Fiat S P A 20F/A 2004 Annual report (foreign) (amended)

As filed with the Securities and Exchange Commission on July 7, 2005

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

Amendment No. 1


o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
		(g) OF THE SECURITIES EXCHANGE ACT OF 1934
		OR


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
		OF THE SECURITIES EXCHANGE ACT OF 1934
		For the Fiscal Year Ended: December 31, 2004
		OR


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
		OF THE SECURITIES EXCHANGE ACT OF 1934

1-10108
(Commission file number)
FIAT S.p.A.
(Exact name of registrant as specified in its charter)
FIAT S.p.A.
(Translation of registrant’s name into English)
Italy
(Jurisdiction of incorporation or organization)
Via Nizza 250, Turin, Italy
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.


		Name of each exchange
Title of each class		on which registered

Ordinary American Depositary Shares		New York Stock Exchange
Ordinary shares with a par value of€5 each*		New York Stock Exchange
Preference American Depositary Shares		New York Stock Exchange
Preference shares with a par value of€5 each*		New York Stock Exchange
Savings American Depositary Shares		New York Stock Exchange
Savings shares with a par value of€5 each*		New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

800,417,598 ordinary shares, 103,292,310
preference shares and 79,912,800 savings shares

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yesþ		Noo

Indicate by check mark which financial statement item the registrant has elected to follow.


Item 17o		Item 18þ



*		Not for trading, but only in connection with the registration of the American Depositary Shares.

EXPLANATORY NOTE

Fiat S.p.A. (“Fiat”) filed its Annual Report on Form 20-F for the fiscal year ended December 31, 2004 (the “Form 20-F”) with the Securities and Exchange Commission (“SEC”) on June 30, 2005.

This Amendment No. 1 to Fiat’s Form 20-F (this “Amendment”) is filed to include the caption “Liquidity and Capital Resources” at the top of page 31 of this Amendment and the complete text of the first two sentences immediately thereafter. Due to a technical error during the Edgarizing process, a portion of this text was inadvertently omitted from Item 5 of the Form 20-F as filed electronically with the SEC via the EDGAR system on June 30, 2005.

Other than the foregoing, no part of Fiat’s Form 20-F filed on June 30, 2005, is being amended, and no part of the Form 20-F or of Item 5 as re-filed pursuant to this amendment speaks as of any date subsequent to June 30, 2005.

Accordingly, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Fiat hereby amends Item 5 of its Form 20-F in its entirety and replaces it with the following:

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

Our worldwide net sales and revenues, reported as including changes in contract work in progress, decreased by 1.2%, from€47,271 million in 2003 to€46,703 million in 2004, with the decline’s being entirely attributable to changes in the scope of consolidation arising from our divestiture in 2003 of significant non-core operations, which more than offset revenue increases at most of our sectors. Excluding the results of the significant operating activities we divested during 2003 from the comparison, our revenues increased by 5.0%, or€2,205 million, from€44,498 million. See “¾Changes in the Scope of Consolidation” below for additional information on the impact of these divestitures and a reconciliation of these non-Italian GAAP figures to the corresponding Italian GAAP results. In 2004, we recorded an operating profit of€22 million, as compared with an operating loss of€510 million in 2003. Excluding the results of the significant operating activities we divested during the year, our operating loss for 2003 would have been€714 million. Our total financial income and expenses amounted to net expenses of€639 million in 2004 (including a gain of approximately€300 million from the unwinding of a total return equity swap involving GM shares; see “—Results of Operations—2004 Compared to 2003,” below), as compared to net expenses of€963 million in 2003. Extraordinary income (expenses), net, amounted to expenses of€863 million in 2004, as compared to income of€347 million in 2003, when the total included€1,747 million in net pre-tax gains on asset disposals. We recorded a net loss before minority interest of€1,548 million for 2004, as compared to a net loss of€1,948 million in 2003. We recorded a net loss of€1,586 million for 2004, as compared to a net loss of€1,900 million in 2003. We analyze each of these items in more detail below.

Changes in the Scope of Consolidation

During 2003 and 2004, we continued to divest non-core operations. These transactions had the effect of changing the scope of consolidation of the Group as a whole. You should consider the impact of these changes on the composition of the Group when reviewing the performance of the individual sectors and of the Group as a whole, as changes in the scope of consolidation had a material impact on our financial and operating results during the relevant years.

