel mix, (ii) a €1.6 billion increase in APAC net
revenues attributable to an increase in shipments and improved vehicle mix, (iii) a €1.1 billion increase in Maserati net
revenues primarily attributable to an increase in shipments, (iv) a €0.7 billion increase in EMEA net revenues mainly
attributable to an increase in shipments and improved mix, and (v) an increase of €0.5 billion in Components net
revenues, which were partially offset by (vi) a decrease of €1.3 billion in LATAM net revenues. The decrease in LATAM
net revenues was attributable to the combined effect of lower vehicle shipments and unfavorable foreign currency
translation effect related to the weakening of the Brazilian Real against the Euro, only partially offset by positive pricing
and vehicle mix.
2014
|
ANNUAL REPORT 57
2013 compared to 2012
Net revenues for the year ended December 31, 2013 were €86.6 billion, an increase of €2.8 billion, or 3.4 percent
(7.4 percent on a constant currency basis), from €83.8 billion for the year ended December 31, 2012.
The increase in net revenues was primarily attributable to increases of €2.3 billion in NAFTA segment net revenues
and €1.5 billion in APAC segment net revenues, both of which were largely driven by increases in shipments. In
addition, Maserati net revenues increased by €0.9 billion supported by an increase in shipments driven by the 2013
launches including the new Quattroporte in March and the Ghibli in October. These increases were partly offset by a
decrease of €1.1 billion in LATAM segment net revenues, and a €0.4 billion decrease in EMEA segment net revenues.
The decrease in LATAM segment net revenues was largely attributable to the combined effect of unfavorable foreign
currency translation related to the weakening of the Brazilian Real against the Euro, and a 3.0 percent decrease
in vehicle shipments. The decrease in EMEA segment net revenues was largely due to a decrease in shipments,
attributable to the combined effect of the persistent weak economic conditions in Europe, which resulted in a
1.8 percent passenger car industry contraction, and in part due to a decrease in our passenger car market share,
as a result of increasing competition in the industry.
See — Segments below for a detailed discussion of net revenues by segment.
Cost of sales
For the Years Ended December 31, Increase/(decrease)
(€ million, except
percentages) 2014
Percentage
of net
revenues 2013
Percentage
of net
revenues 2012
Percentage
of net
revenues 2014 vs. 2013 2013 vs. 2012
Cost of sales 83,146 86.5% 74,326 85.8% 71,473 85.3% 8,820 11.9% 2,853 4.0%
Cost of sales includes purchases, certain warranty and product-related costs, labor costs, depreciation, amortization
and logistic costs. We purchase a variety of components (including mechanical, steel, electrical and electronic, plastic
components as well as castings and tires), raw materials (steel, rubber, aluminum, resin, copper, lead, and precious
metals including platinum, palladium and rhodium), supplies, utilities, logistics and other services from numerous
suppliers which we use to manufacture our vehicles, parts and accessories. These purchases generally account for
approximately 80 percent of total cost of sales. Fluctuations in cost of sales are primarily related to the number of our
vehicles we produce and ship, along with changes in vehicle mix, as newer models of vehicles generally have more
technologically advanced components and enhancements and therefore additional costs per unit. The cost of sales
could also be affected, to a lesser extent, by ?uctuations in certain raw material prices.
58 2014
|
ANNUAL REPORT
Operating Results
2014 compared to 2013
Cost of sales for the year ended December 31, 2014 was €83.1 billion, an increase of €8.8 billion, or 11.9 percent
(12.8 percent on a constant currency basis), from €74.3 billion for the year ended December 31, 2013.
As a percentage of net revenues, cost of sales was 86.5 percent for the year ended December 31, 2014 compared to
85.8 percent for the year ended December 31, 2013.
The increase in cost of sales was primarily due to the combination of (i) €5.6 billion related to increased vehicle
shipments, primarily in the NAFTA, APAC, Maserati and EMEA segments, partially offset by a reduction in LATAM
shipments, (ii) €2.5 billion related to vehicle and distribution channel mix primarily attributable to the NAFTA segment,
and (iii) €0.5 billion arising primarily from price increases for certain raw materials in LATAM, which were partially offset
by (iv) favorable foreign currency translation effect of €0.7 billion.
In particular, the €2.5 billion increase in cost of sales related to vehicle and distribution channel mix was primarily
driven by the higher percentage of growth in certain SUV shipments as compared to passenger car shipments, along
with more retail shipments relative to ?eet shipments in NAFTA.
Cost of sales for the year ended December 31, 2014 increased by approximately €800 million due to an increase of
warranty expense and also included the effects of recently approved recall campaigns in the NAFTA segment.
The favorable foreign currency translation impact of €0.7 billion was primarily attributable to the LATAM segment,
driven by the weakening of the Brazilian Real against the Euro.
2013 compared to 2012
Cost of sales for the year ended December 31, 2013 was €74.3 billion, an increase of €2.8 billion, or 4.0 percent
(7.9 percent on a constant currency basis), from €71.5 billion for the year ended December 31, 2012. As a
percentage of net revenues, cost of sales was 85.8 percent for the year ended December 31, 2013 compared to
85.3 percent for the year ended December 31, 2012.
The increase in costs of sales was due to the combination of (i) increased costs of €2.1 billion related to increased
vehicle shipments, primarily in the NAFTA segment, (ii) increased costs of €1.7 billion primarily attributable to the
NAFTA segment, related to shifts in vehicle and distribution channel mix, (iii) increased cost of sales of €0.9 billion
relating to the new-model content enhancements, (iv) increased costs of €0.5 billion arising from price increases
for certain raw materials, and (v) an increase in other costs of sales of €0.5 billion, the effects of which were partially
offset by the positive impact of foreign currency translation of €2.8 billion, largely attributable to the weakening of the
U.S. Dollar and the Brazilian Real against the Euro.
In particular, the increase in cost related to vehicle mix was primarily driven by a higher percentage growth in truck
and certain SUV shipments as compared to passenger car shipments, while the shift in distribution channel mix was
driven by the relative growth in retail shipments, which generally have additional content per vehicle as compared
to ?eet shipments. The €0.5 billion increase in the price of raw materials was particularly related to the LATAM
segment, driven by the weakening of the Brazilian Real, which impacts foreign currency denominated purchases in
that segment. The increase in other costs of sales of €0.5 billion was largely attributable to increases in depreciation
relating to the investments associated with our recent product launches and an increase in labor costs in order to
meet increased production requirements both of which primarily related to the NAFTA segment.
2014
|
ANNUAL REPORT 59
Selling, general and administrative costs
For the Years Ended December 31, Increase/(decrease)
(€ million, except
percentages) 2014
Percentage
of net
revenues 2013
Percentage
of net
revenues 2012
Percentage
of net
revenues 2014 vs. 2013 2013 vs. 2012
Selling, general and
administrative costs 7,084 7.4% 6,702 7.7% 6,775 8.1% 382 5.7% (73) (1.1)%
2014 compared to 2013
Selling, general and administrative costs include advertising, personnel, and other costs. Advertising costs accounted
for approximately 44.0 percent and 43.0 percent of total selling, general and administrative costs for the year ended
December 31, 2014 and 2013 respectively.
Selling, general and administrative costs for the year ended December 31, 2014 were €7,084 million, an increase
of €382 million, or 5.7 percent, from €6,702 million for the year ended December 31, 2013. As a percentage of net
revenues, selling, general and administrative costs were 7.4 percent for the year ended December 31, 2014 compared
to 7.7 percent for the year ended December 31, 2013.
The increase in selling, general and administrative costs was due to the combined effects of (i) a €293 million increase
in advertising expenses driven primarily by the NAFTA, APAC and EMEA segments, (ii) a €157 million increase in other
selling, general and administrative costs primarily attributable to the LATAM and Maserati segments, and to a lesser
extent, the APAC segment which were partially offset by (iii) a reduction in other general and administrative expenses
in the NAFTA segment and (iv) the impact of favorable foreign currency translation of €68 million.
The increase in advertising expenses was largely attributable to the APAC and NAFTA segments to support the
growth of the business in their respective markets. In addition, advertising expenses increased within the NAFTA
segment for new product launches, including the all-new 2014 Jeep Cherokee and the all-new 2015 Chrysler 200.
There were additional increases in advertising expenses for the EMEA segment related to the Jeep brand growth and
new product launches, including the all-new 2014 Jeep Cherokee and Renegade. The favorable foreign currency
translation impact of €68 million was primarily attributable to the LATAM segment, driven by the weakening of the
Brazilian Real against the Euro.
The increase in other selling, general and administrative costs attributable to the Maserati segment has been driven
by the increase in volumes. The increase in other selling, general and administrative costs attributable to the APAC
segment was driven by volume growth in the region, while the increase in the LATAM segment includes the start-up
costs of the Pernambuco plant.
2013 compared to 2012
Selling, general and administrative costs for the year ended December 31, 2013 were €6,702 million, a decrease
of €73 million, or 1.1 percent, from €6,775 million for the year ended December 31, 2012. As a percentage of net
revenues, selling, general and administrative costs were 7.7 percent for the year ended December 31, 2013 compared
to 8.1 percent for the year ended December 31, 2012.
The decrease in selling, general and administrative costs was due to the combined effects of the positive impact of
foreign currency translation of €240 million, partially offset by a €102 million increase in personnel expenses, largely
related to the NAFTA segment, and an increase in advertising expenses of €37 million. In particular, advertising
expenses increased in 2013 due to the product launches in the NAFTA segment (2014 Jeep Grand Cherokee, the
all-new 2014 Jeep Cherokee and the all-new Fiat 500L), in the APAC segment (Dodge Journey) and the Maserati
segment (Quattroporte and Ghibli), which continued following launch to support the growth in their respective
markets, which were partially offset by a decrease in advertising expenses for the EMEA segment as a result of efforts
to improve the focus of advertising campaigns.
60 2014
|
ANNUAL REPORT
Operating Results
Research and development costs
For the Years Ended December 31, Increase/(decrease)
(€ million, except
percentages) 2014
Percentage
of net
revenues 2013
Percentage
of net
revenues 2012
Percentage
of net
revenues 2014 vs. 2013 2013 vs. 2012
Research and
development
costs expensed
during the year 1,398 1.5% 1,325 1.5% 1,180 1.4% 73 5.5% 145 12.3%
Amortization of
capitalized
development
costs 1,057 1.1% 887 1.0% 621 0.7% 170 19.2% 266 42.8%
Write-down of
costs previously
capitalized 82 0.1% 24 0.0% 57 0.1% 58 241.7% (33) (57.9)%
Research and
development
costs 2,537 2.6% 2,236 2.6% 1,858 2.2% 301 13.5% 378 20.3%
We conduct research and development for new vehicles and technology to improve the performance, safety,
fuel ef?ciency, reliability, consumer perception and environmental impact (i.e. reduced emissions) of our vehicles.
Research and development costs consist primarily of material costs and personnel related expenses that support the
development of new and existing vehicles with powertrain technologies.
2014 compared to 2013
Research and development costs for the year ended December 31, 2014 were €2,537 million, an increase of
€301 million, or 13.5 percent, from €2,236 million for the year ended December 31, 2013. As a percentage of net
revenues, research and development costs were 2.6 percent both for years ended December 31, 2014 and 2013.
The increase in research and development costs was attributable to the combined effects of (i) an increase in the
amortization of previously capitalized development costs of €170 million, (ii) an increase in research and development
costs expensed during the period of €73 million and (iii) an increase in write-down of costs previously capitalized of
€58 million.
Research and development costs capitalized as a percentage of total expenditures on research and development
were 61.9 percent for the year ended December 31, 2014, as compared to 60.6 percent for the year ended
December 31, 2013. Expenditures on research and development amounted to €3,665 million for the year ended
December 31, 2014, an increase of 8.9 percent, from €3,367 million, for the year ended December 31, 2013,
resulting in a 5.5 percent increase in research and development costs expensed.
The increase in amortization of capitalized development costs was attributable to the launch of new products, and in
particular related to the NAFTA segment, driven by the all-new 2014 Jeep Cherokee, which began shipping to dealers
in late October 2013, and the all-new 2015 Chrysler 200, which was launched in the ?rst quarter of 2014, and began
arriving in dealerships in May 2014.
2014
|
ANNUAL REPORT 61
2013 compared to 2012
Research and development costs for the year ended December, 31 2013 were €2,236 million, an increase of
€378 million, or 20.3 percent, from €1,858 million for the year ended December 31, 2012. As a percentage of net
revenues, research and development costs were 2.6 percent for the year ended December 31, 2013 compared to
2.2 percent for the year ended December 31, 2012.
The increase in research and development costs was attributable to the combined effects of (i) an increase in the
amortization of capitalized development costs of €266 million and (ii) an increase in research and development costs
expensed during the year of €145 million, which were partly offset by €33 million lower write-down of costs previously
capitalized.
The increase in amortization of capitalized development costs was largely attributable to new product launches. In
particular, amortization of capitalized development in the NAFTA segment increased as a result of the 2013 launches,
including the all-new 2014 Jeep Cherokee, the Jeep Grand Cherokee and the Ram 1500. The €145 million increase
in research and development costs expensed during the year was largely attributable to increases in the NAFTA
segment, largely driven by an increase in expenses related to personnel involved in research and development
activities. In particular, at December 31, 2013 a total of 18,700 employees were dedicated to research and
development activities at Group level, compared to 17,900 at December 31, 2012.
Other income/(expenses)
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Other income/(expenses) 197 77 (68) 120 155.8% 145 n.m.
2014 compared to 2013
Other income/(expenses) for the year ended December 31, 2014 amounted to net income of €197 million, as
compared to net income of €77 million for the year ended December 31, 2013.
For both years ended December 31, 2014 and December 31, 2013, there were no items that either individually or in
aggregate are considered material.
2013 compared to 2012
Other income/(expenses) for the year ended December 31, 2013 amounted to net other income of €77 million, an
increase of €145 million, from net other expenses of €68 million for the year ended December 31, 2012.
For 2013 other income/(expenses) was comprised of other income of €291 million, which was partially offset by other
expenses of €214 million. Of the total 2013 other income, €140 million related to rental, royalty and licensing income,
and €151 million related to miscellaneous income, which includes insurance recoveries and other costs recovered.
Other expenses mainly related to indirect tax expenses incurred.
For 2012 other income/(expenses) was comprised of other income of €242 million, which was more than offset by
other expenses of €310 million. Of the total 2012 other income, €132 million related to rental, royalty and licensing
income, and €110 million related to miscellaneous income. In 2012, other expenses mainly related to indirect tax
expenses incurred.
62 2014
|
ANNUAL REPORT
Operating Results
Result from investments
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Result from investments 131 84 87 47 56.0% (3) (3.4)%
2014 compared to 2013
The largest contributors to result from investments for the years ended December 31, 2014 and 2013 were FCA
Bank S.p.A (“FCA Bank”) formerly known as FGA Capital S.p.A., a jointly-controlled ?nance company that manages
activities in retail automotive ?nancing, dealership ?nancing, long-term car rental and ?eet management in 14
European countries and Tofas-Turk Otomobil Fabrikasi A.S. a jointly-controlled Turkish automaker.
Result from investments for the year ended December 31, 2014 was €131 million, an increase of €47 million, or
56.0 percent, from €84 million for the year ended December 31, 2013. The increase in result from investments was
primarily attributable to the €20 million decrease in the loss relating to the Group’s investment in RCS MediaGroup
and to the €26 million increase in results from investments in the EMEA segment.
2013 compared to 2012
Result from investments for the year ended December, 31 2013 was €84 million, a decrease of €3 million,
or 3.4 percent, from €87 million for the year ended December 31, 2012.
The decrease was largely attributable to the combined effect of a €23 million increase in the loss of a Chinese joint
venture and a €12 million decrease in the pro?t of the Turkish joint venture, which were almost entirely offset by a
€35 million decrease in the loss relating to the Group’s investment in RCS MediaGroup.
Gains/(losses) on the disposal of investments
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Gains/(losses) on the disposal of investments 12 8 (91) 4 50.0% 99 n.m.
2014 compared to 2013
Gains on the disposal of investments for the year ended December 31, 2014 were €12 million, an increase of
€4 million, from €8 million for the year ended December 31, 2013.
For both years ended December 31, 2014 and December 31, 2013, there were no items that either individually or in
aggregate are considered material.
2013 compared to 2012
Gains on the disposal of investments for the year ended December 31, 2013 were €8 million, an increase of
€99 million from a loss on the disposal of investments for the year ended December 31, 2012 of €91 million.
The loss on disposal of investments recognized in 2012 relates to the write-down of our investment in Sevelnord
Société Anonyme, a vehicle manufacturing joint venture with PSA Peugeot Citroen following its remeasurement at
fair value as a result of being classi?ed as an asset held for sale in 2012, in accordance with IFRS 5 - Non-current
Assets Held for Sale and Discontinued Operations. In 2012, we entered into an agreement with PSA Peugeot Citroen
providing for the transfer of its shareholding in Sevelnord Société Anonyme. The investment was sold in the ?rst
quarter of 2013.
2014
|
ANNUAL REPORT 63
Restructuring costs
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Restructuring costs 50 28 15 22 78.6% 13 86.7%
2014 compared to 2013
Restructuring costs for the year ended December 31, 2014 were €50 million, an increase of €22 million, from
€28 million for the year ended December 31, 2013.
Restructuring costs for the year ended December 31, 2014 mainly relate to the LATAM and Components segments.
Restructuring costs for the year ended December 31, 2013 mainly relate to Other activities partially offset by release of
a restructuring provision previously recognized in the NAFTA segment.
2013 compared to 2012
Restructuring costs for the year ended December 31, 2013 were €28 million, an increase of €13 million, from
€15 million for the year ended December 31, 2012.
Net restructuring costs for 2013 mainly relate to a €38 million restructuring provision related to activities included
within other activities, partially offset by a €10 million release of a previously recognized provision related to the NAFTA
segment primarily related to decreases in expected workforce reduction costs and legal claim reserves.
Net restructuring costs for 2012 include EMEA segment restructuring costs of €43 million and €20 million related
to the Components segment and other activities, which were partially offset by a €48 million release of a previously
recognized provision related to the NAFTA segment.
Other unusual income/(expenses)
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Other unusual income/(expenses) (390) (499) (138) 109 21.8% (361) (261.6)%
2014 compared to 2013
Other unusual expenses for the year ended December 31, 2014 were €390 million, a decrease of €109 million from
€499 million for the year ended December 31, 2013.
For the year ended December 31, 2014, Other unusual income/(expenses) amounted to net expenses of €390 million,
primarily relating to the €495 million expense recognized in the NAFTA segment in connection with the execution of
the MOU with the UAW which was entered into by FCA US on January 21, 2014, which was partially offset by the
non-cash and non-taxable gain of €223 million on the remeasurement to fair value of the previously exercised options
on approximately 10 percent of FCA US’s membership interest in connection with FCA’s acquisition of the remaining
41.5 percent ownership interest in FCA US that was not previously owned. In addition, Other unusual expenses
include a €98 million remeasurement charge recognized in the LATAM segment as a result of the Group’s change
in the exchange rate used to remeasure its Venezuelan subsidiary’s net monetary assets in U.S. Dollar, based on
developments in the ?rst quarter 2014 related to the foreign exchange process in Venezuela as described in more
detail in the discussion of results for LATAM below. For the year ended December 31, 2014, Other unusual expenses
also included the €15 million compensation costs deriving from the resignation of the former Ferrari chairman.
64 2014
|
ANNUAL REPORT
Operating Results
2013 compared to 2012
Other unusual expenses for the year ended December 31, 2013 were €499 million, an increase of €361 million, from
€138 million for the year ended December 31, 2012.
Other unusual expenses for the year ended December 31, 2013 included other unusual expenses of €686 million, and
other unusual income of €187 million.
Other unusual expenses for the year ended December 31, 2013 mainly included (i) impairments of €385 million,
(ii) €115 million related to voluntary safety recalls and customer satisfaction actions in the NAFTA segment, and
(iii) €43 million related to the devaluation of the Venezuelan Bolivar, or VEF, against the U.S. Dollar. In particular,
impairments for 2013 include €272 million related to the rationalization of architectures (the combination of systems
that enables the generation of speci?c vehicle platforms for the different models in a certain segment), associated with
the new product strategy for the Alfa Romeo, Maserati and Fiat brands, €57 million related to asset impairments for
the cast iron business in Teksid and €56 million related to write-off of certain equity recapture rights resulting from the
acquisition of the remaining 41.5 interest in FCA US that was not previously owned. Refer to the Consolidated ?nancial
statements included elsewhere in this report for further information on the acquisition of the remaining 41.5 percent
interest in FCA US.
Other unusual income for the year ended December 31, 2013 mainly included the impacts of curtailment gains and plan
amendments of €166 million related to changes made to FCA US’s U.S. and Canadian de?ned bene?t pension plans.
Other unusual expenses for the year ended December 31, 2012 primarily consisted of costs arising from disputes
relating to operations terminated in prior years, costs related to the termination of the Sevelnord Société Anonyme joint
venture and to the rationalization of relationships with certain suppliers.
EBIT
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
EBIT 3,223 3,002 3,434 221 7.4% (432) (12.6)%
2014 compared to 2013
EBIT for the year ended December 31, 2014 was €3,223 million, an increase of €221 million, or 7.4 percent
(9.4 percent on a constant currency basis), from €3,002 million for the year ended December 31, 2013.
The increase in EBIT was primarily attributable to the combined effect of (i) a €397 million decrease in EMEA loss, (ii) a
€202 million increase in APAC (iii) a €169 million increase in Maserati, (iv) a €114 million increase in Components and
(v) the non-cash and non-taxable gain of €223 million on the remeasurement to fair value of the previously exercised
options on approximately 10 percent of FCA US’s membership interest in connection with the acquisition of the
remaining 41.5 percent interest in FCA US that was not previously owned, which were partially offset by (vi) a
€643 million decrease in NAFTA and (vii) a €315 million decrease in LATAM.
2013 compared to 2012
EBIT for the year ended December 31,2013 was €3,002 million, a decrease of €432 million, or 12.6 percent
(7.2 percent on a constant currency basis), from €3,434 million for the year ended December 31, 2012.
The decrease in EBIT was primarily attributable to the combined effect of (i) a €533 million decrease in LATAM
segment EBIT and (ii) a €201 million decrease in NAFTA segment EBIT, which were partially offset by (iii) a
€219 million decrease in EMEA segment EBIT loss, (iv) a €49 million increase in Maserati segment EBIT.
See —Segments for a detailed discussion of EBIT by segment.
2014
|
ANNUAL REPORT 65
Net ?nancial income/(expenses)
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Net ?nancial income/(expenses) (2,047) (1,987) (1,910) (60) (3.0)% (77) (4.0)%
2014 compared to 2013
Net ?nancial expenses for the year ended December 31, 2014 were €2,047, an increase of €60 million, or 3.0
percent, from €1,987 million for the year ended December 31, 2013.
Excluding the gain on the Fiat stock option-related equity swaps of €31 million recognized in the year ended
December 31, 2013, net ?nancial expenses were substantially unchanged as the bene?ts from the new ?nancing
transactions completed in February 2014 by FCA US were offset by higher average debt levels (refer to Note 27 to
the Consolidated ?nancial statements included elsewhere in this report for a more detailed description of the new
?nancings of FCA US).
2013 compared to 2012
Net ?nancial expenses for the year ended December 31, 2013 were €1,987 million, an increase of €77 million, or 4.0
percent, from €1,910 million for the year ended December 31, 2012. Excluding the gains on the Fiat stock option-
related equity swaps (€31 million for 2013, at their expiration, compared to €34 million for 2012), net ?nancial expense
was €74 million higher, largely due to a higher average net debt level.
Tax expense/(income)
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Tax expense/(income) 544 (936) 628 1,480 158.1% (1,564) n.m
2014 compared to 2013
Tax expense for the year ended December 31, 2014 was €544 million, compared with tax income of €936 million
for the year ended December 31, 2013. At December 31, 2013, previously unrecognized deferred tax assets of
€1,500 million were recognized, principally related to tax loss carry forwards and temporary differences in the NAFTA
operations.
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 bene?ts which did not occur in the prior year.
In 2014, the Group’s effective tax rate is equal to 39.5%. The difference between the theoretical and the effective
income taxes is primarily due to €379 million arising from the unrecognized deferred tax assets on temporary
differences and tax losses originating in the year in EMEA, which is partially offset by the recognition of non-recurring
deferred tax bene?ts of €173 million.
66 2014
|
ANNUAL REPORT
Operating Results
2013 compared to 2012
Tax income for the year ended December 31, 2013 was €936 million, compared to tax expense of €628 million for
the year ended December 31, 2012.
The increase in tax income was due to the recognition of previously unrecognized deferred tax assets related to FCA
US of €1,500 million. The FCA US deferred tax assets were recognized as a result of the recoverability assessment
performed at December 31, 2013, which reached the conclusion that it was probable that future taxable pro?t will
allow the deferred tax assets to be recovered. For further details of the recoverability assessment. Excluding the effect
of the previously unrecognized deferred tax assets, the effective rate of tax would have been 48.7 percent compared
to 35.7 percent for 2012. See Note 10 to the Consolidated ?nancial statements included elsewhere in this report for a
reconciliation of the theoretical tax expense to the effective tax charge. The increase in the effective tax rate was mainly
attributable to lower utilization of tax losses carried forward for which deferred tax assets had not been recognized in
the past, partially offset by lower unrecognized deferred tax assets on temporary differences and tax losses arising in
the year.
Segments
The following is a discussion of net revenues, EBIT and shipments for each segment.
(€ million, except
shipments which are
in thousands of units)
Net revenues
for the years ended
December 31,
EBIT
for the years ended
December 31,
Shipments
(*)
for the years ended
December 31,
2014 2013 2012 2014 2013 2012 2014 2013 2012
NAFTA 52,452 45,777 43,521 1,647 2,290 2,491 2,493 2,238 2,115
LATAM 8,629 9,973 11,062 177 492 1,025 827 950 979
APAC 6,259 4,668 3,173 537 335 274 220 163 103
EMEA 18,020 17,335 17,717 (109) (506) (725) 1,024 979 1,012
Ferrari 2,762 2,335 2,225 389 364 335 7 7 7
Maserati 2,767 1,659 755 275 106 57 36 15 6
Components 8,619 8,080 8,030 260 146 165 n.m. n.m. n.m.
Other activities 831 929 979 (114) (167) (149) n.m. n.m. n.m.
Unallocated items
& adjustments
(1)
(4,249) (4,132) (3,697) 161 (58) (39) n.m. n.m. n.m.
Total 96,090 86,624 83,765 3,223 3,002 3,434 4,608 4,352 4,223
(1)
Primarily includes intercompany transactions which are eliminated on consolidation.
NAFTA
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are in
thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 52,452 100.0% 45,777 100.0% 43,521 100.0% 6,675 14.6% 2,256 5.2%
EBIT 1,647 3.1% 2,290 5.0% 2,491 5.7% (643) (28.1)% (201) (8.1)%
Shipments 2,493 n.m. 2,238 n.m. 2,115 n.m. 255 11.4% 123 5.8%
2014
|
ANNUAL REPORT 67
Net revenues
2014 compared to 2013
NAFTA net revenues for the year ended December 31, 2014 were €52.5 billion, an increase of €6.7 billion, or
14.6 percent, from €45.8 billion for the year ended December 31, 2013. The total increase of €6.7 billion was
primarily attributable to (i) an increase in shipments of €4.4 billion, (ii) favorable market and vehicle mix of €1.9 billion
and (iii) favorable net pricing of €0.4 billion.
The 11.4 percent increase in vehicle shipments from 2,238 thousand units for the year ended December 31, 2013, to
2,493 thousand units for the year ended December 31, 2014, was largely driven by increased demand of the Group’s
vehicles, including the all-new 2014 Jeep Cherokee, Ram pickups and the Jeep Grand Cherokee. These increases
were partially offset by a reduction in the prior model year Chrysler 200 and Dodge Avenger shipments due to their
discontinued production in the ?rst quarter of 2014 in preparation for the launch and changeover to the all-new 2015
Chrysler 200, which began arriving in dealerships in May 2014.
Of the favorable mix impact of €1.9 billion, €1.7 billion related to vehicle mix due to higher proportion of trucks and
certain SUVs as compared to passenger cars (as these larger vehicles generally have a higher selling price), and
€0.2 billion related to a shift in distribution channel mix to greater retail shipments as a percentage of total shipments,
which is consistent with the continuing strategy to grow U.S. retail market share while maintaining stable ?eet shipments.
Favorable net pricing of €0.4 billion re?ected favorable pricing and pricing for enhanced content, partially offset by
incentive spending on certain vehicles in portfolio.
2013 compared to 2012
NAFTA net revenues for the year ended December 31, 2013 were €45.8 billion, an increase of €2.3 billion,
or 5.2 percent (8.7 percent on a constant currency basis), from €43.5 billion for the year ended December 31, 2012.
The total increase of €2.3 billion was mainly attributable to the combination of (i) an increase in shipments of €1.5
billion, (ii) favorable market and vehicle mix of €1.2 billion and (iii) favorable vehicle pricing of €0.9 billion, which were
partially offset by (iv) unfavorable foreign currency impact of €1.5 billion.
The 5.8 percent increase in vehicle shipments from 2,115 thousand vehicles for the year ended December 31, 2012
to 2,238 thousand vehicles for the year ended December 31, 2013, was primarily driven by increased demand for our
products, as evidenced by the increase in market share, from 11.3 percent for the year ended December 31, 2012 to
11.5 percent for the year ended December 31, 2013. The increase in shipments was supported by the launch of the
Ram 1500 in late 2012 and the all-new 2014 Jeep Cherokee, the effects of which were partially offset by a decrease in
Jeep Liberty shipments following its discontinued production during 2012. Of the favorable mix impact of €1.2 billion,
€0.9 billion was related to the increase of shipments of trucks and certain SUVs, as compared to passenger cars
(as trucks generally have a higher selling price), while a shift in the distribution channel mix towards higher priced retail
shipments and away from ?eet shipments resulted in an increase in net revenues of €0.3 billion. Our ability to increase
sales price of current year models to re?ect enhancements made resulted in an increase in net revenues of €0.9
billion. These increases were partially offset by the impact of the weakening of the U.S. Dollar against the Euro during
2013, which amounted to €1.5 billion.
68 2014
|
ANNUAL REPORT
Operating Results
EBIT
2014 compared to 2013
NAFTA EBIT for the year ended December 31, 2014 was €1,647 million, a decrease of €643 million, or 28.1 percent,
from EBIT of €2,290 million for the year ended December 31, 2013.
The decrease in NAFTA EBIT was primarily attributable to the combination of (i) increased industrial costs of €1,577
million (ii) an increase of €575 million in other unusual expenses and (iii) a €29 million increase in selling, general and
administrative costs largely attributable to higher advertising costs to support new vehicle launches, including the
all-new 2014 Jeep Cherokee and the all-new 2015 Chrysler 200, partially offset by (iv) the favorable volume/mix
impact of €1,129 million, driven by the previously described increase in shipments, and (v) favorable net pricing of
€411 million due to favorable pricing and pricing for enhanced content, partially offset by incentive spending on certain
vehicles in portfolio.
The increase in industrial costs was attributable to an increase in warranty expenses of approximately €800 million
which included the effects of certain recall campaigns, an increase in base material costs of €978 million mainly
related to higher base material costs associated with vehicles and components and content enhancements on new
models and €262 million in higher research and development costs and depreciation and amortization.
For the year ended December 31, 2014, unusual items were negative by €504 million primarily re?ecting the
€495 million charge in the ?rst quarter of 2014 connected with the UAW MOU entered into by FCA US on
January 21, 2014.
For the year ended December 31, 2013, unusual items were positive by €71 million, primarily including (i) a
€115 million charge related to the June 2013 voluntary safety recall for the 1993-1998 Jeep Grand Cherokee and
the 2002-2007 Jeep Liberty, as well as the customer satisfaction action for the 1999-2004 Jeep Grand Cherokee,
partially offset by (ii) the impacts of a curtailment gain and plan amendments of €166 million with a corresponding net
reduction pension obligation in NAFTA.
2013 compared to 2012
NAFTA EBIT for the year ended December 31, 2013 was €2,290 million, a decrease of €201 million, or 8.1 percent
(4.9 percent on a constant currency basis), from €2,491 million for the year ended December 31, 2012.
The decrease in NAFTA EBIT was primarily attributable to the combination of (i) favorable pricing effects of
€868 million, driven by our ability to increase sales price of current year models for enhancements made and
(ii) favorable volume/mix impact of €588 million, driven by an increase of shipments of trucks and certain SUVs as
compared to passenger cars, which were more than offset by (iii) increased industrial costs of €1,456 million (iv) an
increase in selling, general and administrative costs of €90 million largely attributable to costs incurred in launching
new products during 2013, (v) unfavorable foreign currency translation of €79 million, driven by the weakening of
the U.S. dollar against the Euro during 2013, and (vi) a €23 million increase in other unusual income. In particular,
the increase in industrial costs was attributable to an increase in cost of sales related to new-model content
enhancements, an increase in depreciation and amortization, driven by the new product launches, including the
all-new 2014 Jeep Cherokee, the Jeep Grand Cherokee and the Ram 1500 pick-up truck and an increase in labor
costs in order to meet increased production requirements. The increase in other unusual income was attributable
to the combined effects of a gain recognized from amendments to FCA US’s U.S. and Canadian de?ned bene?t
pension plans, offset by charges related to voluntary safety recalls and customer satisfaction action for certain models
produced in various years from 1993 to 2007 by Old Carco.
2014
|
ANNUAL REPORT 69
LATAM
For the Years Ended December 31, Increase/(decrease)
(€ million, except
percentages and
shipments which are
in thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 8,629 100.0% 9,973 100.0% 11,062 100.0% (1,344) (13.5)% (1,089) (9.8)%
EBIT 177 2.1% 492 4.9% 1,025 9.3% (315) (64.0)% (533) (52.0)%
Shipments 827 n.m 950 n.m. 979 n.m. (123) (12.9)% (29) (3.0)%
Net revenues
2014 compared to 2013
LATAM net revenues for the year ended December 31, 2014 were €8.6 billion, a decrease of €1.3 billion, or
13.5 percent (6.9 percent on a constant currency basis), from €10.0 billion for the year ended December 31, 2013.
The total decrease of €1.3 billion was attributable to (i) a decrease of €1.2 billion driven by lower shipments, and (ii)
unfavorable foreign currency translation of €0.7 billion, which were partially offset by (iii) favorable net pricing and
vehicle mix of €0.6 billion.
The 12.9 percent decrease in vehicle shipments from 950 thousand units for the year ended December 31, 2013, to
827 thousand units for the year ended December 31, 2014 re?ected the weaker demand in the region’s main markets,
where Brazil continued the negative market trend started in 2012, Argentina was impacted by import restrictions and
additional tax on more expensive vehicles and Venezuela suffered from weaker trading conditions. The weakening
of the Brazilian Real against the Euro impacted net revenues by €0.6 billion, in particular, the average exchange rate
used to translate Brazilian Real balances for the year ended December 31, 2014, was 8.9 percent lower than the
average exchange rate used for the same period in 2013.
2013 compared to 2012
LATAM net revenues for the year ended December 31, 2013 were €10.0 billion, a decrease of €1.1 billion, or 9.8
percent (an increase of 0.7 percent on a constant currency basis), from €11.1 billion for the year ended December
31, 2012. The total decrease of €1.1 billion was attributable to the combination of the impact of (i) unfavorable foreign
currency translation of €1.2 billion, and (ii) €0.3 billion related to a decrease in vehicle shipments, which were partially
offset by (iii) favorable mix of €0.1 billion and (iv) favorable pricing impact of €0.1 billion.
LATAM net revenues were signi?cantly impacted by the weakening of the Brazilian Real against the Euro, as the
average exchange rate used to translate 2013 balances was 14.3 percent lower than the average exchange rate
for 2012, impacting net revenues negatively by €1.2 billion. The 3.0 percent vehicle shipment decrease from
979 thousand units for 2012 to 950 thousand units for 2013, which impacted net revenues by €0.3 billion, was largely
attributable to reductions of shipments in Brazil. In 2012 sales tax incentives were introduced to promote the sale of
small vehicles, a segment in which we hold a market leading position. As such, we were well positioned to meet the
increased consumer demand for small cars, recording an increase in shipments in 2012. In 2013, the gradual phase
out of the tax incentives was initiated and was a contributing factor to a shift in market demand away from the small
car segment and into larger vehicles, resulting in a decrease in our Brazilian market share, from 23.3 percent in 2012
to 21.5 percent in 2013.
70 2014
|
ANNUAL REPORT
Operating Results
EBIT
2014 compared to 2013
LATAM EBIT for the year ended December 31, 2014 was €177 million, a decrease of €315 million, or 64.0 percent
(53.7 percent on a constant currency basis), from €492 million for the year ended December 31, 2013.
The decrease in LATAM EBIT was primarily attributable to the combination of (i) unfavorable volume/mix impact
of €228 million attributable to a decrease in shipments, partially offset by an improvement in vehicle mix in Brazil,
(ii) an increase in industrial costs of €441 million largely attributable to price increases for certain foreign currency
denominated purchases, which were impacted by the weakening of the Brazilian Real, (iii) the impact of unfavorable
foreign currency translation of €51 million attributable to the weakening of the Brazilian Real against the Euro, partially
offset by (v) favorable pricing of €381 million driven by pricing actions in Brazil and Argentina.
In particular, LATAM net other unusual expenses amounted to €112 million for the year ended December 31, 2014,
which included €98 million for the remeasurement charge on the Venezuelan subsidiary’s net monetary assets,
compared to €127 million for the year ended December 31, 2013 which included €75 million attributable to the
streamlining of architectures and models associated to the refocused product strategy and €43 million relating to the
loss recognized on translation of certain monetary liabilities from VEF into U.S. Dollar.
During the year ended December 31, 2014, the economic conditions in Venezuela declined due to high in?ation, the
downward trend in the price of oil which began during the fourth quarter of 2014, and continued uncertainty regarding
liquidity within the country and the availability of U.S. Dollar. In addition, the Venezuelan government enacted a law in
January 2014 which provided limits on costs, sales prices and pro?t margins (30 percent maximum above structured
costs) across the Venezuelan economy. There remains uncertainty as to the application of certain aspects of this law
by the Venezuelan government; therefore, we are unable to assess its impact on our vehicle, parts and accessory
sales. Despite the negative economic conditions in Venezuela, we continued to obtain cash to support future
operations through the SICAD I auctions and were also able to complete our workforce reduction initiative.
As of December 31, 2014, we continue to control and therefore consolidate our Venezuelan operations. We will
continue to assess conditions in Venezuela and if in the future, we conclude that we no longer maintain control over
our operations in Venezuela, we may incur a pre-tax charge of approximately €247 million using the current exchange
rate of 12.0 VEF to U.S. Dollar.
Based on ?rst quarter 2014 developments related to the foreign exchange process in Venezuela, we changed the
exchange rate used to remeasure our Venezuelan subsidiary’s net monetary assets in U.S. Dollar. The of?cial exchange
rate was increasingly reserved only for purchases of those goods and services deemed “essential” by the Venezuelan
government. As of March 31, 2014, we began to use the exchange rate determined by an auction process conducted by
Venezuela’s Supplementary Foreign Currency Administration System, referred to as the SICAD I rate.
In late March 2014, the Venezuelan government introduced an additional auction-based foreign exchange system,
referred to as SICAD II rate. Prior to the new exchange system described below, the SICAD II rate had ranged from
49 to 52.1VEF to U.S. Dollar in the period since its introduction. The SICAD II rate was expected to be used primarily
for imports and has been limited to amounts of VEF that could be exchanged into other currencies, such as the
U.S. Dollar. As a result of the March 2014 exchange agreement between the Central Bank of Venezuela and the
Venezuelan government and the limitations of the SICAD II rate, we believed at December 31, 2014, that any future
remittances of dividends would be transacted at the SICAD I rate. As a result, we determined that the SICAD I rate is
the most appropriate rate to use as of December 31, 2014.
As of December 31, 2014 and 2013, the net monetary assets of FCA Venezuela LLC, formerly known as Chrysler de
Venezuela LLC, or FCA Venezuela, denominated in VEF were 783 million (€54 million) and 2,221 million
(€255 million), respectively, which included cash and cash equivalents denominated in VEF of 1,785 million
(€123 million) and 2,347 million (€270 million), respectively. Based on our net monetary assets at December 31, 2014,
a charge of approximately €5 million would result for every 10.0 percent devaluation of the VEF.
2014
|
ANNUAL REPORT 71
On February 10, 2015, the Venezuelan government introduced a new market-based exchange system, referred to
as Marginal Currency System, or the SIMADI rate, with certain speci?ed limitations on its usage by individuals and
legal entities. On February 12, 2015, the SIMADI rate began trading at 170 VEF to U.S. Dollar and is expected to be
used by individuals and legal entities in the private sector. We are currently evaluating our utilization of the SIMADI rate
since this new exchange system is limited by certain government mandated restrictions. In addition, the Venezuelan
government announced that the SICAD I and SICAD II auction-based exchange systems would be merged into a
single exchange system, with a rate starting at 12.0 VEF to U.S. Dollar. We continue to monitor the appropriate rate
to be used for remeasuring our net monetary assets. Additionally, we will continue to monitor the currency exchange
regulations and other factors to assess whether our ability to control and bene?t from our Venezuelan operations has
been adversely affected.
2013 compared to 2012
LATAM EBIT for the year ended December 31, 2013 was €492 million, a decrease of €533 million, or 52.0 percent
(44.5 percent on a constant currency basis), from €1,025 million for December 31, 2012.
The decrease in LATAM EBIT was primarily attributable to the combination of (i) an increase in industrial costs of
€257 million related to increased labor costs and price increases for certain purchases, as the weakening of the
Brazilian Real affected the prices of foreign currency denominated purchases, (ii) unfavorable volume/mix impact
of €111 million, driven by the combination of the previously described 3.0 percent decrease in shipments, and an
increase in the proportion of vehicles produced in Argentina, for which we have higher manufacturing and logistic
costs than in Brazil, (iii) a €96 million increase in other unusual expenses, (iv) the impact of unfavorable foreign
currency translation of €77 million related to the previously described weakening of the Brazilian Real against the Euro
and (v) an increase in selling, general and administrative costs of €37 million mainly due to new advertising campaigns
in Brazil, which were partially offset by favorable pricing impact of €64 million, supported by new product launches.
In particular, the most signi?cant components of other unusual expenses included €75 million attributable to the
streamlining of architectures and models associated to the refocused product strategy and €43 million relating to the
loss recognized on translation of certain monetary liabilities from VEF into U.S. Dollar, on the devaluation of the of?cial
exchange rate of the VEF. For further details see Notes 8 and 21 to the Consolidated ?nancial statements included
elsewhere in this report.
APAC
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are in
thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 6,259 100.0% 4,668 100.0% 3,173 100.0% 1,591 34.1% 1,495 47.1%
EBIT 537 8.6% 335 7.2% 274 8.6% 202 60.3% 61 22.3%
Shipments 220 n.m 163 n.m. 103 n.m. 57 35.0% 60 58.3%
Net revenues
2014 compared to 2013
APAC net revenues for the year ended December 31, 2014 were €6.3 billion, an increase of €1.6 billion,
or 34.1 percent (34.6 percent on a constant currency basis), from €4.7 billion for the year ended December 31, 2013.
The total increase of €1.6 billion was primarily attributable to an increase in shipments and improved vehicle mix.
The 35.0 percent increase in shipments from 163 thousand units for the year ended December 31, 2013, to
220 thousand units for the year ended December 31, 2014, was largely supported by shipments to China and
Australia, and in particular, driven by Jeep Grand Cherokee, Dodge Journey and the newly-launched Jeep Cherokee.
72 2014
|
ANNUAL REPORT
Operating Results
2013 compared to 2012
APAC net revenues for the year ended December 31, 2013 were €4.7 billion, an increase of €1.5 billion,
or 47.1 percent (54.2 percent on a constant currency basis), from €3.2 billion for the year ended December 31, 2012.
The total increase of €1.5 billion was mainly attributable to an increase in shipments of €1.8 billion, which was partially
offset by the impact of unfavorable foreign currency translation of €0.2 billion.
The 58.3 percent increase in vehicle shipments from 103 thousand units for the year ended December 31, 2012 to
163 thousand units for the year ended December 31, 2013 was primarily driven by our performance in China and
Australia. In particular, our performance in China was driven by efforts to grow our dealer network, the reintroduction
of the Dodge Journey and our continued strong performance of the Jeep brand, as a result of which our China
market share increased from 0.4 percent in 2012 to 0.8 percent in 2013, while our growth in Australia was mainly
driven by the Fiat and Alfa Romeo brands, resulting in an increase in market share from 2.1 percent for the year
ended December 31, 2012 to 3.1 percent for the year ended December 31, 2013. The increase in shipments also
resulted in an increase in service parts, accessories and service contracts and other revenues, supported our market
share growth in APAC markets. The impact of unfavorable foreign currency translation was primarily attributable to
?uctuations of the U.S. Dollar and to a lesser extent, the Japanese Yen against the Euro. In particular, the FCA US
portion of APAC segment net revenues were translated from FCA US’s functional currency which is the U.S. Dollar
into the Euro, and not from the individual entity functional currency into Euro.
EBIT
2014 compared to 2013
APAC EBIT for the year ended December 31, 2014 was €537 million, an increase of €202 million, or 60.3 percent
(unchanged on a constant currency basis) from €335 million for the year ended December 31, 2013.
The increase in APAC EBIT was primarily attributable to (i) a positive volume/mix impact of €494 million as a result of
the increase in shipments described above partially offset by (ii) an increase in selling, general and administrative costs
of €111 million to support the growth of the APAC operations, (iii) an increase in industrial costs of €54 million due to
higher research and development costs, increased ?xed manufacturing costs for new product initiatives and higher
production volumes, (iv) unfavorable pricing of €142 million due to the increasingly competitive trading environment,
particularly in China.
2013 compared to 2012
APAC EBIT for the year ended December 31, 2013 was €335 million, an increase of €61 million, or 22.3 percent
(27.7 percent on a constant currency basis) from €274 million for the year ended December 31, 2012.
The increase in APAC EBIT was attributable to the combined effect of (i) the positive volume and mix impact of
€423 million, driven by the efforts to grow our presence in the APAC markets and the previously described 2013
launches of new vehicles, which was partially offset by (ii) an increase in industrial costs of €106 million in higher
research and development costs and ?xed manufacturing costs, attributable to the growth in our business,
(iii) unfavorable pricing effects of €79 million due to the increasingly competitive environment, particularly in China,
(iv) an increase in selling, general and administrative costs of €72 million driven by the advertising and promotional
expenses incurred in relation to the 2013 launches, including the Dodge Journey and Jeep Compass/Patriot in China
and the new Fiat Punto and Fiat Panda in Australia (v) a €26 million decrease in the results of investments, and (vi)
the impact of unfavorable foreign currency translation of €15 million. The decrease in result from investments was
largely due to the €23 million increase in the loss recorded in the Chinese joint venture GAC FIAT Automobiles Co,
attributable to the costs incurred in relation to the future launch of the Fiat Viaggio.
2014
|
ANNUAL REPORT 73
EMEA
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are
in thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 18,020 100.0% 17,335 100.0% 17,717 100.0% 685 4.0% (382) (2.2)%
EBIT (109) (0.6)% (506) (2.9)% (725) (4.1)% 397 78.5% 219 30.2%
Shipments 1,024 n.m 979 n.m. 1,012 n.m. 45 4.6% (33) (3.3)%
Net revenues
2014 compared to 2013
EMEA net revenues for the year ended December 31, 2014 were €18.0 billion, an increase of €0.7 billion, or 4.0
percent, from €17.3 billion for the year ended December 31, 2013.
The €0.7 billion increase in EMEA net revenues was mainly attributable to the combination of (i) a €0.6 billion increase
in vehicle shipments, (ii) a €0.3 billion favorable sales mix impact primarily driven by Jeep brand and LCV shipments,
partially offset by (iii) unfavorable pricing of €0.1 billion due to the increasingly competitive trading environment
particularly related to passenger cars in Europe and (iv) €0.1 billion lower components sales.
In particular, the 4.6 percent increase in vehicle shipments, from 979 thousand units for the year ended December 31,
2013, to 1,024 thousand units for the year ended December 31, 2014, was largely driven by the Fiat 500 family, the
Jeep brand (the all-new Renegade and Cherokee) and the new Fiat Ducato.
2013 compared to 2012
EMEA net revenues for the year ended December 31, 2013 were €17.3 billion, a decrease of €0.4 billion,
or 2.2 percent (1.4 percent on a constant currency basis), from €17.7 billion for the year ended December 31, 2012.
The total decrease of €0.4 billion was attributable to the combined effects of (i) a decrease in vehicle shipments of
€0.4 billion, (ii) unfavorable vehicle pricing of €0.2 billion, (iii) a decrease in service parts, accessories and service
contracts and other revenues of €0.1 billion and (iv) the impact of unfavorable foreign currency translation of
€0.1 billion mainly due to ?uctuations of the U.S. Dollar and the British Pound Sterling which were partially offset by
(v) the effects of a change in scope of consolidation, arising from obtaining control of VM Motori S.p.A. in 2013, a
diesel engine manufacturing company which impacted net revenues positively by €0.2 billion and (vi) positive vehicle
mix of €0.1 billion.
The 3.3 percent decrease in vehicle shipments, from 1,012 thousand units in 2012 to 979 thousand units in 2013,
impacted net revenues by €0.4 billion. The decrease in vehicle shipments was in part due to the persistent weak
economic conditions in Europe (EU27 + EFTA), which resulted in a 1.8 percent passenger car industry contraction,
and in part due to a decrease in our passenger car market share from 6.3 percent in 2012 to 6.0 percent in 2013,
while LCV market share decreased from 11.7 percent for 2012 to 11.6 percent for 2013, as a result of the increasing
competition in the industry. These conditions led to a decrease in service parts, accessories and service contracts and
other revenues of €0.1 billion, while the highly competitive environment and resulting price pressure impacted pricing
unfavorably by €0.2 billion. In July 2013, the Group’s option to acquire the remaining 50.0 percent stake in VM Motori
S.p.A. became exercisable, which resulted in consolidation on a line-by-line basis. This resulted in a positive impact
to net revenues of €0.2 billion. The shift in sales mix towards newly launched and content enriched vehicles, for which
sales prices were adjusted, such as the Fiat 500L and the new Fiat Panda over other vehicles, such as the existing Fiat
Panda resulted in a positive vehicle mix impact of €0.1 billion.
74 2014
|
ANNUAL REPORT
Operating Results
EBIT
2014 compared to 2013
EMEA EBIT loss for the year ended December 31, 2014 was €109 million, an improvement of €397 million, or
78.5 percent, from an EBIT loss of €506 million for the year ended December 31, 2013.
The decrease in EMEA EBIT loss was primarily attributable to the combination of (i) a €199 million decrease in other
unusual expenses, (ii) a favorable volume/mix impact of €174 million driven by the previously described increase in
shipments and improved vehicle mix, (iii) a decrease in net industrial costs of €166 million mainly driven by industrial
and purchasing ef?ciencies, which were partially offset by (iv) unfavorable pricing of €85 million as a result of the
competitive trading environment and resulting price pressure and (v) an increase in selling, general and administrative
costs of €67 million mainly related to advertising expenses primarily to support the growth of Jeep brand and the Jeep
Renegade launch.
In 2013, other unusual expenses were €195 million which included the write-off of previously capitalized research and
development related to new model development for Alfa Romeo products which were switched to a new platform
considered more appropriate for the brand.
2013 compared to 2012
EMEA EBIT for the year ended December 31, 2013 was a loss of €506 million, an improvement of €219 million, or
30.2 percent (31.9 percent on a constant currency basis), from a loss of €725 million for the year ended December
31, 2012.
The decrease in EMEA EBIT loss was attributable to the combined effect of (i) a decrease in selling, general and
administrative costs of €199 million as a result of the cost control measures implemented in response to the European
market weakness, including efforts to improve the focus of advertising initiatives, (ii) a decrease in industrial costs of
€139 million attributable to industrial ef?ciencies driven by the WCM program and purchasing savings implemented
and (iii) a positive volume and mix impact of €77 million, primarily driven by the Fiat 500 family of vehicles, the effects of
which were partially offset by (iv) unfavorable net pricing effects of €172 million, attributable to increased competitive
pressure, particularly in the ?rst half of 2013, and (v) a decrease in the results of investments of €16 million.
Ferrari
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are in
thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 2,762 100.0% 2,335 100.0% 2,225 100.0% 427 18.3% 110 4.9%
EBIT 389 14.1% 364 15.6% 335 15.1% 25 6.9% 29 8.7%
Shipments 7 n.m. 7 n.m. 7 n.m. 0 0 0 0
Net Revenues
2014 compared to 2013
For the year ended December 31, 2014, Ferrari net revenues were €2.8 billion, an increase of €0.4 billion, or 18.3
percent, from €2.3 billion for the year ended December 31, 2013. The increase was primarily attributable to the
increased volumes and improved vehicle mix driven by the contribution of the LaFerrari model.
2013 compared to 2012
Ferrari net revenues for the year ended December 31, 2013 were €2.3 billion, an increase of €0.1 billion,
or 4.9 percent, from €2.2 billion for the year ended December 31, 2012. The total increase of €0.1 billion was primarily
attributable to the launch of the production and sale of engines to Maserati for use in their new vehicles in 2013.
2014
|
ANNUAL REPORT 75
EBIT
2014 compared to 2013
Ferrari EBIT for the year ended December 31, 2014, was €389 million, an increase of €25 million, or 6.9 percent
from €364 million for the year ended December 31, 2013. For 2014 EBIT includes an unusual charge of €15 million
in compensation cost related to the resignation of the former chairman. Increase in EBIT was attributable to higher
volumes and improved sales mix largely driven by the contribution of the LaFerrari model.
2013 compared to 2012
Ferrari EBIT for 2013 was €364 million, an increase of €29 million, or 8.7 percent, from €335 million for 2012,
attributable to favorable vehicle mix and an increase in the contribution from licensing activities and revenues from the
personalization of vehicles.
Maserati
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages
and shipments which are in
thousands of units) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Net revenues 2,767 100.0% 1,659 100.0% 755 100.0% 1,108 66.8% 904 119.7%
EBIT 275 9.9% 106 6.4% 57 7.5% 169 159.4% 49 86.0%
Shipments 36 n.m. 15 n.m. 6 n.m. 21 140.0% 9 150.0%
Net revenues
2014 compared to 2013
Maserati net revenues were €2.8 billion, an increase of €1.1 billion, or 66.8 percent from €1.7 billion for the year
ended December 31, 2013, primarily driven by an increase in vehicle shipments from 15 thousand units for the year
ended December 31, 2013, to 36 thousand units for the year ended December 31, 2014.
2013 compared to 2012
Maserati net revenues for 2013 were €1.7 billion, an increase of €0.9 billion, from €0.8 billion for 2012. The increase
of €0.9 billion was largely attributable to the increase in vehicle shipments driven primarily by the 2013 launches of the
new Quattroporte model in March and the new Ghibli in October.
EBIT
2014 compared to 2013
Maserati EBIT for the year ended December 31, 2014 was €275 million, an increase of €169 million, or 159.4
percent, from €106 million for the year ended December 31, 2013. The increase was primarily driven by the growth
in shipments, as previously discussed. In 2013, EBIT included €65 million in unusual charges related to the write-
down of previously capitalized development costs following the decision to switch a future model to a more technically
advanced platform.
2013 compared to 2012
Maserati EBIT for 2013 was €106 million, an increase of €49 million, or 86.0 percent, from €57 million for 2012,
attributable to the combined effect of strong volume growth driven by the previously described 2013 product
launches, which was partially offset by an increase in other unusual expenses of €65 million related to the write-down
of capitalized development costs related to a new model, which will be developed on a more technically advanced
platform considered more appropriate for the Maserati brand.
76 2014
|
ANNUAL REPORT
Operating Results
Components
For the Years Ended December 31, Increase/(decrease)
(€ million, except percentages) 2014
% of
segment
net
revenues 2013
% of
segment
net
revenues 2012
% of
segment
net
revenues 2014 vs. 2013 2013 vs. 2012
Magneti Marelli
Net revenues 6,500 5,988 5,828 512 8.6% 160 2.7%
EBIT 204 169 131 35 20.7% 38 29.0%
Teksid
Net revenues 639 688 780 (49) (7.1)% (92) (11.8)%
EBIT (4) (70) 4 66 (94.3)% (74) n.m.
Comau
Net revenues 1,550 1,463 1,482 87 5.9% (19) (1.3)%
EBIT 60 47 30 13 27.7% 17 56.7%
Intrasegment eliminations
Net revenues (70) (59) (60) (11) 18.6% 1 (1.7)%
Components
Net revenues 8,619 100.0% 8,080 100.0% 8,030 100.0% 539 6.7% 50 0.6%
EBIT 260 3.0% 146 1.8% 165 2.1% 114 78.1% (19) (11.5)%
Net revenues
2014 compared to 2013
Components net revenues for the year ended December 31, 2014, revenues were €8.6 billion, an increase of
€0.5 billion, or 6.7 percent (9.3 percent on a constant currency basis), from €8.1 billion for the year ended December
31, 2013.
Magneti Marelli
Magneti Marelli net revenues for the year ended December 31, 2014, were €6.5 billion, an increase of €0.5 billion, or
8.6 percent, from €6.0 billion for the year ended December 31, 2013 primarily re?ecting positive performance in North
America, China and Europe, partially offset by performance in Brazil, which was impacted by the weakening of the
Brazilian Real against the Euro.
Teksid
Teksid net revenues for the year ended December 31, 2014 were €639 million, a decrease of €49 million, or
7.1 percent, from €688 million for the year ended December 31, 2013, primarily attributable to a 4.0 percent decrease
in cast iron business volumes, which were partially offset by a 24.0 percent increase in aluminum business volumes.
Comau
Comau net revenues for the year ended December 31, 2014 were €1.6 billion, an increase of €0.1 billion,
or 5.9 percent, from €1.5 billion for the year ended December 31, 2013, mainly attributable to the body welding
business.
2014
|
ANNUAL REPORT 77
2013 compared to 2012
Components net revenues for the year ended December 31, 2013 were €8.1 billion, an increase of €0.1 billion,
or 0.6 percent (4.4 percent on a constant currency basis), from €8.0 billion for the year ended December 2012.
Magneti Marelli
Magneti Marelli net revenues for 2013 were €6.0 billion, an increase of €0.2 billion, or 2.7 percent, from €5.8 billion
for 2012, primarily driven by the performance of the automotive lighting and to a lesser extent, the electronics business
units. See Overview—Components Segment—Magneti Marelli for a description of the Magneti Marelli business
lines. In particular, the automotive lighting net revenues increased by 11.6 percent driven by large orders from Asian
and North American OEM clients, and the effect of the full-year contribution of lighting solutions launched in the
second half of 2012, while electronics net revenues increased by 7.0 percent, driven by the trend of increasingly
technologically advanced vehicle components.
Teksid
Teksid net revenues for the year ended December 31, 2013 were €0.7 billion, a decrease of €0.1 billion,
or 11.8 percent, from €0.8 billion for 2012, attributable to a €0.1 billion decrease in net revenues from the cast iron
business, attributable to a decrease in iron prices and a decrease in cast iron volumes sold.
Comau
Comau net revenues for both years ended December 31, 2013 and December 31, 2012 were €1.5 billion, attributable
to the combined effects of (i) an increase in body welding revenues supported by large orders from European and
North American customers, which was offset by (ii) decreased powertrain revenues. See Overview—Components
Segment—Comau for a description of the Comau business lines.
EBIT
2014 compared to 2013
Components EBIT for the year ended December 31, 2014 was €260 million, an increase of €114 million,
or 78.1 percent, from €146 million for the year ended December 31, 2013.
Magneti Marelli
Magneti Marelli EBIT for the year ended December 31, 2014 EBIT was €204 million, an increase of €35 million,
20.7 percent, from €169 million for the year ended December 31, 2013. EBIT includes unusual charges of €20 million
for 2014 (unusual income of €1 million for 2013). Excluding these unusual charges, EBIT increased by €56 million,
mainly re?ecting higher volumes and the bene?t of cost containment actions and ef?ciencies.
Teksid
Teksid EBIT loss for the year ended December 31, 2014 was €4 million, a decrease of €66 million, from an EBIT loss
of €70 million for the year ended December 31, 2013. In 2013, EBIT included unusual charges of €60 million, mainly
related to impairment of assets in the Cast Iron business unit.
Comau
Comau EBIT for the year ended December 31, 2014 was €60 million, an increase of €13 million, or 27.7 percent,
from €47 million for the year ended December 31, 2013, primarily due to volume in body welding operations and an
improved mix.
78 2014
|
ANNUAL REPORT
Operating Results
2013 compared to 2012
Components EBIT for the year ended December 31, 2013 was €146 million, a decrease of €19 million,
or 11.5 percent (6.7 percent on a constant currency basis), from €165 million for the year ended December 31, 2012.
Magneti Marelli
Magneti Marelli EBIT for the year ended December 31, 2013 was €169 million, an increase of €38 million, or 29.0
percent, from €131 million for the year ended December 31, 2012, attributable to the previously described increase in
net revenues, which was partially offset by higher costs incurred in relation to product launches in North America, and
the impact of unusual charges recognized in 2012.
Teksid
Teksid EBIT for the year ended December 31, 2013 was a loss of €70 million, compared to a gain of €4 million for
the year ended December 31, 2012, attributable to the combined effects of volume decreases from the cast iron
business, and €60 million other unusual expenses, related to asset impairments of the cast iron business.
Comau
Comau EBIT for the year ended December 31, 2013 was €47 million, an increase of €17 million, or 56.7 percent,
from €30 million for the year ended December 31, 2012, primarily attributable to the body welding operations.
Liquidity and Capital Resources
Liquidity Overview
We require signi?cant liquidity in order to meet our obligations and fund our business. Short-term liquidity is required
to purchase raw materials, parts and components for vehicle production, and to fund selling, administrative, research
and development, and other expenses. In addition to our general working capital and operational needs, we expect
to use signi?cant amounts of cash for the following purposes: (i) capital expenditures to support our existing and
future products; (ii) principal and interest payments under our ?nancial obligations and (iii) pension and employee
bene?t payments. We make capital investments in the regions in which we operate primarily related to initiatives to
introduce new products, enhance manufacturing ef?ciency, improve capacity, and for maintenance and environmental
compliance. Our capital expenditures in 2015 are expected to be approximately between €8.5 and €9.0 billion, which
we plan to fund primarily with cash generated from our operating activities, as well as with credit lines provided to
certain of our Group entities.
Our business and results of operations depend on our ability to achieve certain minimum vehicle sales volumes. As
is typical for an automotive manufacturer, we have signi?cant ?xed costs, and therefore, changes in our vehicle sales
volume can have a signi?cant effect on pro?tability and liquidity. We generally receive payment for sales of vehicles to
dealers and distributors, shortly after shipment, whereas there is a lag between the time we receive parts and materials
from our suppliers and the time we are required to pay for them. Therefore, during periods of increasing vehicle sales,
there is generally a corresponding positive impact on our cash ?ow and liquidity. Conversely, during periods in which
vehicle sales decline, there is generally a corresponding negative impact on our cash ?ow and liquidity. Thus, delays
in shipments of vehicles, including delays in shipments in order to address quality issues, tend to negatively affect our
cash ?ow and liquidity. In addition, the timing of our collections of receivables for export sales of vehicles, ?eet sales
and part sales tend to be longer due to different payment terms. Although we regularly enter into factoring transactions
for such receivables in certain countries, in order to anticipate collections and transfer relevant risks to the factor, a
change in volumes of such sales may cause ?uctuations in our working capital. The increased internationalization of
our product portfolio may also affect our working capital requirements as there may be an increased requirement to
ship vehicles to countries different from where they are produced. Finally, working capital can be affected by the trend
and seasonality of sales under vehicle buy-back programs.
2014
|
ANNUAL REPORT 79
Management believes that the funds currently available, in addition to those funds that will be generated from
operating and ?nancing activities, will enable the Group to meet its obligations and fund its businesses including
funding planned investments, working capital needs and ful?lling its obligations to repay its debts in the ordinary
course of business.
Liquidity needs are met primarily through cash generated from operations, including the sale of vehicles, service and
parts to dealers, distributors and other consumers worldwide.
The operating cash management, main funding operations and liquidity investment of the Group, excluding FCA
US, are centrally coordinated by dedicated treasury companies with the objective of ensuring effective and ef?cient
management of the Group’s funds. The companies raise capital in the ?nancial markets through various funding
sources. See Overview—Industry Overview—Financial Services.
FCA US continues to manage its liquidity independently from the rest of the Group. Intercompany ?nancing from FCA
US to other Group entities is not restricted other than through the application of covenants requiring that transactions
with related parties be conducted at arm’s length terms or be approved by a majority of the “disinterested” members
of the Board of Directors of FCA US. In addition, certain of FCA US’s ?nancing agreements place restrictions on the
distributions which it is permitted to make. In particular, dividend distributions, other than certain exceptions including
certain permitted distributions and distributions with respect to taxes, are generally limited to an amount not to exceed
50.0 percent of cumulative consolidated net income (as de?ned in the agreements) from January 1, 2012.
FCA has not provided any guarantee, commitment or similar obligation in relation to any of FCA US’s ?nancial
indebtedness, nor has it assumed any kind of obligation or commitment to fund FCA US. However, certain bonds
issued by FCA and its subsidiaries (other than FCA US and its subsidiaries) include covenants which may be affected
by circumstances related to FCA US, in particular there are cross-default clauses which may accelerate repayments in
the event that FCA US fails to pay certain of its debt obligations.
At December 31, 2014 the treasury companies of the Group, excluding FCA US and its subsidiaries, had access to
approximately €3.3 billion of medium/long term committed credit lines expiring beyond 12 months (€3.2 billion at
December 31, 2013), of which €2.1 billion relate to the three year syndicated revolving credit line due in July 2016
which was undrawn at December 31, 2014 and December 31, 2013.
Additionally, the operating entities of the Group, excluding FCA US and its subsidiaries, have access to dedicated
credit facilities in order to fund investments and working capital requirements. In particular the Brazilian companies
have committed credit lines available, mainly in relation to the set-up of our new plant in the State of Pernambuco,
Brazil, with residual maturities after twelve months, to fund scheduled investments, of which approximately €0.9 billion
was undrawn at December 31, 2014 (approximately €1.8 billion was undrawn at December 31, 2013).
FCA US has access to a revolving credit facility of U.S. $1.3 billion (€1.1 billion), maturing in May 2016, or the
Revolving Credit Facility, which was also undrawn at December 31, 2014 and December 31, 2013. See —Total
Available Liquidity below.
The following pages discuss in more detail the principal covenants relating to the Group’s revolving credit facilities and
certain other ?nancing agreements. At December 31, 2014 and at December 31, 2013, the Group was in compliance
with all covenants under its ?nancing agreements.
Long-term liquidity requirements may involve some level of debt re?nancing as outstanding debt becomes due or
we are required to make amortization or other principal payments. Although we believe that our current level of total
available liquidity is suf?cient to meet our short-term and long-term liquidity requirements, we regularly evaluate
opportunities to improve our liquidity position in order to enhance ?nancial ?exibility and to achieve and maintain a
liquidity and capital position consistent with that of our principal competitors.
However, any actual or perceived limitations of our liquidity may limit the ability or willingness of counterparties,
including dealers, consumers, suppliers, lenders and ?nancial service providers, to do business with us, or require us
to restrict additional amounts of cash to provide collateral security for our obligations. Our liquidity levels are subject to
a number of risks and uncertainties, including those described in the Risk Factors section.
80 2014
|
ANNUAL REPORT
Operating Results
Total Available Liquidity
At December 31, 2014, our total available liquidity was €26.2 billion (€22.7 billion at December 31, 2013), including
€3.2 billion available under undrawn committed credit lines, primarily related to the €2.1 billion three year syndicated
revolving credit line and the U.S.$1.3 billion (approximately €1.1 billion) Revolving Credit Facility of FCA US. The terms of
the Revolving Credit Facility require FCA US to maintain a minimum liquidity of U.S.$3.0 billion (€2.5 billion), which include
any undrawn amounts under the Revolving Credit Facility. Total available liquidity includes cash and cash equivalents and
current securities. Total available liquidity is subject to intra-month, foreign exchange and seasonal ?uctuations resulting
from business and collection-payment cycles as well as to changes in foreign exchange conversion rates.
The following table summarizes our total available liquidity:
As of December 31,
(€ million) 2014 2013 2012
Cash, cash equivalent and current securities
(1)
23,050 19,702 17,922
Undrawn committed credit lines
(2)
3,171 3,043 2,935
Total available liquidity
(3)
26,221 22,745 20,857
(1)
Current securities comprise short term or marketable securities which represent temporary investments but which do not satisfy all the
requirements to be classified as cash equivalents as they may not be able to be readily converted into cash or they are subject to significant
risk of change in value (even if they are short-term in nature or marketable).
(2)
Excludes the undrawn €0.9 billion medium/long-term dedicated credit lines available to fund scheduled investments as of December 31, 2014
(€1.8 billion was undrawn as of December 31, 2013 and €1.3 billion was undrawn as of December 31, 2012).
(3)
The majority of our liquidity is available to our treasury operations in Europe, U.S. (subject to the previously discussed restrictions on FCA US
distributions) and Brazil; however, liquidity is also available to certain subsidiaries which operate in other areas. Cash held in such countries
may be subject to restrictions on transfer depending on the foreign jurisdictions in which these subsidiaries operate. Based on our review of
such transfer restrictions in the countries in which we operate and maintain material cash balances, we do not believe such transfer restrictions
have an adverse impact on the Group’s ability to meet its liquidity requirements at the dates represented above.
Our liquidity is principally denominated in U.S. Dollar and in Euro. Out of the total €23.0 billion of cash, cash
equivalents and current securities available at December 31, 2014 (€19.7 billion at December 31, 2013, €17.9 billion
at December 31, 2012), €10.6 billion, or 46.0 percent were denominated in U.S. Dollar (€8.3 billion, or 42.1 percent,
at December 31, 2013) and €6.2 billion, or 27.0 percent, were denominated in Euro (€6.1 billion, or 31.0 percent,
at December 31, 2013). Liquidity available in Brazil and denominated in Brazilian Reals accounted for €1.6 billion or
7.0 percent at December 31, 2014 (€1.5 billion, or 7.6 percent, at December 31, 2013), with the remainder being
distributed in various countries and denominated in the relevant local currencies.
The increase in total available liquidity from December 31, 2013 to December 31, 2014 primarily re?ects a €3,385
million increase in cash and cash equivalents. Refer to Cash Flows, below for additional information regarding change
in cash and cash equivalents.
Acquisition of the Remaining Equity Interest in FCA US
On January 1, 2014 we announced an agreement with the VEBA Trust, under which our wholly owned subsidiary,
FCA North America Holdings LLC (“FCA NA”, formerly known as Fiat North America LLC), would acquire the
remaining 41.5 percent ownership interest in FCA US held by the VEBA Trust for total consideration of U.S.$3,650
million (equivalent to €2,691 million). The transaction closed on January 21, 2014. The consideration for the
acquisition consisted of:
a special distribution paid by FCA US to its members on January 21, 2014 of U.S.$1,900 million (equivalent to
€1,404 million) wherein FCA NA directed its portion of the special distribution to the VEBA Trust as part of the
purchase consideration which served to fund a portion of the transaction; and
a cash payment by FCA NA to the VEBA Trust of U.S.$1,750 million (equivalent to €1.3 billion) on January 21,
2014.
The distribution from FCA US was funded from FCA US’s available cash on hand. The payment by FCA NA was
funded by Fiat’s available cash on hand.
2014
|
ANNUAL REPORT 81
FCA US New Debt Issuances and Prepayment of VEBA Trust Note
In February 2014, FCA US prepaid all amounts outstanding including accrued and unpaid interest of approximately
U.S.$5.0 billion (€3.6 billion) related to its ?nancial liability to the VEBA Trust, or the VEBA Trust Note. Such
prepayment was ?nanced by FCA US as follows:
proceeds from new senior credit facilities – a U.S.$250 million (€181 million) incremental term loan under FCA US’s
existing tranche B term loan facility that matures on May 24, 2017 and a new U.S.$1,750 million (€1.3 billion) term
loan, issued under a new term loan credit facility, that matures on December 31, 2018;
proceeds from secured senior notes due 2019 – issuance of U.S.$1,375 million (€1.0 billion) aggregate principal
amount of 8.0 percent secured senior notes due June 15, 2019, at an issue price of 108.25 percent of the
aggregate principal amount, which were incremental to the secured senior notes due 2019 that were issued in May
2011, (together, the 2019 Notes); and
proceeds from secured senior notes due 2021 – issuance of U.S.$1,380 million (€1.0 billion) aggregate principal
amount of 8.25 percent secured senior notes due June 15, 2021 at an issue price of 110.5 percent of the
aggregate principal amount, which were incremental to the secured senior notes due 2021 that were issued in May
2011, (together, the 2021 Notes).
The 2019 Notes and the 2021 Notes are collectively referred to as the Secured Senior Notes.
Cash Flows
Year Ended December 31, 2014 compared to Years Ended December 31, 2013 and 2012
The following table summarizes the cash ?ows from operating, investing and ?nancing activities for each of the years
ended December 31, 2014, 2013 and 2012. For a complete discussion of our cash ?ows, see our Consolidated
statement of cash ?ows included in our Consolidated ?nancial statements included elsewhere in this report.
(€ million) 2014 2013 2012
Cash and cash equivalents at beginning of the period 19,455 17,666 17,526
Cash ?ows from operating activities during the year 8,169 7,618 6,492
Cash ?ows used in investing activities (8,140) (8,054) (7,542)
Cash ?ows from ?nancing activities 2,137 3,136 1,610
Translation exchange differences 1,219 (911) (420)
Total change in cash and cash equivalents 3,385 1,789 140
Cash and cash equivalents at end of the period 22,840 19,455 17,666
Operating Activities — Year Ended December 31, 2014
For the year ended December 31, 2014, our net cash from operating activities was €8,169 million and was primarily
the result of:
(i) net pro?t of €632 million adjusted to add back (a) €4,897 million for depreciation and amortization expense and
(b) other non-cash items of €352 million, which primarily include (i) €381 million related to the non-cash portion
of the expense recognized in connection with the execution of the MOU Agreement entered into by the UAW and
FCA US on January 21, 2014 (ii) €98 million remeasurement charge recognized as a result of the Group’s change
in the exchange rate used to remeasure its Venezuelan subsidiary’s net monetary assets in U.S. Dollar (reported,
for the effect on cash and cash equivalents, in the “Translation exchange differences”) which were partially offset
by (iii) the non-taxable gain of €223 million on the remeasurement at fair value of the previously exercised options
on approximately 10 percent of FCA US’s membership interests in connection with the acquisition of the remaining
41.5 percent interest in FCA US not previously owned;
82 2014
|
ANNUAL REPORT
Operating Results
(ii) a net increase of €1,239 million in provisions, mainly related to a €1,023 million increase in Other provisions
following net adjustments to warranties for NAFTA and higher accrued sales incentives, primarily due to an
increase in retail incentives as well as an increase in dealer stock levels to support increased sales volumes in
NAFTA and a €216 million increase in employees bene?ts mainly related to U.S. and Canada pension plan as
lower discount rates impact was not fully offset by higher return on assets;
(iii) positive impact of change in working capital of €965 million primarily driven by (a) €1,495 million increase in trade
payables, mainly related to increased production in EMEA and NAFTA as a result of increased consumer demand
for our vehicles (b) €123 million decrease in trade receivables in addition to (c) €21 million increase in net other
current assets and liabilities, which were partially offset by (d) €674 million increase in inventory (net of vehicles
sold under buy-back commitments), mainly related to increased ?nished vehicle and work in process levels at
December 31, 2014 compared to December 31, 2013, in part driven by higher production levels in late 2014 to
meet anticipated consumer demand in NAFTA, EMEA and Maserati.
(iv) €87 million dividends received from jointly-controlled entities.
The translation exchange differences in the period were positive for €1,219 million and mainly re?ect the increase in
Euro translated value of U.S. Dollar denominated cash and cash equivalent balances, due to the appreciation of the
U.S. Dollar, as compared to December 31, 2013.
Operating Activities — Year Ended December 31, 2013
For the year ended December 31, 2013, our net cash from operating activities was €7,618 million and was primarily
the result of:
(i) net pro?t of €1,951 million adjusted to add back (a) €4,635 million for depreciation and amortization expense and
(b) other non-cash items of €535 million, which primarily include €336 million of impairment losses on tangible and
intangible assets, €59 million loss related to the devaluation of the of?cial exchange rate of the VEF per U.S. Dollar,
€56 million write-off of the book value of the equity recapture rights resulting from the acquisition of the remaining
41.5 interest in FCA US that was not previously owned, €105 million of write-down in ?nancial assets from the
lending portfolio of our ?nancial services activities, partially offset by €74 million of the share of pro?t or loss of
equity method investees;
(ii) positive impact of change in working capital of €1,410 million primarily driven by (a) €1,328 million increase in
trade payables, mainly related to increased production in NAFTA as a result of increased consumer demand for
our vehicles, and increased production of Maserati, (b) €817 million in net other current assets and liabilities,
mainly related to increases in accrued expenses and deferred income as well as indirect taxes payables,
(c) €213 million decrease in trade receivables, principally due to the contraction of sales volumes in EMEA and
LATAM which were partially offset by (d) €948 million increase in inventory (net of vehicles sold under buy-back
commitments), mainly related to increased ?nished vehicle and work in process levels at December 31, 2013
compared to December 31, 2012, in part driven by higher production levels in late 2013 to meet anticipated
consumer demand in NAFTA, APAC and Maserati segment;
(iii) a net increase of €457 million in provisions, mainly related to accrued sales incentives due to increased dealer
stock levels at December 31, 2013 compared to December 31, 2012 to support increased sales volumes; which
were partially offset by a net reduction in the post-retirement bene?t reserve; and
(iv) €92 million dividends received from jointly-controlled entities.
These positive contributions were partially offset by:
(i) €1,578 million non-cash impact of deferred taxes mainly arising from the recognition of previously unrecognized
deferred tax assets relating to FCA US.
2014
|
ANNUAL REPORT 83
Operating Activities — Year Ended December 31, 2012
For the year ended December 31, 2012, our net cash from operating activities was €6,492 million and was primarily
the result of:
(i) net pro?t of €896 million, adjusted to add back (a) €4,201 million for depreciation and amortization expense,
(b) other non-cash items of €582 million, which primarily include €515 million following the retrospective
application of the IAS 19 - Employee Bene?ts revised from January 1, 2013, €106 million of impairment losses on
tangible and intangible assets and €50 million of write-down in ?nancial assets from the lending portfolio of our
?nancial services activities, partially offset by €74 million of the share of pro?t or loss of equity method investees,
and €31 million related to the non-cash gain on fair value measurement of equity swaps on Fiat and CNHI ordinary
shares and (c) net losses of €105 million on disposal of property, plant and equipment and intangible assets, and
investments primarily related to the termination of the joint venture Sevelnord Societè Anonyme for €91 million;
(ii) change in net working capital of €689 million primarily driven by (a) €506 million increase in trade payables,
mainly related to increased production in response to increased consumer demand of our vehicles especially
in NAFTA and APAC, partially offset by reduced production and sales levels in EMEA, (b) €961 million in other
current assets and liabilities, primarily due to increases in accrued expenses, deferred income and taxes which
were partially offset by (c) €572 million increase in inventory (net of vehicles sold under buy-back commitments),
primarily due to increased ?nished vehicle and work in process levels at December 31, 2012 versus December 31,
2011, driven by an increase in our vehicle inventory levels in order to support consumer demand in NAFTA and
APAC and (d) €206 million increase in trade receivables, primarily due to an increase in receivables from third
party international dealers and distributors due to increased sales at the end of 2012 as compared to 2011 due to
consumer demand;
(iii) a net increase of €63 million in provisions, mainly related to accrued sales incentives due to increased dealer stock
levels at December 31, 2012 compared to December 31, 2011 to support increased sales volumes which were
partially offset by a net reduction in the post-retirement bene?t reserve; and
(iv) €89 million dividends received from jointly-controlled entities.
Investing Activities — Year Ended December 31, 2014
For the year ended December 31, 2014, net cash used in investing activities was €8,140 million and was primarily the
result of:
(i) €8,121 million of capital expenditures, including €2,267 million of capitalized development costs, to support
investments in existing and future products. Capital expenditure primarily relates to the mass-market operations in
NAFTA and EMEA and the ongoing construction of the new plant at Pernambuco, Brazil, and
(ii) €137 million of a net increase in receivables from ?nancing activities, of which €104 million related to the increased
lending portfolio of the ?nancial services activities of the Group and €31 million related to increased ?nancial
receivables due from jointly controlled ?nancial services companies.
Investing Activities — Year Ended December 31, 2013
For the year ended December 31, 2013, our net cash used in investing activities was €8,054 million, and was primarily
the result of:
(i) €7,492 million of capital expenditures, including €2,042 million of capitalized development costs, to support
our investments in existing and future products. The capitalized development costs primarily include materials
costs and personnel related expenses relating to engineering, design and development focused on content
enhancement of existing vehicles, new models and powertrain programs in NAFTA and EMEA. The remaining
capital expenditure primarily relates to the car mass-market operations in NAFTA and EMEA and the ongoing
construction of the new LATAM plant at Pernambuco, Brazil;
84 2014
|
ANNUAL REPORT
Operating Results
(ii) €166 million related to equity investments, which principally includes €94 million of additional investment in RCS
MediaGroup S.p.A., €37 million of capital injection into the 50.0 percent joint venture related to GAC Fiat Chrysler
Automobiles Co. Ltd (previously known as GAC Fiat Automobiles Co. Ltd.); and
(iii) €459 million of net increase in receivables from ?nancing activities, primarily due to the increased lending portfolio
of the ?nancial services activities of the Group.
These cash out?ows were partially offset by:
(i) €59 million proceeds from the sale of tangible and intangible assets.
Investing Activities — Year Ended December 31, 2012
For the year ended December 31, 2012, our net cash used in investing activities was €7,542 million, and was primarily
the result of:
(i) €7,564 million of capital expenditures, including €2,138 million of capitalized development costs, to support our
investments in existing and future products;
partially offset by:
(ii) €118 million proceeds from the sale of tangible assets.
Financing Activities —Year Ended December 31, 2014
For the year ended December 31, 2014, net cash from ?nancing activities was €2,137 million and was primarily the
result of:
(i) net proceeds from the mandatory convertible securities issuance due 2016 of €2,245 million and the net proceeds
from the offering of 100 million common shares of €849 million;
(ii) proceeds from bond issuances for a total amount of €4,629 million which includes (a) approximately €2,556
million of notes issued as part of the Global Medium Term Notes Program (“GMTN Program”) and (b) €2,073
million (for a total face value of U.S.$2,755 million) of Secured Senior Notes issued by FCA US used to repay the
VEBA Trust Note;
(iii) proceeds from new medium-term borrowings for a total of €4,876 million, which include (a) the incremental term
loan entered into by FCA US of U.S.$250 million (€181 million) under its existing tranche B term loan facility and (b)
the new U.S.$1,750 million (€1.3 billion) tranche B term loan, issued under a new term loan credit facility entered
into by FCA US to facilitate the prepayment of the VEBA Trust Note, and new medium term borrowing in Brazil;
and
(iv) a positive net contribution of €548 million from the net change in other ?nancial payables and other ?nancial
assets/liabilities.
These positive items, were partially offset by:
(i) the cash payment to the VEBA Trust for the acquisition of the remaining 41.5 percent ownership interest in FCA
US held by the VEBA Trust equal to U.S.$3,650 million (€2,691 million) and U.S.$60 million (€45 million) of tax
distribution by FCA US to cover the VEBA Trust’s tax obligation. In particular the consideration for the acquisition
consisted of a special distribution paid by FCA US to its members on January 21, 2014 of U.S.$1,900 million
(€1,404 million) (FCA NA’s portion of the special distribution was assigned to the VEBA Trust as part of the
purchase consideration) which served to fund a portion of the transaction; and a cash payment by FCA NA to
the VEBA Trust of U.S.$1,750 million (€1.3 billion). The special distribution by FCA US and the cash payment by
FCA NA for an aggregate amount of €2,691 million is classi?ed as acquisition of non-controlling interest while the
tax distribution (€45 million) is classi?ed separately in the Statement of cash ?ows in the Consolidated ?nancial
statements included elsewhere in this report,
2014
|
ANNUAL REPORT 85
(ii) payment of medium-term borrowings for a total of €5,838 million, mainly related to the prepayment of all amounts
under the VEBA Trust Note amounting to approximately U.S.$5 billion (€3.6 billion), including accrued and unpaid
interest, and repayment of medium term borrowings primarily in Brazil;
(iii) the repayment on maturity of notes issued under the GMTN Program, for a total principal amount of
€2,150 million;
(iv) the net cash disbursement of €417 million for the exercise of cash exit rights in connection with the Merger.
Financing Activities —Year Ended December 31, 2013
For the year ended December 31, 2013, net cash from ?nancing activities was €3,136 million and was primarily the
result of:
(i) proceeds from bond issuances for a total amount of €2,866 million, relating to notes issued as part of the GMTN
Program;
(ii) the repayment on maturity of notes issued under the GMTN Program in 2006, for a total principal amount of €1
billion;
(iii) proceeds from new medium-term borrowings for a total of €3,188 million, which mainly include (a) new borrowings
by the Brazilian companies for €1,686 million, primarily in relation to investments in the country (b) €400 million
loan granted by the European Investment Bank in order to fund our investments and research and development
costs in Europe and (c) €595 million (U.S.$790 million) related to the amendments and re-pricings in 2013 of the
U.S.$3.0 billion tranche B term loan which matures May 24, 2017 and the revolving credit facility that matures in
May 2016. In particular, pursuant to such amendments and re-pricings in 2013, an amount of U.S.$790 million
of the outstanding principal balance of the U.S.$3.0 billion tranche B term loan which matures May 24, 2017 was
repaid. However, new and continuing lenders acquired the portion of such loan, therefore the principal balance
outstanding did not change. Refer to —FCA US Senior Credit Facilities, below, for additional information regarding
this transaction;
(iv) repayment of medium-term borrowings on their maturity for a total of €2,558 million, including the €595 million
(U.S.$790 million) relating to the amendments and re-pricings of the Senior Credit Facilities described above; and
(v) a positive net contribution of €677 million from the net change in other ?nancial payables and other ?nancial
assets/liabilities.
Financing Activities —Year Ended December 31, 2012
For the year ended December 31, 2012, net cash from ?nancing activities was €1,610 million and was primarily the
result of:
(i) proceeds from bond issuances for a total amount of €2,535 million, relating to notes issued as part of the GMTN
Program;
(ii) the repayment on maturity of notes issued as part of the GMTN Program in 2009, for a total principal amount of
€1,450 million;
(iii) proceeds from new medium-term borrowings for a total of €1,925 million, which include new borrowings by the
Brazilian companies for €1,236 million, mainly in relation to investments and operations in the country;
(iv) repayment of medium-term borrowings on their maturity for a total of €1,535 million;
(v) a positive net contribution of €171 million from the net change in other ?nancial payables and other ?nancial
assets/liabilities; and
(vi) dividends paid to shareholders and minorities for a total €58 million.
86 2014
|
ANNUAL REPORT
Operating Results
Net Industrial Debt
Net Industrial Debt is management’s primary measure for analyzing our ?nancial leverage and capital structure and is
one of the key targets used to measure our performance.
The following table details our Net Debt for industrial activities and ?nancial services at December 31, 2014 and
December 31, 2013.
All FCA US activities are included under industrial activities. Since FCA US’s treasury activities (including funding and
cash management) are managed separately from the rest of the Group we also provide the analysis of Net Industrial
Debt split between FCA excluding FCA US, and FCA US.
December 31, 2014 December 31, 2013
Industrial
Activities
Financial
Services
Consoli-
dated
Industrial
Activities
Financial
Services
Consoli-
dated
(€ million) Total
FCA ex
FCA US FCA US Total
FCA ex
FCA US FCA US
Third Parties Debt (Principal) (31,381) (21,011) (10,370) (1,980) (33,361) (27,624) (18,325) (9,299) (2,031) (29,655)
Capital Market
(1)
(17,378) (12,473) (4,905) (351) (17,729) (13,981) (11,661) (2,320) (239) (14,220)
Bank Debt (11,904) (7,484) (4,420) (1,216) (13,120) (7,635) (5,095) (2,540) (1,297) (8,932)
Other Debt
(2)
(2,099) (1,054) (1,045) (413) (2,512) (6,008) (1,569) (4,439) (495) (6,503)
Accrued Interest and Other
Adjustments
(3)
(362) (200) (162) (1) (363) (626) (467) (159) (2) (628)
Debt with third Parties (31,743) (21,211) (10,532) (1,981) (33,724) (28,250) (18,792) (9,458) (2,033) (30,283)
Intercompany Financial
Receivables/Payables (net)
(4)
1,453 1,515 (62) (1,453) — 1,336 1,415 (79) (1,336) —
Current ?nancial receivables
from jointly-controlled ?nancial
services companies
(5)
58 58 — — 58 27 27 — — 27
Debt, net of intercompany and
current ?nancial receivables
from jointly-controlled ?nancial
services companies (30,232) (19,638) (10,594) (3,434) (33,666) (26,887) (17,350) (9,537) (3,369) (30,256)
Other ?nancial assets/
(liabilities) (net)
(6)
(229) (251) 22 (4) (233) 399 323 76 (3) 396
Current securities 180 180 — 30 210 219 219 — 28 247
Cash and cash equivalents 22,627 10,653 11,974 213 22,840 19,255 9,579 9,676 200 19,455
Net Debt (7,654) (9,056) 1,402 (3,195) (10,849) (7,014) (7,229) 215 (3,144) (10,158)
(1)
Includes bonds (€16,980 million at December 31, 2014 and €13,966 million at December 31, 2013) and other securities issued in financial
markets (€749 million, which includes the coupon related to mandatory convertible securities issuance, at December 31, 2014 and €254 million
at December 31, 2013 mainly from LATAM financial services companies.
(2)
Includes The VEBA Trust Note (€3,419 million at December 31, 2013), Canadian HCT notes (€620 million at December 31, 2014 and
€664 million at December 31, 2013), asset backed financing, i.e. sales of receivables for which derecognition is not allowed under IFRS (€469
million at December 31, 2014 and €756 million at December 31, 2013), arrangements accounted for as a lease under IFRIC 4 -Determining
whether an arrangement contains a lease, and other financial payables. All amounts outstanding under the VEBA Trust Note were prepaid on
February 7, 2014.
(3)
Includes adjustments for fair value accounting on debt (€67 million at December 31, 2014 and €78 million at December 31, 2013) and (accrued)/
deferred interest and other amortizing cost adjustments (€296 million at December 31, 2014 and €550 million net at December 31, 2013).
(4)
Net amount between Industrial Activities financial receivables due from Financial Services (€1,595 million at December 31, 2014 and €1,465
million at December 31, 2013 and Industrial Activities financial payables due to Financial Services (€142 million at December 31, 2014 and
€129 million at December 31, 2013).
(5)
Financial receivables from FCA Bank (previously known as FGA Capital S.p.A, or FGAC.
(6)
Fair value of derivative financial instruments (net negative €271 million at December 31, 2014 and net positive €376 million at December 31,
2013) and collateral deposits (€38 million at December 31, 2014 and €20 million at December 31, 2013).
2014
|
ANNUAL REPORT 87
Change in Net Industrial Debt
The following section sets forth an explanation of the changes in our Net Industrial Debt for the historical periods.
2014
In 2014 Net Industrial Debt increased by €640 million, from €7,014 million at December 31, 2013 to €7,654 million at
December 31, 2014. The movements in Net Industrial Debt were primarily driven by:
payments for the acquisition of the remaining 41.5 percent interest in FCA US previously not owned, inclusive
of approximately 10 percent of previously exercised options subject to ongoing litigation, of €2,691 million
(U.S.$3,650 million);
investments in industrial activities of €8,119 million representing investments in property, plant and equipment and
intangible assets;
The increases noted above were partially offset by the reductions in Net Industrial Debt primarily driven by:
contribution of the mandatory convertible securities issuance due 2016 of €1,910 million (net proceeds of €2,245
million net of the liability component of €335 million) and the net proceeds from the offering of 100 million common
shares of €849 million, net of the exercise of cash exit rights in connection with the Merger for a net aggregate cash
disbursement of €417 million;
cash ?ow from industrial operating activities of €8,017 million which represents the consolidated cash ?ow from
operating activities of €8,169 million net of the cash ?ows from operating activities attributable to ?nancial services
of €152 million. For an explanation of the drivers in consolidated cash ?ows from operating activities see the —
Cash Flows section above.
2013
In 2013 Net Industrial Debt increased by €64 million, from €6,950 million at December 31, 2012 to €7,014 million at
December 31, 2013. The movements in Net Industrial Debt were primarily driven by:
Cash ?ow from industrial operating activities of €7,534 million which represents the consolidated cash ?ow from
operating activities of €7,618 million net of the cash ?ows from operating activities attributable to ?nancial services
of €84 million. For an explanation of the drivers in consolidated cash ?ows from operating activities see —Operating
Activities —Year Ended December 31, 2013 above;
Investments in industrial activities property, plant and equipment of €7,486 million, representing the majority of the
Group’s investments in property, plant and equipment of €7,492 million; and
Additional investments in RCS MediaGroup S.p.A. for an amount of €94 million.
2012
In 2012 Net Industrial Debt increased by €1,090 million, from €5,860 million at January 1, 2012 to €6,950 million at
December 31, 2012. The movements in Net Industrial Debt were primarily driven by:
Cash ?ow from industrial operating activities of €6,390 million which represents the consolidated cash ?ow from
operating activities of €6,492 million net of the cash ?ows from operating activities attributable to ?nancial services
of €102 million. For an explanation of the drivers in consolidated cash ?ows from operating activities see —
Operating Activities —Year Ended December 31, 2012;
Investments in industrial activities property, plant and equipment of €7,560 million, representing almost all of the
Group’s investments in property, plant and equipment of €7,564 million; and
Proceeds from disposals of property, plant and equipment of €127 million representing almost all of the
consolidated total of €130 million.
88 2014
|
ANNUAL REPORT
Operating Results
Capital Market
At December 31, 2014 and December 31, 2013 capital market debt mainly relates to notes issued under the GMTN
Program by the Group, excluding FCA US, and the Secured Senior Notes of FCA US. In addition we had €749 million
(which included the coupon related to issuance of the mandatory convertible securities described in more detail
in Note 23 to the Consolidated ?nancial statements included elsewhere in this report) and €254 million short and
medium-term marketable ?nancial instruments issued by various subsidiaries, principally in LATAM at December 31,
2014 and December 31, 2013, respectively.
The following table sets forth our outstanding bonds at December 31, 2014 and 2013
Currency
Face value of
outstanding
bonds
(in million) Coupon Maturity
December 31,
2014
December 31,
2013
Global Medium Term Notes: (€ million)
Fiat Chrysler Finance Europe S.A. EUR 900 6.125% July 8, 2014 — 900
Fiat Chrysler Finance Europe S.A. EUR 1,250 7.625% September 15, 2014 — 1,250
Fiat Chrysler Finance Europe S.A. EUR 1,500 6.875% February 13, 2015 1,500 1,500
Fiat Chrysler Finance Europe S.A. CHF 425 5.000% September 7, 2015 353 346
Fiat Chrysler Finance Europe S.A. EUR 1,000 6.375% April 1, 2016 1,000 1,000
Fiat Chrysler Finance Europe S.A. EUR 1,000 7.750% October 17, 2016 1,000 1,000
Fiat Chrysler Finance Europe S.A. CHF 400 5.250% November 23, 2016 333 326
Fiat Chrysler Finance Europe S.A. EUR 850 7.000% March 23, 2017 850 850
Fiat Chrysler Finance North America Inc. EUR 1,000 5.625% June 12, 2017 1,000 1,000
Fiat Chrysler Finance Europe S.A. CHF 450 4.000% November 22, 2017 374 367
Fiat Chrysler Finance Europe S.A. EUR 1,250 6.625% March 15, 2018 1,250 1,250
Fiat Chrysler Finance Europe S.A. EUR 600 7.375% July 9, 2018 600 600
Fiat Chrysler Finance Europe S.A. CHF 250 3.125% September 30, 2019 208 —
Fiat Chrysler Finance Europe S.A. EUR 1,250 6.750% October 14, 2019 1,250 1,250
Fiat Chrysler Finance Europe S.A. EUR 1,000 4.750% March 22, 2021 1,000 —
Fiat Chrysler Finance Europe S.A. EUR 1,350 4.750% July 15, 2022 1,350 —
Others EUR 7 7 7
Total Global Medium Term Notes 12,075 11,646
Other bonds:
FCA US (Secured Senior Notes) U.S.$ 2,875 8.000% June 15, 2019 2,368 1,088
FCA US (Secured Senior Notes) U.S.$ 3,080 8.250% June 15, 2021 2,537 1,232
Total other bonds 4,905 2,320
Hedging effect and amortized
cost valuation 668 500
Total bonds 17,648 14,466
Notes Issued Under The GMTN Program
All bonds issued by the Group, excluding FCA US, are currently governed by the terms and conditions of the GMTN
Program. A maximum of €20 billion may be used under this program, of which notes of approximately €12.1 billion
have been issued and are outstanding to December 31, 2014 (€11.6 billion at December 31, 2013). The GMTN
Program is guaranteed by FCA. We may from time to time buy back bonds in the market that have been issued by the
Group. Such buybacks, if made, depend upon market conditions, our ?nancial situation and other factors which could
affect such decisions.
2014
|
ANNUAL REPORT 89
The bonds issued by Fiat Chrysler Finance Europe S.A. (formerly known as Fiat Finance and Trade Ltd S.A.) and
by Fiat Chrysler Finance North America Inc. (formerly known as Fiat Finance North America Inc.) impose covenants
on the issuer and, in certain cases, on FCA as guarantor, which include: (i) negative pledge clauses which require
that, in case any security interest upon assets of the issuer and/or FCA is granted in connection with other bonds or
debt securities having the same ranking, such security should be equally and ratably extended to the outstanding
bonds; (ii) pari passu clauses, under which the bonds rank and will rank pari passu with all other present and future
unsubordinated and unsecured obligations of the issuer and/or FCA; (iii) periodic disclosure obligations; (iv) cross-
default clauses which require immediate repayment of the bonds under certain events of default on other ?nancial
instruments issued by the Group’s main entities; and (v) other clauses that are generally applicable to securities of a
similar type. A breach of these covenants may require the early repayment of the notes. In addition, the agreements
for the bonds guaranteed by FCA contain clauses which could require early repayment if there is a change of the
controlling shareholder of FCA leading to a resulting a ratings downgrade by ratings agencies.
FCA US Secured Senior Notes
FCA US may redeem, at any time, all or any portion of the Secured Senior Notes on not less than 30 and not more
than 60 days’ prior notice mailed to the holders of the Secured Senior Notes to be redeemed.
Prior to June 15, 2015, the 2019 Notes will be redeemable at a price equal to the principal amount of the 2019
Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make–whole” premium
calculated under the indenture governing these notes. On and after June 15, 2015, the 2019 Notes are redeemable
at redemption prices speci?ed in the 2019 Notes, plus accrued and unpaid interest to the date of redemption. The
redemption price is initially 104.0 percent of the principal amount of the 2019 Notes being redeemed for the twelve
months beginning June 15, 2015, decreasing to 102.0 percent for the twelve months beginning June 15, 2016 and
to par on and after June 15, 2017.
Prior to June 15, 2016, the 2021 Notes will be redeemable at a price equal to the principal amount of the 2021
Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make–whole” premium
calculated under the indenture governing these notes. On and after June 15, 2016, the 2021 Notes are redeemable
at redemption prices speci?ed in the 2021 Notes, plus accrued and unpaid interest to the date of redemption. The
redemption price is initially 104.125 percent of the principal amount of the 2021 Notes being redeemed for the
twelve months beginning June 15, 2016, decreasing to 102.750 percent for the twelve months beginning June 15,
2017, to 101.375 percent for the twelve months beginning June 15, 2018 and to par on and after June 15, 2019.
The indenture governing the Secured Senior Notes issued by FCA US includes af?rmative covenants, including
the reporting of ?nancial results and other developments. The indenture also includes negative covenants which
limit FCA US’s ability and, in certain instances, the ability of certain of its subsidiaries to, (i) pay dividends or make
distributions of FCA US’s capital stock or repurchase FCA US’s capital stock; (ii) make restricted payments; (iii) create
certain liens to secure indebtedness; (iv) enter into sale and leaseback transactions; (v) engage in transactions with
af?liates; (vi) merge or consolidate with certain companies and (vii) transfer and sell assets. The indenture provides
for customary events of default, including but not limited to, (i) non-payment; (ii) breach of covenants in the indenture;
(iii) payment defaults or acceleration of other indebtedness; (iv) a failure to pay certain judgments and (v) certain events
of bankruptcy, insolvency and reorganization. If certain events of default occur and are continuing, the trustee or the
holders of at least 25.0 percent in aggregate of the principal amount of the Secured Senior Notes outstanding under
one of the series may declare all of the notes of that series to be due and payable immediately, together with accrued
interest, if any. As of December 31, 2014, FCA US was in compliance with all covenants.
The Secured Senior Notes are secured by security interests junior to the Senior Credit Facilities (as de?ned below) in
substantially all of FCA US’s assets and the assets of its U.S. subsidiary guarantors, subject to certain exceptions. The
collateral includes 100.0 percent of the equity interests in FCA US’s U.S. subsidiaries and 65.0 percent of the equity
interests in certain of its non-U.S. subsidiaries held directly by FCA US and its U.S. subsidiary guarantors.
90 2014
|
ANNUAL REPORT
Operating Results
Bank Debt
Bank debt principally comprises amounts due under (i) the senior credit facilities of FCA US (€4.0 billion at December
31, 2014 and €2.1 billion at December 31, 2013), (ii) ?nancial liabilities of the Brazilian operating entity (€4.7 billion
at December 31, 2014 and €2.9 billion at December 31, 2013) relating to a number of ?nancing arrangements, also
with certain Brazilian development banks, primarily used to support capital expenditure, including in our new plant
in the State of Pernambuco as well as to fund the ?nancial services business in that country, (iii) loans provided by
the European Investment Bank (€1.0 billion at December 31, 2014 and €1.1 billion at December 31, 2013) to fund
our investments and research and development costs, (iv) amounts drawn down by FCA excluding FCA US treasury
companies under short and medium term credit facilities (€1.4 billion at December 31, 2014 and €1.1 billion at
December 31, 2013) and (v) amounts outstanding relating to ?nancing arrangements of Chrysler de Mexico with
certain Mexican development banks, amounting to €0.4 billion at December 31, 2014 and 2013.
The main terms and conditions of the principal bank facilities are described as follows.
FCA US Senior Credit Facilities
The Tranche B Term Loan due 2017 of FCA consists of the existing U.S.$3.0 billion tranche B term loan (€2,471
million) that matures on May 24, 2017, or the Original Tranche B Term Loan, and an additional U.S.$250 million (€206
million at December 31, 2014) term loan entered into on February 7, 2014 under the Original Tranche B Term Loan
that also matures on May 24, 2017, collectively the Tranche B Term Loan due 2017. The Original Tranche B Term
Loan was re-priced in June and in December 2013 and subsequently, all amounts outstanding under Tranche B Term
Loan due 2017 will bear interest at FCA’s option at either a base rate plus 1.75 percent per annum or at LIBOR plus
2.75 percent per annum, subject to a base rate ?oor of 1.75 percent per annum or a LIBOR ?oor of 0.75 percent per
annum. For the year ended December 31, 2014, interest was accrued based on LIBOR. The outstanding principle
amount of the Tranche B Term Loan due 2017 is payable in equal quarterly installments of U.S.$8.1 million (€6.7
million) commencing on March 2014, with the remaining balance due at maturity in May 2017. The Tranche B Term
Loan due 2017 was fully drawn and a total of €2,587 million (including accrued interest) was outstanding at December
31, 2014 (€2,119 million including accrued interest at December 31, 2013).
On February 7, 2014, FCA US entered into a new U.S.$1,750 million (€1.3 billion) tranche B term loan issued under
a new term loan credit facility, or the Tranche B Term Loan due 2018, that matures on December 31, 2018. The
outstanding principal amount of the Tranche B Term Loan due 2018 is payable in quarterly installments of U.S.$4.4
million (€3.6 million), commencing June 30, 2014, with the remaining balance due at maturity. The Tranche B Term
Loan due 2018 bears interest, at FCA US’s option, either at a base rate plus 1.50 percent per annum or at LIBOR
plus 2.50 percent per annum, subject to a base rate ?oor of 1.75 percent per annum or a LIBOR ?oor of 0.75 percent
per annum. At December 31, 2014, a total of €1,421 million (including accrued interest) was outstanding on the
Tranche B Term Loan due 2018.
FCA US may pre-pay, re?nance or re-price the Tranche B Term Loan due 2017 and the Tranche B Term Loan due
2018 without premium or penalty.
In addition, FCA US had a secured revolving credit facility amounting to U.S.$1.3 billion (€1.1 billion) which matures
in May 2016 and remains undrawn at December 31, 2014. The secured revolving credit facility was also re-priced
in June 2013 and as a result, all amounts outstanding under the secured revolving credit facility bear interest, at the
option of FCA US, either at a base rate plus 2.25 percent per annum or at LIBOR plus 3.25 percent per annum. At
December 31, 2014, the secured revolving credit facility was undrawn.
The Tranche B Term Loan due 2017, Tranche B Term Loan due 2018 and the Revolving Credit Facility, are collectively
referred to as the Senior Credit Facilities. Subject to the limitations in the credit agreements governing the Senior
Credit Facilities, or the Senior Credit Agreements and the indenture governing the Secured Senior Notes, FCA US
has the option to increase the amount of the Revolving Credit Facility in an aggregate principal amount not to exceed
U.S.$700 million (approximately €577 million) subject to certain conditions.
2014
|
ANNUAL REPORT 91
The Senior Credit Facilities are secured by a senior priority security interest in substantially all of FCA US’s assets and
the assets of its U.S. subsidiary guarantors, subject to certain exceptions. The collateral includes 100.0 percent of the
equity interests in FCA US’s U.S. subsidiaries and 65.0 percent of the equity interests in its non-U.S. subsidiaries held
directly by FCA US and its U.S. subsidiary guarantors.
The Senior Credit Agreements include negative covenants, including but not limited to: (i) limitations on incurrence,
repayment and prepayment of indebtedness; (ii) limitations on incurrence of liens; (iii) limitations on making certain
payments; (iv) limitations on transactions with af?liates, swap agreements and sale and leaseback transactions;
(v) limitations on fundamental changes, including certain asset sales and (vi) restrictions on certain subsidiary
distributions. In addition, the Senior Credit Agreements require FCA US to maintain a minimum ratio of “borrowing
base” to “covered debt” (as de?ned in the Senior Credit Agreements), as well as a minimum liquidity of U.S.$3.0 billion
(€2.5 billion), which includes any undrawn amounts on the Revolving Credit Facility.
The Senior Credit Agreements contain a number of events of default related to: (i) failure to make payments when due;
(ii) failure to comply with covenants; (iii) breaches of representations and warranties; (iv) certain changes of control;
(v) cross–default with certain other debt and hedging agreements and (vi) the failure to pay or post bond for certain
material judgments. As of December 31, 2014 FCA US was in compliance with all covenants under the Senior Credit
Agreements.
Syndicated Credit Facility of the Group Excluding FCA US
FCA, excluding FCA US, has a syndicated credit facility in the amount of €2.1 billion, or the Syndicated Credit Facility,
which was undrawn at December 31, 2014 and December 31, 2013. The covenants of this facility include ?nancial
covenants (Net Debt/Earnings Before Interest, Taxes, Depreciation and Amortization, or EBITDA, and EBITDA/Net
Interest ratios related to industrial activities) and negative pledge, pari passu, cross default and change of control
clauses. The failure to comply with these covenants, in certain cases if not suitably remedied, can lead to the
requirement to make early repayment of the outstanding loans.
The syndicated credit facility currently includes limits to FCA’s ability to extend guarantees or loans to FCA US.
European Investment Bank Borrowings
We have ?nancing agreements with the European Investment Bank, or EIB, for a total of €1.1 billion primarily to
support investments and research and development projects. In particular, ?nancing agreements include (i) two
facilities of €400 million (maturing in 2018) and €250 million (maturing in 2015) for the purposes of supporting
research and development programs in Italy to protect the environment by reducing emissions and improving energy
ef?ciency and (ii) €500 million facility (maturing in 2021) for an investment program relating to the modernization and
expansion of production capacity of an automotive plant in Serbia.
As of December 31, 2014 and December 31, 2013 these facilities had been fully drawn.
The covenants applicable to the EIB borrowings are similar to those applicable to the Syndicated Credit Facility
explained above.
92 2014
|
ANNUAL REPORT
Operating Results
Other Debt
At December 31, 2014, Other debt mainly relates to the unsecured Canadian Health Care Trust notes, or HCT Notes,
totaling €651 million including accrued interest (€703 million at December 31, 2013) including accrued interest), which
represents FCA US’s ?nancial liability to the Canadian Health Care Trust arising from the settlement of its obligations
for postretirement health care bene?ts for National Automobile, Aerospace, Transportation and General Workers
Union of Canada, or CAW (now part of Unifor), which represented employees, retirees and dependents. The HCT
Notes were issued in four tranches on December 31, 2010, and have maturities up to 2024. Interest is accrued at the
stated rate of 9.0 percent per annum for the HCT tranche A and B notes and 7.5 percent per annum for HCT tranche
C note. The HCT tranche D note was fully repaid in 2012. The terms of each of the HCT Notes are substantially
similar and provide that each note will rank pari passu with all existing and future unsecured and unsubordinated
indebtedness for borrowed money of FCA US, and that FCA US will not incur indebtedness for borrowed money that
is senior in any respect in right of payment to the HCT Notes.
Other debt at December 31, 2013 also included the VEBA Trust Note (€3,575 million including accrued interest),
which represented FCA US’s ?nancial liability to the VEBA Trust having a principal amount outstanding of U.S.$4,715
million (€3,419 million). The VEBA Trust Note was issued by FCA US in connection with the settlement of its
obligations related to postretirement healthcare bene?ts for certain UAW retirees. The VEBA Trust Note had an implied
interest rate of 9.0 percent per annum and required annual payments of principal and interest through July 15, 2023.
On February 7, 2014, FCA US prepaid the VEBA Trust Note (see —FCA US New Debt Issuances and Prepayment of
VEBA Trust Note).
The remaining components of Other debt mainly relate to amounts outstanding under ?nance leases, amounts due to
related parties and interest bearing deposits of dealers in Brazil.
At December 31, 2014, debt secured by assets of the Group, excluding FCA US, amounts to €777 million (€432
million at December 31, 2013), of which €379 million (€386 million at December 31, 2013) is due to creditors for
assets acquired under ?nance leases and the remaining amount mainly related to subsidized ?nancing in Latin
America. The total carrying amount of assets acting as security for loans amounts to €1,670 million at December 31,
2014 (€418 million at December 31, 2013).
At December 31, 2014, debt secured by assets of FCA US amounts to €9,881 million (€5,180 million at December
31, 2013), and includes €9,093 million (€4,448 million at December 31, 2013) relating to the Secured Senior
Notes and the Senior Credit Facilities, €251 million (€165 million at December 31, 2013) was due to creditors for
assets acquired under ?nance leases and other debt and ?nancial commitments for €537 million (€567 million at
December 31, 2013).
2014
|
ANNUAL REPORT 93
Subsequent Events
and 2015 Outlook
Subsequent Events and 2015 Outlook
Subsequent events
The Group has evaluated subsequent events through March 5, 2015, which is the date the ?nancial statements were
authorized for issuance. There were no subsequent events.
2015 Outlook
The Group indicates the following guidance for 2015:
Worldwide shipments in 4.8 to 5.0 million unit range;
Net revenues of ~€108 billion;
EBIT
(*)
in €4.1 to €4.5 billion range;
Net Income
(*)
in €1.0 to €1.2 billion range, with EPS
(**)
in €0.64 to €0.77 range;
Net Industrial Debt in €7.5 billion to €8.0 billion range.
Figures do not include any impacts for the previously announced capital transactions regarding Ferrari.
(*)
Excluding eventual unusual items
(**)
EPS calculated including the MCS conversion at minimum number of shares at 222 million.
March 5, 2015
The Board of Directors
John P. Elkann
Sergio Marchionne
Andrea Agnelli
Tiberto Brandolini D’Adda
Glenn Earle
Valerie Mars
Ruth J. Simmons
Ronald L. Thompson
Patience Wheatcroft
Stephen M. Wolf
Ermenegildo Zegna
94 2014
|
ANNUAL REPORT
Major Shareholders
Major Shareholders
Exor is the largest shareholder of FCA through its 29.19 percent shareholding interest in our issued common
shares (as of February 27, 2015). See “The FCA Merger.” Exor also purchased U.S.$886 million (€730 million) in
aggregate notional amount of mandatory convertible securities that were issued in December 2014 (see Note 23 of
the Consolidated ?nancial statements included elsewhere in this report). As a result of the loyalty voting mechanism,
Exor’s voting power is approximately 44.31 percent.
Consequently, Exor could strongly in?uence all matters submitted to a vote of FCA shareholders, including approval of
annual dividends, election and removal of directors and approval of extraordinary business combinations.
Exor is controlled by Giovanni Agnelli e C. S.a.p.az., (“G.A.”) which holds 51.39 percent of its share capital. G.A. is a
limited partnership with interests represented by shares (Societa’ in Accomandita per Azioni), founded by Giovanni
Agnelli and currently held by members of the Agnelli and Nasi families, descendants of Giovanni Agnelli, founder of
Fiat. Its present principal business activity is to purchase, administer and dispose of equity interests in public and
private entities and, in particular, to ensure the cohesion and continuity of the administration of its controlling equity
interests. The managing directors of G.A. are John Elkann, Tiberto Brandolini d’Adda, Alessandro Nasi, Andrea
Agnelli, Gianluigi Gabetti, Gianluca Ferrero, Luca Ferrero de’ Gubernatis Ventimiglia and Maria Sole Agnelli.
Based on the information in FCA’s shareholder register, regulatory ?lings with the Netherlands Authority for the
Financial Markets (stichting Autoriteit Financiële Markten, the “AFM”) and the SEC and other sources available to FCA,
the following persons owned, directly or indirectly, in excess of three percent of the common shares of FCA, as of
February 27, 2015:
FCA Shareholders
Number of Issued
Common Shares Percentage Owned
Exor
(1)
375,803,870 29.19
Baillie Gifford & Co.
(2)
68,432,691 5.32
(1)
As a result of the issuance of the mandatory convertible securities completed in December 2014 (“MCS Offering”), Exor beneficially owns
444,352,804 common shares of FCA, consisting of (i) 375,803,870 common shares of FCA owned prior to the MCS Offering, and (ii)
68,548,934 common shares underlying the mandatory convertible securities purchased in the MCS Offering, at the minimum conversion
rate of 7.7369 common shares per mandatory convertible security (being the rate at which Exor may convert the mandatory convertibles
securities into common shares at its option). Including the common shares into which the mandatory convertibles securities sold in the offering
completed in December 2014, are convertible at the option of the holders, the percentage is 29.43%. In addition, Exor holds 375,803,870
special voting shares. Exor’s beneficial ownership in FCA was approximately 44.31% prior to the issuance of the mandatory convertible
securities. Current Exor’s beneficial ownership in FCA is approximately 42.75%, calculated as the ratio of (i) the aggregate number of common
and special voting shares owned prior to the MCS Offering, and the common shares underlying the mandatory convertible securities purchased
by Exor in the MCS Offering, at the minimum conversion rate as set forth above and (ii) the aggregate number of outstanding common and
special voting shares, and the common shares underlying all of the mandatory convertible securities sold in the MCS Offering, at the minimum
conversion rate set forth above.
(2)
Baillie Gifford & Co., as an investment adviser in accordance with rule 240.13d-1 (b), beneficially owns 123,397,920 common shares with sole
dispositive power (7.27% of the issued shares), of which 68,432,691 common shares are held with sole voting power (4.03% of the issued
shares).
As of February 27, 2015, approximately 1,000 holders of record of FCA common shares had registered addresses in
the U.S. and in total held approximately 320 million common shares, or 25 percent of the FCA common shares.
2014
|
ANNUAL REPORT 95
Corporate Governance
Corporate Governance
Introduction
Fiat Chrysler Automobiles N.V. (the “Company”) is a public company with limited liability, incorporated and organized
under the laws of the Netherlands, which results from the cross-border merger of Fiat S.p.A. with and into Fiat
Investments N.V., renamed Fiat Chrysler Automobiles N.V. upon effectiveness of the merger on October 12, 2014
(the “Merger”). The Company quali?es as a foreign private issuer under the New York Stock Exchange (“NYSE”) listing
standards and its common shares are listed on the NYSE and on the Mercato Telematico Azionario managed by
Borsa Italiana S.p.A. (“MTA”).
In accordance with the NYSE Listed Company Manual, the Company is permitted to follow home country practice
with regard to certain corporate governance standards. The Company has adopted, except as discussed below, the
best practice provisions of the Dutch corporate governance code issued by the Dutch Corporate Governance Code
Committee, which entered into force on January 1, 2009 (the “Dutch Corporate Governance Code”) and contains
principles and best practice provisions that regulate relations between the board of directors of a company and its
shareholders.
In this report the Company addresses its overall corporate governance structure. The Company discloses, and intends
to disclose any material departure from the best practice provisions of the Dutch Corporate Governance Code in its
future annual reports.
Board of Directors
Pursuant to the Company’s articles of association (the “Articles of Association”), its board of directors (the “Board
of Directors”) may have three or more directors (the “Directors”). At the general meeting of shareholders held on
August 1, 2014, the number of the Directors upon completion of the merger was set at eleven and the current slate
of Directors was elected. The term of of?ce of the current Board of Directors will expire on April 16, 2015 and the
Company’s general meeting of shareholders will elect a new Board of Directors for a one-year term. Each Director
may be reappointed at any subsequent general meeting of shareholders.
The Board of Directors as a whole is responsible for the strategy of the Company. The Board of Directors is composed
of two executive Directors (i.e., the Chairman and the Chief Executive Of?cer), having responsibility for the day-to-day
management of the Company, and nine non-executive Directors, who do not have such day-to-day responsibility
within the Company or the Group. Pursuant to Article 17 of the Articles of Association, the general authority to
represent the Company shall be vested in the Board of Directors and the Chief Executive Of?cer.
On October 13, 2014 the Board of Directors appointed the following internal committees: (i) an Audit Committee, (ii) a
Governance and Sustainability Committee, and (iii) a Compensation Committee.
On certain key industrial matters the Board of Directors is advised by the Group Executive Council (the “GEC”): the
GEC is an operational decision-making body of the Company’s group (the “Group”), which is responsible for reviewing
the operating performance of the businesses, and making decisions on certain operational matters.
Seven Directors quali?ed as independent (representing a majority) for purposes of NYSE rules, Rule 10A-3 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Dutch Corporate Governance Code.
The Board of Directors has also appointed Mr. Ronald L. Thompson as Senior Non-Executive Director in accordance
with Section III.8.1 of the Code.
Directors are expected to prepare themselves for and to attend all Board of Directors meetings, the annual general
meeting of shareholders and the meetings of the committees on which they serve, with the understanding that, on
occasion, a Director may be unable to attend a meeting.
Since October 12, 2014 - after the effectiveness of the merger transaction - to the year-end there were two meetings
of the Board of Directors. The average attendance at those meetings was 95.45%.
96 2014
|
ANNUAL REPORT
Corporate Governance
The current composition of the Board of Directors is the following:
John Elkann (executive director) - John Elkann is Chairman of FCA He was appointed chairman of Fiat on 21 April
2010 where he has served as vice chairman since 2004 and as a board member since December 1997. He is also
chairman and chief executive of?cer of Exor and chairman of Giovanni Agnelli e C. Sapaz.. Born in New York in
1976, he obtained a scienti?c baccalaureate from the Lycée Victor Duruy in Paris, and graduated in Engineering
and Management from Politecnico, the Engineering University of Turin (Italy). While at university, he gained work
experience in various companies of the Fiat Group in the UK and Poland (manufacturing) as well as in France (sales
and marketing). He started his professional career in 2001 at General Electric as a member of the Corporate Audit
Staff, with assignments in Asia, the USA and Europe. He is chairman of Cushman & Wake?eld and Italiana Editrice
and a board member of CNHI, The Economist Group, News Corporation and Banca Leonardo. He is a member of
the IAC of Brookings Institution and of MoMA. He also serves as vice chairman of the Italian Aspen Institute and of
the Giovanni Agnelli Foundation.
Born in 1976, Italian citizenship.
Sergio Marchionne (executive director) - Mr. Marchionne currently serves as Chief Executive Of?cer of FCA
and Chairman and Chief Executive Of?cer of both FCA US LLC and FCA Italy S.p.A. Since October 2014, Mr.
Marchionne has served as Chairman of Ferrari S.p.A. Mr. Marchionne leads the GEC and has been Chief Operating
Of?cer of its NAFTA region since September 2011. He also serves as Chairman of CNHI. He was the chairman of
Fiat Industrial and CNH Global N.V. until the integration of these companies into CNHI. Prior to joining the Company,
Mr. Marchionne served as Chief Executive Of?cer of SGS SA, Chief Executive Of?cer ?rst and then Chairman of
the Lonza Group Ltd. and Chief Executive Of?cer of Alusuisse Lonza (Algroup). He also served as Vice President
of Legal and Corporate Development and Chief Financial Of?cer of the Lawson Mardon Group after serving as
Chief Financial Of?cer of Acklands Ltd. and Executive Vice President of Glenex Industries. Mr. Marchionne holds a
Bachelor of Laws from Osgoode Hall Law School at York University in Toronto, Canada and a Master of Business
Administration and a Bachelor of Commerce from the University of Windsor, Canada. Mr. Marchionne also holds a
Bachelor of Arts with a major in Philosophy and minor in Economics from the University of Toronto. Mr. Marchionne
serves on the Board of Directors of Philip Morris International Inc. and as Chairman of SGS SA headquartered in
Geneva. Additionally, Mr. Marchionne serves as Chairman of CNHI, and as a director of Exor, a shareholder of FCA
and CNHI. Mr. Marchionne is on the Board of Directors of ACEA (European Automobile Manufacturers Association).
He previously served as appointed non-executive Vice Chairman and Senior Independent Director of UBS AG as
well as a director of Fiat Industrial.
Born in 1952, Canadian and Italian citizenship.
Andrea Agnelli (non-executive director) - Andrea Agnelli is chairman of Juventus Football Club S.p.A. and Lamse
S.p.A., a holding company of which he is a founding shareholder. Born in Turin in 1975, he studied at Oxford (St.
Clare’s International College) and Milan (Università Commerciale Luigi Bocconi). While at university, he gained
professional experience both in Italy and abroad, including positions at: Iveco-Ford in London; Piaggio in Milan;
Auchan Hypermarché in Lille; Schroder Salomon Smith Barney in London; and, ?nally, Juventus Football Club
S.p.A. in Turin. He began his career in 1999 at Ferrari Idea in Lugano, where he was responsible for promoting
and developing the Ferrari brand in non-automotive areas. In November 2000, he moved to Paris and assumed
responsibility for marketing at Uni Invest SA, a Banque San Paolo company specialized in managed investment
products. From 2001 to 2004, Mr. Agnelli worked at Philip Morris International in Lausanne, where he initially had
responsibility for marketing and sponsorships and, subsequently, corporate communication. In 2005, he returned
to Turin to work in strategic development for IFIL Investments S.p.A. (now Exor). Mr. Agnelli is a general partner
of Giovanni Agnelli e C. S.a.p.az., a member of the board of directors of Exor, a member of the advisory board of
BlueGem Capital Partners LLP, in addition to serving on the board of the European Club Association. Mr. Agnelli
has been a member of the board of directors of Fiat since May 30, 2004.
Born in 1975, Italian citizenship.
2014
|
ANNUAL REPORT 97
Tiberto Brandolini d’Adda (non-executive director) - Born in Lausanne (Switzerland) in 1948 and a graduate
in commercial law from the University of Parma. From 1972 to 1974, Mr. Brandolini d’Adda gained his initial work
experience in the international department of Fiat and then at Lazard Bank in London. In 1975, he was appointed
assistant to the Director General for Enterprise Policy at the European Economic Commission in Brussels. In 1976
he joined I?nt, as general manager for France. In 1985, he was appointed general manager for Europe and then in
1993 managing director of Exor group (formerly I?nt), where he also served as vice chairman from 2003 until 2007.
He has extensive international experience as a main board director of several companies, including: Le Continent,
Bolloré Investissement, Société Foncière Lyonnaise, Sa?c-Alcan and Chateau Margaux. Mr. Brandolini d’Adda
served as director and then, from 1997 to 2003, as chairman of the conseil de surveillance of Club Mediterranée.
In May 2004, he was appointed chairman of the conseil de surveillance of Worms & Cie, where he had served as
deputy chairman since 2000. In May 2005, he became chairman and chief executive of?cer of Sequana Capital
(formerly Worms & Cie). Mr. Brandolini d’Adda currently serves as chairman of Exor S.A. (Luxembourg) and is also
a member of the board of directors of YAFA S.p.A. He is general partner of Giovanni Agnelli & C. S.a.p.az. and vice
chairman of Exor, formed through the merger between IFI and IFIL Investments. Brandolini d’Adda is Of?cier de la
Légion d’Honneur. He has been a member of the board of directors of Fiat since May 30, 2004.
Born in 1948, Italian citizenship.
Glenn Earle (non-executive director) - Glenn Earle is a Senior Advisor at Af?liated Managers Group Limited (AMG)
and a Board Member and Trustee of the Royal National Theatre and of Teach First, where he is a member of the
Finance Committee. He is also a Director of Rothesay Holdco UK and Chairman of the Advisory Board of Cambridge
University Judge Business School. Mr. Earle retired in December 2011 from Goldman Sachs International, where he
was most recently a Partner Managing Director and the Chief Operating Of?cer. He previously worked at Goldman
Sachs in various roles in New York, Frankfurt and London from 1987, becoming a Partner in 1996. From 1979 to
1985, he worked in the Latin America department at Grindlays Bank/ANZ in London and New York, leaving as a Vice
President. He is a graduate of Emmanuel College, Cambridge and of Harvard Business School, where he earned
an MBA with High Distinction and was a Baker Scholar and Loeb, Rhoades Fellow. His other activities include
membership of The Higher Education Commission and The William Pitt Group at Chatham House. His previous
responsibilities include membership of the Board of Trustees of the Goldman Sachs Foundation and of the Ministerial
Task Force for Gifted and Talented Youth and the Development Advisory Forum of Emmanuel College, Cambridge.
Mr. Earle has been an independent member of the Board of Directors of Fiat since June 23, 2014.
Born in 1958, British citizenship.
Valerie Mars (non-executive director) - Valerie Mars serves as senior vice president & head of corporate
development for Mars, Incorporated, a $32 billion diversi?ed food business, operating in over 120 countries and
one of the largest privately held companies in the world. In this position, she focuses on acquisitions, joint ventures
and divestitures for the company. She served on the Mars, Incorporated audit committee, currently serves on
its remuneration committee and is a member of the board of Royal Canin. Additionally, Mars is a member of the
Rabobank North American Advisory Board and is on the Board of Hello Stage. Mars is also a founding partner of
KKM, a consulting partnership dedicated to advising family businesses that are planning the transition from the
owner-manager to the next generation. Mars served on the board of Celebrity Inc., a NASDAQ listed company, from
1994 to September 2000. Previously, Mars was the director of corporate development for Masterfoods Europe. Her
European work experience began in 1996 when she became general manager of Masterfoods Czech and Slovak
Republics. Mars joined M&M/Mars on a part time basis in 1992 and began working on special projects. She worked
on due diligence for acquisition, was part of the company’s Innovation Team and VO2Max Team. Prior to joining
Mars, Incorporated, Mars was a controller with Whitman Heffernan Rhein, a boutique investment company. She
began her career with Manufacturers Hanover Trust Company as a training program participant and rose to Assistant
Secretary, supporting U.S. -based clients and then companies with global operations like General Motors and Dow
Chemical. Mars was involved in a number of community and educational organizations and currently serves on the
Board of Conservation International. She is a Director Emeritus of The Open Space Institute. Previously she served on
the Hotchkiss School Alumni Nominating Committee and the Prague American Chamber of Commerce Board. Mars
holds a Bachelor of Arts degree from Yale University and a MBA from the Columbia Business School.
Born in 1959, American citizenship.
98 2014
|
ANNUAL REPORT
Corporate Governance
Ruth J. Simmons (non-executive director) - Ruth J. Simmons was appointed to the board of directors of
Chrysler Group LLC in June 2012. Simmons was President of Brown University from 2001 until June 30, 2012
and remains with the university as president emerita. Prior to joining Brown University, she was president of Smith
College, where she started the ?rst engineering program at a U.S. women’s college. She also was vice provost at
Princeton University and provost at Spelman College and she held various positions of increasing responsibility
until becoming Associate Dean of the faculty at Princeton University; she previously was Assistant Dean and then
Associate Dean at the University of Southern California; she held various positions including Acting Director of
international programs at the California State University (Northridge); she was Assistant Dean at the College of
Liberal Arts, Assistant Professor of French at the University of New Orleans, Admissions Of?cer at the Radcliffe
College, instructor in French at the George Washington University and interpreter-Language Services Division at the
U.S. Department of State. Simmons serves on several boards, including those of Princeton University and Texas
Instruments. Simmons is a graduate of Dillard University in New Orleans (1967), and received her Ph.D. in Romance
languages and literatures from Harvard University (1973). Simmons is a Fellow of the American Academy of Arts
and Sciences and a member of the Council on Foreign Relations.
Born in 1945, American citizenship.
Ronald L. Thompson (non-executive director) - Ronald L. Thompson is the senior non-executive director of
FCA. He was appointed to the board of directors of FCA US on July 6, 2009. Thompson is currently chairman of the
board of trustees for Teachers Insurance and Annuity Association, or TIAA, a for-pro?t life insurance company that
serves the retirement and ?nancial needs of faculty and employees of colleges and universities, hospitals, cultural
institutions and other nonpro?t organizations. He also serves on the Board of Trustees for Washington University in
St. Louis, Mo., on the Board of Directors of the Medical University of South Carolina Foundation and as a member
of the Advisory Board of Plymouth Venture Partners Fund. Thompson was the Chief Executive Of?cer and Chairman
of Midwest Stamping Company of Maumee, Ohio, a manufacturer of medium and heavy gauge metal components
for the automotive market. Under Thompson’s ownership, the company experienced rapid growth as a Tier One
automotive supplier and became one of the largest minority-owned companies in the U.S. He sold the company
in late 2005. Thompson has served on the boards of many different companies including Commerce Bank of St.
Louis, GR Group (U.S.), Illinova Corporation, Interstate Bakeries Corporation, McDonnell Douglas Corporation,
Midwest Stamping Company, Ralston Purina Company and Ryerson Tull, Inc. He was also a member of the Board
of Directors of the National Association of Manufacturers. He was General Manager at Puget Sound Pet Supply
Company and Chairman and Chief Executive Of?cer at Evaluation Technologies. Thompson has served on the
faculties of Old Dominion University, Virginia State University and the University of Michigan.
Thompson holds a Ph.D. and Master of Science in Agricultural Economics from Michigan State University and a
Bachelor of Business Administration from the University of Michigan.
Born in 1949, American citizenship.
Patience Wheatcroft (non-executive director) - Patience Wheatcroft is a British national and graduate in law
from the University of Birmingham. She is also a member of the House of Lords and a ?nancial commentator and
journalist. Ms. Wheatcroft currently serves on the advisory board of the public relations company Bell Pottinger
LLP. She also serves as non-executive director of the wealth management company St. James’s Place PLC.
Ms. Wheatcroft has a broad range of experience in the media and corporate world with past positions at the Wall
Street Journal Europe, where she was editor-in-chief, The Sunday Telegraph, The Times, Mail on Sunday, as well
as serving as non-executive director of Barclays Group PLC and Shaftesbury PLC. Since 2011, she has been a
member of the House of Lords. Finally, Ms. Wheatcroft is also on the board of trustees of the British Museum. Ms.
Wheatcroft has been an independent member of the board of directors of Fiat since April 4, 2012.
Born in 1951, British citizenship.
2014
|
ANNUAL REPORT 99
Stephen M. Wolf (non-executive director) - Stephen M. Wolf was appointed to the board of directors of Chrysler
Group LLC on July 6, 2009. Wolf became chairman of R. R. Donnelley & Sons Company, a full service provider of
print and related services, in 2004. He has served as the managing partner of Alpilles LLC since 2003. Previously,
he was chairman of US Airways Group Inc. and US Airways Inc. Wolf was chairman and CEO of US Airways from
1996 until 1998. Prior to joining US Airways, Wolf had served since 1994 as senior advisor to the investment
banking ?rm Lazard Frères & Co. From 1987 to 1994, he served as chairman and chief executive of?cer of UAL
Corporation and United Airlines Inc. Wolf’s career in the aviation industry began in 1966 with American Airlines,
where he rose to the position of vice president. He joined Pan American World Airways as a senior vice president in
1981 and became president and COO of Continental Airlines in 1982. In 1984, he became president and CEO of
Republic Airlines, where he served until 1986 at which time he orchestrated the Company’s merger with Northwest
Airlines. Thereafter, he served as chairman and CEO of Tiger International, Inc. and The Flying Tiger Line, Inc. where
he oversaw the sale of the company to Federal Express. Wolf also serves as a member of the board of directors of
Philip Morris International and as Chairman of the Advisory Board of Trilantic Capital Partners, previously Lehman
Brothers Merchant Banking. Wolf had also served as chairman of Lehman Brothers Private Equity Advisory Board.
Wolf is an honorary trustee of The Brookings Institution. Wolf holds a Bachelor of Arts degree in Sociology from San
Francisco State University.
Born in 1941, American citizenship.
Ermenegildo Zegna (non-executive director) year of birth: 1955, nationality: Italian/Swiss - Ermenegildo Zegna
has been Chief Executive Of?cer of the Ermenegildo Zegna Group since 1997, having served on the board since
1989. Previously, he held senior executive positions within the Zegna Group including the U.S., after a retail
experience at Bloomingdale’s, New York. Zegna, the standard of excellence for the entire luxury fashion industry, is
a vertically integrated company that covers sourcing wool at the markets of origin, manufacturing, marketing right
through directly operated stores. Under the guidance of the fourth generation, the Group expanded its network to
545 stores, of which 310 are fully owned, in over 100 countries. In 2013, Zegna reached consolidated sales of 1.27
billion euro, achieving global leadership in men’s luxury wear. The company’s success is based on an increasingly
wide-reaching portfolio of products and styles - formal, casual and sports apparel, avant-garde lines, shoes,
leather accessories, and under license fragrances, eyewear, underwear and watches. He is also a member of the
international advisory board of IESE Business School of Navarra; he is board member of the Camera Nazionale della
Moda Italiana and of the Council for the United States and Italy. In 2011 he was nominated Cavaliere del Lavoro by
the President of the Italian Republic. A graduate in economics from the University of London, Ermenegildo Zegna
also studied at the Harvard Business School.
Born in 1955, Italian and Swiss citizenship.
100 2014
|
ANNUAL REPORT
Corporate Governance
Board Regulations
On October 29, 2014 the Board of Directors adopted its regulations. Such regulations deal with matters that concern
the Board of Directors and its committees internally.
The regulations contain provisions concerning the manner in which meetings of the Board of Directors are called
and held, including the decision-making process. The regulations provide that meetings may be held by telephone
conference or video-conference, provided that all participating Directors can follow the proceedings and participate in
real time discussion of the items on the agenda.
The Board of Directors can only adopt valid resolutions when the majority of the Directors in of?ce shall be present at
the meeting or be represented thereat.
A Director may only be represented by another Director authorized in writing.
A Director may not act as a proxy for more than one other Director.
All resolutions shall be adopted by the favorable vote of the majority of the Directors present or represented at the
meeting, provided that the regulations may contain speci?c provisions in this respect. Each Director shall have one vote.
The Board of Directors shall be authorized to adopt resolutions without convening a meeting if all Directors shall have
expressed their opinions in writing, unless one or more Directors shall object in writing to the resolution being adopted
in this way prior to the adoption of the resolution.
The regulations are available on the Company’s website.
The Audit Committee
The Audit Committee is responsible for assisting and advising the Board of Directors’ oversight of: (i) the integrity
of the Company’s ?nancial statements, (ii) the Company’s policy on tax planning, (iii) the Company’s ?nancing, (iv)
the Company’s applications of information and communication technology, (v) the systems of internal controls that
management and the Board of Directors have established, (vi) the Company’s compliance with legal and regulatory
requirements, (vii) the Company’s compliance with recommendations and observations of internal and independent
auditors, (viii) the Company’s policies and procedures for addressing certain actual or perceived con?icts of
interest, (ix) the independent auditors’ quali?cations, independence, remuneration and any non-audit services for
the Company, (x) the performance of the Company’s internal auditors and of the independent auditors, (xi) risk
management guidelines and policies, and (xii) the implementation and effectiveness of the Company’s ethics and
compliance program.
The Audit Committee currently consists of Mr. Glenn Earle (Chairman), Mr. Thompson and Ms. Wheatcroft. The
Audit Committee is elected by the Board of Directors and is comprised of at least three non-executive Directors.
Audit Committee members are also required (i) not to have any material relationship with the Company or to serve
as auditors or accountants for the Company, (ii) to be “independent”, for purposes of NYSE rules, Rule 10A-3 of the
Exchange Act and the Dutch Corporate Governance Code, and (iii) to be “?nancially literate” and have “accounting
or selected ?nancial management expertise” (as determined by the Board of Directors). At least one member of the
Audit Committee shall be a “?nancial expert” as de?ned by the Sarbanes-Oxley Act and the rules of the U.S. Securities
and Exchange Commission and best practice provision III.5.7 of the Dutch Corporate Governance Code. No Audit
Committee member may serve on more than four audit committees for other public companies, absent a waiver from
the Board of Directors, which must be disclosed in the annual report on Form 20-F. Unless decided otherwise by the
Audit Committee, the independent auditors of the Company attend its meetings while the Chief Executive Of?cer and
Chief Financial Of?cer are free to attend the meetings.
Since October 12, 2014 - after the effectiveness of the merger transaction - to the year-end the Audit Committee met
twice and attendance of Directors at those meetings was 100%.
2014
|
ANNUAL REPORT 101
The Compensation Committee
The Compensation Committee is responsible for, among other things, assisting and advising the Board of Directors
in: (i) determining executive compensation consistent with the Company’s remuneration policy, (ii) reviewing and
approving the remuneration structure for the executive Directors, (iii) administering equity incentive plans and deferred
compensation bene?t plans, and (iv) discussing with management the Company’s policies and practices related to
compensation and issuing recommendations thereon.
The Compensation Committee currently consists of Mr. Wolf (Chairman), Ms. Mars and Mr. Zegna. The
Compensation Committee is elected by the Board of Directors and is comprised of at least three non-executive
directors. Unless decided otherwise by the Compensation Committee, the Head of Human Resources of the
Company attends its meetings.
Since October 12, 2014 - after the effectiveness of the merger transaction - to the year-end the Compensation
Committee met once with 67% attendance of Directors at such meeting.
The Governance and Sustainability Committee
The Governance and Sustainability Committee is responsible for, among other things, assisting and advising the
Board of Directors with: (i) the identi?cation of the criteria, professional and personal quali?cations for candidates
to serve as Directors, (ii) periodical assessment of the size and composition of the Board of Directors, (iii) periodical
assessment of the functioning of individual Directors and reporting on this to the Board of Directors, (iv) proposals
for appointment of executive and non-executive Directors, (v) supervision of the selection criteria and appointment
procedure for senior management, (vi) monitoring and evaluating reports on the Group’s sustainable development
policies and practices, management standards, strategy, performance and governance globally, and (vii) reviewing,
assessing and making recommendations as to strategic guidelines for sustainability-related issues, and reviewing the
annual Sustainability Report.
The Governance and Sustainability Committee currently consists of Mr. Elkann (Chairman), Ms. Wheatcroft and Ms.
Simmons. The Governance and Sustainability Committee is elected by the Board of Directors and is comprised of at
least three Directors. No more than two members may be non-independent, and at most one of the members may be
an executive Director.
In addition, as described above, the charters of the Audit Committee, Compensation Committee and Governance and
Sustainability Committee set forth independence requirements for their members for purposes of the Dutch Corporate
Governance Code. Audit Committee members are also required to qualify as independent for purposes of NYSE rules
and Rule 10A-3 of the Exchange Act.
Since October 12, 2014 to the year-end the Governance and Sustainability Committee did not have any meeting.
Amount and Composition of the remuneration of the Board of Directors
Details of the remuneration of the Board of Directors and its committees are set forth under the Section Remuneration
of Directors.
Indemni?cation of Directors
The Company shall indemnify any and all of its Directors, of?cers, former Directors, former of?cers and any person
who may have served at its request as a Director or of?cer of another company in which it owns shares or of which
it is a creditor, against any and all expenses actually and necessarily incurred by any of them in connection with the
defense of any action, suit or proceeding in which they, or any of them, are made parties, or a party, by reason of
being or having been Director or of?cer of the Company, or of such other company, except in relation to matters as to
which any such person shall be adjudged in such action, suit or proceeding to be liable for gross negligence or willful
misconduct in the performance of duty. Such indemni?cation shall not be deemed exclusive of any other rights to
which those indemni?ed may be entitled otherwise.
102 2014
|
ANNUAL REPORT
Corporate Governance
Con?ict of interest
A Director shall not participate in discussions and decision making of the Board of Directors with respect to a matter in
relation to which he or she has a direct or indirect personal interest that is in con?ict with the interests of the Company
and the business associated with the Company (“Con?ict of Interest”).
In addition, the Board of Directors as a whole may, on an ad hoc basis, resolve that there is such a strong appearance
of a Con?ict of Interest of an individual Director in relation to a speci?c matter, that it is deemed in the best interest of
a proper decision making process that such individual Director be excused from participation in the decision making
process with respect to such matter even though such Director may not have an actual Con?ict of Interest.
At least annually, each Director shall assess in good faith whether (i) he or she is independent under (A) best practice
provision III.2.2. of the Dutch Corporate Governance Code, (B) the requirements of Rule 10A-3 under the Exchange
Act, and (C) Section 303A of the NYSE Listed Company Manual; and (ii) he or she would have a Con?ict of Interest
in connection with any transactions between the Company and a signi?cant shareholder or related party of the
Company, including af?liates of a signi?cant shareholder (such con?ict, a “Related-Party Con?ict”), it being understood
that currently Exor S.p.A. would be considered a signi?cant shareholder.
The Directors shall inform the Board of Directors through the Senior Non-executive Director or the Secretary of the
Board of Directors as to all material information regarding any circumstances or relationships that may impact their
characterization as “independent,” or impact the assessment of their interests, including by responding promptly
to the annual D&O questionnaires circulated by or on behalf of the Secretary that are designed to elicit relevant
information regarding business and other relationships.
Based on each Director’s assessment described above, the Board of Directors shall make a determination at
least annually regarding such Director’s independence and such Director’s Related-Party Con?ict. These annual
determinations shall be conclusive, absent a change in circumstances from those disclosed to the Board of Directors,
that necessitates a change in such determination.
Loyalty Voting Structure
The Company implemented a loyalty voting structure, pursuant to which the former shareholders of Fiat S.p.A. were
able to elect to receive one special voting share with a nominal value of €0.01 per share for each common share
they were entitled to receive in the Merger, provided that they ful?lled the requirements described in the terms and
conditions of the special voting shares. Such shareholders had their common shares registered in a separate register
(the “Loyalty Register”) of the Company’s shareholders register. Following this registration, a corresponding number
of special voting shares were allocated to the above-mentioned Shareholders. By signing an election form, whose
execution was necessary to elect to receive special voting shares, shareholders also agreed to be bound by the terms
and conditions thereof, including the transfer restrictions described below.
Following the completion of the Merger, new shareholders may at any time elect to participate in the loyalty voting
structure by requesting that the Company registers all or some of their common shares in the Loyalty Register. If these
common shares have been registered in the Loyalty Register (and thus blocked from trading in the regular trading
system) for an uninterrupted period of three years in the name of the same shareholder, such shares become eligible
to receive special voting shares (the “Qualifying Common Shares”) and the relevant shareholder will be entitled to
receive one special voting share for each such Qualifying Common Share. If at any time such common shares are de-
registered from the Loyalty Register for whatever reason, the relevant shareholder shall lose its entitlement to hold a
corresponding number of special voting shares.
A holder of Qualifying Common Shares may at any time request the de-registration of some or all such shares from
the Loyalty Register, which will allow such shareholder to freely trade its common shares. From the moment of such
request, the holder of Qualifying Common Shares shall be considered to have waived her or his rights to cast any
votes associated with such Qualifying Common Shares. Upon the de-registration from the Loyalty Register, the
relevant shares will therefore cease to be Qualifying Common Shares. Any de-registration request would automatically
trigger a mandatory transfer requirement pursuant to which the special voting shares will be acquired by the Company
for no consideration (om niet) in accordance with the terms and conditions of the special voting shares.
2014
|
ANNUAL REPORT 103
The Company’s common shares are freely transferable. However, any transfer or disposal of the Company’s common
shares with which special voting shares are associated would trigger the de-registration of such common shares from
the Loyalty Register and the transfer of all relevant special voting shares to the Company. Special voting shares are not
admitted to listing and are transferable only in very limited circumstances. In particular, no shareholder shall, directly or
indirectly: (a) sell, dispose of or transfer any special voting share or otherwise grant any right or interest therein; or (b)
create or permit to exist any pledge, lien, ?xed or ?oating charge or other encumbrance over any special voting share
or any interest in any special voting share.
The purpose of the loyalty voting structure is to grant long-term shareholders an extra voting right by means of
granting a special voting share (shareholders holding special voting shares are entitled to exercise one vote for each
special voting share held and one vote for each common share held), without entitling such shareholders to any
economic rights, other than those pertaining to the common shares. However, under Dutch law, the special voting
shares cannot be excluded from economic entitlements. As a result, pursuant to the Articles of Association, holders
of special voting shares are entitled to a minimum dividend, which is allocated to a separate special dividend reserve
(the “Special Dividend Reserve”). A distribution from the Special Dividend Reserve or the (partial) release of the Special
Dividend Reserve, will require a prior proposal from the board of directors and a subsequent resolution of the meeting
of holders of special voting shares. The power to vote upon the distribution from the Special Dividend Reserve is
the only power that is granted to that meeting, which can only be convened by the Board of Directors as it deems
necessary. The special voting shares do not have any other economic entitlement.
Section 10 of the terms and conditions of the special voting shares include liquidated damages provisions intended to
discourage any attempt by holders to violate the terms thereof. These liquidated damages provisions may be enforced
by the Company by means of a legal action brought by the Company in the courts of the Netherlands. In particular, a
violation of the provisions of the above-mentioned terms and condition concerning the transfer of special voting shares
may lead to the imposition of liquidated damages.
Pursuant to Section 12 of the terms and conditions of the special voting shares, any amendment to the terms and
conditions (other than merely technical, non-material amendments) may only be made with the approval of the general
meeting of shareholders of the Company.
A Shareholder must promptly notify the Company upon the occurrence of a change of control, which is de?ned in
Article 1.1. of the Articles of Association as including any direct or indirect transfer, carried out through one or a series
of related transactions, by a shareholder that is not an individual (natuurlijk persoon) as a result of which (i) a majority of
the voting rights of such shareholder, (ii) the de facto ability to direct the casting of a majority of the votes exercisable
at general meetings of shareholders of such shareholder and/or (iii) the ability to appoint or remove a majority of the
directors, executive directors or board members or executive of?cers of such shareholder or to direct the casting of
a majority or more of the voting rights at meetings of the board of directors, governing body or executive committee
of such shareholder has been transferred to a new owner. No change of control shall be deemed to have occurred if
(a) the transfer of ownership and/or control is an intragroup transfer under the same parent company, (b) the transfer
of ownership and/or control is the result of the succession or the liquidation of assets between spouses or the
inheritance, inter vivo donation or other transfer to a spouse or a relative up to and including the fourth degree or (c)
the fair market value of the Qualifying Common Shares held by such shareholder represents less than twenty percent
(20%) of the total assets of the Transferred Group at the time of the transfer and the Qualifying Common Shares held
by such shareholder, in the sole judgment of the Company, are not otherwise material to the Transferred Group or the
change of control transaction.
Article 1.1. of the Articles of Association de?nes “Transferred Group” as comprising the relevant shareholder together
with its af?liates, if any, over which control was transferred as part of the same change of control transaction, as such
term is de?ned in the above mentioned Article of the Articles of Association. A change of control will trigger the de-
registration of the relevant Qualifying Common Shares from the Loyalty Register and the suspension of the special
voting rights attached to the Qualifying Common Shares.
104 2014
|
ANNUAL REPORT
Corporate Governance
If the Company was to be dissolved and liquidated, after all the debts of the Company have been paid, any
remaining balances would be distributed in the following order of priority: (i) ?rst, to satisfy the aggregate balance
of share premium reserves and other reserves than the Special Dividend Reserve to the holders of common shares
in proportion to the aggregate nominal value of the common shares held by each of them; (ii) second, an amount
equal to the aggregate amount of the nominal value of the common shares to the holders thereof in proportion to the
aggregate nominal value of the common shares held by each of them; (iii) third, an amount equal to the aggregate
amount of the special voting shares dividend reserve to the holders of special voting shares in proportion to the
aggregate nominal value of the special voting shares held by each of them; and (iv) fourth, the aggregate amount of
the nominal value of the special voting shares to the holders thereof in proportion to the aggregate nominal value of the
special voting shares held by each of them.
General Meeting of Shareholders
At least one general meeting of shareholders shall be held every year, which meeting shall be held within six months
after the close of the ?nancial year.
Furthermore, general meetings of shareholders shall be held in the case referred to in Section 2:108a of the Dutch Civil
Code as often as the Board of Directors, the Chairman or the Chief Executive Of?cer deems it necessary to hold them
or as otherwise required by Dutch law, without prejudice to what has been provided in the next paragraph hereof.
Shareholders solely or jointly representing at least ten percent (10%) of the issued share capital may request the Board
of Directors, in writing, to call a general meeting of shareholders, stating the matters to be dealt with.
If the Board of Directors fails to call a meeting, then such shareholders may, on their application, be authorized by
the interim provisions judge of the court (voorzieningenrechter van de rechtbank) to convene a general meeting of
shareholders. The interim provisions judge (voorzieningenrechter van de rechtbank) shall reject the application if he is
not satis?ed that the applicants have previously requested the Board of Directors in writing, stating the exact subjects
to be discussed, to convene a general meeting of shareholders.
General meetings of shareholders shall be held in Amsterdam or Haarlemmermeer (Schiphol Airport), the Netherlands,
and shall be called by the Board of Directors, the Chairman or the Chief Executive Of?cer, in such manner as is
required to comply with the law and the applicable stock exchange regulations, not later than on the forty-second day
prior to the day of the meeting.
All convocations of general meetings of shareholders and all announcements, noti?cations and communications
to shareholders shall be made by means of an announcement on the Company’s corporate website and such
announcement shall remain accessible until the relevant general meeting of shareholders. Any communication to
be addressed to the general meeting of shareholders by virtue of Dutch law or the Articles of Association, may be
either included in the notice, referred to in the preceding sentence or, to the extent provided for in such notice, on the
Company’s corporate website and/or in a document made available for inspection at the of?ce of the Company and
such other place(s) as the Board of Directors shall determine.
Convocations of general meetings of shareholders may be sent to Shareholders through the use of an electronic
means of communication to the address provided by such Shareholders to the Company for this purpose.
The notice shall state the place, date and hour of the meeting and the agenda of the meeting as well as the other data
required by law.
An item proposed in writing by such number of Shareholders who, by Dutch law, are entitled to make such proposal,
shall be included in the notice or shall be announced in a manner similar to the announcement of the notice, provided
that the Company has received the relevant request, including the reasons for putting the relevant item on the agenda,
no later than the sixtieth day before the day of the meeting.
The agenda of the annual general meeting shall contain, inter alia, the following items:
a) adoption of the annual accounts;
b) the implementation of the remuneration policy;
2014
|
ANNUAL REPORT 105
c) the policy of the Company on additions to reserves and on dividends, if any;
d) granting of discharge to the Directors in respect of the performance of their duties in the relevant ?nancial year;
e) the appointment of Directors;
f) if applicable, the proposal to pay a dividend;
g) if applicable, discussion of any substantial change in the corporate governance structure of the Company; and
h) any matters decided upon by the person(s) convening the meeting and any matters placed on the agenda with due
observance of applicable Dutch law.
The Board of Directors shall provide the general meeting of shareholders with all requested information, unless this
would be contrary to an overriding interest of the Company. If the Board of Directors invokes an overriding interest, it
must give reasons.
When convening a general meeting of shareholders, the Board of Directors shall determine that, for the purpose
of Article 19 and Article 20 of the Articles of Association, persons with the right to vote or attend meetings shall
be considered those persons who have these rights at the twenty-eighth day prior to the day of the meeting (the
“Record Date”) and are registered as such in a register to be designated by the Board of Directors for such purpose,
irrespective whether they will have these rights at the date of the meeting. In addition to the Record Date, the notice
of the meeting shall further state the manner in which shareholders and other parties with meeting rights may have
themselves registered and the manner in which those rights can be exercised.
The general meeting of shareholders shall be presided over by the Chairman or, in his absence, by the person chosen
by the Board of Directors to act as chairman for such meeting.
One of the persons present designated for that purpose by the chairman of the meeting shall act as secretary and take
minutes of the business transacted. The minutes shall be con?rmed by the chairman of the meeting and the secretary
and signed by them in witness thereof.
The minutes of the general meeting of shareholders shall be made available, on request, to the shareholders no later
than three months after the end of the meeting, after which the shareholders shall have the opportunity to react to the
minutes in the following three months. The minutes shall then be adopted in the manner as described in the preceding
paragraph.
If an of?cial notarial record is made of the business transacted at the meeting then minutes need not be drawn up and
it shall suf?ce that the of?cial notarial record be signed by the notary.
As a prerequisite to attending the meeting and, to the extent applicable, exercising voting rights, the shareholders
entitled to attend the meeting shall be obliged to inform the Board of Directors in writing within the time frame
mentioned in the convening notice. At the latest this notice must be received by the Board of Directors on the day
mentioned in the convening notice.
Shareholders and those permitted by Dutch law to attend the general meetings of the shareholders may cause
themselves to be represented at any meeting by a proxy duly authorized in writing, provided they shall notify
the Company in writing of their wish to be represented at such time and place as shall be stated in the notice of
the meetings. For the avoidance of doubt, such attorney is also authorized in writing if the proxy is documented
electronically. The Board of Directors may determine further rules concerning the deposit of the powers of attorney;
these shall be mentioned in the notice of the meeting.
The Company is exempt from the proxy rules under the U.S. Securities Exchange Act of 1934, as amended.
The chairman of the meeting shall decide on the admittance to the meeting of persons other than those who are
entitled to attend.
106 2014
|
ANNUAL REPORT
Corporate Governance
For each general meeting of shareholders, the Board of Directors may decide that shareholders shall be entitled to
attend, address and exercise voting rights at such meeting through the use of electronic means of communication,
provided that shareholders who participate in the meeting are capable of being identi?ed through the electronic means
of communication and have direct cognizance of the discussions at the meeting and the exercising of voting rights (if
applicable). The Board of Directors may set requirements for the use of electronic means of communication and state
these in the convening notice. Furthermore, the Board of Directors may for each general meeting of shareholders
decide that votes cast by the use of electronic means of communication prior to the meeting and received by the
Board of Directors shall be considered to be votes cast at the meeting. Such votes may not be cast prior to the
Record Date. Whether the provision of the foregoing sentence applies and the procedure for exercising the rights
referred to in that sentence shall be stated in the notice.
Prior to being allowed admittance to a meeting, a shareholder and each person entitled to attend the meeting, or
its attorney, shall sign an attendance list, while stating his name and, to the extent applicable, the number of votes
to which he is entitled. Each shareholder and other person attending a meeting by the use of electronic means of
communication and identi?ed in accordance with the above shall be registered on the attendance list by the Board of
Directors. In the event that it concerns an attorney of a shareholder or another person entitled to attend the meeting,
the name(s) of the person(s) on whose behalf the attorney is acting, shall also be stated. The chairman of the meeting
may decide that the attendance list must also be signed by other persons present at the meeting.
The chairman of the meeting may determine the time for which shareholders and others entitled to attend the general
meeting of shareholders may speak if he considers this desirable with a view to the orderly conduct of the meeting as
well as other procedures that the chairman considers desirable for the ef?cient and orderly conduct of the business of
the meeting.
Every share (whether common or special voting) shall confer the right to cast one vote.
Shares in respect of which Dutch law determines that no votes may be cast shall be disregarded for the purposes
of determining the proportion of shareholders voting, present or represented or the proportion of the share capital
present or represented.
All resolutions shall be passed with an absolute majority of the votes validly cast unless otherwise speci?ed herein.
Blank votes shall not be counted as votes cast.
All votes shall be cast in writing or electronically. The chairman of the meeting may, however, determine that voting by
raising hands or in another manner shall be permitted.
Voting by acclamation shall be permitted if none of the Shareholders present or represented objects.
No voting rights shall be exercised in the general meeting of shareholders for shares owned by the Company or by a
subsidiary of the Company. Pledgees and usufructuaries of shares owned by the Company and its subsidiaries shall
however not be excluded from exercising their voting rights, if the right of pledge or usufruct was created before the
shares were owned by the Company or a subsidiary. Neither the Company nor any of its subsidiaries may exercise
voting rights for shares in respect of which it holds a right of pledge or usufruct.
Without prejudice to the Articles of Association, the Company shall determine for each resolution passed:
a) the number of shares on which valid votes have been cast;
b) the percentage that the number of shares as referred to under a. represents in the issued share capital;
c) the aggregate number of votes validly cast; and
d) the aggregate number of votes cast in favor of and against a resolution, as well as the number of abstentions.
2014
|
ANNUAL REPORT 107
Issuance of shares
The general meeting of shareholders or alternatively the Board of Directors, if it has been designated to do so by the
general meeting of shareholders, shall have authority to resolve on any issuance of shares and rights to subscribe for
shares. The general meeting of shareholders shall, for as long as any such designation of the Board of Directors for this
purpose is in force, no longer have authority to decide on the issuance of shares and rights to subscribe for shares.
For a period of ?ve years from October 12, 2014, the Board of Directors has been irrevocably authorized to issue shares
and rights to subscribe for shares up to the maximum aggregate amount of shares as provided for in the company’s
authorized share capital as set out in Article 4.1 of the Articles of Association, as amended from time to time.
The general meeting of shareholders or the Board of Directors if so designated in accordance with the Articles of
Association, shall decide on the price and the further terms and conditions of issuance, with due observance of what
has been provided in relation thereto in Dutch law and the Articles of Association.
If the Board of Directors is designated to have authority to decide on the issuance of shares or rights to subscribe for
shares, such designation shall specify the class of shares and the maximum number of shares or rights to subscribe
for shares that can be issued under such designation. When making such designation the duration thereof, which shall
not be for more than ?ve years, shall be resolved upon at the same time. The designation may be extended from time
to time for periods not exceeding ?ve years. The designation may not be withdrawn unless otherwise provided in the
resolution in which the designation is made.
Payment for shares shall be made in cash unless another form of consideration has been agreed. Payment in a
currency other than euro may only be made with the consent of the Company.
The Board of Directors has also been designated as the authorized body to limit or exclude the rights of pre-emption
of shareholders in connection with the authority of the Board of Directors to issue common shares and grant rights to
subscribe for common shares as referred to above.
In the event of an issuance of common shares every holder of common shares shall have a right of pre-emption with
regard to the common shares or rights to subscribe for common shares to be issued in proportion to the aggregate
nominal value of his common shares, provided however that no such right of pre-emption shall exist in respect of
shares or rights to subscribe for common shares to be issued to employees of the Company or of a group company
pursuant to any option plan of the Company.
A shareholder shall have no right of pre-emption for shares that are issued against a non-cash contribution.
In the event of an issuance of special voting shares to qualifying shareholders, shareholders shall not have any right of
pre-emption.
The general meeting of shareholders or the Board of Directors, as the case may be, shall decide when passing the
resolution to issue shares or rights to subscribe for shares in which manner the shares shall be issued and, to the
extent that rights of pre-emption apply, within what period those rights may be exercised.
Corporate of?ces
The Company is incorporated under the laws of the Netherlands. It has its corporate seat in Amsterdam, the
Netherlands, and the place of effective management of the Company is in the United Kingdom.
The business address of the Board of Directors and the senior managers is 25 St. James’s Street, SW1A1HA London,
United Kingdom.
The Company is registered at the Dutch trade register under number 60372958 and at the Companies House in the
United Kingdom under ?le number FC031853.
108 2014
|
ANNUAL REPORT
Corporate Governance
Internal Control System
The Group has in place an internal control system (the “System”), based on the model provided by the COSO
Framework (Committee of Sponsoring Organizations of the Treadway Commission Report - Enterprise Risk
Management model) and the principles of the Dutch Corporate Governance Code, which consists of a set of policies,
procedures and organizational structures aimed at identifying, measuring, managing and monitoring the principal
risks to which the Company is exposed. The System is integrated within the organizational and corporate governance
framework adopted by the Company and contributes to the protection of corporate assets, as well as to ensuring
the ef?ciency and effectiveness of business processes, reliability of ?nancial information and compliance with laws,
regulations, the Articles of Association and internal procedures.
The System, which has been developed on the basis of international best practices, consists of the following three
levels of control:
Level 1: operating areas, which identify and assess risk and establish speci?c actions for management of such risk;
Level 2: departments responsible for risk control, which de?ne methodologies and instruments for managing risk
and monitoring such risk;
Level 3: internal audit, which conducts independent evaluations of the System in its entirety.
Principal Characteristics of the Internal Control System and Internal Control over Financial Reporting
The Company has in place a system of risk management and internal control over ?nancial reporting based on
the model provided in the COSO Framework, according to which the internal control system is de?ned as a set of
rules, procedures and tools designed to provide reasonable assurance of the achievement of corporate objectives.
In relation to the ?nancial reporting process, reliability, accuracy, completeness and timeliness of the information
contribute to the achievement of such corporate objectives. Risk management is an integral part of the internal control
system. A periodic evaluation of the system of internal control over ?nancial reporting is designed to ensure the overall
effectiveness of the components of the COSO Framework (control environment, risk assessment, control activities,
information and communication, and monitoring) in achieving those objectives.
The Company has a system of administrative and accounting procedures in place that ensure a high degree of
reliability in the system of internal control over ?nancial reporting.
The approach adopted by the Company for the evaluation, monitoring and continuous updating of the system of
internal control over ?nancial reporting, is based on a ‘top-down, risk-based’ process consistent with the COSO
Framework. This enables focus on areas of higher risk and/or materiality, where there is risk of signi?cant errors,
including those attributable to fraud, in the elements of the ?nancial statements and related documents. The key
components of the process are:
identi?cation and evaluation of the source and probability of material errors in elements of ?nancial reporting;
assessment of the adequacy of key controls in enabling ex-ante or ex-post identi?cation of potential misstatements
in elements of ?nancial reporting; and
veri?cation of the operating effectiveness of controls based on the assessment of the risk of misstatement in
?nancial reporting, with testing focused on areas of higher risk.
Identi?cation and evaluation of the risk of misstatements which could have material effects on ?nancial reporting is
carried out through a risk assessment process that uses a top-down approach to identify the organizational entities,
processes and the related accounts, in addition to speci?c activities, which could potentially generate signi?cant
errors. Under the methodology adopted by the Company, risks and related controls are associated with the
accounting and business processes upon which accounting information is based.
Signi?cant risks identi?ed through the assessment process require de?nition and evaluation of key controls that
address those risks, thereby mitigating the possibility that ?nancial reporting will contain any material misstatements.
2014
|
ANNUAL REPORT 109
In accordance with international best practices, the Group has two principal types of control in place:
controls that operate at Group or subsidiary level, such as delegation of authorities and responsibilities, separation
of duties, and assignment of access rights for IT systems; and
controls that operate at process level, such as authorizations, reconciliations, veri?cation of consistencies, etc.
This category includes controls for operating processes, controls for closing processes and cross-sector controls
carried out by captive service providers. These controls can be preventive (i.e., designed to prevent errors or fraud
that could result in misstatements in ?nancial reporting) or detective (i.e., designed to reveal errors or fraud that have
already occurred). They may also be de?ned as manual or automatic, such as application-based controls relating to
the technical characteristics and con?guration of IT systems supporting business activities.
An assessment of the design and operating effectiveness of key controls is carried out through tests performed by
internal audit functions, both at group and subsidiary level, using sampling techniques recognized as best practices
internationally. Internal Audit also conducts a qualitative review of the tests performed by subsidiary companies.
The assessment of the controls may require the de?nition of compensating controls and plans for remediation
and improvement. The results of monitoring are subject to periodic review by the manager responsible for of the
Company’s ?nancial reporting and communicated by him to senior management and to the Audit Committee (which in
turn reports to the Board of Directors).
Code of Conduct
The Company and all its subsidiaries refer to the principles contained in the Fiat S.p.A. code of conduct (the “Code of
Conduct”) and related Guidelines until approval of the new Code of Conduct by the Board of Directors.
The latest version of the Code of Conduct, a revision of the 2003 version, took effect in February 2010. The Code
of Conduct represents a set of values recognized, adhered to and promoted by the Group which understands that
conduct based on the principles of diligence, integrity and fairness is an important driver of social and economic
development.
The Code of Conduct is a pillar of the governance system which regulates the decision-making processes and
operating approach of the Group and its employees in the interests of stakeholders. The Code of Conduct ampli?es
aspects of conduct related to the economic, social and environmental dimensions, underscoring the importance of
dialog with stakeholders. Explicit reference is made to the UN’s Universal Declaration on Human Rights, the principal
Conventions of the International Labor Organization (ILO), the OECD Guidelines for Multinational Enterprises and
the U.S. Foreign Corrupt Practices Act (FCPA). The Code of Conduct was amended to include speci?c guidelines
relating to: the Environment, Health and Safety, Business Ethics and Anti-corruption, Suppliers, Human Resource
Management, Respect of Human Rights, Con?icts of Interest, Community Investment, Data Privacy and Use of IT and
Communications Equipment.
In May 2014, the Code of Conduct was updated to reinforce the principles regarding “Antitrust” and “Export controls”
regulations and two new related Guidelines also entered into force. The Code of Conduct applies to all Directors,
employees of Group companies and other individuals or companies that act in the name and on behalf of one or more
Group companies.
The Company promotes adoption of the Code of Conduct as a best practice standard of business conduct by
partners, suppliers, consultants, agents, dealers and others with whom it has a long-term relationship. In fact, Group
contracts worldwide include speci?c clauses relating to recognition and adherence to the principles underlying the
Code of Conduct and related guidelines, as well as compliance with local regulations, particularly those related to
corruption, money-laundering, terrorism and other crimes constituting liability for legal persons.
The Code of Conduct is available on the Investors section (Fiat S.p.A. Archive) of the Group’s website.
110 2014
|
ANNUAL REPORT
Corporate Governance
Insider Trading Policy
On October 10, 2014 the Fiat Investments‘s Board of Directors adopted an insider trading policy setting forth
guidelines and recommendations to all Directors, of?cers and employees of the Group with respect to transactions
in the Company’s securities. This policy, which also applies to immediate family members and members of the
households of persons covered by the policy, is designed to prevent insider trading or allegations of insider trading,
and to protect the Company’s for integrity and ethical conduct.
Sustainability Practices
The Group is committed to operating in an environmentally and socially-responsible manner.
As discussed above, the Governance and Sustainability Committee was assigned responsibility for strategic oversight
of sustainability-related issues and reviews the annual Sustainability Report. The GEC de?nes the strategic approach,
evaluates the congruity of the Sustainability Plan with business objectives and is regularly updated on the Group’s
sustainability performance.
The Sustainability Unit, which is part of the Group’s ?nancial organization, has operational responsibility for promoting
a culture of sustainability throughout the Group, it facilitates the process of continuous improvement, and contributes
to managing risks and strengthening the relationship with and perceptions of stakeholders, in addition to managing
sustainability reporting and communications.
The Code of Conduct includes guidelines aimed at ensuring the Group’s activities are conducted in a consistent and
responsible manner. In addition, the Group has also adopted “Sustainability Guidelines for Suppliers,” setting forth
expectations for suppliers and sub-suppliers of the Group worldwide, “Environmental Guidelines,” which provide clear
indications on how to establish and update environmental targets, develop new products and execute daily activities
worldwide, and “Green Logistics Principles” setting forth principles for ensuring respect for the environment in the
Group’s logistical and supply chain operations.
The Group also produces a Sustainability Plan, to drive continuous improvement in the Group’s sustainability
performance. The Sustainability Plan reports on the annual progress of existing and new targets, as well as actions to
be implemented in order to reach these commitments.
The Sustainability Plan is part of the Sustainability Report, which is prepared on a voluntary basis applying the Global
Reporting Initiative’s G4 guidelines (GRI - G4) - comprehensive approach, taking also into account international
Integrated Reporting Framework principles and contents.
The Company’s sustainability model results in a variety of initiatives related to good corporate governance;
environmentally responsible products, plants and processes; a healthy, safe and inclusive work environment; and
constructive relationships with local communities and business partners, as these are the milestones along the
Group’s path of continual improvement oriented to long-term value creation.
Over the years, the Group has placed particular emphasis on the reduction of polluting emissions, fuel consumption
and greenhouse gas emissions in:
engines, by developing increasingly ef?cient technologies for conventional engines, expanding the use of alternative
fuels (such as natural gas and biofuels), and developing alternative propulsion systems (such as hybrid or electric
solutions), based on the speci?c energy needs and fuel availability of the various countries:
production plants, by cutting energy consumption levels and promoting the use of renewable energy;
transport activities, by increasing low-emission transport and involving our employees to reduce their commuting
emissions;
supplier activities, by promoting environmental responsibility and spreading the principles and culture of World
Class Manufacturing;
of?ce-related activities, such as business travel, of?ce activities and information technology emissions;
eco-responsible driving behavior, by providing dealers and customers with information and training on vehicle use
and maintenance.
2014
|
ANNUAL REPORT 111
The Company’s achievements in improving its sustainability performance have been recognized through inclusion in several
leading sustainability indices. In particular, in 2014 the Company was included in the Dow Jones Sustainability World Index.
Compliance with Dutch Corporate Governance Code
While the Company endorses the principles and best practice provisions of the Dutch Corporate Governance Code,
its current corporate governance structure applies as follows the following best practice provisions:
As far the provisions of paragraph II.1.8 regarding the limitation of positions of directors is concerned, the Company
endorses that a proper performance by its Directors of their duties is assured. Given the historical af?liation between
the Company and CNH Industrial N.V., the Company values the current connection between both companies
through the combined positions of Mr Elkann and Mr Marchionne and therefore does not apply those provisions.
The Company applies the best practice provisions in the paragraphs II.2.4 and II.2.5 of the Dutch Corporate
Governance Code. However, prior to the Merger Fiat S.p.A. implemented the 2012 Long Term incentive Plan (the
“Plan”). Pursuant to the Plan, options and stock grants (the “Equity Rights”) related to Fiat S.p.A. were granted
by Fiat S.p.A. to eligible persons prior to the Merger. The Plan provides that such Equity Rights may be exercised
within one year after the date of granting. Due to the Merger, the Equity Rights related to Fiat S.p.A. that were
already granted by Fiat S.p.A. pursuant to the Plan (and that are considered acquired rights) had to be converted
into comparable Equity Rights relating to the Company. In order to achieve this, the Company has granted (rights
to acquire) common shares in the capital of the Company under the Plan under the same terms as apply to the
corresponding Equity Rights related to Fiat S.p.A., including in respect of the term for exercising the Equity Rights.
Pursuant to the provisions of the paragraphs II.3.3 and III.6.2, a Director may not take part in any discussion or
decision-making that involves a subject or transaction in relation to which he or she may appear to have a con?ict of
interest with the Company. However, the de?nition of con?ict of interest as referred to in the Dutch Civil Code refers
to an actual con?ict of interest and as such the regulations of the Board of Directors are geared towards an actual
con?ict of interest and do not include the reference to the appearance of a con?ict of interest. Nevertheless, these
regulations stipulate that the Board of Directors as a whole may, on an ad hoc basis, resolve that there is such a strong
appearance of a con?ict of interest of an individual Director in relation to a speci?c matter, that it is deemed in the best
interest of proper decision making process that such individual Director be recused from participation in the decision
making process with respect to such matter even though such Director may not have an actual con?ict of interest.