Significant transactions that resulted in a change in the scope of consolidation during 2004 included:

	•		Effective January 1, 2004, the Group consolidated Electronic Systems on a line-by-line basis as a result of our gradual acquisition of control over this strategic supplier of Fiat Auto and other automotive groups. In 2002, we had sold this business to the Mekfin Group, which later sold it to the Ixfin Group. However, in 2003, the Ixfin Group and the Fiat Group signed an agreement providing for Magneti Marelli to become increasingly involved in the management of Electronic Systems, including through a usufruct over the company’s voting shares. In the context of this agreement, among other things, we acquired a call option exercisable at any time up to December 31, 2004 to repurchase Electronic Systems. On July 28, 2004, the Fiat Group decided to acquire full ownership of Electronic Systems by exercising our call option for consideration of€96 million (including cash and the assumption of debt). For additional details of these transactions, see Item 4. “Information on the Company¾Sectors¾Components.”

	•		In February, we sold 100% of our interest in Fiat Engineering to Maire Investimenti S.p.A. (now Maire Engineering S.p.A.), a privately held Italian company, for cash consideration of

			€115 million, generating a net pre-tax gain of€58 million. At the same time, Fiat Partecipazioni S.p.A., our wholly owned subsidiary, subscribed to a capital increase in Maire Engineering S.p.A. in an amount of€34 million, and now owns 30% of its capital. Each party holds put and call options, respectively, with respect to this 30% interest, that are exercisable at a predetermined price.

	•		In September, Magneti Marelli sold 100% of the Midas automotive repair and maintenance service business in Europe and Latin America to the Norauto Group for approximately€48 million, generating a net pre-tax gain of approximately€28 million. These activities were deconsolidated as of September 30, 2004.

Significant transactions that resulted in a change in the scope of consolidation during 2003 included:

	•		Iveco sold the activities of Fraikin, a company specializing in long-term vehicle leasing, to Eurazeo in the first quarter of 2003, for a price of€307 million, realizing a net pre-tax loss of€24 million. We had already written down the value of Fraikin by€210 million at the end of 2002 in anticipation of this sale. The results of these activities were deconsolidated as of January 1, 2003.

	•		Also in the first quarter of 2003, Business Solutions sold to the Zunino group a stake of approximately 56% in the real estate management company IPI S.p.A. for a sale price of€107 million, realizing a net pre-tax gain of€15 million; IPI S.p.A. was also deconsolidated as of January 1, 2003. We retained a 10% equity interest in IPI S.p.A., which is accounted for at its equity value as of the date of our sale of the controlling interest.

	•		In March 2003, Fiat Auto sold 100% of Banco Fiat SA, through which it conducted retail auto financing activities in Brazil, to the Itaù banking group for a sale price of€247 million, realizing a net pre-tax gain of€103 million. These activities were deconsolidated as of March 31, 2003.

	•		We deconsolidated the results of our former insurance sector as of May 2, 2003, following the sale of Toro Assicurazioni and its subsidiaries to the DeAgostini Group for a price of€2,378 million, realizing a net pre-tax gain of€390 million. Receipt of the sale proceeds and the official transfer of the Toro Assicurazioni shares did not take place until July 30, 2003, following receipt of all required regulatory approvals.

	•		We deconsolidated the results of Fidis Retail Italia, which had carried out retail consumer financing activities for automobile purchases for Fiat Auto, following our sale of a 51% interest in the company to Synesis Finanziaria, an Italian company owned equally by Capitalia, Banca Intesa, San Paolo-IMI and Unicredito, for a sale price of€370 million, realizing a net pre-tax loss of€15 million. At the date of sale of our controlling interest in Fidis Retail Italia on May 27, 2003, this company controlled our automobile retail financing operations in Italy and certain other European countries. In September and October 2003, following receipt of the necessary regulatory approvals, we transferred to Fidis Retail Italia most of our remaining European auto financing operations, including those in Germany and France. The final step in this transaction took place in the fourth quarter of 2004, when Fiat Auto transferred its auto financing operations in the United Kingdom to Fidis Retail Italia. The results of operations of each of these companies were fully consolidated up to their respective dates of sale. We account for the 49% shareholding we retained in Fidis Retail

			Italia on an equity basis. For additional information on this transaction, see Note 3 to the Consolidated Financial Statements included in Item 18.

	•		We deconsolidated the results of our former aviation sector, which was led by FiatAvio, as of July 1, 2003, following the sale of its activities to Avio Holding S.p.A., a company 70% owned by The Carlyle Group and 30% by Finmeccanica S.p.A. We sold these activities for a price of€1,509 million, realizing a net pre-tax gain of€1,258 million.

Because of the significant contribution these operations made to our results prior to their deconsolidation, in order to facilitate an understanding of the performance of our remaining operations during the past two years, we present in this report both the results of our operations as reported by us on a consolidated basis under Italian GAAP, as well as the results of our operations in 2003 and, for comparative purposes, in 2002, on a “comparable consolidation” basis, excluding the results of the deconsolidated operations. In order to calculate the “comparable consolidation” results, we have deconsolidated from our consolidated results the amounts contributed to each line item by the deconsolidated operations, for the full year in 2002 and for the period through the date of deconsolidation for 2003.