The Company does not have a retirement schedule as referred to in paragraph III.3.6 of the Dutch Corporate
Governance Code, because pursuant to the Articles of Association the term of of?ce of Directors is approximately
one year, such period expiring on the day the ?rst annual general meeting of shareholders is held in the following
calendar year. This approach is in line with the general practice for companies listed in the U.S. As the Company is
listed at NYSE, the Company also relies on certain US governance policies, one of which is the reappointment of
our directors at each annual general meeting of shareholders.
The Governance and Sustainability Committee currently has only one non-independent member as required by
paragraph III.5.1. of the Code and although the committee charter allows for the Governance and Sustainability
Committee to have no more than two non-independent members, at the moment the Company does not intend
to make use of this possibility. Mr John Elkann, being an executive Director, has a position on the Governance
and Sustainability Committee to which paragraph III.8.3 of the Dutch Corporate Governance Code applies. The
position of Mr Elkann as executive Director in this committee inter alia follows from the duties of the governance and
sustainability committee, which are more extensive than the duties of a selection and appointment committee and
include duties that warrant participation of an executive Director.
The Dutch Corporate Governance Code provisions primarily refer to companies with a two-tier board structure
(consisting of a management board and a separate supervisory board), while the Company has implemented a one-
tier board. The best practices re?ected in the Dutch Corporate Governance Code for supervisory board members
apply by analogy to non-executive directors. Unlike supervisory board members of companies with a two-tier
board to which provision III.7.1 of the Dutch Corporate Governance Code applies, non-executive directors of the
Company also have certain management tasks. In view hereof, non-executive directors have the opportunity to
elect whether (part of) their annual retainer fee will be made in common shares of the Company.
112 2014
|
ANNUAL REPORT
Corporate Governance
IN CONTROL STATEMENT
Internal Control System
The Board of Directors is responsible for designing, implementing and maintaining internal controls, including proper
accounting records and other management information suitable for running the business.
The principal characteristics of the Internal Control System and Internal Control over Financial Reporting adopted by
the Company are described in the speci?c paragraph mentioned above.
Based on the assessment performed, the Board of Directors concluded that, as of December 31, 2014 the Group’s
and the Company’s Internal Control over Financial Reporting is considered effective.
March 5, 2015
John Elkann
Chairman
Sergio Marchionne
Chief Executive Of?cer
2014
|
ANNUAL REPORT 113
RESPONSIBILITIES IN RESPECT TO THE ANNUAL REPORT
The Board of Directors is responsible for preparing the Annual Report, inclusive of the Consolidated and Company
Financial Statements and Report on Operations, in accordance with Dutch law and International Financial Reporting
Standards as issued by the International Accounting Standards Board and as adopted by the European Union (IFRS).
In accordance with Section 5:25c, paragraph 2 of the Dutch Financial Supervision Act, the Board of Directors states
that, to the best of its knowledge, the Financial Statements prepared in accordance with applicable accounting
standards provide a true and fair view of the assets, liabilities, ?nancial position and pro?t or loss for the year of the
Company and its subsidiaries and that the Report on Operations provides a true and a fair view of the performance
of the business during the ?nancial year and the position at balance sheet date of the Company and its subsidiaries,
together with a description of the principal risks and uncertainties that the Company and the Group face.
March 5, 2015
The Board of Directors
John Elkann
Sergio Marchionne
Andrea Agnelli
Tiberto Brandolini d’Adda
Glenn Earle
Valerie Mars
Ruth J. Simmons
Ronald L. Thompson
Patience Wheatcroft
Stephen M. Wolf
Ermenegildo Zegna
114 2014
|
ANNUAL REPORT
Sustainability Disclosure
Sustainability Disclosure
Sustainability Governance and Commitment to Stakeholders
Sustainability Governance
All areas of the Group have an active role in addressing the goals and challenges of sustainability. The sustainability
management process is based on a model of shared responsibility that begins with the top level of management
and involves every area and function within the organization. All employees worldwide are expected to conduct their
activities responsibly.
Several entities within the organization are responsible for directing and coordinating sustainability activities across the
Group’s businesses. Those entities include:
The Sustainability Team, through its of?ces in Italy, the U.S., Brazil and China, has a key role in promoting a culture
of sustainability within the Group and facilitating the process of continuous improvement, while contributing to
risk management, cost optimization, stakeholder engagement and enhancement of the Group’s image. The
team collaborates with individuals within the business areas, regions and central functions that have operational
responsibility for issues such as the environment, energy, innovation and human resources, and supports them
in identifying key areas for action. It also manages relationships with international sustainability organizations, as
well as sustainability rating agencies and investment analysts, with the support and coordination of the Investor
Relations team.
The Cross-functional Sustainability Committee (CSC) consists of the heads of the principal central functions, operating
segments and regions, who are often also consulted individually. The CSC evaluates and facilitates operational
decisions, as well as serving in an advisory capacity for proposals submitted by the Sustainability Team to the
Group Executive Council (GEC), the decision-making body composed of the Chief Executive Of?cer (CEO) and
Chief Operating Of?cers (COOs) of the regions and operating segments, together with the heads of various central
functions. The GEC is responsible for de?ning the strategic approach, approving operating guidelines and evaluating
the alignment of the Sustainability Plan with business objectives. The CSC periodically updates the GEC on individual
initiatives and the Group’s overall sustainability performance.
The Governance and Sustainability Committee (a committee of the Board of Directors) evaluates proposals relating
to strategic guidelines for sustainability-related issues and, as appropriate, formulates proposals to the Board of
Directors. This Committee also reviews the annual Sustainability Report.
Commitment to Stakeholders
Our ability to generate value through our business decisions is intrinsically linked to how effective we are in listening
to and understanding the needs and expectations of our stakeholders. FCA has established a global target
to expand and innovate the sustainability dialogue with our stakeholders, and to reach an increasing number
worldwide each year.
The decisions made by many of our stakeholders - including customers, suppliers, dealers, employees, public
institutions, trade and industry groups, investors and local communities - affect the Group’s activities. Similarly, the
Group’s activities and results affect, to varying degrees, the actions and expectations of stakeholders.
For this reason, operating responsibly requires continuous engagement with stakeholders at the local and global
levels, as indicated in the Group’s Stakeholder Engagement Guidelines.
Over time, our engagement has evolved and we have developed a variety of channels to communicate with each type
of stakeholder. This has fostered a deeper understanding of stakeholder expectations and led to the implementation
of initiatives that are more effective at addressing their speci?c needs.
2014
|
ANNUAL REPORT 115
In 2014, FCA conducted 14 internal sustainability-focused Stakeholder Engagement events in Italy, the U.S. and
China. These events provided a platform for more than 400 employees representing the various business areas to
express their views, needs and priorities. The participants took part in discussions and workshops that addressed the
economic, environmental and social impacts of FCA’s activities. The events were also effective in identifying material
aspects speci?c to each region.
Materiality Analysis
FCA’s sustainability reporting focuses on topics that have been determined to be material in accordance with the
Global Reporting Initiative (G4) framework (“Material Aspects are those that re?ect the organization’s signi?cant
economic, environmental and social impacts; or substantively in?uence the assessments and decisions of
stakeholders”, Global Reporting Initiative, Sustainability Reporting Guidelines- G4, pg. 7).
In 2014, material topics identi?ed in prior years were subjected to a thorough review and the FCA materiality diagram
was updated accordingly (The materiality analysis was carried out in accordance with the AA1000 Stakeholder
Engagement Standard guidelines for the steps relating to the identi?cation, mapping and prioritization of stakeholders,
and to the analysis of the results of their involvement. The guidance notes on Accountability and the criteria de?ned
by the Global Reporting Initiative (GRI-G4) were also followed with regard to outlining an approach to the materiality
principle and the identi?cation of material issues). In addition to the results from our stakeholder engagement activities,
the determination of materiality also took into account strategic priorities, corporate values, competitive activities and
social expectations.
An analysis of the scope of each material aspect con?rmed that it has impacts throughout the entire organization
and across all operating segments and regions. In addition, each aspect has impacts outside the organization in
geographical areas where the Group operates and for all stakeholder categories identi?ed.
Product Social Environment
Alternative fuels (natural gas, biofuel)
I
m
p
o
r
t
a
n
t
Important
V
e
r
y
i
m
p
o
r
t
a
n
t
Very important
I
n
c
r
e
a
s
i
n
g
i
m
p
o
r
t
a
n
c
e
f
o
r
e
x
t
e
r
n
a
l
s
t
a
k
e
h
o
l
d
e
r
s
Increasing importance for internal stakeholders
Vehicle safety
Vehicle fuel economy
Vehicle quality
Alternative propulsion and drive systems
(hybrid and electric)
Product innovation
New mobility solutions
Vehicle CO
2
emissions
Energy and CO
2
emissions from operations, of?ces
Waste generated by operations
Environmental impact of logistics
Responsible sourcing
and recycling
Water used by operations
Workforce diversity
and equal opportunities
Engagement with trade unions Engagement
with business partners
Employee development and training
Employee health and safety
Human rights along the value chain
Business integrity and ethical standards
Customer satisfaction
Community engagement
Employee well-being and work-life balance
116 2014
|
ANNUAL REPORT
Sustainability Disclosure
Research, Innovation and Sustainable Mobility
FCA is committed to meeting the mobility needs of customers, while reducing the environmental and social impact of
vehicles over their entire life cycle. The Group’s global research and innovation activities are focused on developing
solutions for increasingly sustainable mobility, by reducing fuel consumption and emissions, improving vehicle
recyclability and safety, and developing new models of mobility. Continuous innovation is essential to development of
products that are environmentally and socially sustainable, as well as affordable.
Innovating for Sustainable Products and Processes
All innovation activities worldwide are coordinated through a common framework, the FCA Global Innovation Process
(GIP). Developed in collaboration with, and on the basis of, input from the Group’s four operating regions, the GIP
covers all phases of the innovation process, from idea generation to pre-competitive development. As part of that
process, guidelines and targets are then formalized in the Strategic Agenda.
During 2014, the process was further enhanced through improved integration of the four regions in several aspects of
project de?nition and management. As a result, achievements for current projects were optimized and proposals for
new initiatives were harmonized on the global level.
The process is coordinated centrally by the Chief Technology Of?cer who, as a member of the Group Executive
Council, ensures alignment of the innovation process with the Group’s strategic objectives, and enables synergies and
the transfer of new solutions across the Group’s global product portfolio.
At year-end 2014, the Group’s research and innovation activities involved approximately 20,000 individuals at 85
centers worldwide.
During the year, the Group invested approximately €3.7 billion in R&D (Includes capitalized R&D and R&D charged
directly to the income statement), representing around 3.9% of net revenues from Industrial Activities.
The Group’s innovation activities have generated a signi?cant intellectual property portfolio over the years and, at year-
end 2014, FCA had a total of 8,311 registered patent applications and 3,719 protected product designs.
Patents - FCA worldwide
Total patents registered at December 31, 2014 8,311
of which: registered in 2014 596
Patents pending at December 31, 2014 3,410
of which: new patent applications ?led in 2014 414
Designs - FCA worldwide
Design rights registered at 31 December 2014 3,719
of which: registered in 2014 294
Centers of Excellence
CRF, headquartered in Orbassano (Turin, Italy) with additional sites across Italy, was established in 1978 as a focal point
for the Company’s research and innovation activities. It is a recognized center of excellence at the international level.
The mission of CRF is to:
develop and transfer innovative systems and features, materials, processes with innovation expertise in order to
improve the competitiveness of FCA products;
represent FCA in European collaborative research programs, joining pre-competitive projects and promoting
networking actions;
support FCA in the protection and enhancement of intellectual property.
2014
|
ANNUAL REPORT 117
CRF draws on technical skills and knowledge covering the full spectrum of automotive engineering disciplines and is
equipped with state-of-the-art laboratories for testing powertrain systems, analyzing materials and electromagnetic
compatibility, and conducting noise and vibration analysis and driving simulations. All research activities are conducted
in coordination with the technical areas and operating regions of FCA.
Located in Windsor, Canada, the FCA Automotive Research and Development Centre (ARDC) opened in May 1996
in partnership with the University of Windsor and serves as an illustration of what can be achieved when industry,
academia and government work together. The ARDC is equipped with six road-test simulators and a range of
research and development support facilities, including the Automotive Coatings Research Facility, the Automotive
Lighting Research Facility and the Vehicle Recycling Laboratory.
Dedication to innovation in numbers (no.) 2014
CRF employees at year end 914
Collaborative research projects, running at the end of 2014 264
of which: approved in 2014 17
Strategy to Minimize Emissions
The Group’s sustainable product strategy is based on reducing the environmental impact of vehicles over their entire
life cycle and addressing emissions challenges on several fronts. Key elements in this strategy include optimizing the
ef?ciency of conventional engines, offering a full range of alternative fuel vehicles, developing alternative propulsion and
emission reduction systems, reducing the energy requirements of vehicles, promoting driver behavior that contributes
to reducing emissions and introducing new mobility services and solutions.
Immediate and tangible results can best be achieved by combining conventional and alternative technologies,
while recognizing and accommodating the different economic, geographic and fuel requirements of each market.
Affordability is also a key consideration: even the most effective technologies cannot have a signi?cant impact on the
environment if they are too expensive to reach a suf?ciently large number of people.
The Group’s commitment to increasingly sustainable mobility is particularly focused on the EMEA and NAFTA regions,
where approximately 73% of Group revenues were generated in 2014.
In the European Union, the Group’s Mass-Market brands (Fiat, Alfa Romeo, Lancia, Abarth, Chrysler and Jeep) have
reduced average CO
2
emissions per vehicle sold by 24% over the past 14 years. In addition, approximately 73% of
Group cars sold in 2014 had CO
2
emissions at or below 120 g/km, and 82% at or below 130 g/km.
New registrations by CO
2
emissions level in European Union for Mass-Market Brands (g/km)
(*)
up to 100 12%
from 101 to 110 15%
from 111 to 120 46%
from 121 to 130 9%
above 130 18%
Total 100%
(*)
CO
2
data based on New European Driving Cycle (NEDC) measurement standard.
In the United States, vehicle ef?ciency is measured by fuel economy (Data is reported to the U.S. National Highway
Traf?c Safety Administration (NHTSA) and provided by model year, meaning the year used to designate a discrete
vehicle model, irrespective of the calendar year in which the vehicle was actually produced, provided that the
production period does not exceed 24 months. CAFE standards from NHTSA are set independently for passenger
cars and light duty trucks. Fuel economy is based on the most recent NHTSA required submission, which for 2014
re?ects mid-model year data. Previous year data is adjusted to re?ect ?nal EPA/NHTSA reports) expressed in miles
per gallon (mpg). Actual ?eet performance is dependent on many factors, including the vehicles and technologies FCA
offers, as well as the mix of vehicles consumers choose to buy.
118 2014
|
ANNUAL REPORT
Sustainability Disclosure
In 2014, trucks, including SUVs, pickup trucks and minivans, accounted for approximately three quarters of FCA sales
in the United States. FCA light duty truck fuel economy improved 6% from 2013 to 2014, increasing from 24.5 mpg in
2013 to 26.0. Due to consumer preference for FCA large cars and larger displacement engines in 2014, FCA domestic
passenger car mpg declined, from 32.3 in 2013 to 31.1.
The Group introduced a number of new solutions in 2014 to improve the eco-performance of our products.
Innovative Powertrains
The latest addition to the FIRE family of gasoline engines - the 140 hp, 1.4-liter Turbo MultiAir II - was launched in
Europe on the new Jeep Renegade in late 2014 and is now also available on the Fiat 500X. This second generation
MultiAir technology brings further improvements in fuel ef?ciency and CO
2
emissions (up to 2% based on the New
European Driving Cycle), building on the advantages of the ?rst generation MultiAir engines that delivered reductions of
up to 10% compared with a conventional gasoline engine of the same displacement.
The new high-performance 1.8-liter Turbo GDI (Euro 6) was introduced on the Alfa Romeo Giulietta for the European
market in combination with the 6-speed TCT (twin clutch) sequential automatic transmission. The aluminum engine
block, electronically-controlled thermostat, variable displacement oil pump and other features all contribute to the
engine’s best-in-class CO
2
emissions performance.
The Start&Stop system was introduced on the 8-valve, 1.2-liter versions of the Fiat 500 and Lancia Ypsilon, further
improving average CO
2
emissions for our vehicle ?eet in Europe.
With respect to new diesel engines in Europe, availability of the second-generation 120 hp, 1.6-liter MultiJet II and
140 hp, 2.0-liter MultiJet II, both Euro 6 compliant, has been extended to the Fiat 500X. Equipped with the 1.6-liter
engine, the 500X delivers fuel consumption as low as 4.1 liters/100 km and CO
2
emissions of 109 g/km (combined
cycle). Other eco-friendly technologies on the 500X include: a smart alternator, which modulates energy output based
on current energy demand and battery charge level; optimization of the engine cooling circuit to reduce warm-up
time; and a variable displacement oil pump that improves energy ef?ciency by regulating oil pressure based on actual
operating conditions.
In the NAFTA region, FCA’s 3.0-liter EcoDiesel engine on the Ram 1500 delivers the highest fuel economy among all
full-size truck competitors - 12% higher than the next-closest competitor. In 2014, in response to strong consumer
demand, FCA increased the EcoDiesel mix to 20% of Ram 1500 production. This engine is also available on the Jeep
Grand Cherokee, delivering 30 miles per gallon with a driving range of more than 730 miles.
During 2014, FCA continued to expand availability of the Group’s advanced technology transmissions. The new
Jeep Renegade became the world’s ?rst small SUV with a nine-speed automatic transmission. This transmission
delivers a smooth driving experience and improved fuel ef?ciency. The nine-speed transmission is also available on
the new Fiat 500X.
In addition, the Jeep Renegade and Fiat 500X are equipped with rear-axle disconnect, which reduces energy loss when
4x4 capability isn’t needed and, as a consequence, improves overall fuel ef?ciency. This technology seamlessly and
automatically switches between two- and four-wheel drive for full-time torque management under all driving conditions.
FCA’s highly ef?cient TorqueFlite eight-speed automatic transmission is now powering more than one million vehicles,
with availability expanded to include all versions of the Chrysler 300, Dodge Charger and Challenger. The TorqueFlite
was already available on the Ram 1500 pickup, Lancia Thema, Dodge Durango and Jeep Grand Cherokee.
Depending on the application, this transmission contributes to fuel economy improvements of up to 12%, compared
with the previous ?ve-speed and six speed transmissions it replaces.
Research activities on gasoline engines have been devoted to the continuous evolution of the MultiAir system
capabilities. The aim is to maintain the highest thermal ef?ciency over the entire engine operating ?eld. Smart
auxiliaries, lightweight materials and low friction components are being assessed for future engine platforms to further
reduce fuel consumption and CO
2
emissions.
Research activities on diesel engines have been focused on both the combustion process and after-treatment technologies.
The aim of the combustion research has been to mitigate pollutant formation and enhance fuel consumption.
2014
|
ANNUAL REPORT 119
Research on after-treatment systems have been focused mainly on passive and active NOx reduction technologies to
address real driving conditions.
For Magneti Marelli, eco-sustainable products (Includes hybrid engine, Xenon and LED headlights, LED tail lights,
GDI injection systems, electronic control modules, automated manual transmissions and components of dual clutch
transmissions) contributed €1.7 billion in revenues for 2014, representing an increase of 21% over the prior year
(€1.41billion).
Natural gas, electric and hybrid solutions
A key element in Group’s emissions reduction strategy is the development of alternatives to the conventional gasoline
engine.
The Group believes that natural gas is currently the most effective and affordable solution available for reducing
CO
2
emissions and pollution levels, particularly in urban areas. The level of CO
2
emissions from a car running on
natural gas is 23% lower than for an equivalent gasoline-powered vehicle. In addition, natural gas in the form of
biomethane, which is produced from biomass, has signi?cant potential for development as a widely-available
renewable energy source. The Group continued as the undisputed leader in this market sector in Europe with over
56,000 natural gas vehicles sold in 2014 (+34% compared with 2011). In North America, FCA remains the only
automaker to offer a factory-built natural gas pickup, the Ram 2500 Heavy Duty CNG. The Group continued research
and development of technologies that will use natural gas even more ef?ciently. Advances in engine technology that
leverage the properties of natural gas offer signi?cant potential for achieving solutions to meet the CO
2
emissions
targets being phased in across Europe through 2020.
FCA maintained its long-standing leadership in biofuel vehicles in Brazil with more than 680,000 Flexfuel and TetraFuel
vehicles sold in 2014, accounting for approximately 98% of vehicles sold by the Group. Flexfuel technology enables
the use of varying blends of gasoline and bioethanol, while the TetraFuel engine is the ?rst in the world capable of
running on four different fuels: bioethanol, Brazilian gasoline (re?ned crude oil and 22% anhydrous ethanol), standard
gasoline and natural gas.
The Group is also investing in hybrid and electric vehicle development. The Fiat 500e battery electric vehicle,
launched in the U.S. in 2013 delivers a best-in-class 108 highway MPGe (MPGe is the measure devised by the
U.S. Environmental Protection Agency for determining how many miles an electric vehicle can travel on a quantity
of battery-generated electricity having the same energy content as a gallon of gasoline) rating and a class-leading
87 miles of combined city/highway driving. In 2014, two new plug-in hybrid electric vehicles were announced in the
2014-2018 FCA Business Plan: a Chrysler Town & Country minivan PHEV for 2016 and a Chrysler Full Size Crossover
PHEV. Also included in the Business Plan was the application on a future vehicle of a mild hybrid using belt starter
generator (BSG) technology. BSG offers improvement in fuel economy combined with a reduction in CO
2
emissions at
a relatively low cost.
FCA is focused on researching electric/hybrid solutions that are competitive in terms of both cost and performance.
Electric vehicles do not yet offer the same level of advantages for the environment and consumers as natural gas
vehicles. Limitations such as cost, range, recharging speed and infrastructure have thus far prevented widespread
market penetration of electric vehicles. FCA supports public and private sector pilot projects aimed at overcoming
these barriers and testing the market potential for widespread application of electric vehicles. One Group initiative in
this area is a car sharing service, established in conjunction with the City of Turin, where FCA has provided a ?eet of
eight all-electric Fiat 500e vehicles. This represents the ?rst test of the Fiat 500e technology in Europe. The Fiat 500e is
also included in the ?eet supplied to Expo 2015 by FCA, which is an Of?cial Global Partner for sustainable mobility.
FCA has established partnerships with several government entities, universities and other organizations to develop
electric technologies. Among these is a 5-year, €13.7 million partnership with McMaster University, a public research
university in Hamilton (Canada), with funding support from the Canadian government. The project will advance FCA’s
electri?cation strategy through the development of multiple prototypes of critical components, platforms and tools
designed to strengthen the Company’s future product lines. The ?rst of three phases was completed in 2014, and
resulted in the ?ling of four new patent applications.
120 2014
|
ANNUAL REPORT
Sustainability Disclosure
Innovative Vehicle Architectures
Solutions for an optimal balance between vehicle safety, comfort and emissions levels are focused on minimizing
vehicle weight, aerodynamic drag, rolling resistance and the energy demands of auxiliary systems.
In 2014, the Group introduced the latest architectural solutions on the new Jeep Renegade and Fiat 500X. High-
Strength Steels (HSS), which represent more than 70% of the weight of the new Jeep Renegade, ensure a strong,
rigid structure. The Renegade was designed with integrated aerodynamic features to reduce drag and contribute to
improving fuel economy. These features include fully integrated, aerodynamic-tuned body and fascias; an extensive
rear spoiler; integrated underbelly pans; an integrated sill; aerodynamic spats; and a tail lamp designed to kick air off
the side of the body.
Sustainable Materials
Research and innovation for materials used in Group vehicles are concentrated in three areas:
research on new materials and structures to reduce vehicle weight (e.g., high-strength steels, new light alloys,
composite plastic materials)
analysis of biomaterials suitable for automotive applications (e.g., recycled polypropylene reinforced with natural
?bers for use in vehicle interiors, and bioplastics from renewable sources)
identi?cation of alternative uses for materials recovered at end of vehicle life (e.g., use of scrap tires to produce
rubberized asphalt)
Promoting Eco-Sustainable Driving
Driving behavior is a signi?cant contributing factor to the environmental impact of vehicles. Aware of the substantial
difference drivers can make, FCA has continued to invest in the eco
rive system, which provides personalized tips to help drivers improve their driving style and, as a consequence, reduce fuel consumption and vehicle emissions. The
eco
rive system is now available on nearly all Fiat and Fiat Professional models sold in Europe, Brazil, the U.S. and Canada.
An analysis of the best drivers revealed that the system can contribute to reducing fuel consumption by as much
as 16%. By the end of 2014, eco
rive had been used by more than 98,400 customers and contributed to annual avoidance of more than -6,000 tons per year of CO
2
emissions.
On the Fiat 500L, 500L and 500X, the latest version of this application, eco
rive Live, allows drivers to see tips and suggestions via the new Uconnect multimedia system. Real-time feedback on driving style enables immediate
reductions in fuel consumption and emissions.
Mobility Models
The Group’s innovation activities also focus on solutions to respond to emerging mobility needs of customers and FCA
employees.
One initiative is Enjoy, an innovative car-sharing service launched in Milan, Italy, by the energy company ENI, in
collaboration with FCA and Trenitalia. In 2014, Enjoy was extended to include Rome and Florence. Enjoy is designed
to address traf?c congestion and improve the quality of life for urban residents. FCA supplies the vehicles for this
initiative, which represents the largest car-sharing ?eet in Italy with more than 1,400 cars. Features of the service
include online or smartphone application sign-up and management, as well as the ability to instantly select from a
pool of available vehicles parked at locations around the city. Drivers can also leave the vehicle at any of the approved
parking facilities within the service coverage area.
Another innovative mobility program, the Fiat 500e Pass, provides alternative transportation to Fiat 500e customers
in the U.S. The program offers a ?exible solution for situations when a 500e customer needs to drive beyond the
vehicle’s range or needs the carrying capability of a larger vehicle. Customers receive up to 12 days of alternate
transportation each year for the ?rst three years after the date of purchase.
2014
|
ANNUAL REPORT 121
Mobility options are also available to support employee commuting. One project is easygo, started at Mira?ori, Turin
(Italy). Easygo targeted approximately 18,000 employees who commute to and from the complex, and has been
implemented in other plants as well. Through a dedicated portal, employees can arrange car-pooling with coworkers
and access updated information on public transport and mobility services.
In the U.S., a grassroots sustainability program promotes vanpool options for employee commuting. In 2014, over 170
vanpool participants avoided driving individual vehicles an additional 3 million km.
The program advantages include reducing the environmental impact of daily commuting, as well as employee bene?ts
such as reducing commute times, cost, stress and the risk of accidents.
In addition FCA’s Autonomy program provides tailored vehicle solutions for customers with reduced motor abilities. In
Italy, revenues from the sale of Autonomy vehicles totaled €117 million in 2014.
Youth have an important part to play in any discussion about the future of mobility. In collaboration with the Italian
Departments of Education and the Environment, FCA launched the Fiat Likes U project in 2012 (with students from
eight universities across Italy taking part. The project represents the ?rst time in Europe that an automaker has worked
with universities on an initiative to promote environmental awareness and the use of eco-friendly cars through the
three-pronged approach of Mobility (free car-sharing service for students), Study (eight €5,000 university scholarships
and eight seminars conducted by FCA managers) and Work (eight paid internships within the Group).
The initiative has proved extremely successful: more than 1,200 students used the car service in 2014, which includes
a ?eet of Fiat Pandas and 500Ls totaling more than 250,000 km. The cities involved in 2014 were Turin, Pisa, Padua,
Bologna and Rotterdam.
In addition to the expansion of the program in Italy to 10 national universities, the second phase of the Fiat Likes U
project extends to ?ve additional countries: Netherlands, Spain, Poland, Denmark and Germany, reaching 785,000
students.
FCA is also a Global Partner of Expo 2015 in Milan, a non-commercial Universal Exposition oriented towards
interpreting the collective challenges faced by humanity.
Beginning in 2013, FCA provided a ?eet of sustainable cars for use up to and during the Expo. A total of 35 vehicles
are already in use, including 21 natural gas-powered Fiat 500Ls. Closer to the opening of the Expo, an additional 50
natural gas/biomethane Fiat 500Ls will be made available for car sharing by visiting delegations from around the world,
together with 10 Fiat 500e electric service vehicles.
In the United States, the Group has been heavily engaged in research on future social and technological trends that
will affect nearly every aspect of our business - from design to manufacturing, marketing and human resources. In
2014, three research initiatives focused on mobility trends including Global Urban Mobility, U.S. Family Mobility and
U.S. demographics. The research provided insight into functional and experiential vehicle needs for new mobility
concepts, services and products.
A customer focused approach
The Group’s products and services are designed to ensure the highest level of customer satisfaction and loyalty by
addressing the increasing diversi?cation in mobility needs.
Feedback received during the Stakeholder Engagement events held in 2014 provided con?rmation that customer
services, vehicle quality and vehicle safety are issues of primary importance to the Group’s stakeholders.
In line with our 2020 targets for engagement with existing and potential customers, we have introduced several
innovative communication tools that to help us better understand their individual needs. At the same time, expanded
consumer access to information increases expectations that businesses will respond rapidly to their requirements.
The Group monitors customer satisfaction on a continuous basis and, where appropriate, develops new customer
channels that help contribute to improvements in product safety and service quality.
122 2014
|
ANNUAL REPORT
Sustainability Disclosure
Interaction with Customers
The Group has established a network of specialist Customer Contact Centers (CCC) whose role is to ensure a
consistent, high standard of quality in the interaction with existing and potential customers. A total of 27 Centers with
around 1,100 customer care professionals manage more than 11 million contacts a year, with services ranging from
information, to complaint management and coordination of roadside assistance in some area. The Customer Contact
Centers, together with the dealer network, represent the primary channel of communication with customers.
The CCCs regularly monitor customer satisfaction levels to identify potential areas for improvement in service levels or
introduction of customized, on-demand channels of communication. Major emphasis is given to training for personnel
who communicate directly with customers given the importance of transparency and professionalism in the customer
relationship.
Managing Vehicle Safety
At FCA, we take transportation safety personally. Customers trust the quality and safety of our products, and we
constantly do our utmost to warrant this con?dence.
In 2014 we made an important organizational move to amplify our commitment to safety, as FCA US established the
new of?ce of Vehicle Safety and Regulatory Compliance. The reorganization created a stand-alone organization led
by a senior vice president who reports directly to the CEO of FCA US, ensuring a high level of information ?ow and
accountability. This new structure establishes a focal point for working with consumers, regulatory agencies and other
partners to enhance safety in real-world conditions.
In addition, the safety organizations in FCA’s four regions - EMEA, NAFTA, LATAM and APAC - constantly share
information and best practices in order to harmonize design guidelines and processes. Safety design guidelines are
implemented from the concept phase of every new model through the release of detailed design speci?cations to all
the providers of sub-systems for the vehicle.
Our overall approach recognizes that safer highways, improved traf?c management and driver education all have a
role to play in enhancing safety on the road. That is why we strive to connect our safety efforts to a collective goal we
share with our employees, drivers, dealers, suppliers, law enforcement, regulators and researchers.
In 2014, a number of FCA vehicles have earned top ratings based on performing to the highest levels during
assessments by independent agencies. These ratings help validate our continuing efforts to deliver the latest
advancements in both passive and active safety technologies.
In Europe, Jeep Renegade was awarded the prestigious Euro NCAP Five-Star rating, with an overall score of 80/100,
achieving a rating of 87% for adult occupant protection, 85% for child occupant protection, 65% for pedestrian
protection and 74% for driving assistance safety systems. Given that Euro NCAP has adopted even stricter thresholds
for the Five-Star rating in relation to adult occupant, child occupant and pedestrian protection, this rating is even more
signi?cant.
In APAC, the Fiat Ottimo was awarded Five Stars in the C-NCAP conducted in China and the highest possible overall
vehicle safety score (Five Stars) was also achieved by Maserati Ghibli in the Australasian New Car Assessment
Program (ANCAP).
To date in the U.S., the 2015 Chrysler 200 FWD, Dodge Challenger, Dodge Dart and Jeep Grand Cherokee 4WD
have earned Five-Star overall safety ratings in the U.S. NCAP conducted by the National Highway Traf?c Safety
Administration (NHTSA). The Insurance Institute for Highway Safety (IIHS) gave the Chrysler 200 a Top Safety Pick+
status. Collision-warning systems are a prerequisite to achieve IIHS Top Safety Pick+ status. The IIHS also gave the
Dodge Dart a Top Safety Pick rating.
The most noticeable improvements in future safety will occur through the continued integration of active safety
systems such as pre-crash warnings, advanced emergency braking, lane departure warnings and lane-keeping assist
technologies.
2014
|
ANNUAL REPORT 123
Product Quality
The Group is committed to offering vehicles of the highest quality, while at the same time addressing the speci?c
requirements of each market. Quality practices and processes have been standardized worldwide to ensure
consistent achievement of that objective.
Vehicle quality improvements are implemented by dedicated model-speci?c teams as well as by cross-functional
teams. Their activities include establishing preventive checks and controls for processes, identifying areas
for improvement and implementing the relevant improvement measures. Quality assessment is based on a
comprehensive set of internal metrics, such as reliability, together with external (3
rd
party) measurement speci?c to
each region.
Employees
The Group’s employees are crucial to its ability to compete as a leader in the global auto sector, as well as to create
value that is sustainable over the long term.
As of December 31, 2014, the Group had a total of 228,690 employees, a 1.4% increase over year-end 2013.
Employees by region
Europe 38.5%
North America 37.4%
South America 20.6%
Asia 3.4%
Rest of World 0.1%
Total 100.0%
Employees by category
(1)(2)
Hourly 69.5%
Salaried 15.0%
Professional 14.5%
Manager 1.0%
Total 100.0%
(1)
Employee workforce figures reported in this section do not include the 50% Sevel JV in EMEA or the 50% Fiat JV in APAC.
(2)
There are four main categories of employees: hourly, salaried, professional and manager. Professional encompasses all individuals who perform
specialized and managerial roles (including “professional” and “professional expert” under the FCA Italy classification system and “mid-level
professional” and “senior professional” under the FCA US classification). Manager refers to individuals in senior management roles (including
those identified as “professional masters,” “professional seniors” and “executives” under the FCA Italy classification system, and “senior
managers” and above under the FCA US classification).
There were a total of 32,198 new hires during the year, of which 44% were in North America, this region experienced
continued increases in production to meet consumer demand. Approximately 5,670 ?xed-term contracts were converted
to permanent, demonstrating the Group’s continued commitment to the long-term stability of the workforce.
Employee turnover
Employees at December 31, 2013 225,587
New Hires 32,198
Departures (27,912)
Change in scope of operations (1,183)
Employees at December 31, 2014 228,690
124 2014
|
ANNUAL REPORT
Sustainability Disclosure
Management and Development
Stakeholder engagement dialogue, which was expanded to all regions worldwide in the past two years, continued to
con?rm that the professional development of Group employees is an issue of major importance.
Recognizing performance, facilitating professional development and ensuring equal opportunity to compete for key
positions within the organization are essential elements of the Group’s commitment to its staff.
FCA uses a structured process to identify and develop talent, as well as to promote employee motivation.
The Performance and Leadership Management (PLM) process implemented worldwide is used to evaluate managers,
professionals and salaried employee performance. This program facilitates setting speci?c objectives for individual
results and professional development.
Performance and leadership mapping involves around 60,700 Group employees worldwide, including all managers
and professionals, and a sub-set of salaried personnel. The Group also uses other performance evaluation processes
to determine individual variable compensation.
Talent management and succession planning are also integral to the Human Resources management model, and are
designed to ensure the alignment of objectives and processes across the four operating regions. In 2014, Talent Reviews
were conducted for 16 different professional families, companies and functions. These Talent Reviews identi?ed talented
individuals with leadership potential who merit additional investment in their professional development.
During the year, the Group also invested around €66 million in training and skill-building initiatives, which represent
another important management tool.
The Group’s extensive training programs were expanded to include new initiatives aimed at strengthening individual
skills and performance by leveraging the Group’s diversity of talent, experience and cultures. The new initiatives included
training and seminars designed to equip employees to operate with the same degree of effectiveness in different cultural
settings. About 4.3 million hours of training were provided during the year to around 180,000 employees.
The model adopted in 2012 to evaluate bene?ts and potential savings from training initiatives has been consolidated
as a best practice and re?ned. Based on the industry leading World Class Manufacturing (WCM) Cost Deployment
framework, this model is called Cost Deployment of Training. With reference to the training initiatives most speci?c
to ?eld activities, the potential savings generated from the result of training were calculated. The application of this
methodology to on-the-job-training has allowed for the generation of process ef?ciencies resulting from investments
in employee training as well as from converting them into their corresponding economic value. The savings generated
through this perimeter of training initiatives was €3.9 million on an overall cost of €1.5 million.
Diversity: Equal Opportunity and Innovation
Diversity is fundamental to the overall success of an organization. FCA is committed to ensuring a work environment
where employees feel respected, valued and included. Diversity, including gender diversity, brings a wealth of
perspectives and experience to the Group and signi?cantly enhances its ability to compete and to understand
customers, cultures and local communities.
During the year, the Group hired people of 65 different nationalities around the world, further enhancing the
multicultural makeup of the organization and the diversity of experience and perspectives.
The percentage of female employees continued to grow, reaching 20.3% of the total workforce at year-end 2014.
Women now also account for approximately 13.2% of management personnel.
The Group also continued to ensure equal opportunities for minority groups, including speci?c opportunities for
disabled workers.
FCA’s commitment to equal opportunity and to a culture free from discrimination is formally set out in the Group Code
of Conduct as well as in guidelines and procedures.
Together, the Code of Conduct and guidelines ensure uniform application of the Group’s standards worldwide, which
take precedence in jurisdictions where legislation is less stringent.
2014
|
ANNUAL REPORT 125
Diversity within an organization is closely correlated to the ability to innovate. To help foster creativity at all levels
within the organization, the Group has set a long-term goal to increase employee contribution through new initiatives
and channels. As part of the World Class Manufacturing (WCM) program, for example, employees worldwide are
encouraged to submit suggestions to improve production processes. Speci?c initiatives in each region are also
designed to increase employee involvement and encourage innovative ideas through the use of non-traditional
channels and forums. At the FCA US Headquarters and Technology Center, there is a dedicated Innovation Space,
which serves as a genuine think tank equipped with tools and materials for idea development. In 2014, nearly 50
training and workshop activities, involving roughly 750 employees, were held in the Innovation Space. In the LATAM
region, the BIS program allowed the collection of about 1,500 employee projects in 2014.
The EMEA region launched the iPropose initiative in 2012, which, similar to the BIS program, is designed to encourage
employees to propose ideas to reduce cost and increase competitiveness. In 2014, an additional 3,500 employees
joined the initiative. The adoption of the best suggestions, as well as the implementation of speci?c projects led by
interfunctional teams and aimed at optimizing value of product and services (e.g. packaging, transportation).
Health and Safety in the Workplace
Fiat Chrysler Automobiles is committed to providing a safe and healthy working environment at every site worldwide
and in every area of activity.
The Group’s health and safety strategy targets the following key areas:
application of uniform procedures for identi?cation and evaluation of risks
adherence to the highest safety and ergonomics standards for plant and machinery design
promotion of safe behavior through training initiatives and awareness campaigns
assurance of a healthy work environment and promotion of a healthy lifestyle.
For several years, FCA has been tracking and analyzing performance data in each of these areas on a monthly basis.
Health and safety performance indicators are, in fact, an integral component of the Group’s industrial performance
measures.
The commitment to achieving “zero accidents” is formalized in the Health and Safety Guidelines - which form the basis
for policies in each area of activity - and through global adoption of an Occupational Health and Safety Management
System (OHSMS) certi?ed to the OHSAS 18001 standard.
At year-end 2014, a total of 134 plants, accounting for 170,000 employees, had an OHSMS in place that was OHSAS
18001 certi?ed.
Measures implemented over the years have contributed to signi?cant improvements in all accident indicators. In 2014,
the Frequency Rate was down 21.1% compared with the prior year (with 0.15 accidents per 100,000 hours worked)
and the Severity Rate was down 16.7% (with 0.05 days absence due to accidents per 1,000 hours worked).
Effective safety management is also assured through the application of World Class Manufacturing tools and
methodologies, active involvement of employees, development of speci?c know-how and targeted investment.
In Italy, investment in health and safety, combined with other measures, has resulted in a progressive reduction in the
level of risk attributed to Group plants by INAIL, the national accident and disability agency. As a result, the Group was
eligible for “good performer” premium discounts, resulting in total savings of about €16 million in 2012, €14.6 million
in 2013 and €18.4 million in 2014.
In addition to safety in the workplace, the Group also has numerous initiatives to promote the health and well-being of
employees and their families.
One example is represented by the FCA “WELL” initiative that promotes a healthy lifestyle and prevention of
cardiovascular disease. This focus on healthy lifestyles is re?ected in the Group’s sponsorship of Expo 2015, which is
dedicated to the theme “access to food that is healthy, safe and suf?cient for everyone on the planet.”
126 2014
|
ANNUAL REPORT
Sustainability Disclosure
Environment Health and Safety Leadership Awards
The Environment Health and Safety Leadership Award (EHSLA) is a group-wide recognition program open to all FCA
employees and contractors.
The main objectives of the EHSLA are:
to recognize individual and group initiatives that contribute to improvements in the safety and environmental
performance of FCA’s products and production processes
to promote knowledge sharing and application of best practices
to encourage a culture of environmental awareness and safety.
Industrial Relations and Social Dialogue
At the Investor Day held in Auburn Hills on May 6, 2014, FCA presented its 2014-2018 Business Plan to members of
the international ?nancial community, dealers, suppliers and media. In addition, as con?rmation of the importance the
Group places on social dialogue, representatives of the most represented trade unions at Group plants in Europe, the
U.S. and Brazil were also invited to attend.
At the European level, EU regulations require that all Community-scale undertakings establish a European Works
Council (EWC), which ensures workers the right to information and consultation. Fiat S.p.A., the predecessor of
FCA, ?rst established an EWC in 1997 on the basis of the establishing agreement signed in 1996 and subsequently
renewed (with amendments and modi?cations).
During 2014, FCA and the IndustriALL - European Trade Union (The European federation of metalworking, chemical
and textile sector trade unions) jointly agreed on solutions to issues, primarily related to the absence of af?liated
trade unions in certain Member States, that had prevented the proper establishment of a European Works Council
in implementation of the renewal agreement signed in June 2011. The FCA EWC held its ?rst meeting on 19-20
November 2014, with 16 members representing workers in each of the European member states where the Group
has a signi?cant presence. Also present were representatives of the trade unions signatories to the establishing
agreement. During the meeting, management presented information relating to the Group’s ?nancial performance,
changes in workforce, current market conditions and sales performance for each of the Group’s main businesses.
Participants were also given an overview of the 5-year business plan for EMEA, as presented on May 6, as well as the
corporate reorganization and creation of FCA completed during the year.
Collective bargaining
Collective bargaining, conducted in accordance with local law and practice, resulted in various agreements with trade
unions on both wage and employment conditions.
Worldwide, approximately 90% of FCA employees are covered by collective bargaining agreements. Also of major
signi?cance in this area are the supplementary pension and health care schemes, which are the result of negotiations
and continuous dialogue between FCA and the trade unions.
In Italy, where all employees are covered by collective bargaining, FCA and the trade unions reached an agreement
for 2014, which included a €260 one-time payment to all personnel in the company’s employ on the date of the
agreement, an in-principle agreement on the employment conditions already negotiated and a commitment to
conclude a 3-year collective labor agreement with changes in current wage and employment conditions that re?ect the
operating requirements of the 2014-2018 business plan. Negotiations for renewal of the collective labor agreement,
initiated in late 2014, are still ongoing.
Outside Italy, an average 81% of employees are covered by collective bargaining agreements. That percentage varies
from country to country on the basis of local practice and regulations.
For FCA companies in the European Union, wage negotiations in 2014 took into account the fact that the Group’s
operations in the region were still loss-making. Plants were operating below capacity and the auto market remained
weak as many European economies continue to struggle with low levels of in?ation and, in some cases, even de?ation.
Accordingly, in 2014 the Group worked to contain the cost of labor without reducing activities or personnel.
2014
|
ANNUAL REPORT 127
In Poland, company-level wage negotiations were limited to payment of a one-time amount for employees at Group
companies where activity levels had been increased.
In France, the annual negotiation (Négociation Annuelle Obligatoire) concluded with no general wage increases except
for the Magneti Marelli plant in Châtellerault, where the reference parameters for 2014 had already been agreed to with
the trade unions in 2012.
In Serbia, the 3-year collective agreement for employees of Fiat Automobili Srbija d.o.o in Kragujevaç was renewed at
year end, bringing it into line with new labor legislation that came into effect in July 2014. In December, the company
de?ned criteria for the determination of the “Christmas Bonus,” which is based on actual employee hours worked.
Following the establishment of trade union representation at Magneti Marelli d.o.o. Kragujevac and pending initiation
of negotiations for a company-level agreement, the company will continue to apply the company’s Internal Rulebook,
which has been updated to re?ect the requirements of the new labor legislation. At Fiat Services d.o.o Kragujevac,
trade union representation was established during the year and negotiations for a company-level agreement to
replace the Internal Rulebook were initiated. The parties agreed to an extension of the original negotiating deadline to
incorporate changes relative to the new labor legislation and negotiations were completed in January 2015.
In Spain, an agreement was reached with trade unions in September to extend the collective labor agreement at
Mecaner S.A.U., which expired at year-end 2014, for a further two years. Under the new agreement, wages will be
increased by 0.5% in 2015 and 0.9% in 2016.
In Brazil, FIEMG (Federação das Indústrias do Estado de Minas Gerais) and metalworking sector trade unions for
the State of Minas Gerais completed wage negotiations in November with agreement to increase the “database”
(Minimum wage) in line with in?ation. Agreements were also negotiated at the company level that provided one-time
amounts additional to the sector-level agreement.
In Mexico, the annual contractual negotiation at Teksid Hierro de Mexico concluded with workers being awarded a
4.3% increase in hourly employee wages, in line with in?ation. At the Comau facility in Tepotzotlan (since relocated to
San Martin Obispo), workers received a 4.5% increase.
In 2014, the level of labor unrest at Group companies in Italy, including local labor actions, was negligible in terms of
the number of instances and level of employee participation.
Outside Italy, the overall level of labor unrest was negligible and mostly related to local issues at individual plants.
Management of Production Levels
The Group’s 2014 ?nancial results demonstrated once again the importance of the contribution of FCA US LLC
(formerly Chrysler Group LLC) and the global diversi?cation of the Group’s businesses. During the year, the Group
was able to respond to higher demand in several markets through the use of ?exible labor mechanisms. As part of the
2014-2018 Business Plan presented in May, the Group set out a new industrial strategy for EMEA, where production
will be increased to support the planned growth in global sales for the premium brands (Maserati, Jeep, Alfa Romeo)
and the 500 family. On the basis of that plan, the Group expects its plants in EMEA will achieve full capacity utilization
by 2018 thanks to 40% of total production destined for markets outside Europe. With the European auto market only
beginning to shows signs of a recovery in the fourth quarter, work stoppages remained necessary in 2014. The Group
maintained its policy of protecting jobs through the use of temporary layoff bene?t schemes, where possible or other
mechanisms provided under collective bargaining agreements or company policy.
In Italy, Group companies continued to utilize temporary layoff schemes to manage weak demand levels and to
implement various restructuring and reorganization activities linked to new investment. There was, however, a 22.1%
decrease in utilization of these schemes versus the prior year, re?ecting the gradual upturn in production and return of
workers to the plants.
Elsewhere in Europe, minimal stoppages were directly related to ?uctuations in demand. There were no signi?cant
restructurings or reorganizations during the year.
In LATAM, Group shipments were down year-over-year due to continued weak trading conditions across the region.
128 2014
|
ANNUAL REPORT
Sustainability Disclosure
In Brazil, where the Group maintained its market leadership, the realignment of production levels to changes in
market demand was primarily managed through the use of ?exible labor mechanisms and reorganization of shifts, in
agreement with the unions.
In 2014, FCA US increased vehicle production through revised operating patterns at its NAFTA facilities in response
to market demand. To support the increase in production output, the company has correspondingly increased
staf?ng levels, including manufacturing employees to support current and anticipated production volumes, as well as
additional engineering, R&D and other highly-skilled employees to support product development, sales, marketing and
other corporate activities.
Sustainable Supply Chain Management
Group Purchasing has primary responsibility for supplier management, including establishing global purchasing
strategies and processes. The organization works closely with internal clients and suppliers to integrate key
environmental, social and governance considerations into its global purchasing processes, enabling responsible and
sustainable economic success for the Group as a whole. In addition to the buying teams, several other teams within
Group Purchasing support the selection, management and development of a high-quality, high-performing automotive
supply base. These include Supplier Quality, Supplier Relations, Product Development Purchasing, and Integration,
Methods and Strategy. Group Purchasing operates according to eight Foundational Principles whose objective
is to maximize the value of our supplier partnerships. These principles are: 1. mutual transparency, 2. proactive
collaboration, 3. sense of urgency, 4. integrity, 5. long-term mindset, 6. empathy and advocacy, 7. continuous
improvement and 8. personal accountability.
In 2014, Group Purchasing managed around €53.4 billion in direct materials purchases through a base of 3,127 direct
materials suppliers. The supplier base is highly concentrated, with the top 176 suppliers, which are considered
strategic, accounting for approximately 59% of total purchases by value. The Group classi?es suppliers as strategic
through a formal process based on the following criteria: allocated spending amount, production and spare parts
capacity, absence of technical and commercially-viable alternatives, and the value of Group procurement orders as a
percentage of the supplier’s annual turnover. Approximately 69% of direct materials purchases (by value) are destined
for plants in NAFTA, 18% for plants in EMEA, and 8% for plants in LATAM, and 5% for plants in APAC. By source,
71% of direct materials purchases are from NAFTA, 16% from EMEA, 2% from LATAM, and 11% from APAC.
Environmental and Social Impacts of Suppliers
FCA aims to prevent or mitigate any adverse environmental or social impacts that may be directly linked to our
own business activities, or to products and services from our suppliers. As partners, suppliers play a key role in
the continuity of our activities and can also have a signi?cant impact on external perceptions of our social and
environmental responsibility. Any adverse event within the supply chain can not only have a direct, material impact on
production and economic performance - both for us and our suppliers - but can also affect our collective reputations.
As such, building and maintaining collaborative, long-term relationships with our suppliers are essential elements in the
effective prevention or mitigation of any potential negative environmental or social impacts of our activities.
Our target for 2020 is to conduct sustainability audits or assessments of all Tier 1 suppliers with potential exposure to
signi?cant environmental or social risks. For strategic suppliers, these audits will be conducted by external auditors.
The assessment of supplier compliance with sustainability criteria is conducted in three phases over a period of
approximately one year. The ?rst phase is the completion of a self-assessment questionnaire. In 2014, Group
Purchasing introduced the Supplier Sustainability Self-Assessment (SSSA) questionnaire in all four operating
regions. This standardized tool - developed by the Automotive Industry Action Group (AIAG) with the contribution
of a workgroup that included FCA and other auto industry OEMs and suppliers - has a three-fold purpose: 1) to
communicate our expectations to suppliers; 2) to determine the effective level of sustainability activity within the
supply base; and 3) to create an effective and ef?cient tool that reduces the burden of multiple and similar information
requests received by suppliers. The Group has developed a user interface (accessible via the eSupplier Connect
portal), which can be used by suppliers to complete the SSSA online.
2014
|
ANNUAL REPORT 129
The questionnaire covers environmental, labor practice, human rights, compliance, ethics, diversity, and health and
safety criteria. During 2014, it was expanded with an increased emphasis on water and environmental stewardship.
The results of the self-assessment are used to create a risk map for the purpose of identifying any suppliers that may
be at risk and, therefore, require further investigation.
On-site Supplier Audits may be conducted by either FCA Supplier Quality Engineers (SQE) or external auditors. If any
critical issues are identi?ed during an audit, a supplier may be placed on watch status or, in particularly severe cases,
the relationship with the supplier may be suspended or terminated. Where areas for improvement are identi?ed, a plan
of corrective actions may be developed with the supplier concerned. Each action plan sets out speci?c responsibilities
within the supplier’s organization, activities and deadlines for implementation.
In addition to the existing monitoring programs, the Group has also adopted models of consultation and collaboration
with suppliers based on effective, interactive communication processes. Initiatives such as local seminars, discussion
forums and training programs have been developed over the years to facilitate the exchange of ideas and knowledge
and to increase the level of collaboration.
On the environmental front, for example, suppliers are encouraged to develop internal policies and guidelines and to
adopt a certi?ed environmental management system. As part of the Group’s 2020 target to monitor CO
2
emissions
of at least 90% of our top suppliers, we are continuing to support suppliers in addressing climate change issues,
including reducing greenhouse gas emissions.
In 2014, selected suppliers were invited to participate in CDP’s supply chain program. The 88 suppliers that disclosed
(out of 126 invited) achieved a score of 65/100 for transparency in disclosure and placed in the C performance band
for commitment toward reducing carbon emissions. The results revealed that measures implemented by these
suppliers had yielded a 62 million ton reduction in CO
2
equivalent emissions. The Group has also initiated a series of
consultations with several strategic suppliers on monitoring water management within the supply chain and, over the
next few years, developing a joint water stewardship strategy in water-stressed areas.
Another important area of long-term focus for the Group, in collaboration with industry peers and stakeholders, is
the respect of human rights and working conditions at all levels in the supply chain. In-depth training on responsible
working conditions is offered to suppliers in partnership with AIAG. Developed in collaboration with other automakers,
the training is designed to help assure and protect the rights and dignity of the workers who make vehicle
components. We are also committed to promoting entrepreneurial growth by providing entrepreneurs the practical
capacity-building training they need to achieve a higher level of sustainability.
In addition, the Group encourages supplier innovation through various initiatives focused on cost reduction. The
Technical Cost Reduction SUPER (SUpplier Product Enhancement Reward) Program, for example, encourages
suppliers to be proactive by sharing the economic bene?ts generated through proposals for innovative manufacturing
technologies and leaner component design. During 2014, approximately 300 ideas were implemented by suppliers in
NAFTA, EMEA and LATAM regions, allowing to share economic bene?ts for approximately €43 million.
Reducing the environmental impact of manufacturing and non-manufacturing processes
FCA is fully committed to minimizing the impact of our activities on the environment in all areas from manufacturing
processes to logistics, dealerships and commercial and administrative of?ces. Efforts to reduce our environmental
footprint and continuously improve environmental performance are an integral part of the Group’s overall industrial
strategy.
A recent example of this commitment is the new Jeep plant in Pernambuco, Brazil, where FCA is dedicating the
maximum know-how and resources to make it the Group’s most technologically-advanced and sustainable plant in
the world.
130 2014
|
ANNUAL REPORT
Sustainability Disclosure
World class manufacturing processes
The World Class Manufacturing (WCM) program was ?rst adopted about 10 years ago and has been implemented at
nearly all FCA plants worldwide. WCM represents the concrete application of our model of environmental sustainability
and, in particular, our efforts to reduce the impacts of our production processes. WCM is a rigorous manufacturing
methodology that involves the entire organization and encompasses all phases of production and distribution. In 2014,
approximately 48,000 WCM-related projects were implemented, including several speci?cally targeted at reducing
environmental impacts. Through the Environment Pillar, in particular, speci?c tools and methodologies are developed
to reduce waste and optimize the use of natural resources. Approximately 3,700 projects based on this pillar led to
reductions in natural resources consumption.
The Group has also developed an Environmental Management System (EMS), aligned with ISO 14001 standards,
which has been implemented worldwide. The EMS consists of a system of methodologies and processes designed to
prevent or reduce the environmental impact of the Group’s manufacturing activities through, for example, reductions
in emissions, water consumption and waste generation and conservation of energy and raw materials. At year-end
2014, 100% of FCA plants included in the 2012 scope of reporting were ISO 14001 certi?ed.
Energy Consumption and Emissions
In response to increasingly stringent environmental regulations, the Group is continuously researching solutions
that will enable further reductions in greenhouse gas emissions and the use of fossil fuels. Over time, this has also
generated signi?cant savings in energy-related costs.
In 2014, approximately 2,700 energy-related projects developed under WCM contributed to a reduction of approximately
3,300 terajoules in energy used, with a corresponding reduction of around 290,000 tons in CO
2
emissions.
As a result of the success of these energy-related initiatives, energy consumption remained in line with the prior year
- despite a year-over-year increase in production volumes - and was well below the 2010 level in both absolute terms
and on a per vehicle produced basis.
Direct and indirect energy consumption (terajoules) 2014 2013 2012
Total energy consumption 48,645 48,322 45,692
Total CO
2
emissions from manufacturing processes also remained stable compared with 2013, but well below the
2010 level also on both a total and per vehicle produced basis.
FCA uses CO
2
emissions per vehicle produced as the primary indicator of its energy performance and, for 2020, is
targeting a 32% reduction compared with 2010.
Total CO
2
emissions (thousands of tons of CO
2
) 2014 2013 2012
Total CO
2
emissions 4,283 4,178 3,965
In 2014, 20.4% of electricity used at FCA plants was from renewable sources.
Water Management
In many parts of the world, water scarcity is one of the greatest challenges faced by governments, businesses and
individuals.
To protect this essential natural resource, the Group has adopted Water Management Guidelines that establish criteria
for sustainable management of the entire water cycle, including technologies and procedures to maximize recycling
and reuse of water and minimize the level of pollutants in discharged water.
2014
|
ANNUAL REPORT 131
In 2014, the level of water reuse in the manufacturing cycle at FCA plants worldwide was 99.3%, representing a total
of about 3.3 billion m
3
in water savings.
As a result, total water consumption (withdrawal) was reduced by 1.1% versus 2013 (generating savings of
approximately €2.4 million) and 27.9% versus 2010. For 2020, FCA is targeting a 40% reduction in water consumed
per vehicle produced compared with 2010.
Water withdrawal (thousands of m
3
) 2014 2013 2012
Total water withdrawal 24,653 24,936 25,874
Waste Management
To reduce the consumption of raw materials and related environmental impacts, FCA has implemented procedures to
ensure maximum recovery and reuse of materials and minimum waste. What cannot be reused is recycled. If neither
reuse nor recovery is possible, waste is disposed of using the method having the least environmental impact, with
land?lls only used as a last resort. These principles are incorporated in the Waste Management Guidelines formalized
in 2012 and adopted at Group sites worldwide.
As a result of continued improvements in the waste management cycle, FCA achieved a 3.6% year-over-year
reduction in total waste generated despite higher production volumes.
At the Group level, the percentage of waste recovered increased to 80.6% of total waste generated. Waste sent to land?ll
accounted for 16.9% and was essentially related to inert sand from Teksid foundries. Plants that produce for the mass-
market brands, which account for the majority of total waste generated, reduced waste to land?ll either to zero or very
close to zero. For hazardous waste, the Group achieved a 3.3% year-over-year reduction (-38.8% since 2010).
The reduction in the total volume of waste generated led to savings of around €9 million and revenues of around €32
million worldwide in 2014.
Waste generated (thousands of tons) 2014 2013 2012
Waste recovered
(1)
1,406 1,339 1,291
% of waste recovered
(1)
80.6% 74.0% 73.3%
Waste disposed of 338 470 470
Total waste generated 1,744 1,809 1,761
of which hazardous 38 39 40
(1)
2012 and 2013 data updated to be consistent with Global Reporting Initiative G4 standard.
Logistics Processes
Ef?cient and eco-sustainable logistics are important elements of the FCA value creation process.
In recent years, we have signi?cantly reduced both the environmental impact and the cost of our logistics activities.
This has primarily been possible through increased use of reusable packaging and optimization of transport ?ows
throughout the supply chain which has reduced emissions and traf?c associated with the movement of materials,
components and ?nished products.
In 2010, the Group published the Green Logistics Principles as part of a process of greater coordination with our
logistics partners. These principles focus on four main areas:
low-emissions transport
intermodal transport solutions
optimized use of available transport capacity
reduced use of packaging and protective materials.
Several initiatives have been launched in support of these principles.
132 2014
|
ANNUAL REPORT
Sustainability Disclosure
In EMEA, Mopar Parts and Service increased the use of reusable containers in 2014, leading to a year-over-year
reduction of more than 1,000 tons of cardboard and wood used in packaging and shipping, and generating €150,000
in cost savings.
In addition, increased use of reusable containers on international routes to and from NAFTA resulted in a further
reduction of 201 tons of wood between July and December 2014.
We have also set targets for increased use of low emissions and alternative fuel vehicles in our ?eet, which will further
improve environmental performance and costs.
In 2014, the Group purchased 24 new Euro VI trucks for transport operations in EMEA and ordered 179 compressed
natural gas trucks for FCA Transport ?eet in NAFTA.
FCA is also engaging external carriers through Green Clauses in contracts, questionnaires, workshops and
certi?cations.
Eco-sustainable dealers
In 2014, the Group continued a number of initiatives to extend its environmental commitment to the dealer network.
In Brazil, the Sustainability Program for Dealerships was launched, with 559 dealerships (accounting for 84% of the
FCA network in Brazil) participating in the ?rst step of the initiative.
In Italy, Group-owned dealerships implemented measures that led to a 19% reduction in energy consumption and
avoidance of 1,500 tons in CO
2
emissions versus 2012. Over the same time period, 6,600 tons in CO
2
emissions were
avoided through the use of electricity generated from renewable sources, resulting in both environmental bene?ts and
cost savings. During 2014, speci?c initiatives to monitor energy and water consumption were implemented at Group-
owned dealerships in other European countries.
Of?ces
During the year, the Group continued its program of replacing electronic of?ce equipment (computers, monitors and
printers) with energy-ef?cient equipment certi?ed by Energy Star, as well as the migration from physical to virtual
servers. For the period 2010-2014, these initiatives led to a reduction of more than 33,400 tons of CO
2
emissions.
New and existing initiatives provided the opportunity for employee involvement and training on issues relating to
personal health, the environment (waste management, water consumption, energy savings) and good practices
in the workstation environment. The ultimate objective of these initiatives is to generate awareness of sustainable
practices applicable both in the of?ce and at home. One example is the Better Of?ce initiative - implemented at various
facilities in Italy and covering approximately 2,300 employees - through which employees are given tips on sustainable
practices in the of?ce and at home via information lea?ets, videos and signage. In 2015, the initiative will be extended
to other sites and countries.
Another initiative is the Zero Waste to Land?ll program instituted at the FCA US Headquarters and Technology Center
in Auburn Hills (Michigan, U.S.), where more than 14,600 people work. Of a total 7,626 tons of waste generated at the
Auburn Hills complex during 2014, zero waste was disposed of via land?ll.
At the same site, in 2014, manual cooling demand-matching controls were replaced with automatic controls, reducing
annual electricity consumption by 12 million kWh, eliminating 9,000 tons of CO
2
emissions and saving over €525,000.
2014
|
ANNUAL REPORT 133
Responsibility to local communities
The Group actively contributes to the advancement of local communities through initiatives that, in line with
the Fiat Chrysler Automobiles (FCA) Guidelines for Investment in Local Communities, are also consistent with
the characteristics and positioning of the Group and its brands. Depending on the scope and level of ?nancial
commitment, projects are approved and managed either centrally or locally by the relevant plant, company or brand.
Initiatives primarily target communities around the Group’s industrial sites and, from time to time, also include
responses to natural disasters in other geographic areas. Social initiatives primarily take the form of investment in
targeted projects, planned in collaboration with local stakeholders, which contribute to the long-term development
of the local community. In addition to monetary contributions, the Group’s investment also often includes employees
volunteering their time and knowledge on projects that address community development, education, the environment
and basic social needs.
Particular attention has been given to educational initiatives, which accounted for 52.9% of more than €24 million
contributed in 2014, as education is vital to the sustainable development and quality of life in local communities. The
Group has set speci?c targets for 2020 to advance education and training among youth, with a particular focus on
programs designed to expand science, technology, engineering and math skills and opportunities, including initiatives
that address innovation, mobility and environmental issues.
Speci?c indicators are used to measure the impact and effectiveness of local community initiatives and identify
opportunities for further development.
134 2014
|
ANNUAL REPORT
Remuneration of Directors
Remuneration of Directors
Introduction
This Remuneration Report (the “Report”) describes the Company’s remuneration policy applicable to the Executive
Directors (the “Policy”) and the remuneration paid to the members of the Company’s Board of Directors in 2014 (both
Executive and non-Executive Directors). Information is also provided on the remuneration paid to the members of Fiat
S.p.A.’s Board of Directors in 2014.
Prior to the completion of the Merger, Fiat, as FCA’s sole shareholder, adopted the Policy, which will remain effective
until a new remuneration policy is approved by FCA’s ?rst general shareholders’ meeting following completion of the
Merger. The form and amount of the compensation to be paid to each of FCA’s directors is determined by the FCA
Board of Directors in accordance with the remuneration policy.
Remuneration Policy for Executive Directors
The Board of Directors determines the compensation for our executive directors at the recommendation of the
Compensation Committee and with reference to the remuneration policy. The remuneration policy is approved by
shareholders and is published on our corporate website www.fcagroup.com.
The objective of the remuneration policy is to provide a compensation structure that allows FCA to attract and retain
the most highly quali?ed executive talent and by motivating such executives to achieve business and ?nancial goals
that create value for shareholders in a manner consistent with our core business and leadership values.
The Policy is based on the remuneration policies adopted in the past by the Company (and its predecessors) as
aligned with Dutch law and the Dutch Corporate Governance Code.
Features of the remuneration for executive directors
FCA’s compensation policy aims to provide total compensation that:
Attracts, retains and motivates quali?ed executives;
Is competitive against the comparable market;
Reinforces our performance driven culture and meritocracy; and
Is aligned to shareholders interests.
The remuneration structure for executive directors provides a ?xed component as well as short and long-term variable
performance based components. FCA believes that the remuneration structure promotes the interests of FCA in
the short and the long-term and is designed to encourage the executive directors to act in the best interests of the
Company and not in their own interests. In determining the level and structure of the compensation of the executive
directors, the non-executive directors will take into account, among other things, the ?nancial and operational results
as well as other business objectives of FCA.
In general, the ?xed remuneration component of executive directors compensation is intended to adequately
compensate individuals for services performed even if the variable compensation components are not received as
a result of the performance targets set by the Board of Directors not being met. This is considered fundamental in
discouraging behavior that is aimed solely at achieving short-term results and actions inconsistent with the target level
of risk established by the Group.
Executive directors are also eligible to receive variable compensation, either immediate or deferred, subject to the
achievement of pre-established challenging economic and ?nancial performance targets.
2014
|
ANNUAL REPORT 135
The Company establishes target compensation levels using a market-based approach and periodically benchmarks
its executive compensation program against peer companies and monitors compensation levels and trends in the
market.
For the CEO, the competitive benchmark included both a US and European peer group. The US peer companies
included General Motors, Ford, General Electric, Hewlett-Packard, IBM, Boeing, Procter & Gamble, Johnson &
Johnson, PepsiCo, United Technologies, Dow Chemical, Caterpillar, ConocoPhillips, P?zer, Lockheed Martin,
Johnson Controls, Honeywell, Deere, General Dynamics, 3M, Northrop, Grumman, Raytheon, Xerox, Goodyear,
Whirlpool. The non US peer companies included Volkswagen, Daimler, BMW Group, Siemens, Nestlé, BASF,
ArcelorMittal, Airbus, Peugeot, Unilever, Novartis, Saint-Gobain, Renault, Bayer, ThyssenKrupp, Rio Tinto, Roche,
Continental, Lyondell Basell, Sano?, and Volvo.
For the Chairman, the same peer group companies were used excluding those companies who do not have an
Executive Chairman only role. Most US companies in the peer group do not have a separate Executive Chairman role;
whereas, most European companies in the peer group do.
Remuneration of Executive Directors
Introduction
The level and structure of the remuneration of the Executive Directors will be determined by the Company’s Board
of Directors at the recommendation of the Compensation Committee within the scope of the Policy and taking into
account the scenario analyses made. It will furthermore be based on compensation levels offered in the market in
general and for the sector.
The Company periodically benchmarks its executive compensation program and the compensation offered to
executive directors against peer companies and monitors compensation levels and trends in the market.
Remuneration elements
On such basis, the compensation of executive directors consists, inter alia, of the following elements:
Fixed component
The primary objective of the base salary (the ?xed part of the annual cash compensation) for executive directors is
to attract and retain well quali?ed senior executives. The Company’s policy is to periodically benchmark comparable
salaries paid to other executives with similar experience in its compensation peer group.
Variable components
The Company’s Chairman is not eligible to receive variable compensation while the CEO is eligible to receive variable
compensation, subject to the achievement of pre-established ?nancial and other designated performance targets.
The variable components of the CEO’s remuneration, both the short and the long-term components, are linked to
predetermined, assessable targets.
Annually, scenario analyses are carried out with respect to the possible outcomes of the variable remuneration
components and how they may affect the remuneration of the executive directors. Such analysis was also carried out
for the ?nancial year 2014.
Short-Term Incentives
The primary objective of performance based short-term variable cash based incentives is to focus on the business
priorities for the current or next year. The CEO’s short-term variable incentive is based on achieving short-term
(annual) ?nancial and other designated objectives proposed by the Compensation Committee and approved by the
non-executive directors each year.
136 2014
|
ANNUAL REPORT
Remuneration of Directors
In regards to the CEO’s annual performance bonus determination, the Compensation Committee and the non-
executive directors:
approve the executive directors’ target and maximum allowable bonus,
select the choice and weighting of metrics,
set the stretch objectives,
review any unusual items that occurred in the performance year to determine the appropriate overall measurement
of achievement, and approve the ?nal bonus determination
The annual objectives for the CEO are comprised of three equally weighted metrics, Trading Pro?t, Net Income, and
Net Industrial Debt. The target achievement for target incentive (which is 100% of base salary) corresponds to the
Board approved targets each year and is consistent with the Company’s ?ve year business plan and external guidance
to investors. The threshold for any incentive earned is 90% of target and maximum payout of 2.5 x base salary is set at
achieving 150% of the objectives or greater. Results and achievement are reviewed by the Compensation Committee
each year typically in the January Board meeting.
Long-Term Incentives
The primary objective of the performance based long-term variable equity based incentives is to reward and retain well
quali?ed senior executives over the longer term while aligning their interests with those of shareholders.
FCA’s long-term variable incentives consists of a share-based incentive plan that links a portion of the variable
component to the achievement of pre-established performance targets consistent with the Company’s strategic
horizon.
As typical with the objective of using equity based awards, these awards help align the executive directors’ interests
with shareholder interests by delivering greater value to the executive director as shareholder value increases.
On 4 April 2012, Fiat S.p.A. General Shareholders Meeting adopted a Long Term Incentive Plan (the “Retention
LTI”), in the form of stock grants. As a result of the Shareholders’ resolution the Group attributed the Chief Executive
Of?cer with 7 million rights, representative of an equal number of Fiat S.p.A. ordinary shares. The rights vested ratably,
one third on 22 February 2013, one third on 22 February 2014 and one third on 22 February 2015, subject to the
requirement that the Chief Executive Of?cer remained in of?ce.
On October 29, 2014, in connection with the formation of FCA and the presentation of the new ?ve year business
plan, the Board of Directors of FCA approved an equity incentive plan (“EIP”) and a new long term incentive program,
covering a ?ve year performance period, 2014-2018, consistent with the Company’s strategic horizon and under
which equity awards can be granted to eligible individuals. The award vesting under the program is conditional on
meeting two independent metrics, Net Income and Relative Total Shareholder Return weighted 50/50 at target. The
awards have three (3) vesting opportunities, one-third after three years’ cumulative results, one-third after four years’
cumulative results and the ?nal third after the full ?ve years’ results. Half of the target award that is subject to the Net
Income metric’s performance begins a payout at 80% of the target achieved and the maximum payout is at 100%
of target. With respect to the other half of the award, the Relative Shareholder Return metric has a partial vesting
if ranked 7th or better among an industry speci?c peer group of 11 and a maximum pay-out of 150% if ranked 1st
among the 11 peers. The peer group includes FCA, Volkswagen AG, Toyota Motor, Daimler AG, General Motors,
Ford Motor, Honda Motor, BMW AG, Hyundai Motor, PSA Peugeot Citroen, and Renault SA. Awards to the CEO
of performance share units under this program are subject to the approval of the shareholders at the next general
meeting of shareholders and are described in the relevant materials.
Extraordinary Incentives
In addition, upon proposal of the Compensation Committee, the non-executive directors retain authority to grant
periodic bonuses for speci?c transactions that are deemed exceptional in terms of strategic importance and effect
on the Company’s results, with the form of any such bonus (cash, common shares of the Company or options to
purchase common shares) to be determined by the non-executive directors.
2014
|
ANNUAL REPORT 137
In 2014, the non-executive directors exercised this authority and approved a €24.7 million (US$ 30 million) cash award,
a one-time grant of 1,620,000 restricted shares (which is subject to the approval of the Company’s general meeting of
shareholders and will vest upon approval) and a €12 million (US$ 15 million) post-mandate award for the CEO, who was
instrumental in major strategic and ?nancial accomplishments for the Group. Most notably, through the CEO’s vision and
guidance, FCA was formed, creating enormous value for the Company, its shareholders, employees and stakeholders.
Pension Provisions and Severance Payments
Both executive directors have a post-mandate bene?t in an amount equal to ?ve times their last annual base
compensation. The award is payable quarterly over a period of 20 years commencing three months after the
conclusion of employment with the Company, with an option for a lump sum payment. In addition, the CEO
participates in Company sponsored pension schemes and is eligible for the post-mandate bene?t mentioned in the
previous paragraph. In 2014 the Company booked in connection with all these bene?ts an amount of € 12.9 million.
For the CEO, an amount of two (2) times the prior year ?xed and variable compensation is provided in the event of an
involuntarily termination except for reason of termination for cause.
1
Other Bene?ts
Executive directors may also be entitled to usual and customary fringe bene?ts such as personal use of aircraft,
company car and driver, personal/home security, medical insurance, accident and disability insurance, tax preparation
and ?nancial counseling. The Compensation Committee may grant other bene?ts to the executive directors in
particular circumstances.
Remuneration Policy for Non-Executive Directors
Remuneration of non-executive directors is set forth in the remuneration policy approved by the Company’s
Shareholders and periodically reviewed by the Compensation Committee.
The current annual remuneration for the non-executive directors is:
US$200,000 for each non-executive director
An additional US$10,000 for each member of the Audit Committee and $20,000 for the Audit Committee Chairman.
An additional US$5,000 for each member of the Compensation Committee and the Governance Committee and
$15,000 for the Compensation Committee Chairman and the Governance Committee Chairman
An additional US$25,000 for the lead independent director
An automobile perquisite of one (1) assigned company-furnished vehicle, rotated semi-annually, subject to taxes
related to imputed income/employee price on purchase or lease of Company vehicles.
Non-executive directors elect whether their annual retainer fee will be made in half in cash and common shares of FCA or
100% in common shares of FCA; whereas, the committee membership and committee chair fee payments will be made
all in cash (providing a board fee structure common to other large multinational companies to help attract a multinational
board membership). Remuneration of non-executive directors is ?xed and not dependent on FCA’s ?nancial results.
Non-executive directors are not eligible for variable compensation and do not participate in any incentive plans.
Set forth below is information relating to the ?xed and variable compensation (including other bene?ts, but excluding
the extraordinary incentives, pension provisions and severance payments described above) that was paid in 2014
by FCA and its subsidiaries to the current members of the FCA Board of Directors and to the individuals who served
on Fiat’s Board of Directors as of October 11, 2014, including as a consequence of the applicable performance
criteria having been met. None of Messrs. Marchionne, Palmer or Neilson received compensation for their services as
directors or of?cers of FCA prior to the effective time of the Merger.
1
In 2014 Ferrari S.p.A. booked an amount of €15 million in connection with the resignation as Chairman of Ferrari S.p.A. of Mr. Luca Cordero
di Montezemolo, former director of Fiat. S.p.A.
138 2014
|
ANNUAL REPORT
Remuneration of Directors
In Euro Of?ce held
In of?ce
from/to Annual fee
Annual
Incentive
(1)
Other
Compensation Total
Directors of FCA N.V.
ELKANN John Philipp Chairman
01/01/2014-
12/31/2014 1,442,161 - 243,702
(2)
1,685,863
MARCHIONNE Sergio CEO
01/01/2014-
12/31/2014 2,500,108 4,000,000 111,410 6,611,518
AGNELLI Andrea Director
01/01/2014-
12/31/2014 80,211 - - 80,211
BRANDOLINI D’ADDA Tiberto Director
01/01/2014-
12/31/2014 80,211 - - 80,211
EARLE Glenn Director
06/23/2014-
12/31/2014 74,065 - - 74,065
MARS Valerie Director
10/12/2014-
12/31/2014 42,212 - - 42,212
SIMMONS Ruth J. Director
10/12/2014-
12/31/2014 42,212 - 1,774
(2)
43,986
THOMPSON Ronald L. Director
10/12/2014-
12/31/2014 62,295
(3)
- 1,589
(2)
63,884
WHEATCROFT Patience Director
01/01/2014-
12/31/2014 106,716 - - 106,716
WOLF Stephen M. Director
10/12/2014-
12/31/2014 54,836
(3)
- 1,520
(2)
56,356
ZEGNA Ermenegildo Director
10/12/2014-
12/31/2014 42,212 - - 42,212
Former directors of Fiat S.p.A.
BIGIO Joyce Victoria Director
01/01/2014-
10/11/2014 66,347 - - 66,347
CARRON René Director
01/01/2014-
10/11/2014 70,250 - - 70,250
CORDERO DI MONTEZEMOLO Luca Director
01/01/2014-
10/11/2014 2,095,528 - - 2,095,528
GROS-PIETRO Gian Maria Director
06/22/2014-
10/11/2014 45,653 - - 45,653
TOTAL 6,805,017 4,000,000 359,995 11,165,012
(1)
The annual incentives are related to the performance in 2014 which are paid out in 2015.
(2)
The stated amount refer to the use of transport
(3)
The amount in the table refers to both FCA NV and FCA US board service fees.
The tables below give an overview of the stock option plans and share plans of the Company held by the CEO (for
stock options) and by the CEO and other Board Members for share plans.
Stock Options
Grant Date Exercise Price (€) Number of Options
Beginning Balance as of 1/1/2014
26/07/04 6.583 10,670,000
03/11/06 13.370 6,250,000
Beginning Total 16,920,000
Vested/Not Exercised 16,920,000
Not Vested -
Options granted during in 2014 - - -
Options exercised in 2014
26/07/04 6.583 10,670,000
03/11/06 13.370 6,250,000
Total Options Exercised in 2014 16,920,000
Closing Total -
2014
|
ANNUAL REPORT 139
Share Plans
Grant
Date
Vesting
Date
Fair Value
on
Granting
Date
(1)
Thompson Wolf Simmons Marchionne Total
Beginning balance
01/01/2014
Fiat Stock grants 04/04/2012 02/22/2015 € 4.205 — — — 4,666,667 4,666,667
2009 FCA US RSUs 12/11/09 06/10/2012 US$ 10.47 499,478 499,478 — — 998,957
2012 FCA US RSUs 07/30/2012 06/10/2013 US$ 10.47 25,032 25,032 25,032 25,032 100,128
2013 FCA US RSUs 07/30/2013 06/10/2014 US$ 10.47 20,161 20,161 20,161 20,161 80,645
544,672 544,672 45,193 45,193 1,179,730
(2)
Post-dilution
adjusted
(3)
beginning balance
01/01/2014
Fiat stock grants 04/4/2012 02/22/2015 € 4.205 — — — 4,666,667 4,666,667
2009 FCA US RSUs 12/11/09 06/10/2012 US$ 8.07 648,023 648,023 — — 1,296,047
2012 FCA US RSUs 07/30/2012 06/10/2013 US$ 8.07 32,477 32,477 32,477 32,477 129,906
2013 FCA US RSUs 07/30/2013 06/10/2014 US$ 8.07 26,157 26,157 26,157 26,157 104,629
706,657 706,657 58,634 58,634 1,530,582
Granted during 2014
Vested during 2014
Fiat stock grants 04/04/2012 02/22/2015 € 4.205 — — — 2,333,333 2,333,333
2013 FCA US RSUs 07/30/2013 06/10/2014 US$ 8.07 26,157 26,157 26,157 26,157 26,157
Ending Balance as of
12/31/2014
FCA stock grants 04/4/2012 02/22/2015 € 4.205 — — — 2,333,334 2,333,334
2009 FCA US RSUs
(4)
12/11/09 06/10/2012 US$ 9.00 648,023 648,023 — — 1,296,047
2012 FCA US RSUs
(4)
07/30/2012 06/10/2013 US$ 9.00 32,477 32,477 32,477 32,477 129,906
2013 FCA US RSUs
(4)
07/30/2013 06/10/2014 US$ 9.00 26,157 26,157 26,157 26,157 104,629
706,657 706,657 58,634 58,634 1,530,582
(1)
Fair value of the FCA US RSUs beginning balance and ending balances reflects the reevaluation price in effect on those dates.
(2)
Mr. Marchionne does not receive any direct compensation for his service on behalf of FCA US (previously Chrysler Group LLC). In connection
with his service as a Director of FCA US, similarly to the equity-based compensation granted to the other Board Members, he was assigned
“Restricted Stock Units” under the Director RSU Plan. Such RSUs will be paid within 60 days following the date he ceases to serve as a Director.
(3)
FCA US RSU awards were adjusted for dilution by a factor of 1.2974 in June 2014.
(4)
FCA US RSUs will be paid within 60 days following the date FCA NV Board service ceases. The FCA US RSUs were revalued at US$ 9.00/unit
as of December 31, 2014.
The total cost booked in 2014 by the Company in connection with the share plans was €2.6 million; no costs were
booked in 2014 for stock options plans.
Executive Of?cers’ Compensation
The aggregate amount of compensation paid to or accrued for executive of?cers that held of?ce during 2014 was
approximately €22 million, including €2 million of pensions and similar bene?ts paid or set aside by us. The aggregate
amounts include 19 executives at December 31, 2014; during 2014, organizational changes occurred that were taken
into consideration, pro-rata temporis, in the total compensation ?gures.
Consolidated
Financial Statements
AT DECEMBER 31, 2014
Consolidated Income Statement ___________________________________________________________________ 142
Consolidated Statement of Comprehensive Income/(Loss) ____________________________________________ 143
Consolidated Statement of Financial Position ________________________________________________________ 144
Consolidated Statement of Cash Flows _____________________________________________________________ 145
Consolidated Statements of Changes in Equity _______________________________________________________ 146
Notes to the Consolidated Financial Statements _____________________________________________________ 147
142 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Consolidated
Income Statement
Consolidated Income Statement
for the years ended December 31, 2014, 2013 and 2012
For the years ended December 31,
2014 2013 2012
Note (€ million)
Net revenues (1) 96,090 86,624 83,765
Cost of sales (2) 83,146 74,326 71,473
Selling, general and administrative costs (3) 7,084 6,702 6,775
Research and development costs (4) 2,537 2,236 1,858
Other income/(expenses) 197 77 (68)
Result from investments: (5) 131 84 87
Share of the pro?t of equity method investees 117 74 74
Other income from investments 14 10 13
Gains and (losses) on the disposal of investments (6) 12 8 (91)
Restructuring costs (7) 50 28 15
Other unusual income/(expenses) (8) (390) (499) (138)
EBIT 3,223 3,002 3,434
Net ?nancial expenses (9) 2,047 1,987 1,910
Pro?t before taxes 1,176 1,015 1,524
Tax expense/(income) (10) 544 (936) 628
Pro?t from continuing operations 632 1,951 896
Net pro?t 632 1,951 896
Net pro?t attributable to:
Owners of the parent 568 904 44
Non-controlling interests 64 1,047 852
Basic earnings per ordinary share (in €) (12) 0.465 0.744 0.036
Diluted earnings per ordinary share (in €) (12) 0.460 0.736 0.036
The accompanying notes are an integral part of the Consolidated financial statements.
2014
|
ANNUAL REPORT
Consolidated
Financial Statements
143
Consolidated Statement of
Comprehensive Income/(Loss)
Consolidated Statement
of Comprehensive Income/(Loss)
for the years ended December 31, 2014, 2013 and 2012
For the years ended December 31,
2014 2013 2012
Note (€ million)
Net pro?t (A) 632 1,951 896
Items that will not be reclassi?ed to the Consolidated income
statement in subsequent periods:
(Losses)/gains on remeasurement of de?ned bene?t plans (23) (333) 2,676 (1,846)
Share of (losses)/gains on remeasurement of de?ned bene?t
plans for equity method investees (23) (4) (7) 4
Related tax impact (23) 29 239 3
Total items that will not be reclassi?ed to the Consolidated
income statement in subsequent periods (B1) (308) 2,908 (1,839)
Items that may be reclassi?ed to the Consolidated income
statement in subsequent periods:
(Losses)/gains on cash ?ow hedging instruments (23) (292) 162 184
(Losses)/gains on available-for-sale ?nancial assets (23) (24) 4 27
Exchange differences on translating foreign operations (23) 1,282 (720) (285)
Share of Other comprehensive income/(loss) for equity
method investees (23) 51 (88) 36
Related tax impact (23) 73 (27) (24)
Total items that may be reclassi?ed to the Consolidated
income statement in subsequent periods (B2) 1,090 (669) (62)
Total Other comprehensive income/(loss), net of tax
(B1)+(B2)=(B) 782 2,239 (1,901)
Total Comprehensive income/(loss) (A)+(B) 1,414 4,190 (1,005)
Total Comprehensive income/(loss) attributable to:
Owners of the parent 1,282 2,117 (1,062)
Non-controlling interests 132 2,073 57
The accompanying notes are an integral part of the Consolidated financial statements.
144 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Consolidated Statement
of Financial Position
Consolidated Statement of Financial Position
At December 31, 2014 and 2013
At December 31,
2014 2013
Note (€ million)
Assets
Intangible assets: 22,847 19,514
Goodwill and intangible assets with inde?nite useful lives (13) 14,012 12,440
Other intangible assets (14) 8,835 7,074
Property, plant and equipment (15) 26,408 23,233
Investments and other ?nancial assets: (16) 2,020 2,052
Investments accounted for using the equity method 1,471 1,388
Other investments and ?nancial assets 549 664
De?ned bene?t plan assets 114 105
Deferred tax assets (10) 3,547 2,903
Total Non-current assets 54,936 47,807
Inventories (17) 12,467 10,278
Trade receivables (18) 2,564 2,544
Receivables from ?nancing activities (18) 3,843 3,671
Current tax receivables (18) 328 312
Other current assets (18) 2,761 2,323
Current ?nancial assets: 761 815
Current investments 36 35
Current securities (19) 210 247
Other ?nancial assets (20) 515 533
Cash and cash equivalents (21) 22,840 19,455
Total Current assets 45,564 39,398
Assets held for sale (22) 10 9
Total Assets 100,510 87,214
Equity and liabilities
Equity: (23) 13,738 12,584
Equity attributable to owners of the parent 13,425 8,326
Non-controlling interest 313 4,258
Provisions: 20,372 17,427
Employee bene?ts (25) 9,592 8,326
Other provisions (26) 10,780 9,101
Deferred tax liabilities (10) 233 278
Debt (27) 33,724 30,283
Other ?nancial liabilities (20) 748 137
Other current liabilities (29) 11,495 8,963
Current tax payables 346 314
Trade payables (28) 19,854 17,207
Liabilities held for sale (22) — 21
Total Equity and liabilities 100,510 87,214
The accompanying notes are an integral part of the Consolidated financial statements.
2014
|
ANNUAL REPORT
Consolidated
Financial Statements
145
Consolidated Statement
of Cash Flows
Consolidated Statement of Cash Flows
for the years ended December 31, 2014, 2013 and 2012
For the years ended December 31,
2014 2013 2012
Note (€ million)
Cash and cash equivalents at beginning of the period (21) 19,455 17,666 17,526
Cash ?ows provided by operating activities:
Net pro?t for the period 632 1,951 896
Amortization and depreciation 4,897 4,635 4,201
Net losses on disposal of tangible and intangible assets 8 31 14
Net (gains)/losses on disposal of investments (10) (8) 91
Other non-cash items (32) 352 535 582
Dividends received 87 92 89
Change in provisions 1,239 457 63
Change in deferred taxes (179) (1,578) (72)
Change in items due to buy-back commitments and GDP vehicles (32) 178 93 (61)
Change in working capital (32) 965 1,410 689
Total 8,169 7,618 6,492
Cash ?ows used in investing activities:
Investments in property, plant and equipment and intangible assets (32) (8,121) (7,492) (7,564)
Acquisitions and capital increases in joint ventures, associates and
unconsolidated subsidiaries (17) (166) (24)
Net cash acquired in the acquisition of interests in subsidiaries and
joint operations (32) 6 15 14
Proceeds from the sale of tangible and intangible assets 40 59 118
Proceeds from disposal of other investments 38 5 21
Net change in receivables from ?nancing activities (137) (459) (14)
Change in current securities 43 (10) (64)
Other changes 8 (6) (29)
Total (8,140) (8,054) (7,542)
Cash ?ows provided by ?nancing activities:
Issuance of bonds 4,629 2,866 2,535
Repayment of bonds (2,150) (1,000) (1,450)
Issuance of other medium-term borrowings 4,876 3,188 1,925
Repayment of other medium-term borrowings (5,838) (2,558) (1,535)
Net change in other ?nancial payables and other ?nancial assets/
liabilities 548 677 171
Issuance of Mandatory Convertible Securities and other share
issuances (23) 3,094 - -
Cash Exit Rights following the merger of Fiat into FCA (417) - -
Exercise of stock options 146 4 22
Dividends paid (15) (1) (58)
Distribution of certain tax obligations of the VEBA Trust (32) (45) - -
Acquisition of non-controlling interests (32) (2,691) (34) -
Distribution for tax withholding obligations on behalf of non-
controlling interests - (6) -
Total 2,137 3,136 1,610
Translation exchange differences 1,219 (911) (420)
Total change in Cash and cash equivalents 3,385 1,789 140
Cash and cash equivalents at end of the period (21) 22,840 19,455 17,666
The accompanying notes are an integral part of the Consolidated financial statements.
146 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Consolidated Statements
of Changes in Equity
Consolidated Statements of Changes in Equity
for the years ended December 31, 2014, 2013 and 2012
Attributable to owners of the parent
Share
capital
Treasury
shares
Other
reserves
Cash
?ow
hedge
reserve
Currency
translation
differences
Available-
for-sale
?nancial
assets
Remeasu-
rement of
de?ned
bene?t
plans
Cumulative
share of OCI
of equity
method
investees
Non-
controlling
interests Total
(€ million)
At December 31, 2011 4,466 (289) 3,930 (170) 834 (43) (1,291) (79) 2,353 9,711
Capital increase — — — — — — — — 22 22
Effect of the conversion of preference
and savings shares into ordinary
shares 10 — (10) — — — — — — —
Share-based payments — 30 (15) — — — — — — 15
Dividends distributed — — (40) — — — — — (18) (58)
Purchase and sale of shares in
subsidiaries from/to non-controlling
interests — — 22 1 3 — (114) — (232) (320)
Net Pro?t — — 44 — — — — — 852 896
Other comprehensive income/(loss) — — — 184 (219) 26 (1,136) 39 (795) (1,901)
Other changes — — 4 — — — — — — 4
At December 31, 2012 4,476 (259) 3,935 15 618 (17) (2,541) (40) 2,182 8,369
Capital increase 1 — 2 — — — — — 1 4
Dividends distributed — — — — — — — — (1) (1)
Share-based payments — — 9 — — — — — — 9
Net Pro?t — — 904 — — — — — 1,047 1,951
Other comprehensive income/(loss) — — — 86 (567) 4 1,784 (94) 1,026 2,239
Distribution for tax withholding
obligations on behalf of NCI — — — — — — — — (6) (6)
Purchase of shares in subsidiaries from
non-controlling interests — — 2 — — — — — — 2
Other changes — — 8 — — — — — 9 17
At December 31, 2013 4,477 (259) 4,860 101 51 (13) (757) (134) 4,258 12,584
Capital increase 2 — 989 — — — — — 3 994
Merger (4,269) 224 4,045 — — — — — — —
Mandatory Convertible Securities — — 1,910 — — — — — — 1,910
Exit Rights (193) — (224) — — — — — — (417)
Dividends distributed — — — — — — — — (50) (50)
Share-based payments — 35 (31) — — — — — — 4
Net Pro?t — — 568 — — — — — 64 632
Other comprehensive income/(loss) — — — (205) 1,198 (24) (303) 48 68 782
Distribution for tax withholding
obligations on behalf of NCI — — — — — — — — (45) (45)
Purchase of shares in subsidiaries from
non-controlling interests — — 1,633 35 175 — (518) — (3,990) (2,665)
Other changes — — 4 — — — — — 5 9
At December 31, 2014 17 — 13,754 (69) 1,424 (37) (1,578) (86) 313 13,738
The accompanying notes are an integral part of the Consolidated financial statements.
2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
147
Notes to the Consolidated Financial Statements
At December 31, 2014 and 2013
PRINCIPAL ACTIVITIES
The FCA Merger
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. and decided to establish Fiat Chrysler Automobiles N.V.,
organized in the Netherlands, as the parent of the Group with its principal executive of?ces in the United Kingdom.
Fiat Chrysler Automobiles N.V. was incorporated as a public limited liability company (naamloze vennootschap) under
the laws of the Netherlands on April 1, 2014 under the name Fiat Investments N.V.
On June 15, 2014, the Board of Directors of Fiat approved the terms of a cross-border legal merger of Fiat into its 100
percent owned direct subsidiary Fiat Investments N.V. (the “Merger”), subject to several conditions precedent. At that
time, Fiat ordinary shares were listed on the Mercato Telematico Azionario (“MTA”) organized and managed by Borsa
Italiana S.p.A, as well as Euronext Paris and Frankfurt stock exchange. On October 7, 2014, Fiat announced that all
conditions precedent for the completion of the Merger were satis?ed:
Fiat shareholders had voted and approved the Merger at their extraordinary general meeting held on August 1,
2014. The New York Stock Exchange (“NYSE”) had provided notice that the listing of Fiat Chrysler Automobiles
N.V. common shares was approved on October 6, 2014 subject to issuance of these shares upon effectiveness of
the Merger. On the same day Borsa Italiana S.p.A. had approved the listing of the common shares of Fiat Chrysler
Automobiles N.V. on the MTA,
the creditors’ opposition period provided under the Italian law had expired on October 4, 2014, and no creditors’
oppositions were ?led,
exercise of the Cash Exit Rights by Fiat shareholders resulted in a total exercise of 60,002,027 Fiat shares,
equivalent to an aggregate amount of €464 million at the €7.727 per share exit price, and
pursuant to the Italian Civil Code, a total of 60,002,027 Fiat shares (equivalent to an aggregate amount of €464
million at the €7.727 per share exit price) were offered to Fiat shareholders not having exercised the Cash Exit
Rights. On October 7, 2014, at the completion of the offer period, Fiat shareholders elected to purchase 6,085,630
shares out of the total of 60,002,027 shares for a total of €47 million; as a result, concurrent with the Merger,
on October 12, 2014, 53,916,397 Fiat shares were canceled in the Merger with a resulting net aggregate cash
disbursement of €417 million.
The Merger was completed and became effective on October 12, 2014. The Merger, which took the form of a reverse
merger resulted in Fiat Investments N.V. being the surviving entity which was then renamed Fiat Chrysler Automobiles
N.V. (“FCA”). On October 13, 2014, FCA common shares commenced trading on the NYSE and on the MTA. The last
day of trading of Fiat ordinary shares on the MTA, Euronext France and Deutsche Börse was October 10, 2014. The
Merger is recognized in FCA’s Consolidated ?nancial statements from January 1, 2014 and FCA, as successor of Fiat,
is the parent company. As the Merger is a business combination in which all of the combining entities are controlled
ultimately by the same party both before and after the business combination, and based on the fact that the control is
not transitory, the transition was deemed to be a combination of entities under common control and therefore outside
the scope of IFRS 3R - Business Combinations and IFRIC 17 - Distributions of Non-cash Assets to Owners. As a
result, the Merger was accounted for without adjusting the carrying amounts of assets and liabilities involved in the
transaction and did not have an impact on the Consolidated ?nancial statements.
148 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Corporate Information
The Group and its subsidiaries, among which the most signi?cant is FCA US LLC (“FCA US”), formerly known as
Chrysler Group LLC or Chrysler, together with its subsidiaries, are engaged in the design, engineering, manufacturing,
distribution and sale of automobiles and light commercial vehicles, engines, transmission systems, automotive-related
components, metallurgical products and production systems. In addition, the Group is also involved in certain other
activities, including services (mainly captive) and publishing, which represent an insigni?cant portion of the Group’s
business.
SIGNIFICANT ACCOUNTING POLICIES
Authorization of Consolidated ?nancial statements and compliance with International Financial Reporting
Standards
These Consolidated ?nancial statements, together with notes thereto of FCA, at December 31, 2014 were authorized
for issuance on March 5, 2015 and have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code. The
Consolidated ?nancial statements are also prepared in accordance with the IFRS adopted by the European Union.
The designation “IFRS” also includes International Accounting Standards (“IAS”) as well as all interpretations of the
IFRS Interpretations Committee (“IFRIC”).
Basis of Preparation
The Consolidated ?nancial statements are prepared under the historical cost method, modi?ed as required for the
measurement of certain ?nancial instruments, as well as on a going concern basis. In this respect, the Group’s
assessment is that no material uncertainties (as de?ned in paragraph 25 of IAS 1- Presentation of Financial
Statements) exist about its ability to continue as a going concern.
The Group’s presentation currency is Euro (€).
Format of the Consolidated Financial Statements
For presentation of the Consolidated income statement, the Group uses a classi?cation based on the function of
expenses, rather than based on their nature, as it is more representative of the format used for internal reporting
and management purposes and is consistent with international practice in the automotive sector. The Group also
presents a subtotal for Earnings before Interest and Taxes (“EBIT”). EBIT distinguishes between the Pro?t before
taxes arising from operating items and those arising from ?nancing activities. EBIT is the primary measure used by the
Chief Operating Decision Maker (identi?ed as the Chief Executive Of?cer) to assess the performance of and allocate
resources to the operating segments.
For the Consolidated statement of ?nancial position, a mixed format has been selected to present current and non-
current assets and liabilities, as permitted by IAS 1 paragraph 60. More speci?cally, the Group’s Consolidated ?nancial
statements include both industrial and ?nancial services companies. The investment portfolios of the ?nancial services
companies are included in current assets, as the investments will be realized in their normal operating cycle. However,
the ?nancial services companies obtain only a portion of their funding from the market; the remainder is obtained from
Group operating companies through the Group’s treasury companies (included within the industrial companies), which
provide funding to both industrial and ?nancial services companies in the Group, as the need arises. This ?nancial
services structure within the Group does not allow the separation of ?nancial liabilities funding the ?nancial services
operations (whose assets are reported within current assets) and those funding the industrial operations. Presentation
of ?nancial liabilities as current or non-current based on their date of maturity would not facilitate a meaningful
comparison with ?nancial assets, which are categorized on the basis of their normal operating cycle. Disclosure as to
the due date of the ?nancial liabilities is provided in Note 27.
The Consolidated statement of cash ?ows is presented using the indirect method.
2014
|
ANNUAL REPORT 149
Reclassi?cations
Certain prior year amounts have been reclassi?ed to conform to the current year presentation.
New standards and amendments effective from January 1, 2014
The following new standards and amendments that are applicable from January 1, 2014 were adopted by the Group
for the purpose of the preparation of the Consolidated ?nancial statements.
IFRS 11 - Joint arrangements
The Group adopted IFRS 11, as amended as of January 1, 2014. The adoption of this standard required the
reclassi?cation of investments previously classi?ed as jointly controlled entities under IAS 31 - Interests in joint
ventures, as either “joint operations” (if the Group has rights to the assets, and obligations for the liabilities, relating to
an arrangement) or “joint ventures” (if the Group has rights only to the net assets of an arrangement). The classi?cation
focuses on the rights and obligations of the arrangements, as well as their legal form. Under the new standard, joint
ventures are accounted for under the equity method while joint operations are accounted for by recognizing the
Group’s share of assets, liabilities, revenues and expenses (these interests would have previously been accounted for
using the equity method under IAS 31).
As a result of the IFRS 11 retrospective application, the Group’s interest in Sevel S.p.A., a joint arrangement with
PSA-Peugeot and the Group’s interests in Fiat India Automobiles Limited, a joint arrangement with Tata Motor, were
classi?ed as joint operations. Therefore, the Group recognized its share of assets, liabilities, revenues and expenses
instead of recognizing its interest in the net assets of the entities under the equity method. The Group’s interests in
joint arrangements which were classi?ed as jointly controlled entities under IAS 31 and have been reclassi?ed as Joint
ventures under IFRS 11 continue to be accounted for using the equity method. The reclassi?cation of these interests
had no impact on these Interim Consolidated Financial Statements.
The impacts of the adoption of IFRS 11 on comparative amounts are set out below:
For the Year Ended December 31, 2013 For the Year Ended December 31, 2012
Amounts as
originally
reported IFRS 11
Amounts as
adjusted
Amounts as
originally
reported IFRS 11
Amounts as
adjusted
(€ million)
Items of Consolidated income statement
impacted by IFRS 11
Net revenues 86,816 (192) 86,624 83,957 (192) 83,765
Cost of sales 74,570 (244) 74,326 71,701 (228) 71,473
Selling, general and administrative costs 6,689 13 6,702 6,763 12 6,775
Research and development costs 2,231 5 2,236 1,850 8 1,858
Other income/(expenses) 68 9 77 (102) 34 (68)
Result from investments 97 (13) 84 107 (20) 87
EBIT 2,972 30 3,002 3,404 30 3,434
Net ?nancial income/(expenses) (1,964) (23) (1,987) (1,885) (25) (1,910)
Tax (income)/expenses (943) 7 (936) 623 5 628
Net pro?t 1,951 — 1,951 896 — 896
Net pro?t attributable to
Owners of the parent 904 — 904 44 — 44
Non-controlling interests 1,047 — 1,047 852 — 852
Basic and diluted earnings per share
Basic earnings per ordinary share 0.744 — 0.744 0.036 — 0.036
Diluted earnings per ordinary share 0.736 — 0.736 0.036 — 0.036
150 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
For the Year Ended December 31, 2013 For the Year Ended December 31, 2012
Amounts
as originally
reported IFRS 11
Amounts
as adjusted
Amounts
as originally
reported IFRS 11
Amounts
as adjusted
(€ million)
Items of Consolidated statement of
comprehensive income/(loss) impacted by
IFRS 11
Net pro?t 1,951 — 1,951 896 — 896
Gains/(losses) on remeasurement of de?ned
bene?t plans, net of tax 2,678 (2) 2,676 (1,839) — (1,839)
Share of gains/(losses) on remeasurement of
de?ned bene?t plans for equity method investees (9) 2 (7) — — —
Exchange differences on translating foreign
operations (708) (12) (720) (270) (15) (285)
Share of Other comprehensive income/(loss) for
equity method investees (100) 12 (88) 21 15 36
At December 31, 2013 At December 31, 2012 At January 1, 2012
Amounts
as
originally
reported IFRS 11
Amounts
as
adjusted
Amounts
as
originally
reported IFRS 11
Amounts
as
adjusted
Amounts
as
originally
reported IFRS 11
Amounts
as
adjusted
(€ million)
Items of Consolidated statement of ?nancial
position impacted by IFRS 11
Assets
Intangible assets 19,509 5 19,514 19,284 10 19,294 18,200 — 18,200
Property, plant and equipment 22,844 389 23,233 22,062 434 22,496 20,830 295 21,125
Investments and other ?nancial assets 2,260 (208) 2,052 2,287 (168) 2,119 2,663 (97) 2,566
Deferred tax assets 2,893 10 2,903 1,738 9 1,747 1,689 10 1,699
Total Non-current assets 47,611 196 47,807 45,464 285 45,749 43,487 208 43,695
Inventories 10,230 48 10,278 9,295 64 9,359 9,123 43 9,166
Trade receivables 2,406 138 2,544 2,702 114 2,816 2,625 89 2,714
Receivables from ?nancing activities — — — 3,727 (7) 3,720 3,968 (15) 3,953
Current tax receivables 291 21 312 236 30 266 369 — 369
Other current assets 2,302 21 2,323 2,163 32 2,195 2,088 13 2,101
Cash and cash equivalents 19,439 16 19,455 17,657 9 17,666 17,526 — 17,526
Total Current assets 39,154 244 39,398 36,587 242 36,829 36,488 130 36,618
Total Assets 86,774 440 87,214 82,106 527 82,633 80,041 338 80,379
Equity and liabilities
Equity 12,584 — 12,584 8,369 — 8,369 9,711 — 9,711
Of which
Other reserves — — — 3,935 — 3,935 3,930 — 3,930
Currency translation differences — — — 633 (15) 618 834 — 834
Remeasurement of de?ned bene?t plans — — — (2,534) (7) (2,541) (1,287) (4) (1,291)
Cumulative share of OCI of equity method investees — — — 18 22 40 (83) 4 (79)
Non-controlling interest — — — 2,182 — 2,182 2,353 — 2,353
Provisions 17,360 67 17,427 20,276 52 20,328 18,182 60 18,242
Employee bene?ts 8,265 61 8,326 11,486 60 11,546 9,584 56 9,640
Other provisions 9,095 6 9,101 8,790 (8) 8,782 8,598 4 8,602
Deferred tax liabilities — — — 801 — 801 761 1 762
Debt 29,902 381 30,283 27,889 414 28,303 26,772 321 27,093
Other current liabilities 8,943 20 8,963 7,781 30 7,811 7,538 21 7,559
Trade payables 17,235 (28) 17,207 16,558 31 16,589 16,418 (65) 16,353
Total Equity and liabilities 86,774 440 87,214 82,106 527 82,633 80,041 338 80,379
2014
|
ANNUAL REPORT 151
For the Year Ended December 31, 2013 For the Year Ended December 31, 2012
Amounts
as originally
reported IFRS 11
Amounts
as adjusted
Amounts
as originally
reported IFRS 11
Amounts
as adjusted
(€ million)
Effects on Consolidated statement
of cash ?ows
Cash and cash equivalents at beginning
of the period 17,657 9 17,666 17,526 — 17,526
Cash ?ows from/(used in) operating activities 7,589 29 7,618 6,444 48 6,492
Of which
Pro?t/(loss) for the period — — — 896 — 896
Other non-cash items — — — 562 20 582
Cash ?ows from/(used in) investing activities (8,086) 32 (8,054) (7,537) (5) (7,542)
Cash ?ows from/(used in) ?nancing activities 3,188 (52) 3,136 1,643 (33) 1,610
Translation exchange differences (909) (2) (911) (419) (1) (420)
Total change in cash and cash equivalents 1,782 7 1,789 131 9 140
Cash and cash equivalents at end of the period 19,439 16 19,455 17,657 9 17,666
IFRS 10 - Consolidated Financial Statements
The Group adopted IFRS 10, as amended, effective January 1, 2014. The new standard builds on existing principles
by identifying a single control model applicable to all entities, including “structured entities”. The standard also provides
additional guidance to assist in the determination of control where this is dif?cult to assess.
In accordance with the transition provision in IFRS 10, the Group reassessed the conclusion on control of its investees
on January 1, 2014 without reporting any signi?cant effect on the adoption of the new standard.
IFRS 12 - Disclosure of Interests in Other Entities
The Group adopted IFRS 12, as amended, effective January 1, 2014. The standard is a new and comprehensive
standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint
arrangements, associates, structured entities and other unconsolidated entities. Other than the modi?cations to the
disclosures regarding these interests reported in these Consolidated ?nancial statements, the adoption of the new
standard did not have any effect on these Consolidated ?nancial statements.
Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32 – Financial Instruments: Presentation)
The Group adopted the amendments to IAS 32 – Financial Instruments: Presentation effective January 1, 2014.
The amendments clarify the application of certain offsetting criteria for ?nancial assets and ?nancial liabilities and are
required to be applied retrospectively. There was no signi?cant effect on the Consolidated ?nancial statements from
the application of these amendments.
Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36 – Impairment of assets)
The Group adopted the amendments to IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets on
January 1,2014 which addresses the disclosure of information about the recoverable amount of impaired assets if
the recoverable amount is based on fair value less cost of disposal. There was no effect on the Consolidated ?nancial
statements from the adoption of these amendments. The application of these amendments will result in expanded
disclosure in the notes to future consolidated ?nancial statements when there is an impairment that is based on fair
value less cost of disposal.
152 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39 – Financial Instruments:
Recognition and Measurement)
These amendments, which were adopted from January 1, 2014, allow hedge accounting to continue in a situation
where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central
counterparty as a result of laws or regulation, if speci?c conditions are met. There was no signi?cant effect on the
Consolidated ?nancial statements from the application of these amendments.
Accounting for an obligation to pay a levy that is not income tax (IFRIC Interpretation 21 – Levies an interpretation of
IAS 37 – Provisions, Contingent Liabilities and Contingent Assets)
The interpretation, effective from January 1, 2014, sets out the accounting for an obligation to pay a levy that is not
income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability
should be recognized. There was no signi?cant effect on the Consolidated ?nancial statements from the application of
this interpretation.
New standards, amendments and interpretations not yet effective
In November 2013, the IASB published narrow scope amendments to IAS 19 – Employee bene?ts entitled “De?ned
Bene?t Plans: Employee Contributions”. These amendments apply to contributions from employees or third parties
to de?ned bene?t plans in order to simplify their accounting in speci?c cases. The amendments are effective,
retrospectively, for annual periods beginning on or after July 1, 2014 with earlier application permitted. No signi?cant
effect is expected from the ?rst time adoption of these amendments.
In December 2013, the IASB issued Annual Improvements to IFRSs 2010 – 2012 Cycle and Annual Improvements
to IFRSs 2011–2013 Cycle. The most important topics addressed in these amendments are, among others,
the de?nition of vesting conditions in IFRS 2 – Share-based payments, the disclosure on judgment used in the
aggregation of operating segments in IFRS 8 – Operating Segments, the identi?cation and disclosure of a related
party transaction that arises when a management entity provides key management personnel service to a reporting
entity in IAS 24 – Related Party disclosures, the extension of the exclusion from the scope of IFRS 3 – Business
Combinations to all types of joint arrangements and to clarify the application of certain exceptions in IFRS 13 – Fair
value Measurement. The improvements are effective for annual periods beginning on or after January 1, 2015. No
signi?cant effect is expected from the adoption of these amendments.
In May 2014, the IASB issued amendments to IFRS 11 – Joint arrangements: Accounting for acquisitions of interests
in joint operations, clarifying the accounting for acquisitions of an interest in a joint operation that constitutes a
business. The amendments are effective, retrospectively, for annual periods beginning on or after January 1, 2016 with
earlier application permitted. No signi?cant effect is expected from the adoption of these amendments.
In May 2014, the IASB issued an amendment to IAS 16 – Property, Plant and Equipment and to IAS 38 – Intangible
Assets. The IASB has clari?ed that the use of revenue-based methods to calculate the depreciation of an asset is
not appropriate because revenue generated by an activity that includes the use of an asset generally re?ects factors
other than the consumption of the economic bene?ts embodied in the asset. The IASB also clari?ed that revenue
is generally presumed to be an inappropriate basis for measuring the consumption of the economic bene?ts
embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances.
These amendments are effective for annual periods beginning on or after January 1, 2016, with early application
permitted. The Group is currently evaluating the method of implementation and impact of this amendment on its
Consolidated ?nancial statements.
In May 2014, the IASB issued IFRS 15 – Revenue from contracts with customers. The standard requires a company
to recognize revenue upon transfer of control of goods or services to a customer at an amount that re?ects the
consideration it expects to receive. This new revenue recognition model de?nes a ?ve step process to achieve this
objective. The updated guidance also requires additional disclosures about the nature, amount, timing and uncertainty
of revenue and cash ?ows arising from customer contracts. The standard is effective for annual periods beginning
on or after January 1, 2017, and requires either a full or modi?ed retrospective application. The Group is currently
evaluating the method of implementation and impact of this standard on its Consolidated ?nancial statements.
2014
|
ANNUAL REPORT 153
In July 2014 the IASB issued IFRS 9 – Financial Instruments. The improvements introduced by the new standard
includes a logical approach for classi?cation and measurement of ?nancial instruments driven by cash ?ow
characteristics and the business model in which an asset is held, a single “expected loss” impairment model for
?nancial assets and a substantially reformed approach for hedge accounting. The standard is effective, retrospectively
with limited exceptions, for annual periods beginning on or after January 1, 2018 with earlier application permitted. The
Group is currently evaluating the impact of this standard on its Consolidated ?nancial statements.
In September 2014, the IASB issued narrow amendments to IFRS 10 – Consolidated Financial Statements and
IAS 28 – Investments in Associates and Joint Ventures (2011). The amendments address an acknowledged
inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or
contribution of assets between an investor and its associate or joint venture. The main consequence of the
amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed
in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute
a business, even if these assets are housed in a subsidiary. The amendments will be effective, prospectively, for
annual periods commencing on or after January 1, 2016.
In September 2014 the IASB issued the Annual Improvements to IFRSs 2012-2014 cycle, a series of amendments
to IFRSs in response to issues raised mainly on IFRS 5 – Non-current assets held for sale and discontinued
operations, on the changes of method of disposal, on IFRS 7 – Financial Instruments: Disclosures on the
servicing contracts, on the IAS 19 – Employee Bene?ts, on the discount rate determination. The effective date of
the amendments is January 1, 2016. The Group is currently evaluating the impact of these amendments on its
Consolidated ?nancial statements.
In December 2014 the IASB issued amendments to IAS 1- Presentation of Financial Statements as part of its
major initiative to improve presentation and disclosure in ?nancial reports. The amendments make clear that
materiality applies to the whole of ?nancial statements and that the inclusion of immaterial information can inhibit the
usefulness of ?nancial disclosures. Furthermore, the amendments clarify that companies should use professional
judgment in determining where and in what order information is presented in the ?nancial disclosures. The
amendments are effective for annual periods beginning on or after January 1, 2016 with early application permitted.
Basis of Consolidation
Subsidiaries
Subsidiaries are entities over which the Group has control. Control is achieved when the Group has power over the
investee, when it is exposed to, or has rights to, variable returns from its involvement with the investee, and has the
ability to use its power over the investee to affect the amount of the investor’s returns. Subsidiaries are consolidated
on a line by line basis from the date on which control is achieved by the Group. The Group reassesses whether or not
it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements
of control listed above.
The Group recognizes a non-controlling interest in the acquiree on a transaction-by-transaction basis, either at fair
value or at the non-controlling interest’s share of the recognized amounts of the acquiree’s identi?able net assets.
Net pro?t or loss and each component of Other comprehensive income/(loss) are attributed to Equity attributable to
owners of the parent and to Non-controlling interest. Total comprehensive income /(loss) of subsidiaries is attributed to
Equity attributable to the owners of the parent and to the non-controlling interest even if this results in a de?cit balance
in Non-controlling interest.
Changes in the Group’s ownership interests in a subsidiary that do not result in the Group losing control over the
subsidiary are accounted for as an equity transaction. The carrying amounts of the Equity attributable to owners of the
parent and Non-controlling interests are adjusted to re?ect the changes in their relative interests in the subsidiary. Any
difference between the carrying amount of the non-controlling interests and the fair value of the consideration paid or
received in the transaction is recognized directly in the Equity attributable to the owners of the parent.
154 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Subsidiaries are deconsolidated from the date on which control ceases. When the Group ceases to have control
over a subsidiary, it de-recognizes the assets (including any goodwill) and liabilities of the subsidiary at their carrying
amounts at the date when control is lost, and de-recognizes the carrying amount of non-controlling interests in the
former subsidiary at the same date and recognizes the fair value of any consideration received from the transaction.
Any retained interest in the former subsidiary is remeasured to its fair value at the date when control is lost. This fair
value is the initial carrying amount for the purposes of subsequent accounting for the retained interest as an associate,
joint venture or ?nancial asset. In addition, any amounts previously recognized in Other comprehensive income/(loss)
in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.
This may mean that amounts previously recognized in Other comprehensive income/(loss) are reclassi?ed to the
Consolidated income statement or transferred directly to retained earnings as required by other IFRS.
Interests in Joint Ventures and Associates
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the arrangement. Joint control involves the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
An associate is an entity over which the Group has signi?cant in?uence. Signi?cant in?uence is the power to participate in
the ?nancial and operating policy decisions of the investees but does not have control or joint control over those policies.
Joint ventures and associates are accounted for using the equity method of accounting from the date on which joint
control and signi?cant in?uence is obtained. On acquisition of the investment, any excess of the cost of the investment
and the Group’s share of the net fair value of the investee’s identi?able assets and liabilities is recognized as goodwill
and is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the
investee’s identi?able assets and liabilities over the cost of the investment is included as income in the determination of
the Group’s share of the investee’s pro?t or loss in the acquisition period.
Under the equity method, the investments are initially recognized at cost, and adjusted thereafter to recognize the
Group’s share of the pro?t or loss and Other comprehensive income/(loss) of the investee. The Group’s share of the
investee’s pro?t or loss is recognized in the Consolidated income statement. Distributions received from an investee
reduce the carrying amount of the investment. Post-acquisition movements in Other comprehensive income/(loss)
are recognized in Other comprehensive income/(loss) with a corresponding adjustment to the carrying amount of
the investment.
Unrealized gains on transactions between the Group and its joint ventures and associates are eliminated to the extent
of the Group’s interest in the joint venture or associate. Unrealized losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
When the Group’s share of the losses of a joint venture or associate exceeds the Group’s interest in that joint venture
or associate, the Group discontinues recognizing its share of further losses. Additional losses are provided for, and
a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made
payments on behalf of the joint venture or associate.
The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or
a joint venture or when it is classi?ed as available-for-sale.
2014
|
ANNUAL REPORT 155
Interests in Joint Operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
assets and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous
consent of the parties sharing control.
When the Group undertakes its activities under joint operations, it recognizes in relation to its interest in the joint
operation: (i) its assets, including its share of any assets held jointly, (ii) its liabilities, including its share of any liabilities
incurred jointly, (iii) its revenue from the sale of its share of the output arising from the joint operation (iv) its share of
the revenue from the sale of the output by the joint operation and (v) its expenses, including its share of any expenses
incurred jointly.
Interests in other companies
Interests in other companies are measured at fair value. Investments in equity investments that do not have a
quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost.
For investments classi?ed as available-for-sale, ?nancial assets gains or losses arising from changes in fair value are
recognized in Other comprehensive income/(loss) until the assets are sold or are impaired; at that time, the cumulative
Other comprehensive income/(loss) is recognized in the Consolidated income statement. Interests in other companies
for which fair value is not available are stated at cost less any impairment losses.
Dividends received are included in Other income/(expenses) from investments.
Transactions eliminated in consolidation
All intra-group balances and transactions and any unrealized gains and losses arising from intra-group transactions
are eliminated in preparing the Consolidated ?nancial statements.
Unrealized gains and losses arising from transactions with associates and joint ventures are eliminated to the extent of
the Group’s interest in those entities. Unrealized losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred.
Foreign currency transactions
The functional currency of the Group’s entities is the currency of their primary economic environment. In individual
companies, transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated
at the exchange rate prevailing at that date. Exchange differences arising on the settlement of monetary items or on
reporting monetary items at rates different from those at which they were initially recorded during the period or in
previous ?nancial statements, are recognized in the Consolidated income statement.
Consolidation of foreign entities
All assets and liabilities of foreign consolidated companies with a functional currency other than the Euro are translated
using the closing rates at the date of the Consolidated statement of ?nancial position. Income and expenses are
translated into Euro at the average exchange rate for the period. Translation differences resulting from the application
of this method are classi?ed as Other comprehensive income/(loss) until the disposal of the investment. Average
exchange rates for the period are used to translate the cash ?ows of foreign subsidiaries in preparing the Consolidated
statement of cash ?ows.
Goodwill, assets acquired and liabilities assumed arising from the acquisition of entities with a functional currency
other than the Euro are recognized in the Consolidated ?nancial statements in the functional currency and translated
at the exchange rate at the acquisition date. These balances are translated at subsequent balance sheet dates at the
relevant exchange rate.
156 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The principal exchange rates used to translate other currencies into Euros were as follows:
2014 2013 2012
Average At December 31, Average At December 31, Average At December 31,
U.S. Dollar 1.329 1.214 1.328 1.379 1.285 1.319
Brazilian Real 3.121 3.221 2.867 3.258 2.508 2.704
Chinese Renminbi 8.187 7.536 8.164 8.349 8.106 8.221
Serbian Dinar 117.247 120.958 113.096 114.642 113.120 113.718
Polish Zloty 4.184 4.273 4.197 4.154 4.185 4.074
Argentine Peso 10.782 10.382 7.263 8.988 5.836 6.478
Pound Sterling 0.806 0.779 0.849 0.834 0.811 0.816
Swiss Franc 1.215 1.202 1.231 1.228 1.205 1.207
Business combinations
Business combinations are accounted for by applying the acquisition method of accounting in accordance with IFRS
3 - Business Combinations.
Under this method:
The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of
the acquisition-date fair values of the assets acquired and liabilities assumed by the Group and the equity interests
issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in the
Consolidated income statement as incurred.
The identi?able assets acquired and the liabilities assumed are recognized at their acquisition date fair values,
except for deferred tax assets and liabilities, assets and liabilities relating to employee bene?t arrangements,
liabilities or equity instruments relating to share-based payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree
and assets (or disposal groups) that are classi?ed as held for sale, which are measured in accordance with the
relevant IFRS standard.
Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the acquisition-date fair value of any previously held equity interest in the
acquiree over the acquisition-date values of the identi?able net assets acquired. If the value of the identi?able net
assets acquired exceeds the aggregate of the consideration transferred, any non-controlling interest recognized
and the fair value of any previously held interest in the acquiree, the excess is recognized as a gain in the
Consolidated income statement.
Non-controlling interest is initially measured either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s identi?able net assets. The selection of the measurement method is made on a transaction-
by-transaction basis.
Any contingent consideration arrangement in the business combination is initially measured at its acquisition-date
fair value and included as part of the consideration transferred in the business combination in order to measure
goodwill. Contingent consideration that is classi?ed within Equity is not remeasured and its subsequent settlement
is accounted for within Equity. Contingent consideration that is classi?ed within Liabilities is remeasured at fair value
at each reporting date with changes in fair value recorded in the Consolidated income statement.
During the measurement period, which may not exceed one year from the acquisition date, any adjustments to the
value of assets or liabilities recognized at the acquisition date arising from additional information obtained about
facts and circumstances that existed at the acquisition date are recognized retrospectively with corresponding
adjustments to goodwill.
2014
|
ANNUAL REPORT 157
When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is
remeasured at its acquisition-date fair value and any resulting gain or loss is recognized in the Consolidated income
statement. Changes in the equity interest in the acquiree that have been recognized in Other comprehensive
income/(loss) in prior reporting periods are reclassi?ed to the Consolidated income statement as if the equity
interest had been disposed.
Intangible assets
Goodwill
Goodwill is not amortized, but is tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired. After initial recognition, Goodwill is measured at cost less any
accumulated impairment losses.
Development costs
Development costs for vehicle project production and related components, engines and production systems are
recognized as an asset if, and only if, both of the following conditions under IAS 38 – Intangible assets are met: that
development costs can be measured reliably and that the technical feasibility of the product, volumes and pricing
support the view that the development expenditure will generate future economic bene?ts. Capitalized development
costs include all direct and indirect costs that may be directly attributed to the development process.
Capitalized development costs are amortized on a straight-line basis from the start of production over the expected
life cycle of the models (generally 5-6 years) or powertrains developed (generally 10-12 years). All other development
costs are expensed as incurred.
Intangible assets with inde?nite useful lives
Intangible assets with inde?nite useful lives consist principally of brands which have no legal, contractual, competitive,
economic, or other factors that limit their useful lives. Intangible assets with inde?nite useful lives are not amortized, but
are tested for impairment annually or more frequently whenever there is an indication that the asset may be impaired,
by comparing the carrying amount with the recoverable amount.
Property, plant and equipment
Cost
Property, plant and equipment is initially recognized at cost which comprises the purchase price, any costs directly
attributable to bringing the assets to the location and condition necessary to be capable of operating in the manner
intended by management and any initial estimate of the costs of dismantling and removing the item and restoring
the site on which it is located. Self-constructed assets are initially recognized at production cost. Subsequent
expenditures and the cost of replacing parts of an asset are capitalized only if they increase the future economic
bene?ts embodied in that asset. All other expenditures are expensed as incurred. When such replacement costs are
capitalized, the carrying amount of the parts that are replaced is recognized in the Consolidated income statement.
Assets held under ?nance leases, which provide the Group with substantially all the risks and rewards of ownership, are
recognized as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the Consolidated statement of position within Debt. The assets are
depreciated by the method and at the rates indicated below depending on the nature of the leased assets.
Leases under which the lessor retains substantially all the risks and rewards of ownership of the leased assets are
classi?ed as operating leases. Operating lease expenditures are expensed on a straight-line basis over the lease terms.
158 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Depreciation
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets during years ended
December 31, 2014, 2013 and 2012, as follows:
Depreciation rates
Buildings 3% - 8%
Plant, machinery and equipment 3% - 33%
Other assets 5% - 33%
Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of property, plant or
equipment or an intangible asset that is deemed to be a qualifying asset as de?ned in IAS 23 - Borrowing Costs
are capitalized. The amount of borrowing costs eligible for capitalization corresponds to the actual borrowing costs
incurred during the period less any investment income on the temporary investment of any borrowed funds not yet
used. The amount of borrowing costs capitalized as of December 31, 2014 and 2013 was €256 million and €230
million, respectively.
Impairment of assets
At the end of each reporting period, the Group assesses whether there is any indication that its Intangible assets
(including development costs) and its Property, plant and equipment may be impaired. Goodwill and Intangible assets
with inde?nite useful lives are tested for impairment annually or more frequently, if there is an indication that an asset
may be impaired.
If indications of impairment are present, the carrying amount of the asset is reduced to its recoverable amount which
is the higher of fair value less costs to sell and its value in use. The recoverable amount is determined for the individual
asset, unless the asset does not generate cash in?ows that are largely independent of those from other assets or
groups of assets, in which case the asset is tested as part of the cash-generating unit (“CGU”) to which the asset
belongs. A CGU is the smallest identi?able group of assets that generates cash in?ows that are largely independent
of the cash in?ows from other assets or groups of assets. In assessing the value in use of an asset or CGU, the
estimated future cash ?ows are discounted to their present value using a discount rate that re?ects current market
assessments of the time value of money and the risks speci?c to the asset or CGU. An impairment loss is recognized
if the recoverable amount is lower than the carrying amount. Impairment of Property plant and equipment and
Intangible assets arising from transactions that are only incidentally related to the ordinary activities of the Group and
that are not expected to occur frequently, are considered to hinder comparability of the Group’s year-on-year ?nancial
performance and are recognized within Other unusual expenses.
When an impairment loss for assets, other than Goodwill no longer exists or has decreased, the carrying amount of
the asset or CGU is increased to the revised estimate of its recoverable amount, but not in excess of the carrying
amount that would have been recorded had no impairment loss been recognized. The reversal of an impairment loss
is recognized in the Consolidated income statement.
2014
|
ANNUAL REPORT 159
Financial instruments
Presentation
Financial instruments held by the Group are presented in the Consolidated ?nancial statements as described in the
following paragraphs.
Investments and other non-current ?nancial assets comprise investments in unconsolidated companies and other
non-current ?nancial assets (held-to-maturity securities, non-current loans and receivables and other non-current
available-for-sale ?nancial assets).
Current ?nancial assets, as de?ned in IAS 39 – Financial Instruments: Recognition and Measurement, include Trade
receivables, Receivables from ?nancing activities, Current investments, Current securities and Other ?nancial assets
(which include derivative ?nancial instruments stated at fair value), as well as Cash and cash equivalents. Cash and
cash equivalents include cash at banks, units in money market funds and other money market securities, comprising
commercial paper and certi?cates of deposit, that are readily convertible into cash and are subject to an insigni?cant
risk of changes in value. Money market funds comprise investments in high quality, short-term, diversi?ed ?nancial
instruments which can generally be liquidated on demand. Current securities include short-term or marketable
securities which represent temporary investments of available funds and do not satisfy the requirements for being
classi?ed as cash equivalents. Current securities include both available-for-sale and held-for-trading securities.
Financial liabilities comprise Debt and Other ?nancial liabilities (which include derivative ?nancial instruments stated at
fair value), Trade payables and Other current liabilities.
Measurement
Non-current ?nancial assets other than Investments, as well as current ?nancial assets and ?nancial liabilities, are
accounted for in accordance with IAS 39 – Financial Instruments: Recognition and Measurement.
Current ?nancial assets and held-to-maturity securities are recognized on the basis of the settlement date and, on
initial recognition, are measured at acquisition cost, including transaction costs. Subsequent to initial recognition,
available-for-sale and held-for-trading ?nancial assets are measured at fair value. When market prices are not directly
available, the fair value of available-for-sale ?nancial assets is measured using appropriate valuation techniques (e.g.
discounted cash ?ow analysis based on market information available at the balance sheet date).
Gains and losses on available-for-sale ?nancial assets are recognized in Other comprehensive income/(loss) until the
?nancial asset is disposed of or is impaired. When the asset is disposed of, the cumulative gains or losses, including
those previously recognized in Other comprehensive income/(loss), are reclassi?ed to the Consolidated income
statement for the period, within Financial income and expenses. When the asset is impaired, accumulated losses are
recognized in the Consolidated income statement. Gains and losses arising from changes in the fair value of held-for-
trading ?nancial instruments are included in the Consolidated income statement for the period.
Loans and receivables which are not held by the Group for trading (loans and receivables originating in the ordinary
course of business), held-to-maturity securities and equity investments whose fair value cannot be determined reliably,
are measured, to the extent that they have a ?xed term, at amortized cost, using the effective interest method. When
the ?nancial assets do not have a ?xed term, they are measured at acquisition cost. Receivables with maturities of over
one year which bear no interest or an interest rate signi?cantly lower than market rates are discounted using market
rates. Assessments are made regularly as to whether there is any objective evidence that a ?nancial asset or group
of assets may be impaired. If any such evidence exists, any impairment loss is included in the Consolidated income
statement for the period.
Except for derivative instruments, ?nancial liabilities are measured at amortized cost using the effective interest method.
Financial assets and liabilities hedged against changes in fair value (fair value hedges) are measured in accordance
with hedge accounting principles: gains and losses arising from remeasurement at fair value, due to changes in the
respective hedged risk, are recognized in the Consolidated income statement and are offset by the effective portion of
the loss or gain arising from remeasurement at fair value of the hedging instrument.
160 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Derivative ?nancial instruments
Derivative ?nancial instruments are used for economic hedging purposes, in order to reduce currency, interest
rate and market price risks (primarily related to commodities and securities). In accordance with IAS 39 - Financial
Instruments: Recognition and Measurement, derivative ?nancial instruments qualify for hedge accounting only when
there is formal designation and documentation of the hedging relationship at inception of the hedge, the hedge is
expected to be highly effective, its effectiveness can be reliably measured and it is highly effective throughout the
?nancial reporting periods for which it is designated.
All derivative ?nancial instruments are measured at fair value.
When derivative ?nancial instruments qualify for hedge accounting, the following accounting treatments apply:
Fair value hedges – Where a derivative ?nancial instrument is designated as a hedge of the exposure to changes in
fair value of a recognized asset or liability that is attributable to a particular risk and could affect the Consolidated
income statement, the gain or loss from remeasuring the hedging instrument at fair value is recognized in the
Consolidated income statement. The gain or loss on the hedged item attributable to the hedged risk adjusts the
carrying amount of the hedged item and is recognized in the Consolidated income statement.
Cash ?ow hedges – Where a derivative ?nancial instrument is designated as a hedge of the exposure to variability
in future cash ?ows of a recognized asset or liability or a highly probable forecasted transaction and could affect
the Consolidated income statement, the effective portion of any gain or loss on the derivative ?nancial instrument
is recognized directly in Other comprehensive income/(loss). The cumulative gain or loss is reclassi?ed from Other
comprehensive income/(loss) to the Consolidated income statement at the same time as the economic effect
arising from the hedged item affects the Consolidated income statement. The gain or loss associated with a hedge
or part of a hedge that has become ineffective is recognized in the Consolidated income statement immediately.
When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to
occur, the cumulative gain or loss realized to the point of termination remains in Other comprehensive income/(loss)
and is recognized in the Consolidated income statement at the same time as the underlying transaction occurs. If
the hedged transaction is no longer probable, the cumulative unrealized gain or loss held in Other comprehensive
income/(loss) is recognized in the Consolidated income statement immediately.
Hedges of a net investment – If a derivative ?nancial instrument is designated as a hedging instrument for a net
investment in a foreign operation, the effective portion of the gain or loss on the derivative ?nancial instrument
is recognized in Other comprehensive income/(loss). The cumulative gain or loss is reclassi?ed from Other
comprehensive income/(loss) to the Consolidated income statement upon disposal of the foreign operation.
If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative ?nancial
instruments are recognized immediately in the Consolidated income statement.
Transfers of ?nancial assets
The Group de-recognizes ?nancial assets when the contractual rights to the cash ?ows arising from the asset are no
longer held or if it transfers the ?nancial asset and transfers substantially all the risks and rewards of ownership of the
?nancial asset. On derecognition of ?nancial assets, the difference between the carrying amount of the asset and the
consideration received or receivable for the transfer of the asset is recognized in the Consolidated income statement.
The Group transfers certain of its ?nancial, trade and tax receivables, mainly through factoring transactions. Factoring
transactions may be either with recourse or without recourse. Certain transfers include deferred payment clauses
(for example, when the payment by the factor of a minor part of the purchase price is dependent on the total amount
collected from the receivables) requiring ?rst loss cover, meaning that the transferor takes priority participation
in the losses, or requires a signi?cant exposure to the cash ?ows arising from the transferred receivables to be
retained. These types of transactions do not meet the requirements of IAS 39 – Financial Instruments: Recognition
and Measurement for the derecognition of the assets since the risks and rewards connected with collection are
not transferred, and accordingly the Group continues to recognize the receivables transferred by this means on the
Consolidated balance sheet and recognizes a ?nancial liability of the same amount under Asset-backed ?nancing. The
gains and losses arising from the transfer of these receivables are only recognized when they are de-recognized.
2014
|
ANNUAL REPORT 161
Inventories
Inventories of raw materials, semi-?nished products and ?nished goods are stated at the lower of cost and net
realizable value, cost being determined on a ?rst in-?rst-out (FIFO) basis. The measurement of Inventories includes
the direct costs of materials, labor and indirect costs (variable and ?xed). A provision is made for obsolete and
slow-moving raw materials, ?nished goods, spare parts and other supplies based on their expected future use and
realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs for sale and distribution.
The measurement of production systems construction contracts is based on the stage of completion determined
as the proportion of cost incurred at the balance sheet date over the estimated total contract cost. These items are
presented net of progress billings received from customers. Any losses on such contracts are fully recorded in the
Consolidated income statement when they are known.
Employee bene?ts
De?ned contribution plans
Costs arising from de?ned contribution plans are expensed as incurred.
De?ned bene?t plans
The Group’s net obligations are determined separately for each plan by estimating the present value of future bene?ts
that employees have earned in the current and prior periods, and deducting the fair value of any plan assets. The
present value of the de?ned bene?t obligation is measured using actuarial techniques and actuarial assumptions that are
unbiased and mutually compatible and attributes bene?ts to periods in which the obligation to provide post-employment
bene?ts arise by using the Projected Unit Credit Method. Plan assets are recognized and measured at fair value.
When the net obligation is a potential asset, the recognized amount is limited to the present value of any economic
bene?ts available in the form of future refunds or reductions in future contributions to the plan (asset ceiling).
The components of the de?ned bene?t cost are recognized as follows:
the service costs are recognized in the Consolidated income statement by function and presented in the relevant
line items (Cost of sales, Selling, general and administrative costs, Research and development costs, etc.);
the net interest on the de?ned bene?t liability or asset is recognized in the Consolidated income statement as
Financial income (expenses), and is determined by multiplying the net liability/(asset) by the discount rate used to
discount obligations taking into account the effect of contributions and bene?t payments made during the year; and
the remeasurement components of the net obligations, which comprise actuarial gains and losses, the return on
plan assets (excluding interest income recognized in the Consolidated income statement) and any change in the
effect of the asset ceiling are recognized immediately in Other comprehensive income/(loss). These remeasurement
components are not reclassi?ed in the Consolidated income statement in a subsequent period.
Past service costs arising from plan amendments and curtailments are recognized immediately in the Consolidated
income statement within Other unusual income /(expenses). Gains and losses on the settlement of a plan are recognized
in the Consolidated income statement within Other unusual income/(expenses) when the settlement occurs.
Other long term employee bene?ts
The Group’s obligations represent the present value of future bene?ts that employees have earned in return for their
service during the current and prior periods. Remeasurement components on other long term employee bene?ts are
recognized in the Consolidated income statement in the period in which they arise.
Termination bene?ts
Termination bene?ts are expensed at the earlier of when the Group can no longer withdraw the offer of those bene?ts
and when the Group recognizes costs for a restructuring.
162 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Share-based compensation
Share-based compensation expenses are measured at the fair value of the goods or services received. If this fair value
cannot be reliably estimated, their value is measured indirectly by reference to the fair value of the equity instruments
granted. Compensation expense for equity-classi?ed awards is measured at the grant date based on the fair value of
the award. For those awards with post-vesting contingencies, an adjustment is applied to the fair value of the award
to account for the probability of meeting the contingencies. Liability-classi?ed awards are remeasured to fair value at
each balance sheet date until the award is settled.
Share-based compensation expenses are recognized over the employee service period with an offsetting increase
to equity or other liabilities depending on the nature of the award. If awards contain certain performance conditions
in order to vest, the Group recognizes the cost of the award when achievement of the performance condition is
probable. Share-based compensation expenses related to plans with graded vesting are generally recognized
using the graded vesting method. Share-based compensation expenses are recognized in Selling, general and
administrative costs in the Consolidated income statement.
Provisions
Provisions are recognized when the Group has a present obligation, legal or constructive, as a result of a past event,
it is probable that an out?ow of resources embodying economic bene?ts will be required to settle the obligation and a
reliable estimate of the amount of the obligation can be made. Changes in estimates of provisions are re?ected in the
Consolidated income statement in the period in which the change occurs.
Revenue recognition
Revenue from sale of vehicles and service parts is recognized if it is probable that the economic bene?ts associated
with a transaction will ?ow to the Group and the revenue can be reliably measured. Revenue is recognized when
the risks and rewards of ownership are transferred to the customer, the sales price is agreed or determinable and
collectability is reasonably assured. For vehicles, this generally corresponds to the date when the vehicles are made
available to dealers, or when the vehicle is released to the carrier responsible for transporting vehicles to dealers.
Revenues are recognized net of discounts, including but not limited to, sales incentives and customer bonuses.
The estimated costs of sales incentive programs include incentives offered to dealers and retail customers, and
granting of retail ?nancing at a signi?cant discount to market interest rates. These costs are recognized at the time of
the sale of the vehicle.
New vehicle sales with a buy-back commitment, or through the Guarantee Depreciation Program (“GDP”) under
which the Group guarantees the residual value or otherwise assumes responsibility for the minimum resale value
of the vehicle, are not recognized at the time of delivery but are accounted for similar to an operating lease. Rental
income is recognized over the contractual term of the lease on a straight-line basis. At the end of the lease term, the
Group recognizes revenue for the portion of the vehicle sales price which had not been previously recognized as rental
income and recognizes the remainder of the cost of the vehicle in Cost of sales.
Revenues from services contracts, separately-priced extended warranty and from construction contracts are
recognized as revenues over the contract period in proportion to the costs expected to be incurred based on historical
information. A loss on these contracts is recognized if the sum of the expected costs for services under the contract
exceeds unearned revenue.
Revenues also include lease rentals recognized over the contractual term of the lease on a straight-line basis as well
as interest income from ?nancial services companies.
Cost of sales
Cost of sales comprises expenses incurred in the manufacturing and distribution of vehicles and parts, of which, cost
of materials and components are the most signi?cant portion. The remaining costs principally include labor costs,
consisting of direct and indirect wages, as well as depreciation, amortization and transportation costs.
2014
|
ANNUAL REPORT 163
Cost of sales also includes warranty and product-related costs, estimated at the time of sale to dealer networks
or to the end customer. Depending on the speci?c nature of the recall, including the signi?cance and magnitude,
certain warranty costs incurred are reported as Other unusual expenses, as the Group believes that this separate
identi?cation allows the users of the Consolidated ?nancial statements to better analyze the comparative year-on-
year ?nancial performance of the Group. Expenses which are directly attributable to the ?nancial services companies,
including the interest expenses related to their ?nancing as a whole and provisions for risks and write-downs of assets,
are reported in Cost of sales.
Government Grants
Government grants are recognized in the ?nancial statements when there is reasonable assurance of the Group’s
compliance with the conditions for receiving such grants and that the grants will be received. Government grants are
recognized as income over the periods necessary to match them with the related costs which they are intended to offset.
The bene?t of a government loan at a below-market rate of interest is treated for accounting purposes as a
government grant. The bene?t of the below-market rate of interest is measured as the difference between the initial
carrying amount of the loan (fair value plus transaction costs) and the proceeds received, and it is accounted for in
accordance with the policies used for the recognition of government grants.
Taxes
Income taxes include all taxes based on the taxable pro?ts of the Group. Current and deferred taxes are recognized
as income or expense and are included in the Consolidated income statement for the period, except tax arising from
(i) a transaction or event which is recognized, in the same or a different period, either in Other comprehensive income/
(loss) or directly in Equity, or (ii) a business combination.
Deferred taxes are accounted for under the full liability method. Deferred tax liabilities are recognized for all taxable
temporary differences between the carrying amounts of assets or liabilities and their tax base, except to the extent that
the deferred tax liabilities arise from the initial recognition of goodwill or the initial recognition of an asset or liability in
a transaction which is not a business combination and at the time of the transaction, affects neither accounting pro?t
nor taxable pro?t. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is
probable that taxable pro?t will be available against which the deductible temporary differences can be utilized, unless
the deferred tax assets arise from the initial recognition of an asset or liability in a transaction that is not a business
combination and at the time of the transaction, affects neither accounting pro?t nor taxable pro?t.
Deferred tax assets and liabilities are measured at the substantively enacted tax rates in the respective jurisdictions in
which the Group operates that are expected to apply to the period when the asset is realized or liability is settled.
The Group recognizes deferred tax liabilities associated with the existence of a subsidiary’s undistributed pro?ts,
except when it is able to control the timing of the reversal of the temporary difference, and it is probable that this
temporary difference will not reverse in the foreseeable future. The Group recognizes deferred tax assets associated
with the deductible temporary differences on investments in subsidiaries only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable pro?t will be available against which the
temporary difference can be utilized.
Deferred tax assets relating to the carry-forward of unused tax losses and tax credits, as well as those arising from
deductible temporary differences, are recognized to the extent that it is probable that future pro?ts will be available
against which they can be utilized. The Group reassesses unrecognized deferred tax assets at the end of each year
and recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future
taxable pro?t will allow the deferred tax asset to be recovered.
Current income taxes and deferred taxes are offset when they relate to the same taxation authority and there is a
legally enforceable right of offset.
Other taxes not based on income, such as property taxes and capital taxes, are included in Other income/(expenses).
164 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
SEGMENT REPORTING
The Group’s activities are carried out through seven reportable segments: four regional mass-market vehicle segments
(NAFTA, LATAM, APAC and EMEA), Ferrari, Maserati and the Components segment as discussed below. As of
December 31, 2013 and 2012, the Group had included Ferrari and Maserati as one reportable segment labeled Luxury
Brands as both operating segments did not individually meet the quantitative thresholds set by IFRS 8 - Operating
Segments to be separate reporting segments and they met the aggregation criteria. At December 31, 2014, there is no
change in the nine operating segments that had previously been identi?ed by the Group, however, the Ferrari operating
segment met the quantitative threshold for being a separate reportable segment. As a result, and in accordance with
IFRS 8 - Operating Segments, the ?nancial information for the Ferrari operating segment is re?ected as a separate
reportable segment as of and for the year ended December 31, 2014. The prior period ?nancial information presented for
comparative purposes was also restated to re?ect the Ferrari operating segment as a separate reportable segment. The
Group also re?ects Maserati as a separate reportable segment, as the ?nancial information for this operating segment is
used by the Group’s chief operating decision maker and this operating segment does not meet the aggregation criteria
stipulated in IFRS 8 for aggregation with another of the Group’s operating segments.
The Group’s four regional mass-market vehicle reportable segments deal with the design, engineering, development,
manufacturing, distribution and sale of passenger cars, light commercial vehicles and related parts and services
in speci?c geographic areas: NAFTA (U.S., Canada, Mexico and Caribbean islands), LATAM (South and Central
America), APAC (Asia and Paci?c countries) and EMEA (Europe, Middle East and Africa). The Group also operates on
a global basis in the luxury vehicle and components sectors. In the luxury vehicle sector the Group has two reportable
segments: Ferrari and Maserati. In the components sector, the Group has the following three operating segments:
Magneti Marelli, Teksid and Comau which did not meet the quantitative thresholds required in IFRS 8 - Operating
Segments for separate disclosure. Therefore, based on their characteristics and similarities, the three operating
segments within the components sector are presented within the reportable segment “Components”.
The operating segments re?ect the components of the Group that are regularly reviewed by the Chief Executive
Of?cer, who is the “chief operating decision maker” as de?ned under IFRS 8– Operating segments, for making
strategic decisions, allocating resources and assessing performance.
In more detail, the reportable segments identi?ed by the Group are the following:
NAFTA mainly earns its revenues from the design, engineering, development, manufacturing, distribution and sale
of vehicles under the Chrysler, Jeep, Dodge, Ram and Fiat brand names and from sales of the related parts and
accessories (under the Mopar brand name) in the United States, Canada, Mexico and Caribbean islands.
LATAM mainly earns its revenues from the design, engineering, development, manufacturing, distribution and sale
of passenger cars and light commercial vehicles and related spare parts under the Fiat and Fiat Professional brand
names in South and Central America and from the distribution of the Chrysler, Jeep, Dodge and Ram brand cars in
the same region. In addition, it provides ?nancial services to the dealer network in Brazil and Argentina.
APAC mainly earns its revenues from the distribution and sale of cars and related spare parts under the Abarth, Alfa
Romeo, Chrysler, Dodge, Fiat and Jeep brands mostly in China, Japan, Australia, South Korea and India. These
activities are carried out through both subsidiaries and joint ventures.
EMEA mainly earns its revenues from the design, engineering, development, manufacturing, distribution and
sale of passenger cars and light commercial vehicles under the Fiat, Alfa Romeo, Lancia, Abarth, Jeep and Fiat
Professional brand names, the sale of the related spare parts in Europe, Middle East and Africa, and from the
distribution of the Chrysler, Dodge and Ram brand cars in the same areas. In addition, the segment provides
?nancial services related to the sale of cars and light commercial vehicles in Europe, primarily through the joint
venture FCA Bank S.p.A. (formerly FGA Capital S.p.A.) set up with the Crédit Agricole group.
Ferrari earns its revenues from the design, engineering, development, manufacturing, distribution and sale of luxury
sport cars under the Ferrari brand.
Maserati earns its revenues from the design, engineering, development, manufacturing, distribution and sale of
luxury sport cars under the Maserati brand.
2014
|
ANNUAL REPORT 165
Components (Magneti Marelli, Teksid and Comau) earns its revenues from the production and sale of lighting
components, engine control units, suspensions, shock absorbers, electronic systems, exhaust systems and plastic
molding components and in the spare parts distribution activities carried out under the Magneti Marelli brand name,
cast iron components for engines, gearboxes, transmissions and suspension systems and aluminum cylinder heads
(Teksid), in addition to the design and production of industrial automation systems and related products for the
automotive industry (Comau).
USE OF ESTIMATES
The Consolidated ?nancial statements are prepared in accordance with IFRS which require the use of estimates,
judgments and assumptions that affect the carrying amount of assets and liabilities, the disclosure of contingent
assets and liabilities and the amounts of income and expenses recognized. The estimates and associated
assumptions are based on elements that are known when the ?nancial statements are prepared, on historical
experience and on any other factors that are considered to be relevant.
The estimates and underlying assumptions are reviewed periodically and continuously by the Group. If the items
subject to estimates do not perform as assumed, then the actual results could differ from the estimates, which would
require adjustment accordingly. The effects of any changes in estimate are recognized in the Consolidated income
statement in the period in which the adjustment is made, or in future periods.
The items requiring estimates for which there is a risk that a material difference may arise in respect of the carrying
amounts of assets and liabilities in the future are discussed below.
Pension plans
The Group sponsors both non-contributory and contributory de?ned bene?t pension plans primarily in the U.S. and
Canada. The majority of the plans are funded plans. The non-contributory pension plans cover certain hourly and
salaried employees. Bene?ts are based on a ?xed rate for each year of service. Additionally, contributory bene?ts are
provided to certain salaried employees under the salaried employees’ retirement plans. These plans provide bene?ts
based on the employee’s cumulative contributions, years of service during which the employee contributions were
made and the employee’s average salary during the ?ve consecutive years in which the employee’s salary was highest
in the 15 years preceding retirement or the freeze of such plans, as applicable.
The Group’s de?ned bene?t pension plans are accounted for on an actuarial basis, which requires the use of estimates
and assumptions to determine the net liability or net asset. The Group estimates the present value of the projected
future payments to all participants taking into consideration parameters of a ?nancial nature such as discount rates,
the rates of salary increases and the likelihood of potential future events estimated by using demographic assumptions
such as mortality, dismissal and retirement rates. These assumptions may have an effect on the amount and timing of
future contributions.
In 2013, the Group amended the U.S. and Canadian salaried de?ned bene?t pension plans. The U.S. plans were
amended in order to comply with Internal Revenue Service regulations, to cease the accrual of future bene?ts
effective December 31, 2013, and to enhance the retirement factors. The Canada amendment ceased the accrual
of future bene?ts effective December 31, 2014, enhanced the retirement factors and continued to consider future
salary increases for the affected employees. The plan amendments resulted in the remeasurement of the plans and
a corresponding curtailment gain. As a result, the Group recognized a €509 million net reduction to its pension
obligation, a €7 million reduction to de?ned bene?t plan assets, and a corresponding €502 million increase in Other
comprehensive income/(loss) for the year ended December 31, 2013. There were no signi?cant plan amendments or
curtailments to the Group’s pension plans for the year ended December 31, 2014.
166 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Plan obligations and costs are based on existing retirement plan provisions. Assumptions regarding any potential
future changes to bene?t provisions beyond those to which the Group is presently committed are not made. The
assumptions used in developing the required estimates include the following key factors:
Discount rates. The Group selects discount rates on the basis of the rate of return on high-quality (AA-rated) ?xed
income investments for which the timing and amounts of payments match the timing and amounts of the projected
pension payments.
Salary growth. The salary growth assumption re?ects the Group’s long-term actual experience, outlook and
assumed in?ation.
In?ation. The in?ation assumption is based on an evaluation of external market indicators.
Expected contributions. The expected amount and timing of contributions is based on an assessment of minimum
funding requirements. From time to time contributions are made beyond those that are legally required.
Retirement rates. Retirement rates are developed to re?ect actual and projected plan experience.
Mortality rates. Mortality rates are developed using our plan-speci?c populations, recent mortality information
published by recognized experts in this ?eld and other data where appropriate to re?ect actual and projected plan
experience.
Plan assets measured at net asset value. Plan assets are recognized and measured at fair value in accordance with
IFRS 13 - Fair Value Measurement. Plan assets for which the fair value is represented by the net asset value (“NAV”)
since there are no active markets for these assets amounted to €2,750 million and €2,780 million at December 31,
2014 and at 2013, respectively. These investments include private equity, real estate and hedge fund investments.
In 2014, following the release of new standards by the Canadian Institute of Actuaries, mortality assumptions used for
our Canadian bene?t plan valuations were updated to re?ect recent trends in the industry and the revised outlook for
future generational mortality improvements. The change increased our Canadian pension obligations by approximately
€41 million.
Additionally, retirement rate assumptions used for our U.S. bene?t plan valuations were updated to re?ect an ongoing
trend towards delayed retirement for FCA US employees. The change decreased our U.S. pension obligations by
approximately €261 million.
Signi?cant differences in actual experience or signi?cant changes in assumptions may affect the pension obligations
and pension expense. The effects of actual results differing from assumptions and of amended assumptions are
included in Other comprehensive income/(loss). The weighted average discount rate used to determine the bene?t
obligation for the de?ned bene?t obligation for the de?ned bene?t plan was 4.03 percent at December 31, 2014 (4.69
percent at December 31, 2013).
At December 31, 2014 the effect of the indicated decrease or increase in selected factors, holding all other
assumptions constant, is shown below:
Effect on pension
de?ned bene?t
obligation
(€ million)
10 basis point decrease in discount rate 317
10 basis point increase in discount rate (312)
At December 31, 2014, the net liabilities and net assets for pension bene?ts amounted to €5,166 million and to
€104 million, respectively (€4,253 million and €95 million, respectively at December 31, 2013). Refer to Note 25 for a
detailed discussion of the Group’s pension plans.
2014
|
ANNUAL REPORT 167
Other post-employment bene?ts
The Group provides health care, legal, severance indemnity and life insurance bene?ts to certain hourly and salaried
employees. Upon retirement, these employees may become eligible for continuation of certain bene?ts. Bene?ts and
eligibility rules may be modi?ed periodically.
Health care, life insurance plans and other employment bene?ts are accounted for on an actuarial basis, which
requires the selection of various assumptions. The estimation of the Group’s obligations, costs and liabilities
associated with these plans requires the use of estimates of the present value of the projected future payments to
all participants, taking into consideration parameters of a ?nancial nature such as discount rate, the rates of salary
increases and the likelihood of potential future events estimated by using demographic assumptions such as mortality,
dismissal and retirement rates.
Plan obligations and costs are based on existing plan provisions. Assumptions regarding any potential future changes
to bene?t provisions beyond those to which the Group is presently committed are not made.
The assumptions used in developing the required estimates include the following key factors:
Discount rates. The Group selects discount rates on the basis of the rate of return on high-quality (AA-rated) ?xed
income investments for which the timing and amounts of payments match the timing and amounts of the projected
bene?t payments.
Health care cost trends. The Group’s health care cost trend assumptions are developed based on historical cost
data, the near-term outlook, and an assessment of likely long-term trends.
Salary growth. The salary growth assumptions re?ect the Group’s long-term actual experience, outlook and
assumed in?ation.
Retirement and employee leaving rates. Retirement and employee leaving rates are developed to re?ect actual and
projected plan experience, as well as legal requirements for retirement in respective countries.
Mortality rates. Mortality rates are developed using our plan-speci?c populations, recent mortality information
published by recognized experts in this ?eld and other data where appropriate to re?ect actual and projected plan
experience.
Additionally, retirement rate assumptions used for our U.S. bene?t plan valuations were updated to re?ect an ongoing
trend towards delayed retirement for FCA US employees. The change decreased our other post-employment bene?t
obligations by approximately €40 million.
At December 31, 2014 the effect of the indicated decreases or increases in the key factors affecting the health
care, life insurance plans and severance indemnity in Italy (trattamento di ?ne rapporto or “TFR”), holding all other
assumptions constant, is shown below:
Effect on health
care and life
insurance de?ned
bene?t obligation
Effect on the TFR
obligation
(€ million)
10 basis point / (100 basis point for TFR) decrease in discount rate 28 55
10 basis point / (100 basis point for TFR), increase in discount rate (28) (49)
100 basis point decrease in health care cost trend rate (43) —
100 basis point increase in health care cost trend rate 50 —
168 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Recoverability of non-current assets with de?nite useful lives
Non-current assets with de?nite useful lives include property, plant and equipment, intangible assets and assets held
for sale. Intangible assets with de?nite useful lives mainly consist of capitalized development costs related to the EMEA
and NAFTA segments.
The Group periodically reviews the carrying amount of non-current assets with de?nite useful lives when events and
circumstances indicate that an asset may be impaired. Impairment tests are performed by comparing the carrying
amount and the recoverable amount of the CGU. The recoverable amount is the higher of the CGU’s fair value less
costs of disposal and its value in use. In assessing the value in use, the pre-tax estimated future cash ?ows are
discounted to their present value using a pre-tax discount rate that re?ects current market assessments of the time
value of money and the risks speci?c to the CGU.
Due to impairment indicators existing in 2014 primarily related to losses incurred in EMEA due to weak demand for
vehicles and strong competition, impairment tests relating to the recoverability of CGUs in EMEA were performed. The
tests compared the carrying amount of the assets allocated to the CGUs (comprising property, plant and equipment
and capitalized development costs) to their value in use using pre-tax estimated future cash ?ows discounted to their
present value using a pre-tax discount rate. The test con?rmed that the value in use of the CGUs in EMEA was greater
than the carrying value at December 31, 2014 and as a result, there was no impairment loss recognized in 2014.
In addition, the recoverable amount of the EMEA segment as a whole was assessed. The value in use of the EMEA
segment was determined using the following assumptions:
the reference scenario was based on the 2014-2018 strategic business plan presented in May 2014 and the
consistent projections for 2019;
the expected future cash ?ows, represented by the projected EBIT before Result from investments, Gains on the
disposal of investments, Restructuring costs, Other unusual income/(expenses), Depreciation and Amortization
and reduced by expected capital expenditure, include a normalized future result beyond the time period explicitly
considered used to estimate the Terminal Value. This normalized future result was assumed substantially in line with
2017-2019 amounts. The long-term growth rate was set at zero;
the expected future cash ?ows were discounted using a pre-tax Weighted Average Cost of Capital (“WACC”) of
10.3 percent. This WACC re?ects the current market assessment of the time value of money for the period being
considered and the risks speci?c to the EMEA region. The WACC was calculated by referring to the yield curve of
10-year European government bonds, to FCA’s cost of debt, and other factors.
Furthermore, a sensitivity analysis was performed by simulating two different scenarios:
a) WACC was increased by 1.0 percent for 2018, 2.0 percent for 2019 and 3.0 percent for Terminal Value;
b) Cash-?ows were reduced by estimating the impact of a 1.7 percent decrease in the European car market demand for 2015,
a 7.5 percent decrease for 2016 and a 10.0 percent decrease for 2017-2019 as compared to the base assumptions.
In all scenarios the recoverable amount was higher than the carrying amount.
The estimates and assumptions described above re?ect the Group’s current available knowledge as to the expected
future development of the businesses and are based on an assessment of the future development of the markets and
the automotive industry, which remain subject to a high degree of uncertainty due to the continuation of the economic
dif?culties in most countries of the Eurozone and its effects on the industry. More speci?cally, considering the
uncertainty, a future worsening in the economic environment in the Eurozone, particularly in Italy, that is not re?ected
in these Group assumptions, could result in actual performance that differs from the original estimates, and might
therefore require adjustments to the carrying amounts of certain non-current assets in future periods.
In 2013, as a result of the new product strategy and decline in the demand for vehicles in EMEA, the Group performed
impairment tests related to the recoverability of the CGUs in EMEA and the EMEA segment as a whole using pre-tax
estimated future cash ?ows discounted to their present value using a pre-tax discount rate of 12.2 percent and the
same methodology for the recoverable amount as described above. For the year ended December 31, 2013, total
impairments of approximately €116 million relating to EMEA were recognized as a result of testing the CGUs in EMEA
(of which €61 million related to development costs and €55 million related to Property, plant and equipment).
2014
|
ANNUAL REPORT 169
As a result of new product strategies, the streamlining of architectures and related production platforms associated
with the Group’s refocused product strategies, the operations to which speci?c capitalized development costs
belonged was redesigned. For example, certain models were switched to new platforms considered technologically
more appropriate. As no future economic bene?ts were expected from these speci?c capitalized development costs,
they were written off in accordance with IAS 38 - Intangible Assets. For the year ended December 31, 2014, speci?c
capitalized development costs of €47 million within the EMEA segment and €28 million of development costs within
the NAFTA segment were written off and recorded within Research and development costs in the Consolidated
income statement. In addition, in 2014, the Group recorded €25 million of impairment losses primarily related to
the EMEA segment for certain powertrains that were abandoned. For the year ended December 31, 2013, speci?c
capitalized development costs of €65 million within the Maserati segment, €90 million within the EMEA segment and
€32 million of development costs within the LATAM segment were written off.
The following table sets forth all impairment charges recognized for non-current assets with de?nite useful lives during
the years ended December 31, 2014, 2013 and 2012.
Impairments to Property, plant and equipment:
Twelve Months Ended December 31,
2014 2013 2012
Note (€ million)
EMEA 25 55 40
Components 2 31 8
LATAM — — 1
Other 6 — 1
(15) 33 86 50
Recorded in the Consolidated income statement within:
Cost of sales 33 — 50
Other unusual expenses — 86 —
33 86 50
Impairments to Other intangible assets:
Twelve Months Ended December 31,
2014 2013 2012
Note (€ million)
Development costs
EMEA 47 151 33
NAFTA 28 — —
Components 3 2 21
Maserati — 65 —
LATAM — 32 2
APAC 4 — 1
82 250 57
Other intangible assets — — 1
(14) 82 250 58
Recorded in the Consolidated income statement within:
Cost of sales — — 1
Research and development costs 82 24 57
Other unusual expenses — 226 —
82 250 58
170 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Recoverability of Goodwill and Intangible assets with inde?nite useful lives
In accordance with IAS 36 – Impairment of Assets, Goodwill and intangible assets with inde?nite useful lives are not
amortized and are tested for impairment annually or more frequently if facts or circumstances indicate that the asset
may be impaired.
Goodwill and intangible assets with inde?nite useful lives are allocated to operating segments or to CGUs within the
operating segments, which represent the lowest level within the Group at which goodwill is monitored for internal
management purposes in accordance with IAS 36. The impairment test is performed by comparing the carrying
amount (which mainly comprises property, plant and equipment, goodwill, brands and capitalized development costs)
and the recoverable amount of each CGU or group of CGUs to which Goodwill has been allocated. The recoverable
amount of a CGU is the higher of its fair value less costs to sell and its value in use.
Goodwill and Intangible assets with inde?nite useful lives at December 31, 2014 includes €10,185 million of
Goodwill (€8,967 million at December 31, 2013) and €2,953 million of Intangible assets with inde?nite useful lives
(€2,600 million at December 31, 2013) resulting from the acquisition of interests in FCA US. Goodwill also includes
€786 million from the acquisition of interests in Ferrari (€786 million at December 31, 2013). The Group did not
recognize any impairment charges for Goodwill and Intangible assets with inde?nite useful lives during the years ended
December 31, 2014, 2013 and 2012.
For a discussion on impairment testing of Goodwill and intangible assets with inde?nite useful lives, see Note 13.
Recoverability of deferred tax assets
The carrying amount of deferred tax assets is reduced to the extent that it is not probable that suf?cient taxable pro?t
will be available to allow the bene?t of part or all of the deferred tax assets to be utilized.
At December 31, 2014, the Group had deferred tax assets on deductible temporary differences of €8,662 million
(€6,183 million at December 31, 2013), of which €480 million was not recognized (€435 million at December 31, 2013).
At the same date the Group had also theoretical tax bene?ts on losses carried forward of €4,696 million (€3,810 million
at December 31, 2013), of which €2,934 million was unrecognized (€2,891 million at December 31, 2013).
At December 31, 2013, in view of the results achieved by FCA US, of the continuous improvement of its product mix,
its trends in international sales and its implementation of new vehicles, together with the consolidation of the alliance
between FCA and FCA US, following FCA US’s acquisition of the remaining shareholding at the beginning of 2014, the
Group recorded previously unrecognized deferred tax assets for a total of €1,734 million, of which €1,500 million was
recognized in Income taxes and €234 million in Other comprehensive income/(loss).
The recoverability of deferred tax assets is dependent on the Group’s ability to generate suf?cient future taxable
income in the period in which it is assumed that the deductible temporary differences reverse and tax losses carried
forward can be utilized. In making this assessment, the Group considers future taxable income arising on the most
recent budgets and plans, prepared by using the same criteria described for testing the impairment of assets and
goodwill. Moreover, the Group estimates the impact of the reversal of taxable temporary differences on earnings and it
also considers the period over which these assets could be recovered.
These estimates and assumptions are subject to a high degree of uncertainty especially as it relates to future
performance in the Eurozone, particularly in Italy. Therefore changes in current estimates due to unanticipated events
could have a signi?cant impact on the Group’s Consolidated ?nancial statements.
Sales incentives
The Group records the estimated cost of sales incentive programs offered to dealers and consumers as a reduction to
revenue at the time of sale of the vehicle to the dealer. This estimated cost represents the incentive programs offered
to dealers and consumers, as well as the expected modi?cations to these programs in order to facilitate sales of the
dealer inventory. Subsequent adjustments to sales incentive programs related to vehicles previously sold to dealers
are recognized as an adjustment to net revenues in the period the adjustment is determinable.
2014
|
ANNUAL REPORT 171
The Group uses price discounts to adjust vehicle pricing in response to a number of market and product factors,
including pricing actions and incentives offered by competitors, economic conditions, the amount of excess industry
production capacity, the intensity of market competition, consumer demand for the product and the desire to support
promotional campaigns. The Group may offer a variety of sales incentive programs at any given point in time, including
cash offers to dealers and consumers and subvention programs offered to customers, or lease subsidies, which
reduce the retail customer’s monthly lease payment or cash due at the inception of the ?nancing arrangement, or
both. Sales incentive programs are generally brand, model and region speci?c for a de?ned period of time.
Multiple factors are used in estimating the future incentive expense by vehicle line including the current incentive
programs in the market, planned promotional programs and the normal incentive escalation incurred as the model
year ages. The estimated incentive rates are reviewed monthly and changes to the planned rates are adjusted
accordingly, thus impacting revenues. As there are a multitude of inputs affecting the calculation of the estimate for
sales incentives, an increase or decrease of any of these variables could have a signi?cant effect on revenues.
Product warranties and liabilities
The Group establishes reserves for product warranties at the time the sale is recognized. The Group issues various
types of product warranties under which the performance of products delivered is generally guaranteed for a certain
period or term. The reserve for product warranties includes the expected costs of warranty obligations imposed by
law or contract, as well as the expected costs for policy coverage, recall actions and buyback commitments. The
estimated future costs of these actions are principally based on assumptions regarding the lifetime warranty costs
of each vehicle line and each model year of that vehicle line, as well as historical claims experience for the Group’s
vehicles. In addition, the number and magnitude of additional service actions expected to be approved and policies
related to additional service actions are taken into consideration. Due to the uncertainty and potential volatility of these
estimated factors, changes in the assumptions used could materially affect the results of operations.
The Group periodically initiates voluntary service and recall actions to address various customer satisfaction and
safety and emissions issues related to vehicles sold. Included in the reserve is the estimated cost of these service and
recall actions. The estimated future costs of these actions are primarily based on historical claims experience for the
Group’s vehicles. Estimates of the future costs of these actions are inevitably imprecise due to some uncertainties,
including the number of vehicles affected by a service or recall action. It is reasonably possible that the ultimate cost
of these service and recall actions may require the Group to make expenditures in excess of (or less than) established
reserves over an extended period of time. The estimate of warranty and additional service and recall action obligations
is periodically reviewed during the year. Experience has shown that initial data for any given model year can be volatile.
The process therefore relies upon long-term historical averages until actual data is available. As actual experience
becomes available, it is used to modify the historical averages to ensure that the forecast is within the range of
likely outcomes. Resulting accruals are then compared with current spending rates to ensure that the balances are
adequate to meet expected future obligations.
Warranty costs incurred are generally recorded in the Consolidated income statement as Cost of sales. However,
depending on the speci?c nature of the recall, including the signi?cance and magnitude, the Group reports certain of
these costs as Other unusual expenses. The Group believes that this separate identi?cation allows the users of the
Consolidated ?nancial statements to better analyze the comparative year-on-year ?nancial performance of the Group.
In addition, the Group makes provisions for estimated product liability costs arising from property damage and
personal injuries including wrongful death, and potential exemplary or punitive damages alleged to be the result of
product defects. By nature, these costs can be infrequent, dif?cult to predict and have the potential to vary signi?cantly
in amount. The valuation of the reserve is actuarially determined on an annual basis based on, among other factors,
the number of vehicles sold and product liability claims incurred. Costs associated with these provisions are recorded
in the Consolidated income statement and any subsequent adjustments are recorded in the period in which the
adjustment is determined.
172 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Other contingent liabilities
The Group records provisions in connection with pending or threatened disputes or legal proceedings when it is
considered probable that there will be an out?ow of funds and when the amount can be reasonably estimated. If an
out?ow of funds becomes possible but the amount cannot be estimated, the matter is disclosed in the notes to the
Consolidated ?nancial statements. The Group is the subject of legal and tax proceedings covering a wide range of
matters in various jurisdictions. Due to the uncertainty inherent in such matters, it is dif?cult to predict the out?ow of
funds that could result from such disputes with any certainty. Moreover, the cases and claims against the Group are
often derived from complex legal issues which are subject to a differing degrees of uncertainty, including the facts
and circumstances of each particular case, the manner in which the applicable law is likely to be interpreted and
applied and the jurisdiction and the different laws involved. The Group monitors the status of pending legal procedures
and consults with experts on legal and tax matters on a regular basis. As such, the provisions for the Group’s legal
proceedings and litigation may vary as a result of future developments in pending matters.
Litigation
Various legal proceedings, claims and governmental investigations are pending against the Group on a wide range
of topics, including vehicle safety, emissions and fuel economy, dealer, supplier and other contractual relationships,
intellectual property rights, product warranties and environmental matters. Some of these proceedings allege defects
in speci?c component parts or systems (including airbags, seats, seat belts, brakes, ball joints, transmissions, engines
and fuel systems) in various vehicle models or allege general design defects relating to vehicle handling and stability,
sudden unintended movement or crashworthiness. These proceedings seek recovery for damage to property,
personal injuries or wrongful death and in some cases include a claim for exemplary or punitive damages. Adverse
decisions in one or more of these proceedings could require the Group to pay substantial damages, or undertake
service actions, recall campaigns or other costly actions.
Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. An
accrual is established in connection with pending or threatened litigation if a loss is probable and a reliable estimate
can be made. Since these accruals represent estimates, it is reasonably possible that the resolution of some of these
matters could require the Group to make payments in excess of the amounts accrued. It is also reasonably possible
that the resolution of some of the matters for which accruals could not be made may require the Group to make
payments in an amount or range of amounts that could not be reasonably estimated.
The term “reasonably possible” is used herein to mean that the chance of a future transaction or event occurring is
more than remote but less than probable. Although the ?nal resolution of any such matters could have a material effect
on the Group’s operating results for the particular reporting period in which an adjustment of the estimated reserve is
recorded, it is believed that any resulting adjustment would not materially affect the Consolidated statement of ?nancial
position or Consolidated statement of cash ?ows.
Environmental Matters
The Group is subject to potential liability under government regulations and various claims and legal actions that are
pending or may be asserted against the Group concerning environmental matters. Estimates of future costs of such
environmental matters are subject to numerous uncertainties, including the enactment of new laws and regulations,
the development and application of new technologies, the identi?cation of new sites for which the Group may have
remediation responsibility and the apportionment and collectability of remediation costs among responsible parties.
The Group establishes provisions for these environmental matters when a loss is probable and a reliable estimate
can be made. It is reasonably possible that the ?nal resolution of some of these matters may require the Group to
make expenditures, in excess of established provisions, over an extended period of time and in a range of amounts
that cannot be reliably estimated. Although the ?nal resolution of any such matters could have a material effect on
the Group’s operating results for the particular reporting period in which an adjustment to the estimated provision is
recorded, it is believed that any resulting adjustment would not materially affect the Consolidated statement of ?nancial
position or the Consolidated statement of cash ?ows.
2014
|
ANNUAL REPORT 173
Business combinations
As discussed below in the paragraph – Acquisition of the remaining ownership interest in FCA US, the consolidation of
FCA US was accounted for as a business combination achieved in stages using the acquisition method of accounting
required under IFRS 3. In accordance with the acquisition method, the Group remeasured its previously held equity
interest in FCA US at fair value. The acquired non-controlling interest in FCA US was also recognized at its acquisition
date fair value. Additionally, the Group recognized the acquired assets and assumed liabilities at their acquisition date
fair values, except for deferred income taxes and certain liabilities associated with employee bene?ts, which were
recorded according to other accounting guidance. These values were based on market participant assumptions,
which were based on market information available at the date of obtaining control and which affected the value at
which the assets, liabilities, non-controlling interests and goodwill were recognized as well as the amount of income
and expense for the period.
Share-based compensation
The Group accounts for share-based compensation plans in accordance with IFRS 2 - Share-based payments,
which requires measuring share-based compensation expense based on fair value. As described in Note 24, Fiat
had granted share-based payments for the years ended December 31, 2013 and 2012 to certain employees and
directors. There were no new Fiat share-based payments made for the year ended December 31, 2014. Also as
described in Note 24, FCA US had granted share-based payments for the years ended December 31, 2014, 2013
and 2012.
The fair value of Fiat share-based payments had been measured based on market prices of Fiat shares at the grant
date taking into account the terms and conditions upon which the instruments were granted. The fair value of FCA US
awards is measured by using a discounted cash ?ow methodology to estimate the price of the awards at the grant
date and subsequently for liability-classi?ed awards at each balance sheet date, until they are settled.
For FCA US awards, since there are no publicly observable market prices for FCA US’s membership interests, the
fair value was determined contemporaneously with each measurement using a discounted cash ?ow methodology.
The Group uses this approach, which is based on projected cash ?ows, to estimate FCA US’s enterprise value. The
Group then deducts the fair value of FCA US’s outstanding interest bearing debt at the measurement date from the
enterprise value to arrive at the fair value of FCA US’s equity.
The signi?cant assumptions used in the measurement of the fair value of these awards at each measurement date
include different assumptions. For example, the assumptions include four years of annual projections that re?ect the
estimated after-tax cash ?ows a market participant would expect to generate from FCA US’s operating business, an
estimated after-tax weighted average cost of capital and projected worldwide factory shipments.
The assumptions noted above used in the contemporaneous estimation of fair value at each measurement date
have not changed signi?cantly during the years ended December 31, 2014, 2013 and 2012 with the exception of the
weighted average cost of capital, which is directly in?uenced by external market conditions.
The Group updates the measurement of the fair value of these awards on a regular basis. It is therefore possible that
the amount of share-based payments reserve and liabilities for share-based payments may vary as the result of a
signi?cant change in the assumptions mentioned above.
174 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
SCOPE OF CONSOLIDATION
FCA is the parent company of the Group and it holds, directly and indirectly, interests in the Group’s main operating
companies. The Consolidated ?nancial statements at December 31, 2014, 2013 and 2012 include FCA and its
subsidiaries over which it has control.
At December 31, 2014 and December 31, 2013, FCA had the following signi?cant direct and indirect interests in the
following subsidiaries:
At December 31, 2014 At December 31, 2013
Name Country
Shares held
by the
Group
Shares
held by
NCI
Shares held
by the
Group
Shares
held by
NCI
(%)
Directly held interests
FCA Italy S.p.A. (previously Fiat Group Automobiles S.p.A.) Italy 100.0 — 100.0 —
Ferrari S.p.A. Italy 90.0 10.0 90.0 10.0
Maserati S.p.A. Italy 100.0 — 100.0 —
Magneti Marelli S.p.A. Italy 99.99 0.01 99.99 0.01
Teksid S.p.A. Italy 84.79 15.21 84.79 15.21
Comau S.p.A. Italy 100.00 — 100.00 —
Indirectly held interests
FCA US LLC (previously Chrysler Group LLC) USA 100.0 — 58.5 41.5
Each of these subsidiaries holds direct or indirect interests in other Group companies. The Consolidated
?nancial statements include 306 subsidiaries consolidated on a line-by-line basis at December 31, 2014 (303 at
December 31, 2013).
Certain minor subsidiaries (mainly dealership, captive service, dormant and companies under liquidation) are excluded
from consolidation on a line-by-line basis and are accounted for at cost or using the equity method. Their aggregate
assets and revenues represent less than 1.0 percent of the Group’s respective amounts for each period and at each
date presented within the Consolidated ?nancial statements.
Non-Controlling Interests
The total Non-controlling interest at December 31, 2014 of €313 million primarily relates to the 10.0 percent interest
held by third parties in Ferrari S.p.A. of €194 million. The total Non-controlling interest at December 31, 2013 of
€4,258 million primarily related to the 41.5 percent interest held by the International Union, United Automobile,
Aerospace, and Agricultural Implement Workers of America (“UAW”) Retiree Medical Bene?ts Trust (the “VEBA Trust”)
in FCA US of €3,944 million (see section —Acquisition of the remaining ownership in FCA US below) and to the 10.0
percent interest held for Ferrari S.p.A. of €215 million.
Financial information (before intra-group eliminations) for FCA US and Ferrari S.p.A. are summarized below. No ?nancial
information is presented as of and for the year ended December 31, 2014 for FCA US as a result of FCA US becoming a
wholly-owned subsidiary of the Group (see section —Acquisition of the remaining ownership in FCA US below).
As of December 31,
2013 2014 2013
FCA US Ferrari S.p.A.
(€ million)
Non-current assets 27,150 988 896
Current assets 16,870 2,835 2,217
Total assets 44,020 3,823 3,113
Debt 9,565 614 322
Other liabilities 24,943 1,490 1,264
Equity (100%) 9,512 1,719 1,527
2014
|
ANNUAL REPORT 175
For the years ended December 31,
2013 2012 2014 2013 2012
FCA US Ferrari S.p.A.
(€ million)
Net revenues 54,370 51,202 2,762 2,335 2,225
EBIT 3,160 3,217 389 364 336
Pro?t before income tax 2,185 2,149 393 366 335
Net pro?t 2,392 1,944 273 246 233
Other comprehensive income/(loss) 2,500 (1,893) (79) 29 46
Total comprehensive income/(loss) 4,892 (51) 194 275 279
Dividends paid to non-controlling interests — — 15 — —
Cash generated in operating activities 5,204 5,889 753 561 621
Cash used in investing activities (3,557) (4,214) (606) (314) (334)
Cash used in ?nancing activities (262) (113) (133) (223) (276)
Total change in cash and cash equivalents 873 1,383 20 15 7
Cash and cash equivalents at December 31, 9,676 8,803 136 116 101
Other commitments and important contractual rights relating to the Non-controlling interests
FCA is subject to a put contract with Renault relating to its original non-controlling investment of 33.5 percent in
Teksid, now 15.2 percent. In particular, Renault has the right to exercise a sale option to FCA on its interest in Teksid,
in the following cases:
in the event of non-ful?llment in the application of the protocol of the agreement and admission to receivership or
any other redressement procedure;
in the event Renault’s investment in Teksid falls below 15.0 percent or Teksid decides to diversify its activities
outside the foundry sector; or
should FCA be the object of the acquisition of control by another car manufacturer.
The exercise price of the option is established as follows:
for the ?rst 6.5 percent of the share capital of Teksid, the initial investment price as increased by a speci?ed
interest rate; and
for the remaining amount of share capital of Teksid, the share of the accounting net equity at the exercise date.
Planned separation of Ferrari
On October 29, 2014, the Board of Directors of FCA, in connection with FCA’s implementation of a capital plan
appropriate to support the Group’s long-term success, announced its intention to separate Ferrari from FCA. The
separation is expected to be effected through an initial public offering (“IPO”) of a portion of FCA’s interest in Ferrari
and a spin-off of FCA’s remaining Ferrari shares to FCA shareholders. The Board authorized FCA’s management to
take the steps necessary to complete these transactions during 2015.
As a result, the Group did not classify Ferrari as an asset held for sale at December 31, 2014. The criteria within IFRS
5 - Non-current Assets Held for Sale and Discontinued Operations were not met as the timing, structure, organization,
terms and ?nancing aspects of the transaction had not yet been ?nalized and are subject to ?nal approval by the
Board of Directors of FCA.
176 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
CHANGES IN THE SCOPE OF CONSOLIDATION
The following signi?cant changes in the scope of consolidation occurred in 2014, 2013 and 2012:
2014
There were no signi?cant changes in the scope of consolidation in 2014
2013
In October 2013, FCA acquired from General Motors the 50.0 percent residual interest of VM Motori Group.
In November 2013, the investment in the Brazilian company, CMP Componentes e Modulos Plasticos Industria e
Commercio Ltda, which was previously classi?ed as held for sale on acquisition, was consolidated on a line-by-line
basis as a result of changes in the plans for its sale.
In December 31, 2013, the assets and liabilities related to a subsidiary consolidated by the Components segment
(Fonderie du Poitou Fonte S.A.S.) were reclassi?ed as Asset and liabilities held for sale (Note 22); the subsidiary was
subsequently disposed of in May 2014.
2012
In April 2012, as a result of changes in the Fiat India Automobiles Limited (“FIAL”) shareholding agreements, this entity
was classi?ed as a Joint operation and its share of assets, liabilities, revenues and expenses were recognized in the
Consolidated ?nancial statements; the investment was no longer accounted for under equity method accounting.
In July 2012, FCA entered into an agreement with PSA Peugeot Citroën providing for the transfer of its interest in the joint
venture Sevelnord Société Anonyme at a symbolic value. In accordance with IFRS 5, from June 2012 the investment in
Sevelnord Société Anonyme was reclassi?ed within assets held for sale and was measured at fair value, resulting in an
unusual loss of €91 million. The joint venture was subsequently disposed of in the fourth quarter of 2012.
ACQUISITION OF THE REMAINING OWNERSHIP INTEREST IN FCA US
As of December 31, 2013, FCA held a 58.5 percent ownership interest in FCA US and the VEBA Trust held the
remaining 41.5 percent. On January 1, 2014, FCA ‘s 100.0 percent owned subsidiary FCA North America Holdings LLC,
(“FCA NA”), formerly known as Fiat North America LLC, and the VEBA Trust announced that they had entered into an
agreement (“the Equity Purchase Agreement”) under which FCA NA agreed to acquire the VEBA Trust’s 41.5 percent
interest in FCA US, which included an approximately 10 percent interest in FCA US subject to previously exercised
options that were subject to ongoing litigation, for cash consideration of U.S.$3,650 million (€2,691 million) as follows:
a special distribution of U.S.$1,900 million (€1,404 million) paid by FCA US to its members, which served to fund a
portion of the transaction, wherein FCA NA directed its portion of the special distribution to the VEBA Trust as part
of the purchase consideration; and
an additional cash payment by FCA NA to the VEBA Trust of U.S.$1,750 million (€1.3 billion).
The previously exercised options for the approximately 10 percent interest in FCA US that were settled in connection
with the Equity Purchase Agreement had an estimated fair value at the transaction date of U.S.$302 million (€223
million). These options were historically carried at cost, which was zero, in accordance with the guidance in
paragraphs AG80 and AG81 of IAS 39 - Financial Instruments: Recognition and Measurement as the options were on
shares that did not have a quoted market price in an active market and as the interpretation of the formula required to
calculate the exercise price on the options was disputed and was subject to ongoing litigation. Upon consummation
of the transactions contemplated by the Equity Purchase Agreement, the fair value of the underlying equity and the
estimated exercise price of the options, at that point, became reliably estimable. As such, on the transaction date, the
options were remeasured to their fair value of U.S.$302 million (€223 million at the transaction date), which resulted
in a corresponding non-taxable gain in Other unusual income/(expenses). The Group has classi?ed this item in Other
unusual income/(expenses) because it relates to options held in relation to the acquisition of a non-controlling interest
and is expected to occur infrequently.
2014
|
ANNUAL REPORT 177
The fair value of the options was calculated as the difference between the estimated exercise price for the disputed
options encompassed in the Equity Purchase Agreement of U.S.$650 million (€481 million) and the estimated fair
value for the underlying approximately 10 percent interest in FCA US of U.S.$952 million (€704 million). The exercise
price for the disputed options was originally calculated by FCA NA pursuant to the formula set out in the option
agreement between FCA NA and the VEBA Trust. The VEBA Trust disputed the calculation of the exercise price,
which ultimately led to the litigation between the two parties regarding the interpretation of the call option agreement.
The dispute primarily related to four elements of the calculation of the exercise price. During the ensuing litigation,
the court ruled in FCA NA’s favor on two of the four disputed elements of the calculation. The court requested an
additional factual record be developed on the other two elements, a process that was ongoing at the time the Equity
Purchase Agreement was executed and consummated.
The dispute between FCA NA and the VEBA Trust over the previously exercised options was settled pursuant to
the Equity Purchase Agreement, effectively resulting in the ful?llment of the previously exercised options. Given that
there was no amount explicitly agreed to by FCA NA and the VEBA Trust in the Equity Purchase Agreement for
the settlement of the previously exercised options, management estimated the exercise price encompassed in the
Equity Purchase Agreement taking into account the judgments rendered by the court to date on the litigation and
a settlement of the two unresolved elements. Based on the nature of the two unresolved elements, management
estimated the exercise price to be between U.S.$600 million (€444 million at the transaction date) and U.S.$700
million (€518 million at the transaction date). Given the uncertainty inherent in court decisions, it was not possible to
pick a point within that range that represented the most likely outcome. As such, management believed the mid-point
of this range, U.S.$650 million (€481 million at the transaction date), represented the appropriate point estimate of the
exercise price encompassed in the Equity Purchase Agreement.
Since there was no publicly observable market price for FCA US’s membership interests, the fair value as of the
transaction date of the approximately 10 percent non-controlling ownership interest in FCA US was determined
based on the range of potential values determined in connection with the IPO that FCA US was pursuing at the time
the Equity Purchase Agreement was negotiated and executed, which was corroborated by a discounted cash ?ow
valuation that estimated a value near the mid-point of the range of potential IPO values. Management concluded that
the mid-point of the range of potential IPO value provided the best evidence of the fair value of FCA US’s membership
interests at the transaction date as it re?ects market input obtained during the IPO process, thus providing better
evidence of the price at which a market participant would transact consistent with IFRS 13 - Fair Value Measurement.
The potential IPO values for 100.0 percent of FCA US’s equity on a fully distributed basis ranged from $10.5 billion to
U.S.$12.0 billion (€7.6 billion to €8.7 billion at December 31, 2013). Management concluded the mid-point of this range,
U.S.$11.25 billion (€8.16 billion at December 31, 2013), was the best point estimate of fair value. The IPO value range
was determined using earnings multiples observed in the market for publicly traded US-based automotive companies
using the key assumptions discussed below. This fully distributed value was then reduced by approximately 15.0 percent
for the expected discount that would have been realized in order to complete a successful IPO for the minority interest
being sold by the VEBA Trust. This discount was estimated based on the following factors that a market participant
would have considered and, therefore, would have affected the price of FCA US’s equity in an IPO transaction:
Fiat held a signi?cant controlling interest and had expressed the intention to remain and act as the majority owner
of FCA US. The fully diluted equity value, which is the starting point for the valuation discussed above, does not
contemplate the perpetual nature of the non-controlling interest that would have been offered in an IPO or the
signi?cant level of control that Fiat would have exerted over FCA US. This level of control creates risk to a non-
controlling shareholder since Fiat would be able to make decisions to maximize its value in a manner that would not
necessarily maximize value to non-controlling shareholders, which Fiat had indicated was its intention.
The fully distributed equity value contemplates an active market for Chrysler’s equity, which did not exist for FCA
US’s membership interests. The IPO price represents the creation of the public market, which would have taken
time to develop into an active market. The estimated price that would be received in an IPO transaction re?ects the
fact that FCA US’s equity was not yet traded in an active market.
As the expected discount that would have been realized in order to complete a successful IPO represented a market-
based discount that would have been re?ected in an IPO price, management concluded it should be included in the
measurement at the transaction date between a willing buyer and willing seller under the principles in IFRS 13.
178 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The other signi?cant assumptions management used in connection with the development of the fair value of FCA US’s
membership interests discussed above included the following:
Inputs derived from FCA US’s long-term business plans in place at the time the Equity Purchase Agreement was
negotiated and executed, including:
An estimated 2014 Earnings before interest, tax, depreciation, amortization, pension and OPEB payments
(EBITDAPO); and
An estimate of net debt, which is composed of debt, pension obligations and OPEB obligations of FCA US, offset
by any expected tax bene?t arising from payment of obligations and cash on hand; and
An EBITDAPO valuation multiple based on observed multiples for other US-based automotive manufacturers,
adjusted for differences between those manufacturers and FCA US.
The transaction under the Equity Purchase Agreement closed on January 21, 2014 and as a result, the Group now
holds a 100.0 percent equity interest in FCA US.
Concurrent with the closing of the acquisition under the Equity Purchase Agreement, FCA US and UAW executed
and delivered a contractually binding and legally enforceable Memorandum of Understanding (“MOU”) to supplement
FCA US’s existing collective bargaining agreement. Under the MOU, the UAW committed to (i) use the best efforts
to cooperate in the continued roll-out of FCA US’s World Class Manufacturing (“WCM”) programs, (ii) to actively
participate in benchmarking efforts associated with implementation of WCM programs across all FCA’s manufacturing
sites to ensure objective competitive assessments of operational performance and provide a framework for the proper
application of WCM principles, and (iii) to actively assist in the achievement of FCA US’s long-term business plan. In
consideration for these legally enforceable commitments, FCA US agreed to make payments to a UAW-organized
independent VEBA Trust totaling U.S.$700 million (€518 million at the transaction date) to be paid in four equal annual
installments. Considering FCA US’s non-performance risk over the payment period as of the transaction date and its
unsecured nature, this payment obligation had a fair value of U.S.$672 million (€497 million) as of the transaction date.
The Group considered the terms and conditions set forth in the above mentioned agreements and accounted for
the Equity Purchase Agreement and the MOU as a single commercial transaction with multiple elements. As such,
the fair value of the consideration paid discussed above, which amounts to U.S.$4,624 million (€3,411 million at the
transaction date), including the fair value of the previously exercised disputed options, was allocated to the elements
obtained by the Group. Due to the unique nature and inherent judgment involved in determining the fair value of
the UAW’s commitments under the MOU, a residual value methodology was used to determine the portion of the
consideration paid attributable to the UAW’s commitments as follows:
(€ million)
Special distribution from FCA US 1,404
Cash payment from FCA NA 1,287
Fair value of the previously exercised options 223
Fair value of ?nancial commitments under the MOU 497
Fair value of total consideration paid 3,411
Less the fair value of an approximately 41.5 percent non-controlling ownership interest in FCA US (2,916)
Consideration allocated to the UAW’s commitments 495
The fair value of the 41.5 percent non-controlling ownership interest in FCA US acquired by FCA from the VEBA Trust
(which includes the approximately 10 percent pursuant to the settlement of the previously exercised options discussed
above) was determined using the valuation methodology discussed above.
The residual of the fair value of the consideration paid of U.S.$670 million (€495 million) was allocated to the UAW’s
contractually binding and legally enforceable commitments to FCA US under the MOU.
2014
|
ANNUAL REPORT 179
The effects of changes in ownership interests in FCA US was as follows:
Transaction date
(€ million)
Carrying amount of non-controlling interest acquired 3,976
Less consideration allocated to the acquisition of the non-controlling interest (2,916)
Additional net deferred tax assets 251
Effect on the equity attributable to owners of the parent 1,311
In accordance with IFRS 10 – Consolidated Financial Statements, equity reserves were adjusted to re?ect the change
in the ownership interest in FCA US through a corresponding adjustment to Equity attributable to the parent. As
the transaction described above resulted in the elimination of the non-controlling interest in FCA US, all items of
comprehensive income previously attributed to the non-controlling interest were recognized in equity reserves.
Accumulated actuarial gains and losses from the remeasurement of the de?ned bene?t plans of FCA US totaling
€1,248 million has been recognized since the consolidation of FCA US in 2011. As of the transaction date,
€518 million, which is approximately 41.5 percent of this amount, had been recognized in non-controlling interest.
In connection with the acquisition of the non-controlling interest in FCA US, this amount was recognized as an
adjustment to the equity reserve for Remeasurement of de?ned bene?t plans.
With respect to the MOU entered into with the UAW, the Group recognized €495 million (U.S.$670 million) in Other
unusual expenses in the Consolidated income statement. The ?rst U.S.$175 million installment under the MOU
was paid on January 21, 2014, which was equivalent to €129 million at that date, and is re?ected in the operating
section of the Consolidated statement of cash ?ows. The remaining outstanding obligation pursuant to the MOU as of
December 31, 2014 of €417 million (U.S.$506 million), which includes €7 million (U.S.$9 million) of accreted interest,
is recorded in Other current liabilities in the Consolidated statement of ?nancial position. The second installment of
$175 million (approximately €151 million at that date) to the VEBA Trust was made on January 21, 2015.
The Equity Purchase Agreement also provided for a tax distribution from FCA US to its members under the terms of
FCA US Group’s Limited Liability Company Operating Agreement (as amended from time to time, the “LLC Operating
Agreement”) in the amount of approximately U.S.$60 million (€45 million) to cover the VEBA Trust’s tax obligation.
As this payment was made pursuant to a speci?c requirement in FCA US’s LLC Operating Agreement, it is not
considered part of the multiple element transaction.
Transactions with non-controlling interests in 2014, 2013 and 2012 were as follows:
Acquisition of the remaining 41.5 percent ownership in FCA US (described above) consummated in January 2014.
In accordance with IFRS 10 - Consolidated Financial Statements, non-controlling interest and equity reserves were
adjusted to re?ect the change in the ownership interest through a corresponding adjustment to equity attributable
to the parent.
In the context of the Merger described above, in April 2014, Fiat Investments N.V. was incorporated as a public
limited liability company under the laws of the Netherlands and was renamed FCA upon completion of the Merger.
This transaction did not have an effect on the Consolidated ?nancial statements.
In August 2014 Ferrari S.p.A. acquired an additional 21.0 percent in the share capital of the subsidiary Ferrari
Maserati Cars International Trading (Shanghai) Co. Ltd. increasing its interest from 59.0 percent to 80.0 percent
(the Group’s interests increased from 53.1 percent to 72.0 percent). In accordance with IFRS 10 - Consolidated
Financial Statements, non-controlling interest and equity reserves were adjusted to re?ect the change in the
ownership interest through a corresponding adjustment to Equity attributable to the parent.
On January 2012, FCA’s ownership interest in FCA US increased by an additional 5.0 percent on a fully-diluted basis.
On October 28, 2013, FCA acquired the remaining 50.0 percent interests in VM Motori Group.
180 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The effects of changes in ownership interests in 2013 for VM Motori Group and in 2012 for FCA US on the Equity
attributable to owners of the parent were as follows:
2013 2012
(€ million)
Carrying amount of non-controlling interest acquired 36 200
Consideration paid to non-controlling interests (34) —
Other ?nancial assets derecognized — (288)
Deferred tax liabilities recognized — —
Effect on the Equity attributable to owners of the parent 2 (88)
1. Net revenues
Net revenues were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Revenues from:
Sales of goods 91,869 82,815 80,101
Services provided 2,202 2,033 2,043
Contract revenues 1,150 1,038 1,078
Interest income of ?nancial services activities 275 239 277
Lease installments from assets under operating leases 308 238 244
Other 286 261 22
Total Net revenues 96,090 86,624 83,765
Net revenues were attributed as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Revenues in:
North America 54,602 47,552 45,171
Brazil 7,512 8,431 9,839
Italy 7,054 6,699 7,048
China 6,336 4,445 2,700
Germany 3,460 3,054 3,167
UK 1,927 1,453 1,429
France 1,837 1,956 2,042
Turkey 1,381 1,268 1,236
Australia 1,220 979 673
Argentina 1,181 1,439 1,179
Spain 1,162 1,015 873
Other countries 8,418 8,333 8,408
Total Net revenues 96,090 86,624 83,765
2014
|
ANNUAL REPORT 181
2. Cost of sales
Cost of sales in 2014, 2013 and 2012 amounted to €83,146 million, €74,326 million and €71,473 million,
respectively, comprised mainly of expenses incurred in the manufacturing and distribution of vehicles and parts, of
which, cost of materials and components are the most signi?cant. The remaining costs principally include labor costs,
consisting of direct and indirect wages, as well as depreciation of Property, plant and equipment and amortization of
Other intangible assets relating to production and transportation costs.
Cost of sales also includes warranty and product-related costs, estimated at the time of sale to dealer networks
or to the end customer. Depending on the speci?c nature of the recall, including the signi?cance and magnitude,
certain warranty expenses incurred are reported as Other unusual expenses. The Group believes that this separate
identi?cation allows the users of the Consolidated ?nancial statements to better analyze the comparative year-on-year
?nancial performance of the Group.
Cost of sales in 2014, 2013 and 2012 also includes €170 million, €190 million and €158 million, respectively, of
interest and other ?nancial expenses from ?nancial services companies.
3. Selling, general and administrative costs
Selling costs in 2014, 2013 and 2012 amounted to €4,565 million, €4,269 million and €4,367 million, respectively,
and mainly consisted of marketing, advertising, and sales personnel costs. Marketing and advertising expenses
consisted primarily of media campaigns, as well as marketing support in the form of trade and auto shows, events,
and sponsorship.
General and administrative costs in 2014, 2013 and 2012 amounted to €2,519 million, €2,433 million and
€2,408 million, respectively, and mainly consisted of administration expenses which are not attributable to sales,
manufacturing or research and development functions.
4. Research and development costs
Research and development costs were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Research and development costs expensed during the year 1,398 1,325 1,180
Amortization of capitalized development costs 1,057 887 621
Write-off of costs previously capitalized 82 24 57
Total Research and development costs 2,537 2,236 1,858
Refer to Note 14 in the Consolidated ?nancial statements for information on capitalized development costs.
5. Result from investments
The net gain in 2014, 2013 and 2012, amounting to €131 million, €84 million and €87 million, respectively, mainly
consisted of the Group’s share in the Net pro?t/(loss) of equity method investments for €117 million, €74 million and
€74 million, respectively and other income and expenses arising from investments measured at cost.
182 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
6. Gains/(losses) on the disposal of investments
In 2014, the Group recognized net gains on the disposal of investments of €12 million.
In 2013, the Group recognized net gains on the disposal of investments of €8 million.
In 2012, the Group recognized a write-down of €91 million of the interest in Sevelnord Société Anonyme following its
reclassi?cation to Assets held for sale and subsequent transfer during the ?rst quarter of 2013.
7. Restructuring costs
Net restructuring costs amounting to €50 million in 2014 primarily related to restructuring provisions recognized in the
LATAM, EMEA and Components segments.
Net restructuring costs in 2013 amounted to €28 million and primarily related to restructuring provisions in other minor
business aggregated within Other activities for the purpose of segment reporting for €38 million, partially offset by the
release of a restructuring provision previously made by the NAFTA segment for €10 million.
Restructuring costs in 2012 amounted to €15 million and related to the EMEA segment for €43 million, the
Components segment and Other activities for €20 million, partially offset by the release of restructuring provisions
previously made by the NAFTA segment for €48 million.
For a more detailed analysis of Restructuring provisions, reference should be made to Note 26.
8. Other unusual income/(expenses)
For the year ended December 31, 2014, Other unusual expenses amounted to expenses of €639 million and primarily
related to the €495 million expense recognized in connection with the execution of the UAW MOU entered into by
FCA US on January 21, 2014, as described in the section —Acquisition of the Remaining Ownership Interest in FCA
US, above. In addition, Other unusual expenses also included €15 million related to compensation costs as a result of
the resignation of the former chairman of Ferrari S.p.A. and included a €98 million remeasurement charge recognized
as a result of the Group’s change in the exchange rate used to remeasure its Venezuelan subsidiary’s net monetary
assets in U.S. Dollar.
Based on ?rst quarter 2014 developments related to the foreign exchange process in Venezuela, we changed the
exchange rate used to remeasure our Venezuelan subsidiary’s net monetary assets in U.S. Dollar as of March 31,
2014. As the of?cial exchange rate is increasingly reserved only for purchases of those goods and services deemed
“essential” by the Venezuelan government, the Group began to use the exchange rate determined by an auction
process conducted by Venezuela’s Supplementary Foreign Currency Administration System (“SICAD”), referred to
as the “SICAD I rate”, as of March 31, 2014. Previously, the Group utilized the of?cial exchange rate of 6.30 VEF
to U.S. Dollar. In late March 2014, the Venezuelan government introduced an additional auction-based foreign
exchange system, referred to as the “SICAD II rate”. The SICAD II rate had ranged from 49 to 51.9 VEF to U.S. Dollar
in the period since its introduction through December 31, 2014. The SICAD II rate is expected to be used primarily
for imports and has been limited to amounts of VEF that can be exchanged into other currencies, such as the U.S.
Dollar. As a result of the recent exchange agreement between the Central Bank of Venezuela and the Venezuelan
government and the limitations of the SICAD II rate, the Group believes any future remittances of dividends would be
transacted at the SICAD I rate. As a result, we determined that the SICAD I rate is the most appropriate rate to use. At
December 31, 2014, the SICAD I rate was 12.0 VEF to U.S. Dollar.
2014
|
ANNUAL REPORT 183
For the year ended December 31, 2013, Other unusual expenses amounted to €686 million and primarily related to
write-downs totaling €272 million as a result of the rationalization of architectures associated with the new product
strategy, particularly for the Alfa Romeo, Maserati and Fiat brands; speci?cally, €226 million related to development
costs and €46 million to tangible assets. In addition, in relation to the expected market trends, the assets of the
cast-iron business in the Components segment (Teksid) were written down by €57 million. Moreover, there was a
€56 million write-off of the book value of the Equity Recapture Agreement Right considering the agreement closed
on January 21, 2014 to purchase the remaining ownership interest in FCA US from the VEBA Trust (as described
above). Other unusual charges also included a €115 million charge related to the June 2013 voluntary safety recall for
the 1993-1998 Jeep Grand Cherokee and the 2002-2007 Jeep Liberty, as well as the customer satisfaction action
for the 1999-2004 Jeep Grand Cherokee. This item also includes a €59 million foreign currency translation loss
related to the February 2013 devaluation of the of?cial exchange rate of the Venezuelan Bolivar (“VEF”) relative to the
U.S. Dollar from 4.30 VEF per U.S. dollar to 6.30 VEF per U.S. Dollar. During the second and third quarter of 2013,
certain monetary liabilities, which had been submitted to the Commission for the Administration of Foreign Exchange
(“CADIVI”) for payment approval through the ordinary course of business prior to the devaluation date, were approved
to be paid at an exchange rate of 4.30 VEF per U.S. Dollar. As a result, €12 million in the second quarter of 2013 and
€4 million in the third quarter of 2013 of foreign currency transaction gains were recognized due to these monetary
liabilities being previously remeasured at the 6.30 VEF per U.S. Dollar at the devaluation date.
In 2012, Other unusual expenses, net were €138 million mainly including €145 million of costs arising from disputes
relating to operations terminated in prior years and costs related to the agreement with PSA Peugeot Citroën providing
for the transfer of the Group’s interest in the company Sevelnord Société Anonyme at a symbolic value.
In 2014, Other unusual income amounted to €249 million which primarily included €223 million related to the fair value
measurement of the previously exercised options for approximately 10 percent interest in FCA US that were settled in
connection with the acquisition of the remaining interest in FCA US as described in the section Changes in the Scope
of Consolidation, above.
In 2013, Other unusual income amounted to €187 million which primarily included the impacts of a curtailment gain
and plan amendments of €166 million with a corresponding net reduction to FCA US’s pension obligation. During the
second quarter of 2013, FCA US amended its U.S. and Canadian salaried de?ned bene?t pension plans. The U.S.
plans were amended in order to comply with Internal Revenue Service regulations, cease the accrual of future bene?ts
effective December 31, 2013, and enhanced the retirement factors. The Canada amendment ceased the accrual of
future bene?ts effective December 31, 2014, enhanced the retirement factors and continued to consider future salary
increases for the affected employees. An interim remeasurement was required for these plans, which resulted in an
additional €509 million net reduction to the pension obligation, a €7 million reduction to de?ned bene?t plan assets
and a corresponding €502 million increase in Total other comprehensive income/(loss).
184 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
9. Net ?nancial income/(expenses)
The following table sets out details of the Group’s ?nancial income and expenses, including the amounts reported in
the Consolidated income statement within the Financial income/(expenses) line item, as well as interest income from
?nancial services activities, recognized under Net revenues, and Interest cost and other ?nancial charges from ?nancial
services companies, recognized under Cost of sales.
For the years ended December 31,
2014 2013 2012
Financial income: (€ million)
Interest income and other ?nancial income: 226 201 266
Interest income from banks deposits 170 153 180
Interest income from securities 7 8 14
Other interest income and ?nancial income 49 40 72
Interest income of ?nancial services activities 275 239 277
Gains on disposal of securities 3 4 2
Total Financial income 504 444 545
Total Financial income relating to:
Industrial companies (A) 229 205 268
Financial services companies (reported within Net revenues) 275 239 277
Financial expenses:
Interest expense and other ?nancial expenses: 1,916 1,904 1,973
Interest expenses on bonds 1,204 959 921
Interest expenses on bank borrowing 427 367 382
Commission expenses 21 25 21
Other interest cost and ?nancial expenses 264 553 649
Write-downs of ?nancial assets 84 105 50
Losses on disposal of securities 6 3 9
Net interest expenses on employee bene?ts provisions 330 371 388
Total Financial expenses 2,336 2,383 2,420
Net expenses/(income) from derivative ?nancial instruments and
exchange rate differences 110 (1) (84)
Total Financial expenses and net expenses from derivative ?nancial
instruments and exchange rate differences 2,446 2,382 2,336
Total Financial expenses and net expenses from derivative ?nancial
instruments and exchange rate differences relating to:
Industrial companies (B) 2,276 2,192 2,178
Financial services companies (reported with Cost of sales) 170 190 158
Net ?nancial income expenses relating to industrial companies (A - B) 2,047 1,987 1,910
Other interest cost and ?nancial expenses includes interest expenses of €33 million (€326 million in 2013 and €342
million in 2012) related to the VEBA Trust Note and interest expenses of €50 million (€61 million in 2013 and €71
million in 2012) related to the Canadian Health Care Trust Note.
Net income/(expenses) from derivative ?nancial instruments and exchange rate differences include net income of €31
million in 2013 and net income of €34 million in 2012 arising from the equity swaps on FCA and CNH Industrial N.V.
(“CNHI”) shares relating to certain stock option plans. These equity swaps expired in 2013.
2014
|
ANNUAL REPORT 185
10. Tax expense/(income)
Income tax was as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Current tax expense 677 615 691
Deferred tax income (145) (1,570) (71)
Taxes relating to prior periods 12 19 8
Total Tax expense/(income) 544 (936) 628
For the year ended December 31, 2014 Total tax expense amounted to €544 million. In 2013, Total tax income was
€936 million and included a €1,500 million positive one-time recognition of net deferred tax assets related to tax loss
carry- forwards and temporary differences within the NAFTA segment.
In 2014, the Regional Italian Income Tax (“IRAP”) recognized within current taxes was €62 million (€58 million in 2013
and €64 million in 2012) and IRAP recognized within deferred tax costs was €18 million (€11 million in 2013 and €21
million in 2012).
The applicable tax rate used to determine the theoretical income taxes was 21.5 percent in 2014, which is the
statutory rate applicable in the United Kingdom, the tax jurisdiction in which FCA is resident. The applicable tax rate
used to determine the theoretical income taxes was 27.5 percent in 2013 and 2012, which was the statutory rate
applicable in Italy, the tax jurisdiction in which Fiat was resident. The change in the applicable tax rate is a result of
the change in tax jurisdiction in connection with the Merger. The reconciliation between the theoretical income taxes
calculated on the basis of the theoretical tax rate and income taxes recognized was as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Theoretical income taxes 253 279 419
Tax effect on:
Recognition and utilization of previously unrecognized deferred
tax assets (173) (1,745) (529)
Permanent differences (148) 8 (79)
Deferred tax assets not recognized and write-downs 379 380 472
Differences between foreign tax rates and the theoretical applicable tax
rate and tax holidays 66 24 164
Taxes relating to prior years 12 19 8
Unrecognized withholding tax 57 84 95
Other differences 18 (54) (7)
Total Tax expense/(income), excluding IRAP 464 (1,005) 543
Effective tax rate 39.5% n.a. 35.7%
IRAP (current and deferred) 80 69 85
Total Tax expense/(income) 544 (936) 628
Because the IRAP taxable basis differs from Pro?t before taxes, it is excluded from the above effective tax rate
calculation.
In 2014, the Group’s effective tax rate is equal to 39.5%. The difference between the theoretical and the effective
income taxes is primarily due to €379 million arising from the unrecognized deferred tax assets on temporary
differences and tax losses originating in the year in EMEA, which is partially offset by the recognition of non-recurring
deferred tax bene?ts of €173 million.
186 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
In 2013, the Group’s effective tax rate includes a signi?cant tax bene?t and is not comparable to prior periods
primarily due to FCA US recognizing previously unrecognized deferred tax assets of €1,500 million. Excluding this
effect, the effective tax rate of the Group in 2013 would have been 48.7 percent. The difference between the 2013
theoretical and effective income tax was primarily due to the above-mentioned recognition and utilization of previously
unrecognized deferred tax assets of €1,734 million (€1,500 million of which was recognized in income taxes and
€234 million in Other Comprehensive income/(loss). These bene?ts were partially offset by the negative impact of
€380 million arising from the unrecognized deferred tax assets on temporary differences and tax losses originating in
the year.
In 2012, the Group’s effective tax rate was 35.7 percent. The difference between the theoretical and the effective
income tax rate was due to the recognition and utilization of previously unrecognized deferred tax assets for €529
million, net of €472 million arising from the unrecognized deferred tax assets on temporary differences and tax losses
originating in the year.
The Group recognizes the amount of Deferred tax assets less the Deferred tax liabilities of the individual consolidated
companies in the Consolidated statement of ?nancial position within Deferred tax asset, where these may be offset.
Amounts recognized were as follows:
At December 31,
2014 2013
(€ million)
Deferred tax assets 3,547 2,903
Deferred tax liabilities (233) (278)
Net deferred tax assets 3,314 2,625
In 2014, net deferred tax assets increased by €689 million mainly due to the following:
€145 million increase for recognition of previously unrecognized Deferred tax assets and the recognition of Deferred
tax assets on temporary differences originating during the year, net of the reversal of deferred taxes relating to
previous years;
€102 million increase for recognition directly to Equity of net deferred tax assets;
€190 million increase due to exchange rate differences and other changes;
€252 million increase in Deferred tax assets due to acquisition of the remaining 41.5 percent interest in FCA US.
2014
|
ANNUAL REPORT 187
The signi?cant components of Deferred tax assets and liabilities and their changes during the years ended December
31, 2014 and 2013 were as follows:
At January 1,
2014
Recognized in
Consolidated
income
statement
Charged
to equity
Changes in
the scope of
consolidation
Translation
differences
and other
changes
At
December 31,
2014
(€ million)
Deferred tax assets arising on:
Provisions 2,938 533 — 4 1,092 4,567
Provision for employee bene?ts 1,131 101 35 — 145 1,412
Intangible assets 343 (31) — — 16 328
Impairment of ?nancial assets 191 (7) — — (10) 174
Inventories 261 41 — — 8 310
Allowances for doubtful accounts 110 — — — 1 111
Other 1,209 (947) 42 (4) 1,460 1,760
Total 6,183 (310) 77 — 2,712 8,662
Deferred tax liabilities arising on:
Accelerated depreciation (1,404) (80) — — (1,222) (2,706)
Capitalization of development costs (1,416) (155) — 2 (407) (1,976)
Other Intangible assets and
Intangible assets with inde?nite
useful lives (640) 23 — 16 (695) (1,296)
Provision for employee bene?ts (20) 2 (2) — (1) (21)
Other (562) (56) 27 (16) (24) (631)
Total (4,042) (266) 25 2 (2,349) (6,630)
Deferred tax asset arising on tax loss
carry-forward 3,810 777 — — 109 4,696
Unrecognized deferred tax assets (3,326) (56) — (2) (30) (3,414)
Total net Deferred tax assets 2,625 145 102 — 442 3,314
At January 1,
2013
Recognized in
Consolidated
income
statement
Charged
to equity
Changes in
the scope of
consolidation
Translation
differences
and other
changes
At
December
31, 2013
(€ million)
Deferred tax assets arising on:
Provisions 2,922 368 — 3 (355) 2,938
Provision for employee bene?ts 1,022 137 18 — (46) 1,131
Intangible assets 381 (38) — 1 (1) 343
Impairment of ?nancial assets 228 13 — — (50) 191
Inventories 264 (1) — 1 (3) 261
Allowances for doubtful accounts 90 18 — — 2 110
Other 1,456 (224) — 2 (25) 1,209
Total 6,363 273 18 7 (478) 6,183
Deferred tax liabilities arising on:
Accelerated depreciation (1,354) (128) — 1 77 (1,404)
Capitalization of development costs (1,211) (252) — — 47 (1,416)
Other Intangible assets and
Intangible assets with inde?nite
useful lives (784) 48 — (17) 113 (640)
Provision for employee bene?ts (22) — — (1) 3 (20)
Other (527) 54 (23) (2) (64) (562)
Total (3,898) (278) (23) (19) 176 (4,042)
Deferred tax asset arising on tax loss
carry-forward 3,399 437 — 7 (33) 3,810
Unrecognized deferred tax assets (4,918) 1,138 217 — 237 (3,326)
Total net Deferred tax assets 946 1,570 212 (5) (98) 2,625
188 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The decision to recognize deferred tax assets is made for each company in the Group by critically assessing
whether conditions exist for the future recoverability of such assets by taking into account recent forecasts from
budgets and plans. At December 31, 2014, following the Group’s reorganization of its subsidiaries in the U.S and in
consideration of the projected positive results in the U.S. and other countries, additional deferred tax assets of €226
million have been recognized. The additional recognized deferred tax assets were offset by a write-down of €232
million deferred tax assets related to the projected spin-off of Ferrari. Despite a tax loss in the Group’s wholly-owned
consolidated Italian subsidiaries, the Group continued to recognize deferred tax assets of €799 million (€1,016 million
at December 31, 2013) as the Group expects future taxable income in future periods and based on the fact that tax
losses can be carried forward inde?nitely.
At December 31, 2014, the Group had deferred tax assets on deductible temporary differences of €8,662 million
(€6,183 million at December 31, 2013), of which €480 million was not recognized (€435 million at December 31,
2013). At December 31, 2014, the Group also had theoretical tax bene?t on losses carried forward of €4,696 million
(€3,810 million at December 31, 2013), of which €2,934 million was unrecognized (€2,891 million at December 31,
2013). At December 31, 2014, net deferred tax assets included the amount of €1,762 million in respect of bene?ts on
unused tax losses carry-forwards (€919 million at December 31, 2013).
Deferred taxes on the undistributed earnings of subsidiaries have not been recognized, except in cases where it is
probable the distribution will occur in the foreseeable future.
Total deductible and taxable temporary differences and accumulated tax losses at December 31, 2014, together with
the amounts for which deferred tax assets have not been recognized, analyzed by year of expiration, are as follows:
Year of expiration
Total at
December
31, 2014 2015 2016 2017 2018
Beyond
2017
Unlimited/
indeterminable
(€ million)
Temporary differences and tax losses
relating to corporate taxation:
Deductible temporary differences 26,777 8,540 2,113 1,742 1,876 12,506 —
Taxable temporary differences (19,119) (757) (1,873) (1,793) (1,834) (9,933) (2,929)
Tax losses 15,852 58 163 154 113 3,695 11,669
Amounts for which deferred tax
assets were not recognized (12,064) (487) (317) (171) (2) (1,176) (9,911)
Temporary differences and tax
losses relating to corporate taxation 11,446 7,354 86 (68) 153 5,092 (1,171)
Temporary differences and tax losses
relating to local taxation (i.e. IRAP in
Italy):
Deductible temporary differences 18,007 4,665 1,622 1,556 1,568 8,596 —
Taxable temporary differences (17,494) (485) (1,905) (1,868) (1,881) (8,404) (2,951)
Tax losses 3,401 3 5 41 75 2,573 704
Amounts for which deferred tax
assets were not recognized (1,052) (84) (36) (19) (15) (354) (544)
Temporary differences and tax
losses relating to local taxation 2,862 4,099 (314) (290) (253) 2,411 (2,791)
11. Other information by nature
Personnel costs in 2014, 2013 and 2012 amounted to €10,099 million, €9,471 million and €9,256 million,
respectively, which included costs that were capitalized mainly in connection with product development activities.
In 2014, FCA had an average number of employees of 231,613 (223,658 employees in 2013 and 208,835 employees
in 2012).
2014
|
ANNUAL REPORT 189
12. Earnings per share
Basic earnings per share
The basic earnings per share for 2014 and 2013 was determined by dividing the Pro?t attributable to the equity
holders of the parent by the weighted average number of shares outstanding during the periods. In addition, the
weighted average number of shares outstanding for 2014 includes the minimum number of ordinary shares to be
converted as a result of the issuance of the mandatory convertible securities described in Note 23. For 2012, the basic
earnings per share takes into account the mandatory conversion of preference and savings shares by dividing the
Pro?t attributable to the equity holders of the parent by the weighted average number of ordinary shares outstanding
during the period (assuming conversion occurred at the beginning of the year).
The following table provides the amounts used in the calculation of basic earnings per share for the years ended
December 31, 2014, 2013 and 2012:
For the years ended December 31,
2014 2013 2012
Ordinary
shares
Ordinary
shares
Ordinary
shares
Pro?t attributable to owners of the parent € million 568 904 44
Weighted average number of shares outstanding thousand 1,222,346 1,215,921 1,215,828
Basic earnings per ordinary share € 0.465 0.744 0.036
Diluted earnings per share
In order to calculate the diluted earnings per share, the weighted average number of shares outstanding has been
increased to take into consideration the theoretical effect that would arise if all the share-based payment plans were
exercised and if the maximum number of ordinary shares related to the mandatory convertible securities (Note 23
in the Consolidated ?nancial statements) were converted. No other instruments could potentially dilute the basic
earnings per share in the future as all contingently issuable shares existing under the stock grant plan and the
mandatory convertible securities (Note 23 in the Consolidated ?nancial statements) were included in the calculation of
the diluted earnings per share. There were no instruments excluded from the calculation of diluted earnings per share
for the periods presented because of an anti-dilutive impact.
The following table provides the amounts used in the calculation of diluted earnings per share for the years ended
December 31, 2014, 2013 and 2012:
For the years ended December 31,
2014 2013 2012
Ordinary
shares
Ordinary
shares
Ordinary
shares
Pro?t attributable to owners of the parent € million 568 904 44
Weighted average number of shares outstanding thousand 1,222,346 1,215,921 1,215,828
Number of shares deployable for stock option plans
linked to FCA shares thousand 11,204 13,005 10,040
Mandatory Convertible Securities thousand 547 — —
Weighted average number of shares outstanding for
diluted earnings per share thousand 1,234,097 1,228,926 1,225,868
Diluted earnings per ordinary share € 0.460 0.736 0.036
190 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
13. Goodwill and intangible assets with inde?nite useful life
Goodwill and intangible assets with inde?nite useful life as at December 31, 2014 and at December 31, 2013 are
summarized below:
At
December 31,
2013
Change in the
scope of
consolidation
Impairment
losses
Translation
differences
and
other changes
At
December 31,
2014
(€ million)
Gross amount 10,283 — — 1,218 11,501
Accumulated impairment losses (443) — — 1 (442)
Goodwill 9,840 — — 1,219 11,059
Brands 2,600 — — 353 2,953
Total Goodwill and intangible assets with
inde?nite useful lives 12,440 — — 1,572 14,012
At
December 31,
2012
Change in the
scope of
consolidation
Impairment
losses
Translation
differences
and
other changes
At
December 31,
2013
(€ million)
Gross amount 10,645 15 — (377) 10,283
Accumulated impairment losses (413) — — (30) (443)
Goodwill 10,232 15 — (407) 9,840
Brands 2,717 — — (117) 2,600
Total Goodwill and intangible assets with
inde?nite useful lives 12,949 15 — (524) 12,440
Foreign exchange effects in 2014 and in 2013 amounted to €1,572 million and €524 million, respectively, and arose
mainly from changes in the U.S. Dollar/Euro rate.
Changes in the scope of consolidation in 2013 included the effects of the consolidation of the VM Motori group from
July 1, 2013 resulting from the acquisition of the remaining 50.0 per cent interest.
Brands
Brands arise from the NAFTA segment and are comprised of the Chrysler, Jeep, Dodge, Ram and Mopar brands.
These rights are protected legally through registration with government agencies and through the continuous use in
commerce. As these rights have no legal, contractual, competitive or economic term that limits their useful lives, they
are classi?ed as intangible assets with inde?nite useful lives, and are therefore not amortized.
For the purpose of impairment testing, the carrying value of Brands, which is allocated to the NAFTA segment, is
tested jointly with the Goodwill allocated to the NAFTA segment.
2014
|
ANNUAL REPORT 191
Goodwill
At December 31, 2014, goodwill includes €10,185 million for FCA US (€8,967 million at December 31, 2013) and
€786 million for Ferrari S.p.A (€786 million at December 31, 2013) which resulted from their respective acquisitions.
Goodwill is allocated to operating segments or to CGUs within the operating segments as appropriate, in accordance
with IAS 36 – Impairment of assets.
The following table presents the allocation of Goodwill across the segments:
At December 31,
2014 2013
(€ million)
NAFTA 8,350 7,330
APAC 1,085 968
LATAM 517 461
EMEA 233 208
Ferrari 786 786
Components 52 51
Other activities 36 36
Total Goodwill (net carrying amount) 11,059 9,840
In accordance with IAS 36, Goodwill is not amortized and is tested for impairment annually, or more frequently, if facts
or circumstances indicate that the asset may be impaired. Impairment testing is performed by comparing the carrying
amount and the recoverable amount of each CGU to which Goodwill has been allocated. The recoverable amount of a
CGU is the higher of its fair value less costs to sell and its value in use.
The assumptions used in this process represent management’s best estimate for the period under consideration.
Goodwill allocated to the NAFTA segment represents 75.5 percent of the Group’s total Goodwill, which also includes
the carrying amount of the Group’s Brands, as discussed above. The estimate of the value in use of the NAFTA
segment for purposes of performing the annual impairment test was based on the following assumptions:
The expected future cash ?ows covering the period from 2015 through 2018 have been derived from the Group
Business Plan presented on May 6, 2014. More speci?cally, in making the estimates, expected EBITDA for the
periods under consideration was adjusted to re?ect the expected capital expenditure and monetary contributions to
pension plans and other post-employment bene?t plans. These cash ?ows relate to the CGU in its condition when
preparing the ?nancial statements and exclude the estimated cash ?ows that might arise from restructuring plans or
other structural changes. Volumes and sales mix used for estimating the future cash ?ow are based on assumptions
that are considered reasonable and sustainable and represent the best estimate of expected conditions regarding
market trends and segment, brand and model share for the NAFTA segment over the period considered.
The expected future cash ?ows include a normalized terminal period used to estimate the future results beyond
the time period explicitly considered. This terminal period was calculated by applying an EBITDA margin of the
average of the expected EBITDA for 2015-2018 to the average 2015-2018 expected revenues used in calculating
the expected EBITDA. The terminal period was then adjusted by a normalized amount of investments determined
assuming a steady state business and by expected monetary contributions to pension plans and post-employment
bene?t plans.
192 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Pre-tax expected future cash ?ows have been estimated in U.S. Dollars, and discounted using a pre-tax
discount rate. The base WACC of 16.4 percent (16.0 percent in 2013, 15.1 percent in 2012) used re?ects the
current market assessment of the time value of money for the period being considered and the risks speci?c to
the segment under consideration. The WACC was calculated using the Capital Asset Pricing Model (“CAPM”)
technique in which the risk-free rate has been calculated by referring to the yield curve of long-term U.S.
government bonds and the beta coef?cient and the debt/equity ratio have been extrapolated by analyzing a
group of comparable companies operating in the automotive sector. Additionally, to re?ect the uncertainty of the
current economic environment and future market conditions, the cost of equity component of the WACC was
progressively increased by a 100 basis point risk premium for the years 2016 and 2017, 90 basis points for 2018
and by 100 basis points in the terminal period.
The value in use estimated as above was determined to be in excess of the book value of the net capital
employed (inclusive of Goodwill and Brands allocated to the NAFTA segment) by approximately €100 million at
December 31, 2014.
Impairment tests for Goodwill allocated to other segments were based on the expected future cash ?ows covering
the period from 2015 through 2018. The assumptions used to determine the pre-tax WACCs and the risk premiums
were consistent with those described above for the NAFTA segment. Discounted cash ?ows were measured using
a pre-tax base WACC of 16.6 percent (14.9 percent in 2013, 14.4 percent in 2012), 18.0 percent (22.3 percent in
2013, 17.2 percent in 2012) and 16.4 percent (17.9 percent in 2013, 16.4 percent in 2012) for the APAC, LATAM and
EMEA segments, respectively. The results of the impairment tests for APAC, LATAM and EMEA resulted in a positive
outcome re?ecting a surplus of the value in use over the book value. A sensitivity analysis was performed by increasing
the base WACC used above for each of the regions by 50 basis points, which resulted in a surplus of the carrying
amount over the value in use for the APAC, LATAM and EMEA segments.
In addition, the Goodwill recorded within the Ferrari operating segment was tested for impairment. The expected
future cash ?ows are the operating cash ?ows taken from the estimates included in the 2015 budget and the expected
business performance, taking account of the uncertainties of the global ?nancial and economic situation, extrapolated
for subsequent years by using the speci?c medium/long-term growth rate for the sector equal to 1.0 percent (1.0
percent in 2013, 2.0 percent in 2012). These cash ?ows were then discounted using a post-tax discount rate of
8.2 percent (8.4 percent in 2013, 8.1 percent in 2012). The recoverable amount of the CGU was signi?cantly higher
than its carrying amount. Furthermore, the exclusivity of the business, its historical pro?tability and its future earnings
prospects indicate that the carrying amount of the Goodwill within the Ferrari operating segment will continue to be
recoverable, even in the event of dif?cult economic and market condition.
2014
|
ANNUAL REPORT 193
14. Other intangible assets
Externally
acquired
development
costs
Development
costs
internally
generated
Patents,
concessions
and licenses
Other
intangible
assets Total
(€ million)
Gross carrying amount Balance at December 31, 2012 5,227 4,637 2,100 638 12,602
Additions 1,562 480 224 64 2,330
Change in the scope of consolidation 198 — 1 21 220
Divestitures (5) (304) (19) (2) (330)
Translation differences and other changes (123) (159) (21) (100) (403)
Balance at December 31, 2013 6,859 4,654 2,285 621 14,419
Additions 1,542 725 350 89 2,706
Change in the scope of consolidation — — — — —
Divestitures (8) (36) (38) (6) (88)
Translation differences and other changes 239 168 207 4 618
Balance at December 31, 2014 8,632 5,511 2,804 708 17,655
Accumulated amortization and impairment losses
Balance at December 31, 2012 2,436 2,516 875 430 6,257
Change in the scope of consolidation 142 — — 11 153
Amortization 479 408 213 48 1,148
Impairment losses 120 130 — — 250
Divestitures (1) (286) (18) (1) (306)
Translation differences and other changes (11) (90) 16 (72) (157)
Balance at December 31, 2013 3,165 2,678 1,086 416 7,345
Change in the scope of consolidation — — — — —
Amortization 648 409 225 49 1,331
Impairment losses 46 36 — — 82
Divestitures (6) (30) (33) (4) (73)
Translation differences and other changes (84) 152 59 8 135
Balance at December 31, 2014 3,769 3,245 1,337 469 8,820
Carrying amount at December 31, 2013 3,694 1,976 1,199 205 7,074
Carrying amount at December 31, 2014 4,863 2,266 1,467 239 8,835
Additions of €2,706 million in 2014 (€2,330 million in 2013) include development costs of €2,267 million (€2,042
million in 2013), consisting primarily of material costs and personnel related expenses relating to engineering, design and
development focused on content enhancement of existing vehicles, new models and powertrain programs in NAFTA and
EMEA segments. In 2014, the Group wrote-down certain internally generated development costs within the EMEA (€47
million) and NAFTA (€28 million) segments primarily in connection with changes in certain product developments.
In 2013, to re?ect the new product strategy the Group wrote-down certain development costs by €250 million. This
amount mainly includes €151 million for the EMEA segment, €32 million for the LATAM segment and €65 million
for Maserati in connection with development costs on new Alfa Romeo, Fiat and Maserati products, which had been
switched to new platforms considered technologically more appropriate. Write-downs of development costs have
been recognized as Other unusual expenses for €226 million and the remaining impairments of €24 million were
recognized in Research and development costs. In 2012, the write-down of development costs amounted to €57
million and it was recognized within Research and development costs, as this was not related to strategic factors.
Change in the scope of consolidation in 2013 mainly includes the effects of the consolidation of the VM Motori group
resulting from the acquisition of the remaining 50.0 percent interest for consideration of €34 million.
Translation differences principally re?ect foreign exchange gains of €482 million in 2014 related to changes in the U.S.
Dollar against the Euro. Translation differences of €243 million in 2013 principally re?ected foreign exchange losses
related to the changes in the U.S. Dollar and Brazilian Real against the Euro. Translation differences of €88 million in
2012 principally re?ected the foreign exchange losses related to the devaluation of the U.S. Dollar and Brazilian Real
against the Euro, partially offset by the appreciation of the Polish Zloty against the Euro.
194 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
15. Property, plant and equipment
Land
Industrial
buildings
Plant,
machinery
and
equipment
Other
assets
Advances
and
tangible
assets in
progress Total
(€ million)
Gross carrying amount
Balance at December 31, 2012 717 6,490 35,453 1,919 3,282 47,861
Additions 4 513 2,559 137 1,949 5,162
Divestitures (5) (29) (858) (56) (20) (968)
Change in the scope of consolidation 3 19 240 5 4 271
Impairment losses — — — — (2) (2)
Translation differences (55) (282) (1,362) (92) (177) (1,968)
Other changes 216 324 2,373 124 (2,752) 285
Balance at December 31, 2013 880 7,035 38,405 2,037 2,284 50,641
Additions 14 766 2,877 292 1,466 5,415
Divestitures (7) (94) (1,248) (37) (2) (1,388)
Change in the scope of consolidation — — — — — —
Impairment losses — — — — — —
Translation differences 35 316 1,586 168 132 2,237
Other changes 23 2 867 62 (969) (15)
Balance at December 31, 2014 945 8,025 42,487 2,522 2,911 56,890
Accumulated depreciation and
impairment losses
Balance at December 31, 2012 7 2,267 22,091 990 10 25,365
Depreciation — 261 3,048 178 — 3,487
Divestitures — (14) (818) (41) — (873)
Impairment losses — — 84 — — 84
Change in the scope of consolidation — 2 148 4 — 154
Translation differences — (82) (693) (43) — (818)
Other changes — (40) 58 (10) 1 9
Balance at December 31, 2013 7 2,394 23,918 1,078 11 27,408
Depreciation — 266 3,099 201 — 3,566
Divestitures (2) (87) (1,219) (33) — (1,341)
Impairment losses — 6 27 — — 33
Change in the scope of consolidation — — — — — —
Translation differences — 57 653 61 — 771
Other changes 2 10 19 9 5 45
Balance at December 31, 2014 7 2,646 26,497 1,316 16 30,482
Carrying amount at December 31, 2013 873 4,641 14,487 959 2,273 23,233
Carrying amount at December 31, 2014 938 5,379 15,990 1,206 2,895 26,408
Additions of €5,415 million in 2014 (€5,162 million in 2013) are primarily related to the car mass-market operations
in the NAFTA and EMEA segments, as well as to the ongoing construction of the new LATAM plant in Pernambuco
(Brazil) in 2014 and 2013.
2014
|
ANNUAL REPORT 195
In 2014, €33 million of impairment losses are primarily related to the EMEA segment for certain powertrains that were
abandoned. In 2013, approximately €30 million of impairment losses related to assets in the Cast Iron business unit of
the Components segment as a result of an expected reduction in these activities compared to previous expectations,
due to the increasing use of aluminum in the production of the automotive engine blocks rather than cast iron.
These impairments, which were due to a structural change in the market, were fully recognized within Other unusual
expenses. The remaining impairment losses (€55 million) related to the above mentioned streamlining of architectures
and models associated with the EMEA segment’s refocused product strategy.
In 2014, translation differences of €1,466 million mainly re?ect the strengthening of the U.S. Dollar against the Euro. In
2013, translation differences of €1,150 million primarily related to the changes of the U.S. Dollar and the Brazilian Real
against the Euro.
In 2014 and 2013, Other changes primarily consisted of the reclassi?cation of prior year balances for Advances and
tangible assets in progress to the respective categories when the assets were acquired and entered service. With
reference to Land, Other changes in 2013 also includes €214 million which is the fair value of the land donated to the
Group by the State of Pernambuco (Brazil) following the Group’s commitment to implement an industrial unit designed
to produce, assemble and sell vehicles.
In 2013, changes in the scope of consolidation mainly re?ect the consolidation of the VM Motori group resulting from
the acquisition of the remaining 50.0 per cent interest for consideration of €34 million.
The net carrying amount of assets leased under ?nance lease agreements included in Property, plant and equipment
were as follows:
At December 31,
2014 2013
(€ million)
Industrial buildings 84 87
Plant machinery and equipment 299 307
Property plant and equipment 383 394
Property, plant and equipment of the Group, excluding FCA US, reported as pledged as security for debt, assets that
are legally owned by suppliers but are recognized in the Consolidated ?nancial statements in accordance with IFRIC
4 - Determining Whether an Arrangement Contains a Lease with the corresponding recognition of a ?nancial lease
payable. They are as follows:
At December 31,
2014 2013
(€ million)
Land and industrial buildings pledged as security for debt 1,019 103
Plant and machinery pledged as security for debt and other commitments 648 310
Other assets pledged as security for debt and other commitments 3 5
Property plant and equipment pledged as security for debt 1,670 418
Information on the assets of FCA US subject to lien are set out in Note 27 in the Consolidated ?nancial statements.
At December 31, 2014, the Group had contractual commitments for the purchase of Property, plant and equipment
amounting to €2,263 million (€1,536 million at December 31, 2013).
196 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
16. Investments and other ?nancial assets
At December 31,
2014 2013
(€ million)
Interest in joint ventures 1,329 1,225
Interest in associates 105 123
Interests in unconsolidated subsidiaries 37 40
Equity method investments 1,471 1,388
Available-for-sale investments 124 148
Equity Investments at fair value — 151
Investments at fair value 124 299
Other Investments measured at cost 59 52
Total Investments 1,654 1,739
Non-current ?nancial receivables 296 257
Other securities and other ?nancial assets 70 56
Total Investments and other ?nancial assets 2,020 2,052
Investments in joint ventures
The Group’s interests in joint ventures, amounting to €1,329 million at December 31, 2014 (€1,225 million at
December 31, 2013) are all accounted for using the equity method of accounting and at December 31, 2014 mainly
include the Group’s interests in FCA Bank S.p.A. (“FCA Bank”) (formerly known as FGA Capital S.p.A) amounting to
€894 million (€839 million at December 31, 2013), the Group’s interest in Tofas-Turk Otomobil Fabrikasi A.S. (“Tofas”)
amounting to €299 million (€240 million at December 31, 2013) and the Group’s interest in GAC Fiat Chrysler
Automobiles Co.Ltd (previously known as GAC Fiat Automobiles Limited) amounting to €45 million (€85 million at
December 31, 2013).
Changes in interests in joint ventures in 2014 and 2013 are as follows:
Investments in
joint ventures
(€ million)
Balance at December 31, 2012 1,282
Share of the net pro?t 112
Acquisitions, Capitalizations (Refunds) 44
Change in the scope of consolidation (37)
Translations differences (69)
Other changes (107)
Balance at December 31, 2013 1,225
Share of the net pro?t 127
Acquisitions, Capitalizations (Refunds) 14
Change in the scope of consolidation 2
Translations differences 33
Other changes (72)
Balance at December 31, 2014 1,329
In 2014, Other changes consisting of a net decrease of €72 million mainly relates to dividends distributed by FCA
Bank for €41 million and by Tofas for €42 million, and to the positive change in the cash ?ow hedge reserve of Tofas
of €13 million.
In 2013, Other changes consisting of a net decrease of €107 million mainly relates to dividends distributed by FCA
Bank for €15 million and by Tofas for €72 million, and to the negative change in the cash ?ow hedge reserve of Tofas
of €17 million.
2014
|
ANNUAL REPORT 197
The only material joint venture for the Group is FCA Bank: a 50/50 joint venture with Crédit Agricole Consumer Finance
S.A. FCA Bank operates in 14 European countries including Italy, France, Germany, UK and Spain. In July 2013, the
Group reached an agreement with Crédit Agricole to extend the term of that joint venture through to December 31,
2021. Under the agreement, FCA Bank will continue to bene?t from the ?nancial support of the Crédit Agricole Group
while continuing to strengthen its position as an active player in the securitization and debt markets. FCA Bank
provides retail and dealer ?nancing and long-term rental services in the automotive sector, directly or through its
subsidiaries as a partner of the Group’s car mass-market brands and for Maserati.
Summarized ?nancial information relating to FCA Bank was as follows:
At December 31,
2014 2013
(€ million)
Financial assets 14,604 14,484
Of which: Cash and cash equivalents — —
Other assets 2,330 2,079
Financial liabilities 14,124 13,959
Other liabilities 896 802
Equity (100%) 1,914 1,802
Net assets attributable to owners of the parent 1,899 1,788
Group’s share of net assets 950 894
Elimination of unrealized pro?ts and other adjustments (56) (55)
Carrying amount of interest in the joint venture 894 839
For the years ended December 31,
2014 2013
(€ million)
Interest and similar income 737 752
Interest and similar expenses (373) (381)
Income tax expense (74) (76)
Pro?t from continuing operations 182 172
Net pro?t 182 172
Net pro?t attributable to owners of the parent (A) 181 170
Group’s share of net pro?t 91 85
Elimination of unrealized pro?ts — —
Group’s share of net pro?t in the joint venture 91 85
Other comprehensive income/(loss) attributable to owners of the parent (B) 12 (1)
Total comprehensive income attributable to owners of the parent (A+B) 193 169
Tofas, which is registered with the Turkish Capital Market Board (“CMB”) and listed on the Istanbul Stock Exchange
(“ISE”) since 1991, is classi?ed as a joint venture as the Group and the other partner each have a shareholding of 37.9
percent. As at December 31, 2014 the fair value of the Group’s interest in Tofas was €1,076 million (€857 million at
December 31, 2013).
198 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The aggregate amounts for the Group’s share in all individually immaterial Joint ventures that are accounted for using
the equity method were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Net Pro?t from continuing operations 36 27 65
Net pro?t 36 27 65
Other comprehensive income/(loss) 37 (90) 39
Total other comprehensive income/(loss) 73 (63) 104
There are no restrictions on the ability of joint ventures to transfer funds to the Group in the form of cash dividends, or
to repay loans or advances made by the entity, that have a material impact on the Group’s liquidity.
Investments in associates
The Group’s interests in associates, amounting to €105 million at December 31, 2014 (€123 million at December 31,
2013) are all accounted for using the equity method of accounting and include the Group’s interests in RCS
MediaGroup S.p.A. (“RCS”) amounting to €74 million at December 31, 2014 (€87 million at December 31, 2013).
As of December 31, 2014 the fair value of the Group’s interest in RCS, which is a company listed on the Italian Stock
exchange, was €81 million (€115 million at December 31, 2013).
The aggregate amounts for the Group’s share in all individually immaterial associates accounted for using the equity
method, including RCS were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Loss from continuing operations (20) (42) (72)
Net loss (20) (42) (72)
Other comprehensive income/(loss) 3 2 (1)
Total other comprehensive loss (17) (40) (73)
There are no restrictions on the ability of associates to transfer funds to the Group in the form of cash dividends, or to
repay loans or advances made by the entity, that have a material impact on the Group’s liquidity.
Investments at fair value
At December 31, 2014, Investments at fair value include the investment in CNHI for €107 million (€282 million at
December 31, 2013), the investment in Fin. Priv. S.r.l. for €14 million (€14 million at December 31, 2013) and the
investment in Assicurazioni Generali S.p.A. for €3 million (€3 million at December 31, 2013).
At January 1, 2011, FCA was allotted 38,568,458 ordinary shares in CNHI’s predecessor, Fiat Industrial S.p.A., without
consideration, following the de-merger of Fiat Industrial S.p.A. from Fiat, corresponding to the number of Treasury
shares it held. Following this allotment, the portion of the cost of Treasury shares recognized in equity and attributable to
the de-merged entity’s shares, amounting to €368 million, was reclassi?ed as an asset in the Consolidated statement
of ?nancial position. This initial allocation was calculated on the basis of the weighting of the stock market prices of
Fiat and Fiat Industrial S.p.A. shares on the ?rst day of quotation. At the same time, in accordance with IAS 39 and its
interpretations, the investment was measured at fair value (€347 million) with a corresponding entry made to Other
reserves. In addition, the de-merger of CNHI from Fiat also established that 23,021,250 shares would service the stock
option and stock grant plans outstanding at December 31, 2010. These shares were therefore considered linked to the
liability for share-based payments recognized by the Group as a result of changes to the plans made by the de-merger
and measured at fair value with changes recognized in pro?t and loss consistently with changes in fair value of the liability.
The remaining CNHI shares were classi?ed as Available-for-sale investments and were measured at fair value with
changes recognized directly in Other comprehensive income/(loss).
2014
|
ANNUAL REPORT 199
At December 31, 2014, the investment in CNHI consisted of 15,948,275 common shares for an amount of €107
million. The investment is classi?ed as Available-for-sale and is measured at fair value with changes recognized directly
in Other comprehensive income/loss. During 2014, 18,059,375 ordinary shares of the investment balance existing at
December 31, 2013 were sold following the exercise of the stock options and 100,625 shares of the residual CNHI
shares corresponding to options not exercised were reclassi?ed as Available-held-for-sale investments.
At December 31, 2013, the investment in CNHI consisted of 34,007,650 ordinary shares for an amount of €282
million. At December 31, 2013, 18,160,000 shares, for an amount of €151 million, were to service the stock option
plans and 15,847,650 shares, for an amount €131 million, were classi?ed as available-for-sale. In addition, at
December 31, 2014, the Group had 15,948,275 special voting shares (33,955,402 at December 31, 2013), which
cannot directly or indirectly be sold, disposed of or transferred, and over which the Group cannot create or permit to
exist any pledge, lien, ?xed or ?oating charge or other encumbrance.
The total investment in CNHI corresponded to 1.7 percent and 3.7 percent of voting rights at December 31, 2014 and
December 31, 2013, respectively.
17. Inventories
At December 31,
2014 2013
(€ million)
Raw materials, supplies and ?nished goods 10,294 8,910
Assets sold with a buy-back commitment 2,018 1,253
Gross amount due from customers for contract work 155 115
Total Inventories 12,467 10,278
In 2014, Inventories increased by €2,189 million from €10,278 million at December 31, 2013 as a result of a higher
level of ?nished products following volume growth in the NAFTA, EMEA and Maserati segments in addition to positive
translation differences primarily related to the strengthening of the US dollar against the Euro.
At December 31, 2014, Inventories include those measured at net realizable value (estimated selling price less the
estimated costs of completion and the estimated costs necessary to make the sale) amounting to €1,694 million
(€1,343 million at December 31, 2013).
The amount of inventory write-downs recognized as an expense, within cost of sales, during 2014 is €596 million
(€571 million in 2013).
The amount due from customers for contract work relates to the design and production of industrial automation
systems and related products for the automotive sector at December 31, 2014 and 2013 was as follows:
At December 31,
2014 2013
(€ million)
Aggregate amount of costs incurred and recognized pro?ts (less recognized losses) to date 1,817 1,506
Less: Progress billings (1,914) (1,600)
Construction contracts, net of advances on contract work (97) (94)
Gross amount due from customers for contract work as an asset 155 115
Less: Gross amount due to customers for contract work as a liability included
in Other current liabilities (252) (209)
Construction contracts, net of advances on contract work (97) (94)
200 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
18. Current receivables and Other current assets
The composition of the Current receivables and Other current assets was as follows:
At December 31,
2014 2013
(€ million)
Trade receivables 2,564 2,544
Receivables from ?nancing activities 3,843 3,671
Current tax receivables 328 312
Other current assets:
Other current receivables 2,246 1,881
Accrued income and prepaid expenses 515 442
Total Other current assets 2,761 2,323
Total Current receivables and Other current assets 9,496 8,850
The analysis by due date (excluding Accrued income and prepaid expenses) was as follows:
At December 31,
2014 2013
Due
within
one year
Due
between
one and
?ve years
Due
beyond
?ve years Total
Due
within
one year
Due
between
one and
?ve years
Due
beyond
?ve years Total
(€ million)
Trade Receivables 2,564 — — 2,564 2,527 15 2 2,544
Receivables from ?nancing activities 3,013 776 54 3,843 2,776 863 32 3,671
Current tax receivables 284 7 37 328 227 44 41 312
Other current receivables 2,076 156 14 2,246 1,658 184 39 1,881
Total current receivables 7,937 939 105 8,981 7,188 1,106 114 8,408
Trade receivables
Trade receivables, amounting to €2,564 million at December 31, 2014 (€2,544 million at December 31, 2013), are
shown net of allowances for doubtful accounts of €320 million at December 31, 2014 (€344 million at December 31,
2013). Changes in these allowances, which are calculated on the basis of historical losses on receivables, were as
follows in 2014:
At
December
31, 2013 Provision
Use and
other
changes
At
December
31, 2014
(€ million)
Allowances for doubtful accounts 344 33 (57) 320
At
December
31, 2012 Provision
Use and
other
changes
At
December
31, 2013
(€ million)
Allowances for doubtful accounts 347 47 (50) 344
2014
|
ANNUAL REPORT 201
Receivables from ?nancing activities
Receivables from ?nancing activities mainly relate to the business of ?nancial services companies fully consolidated by
the Group (primarily related to dealer and retail ?nancing).
At December 31,
2014 2013
(€ million)
Dealer ?nancing 2,313 2,286
Retail ?nancing 1,039 970
Finance leases 349 297
Other 142 118
Total Receivables from ?nancing activities 3,843 3,671
Receivables from ?nancing activities are shown net of an allowance for doubtful accounts determined on the basis of
speci?c insolvency risks. At December 31, 2014, the allowance amounts to €73 million (€119 million at December 31,
2013). Changes in the allowance accounts during the year were as follows:
At
December
31, 2013 Provision
Use and
other
changes
At
December
31, 2014
(€ million)
Allowance for Receivables from ?nancing activities 119 69 (115) 73
At
January 1,
2013 Provision
Use and
other
changes
At
December
31, 2013
(€ million)
Allowance for Receivables from ?nancing activities 101 89 (71) 119
Receivables for dealer ?nancing are typically generated by sales of vehicles, and are generally managed under dealer
network ?nancing programs as a component of the portfolio of the ?nancial services companies. These receivables are
interest bearing, with the exception of an initial limited, non-interest bearing period. The contractual terms governing
the relationships with the dealer networks vary from country to country, although payment terms range from two to six
months.
Finance lease receivables refer to vehicles leased out under ?nance lease arrangements, mainly by the Ferrari and
Maserati segments. This item may be analyzed as follows, gross of an allowance of €10 million at December 31, 2014
(€5 million at December 31, 2013):
At December 31,
2014 2013
Due
within
one year
Due
between
one and
?ve
years
Due
beyond
?ve
years Total
Due
within
one year
Due
between
one and
?ve
years
Due
beyond
?ve
years Total
(€ million)
Receivables for future minimum lease
payments 110 281 8 399 104 223 8 335
Less: unrealized interest income (16) (24) — (40) (14) (18) (1) (33)
Present value of future minimum
lease payments 94 257 8 359 90 205 7 302
202 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Other current assets
At December 31, 2014, Other current assets mainly consisted of Other tax receivables for VAT and other indirect taxes
of €1,430 million (€969 million at December 31, 2013), Receivables from employees of €151 million (€151 million at
December 31, 2013) and Accrued income and prepaid expenses of €515 million (€442 million at December 31, 2013).
Transfer of ?nancial assets
At December 31, 2014, the Group had receivables due after that date which had been transferred without
recourse and which were derecognized in accordance with IAS 39 amounting to €4,511 million (€3,603 million at
December 31, 2013). The transfers related to trade receivables and other receivables for €3,676 million (€2,891
million at December 31, 2013) and ?nancial receivables for €835 million (€712 million at December 31, 2013). These
amounts include receivables of €2,611 million (€2,177 million at December 31, 2013), mainly due from the sales
network, transferred to jointly controlled ?nancial services companies (FCA Bank).
At December 31, 2014 and 2013, the carrying amount of transferred ?nancial assets not derecognized and the related
liabilities were as follows:
At December 31,
2014 2013
Trade
receivables
Receivables
from
?nancing
activities
Current tax
receivables Total
Trade
receivables
Receivables
from
?nancing
activities
Current tax
receivables Total
(€ million)
Carrying amount of
assets transferred and
not derecognized 37 407 25 469 283 440 33 756
Carrying amount of the
related liabilities 37 407 25 469 283 440 33 756
19. Current securities
Current securities consist of short-term or marketable securities which represent temporary investments, but which do
not satisfy all the requirements to be classi?ed as cash equivalents.
At December 31,
2014 2013
(€ million)
Current securities available-for-sale 30 92
Current securities held-for-trading 180 155
Total current securities 210 247
2014
|
ANNUAL REPORT 203
20. Other ?nancial assets and Other ?nancial liabilities
These line items mainly consist of fair value measurement of derivative ?nancial instruments. They also include some
collateral deposits (held in connection with derivative transactions and debts).
At December 31,
2014 2013
Positive
fair value
Negative
fair value
Positive
fair value
Negative
fair value
(€ million)
Fair value hedges:
Interest rate risk - interest rate swaps 82 — 93 —
Interest rate and exchange rate risk - combined interest rate
and currency swaps — (41) 15 —
Total Fair value hedges 82 (41) 108 —
Cash ?ow hedge:
Currency risks - forward contracts, currency swaps and currency options 222 (467) 260 (59)
Interest rate risk - interest rate swaps 1 (4) 1 (3)
Interest rate and currency risk - combined interest rate and currency swaps 60 (7) 9 (22)
Commodity price risk – commodity swaps and commodity options 4 (16) 6 (5)
Total Cash ?ow hedges 287 (494) 276 (89)
Derivatives for trading 108 (213) 129 (48)
Fair value of derivative instruments 477 (748) 513 (137)
Collateral deposits 38 — 20 —
Other ?nancial assets/(liabilities) 515 (748) 533 (137)
The overall change in Other ?nancial assets (from €533 million at December 31, 2013 to €515 million at
December 31, 2014) and in Other ?nancial liabilities (from €137 million at December 31, 2013 to €748 million at
December 31, 2014) was mostly due to ?uctuations in exchange rates, interest rates, commodity prices during the
year and the settlement of the instruments which matured during the year.
As Other ?nancial assets and liabilities primarily consist of hedging derivatives, the change in their value is
compensated by the change in the value of the hedged items.
At December 31, 2014 and 2013, Derivatives for trading primarily consisted of derivative contracts entered for hedging
purposes which do not qualify for hedge accounting and one embedded derivative in a bond issue in which the yield is
determined as a function of trends in the in?ation rate and related hedging derivative, which converts the exposure to
?oating rate (the total value of the embedded derivative is offset by the value of the hedging derivative).
The following table provides an analysis by due date of outstanding derivative ?nancial instruments based on their
notional amounts:
At December 31,
2014 2013
Due
within
one year
Due
between
one and
?ve
years
Due
beyond
?ve
years Total
Due
within
one year
Due
between
one and
?ve
years
Due
beyond
?ve
years Total
(€ million)
Currency risk management 15,328 2,544 — 17,872 10,446 802 — 11,248
Interest rate risk management 172 1,656 — 1,828 764 1,782 — 2,546
Interest rate and currency risk management 698 1,513 — 2,211 — 1,455 — 1,455
Commodity price risk management 483 59 — 542 450 23 — 473
Other derivative ?nancial instruments — — 14 14 — — 14 14
Total notional amount 16,681 5,772 14 22,467 11,660 4,062 14 15,736
204 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Cash ?ow hedges
The effects recognized in the Consolidated income statement mainly relate to currency risk management and, to a
lesser extent, to hedges regarding commodity price risk management and the cash ?ows that are exposed to an
interest rate risk.
The Group’s policy for managing currency risk normally requires hedging of projected future cash ?ows from trading
activities which will occur within the following twelve months, and from orders acquired (or contracts in progress),
regardless of their due dates. The hedging effect arising from this and recorded in the cash ?ow hedge reserve will be
recognized in the Consolidated income statement, mainly during the following year.
Derivatives relating to interest rate and currency risk management are treated as cash ?ow hedges and are entered into
for the purpose of hedging bonds issued in foreign currencies. The amount recorded in the cash ?ow hedge reserve is
recognized in the Consolidated income statement according to the timing of the ?ows of the underlying bonds.
21. Cash and cash equivalents
Cash and cash equivalents consisted of:
At December 31,
2014 2013
(€ million)
Cash at banks 10,645 9,939
Money market securities 12,195 9,516
Total Cash and cash equivalents 22,840 19,455
These amounts include cash at banks, units in money market funds and other money market securities, comprising
commercial paper and certi?cates of deposit that are readily convertible into cash, with original maturities of three
months or less at the date of purchase. Cash and cash equivalents are subject to an insigni?cant risk of changes
in value, and consist of balances spread across various primary national and international banking institutions, and
money market instruments.
The item Cash at banks includes bank deposits which may be used exclusively by Group companies entitled to
perform speci?c operations (cash with a pre-determined use) amounting to €3 million at December 31, 2014 (€3
million at December 31, 2013).
22. Assets and Liabilities held for sale
The items included in Assets and liabilities held for sale were as follows:
At December 31,
2014 2013
(€ million)
Property, plant and equipment 8 1
Investments and other ?nancial assets 2 —
Inventories — 3
Trade and other receivables — 5
Total Assets held for sale 10 9
Provisions — 5
Trade and other payables — 16
Total Liabilities held for sale — 21
2014
|
ANNUAL REPORT 205
Assets and liabilities held for sale at December 31, 2014 consisted of buildings allocated to the LATAM and
Components segments as well as certain minor investments within the EMEA segment.
At December 31, 2013, Assets and liabilities held for sale primarily related to a subsidiary (Fonderie du Poitou Fonte
S.A.S.) within the Components segment for which the Group disposed of its interest in the subsidiary in May 2014.
The Group holds a subsidiary which operates in Venezuela whose functional currency is the U.S. Dollar. Pursuant
to certain Venezuelan foreign currency exchange control regulations, the Central Bank of Venezuela centralizes all
foreign currency transactions in the country. Under these regulations, the purchase and sale of foreign currency
must be made through the Centro Nacional de Comercio Exterior en Venezuela from January 1, 2014 (CADIVI until
December 31, 2013). The cash and cash equivalents denominated in VEF amounted to €123 million (VEF 1,785
million) at December 31, 2014 and €270 million (VEF 2,347 million) at December 31, 2013. The reduction, in Euro
terms, is largely due to the adoption of SICAD I rate at March 31, 2014 for the conversion of the VEF denominated
monetary items, as explained in more detail in Note 8, and in part to the payments made by the subsidiary during the
period. In addition, Cash and cash equivalents held in certain foreign countries (primarily, China and Argentina) are
subject to local exchange control regulations providing for restrictions on the amount of cash other than dividends that
can leave the country.
23. Equity
Consolidated shareholders’ equity at December 31, 2014 increased by €1,154 million from December 31, 2013,
mainly due to the issuance of mandatory convertible securities (described in more detail below) resulting in an increase
of €1,910 million, the placement of 100,000,000 common shares (described below) resulting in an aggregate
increase of € 994 million, net pro?t for the period of €632 million, the increase in cumulative exchange differences
on translating foreign operations of €782 million, partially offset by the decrease of €2,665 million arising from the
acquisition of the 41.5 percent non-controlling interest in FCA US and the disbursement to Fiat shareholders who
exercised cash exit rights.
Consolidated shareholders’ equity at December 31, 2013 increased by €4,215 million from December 31, 2012, mainly
due to an increase of €2,908 million in the remeasurement of de?ned bene?t plans reserve net of related tax impact, the
pro?t for the period of €1,951 million and an increase of €123 million in the cash ?ow hedge reserve partially offset by the
decrease of €796 million in the cumulative exchange differences on translating foreign operations.
Share capital
At December 31, 2014, fully paid-up share capital of FCA amounted to €17 million (€4,477 million at December 31,
2013) and consisted of 1,284,919,505 common shares and of 408,941,767 special voting shares, all with a par value
of €0.01 each (1,250,687,773 ordinary shares with a par value of €3.58 each of Fiat at December 31, 2013 - see
section Merger, below). On December 12, 2014, FCA issued 65,000,000 new common shares and sold 35,000,000
of treasury shares for aggregate net proceeds of $1,065 million (€849 million) comprised of gross proceeds of $1,100
million (€877 million) less $35 million (€28 million) of transaction costs.
On October 29, 2014, the Board of Directors of FCA resolved to authorize the issuance of up to a maximum of
90,000,000 common shares under the framework equity incentive plan which had been adopted before the closing
of the Merger. No grants have occurred under such framework equity incentive plan and any issuance of shares
thereunder in the period from 2014 to 2018 will be subject to the satisfaction of certain performance/retention
requirements. Any issuances to directors will be subject to shareholders approval.
Treasury shares
There were no treasury shares held by FCA at December 31, 2014 (34,577,867 Fiat ordinary shares for an amount of
€259 million at December 31, 2013) (see section - Merger, below).
206 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Merger
As a result of the merger described in the section Principle Activities—FCA Merger above becoming effective on
October 12, 2014:
60,002,027 Fiat ordinary shares were reacquired by Fiat with a disbursement of €464 million as a result of the
cash exit rights exercised by a number of Fiat shareholders following the Merger. Pursuant to the Italian law, these
shares were offered to Fiat shareholders not having exercised the cash exit rights. These Fiat shareholders elected
to purchase 6,085,630 shares with a cash disbursement of €47 million. As a result, concurrent with the Merger, on
October 12, 2014, 53,916,397 Fiat shares were cancelled with a net aggregate cash disbursement of €417 million.
As the Merger, which took the form of a reverse merger, resulted in FCA being the surviving entity, all Fiat ordinary
shares outstanding as of the Merger date (1,167,181,255 ordinary shares) were cancelled and exchanged. FCA
allotted one new FCA common share (each having a nominal value of €0.01) for each Fiat ordinary share (each
having a nominal value of €3.58). The original investment of FCA in Fiat which consisted of 35,000,000 common
shares was not cancelled resulting in 35,000,000 treasury shares in FCA. On December 12, 2014, FCA completed
the placement of these treasury shares on the market.
The following table provides the detail for the number of Fiat ordinary shares outstanding at December 31, 2013 and
the number of FCA common shares outstanding at December 31, 2014:
Fiat S.p.A. FCA
Thousand of shares
At
December
31, 2013
Share-
based
payments
and
exercise
of stock
options
Exit
Rights
Cancellation
of treasury
shares upon
the Merger
At the
date of the
Merger
FCA
share
capital
at the
Merger
Issuance
of FCA
Common
shares
and
sale of
treasury
shares
Exercise
of Stock
Options
At
December
31, 2014
Shares issued 1,250,688 320 (53,916) (29,911) 1,167,181 35,000 65,000 17,738 1,284,919
Less: treasury shares (34,578) 4,667 — 29,911 — (35,000) 35,000 — —
Shares issued and
outstanding 1,216,110 4,987 (53,916) — 1,167,181 — 100,000 17,738 1,284,919
Mandatory Convertible Securities
In December 2014, FCA issued an aggregate notional amount of U.S.$2,875 million (€2,293 million) of mandatory
convertible securities (the “Mandatory Convertible Securities”). Per the terms of the prospectus, the Mandatory
Convertible Securities will pay cash coupons at a rate of 7.875 percent per annum, which can be deferred at the option
of FCA. The Mandatory Convertible Securities will mature on December 15, 2016 (the “Mandatory Conversion Date”).
The purpose of the transaction was to provide additional ?nancing to the Group for general corporate purposes.
As part of the issuance of the Mandatory Convertible Securities, the underwriters had the option to purchase, within
30 days beginning on, and including, the date of initial issuance of U.S.$2,500 million (€1,994 million) of Mandatory
Convertible Securities, up to an additional U.S.$375 million of Mandatory Convertible Securities from FCA at
the same price as that sold to the public, less the underwriting discounts and commissions (the “over-allotment
option”). The underwriters exercised the over-allotment option concurrent with the issuance of the Mandatory
Convertible Securities and purchased an additional U.S.$375 million (€299 million) of Mandatory Convertible
Securities, resulting in the aggregate notional amount of U.S.$2,875 million (€2,293 million) of Mandatory
Convertible Securities that were issued.
2014
|
ANNUAL REPORT 207
The Mandatory Convertible Securities will automatically convert on the Mandatory Conversion Date into a number of
common shares equal to the conversion rate calculated based on the share price relative to the applicable market
value (“AMV”), as de?ned in the prospectus, as follows:
Maximum Conversion Rate: 261,363,375 shares if AMV ? Initial Price (U.S.$11), in aggregate the Maximum Number
of Shares
(1)
A number of shares equivalent to the value of U.S.$100 (i.e., U.S.$100 / AMV), if Initial Price (U.S.$11) ? AMV ?
Threshold Appreciation Price (U.S.$12.925)
(1)
Minimum Conversion Rate: 222,435,875 shares if AMV ? Threshold Appreciation Price (U.S.$12.925), in aggregate
the Minimum Number of Shares
(1)
Upon Mandatory Conversion: Holders receive: (i) any deferred coupon payments, (ii) accrued and unpaid coupon
payments in cash or in Shares at the election of the Group.
(1)
The Conversion Rates, the Initial Price and the Threshold Appreciation Price are each subject to adjustment related to dilutive events. In
addition, upon the occurrence of a Spin-Off (as defined), the Threshold Appreciation Price, the Initial Price and the Stated Amount are also
subject to adjustment.
Other features of the Mandatory Convertible Securities are outlined below:
Early Conversion at Option of the Group: FCA has the option to convert the Mandatory Convertible Securities and
deliver the Maximum Number of Shares prior to the Mandatory Conversion Date, subject to limitations around
timing of the planned Ferrari separation. Upon exercise of this option, holders receive cash equal to: (i) any deferred
coupon payments, (ii) accrued and unpaid coupon payments, and (iii) the present value of all remaining coupon
payments on the Mandatory Convertible Securities discounted at the Treasury Yield rate.
Early Conversion at Option of the Holder: holders have the option to convert their Mandatory Convertible Securities
early and receive the Minimum Number of Shares, subject to limitations around timing of the planned Ferrari
separation. Upon exercise of this option, holders receive any deferred coupon payments in cash or in common
shares at the election of FCA.
The Mandatory Convertible Securities also provide for the possibility of early conversion in limited situations upon
occurrence of de?ned events outlined in the prospectus.
Under IAS 32 - Financial Instruments: Presentation, the issuer of a ?nancial instrument shall classify the instrument,
or its component parts, on initial recognition in accordance with the substance of the contractual arrangement and
whether the components meet the de?nitions of a ?nancial asset, ?nancial liability or an equity instrument. As the
Mandatory Convertible Securities are a compound ?nancial instrument that is an equity contract combined with a
?nancial liability for the coupon payments, there are two units of account for this instrument.
The equity contract meets the de?nition of an equity instrument as described in paragraph 16 of IAS 32 as the equity
contract does not include a contractual obligation to (i) deliver cash or another ?nancial asset to another entity or (ii)
exchange ?nancial assets or ?nancial liabilities with another entity under conditions that are potentially unfavorable
to FCA. Additionally, the equity contract is a non-derivative that includes no contractual obligation for FCA to deliver
a variable number of its own equity, as FCA controls its ability to settle for a ?xed number of shares under the terms
of the contract. Management has determined that the terms of the contract are substantive as there are legitimate
corporate objectives that could cause FCA to seek early conversion of the Mandatory Convertible Securities. As a
result, the equity conversion feature has been accounted for as an equity instrument.
In regard to the obligation to pay coupons, FCA notes that this meets the de?nition of a ?nancial liability as it is a
contractual obligation to deliver cash to another entity. FCA has the right to, or in certain limited circumstances the
investors can force FCA to prepay the coupons, in addition to settling the equity conversion feature, before maturity.
Under IFRS, the early settlement features would be bifurcated from the ?nancial liability for the coupon payments since
they require the repayment of the coupon obligation at an amount other than fair value or the amortized cost of the
debt instrument as required by IAS 39.AG30(g).
208 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
As required by paragraph 31 of IAS 32, the initial carrying amount of a compound ?nancial instrument is allocated to
its equity and liability components. The equity component is assigned the residual amount after deducting the amount
separately determined for the liability component from the fair value of the instrument as a whole. The value of any
derivative features embedded in the compound ?nancial instrument other than the equity component is included in the
liability component. Therefore, the ?nancial liability for the coupon payments will be initially recognized at its fair value.
The derivative related to the early settlement conversion features de?ned in the Mandatory Convertible Securities
will be bifurcated from the ?nancial liability for the coupon payments and will be accounted for at fair value through
pro?t and loss. Subsequently, the ?nancial liability related to the coupon payments will be accounted for at amortized
cost using the effective interest method. The ?nancial liabilities related to the embedded derivative features will be
remeasured to their fair value at each reporting date with the remeasurement gains or losses being recorded in the
Consolidated statement of income. The residual amount of the proceeds received from the issuance of the Mandatory
Convertible Securities will be allocated to share reserves in Equity. The amount of proceeds recorded in equity will not
be remeasured subsequently.
Under IAS 32, transaction costs that relate to the issue of a compound ?nancial instrument are allocated to the liability
and equity components of the instrument in proportion to the allocation of proceeds. The portion allocated to the
equity component should be accounted for as a deduction from equity to the extent that they are incremental costs
directly attributable to the equity transaction. The portion allocated to the liability component (including third party
costs and creditor fees) are deducted from the liability component balance, are accounted for as a debt discount and
are amortized over the life of the coupon payments using the effective interest method.
Net proceeds of U.S.$2,814 million (€2,245 million), consisting of gross proceeds of U.S.$2,875 million (€2,293
million) less total transaction costs of U.S.$61 million (€48 million) directly related to the issuance, were received in
connection with the issuance of the Mandatory Convertible Securities. The fair value amount determined for the liability
component at issuance was U.S.$419 million (€335 million) which was calculated as the present value of the coupon
payments due, less allocated transaction costs of U.S.$9 million (€7 million) that are accounted for as a debt discount
(Note 27). The remaining net proceeds of U.S.$2,395 million (€1,910 million) (including allocated transaction costs of
U.S.$52 million (€41 million) was recognized within equity reserves.
Other reserves
Other reserves mainly include:
the legal reserve of €10,816 million at December 31, 2014 (€6,699 million at December 31, 2013) that were
determined in accordance to the Dutch law and mainly refers to development costs capitalized by subsidiaries and
their earnings subject to certain restrictions to distributions to the parent company. The legal reserve also includes
the reserve for the equity component of the Mandatory Convertible Securities of €1,910 million at December 31,
2014. Pursuant to Dutch law, limitations exist relating to the distribution of shareholders’ equity up to the total
amount of the legal reserve;
the capital reserves amounting to €3,472 million at December 31, 2014 and consisting mainly of the effects of the
Merger resulting in a different par value of FCA common shares (€0.01 each) as compared to Fiat S.p.A. ordinary
shares (€3.58 each) where the consequent difference between the share capital before and after the Merger was
recognized to increase the capital reserves;
retained earnings, that after separation of the legal reserve, are negative by €1,458 million;
the pro?t attributable to owners of the parent of €568 million at December 31, 2014 (a pro?t of €904 million for the
year ended December 31, 2013);
2014
|
ANNUAL REPORT 209
Other comprehensive income/(loss)
Other comprehensive income/(loss) was as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Items that will not be reclassi?ed to the Consolidated income statement:
(Losses)/gains on remeasurement of de?ned bene?t plans (333) 2,676 (1,846)
Shares of (losses)/gains on remeasurement of de?ned bene?t plans for equity
method investees (4) (7) 4
Total items that will not be reclassi?ed to the Consolidated income statement (B1) (337) 2,669 (1,842)
Items that may be reclassi?ed to the Consolidated income statement:
(Losses)/gains on cash ?ow hedging instruments arising during the period (396) 343 91
(Losses)/gains on cash ?ow hedging instruments reclassi?ed to the Consolidated
income statement 104 (181) 93
(Losses)/gains on cash ?ow hedging instruments (292) 162 184
(Losses)/gains on available-for-sale ?nancial assets arising during the period (24) 4 27
(Losses)/gains on available-for-sale ?nancial assets reclassi?ed to the Consolidated
income statement
— — —
(Losses)/gains on available-for-sale ?nancial assets (24) 4 27
Exchange differences on translating foreign operations arising during the period 1,282 (720) (285)
Exchange differences on translating foreign operations reclassi?ed to the
Consolidated income statement — — —
Exchange differences on translating foreign operations 1,282 (720) (285)
Share of Other comprehensive income/(loss) for equity method investees arising
during the period 35 (75) 19
Share of Other comprehensive income/(loss) for equity method investees reclassi?ed
to the Consolidated income statement 16 (13) 17
Share of Other comprehensive income/(loss) for equity method investees 51 (88) 36
Total items that may be reclassi?ed to the Consolidated income statement (B2) 1,017 (642) (38)
Total Other comprehensive income/(loss) (B1)+(B2)=(B) 680 2,027 (1,880)
Tax effect 102 212 (21)
Total Other comprehensive income/(loss), net of tax 782 2,239 (1,901)
With reference to the de?ned bene?t plans, the gains and losses arising from the remeasurement mainly include
actuarial gains and losses arising during the period, the return on plan assets (net of interest income recognized in the
Consolidated income statement) and any changes in the effect of the asset ceiling. These gains and losses are offset
against the related net liabilities or assets for de?ned bene?t plans (see Note 25 in the Consolidated ?nancial statements).
210 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The tax effect relating to Other comprehensive income/(loss) was as follows:
For the years ended December 31,
2014 2013 2012
Pre-tax
balance
Tax
income/
(expense)
Net
balance
Pre-tax
balance
Tax
income/
(expense)
Net
balance
Pre-tax
balance
Tax
income/
(expense)
Net
balance
(€ million)
Gains/(Losses) on
remeasurement of de?ned
bene?t plans (333) 29 (304) 2,676 239 2,915 (1,846) 3 (1,843)
Gains/(losses) on cash ?ow
hedging instruments (292) 73 (219) 162 (27) 135 184 (24) 160
Gains/(losses) on available-
for-sale ?nancial assets (24) — (24) 4 — 4 27 — 27
Exchange gains/(losses) on
translating foreign operations 1,282 — 1,282 (720) — (720) (285) — (285)
Share of Other comprehensive
income/(loss) for equity method
investees 47 — 47 (95) — (95) 40 — 40
Total Other comprehensive
income/(loss) 680 102 782 2,027 212 2,239 (1,880) (21) (1,901)
Non-controlling interest
Total non-controlling interest at December 31, 2014 of €313 million primarily related to the 10.0 percent interest held
in Ferrari S.p.A. of €194 million. Total non-controlling interest at December 31, 2013 of €4,258 million primarily related
to the 41.5 per cent interest held in FCA US of €3,944 million and to the 10.0 percent interest held in Ferrari S.p.A. of
€215 million.
Policies and processes for managing capital
For 2014, the Board of Directors has not recommended a dividend payment on FCA common shares in order to
further fund capital requirements of the Group’s ?ve-year business plan presented on May 6, 2014.
The objectives identi?ed by the Group for managing capital are to create value for shareholders as a whole, safeguard
business continuity and support the growth of the Group. As a result, the Group endeavors to maintain an adequate
level of capital that at the same time enables it to obtain a satisfactory economic return for its shareholders and
guarantee economic access to external sources of funds, including by means of achieving an adequate credit rating.
The Group constantly monitors the ratio between debt and equity, particularly the level of net debt and the generation
of cash from its industrial activities. In order to reach these objectives, the Group continues to aim for improvement in
the pro?tability of its operations. Furthermore, the Group may sell part of its assets to reduce the level of its debt, while
the Board of Directors may make proposals to Shareholders in the general meeting to reduce or increase share capital
or, where permitted by law, to distribute reserves. The Group may also make purchases of treasury shares, without
exceeding the limits authorized by Shareholders in the general meeting, under the same logic of creating value,
compatible with the objectives of achieving ?nancial equilibrium and an improvement in the Group’s rating.
2014
|
ANNUAL REPORT 211
The FCA loyalty voting structure
The purpose of the loyalty voting structure is to reward long-term ownership of FCA common shares and to promote
stability of the FCA shareholder base by granting long-term FCA shareholders with special voting shares to which
one voting right is attached additional to the one granted by each FCA common share that they hold. In connection
with the Merger, FCA issued 408,941,767 special voting shares, with a nominal value of €0.01 each, to those eligible
shareholders of Fiat who had elected to participate in the loyalty voting structure upon completion of the Merger in
addition to FCA common shares. After closing of the Merger, an FCA shareholder may at any time elect to participate
in the loyalty voting structure by requesting that FCA register all or some of the number of FCA common shares held by
such FCA shareholder in the Loyalty Register. Only a minimal dividend accrues to the special voting shares allocated to
a separate special dividend reserve, and they shall not carry any entitlement to any other reserve of FCA. Having only
immaterial economics entitlements, the special voting shares do not impact the FCA earnings per share calculation.
With respect to cash ?ow hedges, in 2014 the Group reclassi?ed losses of €106 million (gains of €190 million in 2013
and losses of €105 million in 2012), net of the tax effect, from Other comprehensive income/(loss) to Consolidated
income statement. These items are reported in the following lines:
For the years ended December 31,
2014 2013 2012
(€ million)
Currency risk
Increase/(Decrease) in Net revenues 53 126 (92)
Decrease in Cost of sales 11 44 25
Financial (expenses)/income (157) 22 32
Result from investments (13) 17 (12)
Interest rate risk
Increase in Cost of sales (2) (6) (6)
Result from investments (3) (4) (5)
Financial (expenses)/income (11) (10) (6)
Commodity price risk
Increase in Cost of sales (2) (1) (40)
Ineffectiveness - overhedge 4 5 (6)
Taxes expenses/(income) 14 (3) 5
Total recognized in the Consolidated income statement (106) 190 (105)
Fair value hedges
The gains and losses arising from the valuation of outstanding interest rate derivatives (for managing interest rate risk)
and currency derivatives (for managing currency risk) recognized in accordance with fair value hedge accounting and
the gains and losses arising from the respective hedged items are summarized in the following table:
For the years ended December 31,
2014 2013 2012
(€ million)
Currency risk
Net gains/(losses) on qualifying hedges (53) 19 14
Fair value changes in hedged items 53 (19) (14)
Interest rate risk
Net gains/(losses) on qualifying hedges (20) (28) (51)
Fair value changes in hedged items 20 29 53
Net gains/(losses) — 1 2
212 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
24. Share-based compensation
The following share-based compensation plans relating to managers of Group companies and the Chief Executive
Of?cer of FCA were in place.
Stock option plans linked to Fiat and CNHI ordinary shares
On July 26, 2004, the Board of Directors granted the Chief Executive Of?cer, as a part of his variable compensation
in that position, options to purchase 10,670,000 Fiat ordinary shares at a price of €6.583 per share. Following the
de-merger of CNHI, from Fiat, the bene?ciary had the right to receive one ordinary Fiat share and one ordinary CNHI
share for each original option, with the option exercise price remaining unchanged. The options were fully vested and
they were exercisable at any time until January 1, 2016. The options were exercised in total in November 2014 and
the bene?ciary received 10,670,000 shares of FCA since the options were exercised after the Merger, in addition to
10,670,000 CNHI shares.
On November 3, 2006, the Fiat Board of Directors approved (subject to the subsequent approval of Shareholders
obtained on April 5, 2007), the “November 2006 Stock Option Plan”, an eight year stock option plan, which granted
certain managers of the Group and the Chief Executive Of?cer of Fiat the right to purchase a speci?c number of Fiat
ordinary shares at a ?xed price of €13.37 each. More speci?cally, the 10,000,000 options granted to employees and
the 5,000,000 options granted to the Chief Executive Of?cer had a vesting period of four years, with an equal number
vesting each year, were subject to achieving certain predetermined pro?tability targets (Non-Market Conditions or
“NMC”) in the reference period and were exercisable from February 18, 2011. An additional 5,000,000 options were
granted to the Chief Executive Of?cer of Fiat that were not subject to performance conditions but also had a vesting
period of four years with an equal number vesting each year and were exercisable from November 2010. The ability
to exercise the options was also subject to speci?c restrictions regarding the duration of the employment relationship
or the continuation of the position held. Following the demerger of CNHI, the bene?ciaries had the right to receive
one ordinary Fiat share and one ordinary CNHI share for each original option, with the option exercise price remaining
unchanged.
The contractual terms of the plan were as follows:
Plan Recipient Expiry date
Strike
price
(€)
N° of
options
vested Vesting date
Vesting
portion
Stock Option - November 2006 Chief Executive Of?cer November 3, 2014 13.37 5,000,000 November 2007
November 2008
November 2009
November 2010
25%
25%
25%
25%
Stock Option - November 2006 Chief Executive Of?cer November 3, 2014 13.37 5,000,000 1st Quarter 2008
(*)
1st Quarter 2009
(*)
1st Quarter 2010
(*)
1st Quarter 2011
(*)
25%xNMC
25%xNMC
25%xNMC
25%xNMC
Stock Option - November 2006 Managers November 3, 2014 13.37 10,000,000 1st Quarter 2008
(*)
1st Quarter 2009
(*)
1st Quarter 2010
(*)
1st Quarter 2011
(*)
25%xNMC
25%xNMC
25%xNMC
25%xNMC
(*)
On approval of the prior year’s Consolidated financial statements; subject to continuation of the employment relationship.
With speci?c reference to the options under the November 2006 Stock Option Plan, for which vesting was subject
to the achievement of pre-established pro?tability targets, only the ?rst tranche of those rights had vested as the
pro?tability targets originally established for the 3-year period 2008-2010 were not met.
2014
|
ANNUAL REPORT 213
Changes during the years ended December 31, 2014, 2013 and 2012 were as follows:
Rights granted to managers
2014 2013 2012
Number of
options
Average
exercise
price (€)
Number of
options
Average
exercise
price (€)
Number of
options
Average
exercise
price (€)
Outstanding shares at the beginning of the year 1,240,000 13.37 1,576,875 13.37 1,636,875 13.37
Granted — — — — — —
Forfeited — — — — — —
Exercised (1,139,375) 13.37 (285,000) 13.37 — —
Expired (100,625) — (51,875) 13.37 (60,000) 13.37
Outstanding shares at the end of the year — — 1,240,000 13.37 1,576,875 13.37
Exercisable at the end of the year — — 1,240,000 13.37 1,576,875 13.37
Rights granted to the Chief Executive Of?cer
2014 2013 2012
Number of
options
Average
exercise
price (€)
Number of
options
Average
exercise
price (€)
Number of
options
Average
exercise
price (€)
Outstanding shares at the beginning of the year 6,250,000 13.37 6,250,000 13.37 6,250,000 13.37
Granted — — — — — —
Forfeited — — — — — —
Exercised (6,250,000) 13.37 — — — —
Expired — — — — — —
Outstanding shares at the end of the year — — 6,250,000 13.37 6,250,000 13.37
Exercisable at the end of the year — — 6,250,000 13.37 6,250,000 13.37
Stock Grant plans linked to Fiat shares
On April 4, 2012, the Shareholders resolved to approve the adoption of a Long Term Incentive Plan (the “Retention
LTI Plan”), in the form of stock grants. As a result, the Group granted the Chief Executive Of?cer 7 million rights, which
represented an equal number of Fiat ordinary shares. The rights vest ratably, one third on February 22, 2013, one third
on February 22, 2014 and one third on February 22, 2015, subject to the requirement that the Chief Executive Of?cer
remains in of?ce.
The Plan is to be serviced through the issuance of new shares. The Group has the right to replace, in whole or in part,
shares vested under the Retention LTI Plan with a cash payment calculated on the basis of the of?cial price of those
shares published by Borsa Italiana S.p.A. on the date of vesting.
Changes in the Retention LTI Plan were as follows:
2014 2013
Number
of Fiat
shares
Average fair
value at the
grant date
(€)
Number
of Fiat
shares
Average fair
value at the
grant date
(€)
Outstanding shares unvested at the beginning of the year 4,666,667 4.205 7,000,000 4.205
Granted — — — —
Forfeited — — — —
Vested 2,333,333 4.205 2,333,333 4.205
Outstanding shares unvested at the end of the year 2,333,334 4.205 4,666,667 4.205
Nominal costs of €2 million were recognized in 2014 for this plan (€6 million in 2013).
214 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Share-Based Compensation Plans Issued by FCA US
Four share-based compensation plans have been issued by FCA US: the FCA US Restricted Stock Unit Plan (“RSU
Plan”), the Amended and Restated FCA US Directors’ Restricted Stock Unit Plan (“Directors’ RSU Plan”), the FCA US
Deferred Phantom Share Plan (“DPS Plan”) and the FCA US 2012 Long-Term Incentive Plan (“2012 LTIP Plan”).
The fair value of each unit issued under the four share-based compensation plans is based on the fair value of FCA
US’s membership interests. Each unit represents an “FCA US Unit,” which is equal to 1/600th of the value of a FCA
US membership interest. Since there is no publicly observable trading price for FCA US membership interests, fair
value was determined using a discounted cash ?ow methodology. This approach, which is based on projected cash
?ows of FCA US, is used to estimate the FCA US enterprise value. The fair value of FCA US’s outstanding interest
bearing debt as of the measurement date is deducted from FCA US’s enterprise value to arrive at the fair value of
equity. This amount is then divided by the total number of FCA US Units, as determined above, to estimate the fair
value of a single FCA US Unit.
The signi?cant assumptions used in the contemporaneous calculation of fair value at each issuance date and for each
period included the following:
four years of annual projections prepared by management that re?ect the estimated after-tax cash ?ows a market
participant would expect to generate from operating the business;
a terminal value which was determined using a growth model that applied a 2.0 percent long-term growth rate to
projected after-tax cash ?ows of FCA US beyond the four year window. The long-term growth rate was based on
internal projections of FCA US, as well as industry growth prospects;
an estimated after-tax weighted average cost of capital of 16.0 percent in 2014, and ranging from 16.0 percent to
16.5 percent in both 2013 and 2012; and
projected worldwide factory shipments ranging from approximately 2.6 million vehicles in 2013 to approximately 3.4
million vehicles in 2018.
On January 21, 2014, FCA acquired the VEBA Trust’s remaining interest in FCA US, as described in the section
—Acquisition of the Remaining Ownership Interest in FCA US. The implied fair value of FCA US resulting from this
transaction, along with certain other factors, was used to corroborate the fair value determined at December 31, 2013
using a discounted cash ?ow methodology.
As of December 31, 2014, 29,400,000 units are authorized to be granted for the RSU Plan, Directors’ RSU Plan
and 2012 LTIP Plan. There is no limit on the number of phantom shares of FCA US (“Phantom Shares”) authorized
under the DPS Plan. Upon adoption of the 2012 LTIP Plan, there were no further grants made under the RSU Plan
and DPS Plan.
Anti-Dilution Adjustment
The documents governing FCA US’s share-based compensation plans contain anti-dilution provisions which provide
for an adjustment to the number of FCA US Units granted under the plans in order to preserve, or alternatively prevent
the enlargement of, the bene?ts intended to be made available to the holders of the awards should an event occur that
impacts the capital structure.
There were no capital structure changes in 2013 or 2012 that required an anti-dilution adjustment. During 2014, two
transactions occurred that diluted the fair value of equity and the per unit fair value of a FCA US Unit based on the
discounted cash ?ow methodology. These transactions were:
the $1,900 million (€1,404 million) distribution paid to its members, on January 21, 2014, which served to fund
a portion of the transaction whereby Fiat acquired the VEBA Trust’s remaining ownership interest in FCA US (as
described above in the section —Acquisition of the Remaining Ownership Interest in FCA US).
The prepayment of the VEBA Trust Note on February 7, 2014 that accelerated tax deductions that were being
passed through to the FCA US’s members.
2014
|
ANNUAL REPORT 215
As a result of these dilutive events and pursuant to the anti-dilution provisions in the share-based compensation
plans, the FCA US’s Compensation Committee approved an anti-dilution adjustment factor to increase the number
of outstanding FCA US Units (excluding performance share units granted under the 2012 LTIP Plan (“LTIP PSUs”))
in order to preserve the economic bene?t intended to be provided to each participant. The value of the outstanding
awards immediately prior to the dilutive events is equal to the value of the adjusted awards subsequent to the dilutive
events. No additional expense was recognized as a result of this modi?cation during 2014. For comparative purposes,
the number of FCA US Units and all December 31, 2013, and 2012 fair value references have been adjusted to re?ect
the impact of the dilutive transactions and the anti-dilution adjustment.
Restricted Stock Unit Plans issued by FCA US
During 2009, the U.S. Treasury’s Of?ce of the Special Master for Troubled Asset Relief Program Executive
Compensation (the “Special Master”) and FCA US’s Compensation Committee approved the FCA US Restricted
Stock Unit Plan (“RSU Plan”), which authorized the issuance of Restricted Stock Units (“RSUs”) to certain key
employees. RSUs represent a contractual right to receive a payment in an amount equal to the fair value of one FCA
US Unit, as de?ned in the RSU plan. Originally, RSUs granted to FCA US’s employees in 2009 and 2010 vested
in two tranches. In September 2012, FCA US’s Compensation Committee approved a modi?cation to the second
tranche of RSUs. The modi?cation removed the performance condition requiring an IPO to occur prior to the award
vesting. Prior to this modi?cation, the second tranche of the 2009 and 2010 RSUs were equity-classi?ed awards.
In connection with the modi?cation of these awards, FCA US determined that it was no longer probable that the
awards would be settled with FCA US’s company stock and accordingly reclassi?ed the second tranche of the
2009 and 2010 RSUs from equity-classi?ed awards to liability-classi?ed awards. As a result of this modi?cation,
additional compensation expense of €12 million was recognized during 2012. RSUs granted to employees
generally vest if the participant is continuously employed by FCA US through the third anniversary of the grant date.
The settlement of these awards is in cash.
In addition, during 2009, FCA US established the Directors’ RSU Plan. In April 2012, FCA US’s Compensation
Committee amended and restated the FCA US 2009 Directors’ RSU Plan to allow grants having a one-year
vesting term to be granted on an annual basis. Director RSUs are granted to FCA US non-employee members of
the FCA US Board of Directors. Prior to the change, Director RSUs were granted at the beginning of a three-year
performance period and vested in three equal tranches on the ?rst, second, and third anniversary of the date of
grant, subject to the participant remaining a member of the FCA US Board of Directors on each vesting date. Under
the plan, settlement of the awards is made within 60 days of the Director’s cessation of service on the Board of
Directors and awards are paid in cash; however, upon completion of an IPO, FCA US has the option to settle the
awards in cash or shares. The value of the awards is recorded as compensation expense over the requisite service
periods and is measured at fair value.
The liability resulting from these awards is measured and adjusted to fair value at each reporting date. The expense
recognized in total for both the RSU Plan and the Directors RSU plan for the years ended December 31, 2014, 2013
and 2012 was approximately €6 million, €14 million and €28 million, respectively. Total unrecognized compensation
expense at December 31, 2014 and at December 31, 2013 for both the RSU Plan and the Directors RSU plan was
less than €1 million.
216 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Changes during 2014, 2013 and 2012 for both the RSU Plan and the Directors RSU Plan were as follows:
Adjusted for Anti-Dilution
2014 2013 2012
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested
at the beginning of the year 4,792,279 3.64 6,143,762 3.35 7,722,554 1.94
Granted — — 209,258 5.75 1,902,667 4.52
Vested (3,361,366) 3.48 (1,268,303) 2.01 (3,355,154) 0.73
Forfeited (96,211) 4.46 (292,438) 4.05 (126,305) 3.66
Outstanding shares unvested
at the end of the year 1,334,702 4.84 4,792,279 3.64 6,143,762 3.35
As Previously Reported
2013 2012
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Restricted
Stock
Units
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at the beginning of the year 4,735,442 4.34 5,952,331 2.51
Granted 161,290 7.46 1,466,523 5.87
Vested (977,573) 2.61 (2,586,060) 0.95
Forfeited (225,403) 5.25 (97,352) 4.76
Outstanding shares unvested at the end of the year 3,693,756 4.72 4,735,442 4.34
2014
|
ANNUAL REPORT 217
Deferred Phantom Shares issued by FCA US
During 2009, the Special Master approved the FCA US DPS Plan which authorized the issuance of Phantom Shares.
Under the DPS Plan, Phantom Shares were granted to certain key employees as well as to the Chief Executive Of?cer
in connection with his role as a member of the FCA US Board of Directors. The Phantom Shares vested immediately
on the grant date and were settled in cash in three equal annual installments. At December 31, 2014, there were no
outstanding awards under the DPS Plan.
Changes during 2014, 2013 and 2012 were as follows:
Adjusted for Anti-Dilution
2014 2013 2012
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Outstanding shares at the
beginning of the year 413,521 3.49 1,957,494 2.07 6,414,963 1.41
Granted and Vested — — — — — —
Settled (413,521) 3.61 (1,543,973) 1.64 (4,457,469) 1.11
Outstanding shares
at the end of the year — — 413,521 3.49 1,957,494 2.07
As Previously Reported
2013 2012
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Phantom
Shares
Weighted
average fair
value at the
grant date (€)
Outstanding shares at the beginning of the year 1,508,785 2.68 4,944,476 1.83
Granted and Vested — — — —
Settled (1,190,054) 2.13 (3,435,691) 1.43
Outstanding shares at the end of the year 318,731 4.53 1,508,785 2.68
The expense recognized in connection with the DPS Plan in 2014 was less than €1 million and was approximately €2
million in 2013 and in 2012.
218 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
2012 Long-Term Incentive Plan of FCA US
In February 2012, the Compensation Committee of FCA US adopted the 2012 LTIP Plan. The 2012 LTIP Plan covers
senior FCA US executives (other than the Chief Executive Of?cer). It is designed to retain talented professionals and
reward their performance through grants of phantom equity in the form of restricted share units (“LTIP RSUs”) and
LTIP PSUs. LTIP RSUs may be granted annually, while LTIP PSUs are generally granted at the beginning of a three-
year performance period. The Compensation Committee of FCA US also has authority to grant additional LTIP PSUs
awards during the three-year performance period. The LTIP RSUs vest over three years in one-third increments on
the anniversary of their grant date, while the LTIP PSUs vest at the end of the three-year performance period only if
FCA US meets or exceeds certain three-year cumulative ?nancial performance targets. Concurrent with the adoption
of the 2012 LTIP Plan, the Compensation Committee of FCA US established ?nancial performance targets based on
FCA US’s consolidated ?nancial results for the three-year performance period, ending December 31, 2014. If FCA US
does not fully achieve these targets, the LTIP PSUs will be deemed forfeited. LTIP RSUs and LTIP PSUs represent a
contractual right to receive a payment in an amount equal to the fair value of one FCA US Unit, as de?ned in the LTIP
Plan. Once vested, LTIP RSUs and LTIP PSUs will be settled in cash or, in the event FCA US conducts an IPO, in cash
or shares of publicly traded stock, at the Compensation Committee’s discretion. Settlement will be made as soon as
practicable after vesting, however in any case no later than March 15 of the year following vesting. Vesting of the LTIP
RSUs and LTIP PSUs may be accelerated in certain circumstances, including upon the participant’s death, disability
or in the event of a change of control.
In light of the May 6, 2014 publication of the 2014-2018 FCA Business Plan and in recognition of FCA US’s
performance for the 2012 and 2013 performance years, the Compensation Committee, on May 12, 2014, approved
an amendment to outstanding LTIP PSU award agreements, subject to participant consent, to modify outstanding
LTIP PSUs by closing the performance period for such awards as of December 31, 2013. Participants were noti?ed
of this modi?cation on or about May 30, 2014, and all plan participants subsequently consented to the amendment.
The modi?cation provides for a payment of the LTIP PSUs granted under the 2012 LTIP Plan representing two-thirds
of the original LTIP PSU award based on the unadjusted December 31, 2013 per unit fair value of €7.62 ($10.47). To
receive the LTIP PSU payment, a participant must remain an employee up to the date the LTIP PSUs are paid, which
is expected to occur on or before March 15, 2015. As a result, compensation expense was reduced by approximately
€16 million ($21 million) during the year ended December 31, 2014.
2014
|
ANNUAL REPORT 219
Changes during 2014, 2013 and 2012 were as follows:
As Previously Reported
December 31, 2013
LTIP RSUs
Weighted
average fair
value at the
grant date (€) LTIP PSUs
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at the beginning of the year 1,805,123 5.78 8,419,684 5.78
Granted 1,628,822 6.89 587,091 7.15
Vested (615,315) 5.77 — —
Forfeited (120,423) 6.20 (589,264) 5.77
Outstanding shares unvested at the end of the year 2,698,207 6.13 8,417,511 5.64
As Previously Reported
December 31, 2012
LTIP RSUs
Weighted
average fair
value at the
grant date (€) LTIP PSUs
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at the beginning of the year — — — —
Granted 1,835,833 5.73 8,450,275 5.73
Vested (20,123) 5.91 — —
Forfeited (10,587) 5.91 (30,591) 5.91
Outstanding shares unvested at the end of the year 1,805,123 5.78 8,419,684 5.78
Adjusted for Anti-Dilution
2014 2013 2012
LTIP RSUs
Weighted
average fair
value at the
grant date (€) LTIP RSUs
Weighted
average fair
value at the
grant date (€) LTIP RSUs
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at
the beginning of the year 3,500,654 4.73 2,341,967 4.46 — —
Granted — — 2,113,234 5.32 2,381,810 4.41
Vested (1,407,574) 4.81 (798,310) 4.45 (26,108) 4.56
Forfeited (104,020) 4.91 (156,237) 4.78 (13,735) 4.56
Outstanding shares unvested
at the end of the year 1,989,060 5.41 3,500,654 4.73 2,341,967 4.46
Adjusted for Anti-Dilution
2014 2013 2012
LTIP PSUs
Weighted
average fair
value at the
grant date (€) LTIP PSUs
Weighted
average fair
value at the
grant date (€) LTIP PSUs
Weighted
average fair
value at the
grant date (€)
Outstanding shares unvested at
the beginning of the year 8,417,511 5.64 8,419,684 5.78 — —
Granted 5,556,503 7.62 587,091 7.15 8,450,275 5.73
Vested — — — — — —
Forfeited (8,653,474) 5.89 (589,264) 5.77 (30,591) 5.91
Outstanding shares unvested
at the end of the year 5,320,540 8.62 8,417,511 5.64 8,419,684 5.78
The expense recognized in connection with these plans in 2014 was €6 million (€36 million in 2013 and €24 million
in 2012). Total unrecognized compensation expenses at December 31, 2014 were approximately €2 million. These
expenses will be recognized over the remaining service periods based upon the assessment of the performance
conditions being achieved.
220 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
25. Provisions for employee bene?ts
The Group’s provisions and net assets for employee bene?ts were as follows:
At December 31,
2014 2013
(€ million)
Present value of de?ned bene?t obligations:
Pension bene?ts 27,287 23,137
Health care and life insurance plans 2,276 1,945
Other post-employment bene?ts 1,074 1,023
Total present value of de?ned bene?t obligations (a) 30,637 26,105
Fair value of plan assets (b) 22,231 18,982
Asset ceiling (c) 6 3
Total net de?ned bene?t plans (a - b + c) 8,412 7,126
of which:
Net de?ned bene?t liability (d) 8,516 7,221
(De?ned bene?t plan asset) (104) (95)
Other provisions for employees and liabilities for share-based payments (e) 1,076 1,105
Total Provisions for employee bene?ts (d + e) 9,592 8,326
The Group provides post-employment bene?ts for certain of its active employees and retirees. The way these
bene?ts are provided varies according to the legal, ?scal and economic conditions of each country in which the
Group operates and may change periodically. The plans are classi?ed by the Group on the basis of the type of bene?t
provided as follows: pension bene?ts, health care and life insurance plans, and other post-employment bene?ts.
Moreover, Group companies provide post-employment bene?ts, such as pension or health care bene?ts, to their
employees under de?ned contribution plans. In this case, the Group pays contributions to public or private insurance
plans on a legally mandatory, contractual, or voluntary basis. By paying these contributions the Group ful?lls all of
its obligations. The Group recognizes the cost for de?ned contribution plans over the period in which the employee
renders service and classi?es this by function in Cost of sales, Selling, general and administrative costs and Research
and development costs. In 2014, this cost totaled €1,405 million (€1,314 million in 2013 and €1,114 million in 2012).
Pension bene?ts
Group companies in the United States and Canada sponsor both non-contributory and contributory de?ned bene?t
pension plans. The non-contributory pension plans cover certain hourly and salaried employees. Bene?ts are based
on a ?xed rate for each year of service. Additionally, contributory bene?ts are provided to certain salaried employees
under the salaried employees’ retirement plans. These plans provide bene?ts based on the employee’s cumulative
contributions, years of service during which the employee contributions were made and the employee’s average salary
during the ?ve consecutive years in which the employee’s salary was highest in the 15 years preceding retirement or
the freeze of such plans, as applicable.
In the United Kingdom, the Group participates, amongst others, in a pension plan ?nanced by various entities
belonging to the Group, called the “Fiat Group Pension Scheme” covering mainly deferred and retired employees.
2014
|
ANNUAL REPORT 221
Liabilities arising from these plans are usually funded by contributions made by Group subsidiaries and, at times by
their employees, into legally separate trusts from which the employee bene?ts are paid. The Group’s funding policy
for de?ned bene?t pension plans is to contribute the minimum amounts required by applicable laws and regulations.
Occasionally, additional discretionary contributions in excess of these legally required are made to achieve certain
desired funding levels. In the U.S. these excess amounts are tracked, and the resulting credit balance can be used to
satisfy minimum funding requirements in future years. As of December 31, 2014, the combined credit balances for the
U.S. and Canadian quali?ed pension plans was approximately €2.1 billion, the usage of the credit balances to satisfy
minimum funding requirements is subject to the plans maintaining certain funding levels. The Group contributions to
funded pension plans for 2015 are expected to be €284 million, of which €262 million relate to FCA US and more
speci?cally, €191 million are discretionary contributions and €71 million will be made to satisfy minimum funding
requirement. The expected bene?t payments for pension plans are as follows:
Expected bene?t
payments
(€ million)
2015 1,769
2016 1,733
2017 1,710
2018 1,688
2019 1,675
2020-2024 8,187
The following summarizes the changes in the pension plans:
2014 2013
Obligation
Fair value
of plan
assets
Asset
ceiling
Liability
(asset) Obligation
Fair value
of plan
assets
Asset
ceiling
Liability
(asset)
(€ million)
Amounts at January 1, 23,137 (18,982) 3 4,158 26,974 (20,049) — 6,925
Included in the Consolidated income
statement 1,290 (816) — 474 1,142 (712) — 430
Included in Other comprehensive
income/loss
Actuarial losses/(gains) from:
- Demographic assumptions (256) — — (256) (35) — — (35)
- Financial assumptions 1,916 (8) — 1,908 (1,943) (1) — (1,944)
- Other 2 — — 2 (2) 2 — —
Return on assets — (1,514) — (1,514) — (518) — (518)
Changes in the effect of limiting net assets — — 3 3 — — 3 3
Changes in exchange rates 2,802 (2,273) — 529 (1,352) 1,107 — (245)
Other
Employer contributions — (229) — (229) — (458) — (458)
Plan participant contributions 2 (2) — — 9 (9) — —
Bene?ts paid (1,611) 1,606 — (5) (1,673) 1,667 — (6)
Other changes 5 (13) — (8) 17 (11) — 6
Amounts at December 31, 27,287 (22,231) 6 5,062 23,137 (18,982) 3 4,158
During 2014, a decrease in discount rates resulted in actuarial losses for the year ended December 31, 2014, while an
increase in discount rates resulted in actuarial gains for the year ended December 31, 2013.
222 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Amounts recognized in the Consolidated income statement were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Current service cost 184 292 271
Interest expense 1,089 1,026 1,199
(Interest income) (878) (768) (942)
Other administration costs 62 42 44
Past service costs/(credits) and gains or losses arising from settlements 17 (162) 10
Total recognized in the Consolidated income statement 474 430 582
In 2014, following the release of new standards by the Canadian Institute of Actuaries, mortality assumptions used for
our Canadian bene?t plan valuations were updated to re?ect recent trends in the industry and the revised outlook for
future generational mortality improvements. Generational improvements represent decreases in mortality rates over
time based upon historical improvements in mortality and expected future improvements. The change increased the
Group’s Canadian pension obligations by approximately €41 million. Additionally, retirement rate assumptions used for
the Group’s U.S. bene?t plan valuations were updated to re?ect an ongoing trend towards delayed retirement for FCA
US employees. The change decreased the Group’s U.S. pension and other post-employment bene?t obligations by
approximately €261 million and €40 million, respectively.
During the second quarter of 2013, FCA US amended its U.S. and Canadian salaried de?ned bene?t pension plans. The U.S.
plans were amended in order to comply with U.S. regulations, cease the accrual of future bene?ts effective December 31,
2013, and enhance the retirement factors. The Canada amendment ceased the accrual of future bene?ts effective
December 31, 2014, enhanced the retirement factors and continued to consider future salary increases for the affected
employees. An interim remeasurement was performed for these plans, which resulted in a curtailment gain of €166 million
recognized in unusual income in the Consolidated income statement (see Note 8). In addition, the Group recognized a €509
million reduction to its pension obligation, a €7 million reduction to de?ned bene?t plan assets and a corresponding €502
million increase in accumulated Other comprehensive income/(loss) for the year ended December 31, 2013. There were no
signi?cant plan amendments or curtailments to the Group’s pension plans for the year ended December 31, 2014.
The fair value of plan assets by class was as follows:
At December 31, 2014 At December 31, 2013
Amount
of which have
a quoted market
price in an
active market Amount
of which have
a quoted market
price in an
active market
(€ million)
Cash and cash equivalents 713 614 532 401
U.S. equity securities 2,406 2,338 2,047 2,033
Non-U.S. equity securities 1,495 1,463 1,540 1,531
Commingled funds 2,009 186 1,518 195
Equity instruments 5,910 3,987 5,105 3,759
Government securities 2,948 780 2,545 729
Corporate bonds (including Convertible and high yield bonds) 6,104 4 5,049 38
Other ?xed income 892 7 635 —
Fixed income securities 9,944 791 8,229 767
Private equity funds 1,648 — 1,713 —
Commingled funds 5 5 — —
Mutual funds 4 — 4 —
Real estate funds 1,395 — 1,222 —
Hedge funds 1,841 — 1,759 —
Investment funds 4,893 5 4,698 —
Insurance contracts and other 771 91 418 46
Total fair value of plan assets 22,231 5,488 18,982 4,973
2014
|
ANNUAL REPORT 223
Non-U.S. Equity securities are invested broadly in developed international and emerging markets. Debt instruments
are ?xed income securities which comprise primarily of long-term U.S. Treasury and global government bonds, as well
as U.S., developed international and emerging market companies’ debt securities diversi?ed by sector, geography
and through a wide range of market capitalization. Commingled funds include common collective trust funds, mutual
funds and other investment entities. Private equity funds include those in limited partnerships that invest primarily
in operating companies that are not publicly traded on a stock exchange. Real estate investments includes those
in limited partnerships that invest in various commercial and residential real estate projects both domestically and
internationally. Hedge fund investments include those seeking to maximize absolute return using a broad range of
strategies to enhance returns and provide additional diversi?cation.
The investment strategies and objectives for pension assets primarily in the U.S. and Canada re?ect a balance of liability-
hedging and return-seeking investment considerations. The investment objectives are to minimize the volatility of the
value of the pension assets relative to the pension liabilities and to ensure assets are suf?cient to pay plan obligations.
The objective of minimizing the volatility of assets relative to liabilities is addressed primarily through asset diversi?cation,
partial asset–liability matching and hedging. Assets are broadly diversi?ed across many asset classes to achieve risk–
adjusted returns that, in total, lower asset volatility relative to the liabilities. Additionally, in order to minimize pension asset
volatility relative to the pension liabilities, a portion of the pension plan assets are allocated to ?xed income securities. The
Group policy for these plans ensures actual allocations are in line with target allocations as appropriate.
Assets are actively managed, primarily, by external investment managers. Investment managers are not permitted
to invest outside of the asset class or strategy for which they have been appointed. The Group uses investment
guidelines to ensure investment managers invest solely within the mandated investment strategy. Certain investment
managers use derivative ?nancial instruments to mitigate the risk of changes in interest rates and foreign currencies
impacting the fair values of certain investments. Derivative ?nancial instruments may also be used in place of physical
securities when it is more cost effective and/or ef?cient to do so. Plan assets do not include shares of FCA or
properties occupied by Group companies.
Sources of potential risk in the pension plan assets measurements relate to market risk, interest rate risk and
operating risk. Market risk is mitigated by diversi?cation strategies and as a result, there are no signi?cant
concentrations of risk in terms of sector, industry, geography, market capitalization, or counterparty. Interest rate
risk is mitigated by partial asset–liability matching. The ?xed income target asset allocation partially matches the
bond–like and long–dated nature of the pension liabilities. Interest rate increases generally will result in a decline
in the fair value of the investments in ?xed income securities and the present value of the obligations. Conversely,
interest rate decreases generally will increase the fair value of the investments in ?xed income securities and the
present value of the obligations.
The weighted average assumptions used to determine the de?ned bene?t obligations were as follows:
At December31,
2014 2013
U.S. Canada UK U.S. Canada UK
(%)
Discount rate 4.0 3.8 4.0 4.7 4.6 4.5
Future salary increase rate n/a 3.5 3.0 3.0 3.5 3.1
The discount rates are used in measuring the obligation and the interest expense/(income) of net period cost. The
Group selects these rates on the basis of the rate on return on high-quality (AA rated) ?xed income investments for
which the timing and amounts of payments match the timing and amounts of the projected pension and other post-
employment plan. The average duration of the U.S. and Canadian liabilities was approximately 11 and 13 years,
respectively. The average duration of the UK pension liabilities was approximately 21 years.
224 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Health care and life insurance plans
Liabilities arising from these plans comprise obligations for retiree health care and life insurance granted to employees
and to retirees in the U.S. and Canada by FCA US companies. Upon retirement from the Group, these employees may
become eligible for continuation of certain bene?ts. Bene?ts and eligibility rules may be modi?ed periodically. These
plans are unfunded. The expected bene?t payments for unfunded health care and life insurance plans are as follows:
Expected
bene?t payments
(€ million)
2015 136
2016 134
2017 133
2018 132
2019 131
2020-2024 651
Changes in the net de?ned bene?t obligations for healthcare and life insurance plans were as follows:
2014 2013
(€ million)
Present value of obligations at January 1, 1,945 2,289
Included in the Consolidated income statement 126 112
Included in OCI:
Actuarial losses (gains) from:
- Demographic assumptions (95) (21)
- Financial assumptions 187 (207)
- Other — 11
Effect of movements in exchange rates 244 (112)
Other changes
Bene?ts paid (128) (126)
Other (3) (1)
Present value of obligations at December 31, 2,276 1,945
Amounts recognized in the Consolidated income statement were as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Current service cost 21 23 22
Interest expense 98 89 103
Past service costs (credits) and gains or losses arising from settlements 7 — (6)
Total recognized in the Consolidated income statement 126 112 119
Health care and life insurance plans are accounted for on an actuarial basis, which requires the selection of various
assumptions, in particular, it requires the use of estimates of the present value of the projected future payments to all
participants, taking into consideration the likelihood of potential future events such as health care cost increases and
demographic experience.
2014
|
ANNUAL REPORT 225
The weighted average assumptions used to determine the de?ned bene?t obligations were as follows:
At December 31,
2014 2013
U.S. Canada U.S. Canada
(%)
Discount rate 4.1 3.9 4.9 4.7
Salary growth — — n/a 2.7
Weighted average ultimate healthcare cost trend rate 5.0 3.6 5.0 3.6
The discount rates used for the measurement of these obligations are based on yields of high-quality (AA-rated) ?xed
income securities for which the timing and amounts of payments match the timing and amounts of the projected
bene?t payments. The average duration of the U.S. and Canadian liabilities was approximately 12 and 16 years,
respectively.
The annual rate of increase in the per capita cost of covered U.S. health care bene?ts assumed for next year and used
in the 2014 plan valuation was 6.5 percent (6.8 percent in 2013). The annual rate was assumed to decrease gradually
to 5.0 percent after 2021 and remain at that level thereafter. The annual rate of increase in the per capita cost of
covered Canadian health care bene?ts assumed for next year and used in the 2014 plan valuation was 3.3 percent
(3.3 percent in 2013). The annual rate was assumed to increase gradually to 3.6 percent in 2017 and remain at that
level thereafter.
Other post-employment bene?ts
Other post-employment bene?ts includes other employee bene?ts granted to Group employees in Europe and
comprises, amongst others, the Italian employee severance indemnity (TFR) obligation amounting to €886 million at
December 31, 2014 and €861 million at December 31, 2013. These schemes are required under Italian Law.
The amount of TFR to which each employee is entitled must be paid when the employee leaves the Group and is
calculated based on the period of employment and the taxable earnings of each employee. Under certain conditions
the entitlement may be partially advanced to an employee during their working life.
The legislation regarding this scheme was amended by Law 296 of December 27, 2006 and subsequent decrees
and regulations issued in the ?rst part of 2007. Under these amendments, companies with at least 50 employees are
obliged to transfer the TFR to the “Treasury fund” managed by the Italian state-owned social security body (INPS) or
to supplementary pension funds. Prior to the amendments, accruing TFR for employees of all Italian companies could
be managed by the company itself. Consequently, the Italian companies’ obligation to INPS and the contributions
to supplementary pension funds take the form, under IAS 19 - Employee Bene?ts, of de?ned contribution plans
whereas the amounts recorded in the provision for employee severance pay retain the nature of de?ned bene?t plans.
Accordingly, the provision for employee severance indemnity in Italy consists of the residual obligation for TFR until
December 31, 2006. This is an unfunded de?ned bene?t plan as the bene?ts have already been entirely earned, with
the sole exception of future revaluations. Since 2007 the scheme has been classi?ed as a de?ned contribution plan
and the Group recognizes the associated cost over the period in which the employee renders service.
226 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Changes in de?ned bene?t obligations for other post-employment bene?ts was as follows:
2014 2013
(€ million)
Present value of obligations at January 1, 1,023 997
Included in the Consolidated income statement: 31 24
Included in OCI:
Actuarial losses (gains) from:
Demographic assumptions (2) (2)
Financial assumptions 81 37
Other 14 23
Effect of movements in exchange rates 1 (4)
Other:
Bene?ts paid (77) (59)
Change in the scope of consolidation 15 21
Other (12) (14)
Present value of obligations at December 31, 1,074 1,023
Amounts recognized in the Consolidated income statement was as follows:
For the years ended December 31,
2014 2013 2012
(€ million)
Current service cost 20 9 8
Interest expense 11 15 25
Past service costs (credits) and gains or losses arising from settlements — — (3)
Total recognized in the Consolidated income statement 31 24 30
The main assumptions used in developing the required estimates for other post-employment bene?ts include the
discount rate, the retirement or employee leaving rate and the mortality rates.
The discount rates used for the measurement of the Italian TFR obligation are based on yields of high-quality (AA
rated) ?xed income securities for which the timing and amounts of payments match the timing and amounts of the
projected bene?t payments. For this plan, the single weighted average discount rate that re?ects the estimated timing
and amount of the scheme future bene?t payments for 2014 is equal to 1.7 percent (2.8 percent in 2013). The average
duration of the Italian TFR is approximately 7 years. Retirement or employee leaving rates are developed to re?ect
actual and projected Group experience and law requirements for retirement in Italy.
Other provisions for employees and liabilities for share-based payments
At December 31, 2014, Other provisions for employees and liabilities for share-based payments comprised other long
term bene?ts obligations for €376 million (€332 million at December 31, 2013), representing the expected obligation
for bene?ts as jubilee and long term disability granted to certain employees by the Group. At December 31, 2013 this
item also included liabilities for share-based payments amounting to €123 million.
2014
|
ANNUAL REPORT 227
26. Other provisions
Changes in Other provisions were as follows:
At
December 31,
2013
Additional
provisions Settlements
Unused
amounts
Translation
differences
Changes in
the scope of
consolidation
and other
changes
At
December 31,
2014
(€ million)
Warranty provision 3,656 2,909 (2,119) — 392 7 4,845
Sales incentives 2,993 9,292 (8,874) (20) 318 (14) 3,695
Legal proceedings and disputes 547 125 (85) (36) 15 9 575
Commercial risks 371 171 (109) (40) 6 (18) 381
Restructuring provision 191 52 (97) (8) 1 (8) 131
Indemnities 62 2 (4) — — — 60
Environmental risks 29 2 (2) — — — 29
Investment provision 12 — — — — (4) 8
Other risks 1,240 299 (256) (173) 41 (95) 1,056
Total Other provisions 9,101 12,852 (11,546) (277) 773 (123) 10,780
The effect of discounting these provisions was €2 million in 2014 (€21 million in 2013).
The warranty provision represents the best estimate of commitments given by the Group for contractual, legal, or
constructive obligations arising from product warranties given for a speci?ed period of time beginning at the date of
sale to the end customer. This estimate is principally based on assumptions regarding the lifetime warranty costs of
each vehicle and each model year of that vehicle line, as well as historical claims experience for vehicles. The Group
establishes provisions for product warranty obligations when the related sale is recognized. Warranty provisions
also include management’s best estimate of the costs that are expected to be incurred in connection with product
defects that could result in a general recall of vehicles, which are estimated by making an assessment of the historical
occurrence of defects on a case-by-case basis and are accrued when a reliable estimate of the amount of the
obligation can be made.
The following table sets forth total warranty costs recognized for the years ended December 31, 2014, 2013 and 2012:
For the years ended December 31,
2014 2013 2012
(€ million)
Warranty costs 2,909 2,011 1,759
Recorded in the Consolidated income statement within:
Cost of sales 2,909 1,896 1,759
Other unusual expenses — 115 —
2,909 2,011 1,759
Warranty provision increased by €1,189 million in the year ended December 31, 2014. The increase was primarily
driven by an increase in the overall warranty expenses relating to the recently approved recall campaigns in the NAFTA
segment. Additionally, there was an increase to the warranty provision of approximately €392 million with respect to
foreign exchange effects when translating from U.S. Dollar to Euro.
Sales incentives are offered on a contractual basis to the Group’s dealer networks, primarily on the basis of a speci?c
cumulative level of sales transactions during a certain period. The sales incentive provision also includes sales cash
incentives provided to retail customers.
228 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The Legal proceedings and disputes provision represents management’s best estimate of the liability to be recognized
by the Group with regard to legal proceedings arising in the ordinary course of business with dealers, customers,
suppliers or regulators (such as contractual or patent disputes), legal proceedings involving claims with active and
former employees and legal proceedings involving different tax authorities. None of these provisions are individually
signi?cant. Each Group company recognizes a provision for legal proceedings when it is deemed probable that
the proceedings will result in an out?ow of resources. In determining their best estimate of the liability, each Group
company evaluates their legal proceedings on a case-by-case basis to estimate the probable losses that typically arise
from events of the type giving rise to the liability. Their estimate takes into account, as applicable, the views of legal
counsel and other experts, the experience of the Group and others in similar situations and the Group’s intentions
with regard to further action in each proceeding. Group’s consolidated provision combines these individual provisions
established by each of the Group’s companies.
Commercial risks arise in connection with the sale of products and services such as maintenance contracts. An
accrual is recorded when the expected costs to complete the services under these contracts exceed the revenues
expected to be realized.
The Group’s restructuring programs primarily relate to restructuring and rationalization activities in the NAFTA and
EMEA segments. The restructuring provision at December 31, 2014 consists of termination bene?ts of €72 million
(€106 million at December 31, 2013) payable to employees in connection with restructuring plans, manufacturing
rationalization costs of €9 million (€15 million at December 31, 2013) and other costs of €50 million (€70 million at
December 31, 2013). These provisions are related to the EMEA segment €41 million (€53 million at December 31,
2013), the NAFTA segment €36 million (€41 million at December 31, 2013), the Components segment €15 million
(€28 million at December 31, 2013), publishing activities €13 million (€31 million at December 31, 2013) and other
minor activities €26 million (€38 million at December 31, 2013).
Indemnities are estimated by the Group in connection with divestitures. These liabilities primarily arise from indemnities
relating to contingent liabilities in existence at the time of the sale, as well as those covering any possible breach of the
representations and warranties provided in the contract and, in certain instances, environmental or tax matters. These
provisions were determined estimating the amount of the expected out?ow of resources, taking into consideration the
relevant level of probability of occurrence.
The environmental risks provision represents management’s best estimate of the Group’s probable environmental
obligations. Amounts included in the estimate include direct costs to be incurred by the Group in connection with
environmental obligations associated with current or formerly owned facilities and sites. This provision also includes
costs related to claims on environmental matters.
Other risks includes, among other items: provisions for disputes with suppliers related to supply contracts or other
matters that are not subject to legal proceedings, provisions for product liabilities arising from personal injuries
including wrongful death and potential exemplary or punitive damages alleged to be the result of product defects,
and disputes with other parties relating to contracts or other matters not subject to legal proceedings. The valuation
of these provisions is determined based on, among other factors, claims incurred and our historical experiences
regarding similar disputes.
2014
|
ANNUAL REPORT 229
27. Debt
Breakdown of debt by category and by maturity was as follows:
At December 31,
2014 2013
Due
within
one year
Due
between
one and
?ve years
Due
beyond
?ve years Total
Due
within
one year
Due
between
one and
?ve years
Due
beyond
?ve
years Total
(€ million)
Bonds 2,292 10,367 4,989 17,648 2,572 8,317 3,577 14,466
Borrowings from banks 3,670 8,131 950 12,751 2,584 5,639 607 8,830
Payables represented by securities 559 544 270 1,373 554 1,374 2,604 4,532
Asset-backed ?nancing 444 25 — 469 746 10 — 756
Other debt 745 424 314 1,483 1,019 353 327 1,699
Total Debt 7,710 19,491 6,523 33,724 7,475 15,693 7,115 30,283
Debt increased by €3,441 million at December 31, 2014. Net of foreign exchange translation effects and scope of
consolidation, the increase in Debt was €2,059 million: FCA issued new bonds for €4,629 million and repaid bonds
on maturity for €2,150 million; medium and long-term loans (those expiring after twelve months) obtained by FCA
amounted to €4,876 million, while medium and long-term borrowings repayments amounted to €5,838 million.
The annual effective interest rates and the nominal currencies of debt at December 31, 2014 and 2013 were as follows:
Interest rate Total at
December 31,
2014
less than
5%
from 5%
to 7.5%
from 7.5%
to 10%
from 10%
to 12.5%
more than
12.5%
(€ million)
Euro 6,805 7,500 1,003 87 — 15,395
U.S. Dollar 5,769 2,651 2,537 8 206 11,171
Brazilian Real 1,720 430 282 376 1,330 4,138
Swiss Franc 593 686 — — — 1,279
Canadian Dollar 31 229 393 — — 653
Mexican Peso — 164 233 — — 397
Chinese Renminbi 1 333 — — — 334
Other 197 20 37 24 79 357
Total Debt 15,116 12,013 4,485 495 1,615 33,724
Interest rate Total at
December 31,
2013
less than
5%
from 5%
to 7.5%
from 7.5%
to 10%
from 10%
to 12.5%
more than
12.5%
(€ million)
Euro 5,382 7,412 2,253 90 — 15,137
U.S. Dollar 2,962 122 5,744 12 169 9,009
Brazilian Real 1,271 431 256 1,190 — 3,148
Swiss Franc 378 672 — — — 1,050
Canadian Dollar 39 79 584 — — 702
Mexican Peso — — 414 — — 414
Chinese Renminbi 2 292 66 — — 360
Other 291 17 51 10 94 463
Total Debt 10,325 9,025 9,368 1,302 263 30,283
For further information on the management of interest rate and currency risk reference should be made to Note 35.
230 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Bonds
All outstanding bonds issued by Fiat Chrysler Finance Europe S.A. (formerly known as Fiat Finance and Trade Ltd
S.A.) and Fiat Chrysler Finance North America Inc. (formerly known as Fiat Finance North America Inc.) (both wholly-
owned subsidiaries of the Group) are governed by the terms and conditions of the Global Medium Term Note Program
(“GMTN Program”). A maximum of €20 billion may be used under this program, of which notes of approximately
€12.1 billion have been issued and are outstanding at December 31, 2014 (€11.6 billion at December 31, 2013). The
GMTN Program is guaranteed by the Group. The companies in the Group may from time to time buy back bonds in
the market that have been issued by FCA. Such buybacks, if made, depend upon market conditions, the ?nancial
situation of FCA and other factors which could affect such decisions.
The bonds issued by Fiat Chrysler Finance Europe S.A. and by Fiat Chrysler Finance North America Inc. impose
covenants on the issuer and, in certain cases, on FCA as guarantor, which include: (i) negative pledge clauses which
require that, in case any security interest upon assets of the issuer and/or FCA is granted in connection with other
bonds or debt securities having the same ranking, such security should be equally and ratably extended to the
outstanding bonds; (ii) pari passu clauses, under which the bonds rank and will rank pari passu with all other present
and future unsubordinated and unsecured obligations of the issuer and/or FCA; (iii) periodic disclosure obligations;
(iv) cross-default clauses which require immediate repayment of the bonds under certain events of default on other
?nancial instruments issued by FCA’s main entities; and (v) other clauses that are generally applicable to securities of
a similar type. A breach of these covenants may require the early repayment of the bonds. In addition, the agreements
for the bonds guaranteed by FCA contain clauses which could require early repayment if there is a change of the
controlling shareholder of FCA leading to a ratings downgrade by ratings agencies.
The bond issues outstanding at December 31, 2014 were as follows:
Face value of
outstanding
bonds (€ million)
Coupon
%
At December 31,
(€ million)
Currency Maturity 2014 2013
Global Medium Term Note Program:
Fiat Chrysler Finance Europe S.A.
(1)
EUR 900 6.125 July 8, 2014 — 900
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,250 7.625 September 15, 2014 — 1,250
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,500 6.875 February 13, 2015 1,500 1,500
Fiat Chrysler Finance Europe S.A.
(2)
CHF 425 5.000 September 7, 2015 353 346
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,000 6.375 April 1, 2016 1,000 1,000
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,000 7.750 October 17, 2016 1,000 1,000
Fiat Chrysler Finance Europe S.A.
(2)
CHF 400 5.250 November 23, 2016 333 326
Fiat Chrysler Finance Europe S.A.
(1)
EUR 850 7.000 March 23, 2017 850 850
Fiat Chrysler Finance North America Inc.
(1)
EUR 1,000 5.625 June 12, 2017 1,000 1,000
Fiat Chrysler Finance Europe S.A.
(2)
CHF 450 4.000 November 22, 2017 374 367
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,250 6.625 March 15, 2018 1,250 1,250
Fiat Chrysler Finance Europe S.A.
(1)
EUR 600 7.375 July 9, 2018 600 600
Fiat Chrysler Finance Europe S.A.
(2)
CHF 250 3.125 September 30, 2019 208 —
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,250 6.750 October 14, 2019 1,250 1,250
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,000 4.750 March 22, 2021 1,000 —
Fiat Chrysler Finance Europe S.A.
(1)
EUR 1,350 4.750 July 15, 2022 1,350 —
Others EUR 7 7 7
Total Global Medium Term Notes 12,075 11,646
Other bonds:
FCA US (Secured Senior Notes)
(3)
U.S.$ 2,875 8.000 June 15, 2019 2,368 1,088
FCA US (Secured Senior Notes)
(3)
U.S.$ 3,080 8.250 June 15, 2021 2,537 1,232
Total Other bonds 4,905 2,320
Hedging effect, accrued interest and amortized
cost valuation 668 500
Total Bonds 17,648 14,466
(1)
Bond for which a listing on the Irish Stock Exchange was obtained.
(2)
Bond for which a listing on the SIX Swiss Exchange was obtained.
(3)
Includes 2019 Notes and 2021 Notes (defined below).
2014
|
ANNUAL REPORT 231
Changes in Global Medium Term Notes during 2014 were mainly due to the:
Issuance of 4.75 percent notes at par in March 2014, having a principal of €1 billion and due March 2021 by Fiat
Chrysler Finance Europe S.A. The proceeds will be used for general corporate purposes. The notes have been
admitted to listing on the Irish Stock Exchange.
Issuance of 4.75 percent notes at par in July 2014, having a principal of €850 million and due July 2022 by Fiat
Chrysler Finance Europe S.A. The notes issuance was reopened in September 2014 for a further €500 million
principal value, priced at 103.265 percent of par value, increasing the total principal amount to €1.35 billion.
Issuance of 3.125 percent notes at par in September 2014 having a principal of CHF250 million and due September
2019 by Fiat Chrysler Finance Europe S.A.
Repayment at maturity of bonds having a nominal value of €900 million and of €1,250 million originally issued by
Fiat Chrysler Finance Europe S.A.
FCA US Secured Senior Notes
In May 2011, FCA US and certain of its U.S. subsidiaries, either as a co-issuer or guarantor, entered into the following
secured senior notes:
secured senior notes due 2019 - issuance of $1,500 million (€1,235 million at December 31, 2014) of 8.0 percent
secured senior notes due June 15, 2019; and
secured senior notes due 2021 - issuance of $1,700 million (€1,400 million at December 31, 2014) of 8.25 percent
secured senior notes due June 15, 2021.
In February 2014, FCA US and certain of its U.S. subsidiaries, either as a co-issuer or guarantor, issued additional
secured senior notes:
secured Senior Notes due 2019 – U.S.$1,375 million (€1,133 million at December 31, 2014) aggregate principal
amount of 8.0 percent secured senior notes (collectively with the May 2011 issuance of the secured senior notes
due 2019, the “2019 Notes”), due June 15, 2019, at an issue price of 108.25 percent of the aggregate principal
amount; and
secured Senior Notes due 2021 – U.S.$1,380 million (€1,137 million at December 31, 2014) aggregate principal
amount of 8.25 percent secured senior notes (collectively with the May 2011 issuance of the secured senior notes due
2021, the “2021 Notes”), due June 15, 2021 at an issue price of 110.50 percent of the aggregate principal amount.
The 2019 Notes and 2021 Notes are collectively referred to as the “Secured Senior Notes”.
FCA US may redeem, at any time, all or any portion of the Secured Senior Notes on not less than 30 and not more
than 60 days’ prior notice mailed to the holders of the Secured Senior Notes to be redeemed.
Prior to June 15, 2015, the 2019 Notes will be redeemable at a price equal to the principal amount of the 2019
Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make–whole” premium
calculated under the indenture governing the Secured Senior Notes. On and after June 15, 2015, the 2019 Notes
are redeemable at redemption prices speci?ed in the 2019 Notes, plus accrued and unpaid interest to the date of
redemption. The redemption price is initially 104.0 percent of the principal amount of the 2019 Notes being redeemed
for the twelve months beginning June 15, 2015, decreasing to 102.0 percent for the twelve months beginning
June 15, 2016 and to par on and after June 15, 2017.
Prior to June 15, 2016, the 2021 Notes will be redeemable at a price equal to the principal amount of the 2021
Notes being redeemed, plus accrued and unpaid interest to the date of redemption and a “make–whole” premium
calculated under the indenture governing the Secured Senior Notes. On and after June 15, 2016, the 2021 Notes
are redeemable at redemption prices speci?ed in the 2021 Notes, plus accrued and unpaid interest to the date
of redemption. The redemption price is initially 104.125 percent of the principal amount of the 2021 Notes being
redeemed for the twelve months beginning June 15, 2016, decreasing to 102.750 percent for the twelve months
beginning June 15, 2017, to 101.375 percent for the twelve months beginning June 15, 2018 and to par on and after
June 15, 2019.
232 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The indenture governing the Secured Senior Notes issued by FCA US includes af?rmative covenants, including
the reporting of ?nancial results and other developments. The indenture also includes negative covenants which
limit FCA US’s ability and, in certain instances, the ability of certain of its subsidiaries to, (i) pay dividends or make
distributions of FCA US’s capital stock or repurchase FCA US’s capital stock; (ii) make restricted payments; (iii) create
certain liens to secure indebtedness; (iv) enter into sale and leaseback transactions; (v) engage in transactions with
af?liates; (vi) merge or consolidate with certain companies and (vii) transfer and sell assets. The indenture provides
for customary events of default, including but not limited to, (i) non-payment; (ii) breach of covenants in the indenture;
(iii) payment defaults or acceleration of other indebtedness; (iv) a failure to pay certain judgments and (v) certain events
of bankruptcy, insolvency and reorganization. If certain events of default occur and are continuing, the trustee or the
holders of at least 25.0 percent in aggregate of the principal amount of the Secured Senior Notes outstanding under
one of the series may declare all of the notes of that series to be due and payable immediately, together with accrued
interest, if any. As of December 31, 2014, FCA US was in compliance with all covenants.
Borrowings from banks
At December 31, 2014, Borrowings from banks includes €2,587 million (€2,119 million at December 31, 2013)
outstanding, which includes accrued interest, on the U.S.$3,250 million (€2,677 million) tranche B term loan maturing
May 24, 2017 of FCA US (“Tranche B Term Loan due 2017”) and €1,421 million outstanding, which includes accrued
interest, on the U.S.$1,750 million (€1,442 million) tranche B term loan maturing December 31, 2018 (“Tranche
B Term Loan due 2018”). The revolving credit facility (described below) was undrawn at December 31, 2014. The
Tranche B Term Loan due 2017, Tranche B Term Loan due 2018 and the revolving credit facility (described below),
are collectively referred to as the “Senior Credit Facilities”.
The Tranche B Term Loan due 2017 of FCA US consists of the existing U.S.$3.0 billion tranche B term loan (€2,471
million) that matures on May 24, 2017, (the “Original Tranche B Term Loan”), and an additional U.S.$250 million (€206
million at December 31, 2014) term loan entered into on February 7, 2014 under the Original Tranche B Term Loan
that also matures on May 24, 2017, collectively the “Tranche B Term Loan due 2017”. The outstanding principle
amount of the Tranche B Term Loan due 2017 is payable in equal quarterly installments of U.S.$8.1 million (€6.7
million) commencing March 2014, with the remaining balance due at maturity in May 2017. The Original Tranche B
Term Loan was re-priced in June and in December 2013 and subsequently, all amounts outstanding under Tranche B
Term Loan due 2017 will bear interest, at FCA’s option, at either a base rate plus 1.75 percent per annum or at LIBOR
plus 2.75 percent per annum, subject to a base rate ?oor of 1.75 percent per annum or a LIBOR ?oor of 0.75 percent
per annum. For the year ended December 31, 2014, interest was accrued based on LIBOR.
On February 7, 2014, FCA US entered into an agreement for the Tranche B Term Loan due 2018 for U.S.$1,750
million (€1,442 million). The outstanding principal amount for the Tranche B Term Loan due 2018 is payable in equal
quarterly installments of U.S.$4.4 million (€3.6 million), commencing June 30, 2014, with the remaining balance due
at maturity. The Tranche B Term Loan due 2018 bears interest, at FCA US’s option, either at a base rate plus 1.50
percent per annum or at LIBOR plus 2.5 percent per annum, subject to a base rate ?oor of 1.75 percent per annum or
a LIBOR ?oor of 0.75 percent per annum.
FCA US may pre-pay, re?nance or re-price the Tranche B Term Loan due 2017 and the Tranche B Term Loan due
2018 without premium or penalty. FCA US also has the option to extend the maturity date of all or a portion of the
aforementioned term loans with the consent of the lenders.
At December 31, 2014, FCA US had a secured revolving credit facility (“Revolving Credit Facility”) amounting to
US$1.3 billion (€1.1 billion), which remains undrawn and which matures in May 2016. All amounts outstanding under
the Revolving Credit Facility bear interest, at the option of FCA US, either at a base rate plus 2.25 percent per annum
or at LIBOR plus 3.25 percent per annum. Subject to the limitations in the credit agreements governing the Senior
Credit Facilities (“Senior Credit Agreements”) and the indenture governing our Secured Senior Notes, FCA US has
the option to increase the amount of the Revolving Credit Facility in an aggregate principal amount not to exceed
U.S.$700 million (approximately €577 million) at December 31, 2014, subject to certain conditions.
2014
|
ANNUAL REPORT 233
The Senior Credit Agreements include a number of af?rmative covenants, many of which are customary, including,
but not limited to, the reporting of ?nancial results and other developments, compliance with laws, payment of
taxes, maintenance of insurance and similar requirements. The Senior Credit Agreements also include negative
covenants, including but not limited to: (i) limitations on incurrence, repayment and prepayment of indebtedness;
(ii) limitations on incurrence of liens; (iii) limitations on making certain payments; (iv) limitations on transactions with
af?liates, swap agreements and sale and leaseback transactions; (v) limitations on fundamental changes, including
certain asset sales and (vi) restrictions on certain subsidiary distributions. In addition, the Senior Credit Agreements
require FCA US to maintain a minimum ratio of “borrowing base” to “covered debt” (as de?ned in the Senior Credit
Agreements), as well as a minimum liquidity of US$3.0 billion (€2.5 billion), which includes any undrawn amounts on
the Revolving Credit Facility.
The Senior Credit Agreements contain a number of events of default related to: (i) failure to make payments when due;
(ii) failure to comply with covenants; (iii) breaches of representations and warranties; (iv) certain changes of control;
(v) cross–default with certain other debt and hedging agreements and (vi) the failure to pay or post bond for certain
material judgments. As of December 31, 2014, FCA US was in compliance with all covenants under the Senior Credit
Agreements.
Medium/long term committed credit lines currently available to the treasury companies of the Group (excluding FCA
US) amount to approximately €3.3 billion at December 31, 2014 (€3.2 billion at December 31, 2013), of which €2.1
billion related to the 3-year syndicated revolving credit line due in July 2016 that was undrawn at December 31, 2014
and at December 31, 2013. The €2.1 billion syndicated credit facility of the Group contains typical covenants for
contracts of this type and size, such as ?nancial covenants (Net Debt/EBITDA and EBITDA/Net Interest ratios related
to industrial activities) and negative pledge, cross default and change of control clauses. The failure to comply with
these covenants, in certain cases, if not suitably remedied, can lead to the requirement for early repayment of the
outstanding loans. Similar covenants are included in the loans granted by the European Investment Bank for a total
of €1.1 billion used to fund the Group’s investments and research and development costs. In addition, the above
syndicated credit facility, currently includes limits on the ability to extend guarantees or loans to FCA US.
Additionally, the operating entities of the Group (excluding FCA US) have committed credit lines available, with residual
maturity after twelve months, to fund scheduled investments, of which approximately €0.9 billion was undrawn at
December 31, 2014 (€1.8 billion at December 31, 2013).
Payables represented by securities
At December 31, 2014, Group’s Payables represented by securities primarily included the unsecured Canadian Health
Care Trust Notes totaling €651 million, including accrued interest, (€703 million at December 31, 2013, including
accrued interest), which represents FCA US’s ?nancial liability to the Canadian Health Care Trust arising from the
settlement of its obligations for postretirement health care bene?ts for National Automobile, Aerospace, Transportation
and General Workers Union of Canada “CAW” (now part of Unifor), which represented employees, retirees and
dependents.
As described in more detail in Note 23, FCA issued aggregate notional amount of U.S.$2,875 million (€2,293 million)
of Mandatory Convertible Securities on December 16, 2014. The obligation to pay coupons as required by the
Mandatory Convertible Securities meets the de?nition of a ?nancial liability as it is a contractual obligation to deliver
cash to another entity. The fair value amount determined for the liability component at issuance of the Mandatory
Convertible Securities was U.S.$419 million (€335 million) calculated as the present value of the coupon payments
due less allocated transaction costs of U.S.$9 million (€7 million) that are accounted for as a debt discount.
Subsequent to issuance, the ?nancial liability for the coupon payments is accounted for at amortized cost. At
December 31, 2014, the ?nancial liability component was U.S.$420 million (€346 million).
234 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
At December 31, 2013 the item Payables represented by securities primarily related to the balance of FCA US’s
?nancial liability to the VEBA Trust (the “VEBA Trust Note”) of €3,575 million including accrued interest. The VEBA
Trust Note had been issued by FCA US in connection with the settlement of its obligations related to postretirement
healthcare bene?ts for certain UAW retirees. The VEBA Trust Note had an implied interest rate of 9.0 percent and
required annual payments of principal and interest through July 15, 2023. The proceeds of the February 7, 2014
issuances of the Secured Senior Notes were used to prepay all amounts outstanding of approximately $5.0 billion
(€3.6 billion) under the VEBA Trust Note, which included a principal payment of $4,715 million (€3,473 million) and
interest accrued through February 7, 2014. The $4,715 million (€3,473 million) principal payment consisted of $128
million (€94 million) of interest that was previously capitalized as additional debt with the remaining $4,587 million
(€3,379 million) representing the original face value of the note.
Asset-backed ?nancing
Asset-backed ?nancing represents the amount of ?nancing received through factoring transactions which do not
meet IAS 39 derecognition requirements and are recognized as assets in the Consolidated statement of ?nancial
position under Current receivables and other current assets (Note 18). Asset-backed ?nancing decreased by €287
million in 2014.
At December 31, 2014, debt secured by assets of the Group (excluding FCA US) amounts to €777 million (€432
million at December 31, 2013), of which €379 million (€386 million at December 31, 2013) was due to creditors
for assets acquired under ?nance leases and the remaining amount mainly related to subsidized ?nancing in Latin
America. The total carrying amount of assets acting as security for loans amounts to €1,670 million at December 31,
2014 (€418 million at December 31, 2013).
At December 31, 2014, debt secured by assets of FCA US amounts to €9,881 million (€5,180 million at
December 31, 2013), and includes €9,093 million (€4,448 million at December 31, 2013) relating to the Secured
Senior Notes and the Senior Credit Facilities and €251 million (€165 million at December 31, 2013) due to creditors
for assets acquired under ?nance leases and other debt and ?nancial commitments for €537 million (€567 million at
December 31, 2013).
In addition, at December 31, 2014 the Group’s assets include current receivables to settle Asset-backed ?nancing of
€469 million (€756 million at December 31, 2013).
Other debt
At December 31, 2014, payables for ?nance leases amount to €630 million and may be analyzed as follows:
At December 31,
2014 2013
Due
within
one
year
Due
between
one and
three
years
Due
between
three
and
?ve
years
Due
beyond
?ve
years Total
Due
within
one
year
Due
between
one and
three
years
Due
between
three
and
?ve
years
Due
beyond
?ve
years Total
(€ million)
Minimum future lease payments 114 209 188 243 754 82 151 133 270 636
Interest expense (33) (51) (31) (9) (124) (20) (31) (21) (13) (85)
Present value of minimum
lease payments 81 158 157 234 630 62 120 112 257 551
At December 31, 2014, the Group (excluding FCA US) had outstanding ?nancial lease agreements for certain
Property, plant and equipment whose overall net carrying amount totals €383 million (€394 million at December 31,
2013) (Note 15). As discussed in Note 15, ?nance lease payables also relate to suppliers’ assets recognized in the
Consolidated ?nancial statements in accordance with IFRIC 4.
2014
|
ANNUAL REPORT 235
Restrictions in Relation to the Group’s Interest in FCA US
The Group is subject to several restrictions that limit its ability to access and use assets or settle liabilities in relation to
its interest in FCA US. Financing arrangements outstanding may limit the Group’s ability to allocate capital between
Group entities or may restrict its ability to receive dividends or other restricted payments from FCA US. In particular,
FCA’s existing syndicated credit facility currently imposes restrictions, with certain exceptions, that limit FCA’s
capability to extend guarantees or loans to FCA US, or subscribe equity to FCA US.
FCA US’s Senior Credit Facilities, are secured by a senior priority security interest in substantially all of FCA US’s
assets and the assets of its U.S. subsidiary guarantors, subject to certain exceptions. The collateral includes 100.0
percent of the equity interests in FCA US’s U.S. subsidiaries and 65.0 percent of the equity interests in certain of its
non-U.S. subsidiaries held directly by FCA US and its U.S. subsidiary guarantors. In addition, FCA US’s Secured
Senior Notes are secured by security interests junior to the Senior Credit Facilities in substantially all of FCA US’s
assets and the assets of its U.S. subsidiary guarantors, including 100.0 percent of the equity interests in FCA US’s
U.S. subsidiaries and 65.0 percent of the equity interests in certain of its non U.S. subsidiaries held directly by FCA
US and its U.S. subsidiary guarantors. In addition, these debt instruments include covenants that restrict FCA US’s
ability to make certain distributions or purchase or redeem its capital stock, prepay certain other debt, encumber
assets, incur or guarantee additional indebtedness, incur liens, transfer and sell assets or engage in certain business
combinations, enter into certain transactions with af?liates or undertake various other business activities as well as the
requirement to maintain borrowing base collateral coverage and a minimum liquidity threshold.
While the Senior Credit Facilities and Secured Senior Notes are outstanding, further distributions to FCA US will be
limited to 50.0 percent of FCA US’s consolidated net income (as de?ned in the agreements) from January 2012, less
the amount of the January 2014 distribution that was used to pay the VEBA Trust for the acquisition of the remaining
41.5 percent interest in FCA US not previously owned by FCA.
28. Trade payables
Trade payables due within one year of €19,854 million at December 31, 2014 increased by €2,647 million from
December 31, 2013. Excluding the foreign exchange translation effects, the increase of Trade payables amounted
to €1,512 million and mainly related to the increased production in the NAFTA and EMEA segments as a result of
increased consumer demand for our vehicles and increased capital expenditures.
29. Other current liabilities
Other current liabilities consisted of the following:
At December 31,
2014 2013
(€ million)
Advances on buy-back agreements 2,571 1,583
Indirect tax payables 1,495 1,304
Accrued expenses and deferred income 2,992 2,370
Payables to personnel 932 781
Social security payables 338 349
Amounts due to customers for contract work 252 209
Other 2,915 2,367
Total Other current liabilities 11,495 8,963
236 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
An analysis of Other current liabilities (excluding Accrued expenses and deferred income) by due date was as follows:
At December 31,
2014 2013
Due
within
one year
Due
between
one
and ?ve
years
Due
beyond
?ve years Total
Due
within
one
year
Due
between
one
and ?ve
years
Due
beyond
?ve years Total
(€ million)
Total Other current liabilities (excluding
Accrued expenses and deferred income) 7,248 1,230 25 8,503 5,731 840 22 6,593
Advances on buy-back agreements refers to buy-back agreements entered into by the Group and includes the price
received for the product recognized as an advance at the date of the sale, and subsequently, the repurchase price
and the remaining lease installments yet to be recognized.
Indirect tax payables includes taxes on commercial transactions accrued by the Brazilian subsidiary, FIASA, for which
the company (as well as a number of important industrial groups which operate in Brazil) is awaiting the decision by
the Supreme Court regarding its claim alleging double taxation. In March 2007, FIASA received a preliminary trial
court decision allowing the payment of such tax on a taxable base consistent with the Group’s position. Since it is
a preliminary decision and the amount may be required to be paid to the tax authorities at any time, the difference
between the tax payments as preliminary allowed and the full amount determined as required by the legislation still in
force is recognized as a current liability due between one and ?ve years. Timing for the Supreme Court decision is not
predictable.
Included within Other current liabilities is the outstanding obligation of €417 million arising from the MOU signed
by FCA US and the UAW. For further information on the MOU refer to the section —Acquisition of the remaining
ownership interest in FCA US.
Deferred income includes the revenues not yet recognized in relation to separately-priced extended warranties and
service contracts offered by FCA US. These revenues will be recognized in the Consolidated income statement over
the contract period in proportion to the costs expected to be incurred based on historical information.
30. Fair value measurement
IFRS 13 - Fair Value Measurement establishes a hierarchy that categorizes into three levels the inputs to the valuation
techniques used to measure fair value by giving the highest priority to quoted prices (unadjusted) in active markets
for identical assets and liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs). In some
cases, the inputs used to measure the fair value of an asset or a liability might be categorized within different levels of
the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the
fair value hierarchy at the lowest level input that is signi?cant to the entire measurement.
Levels used in the hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities that the Group can
access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the assets or
liabilities, either directly or indirectly.
Level 3 inputs are unobservable inputs for the assets and liabilities.
2014
|
ANNUAL REPORT 237
Assets and liabilities that are measured at fair value on a recurring basis
The following table shows the fair value hierarchy for ?nancial assets and liabilities that are measured at fair value on a
recurring basis at December 31, 2014:
At December 31, 2014
Level 1 Level 2 Level 3 Total
Note (€ million)
Assets at fair value available-for-sale:
Investments at fair value with changes directly
in Other comprehensive income/(loss) (16) 110 14 — 124
Other non-current securities (16) 45 — 22 67
Current securities available-for-sale (19) 30 — — 30
Financial assets at fair value held-for-trading:
Current investments 36 — — 36
Current securities held for trading (19) 180 — — 180
Other ?nancial assets (20) 38 473 4 515
Cash and cash equivalents (21) 20,804 2,036 — 22,840
Total Assets 21,243 2,523 26 23,792
Other ?nancial liabilities (20) — 740 8 748
Total Liabilities — 740 8 748
In 2014, there were no transfers between Levels in the fair value hierarchy.
The fair value of Other ?nancial assets and liabilities, which mainly include derivatives ?nancial instruments, is
measured by taking into consideration market parameters at the balance sheet date and using valuation techniques
widely accepted in the ?nancial business environment. In particular:
the fair value of forward contracts and currency swaps is determined by taking the prevailing exchange rates and
interest rates at the balance sheet date;
the fair value of interest rate swaps and forward rate agreements is determined by taking the prevailing interest rates
at the balance sheet date and using the discounted expected cash ?ow method;
the fair value of combined interest rate and currency swaps is determined using the exchange and interest rates
prevailing at the balance sheet date and the discounted expected cash ?ow method;
the fair value of swaps and options hedging commodity price risk is determined by using suitable valuation
techniques and taking market parameters at the balance sheet date (in particular, underlying prices, interest rates
and volatility rates).
The par value of Cash and cash equivalents, which primarily consist of bank current accounts and time deposits,
certi?cates of deposit, commercial paper, bankers’ acceptances and money market funds, usually approximates fair
value due to the short maturity of these instruments. The fair value of money market funds is also based on available
market quotations. Where appropriate, the fair value of cash equivalents is determined with discounted expected cash
?ow techniques using observable market yields (represented in level 2).
238 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The following table provides a reconciliation for the changes in items measured at fair value and categorized as Level 3
in 2014:
Other non-current
securities
Other ?nancial
assets/(liabilities)
(€ million)
At December 31, 2013 12 2
Gains/(Losses) recognized in Consolidated income statement — 16
Gains/(Losses) recognized in Other comprehensive income/loss — (8)
Issues/Settlements 10 (14)
At December 31, 2014 22 (4)
The gains/losses included in the Consolidated income statement are recognized in Cost of sales for €16 million. The
gains and losses recognized in Other comprehensive income/(loss) have been included in Gains/(losses) on cash ?ow
hedging instruments for €8 million.
Assets and liabilities not measured at fair value on recurring basis
For ?nancial instruments represented by short-term receivables and payables, for which the present value of
future cash ?ows does not differ signi?cantly from carrying value, we assume that carrying value is a reasonable
approximation of the fair value. In particular, the carrying amount of Current receivables and Other current assets and
of Trade payables and Other current liabilities approximates their fair value.
Refer to Note 23 and Note 27 for a detailed discussion of the allocation of the fair value of the liability component of the
Mandatory Convertible Securities issued by FCA in December 2014.
Refer to section —Acquisition of the remaining ownership interest in FCA US for a discussion of the residual value
methodology used to determine the fair values of the acquired elements in connection with the transactions under the
Equity Recapture Agreement and MOU.
The following table represents carrying amount and fair value for the most relevant categories of ?nancial assets and
liabilities not measured at fair value on a recurring basis:
At December 31,
2014 2013
Carrying
amount
Fair
Value
Carrying
amount
Fair
Value
Note (€ million)
Dealer ?nancing 2,313 2,312 2,286 2,290
Retail ?nancing 1,039 1,032 970 957
Finance lease 349 351 297 296
Other receivables from ?nancing activities 142 142 118 118
Receivables from ?nancing activities (18) 3,843 3,837 3,671 3,661
Asset backed ?nancing 469 469 756 756
Bonds 17,648 18,794 14,466 15,464
Other debt 15,607 15,685 15,061 15,180
Debt (27) 33,724 34,948 30,283 31,400
The fair values of Receivables from ?nancing activities, which are categorized within the Level 3 of the fair value
hierarchy, have been estimated with discounted cash ?ows models. The most signi?cant inputs used for this
measurement are market discount rates that re?ect conditions applied in various reference markets on receivables
with similar characteristics, adjusted in order to take into account the credit risk of the counterparties.
2014
|
ANNUAL REPORT 239
Bonds that are traded in active markets for which close or last trade pricing is available are classi?ed within Level 1 of
the fair value hierarchy. Bonds for which such prices are not available (valued at the last available price or based on
quotes received from independent pricing services or from dealers who trade in such securities), which are primarily
the FCA US Secured Senior Notes (i.e. the 2019 Notes and 2021 Notes), are categorized as Level 2. At December 31,
2014, €13,433 million and €5,361 million of Bonds were classi?ed within Level 1 and Level 2, respectively.
The fair value of Other debt included in Level 2 of the fair value hierarchy has been estimated using discounted
cash ?ow models. The main inputs used are year-end market interest rates, adjusted for market expectations of the
Group’s non-performance risk implied in quoted prices of traded securities issued by the Group and existing credit
derivatives on Group liabilities. The fair value of the debt that requires signi?cant adjustments using unobservable
inputs is categorized in Level 3 of the fair value hierarchy. At December 31, 2014, €13,144 million and €2,541 million
of Other Debt were classi?ed within Level 2 and Level 3, respectively.
31. Related party transactions
Pursuant to IAS 24 - Related Party Disclosures, the related parties of the Group are entities and individuals capable
of exercising control, joint control or signi?cant in?uence over the Group and its subsidiaries. Related parties include
companies belonging to the Exor group (the largest shareholder of FCA through its 29.25 percent common shares
shareholding interest and 44.37% voting power at December 31, 2014) who also purchased U.S.$886 million (€730
million) in aggregate notional amount of mandatory convertible securities that were issued in December 2014 (Note
23). Related parties also include CNHI and other unconsolidated subsidiaries, associates or joint ventures of the
Group. In addition, at December 31, 2014, members of the FCA Board of Directors, Board of Statutory Auditors and
executives with strategic responsibilities and their families are also considered related parties.
The Group carries out transactions with unconsolidated subsidiaries, joint ventures, associates and other related
parties, on commercial terms that are normal in the respective markets, considering the characteristics of the goods or
services involved. Transactions carried out by the Group with unconsolidated subsidiaries, joint ventures, associates
and other related parties are primarily of those a commercial nature, which have had an effect on revenues, cost of
sales, and trade receivables and payables; these transactions primarily relate to:
the sale of motor vehicles to the joint ventures Tofas and FCA Bank leasing and renting subsidiaries;
the sale of engines, other components and production systems and the purchase of commercial vehicles with the
joint operation Sevel S.p.A. Amounts re?ected in the tables below represents amounts for FCA’s 50.0 percent
interest in 2012 and in 2013 when the interest in Sevel was accounted for as a joint operation;
the sale of engines, other components and production systems to companies of CNHI;
the provision of services and the sale of goods with the joint operation Fiat India Automobiles Limited. Amounts
re?ected in the tables below represents amounts for FCA’s 50.0 percent interest from 2012 when the entity became
a joint operation;
the provision of services and the sale of goods to the joint venture GAC Fiat Chrysler Automobiles Co. Ltd;
the provision of services (accounting, payroll, tax administration, information technology, purchasing and security) to
the companies of the CNHI;
the purchase of commercial vehicles from the joint venture Tofas;
the purchase of engines from the VM Motori group in 2012 and in the ?rst half of 2013;
the purchase of commercial vehicles under contract manufacturing agreement from CNHI.
240 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The most signi?cant ?nancial transactions with related parties generated Receivables from ?nancing activities of the
Group’s ?nancial services companies from joint ventures and Asset-backed ?nancing relating to amounts due to
FCA Bank for the sale of receivables which do not qualify for derecognition under IAS 39 – Financial Instruments:
Recognition and Measurement. At December 31, 2014 and at December 31, 2013, Receivables from ?nancing
activities due from related parties also included receivables due from CNHI mainly arising from customer factoring
provided by the Group’s ?nancial services companies. On the other hand, Debt due to related parties included certain
balances due to CNHI, mainly relating to factoring and dealer ?nancing in Latin America.
In accordance with IAS 24, transactions with related parties also include compensation payable to Directors, Statutory
Auditors and managers with strategic responsibilities.
The amounts of the transactions with related parties recognized in the Consolidated income statement were as follows:
For the years ended December 31,
2014 2013 2012
Net
Revenues
Cost of
sales
Selling,
general
and
adminis-
trative
costs
Financial
income/
(expenses)
Net
Revenues
Cost of
sales
Selling,
general
and
adminis-
trative
costs
Financial
income/
(expenses)
Net
Revenues
Cost of
sales
Selling,
general
and
adminis-
trative
costs
Financial
income/
(expenses)
(€ million)
Tofas 1,247 1,189 1 — 1,145 1,287 3 — 1,115 1,227 4 —
Sevel S.p.A. 274 — 4 — 237 — 3 — 235 — — —
FCA Bank 276 10 7 (29) 223 62 10 (24) 200 82 12 (28)
GAC Fiat Automobiles
Co Ltd 153 — — — 144 — 1 — 150 — — —
Fiat India Automobiles
Limited 17 — — — 14 — 2 1 19 — 1 —
Société Européenne
de Véhicules Légers
du Nord- Sevelnord
Société Anonyme
(*)
— — — — — — — — 24 218 — —
VM Motori Group — — — — — 121 — — — 215 — —
Other 18 22 — — 7 6 — — 6 4 — —
Total joint
arrangements 1,985 1,221 12 (29) 1,770 1,476 19 (23) 1,749 1,746 17 (28)
To-dis S.r.l. 46 2 — — 48 4 — — 48 2 — —
Arab American Vehicles
Company S.A.E. 28 — — — 15 — — — 24 — — —
Other 28 — 6 — 7 — 5 — 6 1 7 —
Total associates 102 2 6 — 70 4 5 — 78 3 7 —
CNHI 602 492 — — 703 500 — — 676 452 1 —
Directors, Statutory
Auditors and Key
Management — — 89 — — — 49 — — — 57 —
Other — 4 20 — — 24 13 — 1 36 7 —
Total CNHI, Directors
and others 602 496 109 — 703 524 62 — 677 488 65 —
Total unconsolidated
subsidiaries 52 7 21 (1) 45 15 28 1 38 99 27 3
Total transactions
with related parties 2,741 1,726 148 (30) 2,588 2,019 114 (22) 2,542 2,336 116 (25)
Total for the Group 96,090 83,146 7,084 (2,047) 86,624 74,326 6,702 (1,987) 83,765 71,473 6,775 (1,910)
(*)
At December 31, 2012, the Investment was classified as Asset held for sale, then transferred at the beginning of the 2013.
2014
|
ANNUAL REPORT 241
Non-?nancial assets and liabilities originating from related party transactions were as follows:
At December 31,
2014 2013
Trade
receivables
Trade
payables
Other
current
assets
Other
current
liabilities
Trade
receivables
Trade
payables
Other
current
assets
Other
current
liabilities
(€ million)
Tofas 48 160 — 1 50 232 — —
FCA Bank 65 234 6 92 49 165 1 93
GAC Fiat Automobiles Co Ltd 48 20 — 1 35 3 — 5
Sevel S.p.A. 12 — — 4 10 — 2 5
Fiat India Automobiles Limited 2 2 — — 5 1 — —
Other 9 2 — — 5 1 1 —
Total joint arrangements 184 418 6 98 154 402 4 103
Arab American Vehicles Company S.A.E. 16 9 — — 9 3 — —
Other 22 4 — 23 13 3 — 25
Total associates 38 13 — 23 22 6 — 25
CNHI 49 24 23 8 48 51 24 13
Directors, Statutory Auditors and Key
Management — — — — — — — 17
Other — 7 — — — 7 — 1
Total CNHI, Directors and others 49 31 23 8 48 58 24 31
Total unconsolidated subsidiaries 31 13 2 2 39 24 4 1
Total originating from related parties 302 475 31 131 263 490 32 160
Total for the Group 2,564 19,854 2,761 11,495 2,544 17,207 2,323 8,963
Financial assets and liabilities originating from related party transactions were as follows:
At December 31,
2014 2013
Current
receivables
from
?nancing
activities
Asset-
backed
?nancing Other debt
Current
receivables
from
?nancing
activities
Asset-
backed
?nancing Other debt
(€ million)
FCA Bank 73 100 4 54 85 270
Tofas 39 — — — — —
Sevel S.p.A. 5 — 13 14 — 10
Other 8 — — 18 — —
Total joint arrangements 125 100 17 86 85 280
Global Engine Alliance LLC — — — — — —
Other 7 — — 7 — —
Total associates 7 — — 7 — —
Total CNHI 6 — — 18 — 53
Total unconsolidated subsidiaries 24 — 30 38 — 20
Total originating from related parties 162 100 47 149 85 353
Total for the Group 3,843 469 33,255 3,671 756 29,527
242 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Commitments and Guarantees pledged in favor of related parties
Guarantees pledged in favor of related parties were as follows:
At December 31,
2014 2013
(€ million)
Joint ventures 11 6
Other related parties and CNHI — —
Unconsolidated subsidiaries 1 9
Total related parties guarantees 12 15
In addition, at December 31, 2014 and 2013, the Group had commitments for constitution, acquisition agreements
and capital increases in respect of Joint ventures for €3 million and €10 million, respectively. Additionally, with
reference to its interest in the joint venture Tofas, the Group had a take or pay commitment whose future minimum
expected obligations as of December 31, 2014 were as follows:
(€ million)
2015 82
2016 82
2017 85
2018 85
2019 80
2020 and thereafter 13
Emoluments to Directors, Statutory Auditors and Key Management
The fees of the Directors and Statutory Auditors of the Group for carrying out their respective functions, including
those in other consolidated companies, were as follows:
For the years ended December 31,
2014 2013 2012
(€ thousand)
Directors (a) 14,305 18,912 22,780
Statutory auditors of Fiat 186 230 229
Total emoluments 14,491 19,142 23,009
(a) This amount includes the notional compensation cost arising from stock grants granted to the Chief Executive Officer.
Additionally to the fees reported in the table above, in 2014 the Chief Executive Of?cer received a cash award of €24.7
million and was assigned a €12 million post-mandate award as a recognition he was instrumental in major strategic
and ?nancial accomplishments for the Group. Most notably, through his vision and guidance, FCA was formed,
creating enormous value for the Company, its shareholders and stakeholders.
In 2014, Ferrari S.p.A. booked a cost of €15 million in connection with the resignation of Mr. Luca Cordero di
Montezemolo, as Chairman of Ferrari S.p.A., former Director of Fiat.
The aggregate compensation payable to executives with strategic responsibilities was approximately €23 million for
2014 (€30 million in 2013 and €34 million in 2012). This is inclusive of the following:
an amount of approximately €9 million in 2014 (approximately €15 million in 2013 and approximately €19 million in
2012) for short-term employee bene?ts;
an amount of €2 million in 2014 (€3 million in 2013 and €5 million in 2012) as the FCA’s contribution to State and
employer de?ned contribution pension funds;
an amount of approximately €0 million in 2014 (€1 million in 2013 and approximately €0 million in 2012) for
termination bene?ts.
2014
|
ANNUAL REPORT 243
32. Explanatory notes to the Consolidated statement of cash ?ows
The Consolidated statement of cash ?ows sets out changes in Cash and cash equivalents during the year. As required
by IAS 7 – Statement of cash ?ows, cash ?ows are separated into operating, investing and ?nancing activities.
The effects of changes in exchange rates on cash and cash equivalents are shown separately under the line item
Translation exchange differences.
Cash ?ows provided by operating activities are mostly derived from the Group’s industrial activities.
The cash ?ows generated by the sale of vehicles under buy-back commitments and GDP vehicles, net of the amounts
included in Pro?t/(loss) for the year, are included under operating activities in a single line item which includes changes
in working capital arising from these transactions.
For the year ended December 31, 2014, Other non-cash items of €352 million mainly included (i) €381 million related
to the non-cash portion of the expense recognized in connection with the execution of the UAW MOU entered into by
FCA US on January 21, 2014, as described in the section —Acquisition of the remaining ownership interest in FCA
US, and (ii) €98 million remeasurement charge recognized as a result of the Group’s change in the exchange rate
used to remeasure its Venezuelan subsidiary’s net monetary assets in U.S. Dollars (Note 8) (reported, for the effect on
cash and cash equivalents, within “Translation exchange differences”) which were partially offset by (iii) the non-taxable
gain of €223 million on the remeasurement to fair value of the previously exercised options on approximately 10
percent of FCA US’s membership interest in connection with the Equity Purchase Agreement described above in the
section —Acquisition of the remaining ownership interest in FCA US.
For the year ended December 31, 2013, Other non-cash items of €535 million mainly included €336 million
impairment losses on tangible and intangible assets, €59 million loss related to the devaluation of the of?cial exchange
rate of the VEF relative to the U.S.$ (Note 8) and €56 million write-off of the book value of the Equity Recapture
Agreement Right. For 2012, Other non-cash items of €582 million mainly included impairment losses on ?xed assets,
the share of the net pro?t and loss of equity method investees and the effect of €515 million related to the adjustment
of the Consolidated income statement for 2012 following the retrospective adoption of IAS 19 revised from January 1,
2013, as if the amendment had always been applied.
Change in working capital generated cash of €965 million for the year ended December 31, 2014 primarily driven
by (a) €1,495 million increase in trade payables, mainly related to increased production in EMEA and NAFTA as a
result of increased consumer demand for vehicles, and increased capital expenditure, (b) €123 million decrease in
trade receivables in addition to (c) €21 million increase in net other current assets and liabilities, which were partially
offset by (d) €674 million increase in inventory (net of vehicles sold under buy-back commitments), mainly related to
increased ?nished vehicle and work in process levels at December 31, 2014 compared to December 31, 2013, in
part driven by higher production levels in late 2014 to meet anticipated consumer demand in the NAFTA, EMEA and
Maserati segments.
Change in working capital generated cash of €1,410 million for the year ended December 31, 2013 primarily driven
by (a) €1,328 million increase in trade payables, mainly related to increased production in NAFTA as a result of
increased consumer demand for vehicles, and increased production for Maserati and Ferrari (b) €817 million in net
other current assets and liabilities, mainly related to increases in accrued expenses and deferred income as well as
indirect taxes payables, (c) €213 million decrease in trade receivables, principally due to the contraction of sales
volumes in the EMEA and LATAM segments which were partially offset by (d) €948 million increase in inventory (net of
vehicles sold under buy-back commitments), mainly related to increased ?nished vehicle and work in process levels at
December 31, 2013 compared to December 31, 2012, in part driven by higher production levels in late 2013 to meet
anticipated consumer demand in the NAFTA, APAC, Maserati and Ferrari segments.
244 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Change in working capital generated cash of €689 million for the year ended December 31, 2012 primarily driven by
(a) €506 million increase in trade payables, mainly related to increased production in response to increased consumer
demand of vehicles especially in the NAFTA and APAC segments, partially offset by reduced production and sales
levels in the EMEA segment, (b) €961 million in other current assets and liabilities, primarily due to increases in
accrued expenses, deferred income and taxes which were partially offset by (c) €572 million increase in inventory (net
of vehicles sold under buy-back commitments), primarily due to increased ?nished vehicle and work in process levels
at December 31, 2012 versus December 31, 2011, driven by an increase in vehicle inventory levels in order to support
consumer demand in the NAFTA and APAC segments and (d) €206 million increase in trade receivables, primarily due
to an increase in receivables from third party international dealers and distributors due to increased sales at the end of
2012 as compared to 2011 due to consumer demand.
Cash ?ows for income tax payments net of refunds amount to €542 million in 2014 (€429 million in 2013 and €475
million in 2012).
In 2014, net cash provided by ?nancing activities was €2,137 million and was primarily the result of:
net proceeds from the issuance of the Mandatory Convertible Securities of €2,245 million, and the net proceeds
from the offering of the total 100 million common shares (65 million ordinary shares and 35 million of treasury
shares) of €849 million;
proceeds from bond issuances for a total amount of €4,629 million which includes (a) €2,556 million of notes
issued as part of the GMTN Program and (b) €2,073 million (for a total face value of U.S.$2,755 million) of Secured
Senior Notes issued by FCA US to facilitate the repayment of the VEBA Trust Note (see Note 27);
proceeds from new medium-term borrowings for a total of €4,876 million, which include (a) the incremental term
loan entered into by FCA US of U.S.$250 million (€181 million) under its existing tranche B term loan facility and
(b) the new U.S.$1,750 million tranche B (€1.3 billion), issued under a new term loan credit facility entered into by
FCA US as part of the re?nancing transaction to facilitate repayment of the VEBA Trust Note, and new medium term
borrowing in Brazil; and
a positive net contribution of €548 million from the net change in other ?nancial payables and other ?nancial assets/
liabilities
These positive items, were partially offset by:
the cash payment to the VEBA Trust for the acquisition of the remaining 41.5 percent ownership interest in FCA
US held by the VEBA Trust equal to U.S.$3,650 million (€2,691 million) and U.S.$60 million (€45 million) of tax
distribution by FCA US to cover the VEBA Trust’s tax obligation. The special distribution by FCA US and the cash
payment by FCA NA for an aggregate amount of €2,691 million is classi?ed as acquisition of non-controlling
interest on the Consolidated statement of cash ?ows while the tax distribution (€45 million) is classi?ed separately
(see Acquisition of the Remaining Ownership Interest in FCA US section above),
payment of medium-term borrowings for a total of €5,838 million, mainly related to the prepayment of all amounts
under the VEBA Trust Note amounting to approximately U.S.$5 billion (€3.6 billion), including accrued and unpaid
interest, and repayment of medium term borrowings primarily in Brazil;
the repayment on maturity of notes issued under the GMTN Program, for a total principal amount of €2,150 million;
and
the net cash disbursement of €417 million for the exercise of cash exit rights in connection with the Merger.
In 2013, net cash provided by ?nancing activities was €3,136 million and was primarily the result of:
proceeds from bond issuances for a total amount of €2,866 million, relating to notes issued as part of the GMTN
Program;
2014
|
ANNUAL REPORT 245
the repayment on maturity of notes issued under the GMTN Program in 2006, for a total principal amount of €1
billion; proceeds from new medium-term borrowings for a total of €3,188 million, which mainly include (a) medium
term borrowings in Brazil, (b) €400 million loan granted by the European Investment Bank in order to fund the
Group’s investments and research and development costs in Europe and (c) €595 million (U.S.$790 million) related
to the amendments and re-pricings in 2013 of the U.S.$3.0 billion tranche B term loan which matures May 24, 2017
and the Revolving Credit Facility.
repayment of medium-term borrowings on their maturity for a total of €2,258 million including the €595 million
(U.S.$790 million) relating to the amendments and re-pricings of the Senior Credit Facilities; and
a positive net contribution of €677 million from the net change in other ?nancial payables and other ?nancial assets/
liabilities.
Interest of €2,054 million in 2014 (€1,832 million in 2013 and €1,951 million in 2012) was paid and interest of €441
million (€398 million in 2013 and €647 million in 2012) was received in 2014. Amounts indicated are inclusive of
interest rate differentials paid or received on interest rate derivatives.
33. Guarantees granted, commitments and contingent liabilities
Guarantees granted
At December 31, 2014, the Group had pledged guarantees on the debt or commitments of third parties totaling €27
million (€31 million at December 31, 2013), as well as guarantees of €12 million on related party debt (€15 million at
December 31, 2013).
SCUSA Private-Label Financing Agreement
In February 2013, FCA US had entered into a private-label ?nancing agreement with Santander Consumer USA Inc.
(“SCUSA”), an af?liate of Banco Santander (the “SCUSA Agreement”). The new ?nancing arrangement launched
on May 1, 2013. Under the SCUSA Agreement, SCUSA provides a wide range of wholesale and retail ?nancing
services to FCA US’s dealers and consumers in accordance with its usual and customary lending standards, under
the Chrysler Capital brand name. The ?nancing services include credit lines to ?nance dealers’ acquisition of vehicles
and other products that FCA US sells or distributes, retail loans and leases to ?nance consumer acquisitions of new
and used vehicles at independent dealerships, ?nancing for commercial and ?eet customers, and ancillary services. In
addition, SCUSA will work with dealers to offer them construction loans, real estate loans, working capital loans and
revolving lines of credit.
The SCUSA Agreement has a ten-year term from February 2013, subject to early termination in certain circumstances,
including the failure by a party to comply with certain of its ongoing obligations under the SCUSA Agreement. In
accordance with the terms of the agreement, SCUSA provided an upfront, nonrefundable payment of €109 million
(U.S.$150 million) in May 2013, which was recognized as deferred revenue and is amortized over ten years. As of
December 31, 2014, €103 million (U.S. $125 million) remained in deferred revenue.
From time to time, FCA US works with certain lenders to subsidize interest rates or cash payments at the inception
of a ?nancing arrangement to incentivize customers to purchase its vehicles, a practice known as “subvention.” FCA
US has provided SCUSA with limited exclusivity rights to participate in speci?ed minimum percentages of certain of its
retail ?nancing rate subvention programs. SCUSA has committed to certain revenue sharing arrangements, as well as
to consider future revenue sharing opportunities. SCUSA bears the risk of loss on loans contemplated by the SCUSA
Agreement. The parties share in any residual gains and losses in respect of consumer leases, subject to speci?c
provisions in the SCUSA Agreement, including limitations on FCA US participation in gains and losses.
246 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Ally Auto Finance Operating Agreement and Repurchase Obligations
In April 2013, the Auto Finance Operating Agreement between FCA US and Ally Financial Inc. (“Ally”), referred as the
“Ally Agreement”, was terminated. Notwithstanding the termination of the Ally Agreement, Ally will continue to provide
wholesale and retail ?nancing to FCA US’s dealers and retail customers in the U.S. in accordance with its usual and
customary lending standards. Dealers and retail customers also obtain funding from other ?nancing sources.
In accordance with the terms of the Ally Agreement, FCA US remained obligated for one year to repurchase Ally-
?nanced U.S. dealer inventory that was acquired on or before April 30, 2013, upon certain triggering events and with
certain exceptions, in the event of an actual or constructive termination of a dealer’s franchise agreement, including
in certain circumstances when Ally forecloses on all assets of a dealer securing ?nancing provided by Ally. These
obligations excluded vehicles that had been damaged or altered, that were missing equipment or that had excessive
mileage or an original invoice date that was more than one year prior to the repurchase date. As of May 1, 2014, FCA
US was no longer obligated to repurchase dealer inventory acquired and ?nanced by Ally prior to April 30, 2013.
Other Repurchase Obligations
In accordance with the terms of other wholesale ?nancing arrangements in Mexico, FCA US is required to
repurchase dealer inventory ?nanced under these arrangements, upon certain triggering events and with certain
exceptions, including in the event of an actual or constructive termination of a dealer’s franchise agreement. These
obligations exclude certain vehicles including, but not limited to, vehicles that have been damaged or altered, that
are missing equipment or that have excessive mileage or an original invoice date that is more than one year prior to
the repurchase date.
As of December 31, 2014, the maximum potential amount of future payments required to be made in accordance
with these other wholesale ?nancing arrangements was approximately €258 million (U.S$313 million) and was based
on the aggregate repurchase value of eligible vehicles ?nanced through such arrangements in the respective dealer’s
stock. If vehicles are required to be repurchased through such arrangements, the total exposure would be reduced
to the extent the vehicles can be resold to another dealer. The fair value of the guarantee was less than €0.1 million
at December 31, 2014, which considers both the likelihood that the triggering events will occur and the estimated
payment that would be made net of the estimated value of inventory that would be reacquired upon the occurrence of
such events. These estimates are based on historical experience.
Arrangements with Key Suppliers
From time to time, in the ordinary course of our business, the Group enters into various arrangements with key third
party suppliers in order to establish strategic and technological advantages. A limited number of these arrangements
contain unconditional purchase obligations to purchase a ?xed or minimum quantity of goods and/or services with
?xed and determinable price provisions. Future minimum purchase obligations under these arrangements as of
December 31, 2014 were as follows:
(€ million)
2015 355
2016 301
2017 222
2018 215
2019 84
2020 and thereafter 168
2014
|
ANNUAL REPORT 247
Other commitments and important contractual rights
The Group has commitments and rights deriving from outstanding agreements which are summarized below.
Sevel S.p.A.
As part of the Sevel cooperation agreement with Peugeot-Citroen SA (“PSA”), the Group is party to a call agreement
with PSA whereby, from July 1, 2017 to September 30, 2017, the Group will have the right to acquire the residual
interest in the Joint operation Sevel with effect from December 31, 2017.
Operating lease contracts
The Group has entered operating lease contracts for the right to use industrial buildings and equipment with an
average term of 10-20 years and 3-5 years, respectively. At December 31, 2014, the total future minimum lease
payments under non-cancellable lease contracts are as follows:
At December 31, 2014
Due within
one year
Due
between
one and
three years
Due
between
three and
?ve years
Due
beyond
?ve years Total
(€ million)
Future minimum lease payments under operating lease agreements 161 263 173 218 815
During 2014, the Group recognized lease payments expenses of €195 million (€199 million in 2013).
Contingent liabilities
As a global group with a diverse business portfolio, the Group is exposed to numerous legal risks, particularly in the areas
of product liability, competition and antitrust law, environmental risks and tax matters, dealer and supplier relationships
and intellectual property rights. The outcome of any proceedings cannot be predicted with certainty. These proceedings
seek recovery for damage to property, personal injuries and in some cases include a claim for exemplary or punitive
damage. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully
covered, by insurers’ compensation payments and could affect the Group’s ?nancial position and results.
At December 31, 2014, contingent liabilities estimated by the Group for which no provisions have been recognized
since an out?ow of resources is not considered to be probable and contingent liabilities for which a reliable estimate
can be made amount to approximately €100 million at December 31, 2014 and 2013. Furthermore, contingent assets
and expected reimbursement in connection with these contingent liabilities for approximately €10 million (€12 million
at December 31, 2013) have been estimated but not recognized. The Group will recognize the related amounts when
it is probable that an out?ow of resources embodying economic bene?ts will be required to settle obligations and the
amounts can be reliably estimated.
Furthermore, in connection with signi?cant asset divestitures carried out in prior years, the Group provided indemnities
to purchasers with the maximum amount of potential liability under these contracts generally capped at a percentage
of the purchase price. These liabilities refer principally to potential liabilities arising from possible breaches of
representations and warranties provided in the contracts and, in certain instances, environmental or tax matters,
generally for a limited period of time. At December 31, 2014, potential obligations with respect to these indemnities
were approximately €240 million at December 31, 2014 and 2013. At December 31, 2014 provisions of €58
million (€62 million December 31, 2013) have been made related to these obligations which are classi?ed as Other
provisions. The Group has provided certain other indemni?cations that do not limit potential payment and as such, it
was not possible to estimate the maximum amount of potential future payments that could result from claims made
under these indemnities.
248 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
34. Segment reporting
The segments, as de?ned in the section - Segment reporting, re?ect the components of the Group that are regularly
reviewed by the Chief Executive Of?cer, who is the “chief operating decision maker”, for making strategic decisions,
allocating resources and assessing performance.
Transactions among car mass-market brand segments generally are presented on a “where-sold” basis, which
re?ects the pro?t/(loss) on the ultimate sale to the external customer within the segment. This presentation generally
eliminates the effect of the legal entity transfer price within the segments. For the segments which also provide
?nancial services activities, revenues and costs also include interest income and expense and other ?nancial income
and expense arising from those activities.
Revenues and EBIT of the other segments, aside from the car mass-market segments, are those directly generated by
or attributable to the segment as the result of its usual business activities and include revenues from transactions with
third parties as well as those arising from transactions with segments, recognized at normal market prices. For the
Ferrari and the Maserati segments, which also provide ?nancial services activities, revenues and costs include interest
income and expense, and other ?nancial income and expense arising from those activities.
Other activities include the results of the activities and businesses that are not operating segments under IFRS 8, the
Unallocated items and adjustments include consolidation adjustments and eliminations in addition to ?nancial income
and expense and income taxes that are not attributable to the performance of the segments and are subject to
separate assessment by the chief operating decision maker.
EBIT is the measure used by the chief operating decision maker to assess performance of and allocate resources to
our operating segments. Operating assets are not included in the data reviewed by the chief operating decision make,
and as a result and as permitted by IFRS 8, the related information is not provided.
Details of the Consolidated income statement by segment for the years ended December 31, 2014, 2013 and 2012
are as follows:
Car Mass-Market brands
Ferrari Maserati Components
Other
activities
Unallocated
items &
adjustments FCA 2014 NAFTA LATAM APAC EMEA
(€ million)
Revenues 52,452 8,629 6,259 18,020 2,762 2,767 8,619 831 (4,249) 96,090
Revenues from transactions
with other segments (271) (100) (10) (589) (264) (7) (2,559) (449) 4,249 —
Revenues from external
customers 52,181 8,529 6,249 17,431 2,498 2,760 6,060 382 — 96,090
Pro?t/(loss) from investments 1 — (50) 167 — — 7 6 — 131
Unusual income/(expenses)* (504) (112) — 4 (15) — (20) 7 212 (428)
EBIT 1,647 177 537 (109) 389 275 260 (114) 161 3,223
Net ?nancial income/
(expenses) (2,047)
Pro?t before taxes 1,176
Tax (income)/expenses 544
Pro?t 632
(*)
Includes Gains and (losses) on the disposal of investments, Restructuring costs/(income) and other unusual income/(expenses)
2014
|
ANNUAL REPORT 249
Car Mass-Market brands
Ferrari Maserati Components
Other
activities
Unallocated
items &
adjustments FCA 2013 NAFTA LATAM APAC EMEA
(€ million)
Revenues 45,777 9,973 4,668 17,335 2,335 1,659 8,080 929 (4,132) 86,624
Revenues from transactions
with other segments (173) (100) (2) (641) (198) (20) (2,544) (454) 4,132 —
Revenues from external
customers 45,604 9,873 4,666 16,694 2,137 1,639 5,536 475 — 86,624
Pro?t/(loss) from investments (1) — (46) 141 — — 5 (13) (2) 84
Unusual income/(expenses)* 71 (127) (1) (195) — (65) (60) (87) (55) (519)
EBIT 2,290 492 335 (506) 364 106 146 (167) (58) 3,002
Net ?nancial income/
(expenses) (1,987)
Pro?t before taxes 1,015
Tax (income)/expenses (936)
Pro?t 1,951
(*)
Includes Gains and (losses) on the disposal of investments, Restructuring costs/(income) and other unusual income/(expenses)
Car Mass-Market brands
Ferrari Maserati Components
Other
activities
Unallocated
items &
adjustments FCA 2012 NAFTA LATAM APAC EMEA
(€ million)
Revenues 43,521 11,062 3,173 17,717 2,225 755 8,030 979 (3,697) 83,765
Revenues from transactions
with other segments (27) (89) (2) (544) (82) (11) (2,489) (453) 3,697 —
Revenues from external
customers 43,494 10,973 3,171 17,173 2,143 744 5,541 526 — 83,765
Pro?t/(loss) from investments — — (20) 157 — — 2 (52) — 87
Unusual income/(expenses)* 48 (31) — (194) — — (11) (12) (44) (244)
EBIT 2,491 1,025 274 (725) 335 57 165 (149) (39) 3,434
Net ?nancial income/
(expenses) (1,910)
Pro?t before taxes 1,524
Tax (income)/expenses 628
Pro?t 896
(*)
Includes Gains and (losses) on the disposal of investments, Restructuring costs/(income) and other unusual income/(expenses)
Unallocated items, and in particular ?nancial income/(expenses), are not attributed to the segments as they do not fall
under the scope of their operational responsibilities and are therefore assessed separately. These items arise from the
management of treasury assets and liabilities by the treasuries of FCA and FCA US, which work independently and
separately within the Group.
Information about geographical area
At December 31,
2014 2013
(€ million)
Non-current assets (excluding ?nancial assets, deferred tax assets and post-employment
bene?ts assets) in:
North America 30,539 26,689
Italy 11,538 10,710
Brazil 4,638 2,955
Poland 1,183 1,277
Serbia 882 1,007
Other countries 2,129 1,848
Total Non-current assets (excluding ?nancial assets, deferred tax assets and post-
employment bene?ts assets) 50,909 44,486
250 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
35. Qualitative and quantitative information on ?nancial risks
The Group is exposed to the following ?nancial risks connected with its operations:
credit risk, arising both from its normal commercial relations with ?nal customers and dealers, and its ?nancing
activities;
liquidity risk, with particular reference to the availability of funds and access to the credit market and to ?nancial
instruments in general;
?nancial market risk (principally relating to exchange rates, interest rates and commodity prices), since the Group
operates at an international level in different currencies and uses ?nancial instruments which generate interests. The
Group is also exposed to the risk of changes in the price of certain commodities and of certain listed shares.
These risks could signi?cantly affect the Group’s ?nancial position and results, and for this reason the Group
systematically identi?es, and monitors these risks, in order to detect potential negative effects in advance and take the
necessary action to mitigate them, primarily through its operating and ?nancing activities and if required, through the
use of derivative ?nancial instruments in accordance with established risk management policies.
Financial instruments held by the funds that manage pension plan assets are not included in this analysis (see Note 25).
The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon the
Group. The quantitative data reported in the following does not have any predictive value, in particular the sensitivity
analysis on ?nance market risks does not re?ect the complexity of the market or the reaction which may result from
any changes that are assumed to take place.
Credit risk
Credit risk is the risk of economic loss arising from the failure to collect a receivable. Credit risk encompasses the
direct risk of default and the risk of a deterioration of the creditworthiness of the counterparty.
The Group’s credit risk differs in relation to the activities carried out. In particular, dealer ?nancing and operating and
?nancial lease activities that are carried out through the Group’s ?nancial services companies are exposed both to the
direct risk of default and the deterioration of the creditworthiness of the counterparty, while the sale of vehicles and
spare parts is mostly exposed to the direct risk of default of the counterparty. These risks are however mitigated by the
fact that collection exposure is spread across a large number of counterparties and customers.
Overall, the credit risk regarding the Group’s trade receivables and receivables from ?nancing activities is concentrated
in the European Union, Latin America and North American markets.
In order to test for impairment, signi?cant receivables from corporate customers and receivables for which collectability
is at risk are assessed individually, while receivables from end customers or small business customers are grouped
into homogeneous risk categories. A receivable is considered impaired when there is objective evidence that the
Group will be unable to collect all amounts due speci?ed in the contractual terms. Objective evidence may be provided
by the following factors: signi?cant ?nancial dif?culties of the counterparty, the probability that the counterparty will
be involved in an insolvency procedure or will default on its installment payments, the restructuring or renegotiation
of open items with the counterparty, changes in the payment status of one or more debtors included in a speci?c
risk category and other contractual breaches. The calculation of the amount of the impairment loss is based on the
risk of default by the counterparty, which is determined by taking into account all the information available as to the
customer’s solvency, the fair value of any guarantees received for the receivable and the Group’s historical experience.
The maximum credit risk to which the Group is theoretically exposed at December 31, 2014 is represented by the
carrying amounts of ?nancial assets in the ?nancial statements and the nominal value of the guarantees provided on
liabilities and commitments to third parties as discussed in Note 33.
2014
|
ANNUAL REPORT 251
Dealers and ?nal customers for which the Group provides ?nancing are subject to speci?c assessments of their
creditworthiness under a detailed scoring system; in addition to carrying out this screening process, the Group also
obtains ?nancial and non-?nancial guarantees for risks arising from credit granted. These guarantees are further
strengthened where possible by reserve of title clauses on ?nanced vehicle sales to the sales network made by Group
?nancial service companies and on vehicles assigned under ?nance and operating lease agreements.
Receivables for ?nancing activities amounting to €3,843 million at December 31, 2014 (€3,671 million at
December 31, 2013) contain balances totaling €3 million (€21 million at December 31, 2013), which have been
written down on an individual basis. Of the remainder, balances totaling €71 million are past due by up to one month
(€72 million at December 31, 2013), while balances totaling €31 million are past due by more than one month (€23
million at December 31, 2013). In the event of installment payments, even if only one installment is overdue, the entire
receivable balance is classi?ed as overdue.
Trade receivables and Other current receivables amounting to €4,810 million at December 31, 2014 (€4,425 million
at December 31, 2013) contain balances totaling €19 million (€19 million at December 31, 2013) which have been
written down on an individual basis. Of the remainder, balances totaling €248 million are past due by up to one month
(€243 million at December 31, 2013), while balances totaling €280 million are past due by more than one month
(€376 million at December 31, 2013).
Provided that Current securities and Cash and cash equivalents consist of balances spread across various primary
national and international banking institutions and money market instruments that are measured at fair value, there
was no exposure to sovereign debt securities at December 31, 2014 which might lead to signi?cant repayment risk.
Liquidity risk
Liquidity risk arises if the Group is unable to obtain the funds needed to carry out its operations under economic
conditions. Any actual or perceived limitations on the Group’s liquidity may affect the ability of counterparties to do
business with the Group or may require additional amounts of cash and cash equivalents to be allocated as collateral
for outstanding obligations.
The continuation of a dif?cult economic situation in the markets in which the Group operates and the uncertainties
that characterize the ?nancial markets, necessitate special attention to the management of liquidity risk. In that sense,
measures taken to generate funds through operations and to maintain a conservative level of available liquidity are
important factors for ensuring operational ?exibility and addressing strategic challenges over the next few years.
The two main factors that determine the Group’s liquidity situation are on the one hand the funds generated by or
used in operating and investing activities and on the other the debt lending period and its renewal features or the
liquidity of the funds employed and market terms and conditions.
The Group has adopted a series of policies and procedures whose purpose is to optimize the management of funds
and to reduce liquidity risk as follows:
centralizing the management of receipts and payments, where it may be economical in the context of the local civil,
currency and ?scal regulations of the countries in which the Group is present;
maintaining a conservative level of available liquidity;
diversifying the means by which funds are obtained and maintaining a continuous and active presence in the capital
markets;
obtaining adequate credit lines;
monitoring future liquidity on the basis of business planning.
252 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
From an operating point of view, the Group manages liquidity risk by monitoring cash ?ows and keeping an adequate
level of funds at its disposal. The operating cash ?ows, main funding operations and liquidity of the Group (excluding
FCA US) are centrally managed in the Group’s treasury companies with the aim of ensuring effective and ef?cient
management of the Group’s funds. These companies obtain funds in the ?nancial markets various funding sources.
FCA US currently manages its liquidity independently from the rest of the Group. Intercompany ?nancing from FCA US
to other Group entities is not restricted other than through the application of covenants requiring that transactions with
related parties be conducted at arm’s length terms or be approved by a majority of the “disinterested” members of the
Board of Directors of FCA US. In addition certain of FCA US ’s ?nance agreements restrict the distributions which it is
permitted to make. In particular, dividend distributions, other than certain exceptions including permitted distributions
and distributions with respect to taxes, are generally limited to an amount not to exceed 50.0 percent of cumulative
consolidated net income (as de?ned in the agreements) from January 1, 2012 less the amount of the January 2014
distribution that was used to pay the VEBA Trust for the acquisition of the remaining 41.5 percent interest in FCA US
not previously owned by FCA.
FCA has not provided any guarantee, commitment or similar obligation in relation to any of FCA US’s ?nancial
indebtedness, nor has it assumed any kind of obligation or commitment to fund FCA US. However, certain bonds
issued by FCA and its subsidiaries (other than FCA US and its subsidiaries) include covenants which may be affected
by circumstances related to FCA US, in particular in relation to cross-default clauses which may accelerate the
repayments in the event that FCA US fails to pay certain of its debt obligations.
Details of the repayment structure of the Group’s ?nancial assets and liabilities are provided in Note 18 and in Note 27.
Details of the repayment structure of derivative ?nancial instruments are provided in Note 20.
The Group believes that the funds currently available to the treasuries of the Group and FCA US, in addition to those
that will be generated from operating and ?nancing activities, will enable the Group to satisfy the requirements of its
investing activities and working capital needs, ful?ll its obligations to repay its debt at the natural due dates and ensure
an appropriate level of operating and strategic ?exibility.
Financial market risks
Due to the nature of our business, the Group is exposed to a variety of market risks, including foreign currency
exchange rate risk, commodity price risk and interest rate risk.
The Group’s exposure to foreign currency exchange rate risk arises both in connection with the geographical
distribution of the Group’s industrial activities compared to the markets in which it sells its products, and in relation to
the use of external borrowing denominated in foreign currencies.
The Group’s exposure to interest rate risk arises from the need to fund industrial and ?nancial operating activities and
the necessity to deploy surplus funds. Changes in market interest rates may have the effect of either increasing or
decreasing the Group’s net pro?t/(loss), thereby indirectly affecting the costs and returns of ?nancing and investing
transactions.
The Group’s exposure to commodity price risk arises from the risk of changes occurring in the price of certain raw
materials and energy used in production. Changes in the price of raw materials could have a signi?cant effect on the
Group’s results by indirectly affecting costs and product margins.
These risks could signi?cantly affect the Group’s ?nancial position and results, and for this reason these risks are
systematically identi?ed and monitored, in order to detect potential negative effects in advance and take the necessary
actions to mitigate them, primarily through its operating and ?nancing activities and if required, through the use of
derivative ?nancial instruments in accordance with its established risk management policies.
The Group’s policy permits derivatives to be used only for managing the exposure to ?uctuations in foreign currency
exchange rates and interest rates as well as commodities prices connected with future cash ?ows and assets and
liabilities, and not for speculative purposes.
2014
|
ANNUAL REPORT 253
The Group utilizes derivative ?nancial instruments designated as fair value hedges mainly to hedge:
the foreign currency exchange rate risk on ?nancial instruments denominated in foreign currency; and
the interest rate risk on ?xed rate loans and borrowings.
The instruments used for these hedges are mainly foreign currency forward contracts, interest rate swaps and
combined interest rate and foreign currency ?nancial instruments.
The Group uses derivative ?nancial instruments as cash ?ow hedges for the purpose of pre-determining:
the exchange rate at which forecasted transactions denominated in foreign currencies will be accounted for;
the interest paid on borrowings, both to match the ?xed interest received on loans (customer ?nancing activity), and
to achieve a targeted mix of ?oating versus ?xed rate funding structured loans; and
the price of certain commodities.
The foreign currency exchange rate exposure on forecasted commercial ?ows is hedged by foreign currency swaps
and forward contracts. Interest rate exposures are usually hedged by interest rate swaps and, in limited cases, by
forward rate agreements. Exposure to changes in the price of commodities is generally hedged by using commodity
swaps and commodity options.
Counterparties to these agreements are major ?nancial institutions.
Information on the fair value of derivative ?nancial instruments held at the balance sheet date is provided in Note 20.
The following section provides qualitative and quantitative disclosures on the effect that these risks may have. The
quantitative data reported below does not have any predictive value, in particular the sensitivity analysis on ?nancial
market risks does not re?ect the complexity of the market or the reaction which may result from any changes that are
assumed to take place.
Financial instruments held by the funds that manage pension plan assets are not included in this analysis.
Quantitative information on foreign currency exchange rate risk
The Group is exposed to risk resulting from changes in foreign currency exchange rates, which can affect its earnings
and equity. In particular:
where a Group company incurs costs in a currency different from that of its revenues, any change in exchange
rates can affect the operating results of that company. In 2014, the total trade ?ows exposed to foreign currency
exchange rate risk amounted to the equivalent of 15 percent of the Group’s turnover.
the principal exchange rates to which the Group is exposed are the following:
U.S. Dollar/CAD, primarily relating to FCA US’s Canadian manufacturing operations;
EUR/U.S. Dollar, relating to sales in U.S. Dollars made by Italian companies (in particular, companies belonging to
the Ferrari and Maserati segments) and to sales and purchases in Euro made by FCA US;
CNY, in relation to sales in China originating from FCA US and from Italian companies (in particular, companies
belonging to the Ferrari and Maserati segments);
GBP, AUD, MXN, CHF, ARS and VEF in relation to sales in the UK, Australian, Mexican, Swiss, Argentinean and
Venezuelan markets;
PLN and TRY, relating to manufacturing costs incurred in Poland and Turkey;
JPY mainly in relation to purchase of parts from Japanese suppliers and sales of vehicles in Japan;
U.S. Dollar/BRL, EUR/BRL, relating to Brazilian manufacturing operations and the related import and export ?ows.
Overall trade ?ows exposed to changes in these exchange rates in 2014 made up approximately 90.0 percent of
the exposure to currency risk from trade transactions.
254 2014
|
ANNUAL REPORT
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
The Group’s policy is to use derivative ?nancial instruments to hedge a percentage of certain exposures subject
to foreign currency exchange rate risk for the upcoming 12 months (including such risk before or beyond that
date where it is deemed appropriate in relation to the characteristics of the business) and to hedge completely the
exposure resulting from ?rm commitments unless not deemed appropriate.
Group companies may have trade receivables or payables denominated in a currency different from the functional
currency of the company. In addition, in a limited number of cases, it may be convenient from an economic point of
view, or it may be required under local market conditions, for companies to obtain ?nancing or use funds in a currency
different from the functional currency of the respective company. Changes in exchange rates may result in exchange
gains or losses arising from these situations. The Group’s policy is to hedge fully, whenever deemed appropriate,
the exposure resulting from receivables, payables and securities denominated in foreign currencies different from the
company’s functional currency.
Certain of the Group’s subsidiaries are located in countries which are outside of the Eurozone, in particular the U.S.,
Brazil, Canada, Poland, Serbia, Turkey, Mexico, Argentina, the Czech Republic, India, China and South Africa. As the
Group’s reference currency is the Euro, the income statements of those entities are converted into Euros using the
average exchange rate for the period, and while revenues and margins are unchanged in local currency, changes in
exchange rates may lead to effects on the converted balances of revenues, costs and the result in Euro.
The monetary assets and liabilities of consolidated companies who have a reporting currency other than the Euro, are
translated into Euro at the period-end foreign exchange rate. The effects of these changes in foreign exchange rates are
recognized directly in the Cumulative Translation Adjustments reserve, included in other comprehensive income/(losses).
The Group monitors its principal exposure to conversion exchange risk, although there was no speci?c hedging in this
respect at the balance sheet dates.
There have been no substantial changes in 2014 in the nature or structure of exposure to foreign currency exchange
rate risk or in the Group’s hedging policies.
The potential loss in fair value of derivative ?nancial instruments held for foreign currency exchange rate risk
management (currency swaps/forwards, currency options, cross-currency interest rate and currency swaps) at
December 31, 2014 resulting from a hypothetical 10 percent change in the exchange rates would have been
approximately €1,402 million (€745 million at December 31, 2013). Compared to December 31, 2013, the increase
resulting from the change in exchange rates is due to the higher volumes of outstanding derivatives, mainly related to
increased exposures.
Receivables, payables and future trade ?ows whose hedging transactions have been analyzed were not considered in
this analysis. It is reasonable to assume that changes in exchange rates will produce the opposite effect, of an equal or
greater amount, on the underlying transactions that have been hedged.
Quantitative information on interest rate risk
The manufacturing companies and treasuries of the Group make use of external borrowings and invest in monetary
and ?nancial market instruments. In addition, Group companies sell receivables resulting from their trading activities
on a continuing basis. Changes in market interest rates can affect the cost of the various forms of ?nancing, including
the sale of receivables, or the return on investments, and the employment of funds, thus negatively impacting the net
?nancial expenses incurred by the Group.
In addition, the ?nancial services companies provide loans (mainly to customers and dealers), ?nancing themselves
using various forms of direct debt or asset-backed ?nancing (e.g. factoring of receivables). Where the characteristics
of the variability of the interest rate applied to loans granted differ from those of the variability of the cost of the
?nancing obtained, changes in the current level of interest rates can affect the operating result of those companies and
the Group as a whole.
In order to manage these risks, the Group uses interest rate derivative ?nancial instruments, mainly interest rate
swaps and forward rate agreements, when available in the market, with the object of mitigating, under economically
acceptable conditions, the potential variability of interest rates on net pro?t/(loss).
2014
|
ANNUAL REPORT 255
In assessing the potential impact of changes in interest rates, the Group segregates ?xed rate ?nancial instruments
(for which the impact is assessed in terms of fair value) from ?oating rate ?nancial instruments (for which the impact is
assessed in terms of cash ?ows).
The ?xed rate ?nancial instruments used by the Group consist principally of part of the portfolio of the ?nancial services
companies (basically customer ?nancing and ?nancial leases) and part of debt (including subsidized loans and bonds).
The potential loss in fair value of ?xed rate ?nancial instruments (including the effect of interest rate derivative ?nancial
instruments) held at December 31, 2014, resulting from a hypothetical 10.0 percent change in market interest rates,
would have been approximately €100 million (approximately €110 million at December 31, 2013).
Floating rate ?nancial instruments consist principally of cash and cash equivalents, loans provided by the ?nancial
services companies to the sales network and part of debt. The effect of the sale of receivables is also considered in
the sensitivity analysis as well as the effect of hedging derivative instruments.
A hypothetical 10.0 percent change in short-term interest rates at December 31, 2014, applied to ?oating rate ?nancial
assets and liabilities, operations for the sale of receivables and derivative ?nancial instruments, would have resulted
in increased net ?nancial expenses before taxes, on an annual basis, of approximately €12 million (€13 million at
December 31, 2013).
This analysis is based on the assumption that there is a general and instantaneous change of 10.0 percent in interest
rates across homogeneous categories. A homogeneous category is de?ned on the basis of the currency in which
the ?nancial assets and liabilities are denominated. In addition, the sensitivity analysis applied to ?oating rate ?nancial
instruments assumes that cash and cash equivalents and other short-term ?nancial assets and liabilities which expire
during the projected 12 month period will be renewed or reinvested in similar instruments, bearing the hypothetical
short-term interest rates.
Quantitative information on commodity price risk
The Group has entered into derivative contracts for certain commodities to hedge its exposure to commodity price risk
associated with buying raw materials and energy used in its normal operations.
In connection with the commodity price derivative contracts outstanding at December 31, 2014, a hypothetical
10.0 percent change in the price of the commodities at that date would have caused a fair value loss of €50 million
(€45 million at December 31, 2013). Future trade ?ows whose hedging transactions have been analyzed were not
considered in this analysis. It is reasonable to assume that changes in commodity prices will produce the opposite
effect, of an equal or greater amount, on the underlying transactions that have been hedged.
36. Subsequent events
The Group has evaluated subsequent events through March 5, 2015, which is the date the ?nancial statements were
authorized for issuance. There were no subsequent events.
Company
Financial Statements
AT DECEMBER 31, 2014
Income Statement ________________________________________________________________________________ 258
Statement of Financial Position ____________________________________________________________________ 259
Notes to the Company Financial Statements _________________________________________________________ 260
Other Information _________________________________________________________________________________ 272
258 2014
|
ANNUAL REPORT
Company Financial
Statements
Income Statement
Income Statement
for the years ended December 31, 2014 and 2013
For the years ended December 31,
2014 2013
Note (€ million)
Result from investments (1) 1,131 1,127
Other operating income (2) 63 83
Personnel costs (3) (28) (39)
Other operating costs (4) (132) (72)
Financial income/(expense) (5) (475) (210)
PROFIT BEFORE TAXES 559 889
Income taxes (6) 9 15
PROFIT FROM CONTINUING OPERATIONS 568 904
Pro?t from discontinued operations — —
PROFIT 568 904
The accompanying notes are an integral part of the Company Financial Statements.
2014
|
ANNUAL REPORT
Company Financial
Statements
259
Statement
of Financial Position
Statement of Financial Position
At December 31, 2014 and 2013
2014 2013
(€ million)
ASSETS
Property, plant and equipment (7) 29 30
Equity investments (8) 22,227 12,695
Other ?nancial assets (9) 1,329 14
Total Fixed Assets 23,585 12,739
Trade receivables (10) 14 7
Other current receivables (11) 326 191
Cash and cash equivalents (12) 11 1
Total current assets 351 199
TOTAL ASSETS 23,936 12,938
EQUITY AND LIABILITIES
Equity (13)
Share capital 17 4,477
Capital reserve 3,742 —
Legal reserves 10,556 6,081
Retained pro?t/(loss) (1,458) (3,136)
Pro?t/(loss) for the year 568 904
Total equity 13,425 8,326
Provisions for employee bene?ts and other provisions (14) 27 143
Non-current debt (15) 197 414
Other non-current liabilities (16) 15 16
Deferred tax liabilities (6) 8 12
Total non-current liabilities 247 585
Provisions for employee bene?ts and other current provisions (17) 2 11
Trade payables (18) 19 19
Current debt (19) 9,714 3,780
Other ?nancial liabilities (9) 135 —
Other debt (20) 394 217
Total current liabilities 10,264 4,027
TOTAL EQUITY AND LIABILITIES 23,936 12,938
The accompanying notes are an integral part of the Company Financial Statements.
260 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
Notes to the Company Financial Statements
PRINCIPAL ACTIVITIES
On January 29, 2014, the Board of Directors of Fiat approved a proposed corporate reorganization resulting in the
formation of Fiat Chrysler Automobiles N.V. (“FCA” or the “Company”) as a fully integrated global automaker. The
Board determined that a redomiciliation into the Netherlands with a listing on the NYSE and an additional listing on
the Mercato Telematico Azionario (“MTA”) would be the structure most suitable to Fiat’s pro?le and its strategic and
?nancial objectives. FCA principal executive of?ces were established in London - United Kingdom.
The principal steps in the reorganization were:
Fiat Chrysler Automobiles N.V. was incorporated as a public limited liability company (naamloze vennootschap)
under the laws of the Netherlands on April 1, 2014 under the name Fiat Investments N.V.,
on June 15, 2014 the Board of Directors of Fiat approved the merger plan and,
at the extraordinary general meeting held on August 1, 2014, the shareholders of Fiat SpA (“Fiat”) approved the
merger which became effective on October 12, 2014.
FCA ?nancial statements are prepared in euros, the Company’s functional currency.
The Statements of Income and of Financial Position and Notes to the Financial Statements are presented in million of
euros, except where otherwise stated.
As parent company, FCA has also prepared consolidated ?nancial statements for FCA Group for the year ended
December 31, 2014.
The FCA Merger
As reported above, on June 15, 2014, the Board of Directors of Fiat approved the terms of a cross-border legal
merger of Fiat into its 100 percent owned direct subsidiary Fiat Investments N.V. (the “Merger”), subject to several
conditions precedent. At that time, Fiat ordinary shares were listed on the Mercato Telematico Azionario (“MTA”)
organized and managed by Borsa Italiana S.p.A, as well as Euronext Paris and Frankfurt stock exchange. On October
7, 2014, Fiat announced that all conditions precedent for the completion of the Merger were satis?ed:
Fiat shareholders had voted and approved the Merger at their extraordinary general meeting held on August 1,
2014. The New York Stock Exchange (“NYSE”) had provided notice that the listing of Fiat Chrysler Automobiles
N.V. common shares was approved on October 6, 2014 subject to issuance of these shares upon effectiveness of
the Merger. On the same day Borsa Italiana S.p.A. had approved the listing of the common shares of Fiat Chrysler
Automobiles N.V. on the MTA,
the creditors’ opposition period provided under the Italian law had expired on October 4, 2014, and no creditors’
oppositions were ?led,
exercise of the Cash Exit Rights by Fiat shareholders resulted in a total exercise of 60,002,027 Fiat shares,
equivalent to an aggregate amount of €464 million at the €7.727 per share exit price, and
pursuant to the Italian Civil Code, a total of 60,002,027 Fiat shares (equivalent to an aggregate amount of €464
million at the €7.727 per share exit price) were offered to Fiat shareholders not having exercised the Cash Exit
Rights. On October 7, 2014, at the completion of the offer period, Fiat shareholders elected to purchase 6,085,630
shares out of the total of 60,002,027 shares for a total of €47 million; as a result, concurrent with the Merger,
on October 12, 2014, 53,916,397 Fiat shares were canceled in the Merger with a resulting net aggregate cash
disbursement of €417 million.
2014
|
ANNUAL REPORT 261
The Merger was completed and became effective on October 12, 2014. The Merger, which took the form of a reverse
merger resulted in Fiat Investments N.V. being the surviving entity which was then renamed Fiat Chrysler Automobiles
N.V.. On October 13, 2014, FCA common shares commenced trading on the NYSE and on the MTA. The last day of
trading of Fiat ordinary shares on the MTA, Euronext France and Deutsche Börse was October 10, 2014. The Merger is
recognized in FCA’s ?nancial statements from January 1, 2014 and FCA, as successor of Fiat, is the parent company.
As the Merger resulted in FCA being the surviving entity, all Fiat ordinary shares outstanding as of the Merger date
(1,167,181,255 ordinary shares) were canceled and exchanged. FCA allotted one new FCA common share (each having
a nominal value of €0.01) for each Fiat ordinary share (each having a nominal value of €3.58). FCA also issued special
voting shares (non-tradable) which were allotted to eligible Fiat shareholders who had elected to receive special voting
shares. On the base of the requests received, FCA issued a total of 408,941,767 special voting shares.
SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The 2014 Company ?nancial statements represent the separate ?nancial statements of the parent company, Fiat
Chrysler Automobiles N.V., and have been prepared in accordance with the legal requirements of Title 9, Book 2 of
the Dutch Civil Code. Section 362 (8), Book 2, Dutch Civil Code, allows companies that apply IFRS as adopted by the
European Union in their consolidated ?nancial statements to use the same measurement principles in their company
?nancial statements. The accounting policies are described in a speci?c section, Signi?cant accounting policies, of
the Consolidated Financial Statements included in this Annual Report. However, as allowed by the law, investments in
subsidiaries and associates are accounted for using the net equity value in the Company ?nancial statements.
With reference to the Merger, it has been accounted for using the “pooling of interest method”, therefore comparative
?gures for the year ended December 31, 2013 have been adjusted as if the companies had always been merged.
Format of the ?nancial statements
Given the activities carried out by FCA, presentation of the Company Income Statement is based on the nature of
revenues and expenses. The Consolidated Income Statement for FCA is classi?ed according to function (also referred
to as the “cost of sales” method), which is considered more representative of the format used for internal reporting and
management purposes and is in line with international practice in the industry.
262 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
COMPOSITION AND PRINCIPAL CHANGES
1. Result from investments
The following is a breakdown of the result of investments:
For the years ended December 31,
2014 2013
(€ million)
Share of the pro?t/(loss) of subsidiaries and associates 1,124 1,120
Dividends from other companies 7 7
Total result of investments 1,131 1,127
The item includes primarily the Company’s share in the net pro?t or loss of the subsidiaries and associates, in addition
to dividends received from CNH Industrial N.V.
2. Other operating income
The following is a breakdown of other operating income:
For the years ended December 31,
2014 2013
(€ million)
Revenues from services rendered to, and other income from, Group companies
and other related parties 61 80
Other revenues and income from third parties 2 3
Total Other operating income 63 83
Revenues from services rendered to Group companies consisted of services rendered by FCA and its managers to the
principal subsidiaries of the Group. The decrease from 2013 is due to the reduced scope of activities of the company
during the year as a consequence of the re-organization.
3. Personnel costs
Personnel costs consisted of the following:
For the years ended December 31,
2014 2013
(€ million)
Wages and salaries (16) (24)
De?ned contribution plans and social security contributions (7) (10)
Other personnel costs (5) (5)
Total personnel costs (28) (39)
The average number of employees decreased from 236 in 2013 to 140 in 2014 due to the reshape of the Company
functions following the reorganization. As described in Note 2, some of the Company’s managers carried out their
activities at the principal subsidiaries of the Group and the associated costs were charged back to the companies
concerned.
2014
|
ANNUAL REPORT 263
4. Other operating costs
The following is a breakdown of other operating costs:
For the years ended December 31,
2014 2013
(€ million)
Costs for services rendered by Group companies and other related parties (25) (25)
Costs for services rendered by third parties (34) (24)
Compensation component from stock grant plans (2) (6)
Depreciation and amortization (2) (2)
Leases and rentals (3) (4)
Other (66) (11)
Total other operating costs (132) (72)
Costs for services rendered by Group companies primarily consisted of support and consulting services in the
administrative area, as well as IT systems, public relations, payroll, security and facility management.
Costs for services rendered by third parties principally included legal, administrative, ?nancial and IT services. Increase
in 2014 primarily re?ects the costs incurred for the reorganization, including the Merger and the listing of the Company
to the NYSE and MTA in Milan.
The compensation component from stock grant plans represents the notional cost of the Long Term Incentive Plan
awarded to the Chief Executive Of?cer, which was recognized directly in the equity reserve.
Increase in other costs primarily refers to Directors compensations as reported in details into the section
“Remuneration of Directors” in the Report on Operations.
5. Net ?nancial income/(expenses)
The breakdown of ?nancial income and expense was as follows:
For the years ended December 31,
2014 2013
(€ million)
Financial income 85 8
Financial expense (564) (249)
Currency exchange gains/(losses) 143 —
Net gains/(losses) on derivative ?nancial instruments (139) 31
Total ?nancial income/(expense) (475) (210)
Financial income are most entirely related to the USD 1.5 billion loan extended in January 2014 to Fiat Chrysler
Automobiles North America Holdings LLC (previously named Fiat North America LLC) to fund partially the acquisition
of 41.5% of FCA US (previously named Chrysler Group LLC).
Increase in ?nancial expense is driven by increase in debt due to the acquisition of the whole capital of Fiat Chrysler
Automobiles North America Holdings LLC from FCA Italy S.p.A in October 2014 for a €7.25 billion consideration.
Currency exchange gains/(losses) and losses on derivatives are related to the USD 1.5 billion loan mentioned above
which is fully hedged into euro. Net gains on derivative ?nancial instruments of €31 million in 2013 essentially related
to the closure, in December 2013, of the equity swaps contracts entered into as hedges on stock options granted to
the Chief Executive Of?cer in 2004 and 2006.
264 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
6. Income taxes
Income taxes were a gain of €9 million in the current year (gain of €15 million in 2013) and relate to compensation
receivable for tax losses carried forward contributed to the Italian tax consolidation scheme.
The Company reported losses for tax purposes as the result from investments resulting from the adoption of the equity
method is tax neutral.
Deferred tax liabilities refer to the impact of Italian local tax on certain temporary differences.
7. Property, plant and equipment
At December 31, 2014, the gross carrying amount of property, plant and equipment was €68 million (€65 million as at
December 31, 2013) and accumulated depreciation was €39 million (€36 million as at December 31, 2013), of which
€24 million (€25 million as at December 31, 2013) was for land and buildings which mainly consists of the Company’s
property at Via Nizza 250, Turin.
No buildings were subject to liens, pledged as collateral or restricted in use.
Depreciation of property, plant and equipment is recognized in the income statement under other operating costs.
8. Equity investments
At December 31, 2014, Equity investments in subsidiaries and associates totaled €22,103 million and Other equity
investments totaled €124 million.
At December 31,
2014 2013 Change
(€ million)
Investments in subsidiaries and associates 22,103 12,397 9,706
Other equity investments 124 298 (174)
Total equity investments 22,227 12,695 9,532
Equity investments in subsidiaries and associates were subject to the following changes during the year:
2014
(€ million)
Balance at beginning of year 12,397
Acquisition of minorities 1,325
Net contributions made to subsidiaries 6,537
Result from investments 1,124
Cumulative translation adjustments and other OCI movements 738
Other (18)
Balance at end of year 22,103
Acquisition of minorities is primarily due to the transaction by which Chrysler became fully owned by the Group.
Net contributions made to subsidiaries refer almost entirely to the following intercompany transactions:
acquisition of 100% of Fiat Chrysler Automobiles North America Holdings LLC from FCA Italy S.p.A for a
consideration of €7,250 million;
acquisition of Magneti Marelli Inc., Comau Inc. and Alfa Romeo USA Inc. for an aggregate of €725 million;
sale of Fiat Partecipazioni S.p.A.to FCA Italy S.p.A. for an amount of €1,450 million.
2014
|
ANNUAL REPORT 265
At December 31, 2014, other equity investments include the investment in CNH Industrial N.V. for €107 million (€282
million at December 31, 2013), the investment in Fin. Priv. S.r.l. for €14 million (€14 million at December 31, 2013) and the
investment in Assicurazioni Generali S.p.A. for €3 million (€3 million at December 31, 2013). At December 31, 2014, the
investment in CNHI consisted of 15,948,275 common shares for an amount of €107 million. During 2014, 18,059,375
CNHI shares of the investment balance existing at December 31, 2013 were sold following the exercise of stock options.
9. Other ?nancial assets
At December 31, 2014, Other ?nancial assets amounted to €1,329 million, as represented below:
At December 31,
2014 2013 Change
(€ million)
Other ?nancial assets 1,313 — 1,313
Fees receivable for guarantees given 16 14 2
Total other ?nancial assets 1,329 14 1,315
Other ?nancial assets is represented by the USD 1.5 billion loan extended in January 2014 and expiring in September
2016, to Fiat Chrysler Automobiles North America Holdings LLC (previously named Fiat North America LLC) to fund
partially the acquisition of 41.5% of FCA US. The amount of €1,313 million includes principal of €1,236 million and
accrued interest of €77 million, both translated into euro at the year end exchange rate of 1.2141. The loan is hedged
into euro by a currency swap with Fiat Chrysler Finance Europe S.A. resulting in a €135 million intercompany payable
at December 31, 2014 reported under other ?nancial liabilities.
10. Trade receivables
At December 31, 2014, trade receivables totaled €14 million (of which €7 million from Group companies) a net
increase of €7 million over year-end 2013.
The carrying amount of trade receivables is deemed to approximate their fair value.
All trade receivables are due within one year and there are no overdue balances.
11. Other current receivables
At December 31, 2014, other current receivables amounted to €326 million, a net increase of €135 million compared
to December 31, 2013, and consisted of the following:
At December 31,
2014 2013 Change
(€ million)
Receivable from Group companies for consolidated Italian corporate tax 141 119 22
VAT receivables 136 22 114
Italian corporate tax receivables 38 42 (4)
Other 11 8 3
Total other current receivables 326 191 135
Receivables from Group companies for consolidated Italian corporate tax relate to tax calculated on the taxable
income contributed by Italian subsidiaries participating in the domestic tax consolidation program.
VAT receivables essentially relate to VAT credits for Italian subsidiaries participating in the VAT tax consolidation.
Italian corporate tax receivables include credits transferred to FCA. by Italian subsidiaries participating in the domestic
tax consolidation program in 2014 and prior years.
266 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
12. Cash and cash equivalents
At December 31, 2014, Cash and cash equivalents totaled €11 million (€1 million as at December 31, 2013) and are
almost entirely represented by amounts held in Euro. The carrying amount of cash and cash equivalents is deemed to
be in line with their fair value.
Credit risk associated with cash and cash equivalents is considered limited as the counterparties are leading national
and international banks.
13. Equity
Changes in shareholders’ equity during 2014 were as follows:
(€ million)
Share
Capital
Capital
Reserves
Legal
Reserves:
Cumulative
translation
adjustment
reserve /
OCI
Legal
Reserves:
Other
Retained
pro?t/
(loss)
Pro?t/
(loss) for
the year
Total
equity
At December 31, 2013 4,477 — (618) 6,699 (3,136) 904 8,326
Allocation of prior year result — — — — 904 (904) —
Capital increase 2 989 — — — — 991
Merger (4,269) 4,269 — — — — —
Mandatory convertible — — — 1,910 — — 1,910
Exit Rights (193) (224) — — — — (417)
Share-based payment — 35 — — (31) — 4
Purchase of shares in subsidiaries from non-
controlling interests — — (308) 880 753 — 1,325
Net pro?t for the year — — — — — 568 568
Current period change in OCI, net of taxes — — 666 — 52 — 718
Legal Reserve — (1,327) — 1,327 — — —
At December 31, 2014 17 3,742 (260) 10,816 (1,458) 568 13,425
Shareholders’ equity increased by €5,099 million in 2014 primarily due to: the issuance of mandatory convertible
securities (see notes to the consolidated ?nancial statements) resulting in an increase of €1,910 million, the placement
of 100 million common shares and the exercise of stock options resulting in an aggregate increase of €991 million, the
positive impact of €1,325 million from the acquisition of the remaining 41.5% of FCA US, the increase in OCI (mainly
driven by cumulative exchange differences on translating foreign operations of €782 million) and pro?t for the year of
€568 million, net of the €417 million reduction for the reimbursement to Fiat shareholders who exercised the cash exit
rights upon the Merger.
Share capital
At December 31, 2014, fully paid-up share capital of FCA amounted to €17 million (€4,477 million of Fiat at December
31, 2013) and consisted of 1,284,919,505 common shares and of 408,941,767 special voting shares, all with a par
value of €0.01 each (1,250,687,773 ordinary shares with a par value of €3.58 each of Fiat at December 31, 2013).
On December 12, 2014, FCA issued 65,000,000 new common shares and sold 35,000,000 of treasury shares for
aggregate net proceeds of $1,065 million (€849 million) comprised of gross proceeds of $1,100 million (€877 million)
less $35 million (€28 million) of transaction costs.
Upon the completion of the Merger, which took the form of a reverse merger, resulted in FCA being the surviving
entity, all Fiat ordinary shares outstanding as of the Merger date (1,167,181,255 ordinary shares) were canceled and
exchanged. FCA allotted one new FCA common share (each having a nominal value of €0.01) for each Fiat ordinary
share (each having a nominal value of €3.58). The original investment of FCA in Fiat which consisted of 35,000,000
common shares was not canceled resulting in 35,000,000 treasury shares in FCA. On December 12, 2014, FCA
completed the placement of these treasury shares on the market.
2014
|
ANNUAL REPORT 267
The following table provides the detail for the number of Fiat ordinary shares outstanding at December 31, 2013 and
the number of FCA common shares outstanding at December 31, 2014:
Fiat S.p.A. FCA
Thousand of shares
At
December
31, 2013
Share-
based
payments
and
exercise
of stock
options
Exit
Rights
Cancellation
of treasury
shares upon
the Merger
At the
date of the
Merger
FCA
share
capital
at the
Merger
Issuance
of FCA
Common
shares
and
sale of
treasury
shares
Exercise
of Stock
Options
At
December
31, 2014
Shares issued 1,250,688 320 (53,916) (29,911) 1,167,181 35,000 65,000 17,738 1,284,919
Less: treasury shares (34,578) 4,667 — 29,911 — (35,000) 35,000 — —
Shares issued and
outstanding 1,216,110 4,987 (53,916) — 1,167,181 — 100,000 17,738 1,284,919
On October 29, 2014, the Board of Directors of FCA resolved to authorize the issuance of up to a maximum of
90,000,000 common shares under the framework equity incentive plan which had been adopted before the closing
of the Merger. No grants have occurred under such framework equity incentive plan and any issuance of shares
thereunder in the period from 2014 to 2018 will be subject to the satisfaction of certain performance/retention
requirements. Any issuances to directors will be subject to shareholders approval.
Capital reserves
At December 31, 2014, capital reserves amounting to €3,742 million consisted mainly of the effects of the Merger
resulting in a different par value of FCA common shares (€0.01 each) as compared to Fiat S.p.A. ordinary shares
(€3.58 each) where the consequent difference between the share capital before and after the Merger was recognized
to increase the capital reserves.
Legal reserve
At December 31, 2014, legal reserve amounted to €10,816 million (€6,699 million at December 31, 2013) and
mainly refers to development costs capitalized by subsidiaries and their earnings subject to certain restrictions to
distributions to the parent company. Legal reserve also refers to unrealized currencies translation gain and losses and
other OCI components for a net negative amount of €260 million. The legal reserve includes the reserve for the equity
component of the Mandatory Convertible Securities of €1,910 million at December 31, 2014.
Pursuant to Dutch law, limitations exist relating to the distribution of shareholders’ equity up to at least the total
amount of the legal reserve. By their nature, unrealized losses relating to OCI components reduce shareholders’ equity
and thereby distributable amounts.
Share-based compensation
In connection with the Merger, FCA assumed the obligation of the former Fiat Stock option plans and Stock
Grant plans. On the effective date of the Merger, the unvested equity rewards under the former Fiat plans became
convertible for common shares of FCA on a one-for-one basis. (See notes to the Consolidated Financial Statements
for details on the stock option and stock grant plans).
14. Provisions for employee bene?ts and other provisions
At December 31, 2014, provisions for employee bene?ts and other provisions totaled €27 million, a €116 million
decrease over year-end 2013, relating primarily to the exercise of stock options granted in previous years. At
31 December 2014, provisions consisted primarily of post-employment bene?ts accruing to employees, former
employees and Directors under supplemental company or individual agreements. Those plans are unfunded.
268 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
15. Non-current debt
At December 31, 2014, non-current debt totaled €197 million, representing a decrease of €217 million over
December 31, 2013, and consisted of the following:
At December 31,
2014 2013 Change
(€ million)
Intercompany ?nancial payable 181 400 219
Financial guarantees 16 14 (2)
Total Non-current debt 197 414 217
Intercompany ?nancial payable relate to the euro-denominated loans due December 30, 2017, entered into with
Magneti Marelli S.p.A. (€162 million), Comau S.p.A. (€19 million) and FCA Italy S.p.A. (€0.2 million) following the
acquisition of certain subsidiaries based in the US on December 30, 2014.
Financial guarantees represent the fair value of the liabilities assumed in relation to guarantees issued. Following an
assessment of potential risks requiring recognition of contingent liabilities and given that those liabilities essentially
related to guarantees provided on loans to Group companies, the present value of fees receivable is considered the
best estimate of the fair value of those guarantees.
16. Other non-current liabilities
At December 31, 2014, other non-current liabilities totaled €15 million, representing a net decrease of €1 million over
December 31, 2013.
At December 31,
2014 2013 Change
(€ million)
Other non-current liabilities 15 16 (1)
Total Other non-current liabilities 15 16 (1)
Other non-current liabilities relate to non-current post-employment bene?ts, being the present value of future bene?ts
payable to a former CEO and management personnel that have left the Company.
17. Provisions for employee bene?ts and other current provisions
This item re?ects the best estimate for variable components of compensation:
At December 31,
2014 2013 Change
(€ million)
Provisions for employee bonuses and similar provisions 2 11 (9)
Provisions for employee bonuses and similar provisions 2 11 (9)
2014
|
ANNUAL REPORT 269
18. Trade payables
At December 31, 2014, trade payables totaled €19 million, in line with December 31, 2013, and consisted of the
following:
At December 31,
2014 2013 Change
(€ million)
Trade payables to third parties 14 13 1
Intercompany trade payables 5 6 (1)
Total trade payables 19 19 —
Trade payables are due within one year and their carrying amount at the reporting date is deemed to approximate their
fair value.
19. Current debt
At December 31, 2014, current debt totaled €9,714 million, a €5,934 million increase over December 31, 2013 and
related to:
At December 31,
2014 2013 Change
(€ million)
Intercompany debt:
- Current account with Fiat Chrysler Finance S.p.A. 6,662 739 5,923
- Short term loans from Fiat Chrysler Finance Europe S.A. 2,682 — 2,682
- Short term loans from Fiat Chrysler Finance S.p.A. — 3,000 (3,000)
- Other intercompany loans — 17 (17)
Total intercompany debt 9,344 3,756 5,588
Third party debt:
- Mandatory Convertible Securities liability component 346 — 346
- Advances on factored receivables 24 24 —
Total third party debt 370 24 346
Total current debt 9,714 3,780 5,934
Current account with Fiat Chrysler Finance S.p.A. represents the overdraft as part of the Group’s centralized treasury
management.
Loans from Fiat Chrysler Finance Europe S.A. consists of euro-denominated ?nancing due within 12 months.
As described in more detail in the notes to the consolidated ?nancial statements, FCA issued aggregate notional
amount of U.S.$2,875 million (€2,293 million) of mandatory convertible securities on December 16, 2014. The
obligation to pay coupons as required by the mandatory convertible securities meets the de?nition of a ?nancial liability
as it is a contractual obligation to deliver cash to another entity. The fair value amount determined for the liability
component at issuance of the mandatory convertible securities was U.S.$419 million (€335 million) calculated as
the present value of the coupon payments due less allocated transaction costs of U.S.$9 million (€7 million) that are
accounted for as a debt discount. Subsequent to issuance, the ?nancial liability for the coupon payments is accounted
for at amortized cost. At December 31, 2014 the ?nancial liability component was U.S.$420 million (€346 million).
Advances on factored receivables relate to advances on income tax receivables in Italy totaling €25 million.
Current intercompany debt of €9,344 million is denominated in euros and the carrying amount is deemed to be in line
with fair value.
270 2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
20. Other debt
At December 31, 2014, Other debt totaled €394 million, a net increase of €177 million over December 31, 2013, and
included the following:
At December 31,
2014 2013 Change
(€ million)
Intercompany other debt:
- Consolidated Italian corporate tax 124 107 17
- Consolidated VAT 222 92 130
- Other 27 — 27
Total intercompany other debt 373 199 174
Other debt and taxes payable:
- Taxes payable — 5 (5)
- Accrued expenses 9 2 7
- Other payables 12 11 1
Total Other debt and taxes payable 21 18 3
Total current debt 394 217 177
At December 31, 2014, intercompany debt for consolidated VAT of €222 million consisted of VAT credits of Italian
subsidiaries transferred to FCA as part of the consolidated VAT regime.
Intercompany debt for consolidated Italian corporate tax of €124 million (€107 million at December 31, 2013)
consisted of compensation payable for tax losses and Italian corporate tax credits contributed by Italian subsidiaries
participating in the domestic tax consolidation program for 2014 in relation to which the Italian branch of FCA is the
consolidating entity.
Other debt and taxes payable are all due within one year and their carrying amount is deemed to approximate their fair
value.
21. Guarantees granted, commitments and contingent liabilities
Guarantees granted
At December 31, 2014, guarantees issued totaled €16,380 million wholly provided on behalf of Group companies.
The increase of €1,358 million over December 31, 2013 related principally to the increase in borrowings in Brazil to
fund the construction of the new plant in Pernambuco and new bonds issued by the subsidiary Fiat Chrysler Finance
Europe S.A. net of repayments.
Main guarantees outstanding at 31 December 2014 were as follows:
€12,531 million for bonds issued;
€1,898 million for borrowings, of which €822 million in favor of the subsidiaries in Brasil mainly related to the
construction of the new plant in Pernambuco and the remaining primarily to Fiat Chrysler Finance S.p.A
€755 million for credit lines, primarily to Fiat Chrysler Finance Europe S.A. and Fiat Chrysler Finance S.p.A.
€984 million for VAT receivables related to the VAT consolidation in Italy.
In addition, in 2005, in relation to the advance received by Fiat Partecipazioni S.p.A. on the consideration for the sale
of the aviation business, FCA as he successor of Fiat S.p.A. is jointly and severally liable with the fully owned subsidiary
Fiat Partecipazioni S.p.A. to the purchaser, Avio Holding S.p.A., should Fiat Partecipazioni S.p.A. fail to honor
(following either an arbitration award or an out-of-court settlement) undertakings provided in relation to the sale and
purchase agreement signed in 2003. Similarly, in connection with sale of a controlling interest in its rail business, Fiat
S.p.A. provided guarantees to the purchaser, Alstom N.V., for any failure of the seller (now Fiat Partecipazioni S.p.A.)
to meet its contractual obligations.
2014
|
ANNUAL REPORT 271
Other commitments, contractual rights and contingent liabilities
FCA has important commitments and rights derived from outstanding agreements in addition to contingent liabilities
that are described in the notes to the Consolidated Financial Statements at December 31, 2014, to which reference
should be made.
22. Audit fees
The following table reports fees paid to the independent auditor Ernst & Young or entities in their network for audit and
other services:
For the years ended December 31,
(€ thousand) 2014 2013
Audit fees 22,518 16,093
Audit-related fees 492 884
Tax fees 247 520
All other fees — —
TOTAL 23,257 17,497
In 2014, approximately €2.0 million audit fees related to the Merger transaction and approximately €0.9 million audit
fees related to the attestation activities regarding the issue of ordinary shares and the mandatory convertible bond.
Audit fees of Ernst & Young Accountants LLP amount to €100 thousand. No other services were performed by Ernst
& Young Accountants LLP.
23. Board remuneration
Detailed information on Board of Directors compensation (including their shares and share options) is included in the
Remuneration of Directors section of this Annual Report.
24. Subsequent Events
The Group has evaluated subsequent events through March 5, 2015, which is the date the ?nancial statements were
authorized for issuance. There were no subsequent events.
March 5, 2015
The Board of Directors
John P. Elkann
Sergio Marchionne
Andrea Agnelli
Tiberto Brandolini D’Adda
Glenn Earle
Valerie Mars
Ruth J. Simmons
Ronald L. Thompson
Patience Wheatcroft
Stephen M. Wolf
Ermenegildo Zegna
272 2014
|
ANNUAL REPORT
Company Financial
Statements
Other Information
Other Information
Independent Auditor’s Report
The report of the Company’s independent auditor, Ernst & Young Accountants LLP, the Netherlands is set forth
following this Annual Report.
Dividends
Dividends will be determined in accordance with the articles 23 of the Articles of Association of Fiat Chrysler
Automobiles N.V. The relevant provisions of the Articles of Association read as follows:
1. The Company shall maintain a special capital reserve to be credited against the share premium exclusively for the
purpose of facilitating any issuance or cancellation of special voting shares. The special voting shares shall not
carry any entitlement to the balance of the special capital reserve. The Board of Directors shall be authorized to
resolve upon (i) any distribution out of the special capital reserve to pay up special voting shares or (ii) re-allocation
of amounts to credit or debit the special capital reserve against or in favor of the share premium reserve.
2. The Company shall maintain a separate dividend reserve for the special voting shares. The special voting shares
shall not carry any entitlement to any other reserve of the Company. Any distribution out of the special voting rights
dividend reserve or the partial or full release of such reserve will require a prior proposal from the Board of Directors
and a subsequent resolution of the meeting of holders of special voting shares.
3. From the pro?ts, shown in the annual accounts, as adopted, such amounts shall be reserved as the Board of
Directors may determine.
4. The pro?ts remaining thereafter shall ?rst be applied to allocate and add to the special voting shares dividend
reserve an amount equal to one percent (1%) of the aggregate nominal value of all outstanding special voting
shares. The calculation of the amount to be allocated and added to the special voting shares dividend reserve
shall occur on a time-proportionate basis. If special voting shares are issued during the ?nancial year to which the
allocation and addition pertains, then the amount to be allocated and added to the special voting shares dividend
reserve in respect of these newly issued special voting shares shall be calculated as from the date on which such
special voting shares were issued until the last day of the ?nancial year concerned. The special voting shares shall
not carry any other entitlement to the pro?ts.
5. Any pro?ts remaining thereafter shall be at the disposal of the general meeting of Shareholders for distribution of
pro?ts on the common shares only, subject to the provision of paragraph 8 of this article.
6. Subject to a prior proposal of the Board of Directors, the general meeting of Shareholders may declare and pay
distribution of pro?ts and other distributions in United States Dollars. Furthermore, subject to the approval of the
general meeting of Shareholders and the Board of Directors having been designated as the body competent
to pass a resolution for the issuance of shares in accordance with Article 6, the Board of Directors may decide
that a distribution shall be made in the form of shares or that Shareholders shall be given the option to receive a
distribution either in cash or in the form of shares.
7. The Company shall only have power to make distributions to Shareholders and other persons entitled to
distributable pro?ts to the extent the Company’s equity exceeds the sum of the paid in and called up part of the
share capital and the reserves that must be maintained pursuant to Dutch law and the Company’s Articles of
Association. No distribution of pro?ts or other distributions may be made to the Company itself for shares that the
Company holds in its own share capital.
8. The distribution of pro?ts shall be made after the adoption of the annual accounts, from which it appears that the
same is permitted.
2014
|
ANNUAL REPORT 273
9. The Board of Directors shall have power to declare one or more interim distributions of pro?ts, provided that
the requirements of paragraph 7 hereof are duly observed as evidenced by an interim statement of assets and
liabilities as referred to in Section 2:105 paragraph 4 of the Dutch Civil Code and provided further that the policy of
the Company on additions to reserves and distributions of pro?ts is duly observed. The provisions of paragraphs 2
and 3 hereof shall apply mutatis mutandis.
10. The Board of Directors may determine that distributions are made from the Company’s share premium reserve
or from any other reserve, provided that payments from reserves may only be made to the Shareholders that are
entitled to the relevant reserve upon the dissolution of the Company.
11. Distributions of pro?ts and other distributions shall be made payable in the manner and at such date(s) - within four
weeks after declaration thereof - and notice thereof shall be given, as the general meeting of Shareholders, or in
the case of interim distributions of pro?ts, the Board of Directors shall determine.
12. Distributions of pro?ts and other distributions, which have not been collected within ?ve years and one day after
the same have become payable, shall become the property of the Company.
On January 28, 2015 the Board of Directors has declined to recommend a dividend payment on FCA common shares
in order to further fund capital requirements of the Group’s ?ve-year business plan presented on May 6, 2014.
Disclosures pursuant to Decree Article 10 EU-Directive on Takeovers
In accordance with the Dutch Besluit artikel 10 overnamerichtlijn (the Decree), the Company makes the following
disclosures:
a. For information on the capital structure of the Company, the composition of the issued share capital and the
existence of the two classes of shares, please refer to Note 13 to the Company ?nancial statements in this Annual
Report. For information on the rights attached to the common shares, please refer to the Articles of Association
which can be found on the Company’s website. To summarize, the rights attached to common shares comprise
pre-emptive rights upon issue of common shares, the entitlement to attend the general meeting of Shareholders
and to speak and vote at that meeting and the entitlement to distributions of such amount of the Company’s pro?t
as remains after allocation to reserves. For information on the rights attached to the special voting shares, please
refer to the Articles of Association and the Terms and Conditions for the Special Voting Shares which can both be
found on the Company’s website and more in particular to the paragraph “Loyalty Voting Structure” of this Annual
Report in the chapter “Corporate Governance”. As at 31 December 2014, the issued share capital of the Company
consisted of 1,284,919,505 common shares, representing 76 per cent. of the aggregate issued share capital and
408,941,767 special voting shares, representing 24 per cent. of the aggregate issued share capital.
b. The Company has imposed no limitations on the transfer of common shares. The Articles of Association provide in
Article 13 for transfer restrictions for special voting shares.
c. For information on participations in the Company’s capital in respect of which pursuant to Sections 5:34, 5:35 and
5:43 of the Dutch Financial Supervision Acts (Wet op het ?nancieel toezicht) noti?cation requirements apply, please
refer to the chapter “Major Shareholders” of this Annual Report. There you will ?nd a list of Shareholders who are
known to the Company to have holdings of 3% or more at the stated date.
d. No special control rights or other rights accrue to shares in the capital of the Company.
e. No restrictions apply to voting rights attached to shares in the capital of the Company, nor are there any deadlines
for exercising voting rights. The Articles of Association allow the Company to cooperate in the issuance of
registered depositary receipts for common shares, but only pursuant to a resolution to that effect of the Board of
Directors. The Company is not aware of any depository receipts having been issued for shares in its capital.
274 2014
|
ANNUAL REPORT
Company Financial
Statements
Other Information
f. The Company is not aware of the existence of any agreements with Shareholders which may result in restrictions
on the transfer of shares or limitation of voting rights except the Lock-Up Agreements that the Company’s
Directors, members of the Company’s GEC and Exor have entered into with the underwriters for a period of 90
days after the date of the Prospectus dated December 4, 2014 and concerning the public offering of 87,000,000
common shares of the Company concurrently with the offering of $ 2,500,000,000 in aggregate notional amount
of the “Mandatory Convertible Securities”. The rules governing the appointment and dismissal of members of the
Board of Directors are stated in the Articles of Association of the Company. All members of the Board of Directors
are appointed by the general meeting of Shareholders. The term of of?ce of all members of the Board of Directors
is for a period of approximately one year after appointment, such period expiring on the day the ?rst Annual
General Meeting of Shareholders is held in the following calendar year. The general meeting of Shareholders has
the power to suspend or dismiss any member of the Board of Directors at any time.
g. The rules governing an amendment of the Articles of Association are stated in the Articles of Association and
require a resolution of the general meeting of Shareholders which can only be passed pursuant to a prior proposal
of the Board of Directors.
h. The general powers of the Board of Directors are stated in the Articles of Association of the Company. For a period
of ?ve years from October 12, 2014, the Board of Directors has been irrevocably authorized to issue shares and
rights to subscribe for shares up to the maximum aggregate amount of shares as provided for in the Company’s
authorized share capital as set out in Article 4.1 of the Articles of Association, as amended from time to time. The
Board of Directors has also been designated for the same period as the authorized body to limit or exclude the
rights of pre-emption of shareholders in connection with the authority of the Board of Directors to issue common
shares and grant rights to subscribe for common shares as referred to above. In the event of an issuance of
special voting shares, shareholders have no right of pre-emptions. The Company has the authority to acquire fully
paid-up shares in its own share capital, provided that such acquisition is made for no consideration. Further rules
governing the acquisition of shares by the Company in its own share capital are set out in article 8 of the Articles of
Association.
i. The Company is not a party to any signi?cant agreements which will take effect, will be altered or will be terminated
upon a change of control of the Company as a result of a public offer within the meaning of Section 5:70 of the
Dutch Financial Supervision Acts (Wet ophet ?nancieel toezicht), provided that some of the loan agreements
guaranteed by the Company and certain bonds guaranteed by the Company contain clauses that, as it is
customary for such ?nancial transactions, may require early repayment or termination in the event of a change of
control of the guarantor or the borrower. In certain cases, that requirement may only be triggered if the change of
control event coincides with other conditions, such as a rating downgrade.
2014
|
ANNUAL REPORT
Company Financial
Statements
Notes to the Company
Financial Statements
275
Appendix -
FCA Companies
AT DECEMBER 31, 2014
276 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Controlling company
Parent Company
Fiat Chrysler Automobiles N.V. Amsterdam Netherlands 16,938,613 EUR -- -- -- --
Subsidiaries consolidated on a line-by-line basis
Business Auto: Car Mass-Market brands
NAFTA
0847574 B.C. Unlimited Liability
Company Vancouver Canada
1 CAD
100.00 New CarCo Acquisition Canada Ltd.
100.000
Auburn Hills Mezzanine LLC Wilmington U.S.A. 100 USD 100.00 CHRYSLER GROUP REALTY
COMPANY LLC 100.000
Auburn Hills Owner LLC Wilmington U.S.A. 100 USD 100.00 Auburn Hills Mezzanine LLC 100.000
Autodie LLC Wilmington U.S.A. 10,000,000 USD 100.00 FCA US LLC 100.000
CG MID LLC Wilmington U.S.A. 2,700,000 USD 100.00 FCA US LLC 100.000
Chrysler Canada Cash Services Inc. Toronto Canada 1,000 CAD 100.00 FCA US LLC 100.000
Chrysler Canada Inc. Windsor Canada 0 CAD 100.00 0847574 B.C. Unlimited Liability
Company
100.000
Chrysler de Mexico S.A. de C.V. Santa Fe Mexico 238,621,186 MXN 100.00 Chrysler Mexico Holding, S. de R.L.
de C.V.
FCA MINORITY LLC
99.996
0.004
CHRYSLER GROUP AUTO
TRANSPORT LLC Wilmington U.S.A. 100 USD 100.00 FCA US LLC 100.000
CHRYSLER GROUP DEALER
CAPITAL LLC Wilmington U.S.A.
0 USD 100.00 FCA US LLC
100.000
CHRYSLER GROUP INTERNATIONAL
LLC Wilmington U.S.A. 0 USD
100.00 FCA US LLC 100.000
CHRYSLER GROUP INTERNATIONAL
SERVICES LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
CHRYSLER GROUP REALTY
COMPANY LLC Wilmington U.S.A. 168,769,528 USD 100.00 FCA US LLC 100.000
Chrysler Group Service Contracts LLC Wilmington U.S.A. 100,000,000 USD 100.00 FCA US LLC 100.000
CHRYSLER GROUP TRANSPORT LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
CHRYSLER GROUP VANS LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
Chrysler Investment Holdings LLC Wilmington U.S.A. 173,350,999 USD 100.00 FCA US LLC 100.000
Chrysler Lease Receivables 1 Inc. Windsor Canada 100 CAD 100.00 Chrysler Canada Inc. 100.000
Chrysler Lease Receivables 2 Inc. Windsor Canada 100 CAD 100.00 Chrysler Canada Inc. 100.000
Chrysler Lease Receivables Limited
Partnership Windsor Canada 0 CAD
100.00 Chrysler Canada Inc.
Chrysler Lease Receivables 1 Inc.
Chrysler Lease Receivables 2 Inc.
99.990
0.005
0.005
Chrysler Mexico Holding, S. de R.L.
de C.V. Santa Fe Mexico 3,377,922,033 MXN 100.00 Chrysler Mexico Investment Holdings
Cooperatie U.A.
CarCo Intermediate Mexico LLC
99.900
0.100
CPK Interior Products Inc. Windsor Canada 1,000 CAD 100.00 Chrysler Canada Inc. 100.000
Extended Vehicle Protection LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
FCA MINORITY LLC Wilmington U.S.A. 0 USD 100.00 FCA US LLC 100.000
FCA US LLC Wilmington U.S.A. 1,632,654 USD 100.00 FCA North America Holdings LLC
FNA HOLDCO 12 LLC
98.342
1.658
Global Engine Manufacturing Alliance
LLC Wilmington U.S.A. 300,000 USD 100.00 FCA US LLC 100.000
New CarCo Acquisition Canada Ltd. Toronto Canada 1,000 CAD 100.00 New CarCo Acquisition Holdings
Canada Ltd.
100.000
New CarCo Acquisition Holdings
Canada Ltd. Toronto Canada 1,000 CAD 100.00 FCA US LLC 100.000
2014
|
ANNUAL REPORT 277
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
LATAM
Banco Fidis S.A. Betim Brazil 473,669,238 BRL 100.00 Fidis S.p.A.
FCA FIAT CHRYSLER AUTOMOVEIS
BRASIL LTDA.
75.000
25.000
Chrysler Argentina S.R.L. Buenos Aires Argentina 29,335,170 ARS 100.00 FCA US LLC
FCA MINORITY LLC
98.000
2.000
Chrysler Chile Importadora Ltda Santiago Chile 41,800,000 CLP 100.00 FCA US LLC
FCA MINORITY LLC
99.990
0.010
Chrysler de Venezuela LLC Wilmington U.S.A. 132,474,694 USD 100.00 CG Venezuela UK Holdings Limited 100.000
CMP Componentes e Modulos
Plasticos Industria e Comercio Ltda. Contagem Brazil 77,021,334 BRL
100.00 FCA FIAT CHRYSLER AUTOMOVEIS
BRASIL LTDA.
100.000
FCA FIAT CHRYSLER AUTOMOVEIS
BRASIL LTDA. Betim Brazil 1,140,046,985 BRL 100.00 FCA Italy S.p.A. 100.000
Fiat Auto Argentina S.A. Buenos Aires Argentina 476,464,366 ARS 100.00 FCA FIAT CHRYSLER AUTOMOVEIS
BRASIL LTDA.
100.000
Fiat Auto S.A. de Ahorro para Fines
Determinados Buenos Aires Argentina 109,535,149 ARS 100.00 Fiat Auto Argentina S.A. 100.000
Fiat Credito Compania Financiera S.A. Buenos Aires Argentina 372,911,891 ARS 100.00 Fidis S.p.A. 100.000
FPT Powertrain Technologies do Brasil
- Industria e Comércio de Motores Ltda Campo Largo Brazil 197,792,500 BRL 100.00 Fiat do Brasil S.A. 100.000
APAC
Chrysler (Hong Kong) Automotive
Limited Hong Kong
People’s Rep.
of China 10,000,000 EUR 100.00 FCA US LLC
100.000
Chrysler Asia Paci?c Investment Co. Ltd. Shanghai People’s Rep.
of China
4,500,000 CNY 100.00 Chrysler (Hong Kong) Automotive
Limited
100.000
Chrysler Australia Pty. Ltd. Mulgrave Australia 143,629,774 AUD 100.00 FCA US LLC 100.000
Chrysler Group (China) Sales Ltd. Beijing People’s Rep.
of China
10,000,000 EUR 100.00 Chrysler (Hong Kong) Automotive
Limited
100.000
Chrysler India Automotive Private
Limited Chennai India 99,990 INR
100.00 Chrysler Netherlands Distribution B.V.
CHRYSLER GROUP DUTCH
OPERATING LLC
99.990
0.010
Chrysler Japan Co., Ltd. Tokyo Japan 104,789,875 JPY 100.00 FCA US LLC
Fiat Group Automobiles Japan K.K.
60.000
40.000
Chrysler South East Asia Pte. Ltd. Singapore Singapore 3,010,513 SGD 100.00 FCA US LLC 100.000
FCA Korea, Ltd. Seoul South Korea 32,639,200,000 KRW 100.00 FCA US LLC 100.000
Fiat Automotive Finance Co. Ltd. Shanghai People’s Rep.
of China
750,000,000 CNY 100.00 Fidis S.p.A. 100.000
FIAT GROUP AUTOMOBILES INDIA
Private Limited Mumbai India 1,789,900,000 INR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Japan K.K. Minatu-Ku.
Tokyo
Japan 420,000,000 JPY 100.00 FCA Italy S.p.A. 100.000
Fiat Powertrain Technologies (Shanghai)
R&D Co. Ltd. Shanghai
People’s Rep.
of China 10,000,000 EUR 100.00 Fiat Powertrain Technologies SpA 100.000
Mopar (Shanghai) Auto Parts Trading
Co. Ltd. Shanghai
People’s Rep.
of China 5,000,000 USD 100.00 Chrysler Asia Paci?c Investment Co. Ltd.
100.000
EMEA
Abarth & C. S.p.A. Turin Italy 1,500,000 EUR 100.00 FCA Italy S.p.A. 100.000
Alfa Romeo S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
Alfa Romeo U.S.A. S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
C.F. GOMMA NEDERLAND B.V. in
liquidation Amsterdam Netherlands 18,100 EUR 100.00 FCA Partec S.p.A. 100.000
C.R.F. Società Consortile per Azioni Orbassano Italy 45,000,000 EUR 100.00 FCA Italy S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Powertrain Technologies SpA
75.000
20.000
5.000
CF GOMMA DEUTSCHLAND GmbH Düsseldorf Germany 26,000 EUR 100.00 FCA Partec S.p.A. 100.000
CG EU NSC LIMITED Cardiff United
Kingdom
1 GBP 100.00 FCA US LLC 100.000
278 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
CG Italia Operations S.r.l. Rome Italy 53,022 EUR 100.00 Chrysler Italia S.r.l. 100.000
CG Venezuela UK Holdings Limited Slough
Berkshire
United
Kingdom
100 GBP 100.00 CG EU NSC LIMITED 100.000
Chrysler Austria GmbH Vienna Austria 4,300,000 EUR 100.00 Chrysler Deutschland GmbH 100.000
CHRYSLER BALKANS d.o.o. Beograd Beograd Serbia 500 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Belgium Luxembourg NV/SA Brussels Belgium 28,262,700 EUR 100.00 CG EU NSC LIMITED
FCA MINORITY LLC
99.998
0.002
Chrysler Czech Republic s.r.o. Prague Czech
Republic
55,932,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Danmark ApS Glostrup Denmark 1,000,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Deutschland GmbH Berlin Germany 20,426,200 EUR 100.00 FCA US LLC 100.000
Chrysler Espana S.L. Alcalá De
Henares
Spain 16,685,690 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler France S.A.S. Trappes France 460,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Group Egypt Limited New Cairo Egypt 240,000 EGP 100.00 FCA US LLC
FCA MINORITY LLC
99.000
1.000
Chrysler Group Middle East FZ-LLC Dubai United Arab
Emirates
300,000 AED 100.00 CHRYSLER GROUP INTERNATIONAL
LLC 100.000
Chrysler International GmbH Stuttgart Germany 25,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Italia S.r.l. Rome Italy 100,000 EUR 100.00 FCA US LLC 100.000
Chrysler Jeep International S.A. Brussels Belgium 1,860,000 EUR 100.00 CG EU NSC LIMITED
FCA MINORITY LLC
99.998
0.002
Chrysler Management Austria GmbH Gossendorf Austria 75,000 EUR 100.00 Chrysler Austria GmbH 100.000
Chrysler Mexico Investment Holdings
Cooperatie U.A. Amsterdam Netherlands
0 EUR 100.00 Chrysler Investment Holdings LLC
FCA MINORITY LLC
99.990
0.010
Chrysler Nederland B.V. Utrecht Netherlands 19,000 EUR 100.00 CG EU NSC LIMITED 100.000
Chrysler Netherlands Distribution B.V. Amsterdam Netherlands 90,000 EUR 100.00 Chrysler Netherlands Holding
Cooperatie U.A.
100.000
Chrysler Polska Sp. z o.o. Warsaw Poland 30,356,000 PLN 100.00 CG EU NSC LIMITED 100.000
Chrysler Russia SAO Moscow Russia 574,665,000 RUB 100.00 FCA US LLC
FCA MINORITY LLC
99.999
0.001
Chrysler South Africa (Pty) Limited Centurion South Africa 200 ZAR 100.00 FCA US LLC 100.000
Chrysler Sweden AB Kista Sweden 100,000 SEK 100.00 CG EU NSC LIMITED 100.000
Chrysler Switzerland GmbH Schlieren Switzerland 2,000,000 CHF 100.00 CG EU NSC LIMITED 100.000
Chrysler UK Limited Slough
Berkshire
United
Kingdom
46,582,132 GBP 100.00 CG EU NSC LIMITED 100.000
Customer Services Centre S.r.l. Turin Italy 2,500,000 EUR 100.00 FCA Italy S.p.A. 100.000
Easy Drive S.r.l. Turin Italy 10,400 EUR 100.00 FCA Italy S.p.A.
Fiat Center Italia S.p.A.
99.000
1.000
Fabbrica Italia Pomigliano S.p.A.
Pomigliano
d’Arco
Italy 1,000,000 EUR 100.00 FGA Real Estate Services S.p.A. 100.000
FCA Fleet & Tenders S.R.L. Turin Italy 7,370,000 EUR 100.00 FCA Italy S.p.A. 100.000
FCA Italy S.p.A. Turin Italy 800,000,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
FCA Partec S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
FGA Austro Car GmbH Vienna Austria 35,000 EUR 100.00 Fiat Group Automobiles Austria GmbH 100.000
FGA Investimenti S.p.A. Turin Italy 2,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
FGA Real Estate Services S.p.A. Turin Italy 150,679,554 EUR 100.00 FCA Italy S.p.A. 100.000
FGA Versicherungsservice GmbH Heilbronn Germany 26,000 EUR 100.00 Fiat Group Automobiles Germany AG
Rimaco S.A.
51.000
49.000
Fiat Auto Poland S.A. Bielsko-Biala Poland 660,334,600 PLN 100.00 FCA Italy S.p.A. 100.000
Fiat Automobil Vertriebs GmbH Frankfurt Germany 8,700,000 EUR 100.00 Fiat Group Automobiles Germany AG 100.000
Fiat Automobiles S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
2014
|
ANNUAL REPORT 279
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
FIAT AUTOMOBILES SERBIA DOO
KRAGUJEVAC Kragujevac Serbia 30,707,843,314 RSD
66.67 FCA Italy S.p.A.
66.670
Fiat Center (Suisse) S.A. Meyrin Switzerland 13,000,000 CHF 100.00 Fiat Group Automobiles Switzerland
S.A. 100.000
Fiat Center Italia S.p.A. Turin Italy 2,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat CR Spol. S.R.O. Prague Czech
Republic
1,000,000 CZK 100.00 FCA Italy S.p.A. 100.000
Fiat France Trappes France 235,480,520 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Austria GmbH Vienna Austria 37,000 EUR 100.00 FCA Italy S.p.A.
FGA Investimenti S.p.A.
98.000
2.000
Fiat Group Automobiles Belgium S.A. Auderghem Belgium 7,000,000 EUR 100.00 FCA Italy S.p.A.
Fiat Group Automobiles Switzerland
S.A.
99.998
0.002
Fiat Group Automobiles Central and
Eastern Europe KFT. Budapest Hungary 150,000,000 HUF 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Denmark A/S Glostrup Denmark 55,000,000 DKK 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Germany AG Frankfurt Germany 82,650,000 EUR 100.00 FCA Italy S.p.A.
Fiat Group Automobiles Switzerland
S.A.
99.000
1.000
Fiat Group Automobiles Hellas S.A. Argyroupoli Greece 62,783,499 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Ireland Ltd. Dublin Ireland 5,078,952 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Maroc S.A. Casablanca Morocco 1,000,000 MAD 99.95 FCA Italy S.p.A. 99.950
Fiat Group Automobiles Netherlands
B.V. Lijnden Netherlands 5,672,250 EUR 100.00 FCA Italy S.p.A.
100.000
Fiat Group Automobiles Portugal, S.A. Alges Portugal 1,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles South Africa
(Proprietary) Ltd Bryanston South Africa 640 ZAR
100.00 FCA Italy S.p.A.
100.000
Fiat Group Automobiles Spain S.A. Alcalá De
Henares
Spain 8,079,280 EUR 100.00 FCA Italy S.p.A.
Fiat Group Automobiles Switzerland
S.A.
99.998
0.002
Fiat Group Automobiles Sweden AB Kista Sweden 10,000,000 SEK 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles Switzerland S.A. Schlieren Switzerland 21,400,000 CHF 100.00 FCA Italy S.p.A. 100.000
Fiat Group Automobiles UK Ltd Slough
Berkshire
United
Kingdom
44,600,000 GBP 100.00 FCA Italy S.p.A. 100.000
Fiat Group Marketing & Corporate
Communication S.p.A. Turin Italy 100,000,000 EUR
100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Partecipazioni France Société par
actions simpli?ée Trappes France 37,000 EUR 100.00 FGA Real Estate Services S.p.A. 100.000
Fiat Powertrain Technologies Poland
Sp. z o.o. Bielsko-Biala Poland 269,037,000 PLN 100.00 Fiat Powertrain Technologies SpA 100.000
Fiat Powertrain Technologies SpA Turin Italy 525,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Professional S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Real Estate Germany GmbH Frankfurt Germany 25,000 EUR 100.00 Fiat Automobil Vertriebs GmbH 100.000
Fiat SR Spol. SR.O. Bratislava Slovack
Republic
33,194 EUR 100.00 FCA Italy S.p.A. 100.000
Fidis S.p.A. Turin Italy 250,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
i-FAST Automotive Logistics S.r.l. Turin Italy 1,250,000 EUR 100.00 FCA Italy S.p.A. 100.000
i-FAST Container Logistics S.p.A. Turin Italy 2,500,000 EUR 100.00 FCA Italy S.p.A. 100.000
International Metropolitan Automotive
Promotion (France) S.A. Trappes France 2,977,680 EUR 100.00 Fiat France
99.997
Italian Automotive Center S.A. Auderghem Belgium 3,000,000 EUR 100.00 Fiat Group Automobiles Belgium S.A.
FCA Italy S.p.A.
99.988
0.012
Italian Motor Village Ltd. Slough
Berkshire
United
Kingdom
1,500,000 GBP 100.00 Fiat Group Automobiles UK Ltd 100.000
Italian Motor Village S.A. Alges Portugal 50,000 EUR 100.00 Fiat Group Automobiles Portugal, S.A. 100.000
Italian Motor Village, S.L.
Alcalá De
Henares
Spain 1,454,420 EUR 100.00 Fiat Group Automobiles Spain S.A. 100.000
280 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Lancia Automobiles S.p.A. Turin Italy 120,000 EUR 100.00 FCA Italy S.p.A. 100.000
Mecaner S.A. Urdùliz Spain 3,000,000 EUR 100.00 FCA Italy S.p.A. 100.000
Motor Village Austria GmbH Vienna Austria 37,000 EUR 100.00 Fiat Group Automobiles Austria GmbH 100.000
Of?cine Maserati Grugliasco S.p.A. Turin Italy 500,000 EUR 100.00 FCA Italy S.p.A. 100.000
Sata-Società Automobilistica
Tecnologie Avanzate S.p.A. Mel? Italy
276,640,000 EUR
100.00 FCA Italy S.p.A.
100.000
SBH EXTRUSION REAL ESTATE S.r.l. Turin Italy 110,000 EUR 100.00 FCA Partec S.p.A. 100.000
Società di Commercializzazione
e Distribuzione Ricambi S.p.A. in
liquidation Turin Italy 100,000 EUR 100.00 FCA Italy S.p.A. 100.000
VM Motori S.p.A. Cento Italy 21,008,000 EUR 100.00 Fiat Powertrain Technologies SpA 100.000
Business Auto: Luxury and Performance Brands
Ferrari
Ferrari S.p.A. Modena Italy 20,260,000 EUR 90.00 Fiat Chrysler Automobiles N.V. 90.000
410 Park Display Inc. Englewood
Cliffs
U.S.A. 100 USD 90.00 Ferrari N.America Inc. 100.000
Ferrari Australasia Pty Limited Sydney Australia 2,000,100 AUD 90.00 Ferrari S.p.A. 100.000
Ferrari Cars International Trading
(Shanghai) Co. Ltd. Shanghai
People’s Rep.
of China 2,212,500 USD
72.00 Ferrari S.p.A.
80.000
Ferrari Central / East Europe GmbH Wiesbaden Germany 1,000,000 EUR 90.00 Ferrari S.p.A. 100.000
FERRARI FAR EAST PTE LTD Singapore Singapore 1,000,000 SGD 90.00 Ferrari S.p.A. 100.000
Ferrari Financial Services AG Munich Germany 1,777,600 EUR 81.00 Ferrari Financial Services S.p.A. 100.000
Ferrari Financial Services Japan KK Tokyo Japan 199,950,000 JPY 81.00 Ferrari Financial Services S.p.A. 100.000
Ferrari Financial Services S.p.A. Modena Italy 5,100,000 EUR 81.00 Ferrari S.p.A. 90.000
Ferrari Financial Services, Inc. Wilmington U.S.A. 1,000 USD 81.00 Ferrari Financial Services S.p.A. 100.000
Ferrari GE.D. S.p.A. Modena Italy 11,570,000 EUR 90.00 Ferrari S.p.A. 100.000
Ferrari Japan KK Tokyo Japan 160,050,000 JPY 90.00 Ferrari S.p.A. 100.000
Ferrari Management Consulting
(Shanghai) CO., LTD Shanghai
People’s Rep.
of China 2,100,000 USD 90.00 Ferrari S.p.A. 100.000
Ferrari N.America Inc. Englewood
Cliffs
U.S.A. 200,000 USD 90.00 Ferrari S.p.A. 100.000
Ferrari North Europe Limited Slough
Berkshire
United
Kingdom
50,000 GBP 90.00 Ferrari S.p.A. 100.000
Ferrari South West Europe S.A.R.L. Levallois-
Perret
France 172,000 EUR 90.00 Ferrari S.p.A. 100.000
GSA-Gestions Sportives Automobiles
S.A. Meyrin Switzerland 1,000,000 CHF 90.00 Ferrari S.p.A. 100.000
Mugello Circuit S.p.A. Scarperia e
San Piero
Italy 10,000,000 EUR 90.00 Ferrari S.p.A.
Ferrari GE.D. S.p.A.
90.000
10.000
Maserati
Maserati S.p.A. Modena Italy 40,000,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
Maserati (China) Cars Trading Co., Ltd. Shanghai People’s Rep.
of China
10,000,000 USD 100.00 Maserati S.p.A. 100.000
Maserati (Suisse) S.A. Schlieren Switzerland 1,000,000 CHF 100.00 Maserati S.p.A. 100.000
Maserati Deutschland GmbH Wiesbaden Germany 500,000 EUR 100.00 Maserati S.p.A. 100.000
Maserati GB Limited Slough
Berkshire
United
Kingdom
20,000 GBP 100.00 Maserati S.p.A. 100.000
Maserati Japan KK Tokyo Japan 18,000,000 JPY 100.00 Maserati S.p.A. 100.000
Maserati North America Inc. Englewood
Cliffs
U.S.A. 1,000 USD 100.00 Maserati S.p.A. 100.000
Maserati West Europe societé par
actions simpli?ée Paris France 37,000 EUR 100.00 Maserati S.p.A. 100.000
2014
|
ANNUAL REPORT 281
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Components and Production Systems
Magneti Marelli
Magneti Marelli S.p.A. Corbetta Italy 254,325,965 EUR 99.99 Fiat Chrysler Automobiles N.V. 99.990 100.000
Administracion Magneti Marelli Sistemi
Sospensioni Mexicana S.R.L. de C.V. Mexico City Mexico 3,000 MXN 51.49 Magneti Marelli Promatcor Sistemi
Sospensioni Mexicana S.R.L. de C.V.
Automotive Lighting Rear Lamps
Mexico S. de r.l. de C.V.
99.000
1.000
Automotive Lighting Brotterode GmbH Brotterode Germany 7,270,000 EUR 99.99 Automotive Lighting Reutlingen GmbH 100.000
Automotive Lighting Italia S.p.A. Venaria Reale Italy 12,000,000 EUR 99.99 Automotive Lighting Reutlingen GmbH 100.000
Automotive Lighting LLC Farmington
Hills
U.S.A. 25,001,000 USD 100.00 Magneti Marelli Holding U.S.A. Inc. 100.000
Automotive Lighting o.o.o. Rjiasan Russia 386,875,663 RUB 99.99 Automotive Lighting Reutlingen GmbH 100.000
Automotive Lighting Rear Lamps
France S.a.s.
Saint Julien
du Sault France 5,134,480 EUR 99.99 Automotive Lighting Italia S.p.A. 100.000
Automotive Lighting Rear Lamps
Mexico S. de r.l. de C.V.
El Marques
Queretaro Mexico 50,000 MXN 100.00 Magneti Marelli Holding U.S.A. Inc. 100.000
Automotive Lighting Reutlingen GmbH Reutlingen Germany 1,330,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Automotive Lighting S.R.O. Jihlava Czech
Republic
927,637,000 CZK 99.99 Automotive Lighting Reutlingen GmbH 100.000
Automotive Lighting UK Limited Chadwell
Heath
United
Kingdom
40,387,348 GBP 99.99 Magneti Marelli S.p.A. 100.000
Centro Ricerche Plast-Optica S.p.A. Amaro Italy 1,033,000 EUR 75.49 Automotive Lighting Italia S.p.A. 75.500
CHANGCHUN MAGNETI MARELLI
POWERTRAIN COMPONENTS Co.Ltd. Changchun
People’s Rep.
of China
5,600,000 EUR
51.00 Magneti Marelli S.p.A.
51.000
Fiat CIEI S.p.A. in liquidation Corbetta Italy 220,211 EUR 99.99 Magneti Marelli S.p.A. 100.000
FMM Pernambuco Componentes
Automotivos Ltda Nova Goiana Brazil 37,984,800 BRL 64.99 Plastic Components and Modules
Automotive S.p.A.
65.000
Hefei Magneti Marelli Exhaust Systems
Co.Ltd. Hefei
People’s Rep.
of China 3,900,000 EUR
51.00 Magneti Marelli S.p.A. 51.000
Industrias Magneti Marelli Mexico S.A.
de C.V. Tepotzotlan Mexico 50,000 MXN 99.99 Magneti Marelli Sistemas Electronicos
Mexico S.A.
Servicios Administrativos Corp. IPASA
S.A.
99.998
0.002
JCMM Automotive d.o.o. Kragujevac Serbia 1,223,910,473 RSD 50.00 Plastic Components and Modules
Automotive S.p.A. 50.000
Magneti Marelli (China) Co. Ltd. Shanghai People’s Rep.
of China
17,500,000 USD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli After Market Parts and
Services S.p.A. Corbetta Italy 7,000,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Aftermarket GmbH Heilbronn Germany 100,000 EUR 99.99 Magneti Marelli After Market Parts and
Services S.p.A.
100.000
Magneti Marelli Aftermarket Sp. z o.o. Katowice Poland 2,000,000 PLN 99.99 Magneti Marelli After Market Parts and
Services S.p.A.
100.000
Magneti Marelli Argentina S.A. Buenos Aires Argentina 700,000 ARS 99.99 Magneti Marelli S.p.A.
Magneti Marelli France S.a.s.
95.000
5.000
Magneti Marelli Automotive
Components (Changsha) Co. Ltd Changsha
People’s Rep.
of China
5,400,000 USD
99.99 Magneti Marelli S.p.A.
100.000
Magneti Marelli Automotive
Components (WUHU) Co. Ltd. Wuhu
People’s Rep.
of China 32,000,000 USD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Automotive d.o.o.
Kragujevac Kragujevac Serbia 154,200,876 RSD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Automotive Electronics
(Guangzhou) Co. Limited Guangzhou
People’s Rep.
of China 16,100,000 USD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Automotive Lighting
(Foshan) Co. Ltd Guangzhou
People’s Rep.
of China 10,800,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
282 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Magneti Marelli Cofap Fabricadora de
Pecas Ltda Santo Andre Brazil 106,831,302 BRL 99.99 Magneti Marelli After Market Parts and
Services S.p.A. 100.000
Magneti Marelli Comandos Mecanicos
Industria e Comercio Ltda Itauna Brazil 1,000 BRL 99.99 Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda
Fiat do Brasil S.A.
99.900
0.100
Magneti Marelli Componentes
Plasticos Ltda Itauna Brazil 6,402,500 BRL 99.99 Plastic Components and Modules
Automotive S.p.A.
100.000
Magneti Marelli Conjuntos de Escape
S.A. Buenos Aires Argentina 7,480,071 ARS
99.99 Magneti Marelli S.p.A.
Magneti Marelli Argentina S.A.
95.000
5.000
Magneti Marelli d.o.o. Kragujevac Kragujevac Serbia 1,363,504,543 RSD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli do Brasil Industria e
Comercio SA Hortolandia Brazil 100,000 BRL
99.99 Magneti Marelli S.p.A.
100.000
Magneti Marelli Espana S.A. Llinares del
Valles
Spain 781,101 EUR 99.99 Magneti Marelli Iberica S.A. 100.000
Magneti Marelli France S.a.s. Trappes France 19,066,824 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli GmbH Russelsheim Germany 200,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Holding U.S.A. Inc. Wixom U.S.A. 10 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
Magneti Marelli Iberica S.A. Santpedor Spain 389,767 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli India Private Ltd Haryana India 20,000,000 INR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli International Trading
(Shanghai) Co. LTD Shanghai
People’s Rep.
of China 200,000 USD 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Japan K.K. KohoKu-Ku-
Yokohama-
Kanagawa
Japan 360,000,000 JPY 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Mako Elektrik Sanayi
Ve Ticaret Anonim Sirketi Bursa Turkey
50,005 TRY
99.94 Automotive Lighting Reutlingen GmbH
PLASTIFORM PLASTIK SANAY ve
TICARET A.S.
Sistemi Comandi Meccanici Otomotiv
Sanayi Ve Ticaret A.S.
99.842
0.052
0.052
Magneti Marelli Motopropulsion France
SAS Argentan France
37,002 EUR 99.99 Magneti Marelli S.p.A.
100.000
Magneti Marelli North America Inc. Wilmington U.S.A. 7,491,705 USD 99.99 Magneti Marelli Cofap Fabricadora de
Pecas Ltda 100.000
Magneti Marelli of Tennessee LLC Auburn Hills U.S.A. 1,300,000 USD 100.00 Magneti Marelli Holding U.S.A. Inc. 100.000
Magneti Marelli Poland Sp. z o.o. Sosnowiec Poland 83,500,000 PLN 99.99 Automotive Lighting Reutlingen GmbH 100.000
Magneti Marelli Powertrain India Private
Limited Haryana India 450,000,000 INR 51.00 Magneti Marelli S.p.A. 51.000
Magneti Marelli Powertrain Mexico S.
de r.l. de c.v. Mexico City Mexico 3,000 MXN 99.99 Magneti Marelli S.p.A.
Automotive Lighting Rear Lamps
Mexico S. de r.l. de C.V.
99.967
0.033
Magneti Marelli Powertrain Slovakia
s.r.o. Kechnech
Slovack
Republic 7,000,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Powertrain U.S.A. LLC Sanford U.S.A. 25,000,000 USD 100.00 Magneti Marelli Holding U.S.A. Inc. 100.000
Magneti Marelli Promatcor Sistemi
Sospensioni Mexicana S.R.L. de C.V. Mexico City Mexico 3,000 MXN 51.00 Sistemi Sospensioni S.p.A. 51.000
Magneti Marelli Repuestos S.A. Buenos Aires Argentina 2,012,000 ARS 99.99 Magneti Marelli After Market Parts and
Services S.p.A.
Magneti Marelli Cofap Fabricadora de
Pecas Ltda
52.000
48.000
Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda Contagem Brazil
206,834,874 BRL 99.99 Magneti Marelli S.p.A.
Automotive Lighting Reutlingen GmbH
66.111
33.889
Magneti Marelli Sistemas Electronicos
Mexico S.A. Tepotzotlan Mexico 50,000 MXN 99.99 Magneti Marelli S.p.A.
Servicios Administrativos Corp. IPASA
S.A.
99.998
0.002
2014
|
ANNUAL REPORT 283
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Magneti Marelli Slovakia s.r.o. Kechnech Slovack
Republic
98,006,639 EUR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli South Africa
(Proprietary) Limited Johannesburg South Africa 7,550,000 ZAR 99.99 Magneti Marelli S.p.A. 100.000
Magneti Marelli Suspension Systems
Bielsko Sp. z.o.o. Bielsko-Biala Poland 70,050,000 PLN 99.99 Sistemi Sospensioni S.p.A. 100.000
Magneti Marelli Um Electronic Systems
Private Limited Haryana India 420,000,000 INR 51.00 Magneti Marelli S.p.A. 51.000
Malaysian Automotive Lighting SDN.
BHD
Simpang
Ampat Malaysia 6,000,000 MYR 79.99 Automotive Lighting Reutlingen GmbH 80.000
MM I&T Sas Valbonne
Sophia
Antipolis France 607,000 EUR 99.99 Magneti Marelli S.p.A.
100.000
MMH Industria e Comercio De
Componentes Automotivos Ltda Nova Goiana Brazil 1,000 BRL 99.99 Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda
Magneti Marelli Cofap Fabricadora de
Pecas Ltda
99.900
0.100
Plastic Components and Modules
Automotive S.p.A. Grugliasco Italy 10,000,000 EUR 99.99 Plastic Components and Modules
Holding S.p.A.
100.000
Plastic Components and Modules
Holding S.p.A. Grugliasco Italy 10,000,000 EUR 99.99 Magneti Marelli S.p.A. 100.000
Plastic Components and Modules
Poland S.A. Sosnowiec Poland
21,000,000 PLN
99.99 Plastic Components and Modules
Automotive S.p.A. 100.000
Plastic Components Fuel Systems
Poland Sp. z o.o. Sosnowiec Poland 29,281,500 PLN 99.99 Plastic Components and Modules
Poland S.A. 100.000
PLASTIFORM PLASTIK SANAY ve
TICARET A.S. Bursa Turkey 715,000 TRY 99.94 Magneti Marelli Mako Elektrik Sanayi
Ve Ticaret Anonim Sirketi
100.000
Servicios Administrativos Corp. IPASA
S.A. Col.
Chapultepec
Mexico 1,000 MXN
99.99 Magneti Marelli Sistemas Electronicos
Mexico S.A.
Industrias Magneti Marelli Mexico S.A.
de C.V.
99.990
0.010
Sistemi Comandi Meccanici Otomotiv
Sanayi Ve Ticaret A.S. Bursa Turkey 90,000 TRY 99.89 Magneti Marelli Mako Elektrik Sanayi
Ve Ticaret Anonim Sirketi 99.956
Sistemi Sospensioni S.p.A. Corbetta Italy 37,622,179 EUR 99.99 Magneti Marelli S.p.A. 100.000
Sof?aggio Polimeri S.r.l. Leno Italy 45,900 EUR 84.99 Plastic Components and Modules
Automotive S.p.A.
85.000
Tecnologia de Iluminacion Automotriz
S.A. de C.V. Juarez Mexico 50,000 MXN 100.00 Automotive Lighting LLC
Automotive Lighting Rear Lamps
Mexico S. de r.l. de C.V.
99.998
0.002
U?ma S.A.S. Trappes France 44,940 EUR 99.99 Magneti Marelli S.p.A.
Fiat Partecipazioni S.p.A.
65.020
34.980
Teksid
Teksid S.p.A. Turin Italy 71,403,261 EUR 84.79 Fiat Chrysler Automobiles N.V. 84.791
Compania Industrial Frontera S.A.
de C.V. Frontera Mexico 50,000 MXN 84.79 Teksid Hierro de Mexico S.A. de C.V.
Teksid Inc.
99.800
0.200
Funfrap-Fundicao Portuguesa S.A. Cacia Portugal 13,697,550 EUR 70.89 Teksid S.p.A. 83.607
Teksid Aluminum S.r.l. Carmagnola Italy 5,000,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
Teksid do Brasil Ltda Betim Brazil 233,679,013 BRL 84.79 Teksid S.p.A. 100.000
Teksid Hierro de Mexico S.A. de C.V. Frontera Mexico 716,088,300 MXN 84.79 Teksid S.p.A. 100.000
Teksid Inc. Wilmington U.S.A. 100,000 USD 84.79 Teksid S.p.A. 100.000
Teksid Iron Poland Sp. z o.o. Skoczow Poland 115,678,500 PLN 84.79 Teksid S.p.A. 100.000
284 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Comau
Comau S.p.A. Grugliasco Italy 48,013,959 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
COMAU (KUNSHAN) Automation
Co. Ltd. Kunshan
People’s Rep.
of China 3,000,000 USD 100.00 Comau S.p.A. 100.000
Comau (Shanghai) Engineering Co.
Ltd. Shanghai
People’s Rep.
of China 5,000,000 USD 100.00 Comau S.p.A. 100.000
Comau (Shanghai) International Trading
Co. Ltd. Shanghai
People’s Rep.
of China
200,000 USD 100.00 Comau S.p.A. 100.000
Comau Argentina S.A. Buenos Aires Argentina 500,000 ARS 100.00 Comau S.p.A.
Comau do Brasil Industria e Comercio
Ltda.
Fiat Argentina S.A.
55.280
44.690
0.030
Comau Automatizacion S.de R.L. C.V. Cuautitlan
Izcalli
Mexico 62,204,118 MXN 100.00 Comau Mexico S.de R.L. de C.V. 100.000
Comau Canada Inc. Windsor Canada 100 CAD 100.00 Comau Inc. 100.000
Comau Deutschland GmbH Boblingen Germany 1,330,000 EUR 100.00 Comau S.p.A. 100.000
Comau do Brasil Industria e Comercio
Ltda. Betim Brazil
102,742,653 BRL
100.00 Comau S.p.A.
100.000
Comau Estil Unl. Luton
United
Kingdom
107,665,056 USD 100.00 Comau S.p.A. 100.000
Comau France S.A.S. Trappes France 6,000,000 EUR 100.00 Comau S.p.A. 100.000
Comau Iaisa S.de R.L. de C.V. Cuautitlan
Izcalli
Mexico 17,181,062 MXN 100.00 Comau Mexico S.de R.L. de C.V. 100.000
Comau Inc. South?eld U.S.A. 100 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
Comau India Private Limited Pune India 239,935,020 INR 100.00 Comau S.p.A.
Comau Deutschland GmbH
99.990
0.010
Comau Mexico S.de R.L. de C.V. Cuautitlan
Izcalli
Mexico 99,349,172 MXN 100.00 Comau S.p.A. 100.000
Comau Poland Sp. z o.o. Bielsko-Biala Poland 3,800,000 PLN 100.00 Comau S.p.A. 100.000
Comau Romania S.R.L. Oradea Romenia 23,673,270 RON 100.00 Comau S.p.A. 100.000
Comau Russia OOO Moscow Russia 4,770,225 RUB 100.00 Comau S.p.A.
Comau Deutschland GmbH
99.000
1.000
Comau Service Systems S.L. Madrid Spain 250,000 EUR 100.00 Comau S.p.A. 100.000
Comau Trebol S.de R.L. de C.V. Tepotzotlan Mexico 16,168,211 MXN 100.00 Comau Mexico S.de R.L. de C.V. 100.000
Comau U.K. Limited Rugby United
Kingdom
2,502,500 GBP 100.00 Comau S.p.A. 100.000
Other Activities: Holding companies and Other companies
BMI S.p.A. Turin Italy 124,820 EUR 100.00 Editrice La Stampa S.p.A. 100.000
Deposito Avogadro S.p.A. Turin Italy 5,100,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Editrice La Stampa S.p.A. Turin Italy 5,700,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
FCA North America Holdings LLC Wilmington U.S.A. 0 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
Fiat Argentina S.A. Buenos Aires Argentina 5,292,117 ARS 100.00 Fiat Services S.p.A.
Fiat do Brasil S.A.
SGR-Sociedad para la Gestion de
Riesgos S.A.
Fiat Auto Argentina S.A.
90.961
9.029
0.009
0.001
Fiat Chrysler Finance Canada Ltd. Calgary Canada 10,099,885 CAD 100.00 Fiat Chrysler Finance Europe S.A. 100.000
Fiat Chrysler Finance Europe S.A. Luxembourg Luxembourg 251,494,000 EUR 100.00 Fiat Chrysler Finance S.p.A.
Fiat Chrysler Automobiles N.V.
60.003
39.997
Fiat Chrysler Finance North America Inc. Wilmington U.S.A. 190,090,010 USD 100.00 Fiat Chrysler Finance Europe S.A. 100.000
Fiat Chrysler Finance S.p.A. Turin Italy 224,440,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
Fiat do Brasil S.A. Nova Lima Brazil 992,030,675 BRL 100.00 FCA Italy S.p.A.
FGA Real Estate Services S.p.A.
95.667
4.333
Fiat Financas Brasil Ltda Nova Lima Brazil 2,469,701 BRL 100.00 Fiat Chrysler Finance S.p.A.
Fiat do Brasil S.A.
99.994
0.006
Fiat Finance et Services S.A. Trappes France 3,700,000 EUR 100.00 Fiat Services S.p.A. 99.997
2014
|
ANNUAL REPORT 285
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Fiat GmbH Ulm Germany 200,000 EUR 100.00 Fiat Services S.p.A. 100.000
Fiat Group Purchasing France S.a.r.l. Trappes France 7,700 EUR 100.00 Fiat Group Purchasing S.r.l. 100.000
Fiat Group Purchasing Poland Sp.
z o.o. Bielsko-Biala Poland 300,000 PLN 100.00 Fiat Group Purchasing S.r.l. 100.000
Fiat Group Purchasing S.r.l. Turin Italy 600,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Iberica S.A. Madrid Spain 2,797,054 EUR 100.00 Fiat Services S.p.A. 100.000
Fiat Information Technology, Excellence
and Methods S.p.A. Turin Italy 500,000 EUR 100.00 Fiat Services S.p.A. 100.000
Fiat Partecipazioni S.p.A. Turin Italy 614,071,587 EUR 100.00 FCA Italy S.p.A. 100.000
Fiat Polska Sp. z o.o. Warsaw Poland 25,500,000 PLN 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Services Belgium N.V. Zedelgem Belgium 62,000 EUR 100.00 Fiat Services S.p.A.
Servizi e Attività Doganali per l’Industria
S.p.A.
99.960
0.040
Fiat Services d.o.o. Kragujevac Kragujevac Serbia 15,047,880 RSD 100.00 Fiat Services S.p.A. 100.000
Fiat Services Polska Sp. z o.o. Bielsko-Biala Poland 3,600,000 PLN 100.00 Fiat Services S.p.A. 100.000
Fiat Services S.p.A. Turin Italy 3,600,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Services Support Mexico S.A.
de C.V. Mexico City Mexico 100 MXN
100.00 Fiat Services S.p.A.
Servizi e Attività Doganali per l’Industria
S.p.A.
99.000
1.000
Fiat Services U.S.A., Inc. Wilmington U.S.A. 500,000 USD 100.00 Fiat Services S.p.A. 100.000
Fiat Servizi per l’Industria S.c.p.a.
Turin Italy
1,652,669
EUR
90.31
FCA Italy S.p.A.
Fiat Partecipazioni S.p.A.
Fiat Chrysler Automobiles N.V.
Teksid S.p.A.
Abarth & C. S.p.A.
C.R.F. Società Consortile per Azioni
Comau S.p.A.
Editrice La Stampa S.p.A.
Ferrari S.p.A.
Fiat Chrysler Finance S.p.A.
Fiat Group Marketing & Corporate
Communication S.p.A.
Fiat Information Technology, Excellence
and Methods S.p.A.
Fiat Services S.p.A.
Fidis S.p.A.
Magneti Marelli S.p.A.
Maserati S.p.A.
Orione-Società Industriale per la
Sicurezza e la Vigilanza Consortile per
Azioni
SIRIO - Sicurezza Industriale Società
consortile per azioni
Deposito Avogadro S.p.A.
51.000
11.500
5.000
2.000
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
1.500
0.500
Fiat U.K. Limited Basildon United
Kingdom
750,000 GBP 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat U.S.A. Inc. New York U.S.A. 16,830,000 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
FNA HOLDCO 12 LLC Detroit U.S.A. 0 USD 100.00 FCA North America Holdings LLC 100.000
Neptunia Assicurazioni Marittime S.A. Lugano Switzerland 10,000,000 CHF 100.00 Rimaco S.A. 100.000
Nexta Srl Turin Italy 50,000 EUR 100.00 Editrice La Stampa S.p.A. 100.000
Publikompass S.p.A. Turin Italy 3,068,000 EUR 100.00 Editrice La Stampa S.p.A. 100.000
Rimaco S.A. Lugano Switzerland 350,000 CHF 100.00 Fiat Partecipazioni S.p.A. 100.000
Risk Management S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Sadi Polska-Agencja Celna Sp. z o.o. Bielsko-Biala Poland 500,000 PLN 100.00 Servizi e Attività Doganali per l’Industria
S.p.A.
100.000
Servizi e Attività Doganali per l’Industria
S.p.A. Turin Italy
520,000 EUR
100.00 Fiat Services S.p.A.
100.000
286 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Subsidiaries consolidated on a line-by-line basis (continued)
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
SIRIO - Sicurezza Industriale Società
consortile per azioni
Turin
Italy
120,000
EUR
86.59
Fiat Partecipazioni S.p.A.
FCA Italy S.p.A.
Magneti Marelli S.p.A.
Fiat Powertrain Technologies SpA
Sata-Società Automobilistica
Tecnologie Avanzate S.p.A.
C.R.F. Società Consortile per Azioni
Fiat Chrysler Automobiles N.V.
Comau S.p.A.
Ferrari S.p.A.
Teksid S.p.A.
Fiat Services S.p.A.
Sistemi Sospensioni S.p.A.
Teksid Aluminum S.r.l.
Fiat Servizi per l’Industria S.c.p.a.
Fiat Chrysler Finance S.p.A.
Fidis S.p.A.
Editrice La Stampa S.p.A.
Automotive Lighting Italia S.p.A.
FGA Real Estate Services S.p.A.
Fiat Group Marketing & Corporate
Communication S.p.A.
Fiat Group Purchasing S.r.l.
Servizi e Attività Doganali per l’Industria
S.p.A.
Plastic Components and Modules
Automotive S.p.A.
Fiat Center Italia S.p.A.
Abarth & C. S.p.A.
Maserati S.p.A.
Orione-Società Industriale per la
Sicurezza e la Vigilanza Consortile per
Azioni
Risk Management S.p.A.
Sisport Fiat S.p.A. - Società sportiva
dilettantistica
Magneti Marelli After Market Parts and
Services S.p.A.
Customer Services Centre S.r.l.
Deposito Avogadro S.p.A.
Easy Drive S.r.l.
FCA Fleet & Tenders S.R.L.
Fiat Information Technology, Excellence
and Methods S.p.A.
i-FAST Automotive Logistics S.r.l.
i-FAST Container Logistics S.p.A.
58.230
16.600
1.841
1.314
0.833
0.768
0.751
0.729
0.729
0.664
0.593
0.551
0.540
0.503
0.406
0.325
0.273
0.255
0.103
0.103
0.103
0.103
0.065
0.045
0.039
0.039
0.039
0.039
0.039
0.037
0.022
0.022
0.022
0.022
0.022
0.020
0.020
Sisport Fiat S.p.A. - Società sportiva
dilettantistica Turin Italy 889,049 EUR
100.00 Fiat Partecipazioni S.p.A.
100.000
Joint arrangements
Business Auto: Car Mass-Market brands
APAC
Fiat India Automobiles Limited Ranjangaon India 24,451,596,600 INR 50.00 FCA Italy S.p.A. 50.000
EMEA
Società Europea Veicoli Leggeri-Sevel
S.p.A. Atessa Italy 68,640,000 EUR 50.00 FCA Italy S.p.A. 50.000
Jointly-controlled entities accounted for using the equity method
Business Auto: Car Mass-Market brands
NAFTA
United States Council for Automotive
Research LLC South?eld U.S.A. 100 USD 33.33 FCA US LLC 33.330
APAC
GAC FIAT Automobiles Co. Ltd. Changsha People’s Rep.
of China
2,400,000,000 CNY 50.00 FCA Italy S.p.A. 50.000
2014
|
ANNUAL REPORT 287
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Jointly-controlled entities accounted for using the equity method (continued)
EMEA
FGA CAPITAL S.p.A. Turin Italy 700,000,000 EUR 50.00 FCA Italy S.p.A. 50.000
FAL Fleet Services S.A.S. Trappes France 3,000,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FC France S.A. Trappes France 11,360,000 EUR 50.00 FGA CAPITAL S.p.A. 99.999
FGA Bank G.m.b.H. Vienna Austria 5,000,000 EUR 50.00 FGA CAPITAL S.p.A.
Fidis S.p.A.
50.000
25.000
FGA Bank Germany GmbH Heilbronn Germany 39,600,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL BELGIUM S.A. Auderghem Belgium 3,718,500 EUR 50.00 FGA CAPITAL S.p.A. 99.999
FGA Capital Danmark A/S Glostrup Denmark 14,154,000 DKK 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL HELLAS S.A. Argyroupoli Greece 1,200,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL IFIC SA Alges Portugal 10,000,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL IRELAND Public Limited
Company Dublin Ireland 132,562 EUR 50.00 FGA CAPITAL S.p.A. 99.994
FGA Capital Netherlands B.V. Lijnden Netherlands 3,085,800 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA CAPITAL RE Limited Dublin Ireland 1,000,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA Capital Services Spain S.A. Alcalá De
Henares Spain
25,145,299 EUR
50.00 FGA CAPITAL S.p.A.
100.000
FGA Capital Spain E.F.C. S.A. Alcalá De
Henares Spain
26,671,557 EUR
50.00 FGA CAPITAL S.p.A.
100.000
FGA CAPITAL UK LTD. Slough
Berkshire
United
Kingdom 50,250,000 GBP 50.00 FGA CAPITAL S.p.A.
100.000
FGA CONTRACTS UK LTD. Slough
Berkshire
United
Kingdom
19,000,000 GBP
50.00 FGA CAPITAL S.p.A. 100.000
FGA Distribuidora Portugal S.A. Alges Portugal 500,300 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA INSURANCE HELLAS S.A. Argyroupoli Greece 60,000 EUR 49.99 FGA CAPITAL HELLAS S.A. 99.975
FGA Leasing GmbH Vienna Austria 40,000 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FGA Leasing Polska Sp. z o.o. Warsaw Poland 24,384,000 PLN 50.00 FGA CAPITAL S.p.A. 100.000
FGA WHOLESALE UK LTD. Slough
Berkshire
United
Kingdom
20,500,000 GBP 50.00 FGA CAPITAL S.p.A. 100.000
Fiat Bank Polska S.A. Warsaw Poland 125,000,000 PLN 50.00 FGA CAPITAL S.p.A. 100.000
Fidis Finance (Suisse) S.A. Schlieren Switzerland 24,100,000 CHF 50.00 FGA CAPITAL S.p.A. 100.000
FL Auto Snc Trappes France 8,954,581 EUR 50.00 FC France S.A. 99.998
FL Location SNC Trappes France 76,225 EUR 49.99 FC France S.A. 99.980
Leasys S.p.A. Turin Italy 77,979,400 EUR 50.00 FGA CAPITAL S.p.A. 100.000
FER MAS Oto Ticaret A.S. Istanbul Turkey 5,500,000 TRY 37.64 Tofas-Turk Otomobil Fabrikasi A.S. 99.418
Koc Fiat Kredi Tuketici Finansmani A.S. Istanbul Turkey 30,000,000 TRY 37.86 Tofas-Turk Otomobil Fabrikasi A.S. 100.000
Tofas-Turk Otomobil Fabrikasi A.S. Levent Turkey 500,000,000 TRY 37.86 FCA Italy S.p.A. 37.856
Components and Production Systems
Magneti Marelli
Hubei Huazhoung Magneti Marelli
Automotive Lighting Co. Ltd
Hubei
Province
People’s Rep.
of China
138,846,000 CNY 50.00 Automotive Lighting Reutlingen GmbH 50.000
Magneti Marelli Motherson Auto
System Limited
New Delhi India 1,400,000,000 INR 50.00 Magneti Marelli S.p.A.
Magneti Marelli Motherson India
Holding B.V.
36.429
27.143
0.000
100.000
Magneti Marelli Motherson India
Holding B.V. Lijnden Netherlands 2,000,000 EUR 50.00 Magneti Marelli S.p.A. 50.000
Magneti Marelli Motherson Shock
Absorbers (India) Private Limited Pune India 1,539,000,000 INR
50.00 Magneti Marelli S.p.A.
50.000
Magneti Marelli SKH Exhaust Systems
Private Limited New Delhi India 274,190,000 INR 50.00 Magneti Marelli S.p.A. 50.000
Magneti Marelli Talbros Chassis
Systems Pvt. Ltd. Haryana India 120,600,000 INR
50.00 Sistemi Sospensioni S.p.A.
50.000
288 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Jointly-controlled entities accounted for using the equity method (continued)
SAIC MAGNETI MARELLI Powertrain
Co. Ltd Shanghai
People’s Rep.
of China
23,000,000 EUR
50.00 Magneti Marelli S.p.A.
50.000
SKH Magneti Marelli Exhaust Systems
Private Limited New Delhi India
95,450,000 INR
46.62 Magneti Marelli S.p.A.
46.621
50.000
Zhejiang Wanxiang Magneti Marelli
Shock Absorbers Co. Ltd.
Zhenjiang-
Jangsu
People’s Rep.
of China 100,000,000 CNY 50.00 Magneti Marelli S.p.A. 50.000
Teksid
Hua Dong Teksid Automotive Foundry
Co. Ltd.
Zhenjiang-
Jangsu
People’s Rep.
of China 385,363,500 CNY
42.40 Teksid S.p.A.
50.000
Subsidiaries accounted for using the equity method
Business Auto: Car Mass-Market brands
NAFTA
Alhambra Chrysler Jeep Dodge, Inc. Wilmington U.S.A. 1,272,700 USD 100.00 FCA US LLC 100.000
Downriver Dodge, Inc. Wilmington U.S.A. 604,886 USD 100.00 FCA US LLC 100.000
Gwinnett Automotive Inc. Wilmington U.S.A. 3,505,019 USD 100.00 FCA US LLC 100.000
La Brea Avenue Motors, Inc. Wilmington U.S.A. 7,373,800 USD 100.00 FCA US LLC 100.000
North Tampa Chrysler Jeep Dodge, Inc. Wilmington U.S.A. 1,014,700 USD 100.00 FCA US LLC 100.000
Superstition Springs Chrysler Jeep, Inc. Wilmington U.S.A. 675,400 USD 100.00 FCA US LLC 100.000
Superstition Springs MID LLC Wilmington U.S.A. 3,000,000 USD 100.00 CG MID LLC 100.000
EMEA
AC Austro Car Handelsgesellschaft
m.b.h. & Co. OHG Vienna Austria 0 EUR 100.00 FGA Austro Car GmbH 100.000
ALFA ROMEO INC. Auburn Hills U.S.A. 0 USD 100.00 Fiat Chrysler Automobiles N.V. 100.000
Chrysler Jeep Ticaret A.S. Istanbul Turkey 5,357,000 TRY 99.96 CG EU NSC LIMITED 99.960
Fabbrica Italia Mira?ori S.p.A. Turin Italy 200,000 EUR 100.00 FGA Real Estate Services S.p.A. 100.000
GESTIN POLSKA Sp. z o.o. Bielsko-Biala Poland 500,000 PLN 100.00 Fiat Auto Poland S.A. 100.000
Italcar SA Casablanca Morocco 4,000,000 MAD 99.85 Fiat Group Automobiles Maroc S.A. 99.900
Sirio Polska Sp. z o.o. Bielsko-Biala Poland 1,350,000 PLN 100.00 Fiat Auto Poland S.A. 100.000
Components and Production Systems
Magneti Marelli
Cofap Fabricadora de Pecas Ltda Santo Andre Brazil 75,720,716 BRL 68.34 Magneti Marelli do Brasil Industria e
Comercio SA
68.350
Comau
COMAU Czech s.r.o. Ostrava Czech
Republic
5,400,000 CZK 100.00 Comau S.p.A. 100.000
Other Activities: Holding companies and Other companies
Fiat (China) Business Co., Ltd. Beijing People’s Rep.
of China
3,000,000 USD 100.00 Fiat Partecipazioni S.p.A. 100.000
SGR-Sociedad para la Gestion de
Riesgos S.A. Buenos Aires Argentina
150,000 ARS 99.96 Rimaco S.A.
99.960
Subsidiaries valued at cost
Business Auto: Car Mass-Market brands
NAFTA
CarCo Intermediate Mexico LLC Wilmington U.S.A. 1 USD 100.00 Chrysler Mexico Investment Holdings
Cooperatie U.A.
100.000
CHRYSLER GROUP DUTCH
OPERATING LLC Wilmington U.S.A. 0 USD
100.00 CNI CV
100.000
Chrysler Receivables 1 Inc. Windsor Canada 100 CAD 100.00 Chrysler Canada Inc. 100.000
2014
|
ANNUAL REPORT 289
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Subsidiaries valued at cost (continued)
Chrysler Receivables 2 Inc. Windsor Canada 100 CAD 100.00 Chrysler Canada Inc. 100.000
Chrysler Receivables Limited
Partnership Windsor Canada 0 CAD 100.00 Chrysler Canada Inc.
Chrysler Receivables 1 Inc.
Chrysler Receivables 2 Inc.
99.990
0.005
0.005
FCA Co-Issuer Inc. Wilmington U.S.A. 100 USD 100.00 FCA US LLC 100.000
Fundacion Chrysler, I.A.P. Santa Fe Mexico 0 MXN 100.00 Chrysler de Mexico S.A. de C.V. 100.000
The Chrysler Foundation Bingham
Farms
U.S.A. 0 USD 100.00 FCA US LLC 100.000
LATAM
(*) SBH EXTRUSAO DO BRASIL LTDA. Betim Brazil 15,478,371 BRL 100.00 SBH Extrusion Srl 100.000
EMEA
Banbury Road Motors Limited Slough
Berkshire
United
Kingdom
100 GBP 100.00 Fiat Group Automobiles UK Ltd 100.000
Chrysler Netherlands Holding Cooperatie
U.A. Amsterdam Netherlands
0 EUR
100.00 CNI CV
CHRYSLER GROUP DUTCH
OPERATING LLC
99.000
1.000
Chrysler UK Pension Trustees Limited Slough
Berkshire
United
Kingdom
1 GBP 100.00 Chrysler UK Limited 100.000
CNI CV Amsterdam Netherlands 0 EUR 100.00 FCA US LLC
FCA MINORITY LLC
99.000
1.000
CODEFIS Società consortile per azioni Turin Italy 120,000 EUR 51.00 FCA Italy S.p.A. 51.000
CONSORZIO FIAT ENERGY Turin Italy 7,000 EUR 54.97 Comau S.p.A.
FCA Italy S.p.A.
Plastic Components and Modules
Automotive S.p.A.
Teksid S.p.A.
14.286
14.286
14.286
14.286
Consorzio Servizi Balocco Turin Italy 10,000 EUR 91.37 FCA Italy S.p.A.
Ferrari S.p.A.
Fiat Powertrain Technologies SpA
Maserati S.p.A.
Abarth & C. S.p.A.
77.800
5.300
4.500
2.800
1.500
FAS FREE ZONE Ltd. Kragujevac Kragujevac Serbia 2,281,603 RSD 66.67 FIAT AUTOMOBILES SERBIA DOO
KRAGUJEVAC
100.000
FGA Russia S.r.l. Turin Italy 1,682,028 EUR 100.00 FCA Italy S.p.A. 100.000
FIAT GROUP AUTOMOBILES
FINLAND Oy Helsinki Finland
50,000 EUR
100.00 FCA Italy S.p.A.
100.000
Fiat Motor Sales Ltd Slough
Berkshire
United
Kingdom
1,500,000 GBP 100.00 Fiat Group Automobiles UK Ltd 100.000
OOO “CABEKO” Nizhniy
Novgorod
Russia 181,869,062 RUB 100.00 FGA Russia S.r.l.
FCA Italy S.p.A.
99.591
0.409
(*) SBH Extrusion Srl Turin Italy 30,000 EUR 100.00 FCA Partec S.p.A. 100.000
VM North America Inc. Auburn Hills U.S.A. 1,000 USD 100.00 FCA Italy S.p.A. 100.000
Business Auto: Luxury and Performance Brands
Ferrari
Scuderia Ferrari Club S.c. a r.l. Maranello Italy 105,000 EUR 84.99 Ferrari S.p.A. 94.438
Components and Production Systems
Magneti Marelli
Magneti Marelli Stamping & Welding
Industria e Comercio Automotivos Ltda Nova Goiana Brazil
1,000 BRL 99.99 Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda
Magneti Marelli Cofap Fabricadora de
Pecas Ltda
99.900
0.100
Magneti Marelli Suspansiyon Sistemleri
Limited Sirketi Bursa Turkey
520,000 TRY
99.99 Sistemi Sospensioni S.p.A.
100.000
(*) Asset held for sale.
290 2014
|
ANNUAL REPORT
Appendix - FCA Companies
at December 31, 2014
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Subsidiaries valued at cost (continued)
Magneti Marelli Trim Parts Industria e
Comercio Ltda Nova Goiana Brazil
1,000 BRL
99.99 Magneti Marelli Sistemas Automotivos
Industria e Comercio Ltda
Magneti Marelli Cofap Fabricadora de
Pecas Ltda
99.900
0.100
New Business 34 S.r.l. Turin Italy 50,000,000 EUR 99.99 Plastic Components and Modules
Automotive S.p.A.
100.000
Comau
Consorzio Fermag in liquidation Bareggio Italy 144,608 EUR 68.00 Comau S.p.A. 68.000
Other Activities: Holding companies and Other companies
Fiat Chrysler Finance Netherlands B.V. Amsterdam Netherlands 1 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
Fiat Common Investment Fund Limited London United Kingdom 2 GBP 100.00 Fiat U.K. Limited 100.000
Fiat Investimenti S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Investments S.p.A. Turin Italy 120,000 EUR 100.00 New Business Netherlands N.V. 100.000
Fiat Oriente S.A.E. in liquidation Cairo Egypt 50,000 EGP 100.00 Fiat Partecipazioni S.p.A. 100.000
Fiat Partecipazioni India Private Limited New Delhi India 28,605,400 INR 100.00 Fiat Partecipazioni S.p.A.
Fiat Group Purchasing S.r.l.
99.825
0.175
Fides Corretagens de Seguros Ltda Belo Horizonte Brazil 365,525 BRL 100.00 Rimaco S.A. 99.998
Isvor Fiat India Private Ltd. in liquidation New Delhi India 1,750,000 INR 100.00 Fiat Partecipazioni S.p.A. 100.000
New Business 29 S.c.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A.
Fiat Chrysler Automobiles N.V.
80.000
20.000
New Business 30 S.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
New Business 35 s.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
New Business 36 s.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000
New Business Netherlands N.V. Amsterdam Netherlands 50,000 EUR 100.00 Fiat Chrysler Automobiles N.V. 100.000
OOO Sadi Rus Moscow Russia 2,700,000 RUB 100.00 Sadi Polska-Agencja Celna Sp. z o.o.
Fiat Services Polska Sp. z o.o.
90.000
10.000
Orione-Società Industriale per la Sicurezza
e la Vigilanza Consortile per Azioni Turin Italy
120,000 EUR
97.73 Fiat Partecipazioni S.p.A.
Fiat Chrysler Automobiles N.V.
Editrice La Stampa S.p.A.
FCA Italy S.p.A.
Comau S.p.A.
Ferrari S.p.A.
Fiat Chrysler Finance S.p.A.
Fiat Group Marketing & Corporate
Communication S.p.A.
Fiat Powertrain Technologies SpA
Fiat Services S.p.A.
Fiat Servizi per l’Industria S.c.p.a.
Magneti Marelli S.p.A.
Sisport Fiat S.p.A. - Società sportiva
dilettantistica
Teksid S.p.A.
76.722
18.003
0.439
0.439
0.220
0.220
0.220
0.220
0.220
0.220
0.220
0.220
0.220
0.220
Associated companies accounted for using the equity method
Business Auto: Car Mass-Market brands
APAC
Hangzhou IVECO Automobile
Transmission Technology Co., Ltd. Hangzhou
People’s Rep.
of China 555,999,999 CNY
33.33 Fiat Partecipazioni S.p.A.
33.333
Haveco Automotive Transmission
Co. Ltd. Zhajiang
People’s Rep.
of China
200,010,000 CNY
33.33 Fiat Partecipazioni S.p.A.
33.330
EMEA
Arab American Vehicles Company S.A.E. Cairo Egypt 6,000,000 USD 49.00 FCA US LLC 49.000
Components and Production Systems
Magneti Marelli
HMC MM Auto Ltd New Delhi India 214,500,000 INR 40.00 Magneti Marelli S.p.A. 40.000
2014
|
ANNUAL REPORT 291
Name
Registered
Of?ce Country Share capital Currency
% of
Group
consoli-
dation Interest held by
% interest
held
% of
voting
rights
Associated companies accounted for using the equity method (continued)
Other Activities: Holding companies and Other companies
Iveco-Motor Sich, Inc. Zaporozhye Ukraine 26,568,000 UAH 38.62 Fiat Partecipazioni S.p.A. 38.618
Otoyol Sanayi A.S. in liquidation Samandira-
Kartal/
Istanbul
Turkey 52,674,386 TRY 27.00 Fiat Partecipazioni S.p.A. 27.000
RCS MediaGroup S.p.A. Milan Italy 475,134,602 EUR 16.73 Fiat Chrysler Automobiles N.V. 16.734
Associated companies valued at cost
Business Auto: Car Mass-Market brands
EMEA
Consorzio ATA - FORMAZIONE Pomigliano
d’Arco
Italy 16,670 EUR 40.01 C.R.F. Società Consortile per Azioni 40.012
Consorzio per la Reindustrializzazione
Area di Arese S.r.l. in liquidation Arese Italy
20,000 EUR
30.00 FCA Italy S.p.A.
30.000
Consorzio Prode Naples Italy 51,644 EUR 20.00 C.R.F. Società Consortile per Azioni 20.000
Innovazione Automotive e
Metalmeccanica Scrl Santa Maria
Imbaro
Italy
115,000 EUR
24.52 FCA Italy S.p.A.
C.R.F. Società Consortile per Azioni
Sistemi Sospensioni S.p.A.
17.391
6.957
0.174
New Holland Fiat (India) Private Limited Mumbai India 12,485,547,400 INR 3.59 FCA Italy S.p.A. 3.593 51.035
Tecnologie per il Calcolo Numerico-
Centro Superiore di Formazione S.c. a r.l. Trento Italy
100,000 EUR
25.00 C.R.F. Società Consortile per Azioni
25.000
Turin Auto Private Ltd. in liquidation Mumbai India 43,300,200 INR 50.00 FGA Investimenti S.p.A. 50.000
Business Auto: Luxury and Performance Brands
Ferrari
Senator Software Gmbh Munich Germany 25,565 EUR 39.69 Ferrari Financial Services AG 49.000
Components and Production Systems
Magneti Marelli
Auto Componentistica Mezzogiorno
- A.C.M. Mel? Società Consortile a
responsabilità limitata Turin Italy
40,000 EUR
28.25 Plastic Components and Modules
Automotive S.p.A.
Sistemi Sospensioni S.p.A.
16.500
11.750
Bari Servizi Industriali S.c.r.l. Modugno Italy 24,000 EUR 25.00 Magneti Marelli S.p.A. 25.000
CF Gomma S.r.l. Passirano Italy 1,000,000 EUR 40.00 Magneti Marelli S.p.A. 40.000
Flexider S.p.A. Orbassano Italy 4,080,000 EUR 25.00 Magneti Marelli S.p.A. 25.000
Mars Seal Private Limited Mumbai India 400,000 INR 24.00 Magneti Marelli France S.a.s. 24.000
Matay Otomotiv Yan Sanay Ve Ticaret
A.S. Bursa Turkey 3,800,000 TRY
28.00 Magneti Marelli S.p.A.
28.000
Other Activities: Holding companies and Other companies
ANFIA Automotive S.c.r.l. Turin Italy 20,000 EUR 20.00 C.R.F. Società Consortile per Azioni
FCA Italy S.p.A.
Fiat Information Technology, Excellence
and Methods S.p.A.
Magneti Marelli S.p.A.
5.000
5.000
5.000
5.000
FMA-Consultoria e Negocios Ltda São Paulo Brazil 1 BRL 50.00 Fiat do Brasil S.A. 50.000
Maxus MC2 S.p.A. Turin Italy 219,756 EUR 20.00 Fiat Partecipazioni S.p.A. 20.000
Parco Industriale di Chivasso Società
Consortile a responsabilità limitata Chivasso Italy
10,000 EUR
30.40 Fiat Partecipazioni S.p.A.
Plastic Components and Modules
Automotive S.p.A.
25.800
4.600
To-dis S.r.l. Milan Italy 510,000 EUR 45.00 Editrice La Stampa S.p.A. 45.000
Independent
Auditor’s Report
294 2014
|
ANNUAL REPORT
Independent auditor’s report
Independent Auditor’s Report
To: the shareholders and the audit committee of Fiat Chrysler Automobiles N.V.
Opinion
We have audited the accompanying ?nancial statements 2014 of Fiat Chrysler Automobiles N.V. (the Company),
based in Amsterdam. The ?nancial statements include the consolidated ?nancial statements and the company
?nancial statements.
In our opinion:
The consolidated ?nancial statements give a true and fair view of the ?nancial position of Fiat Chrysler Automobiles
N.V. as at December 31, 2014, and of its result and its cash ?ows for 2014 in accordance with International
Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch
Civil Code.
The company ?nancial statements give a true and fair view of the ?nancial position of Fiat Chrysler Automobiles N.V.
as at December 31, 2014 and of its result for 2014 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The consolidated ?nancial statements comprise:
1 the consolidated statement of ?nancial position as at December 31, 2014;
2 the following statements for 2014: consolidated income statement and consolidated statements of comprehensive
income, cash ?ows and changes in equity; and
3 the notes, comprising a summary of the signi?cant accounting policies and other explanatory information.
The company ?nancial statements comprise:
1 the company balance sheet as at December 31, 2014;
2 the company income statement for 2014; and
3 the notes comprising a summary of the signi?cant accounting policies and other explanatory information.
Basis for Opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities
under those standards are further described in the “Our Responsibilities for the Audit of the Financial Statements”
section of our report.
We are independent of Fiat Chrysler Automobiles N.V. in accordance with the “Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten” (ViO) and other relevant independence regulations in the
Netherlands. Furthermore we have complied with the “Verordening gedrags- en beroepsregels accountants” (VGBA).
We believe that the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our opinion.
2014
|
ANNUAL REPORT 295
Materiality
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to in?uence the economic decisions of users taken on the basis of the ?nancial statements.
The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of
identi?ed misstatements on our opinion.
Based on our professional judgment we determined the materiality for the consolidated ?nancial statements as a
whole at €400 million. The materiality is based on approximately 0.5% of the consolidated revenues. We have also
taken into account misstatements and/or possible misstatements that in our opinion are material to the users of the
consolidated ?nancial statements for qualitative reasons.
We agreed with the audit committee that misstatements in excess of €20 million, which are identi?ed during the audit,
would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of our group audit
Fiat Chrysler Automobiles N.V. is head of a group of entities. The ?nancial information of this group is included in the
consolidated ?nancial statements of Fiat Chrysler Automobiles N.V.
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and
performing the group audit. In this respect we have determined the nature and extent of the audit procedures carried
out for group entities. Group entities are considered signi?cant components either because of their individual ?nancial
signi?cance or because they are likely to include signi?cant risks of material misstatement due to their speci?c nature
or circumstances. On this basis, we selected group entities for which an audit or review had to be carried out on
the complete set of ?nancial information or speci?c items. Fiat Chrysler Automobiles N.V. is organized along seven
reportable segments, being NAFTA, EMEA, LATAM, APAC, Ferrari, Maserati and Components, along with certain
other corporate functions which are not included within the reportable segments.
In establishing the overall approach to the audit, we determined the type of work that needed to be performed at
the group entities level by us, as the group engagement team, or component auditors from other EY network ?rms
operating under our instruction. Where the work was performed by component auditors, we determined the level of
involvement we needed to have in the audit work at those group entities to be able to conclude whether suf?cient
appropriate audit evidence had been obtained as a basis for our opinion on the Consolidated Financial Statements as
a whole.
Accordingly, we identi?ed 106 of Fiat Chrysler Automobiles N.V.’s group entities, which, in our view, required an
audit of their complete ?nancial information, either due to their overall size or their risk characteristics. Speci?c audit
procedures on certain balances and transactions were performed on a further 8 entities.
Of the remaining group entities, 27 were subject to analytical procedures, with a focus on higher risk balances and
additional audit procedures over speci?c transactions (for example, certain acquisitions and divestments). This,
together with additional procedures performed on consolidated level, provided us with the evidence we needed for our
opinion on the Consolidated Financial Statements as a whole.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most signi?cance in our audit of the
consolidated ?nancial statements. We have communicated the key audit matters to the audit committee. The key
audit matters are not a comprehensive re?ection of all matters discussed.
These matters were addressed in the context of our audit of the consolidated ?nancial statements as a whole and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
296 2014
|
ANNUAL REPORT
Independent auditor’s report
Valuation of non-current assets with de?nite and inde?nite useful lives
At December 31, 2014 the recorded amount of goodwill and other intangible assets with inde?nite useful lives was
€14,012 million; the majority of these assets relate to the NAFTA segment. Non-current assets with de?nite useful
lives include property, plant and equipment, intangible assets and assets held for sale. Intangible assets with de?nite
useful lives mainly consist of capitalized development costs related to the EMEA and NAFTA segments.
The Company reviews the carrying amounts of these non-current assets annually or more frequently if impairment
indicators are present. Estimating the recoverable amount of the assets requires critical management judgment
including estimates of future sales, gross margins, operating costs, terminal value growth rates, capital expenditures
and the discount rate and the assumptions inherent in those estimates. The annual impairment test is signi?cant to our
audit because the assessment process is complex and requires signi?cant judgment.
The Company disclosed the nature and value of the assumptions used in the impairment analyses on pages 168 till
170 and 190 till 192.
We designed our audit procedures to be responsive to this risk. We obtained an understanding of the impairment
assessment processes and evaluated the design and tested the effectiveness of controls in this area relevant to our
audit. Our focus included evaluating the work of the management specialists used for the valuation, evaluating and
testing key assumptions used in the valuation including projected future income and earnings, performing sensitivity
analyses, and testing the allocation of the assets, liabilities, revenues and expenses.
Income taxes – recoverability of deferred tax assets
At December 31, 2014, the Group had deferred tax assets on deductible temporary differences of €8,182 million
which were recognized and €480 million which were not recognized. At the same date the Group also had deferred
tax assets on tax losses carried forward of €1,762 million which were recognized and €2,934 million which were
not recognized. The analysis of the recoverability of deferred tax assets was signi?cant to our audit because the
assessment process is complex and judgmental and is based on assumptions that are affected by expected future
market or economic conditions.
The disclosures in relation to income taxes are included in note 10 on pages 185 till 188.
We obtained an understanding of the income taxes process, and evaluated the design and tested the effectiveness of
controls in this area relevant to our audit. We performed substantive audit procedures on the recognition of deferred
tax balances based on different local tax regulations, and on the analysis of the recoverability of the deferred tax assets
based on the estimated future taxable income, on which we performed our audit procedures, principally by performing
sensitivity analyses and evaluating and testing the key assumptions used to determine the amounts recognized.
Provisions for product warranties
At December 31, 2014 the provisions for product warranties amounted to €4,845 million. The Group issues various
types of product warranties under which the performance of products delivered is generally guaranteed for a certain
period or term; the reserve for product warranties includes the expected costs of warranty obligations imposed by law
or contract, as well as the expected costs for policy coverage, recall actions and buyback commitments.
In addition, the Group periodically initiates voluntary service and recall actions to address various customer
satisfaction, safety and emissions issues related to vehicles sold; the estimated future costs of the service and recall
actions are based primarily on historical claims experience for the Group’s vehicles.
We focused on this area because changes in the assumptions can materially affect the levels of provisions recorded in
the ?nancial statements.
The disclosures on warranty provisions are included in note 26 on pages 227 and 228.
We obtained an understanding of the warranty process, evaluated the design of, and performed tests of, controls
in this area. Our focus included evaluating the appropriateness of the Group’s methodology, evaluating and testing
assumptions used in the determination of the warranty provisions, performing sensitivity analyses, and testing the
validity of the data used in the calculations.
2014
|
ANNUAL REPORT 297
Responsibilities of management and the audit committee for ?nancial statements
Management is responsible for:
the preparation and fair presentation of the ?nancial statements in accordance with EU-IFRS and Part 9 of Book 2
of the Dutch Civil Code, and for the preparation of the report on operations in accordance with Part 9 of Book 2 of
the Dutch Civil Code, and for
such internal control as management determines is necessary to enable the preparation of ?nancial statements that
are free from material misstatement, whether due to fraud or error.
As part of the preparation of the ?nancial statements, management is responsible for assessing the Company’s ability
to continue as a going concern. Based on the ?nancial reporting frameworks mentioned, management should prepare
the ?nancial statements using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so. Management should disclose events
and circumstances that may cast signi?cant doubt on the Company’s ability to continue as a going concern in the
?nancial statements.
The audit committee is responsible for overseeing the Company’s ?nancial reporting process.
Our responsibilities for the audit of the ?nancial statements
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain suf?cient and
appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may have not
uncovered all errors and fraud.
We have exercised professional judgment and have maintained professional scepticism throughout the audit, in
accordance with Dutch Standards on Auditing, ethical requirements and independence requirements.
Our audit included e.g.:
Identifying and assessing the risks of material misstatement of the ?nancial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suf?cient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
Concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on
the audit evidence obtained, whether a material uncertainty exists related to events and or conditions that may cast
signi?cant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the ?nancial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluating the overall presentation, structure and content of the ?nancial statements, including the disclosures, and
whether the ?nancial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit
and signi?cant audit ?ndings, including any signi?cant ?ndings in internal control that we identify during our audit.
298 2014
|
ANNUAL REPORT
Independent auditor’s report
We provide the audit committee with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with the audit committee, we determine those matters that were of most signi?cance
in the audit of the ?nancial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, not communicating the matter is in the public interest.
Report on other legal and regulatory requirements
Report on the report on operations and the other information
Pursuant to legal requirements of Part 9 of Book 2 of the Dutch Civil Code (concerning our obligation to report about
the report on operations and other data),:
We have no de?ciencies to report as a result of our examination whether the report on operations, to the extent we
can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as
required by Part 9 of Book 2 of the Dutch Civil Code has been annexed.
Further we report that the report on operations, to the extent we can assess, is consistent with the ?nancial
statements.
Appointment
We were appointed by the audit committee as auditor of Fiat Chrysler Automobiles N.V. on October 28, 2014, as of
the audit for the year 2014 and have operated as statutory auditor ever since that date.
Rotterdam, March 5, 2015
/s/ Ernst & Young Accountants LLP
Sander Arkesteijn
2014
|
ANNUAL REPORT 299
Contact
Corporate Of?ce:
25 St James’s Street, London SW1A 1HA - U.K.
Tel. ++44 (0) 207 7660311
Printing
This document is printed on eco-responsible CyclusPrint, a 100% recycled paper produced by Arjowiggins Graphic.
The internal pages are printed on 100 gsm paper and the cover is 300 gsm.
By using this paper, rather than a non-recycled paper, the environmental impact was reduced by:
9,373
liters of water
301
kg of land?ll
604
km travel in the average
European car
489
kg of wood
60
kg of CO
2
871
kWh of energy
Graphic design and editorial coordination
Sunday
Turin, Italy
Printing
Stamperia Artistica Nazionale S.p.A.
Trofarello (TO) Italy
Printed in Italy
April 2015
CO
2
2014 ANNUAL REPORT
FCA
ANNUAL REPORT
AT 31 DECEMBER 2014
F
C
A
A
n
n
u
a
l
R
e
p
o
r
t
a
t
3
1
D
e
c
e
m
b
e
r
2
0
1
4
Fiat Chrysler Automobiles N.V.
Registered Office: Amsterdam, The Netherlands
Amsterdam Chamber of Commerce: 60372958
Corporate Office: 25 St James’s Street, London SW1A 1HA U.K.
doc_966476571.pdf