The following tables illustrate, respectively, the calculation of our net sales and revenues and operating profit on a comparable consolidation basis for the years ended December 31, 2003 and 2002. The table identifies each of the relevant activities and the date its results were deconsolidated, and the results of each for the relevant period. We have subtracted the total for each year from our consolidated result for that year in order to arrive at the result on a comparable consolidation basis. For purposes of these calculations, we have also added back eliminations and consolidation adjustments that are made in calculating our Group-wide net sales and revenues, in line with our practice of analyzing revenues and operating income for the individual sectors based on such measures prior to eliminations for intra-Group transactions. See the table “Operating Results by Sector” in Item 4 above. We have used the same method to calculate the other line items we discuss on both a consolidated and a comparable consolidation basis.

Results calculated on a “comparable consolidation” basis for purposes of Italian GAAP differ from results of continuing and discontinued operations as calculated for purposes of U.S. GAAP. See Note 24(f.i) to the Consolidated Financial Statements included in Item 18.

Net Sales and Revenues


	2003			2002
	(in millions of euro)
Fraikin (January 1, 2003)	€	—		€	517
IPI S.p.A. (January 1, 2003)		—			31
Banco Fiat SA (March 31, 2003)		55			349
Toro Assicurazioni (May 2, 2003)		1,654			4,916
Fidis Retail Italia (May 27, 2003)		110			282
FiatAvio (July 1, 2003)		623			1,499
Fidis Retail Italia (September/October 2003)		507			457

Total	€	2,949		€	8,051


Consolidated		47,271			55,649
Total deconsolidated	€	(2,949	)	€	(8,051	)
Eliminations and consolidating adjustments		176			428

Comparable consolidation	€	44,498		€	48,026

Operating Income


	2003			2002
	(in millions of euro)
Fraikin (January 1, 2003)	€	—		€	20
IPI S.p.A. (January 1, 2003)		—			21
Banco Fiat SA (March 31, 2003)		7			77
Toro Assicurazioni (May 2, 2003)		35			108
Fidis Retail Italia (May 27, 2003)		39			38
FiatAvio (July 1, 2003)		54			218
Fidis Retail Italia (September/October, 2003)		69			104

Total	€	204		€	586


Consolidated		(510	)		(762	)
Total deconsolidated	€	(204	)	€	(586	)

Comparable consolidation	€	(714	)	€	(1,348	)

Although the transactions that affected our scope of consolidation in 2004 had an impact on the comparability of information for the fiscal years 2003 and 2004 that we analyze below, we have not recalculated our 2004 consolidated results on a “comparable consolidation” basis to take the effects of these transactions into account, given their lesser aggregate impact on our consolidated financial results; these effects are therefore not reflected in the discussions below of our consolidated results on a “comparable consolidation” basis. Fiat Engineering reported revenues (prior to eliminations) of€369 million and operating income of€20 million during 2003, while Electronic Systems reported revenues (prior to eliminations) of€476 million and operating income of€26 million during 2004. Midas reported revenues (prior to eliminations) of€63 million and recorded an operating result of break-even during 2004, prior to its deconsolidation on September 30, 2004.

Critical Accounting Policies

The Consolidated Financial Statements included in Item 18 are prepared in conformity with Italian GAAP; a summary of the significant differences between Italian GAAP and U.S. GAAP and their effect on consolidated net income and stockholders’ equity is provided in Note 24 thereto. See also “¾U.S. GAAP Reconciliation” below. The preparation of these financial statements requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Fiat believes that its most critical accounting policies, which are those that require management’s most difficult, subjective and complex judgments, are as follows:

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects our estimate of losses inherent in our wholesale and retail credit portfolio. We have reserved for the expected credit losses based on past experience with similar receivables, including current and historical past due amounts, dealer termination rates, write-offs and collections, the careful monitoring of portfolio credit quality and current and projected economic and market conditions. Management believes that reserves are adequate; however, different assumptions or changes in economic circumstances could result in changes to the allowance for doubtful accounts.

Recoverability of Long-lived Assets (Including Goodwill)

Long-lived assets include tangible assets, intangible assets (including goodwill) and financial fixed assets. As described in “Principles of consolidation and significant accounting policies” in the Notes to the Consolidated Financial Statements included in Item 18, we periodically review the carrying value of our long-lived assets held and used and that of assets to be disposed of when events and circumstances warrant such a review. We perform this review using estimates of future cash flows from use or disposal of the asset. If the carrying value of a long-lived asset is considered impaired, we record an impairment charge for the amount by which the carrying value of the long-lived asset exceeds its estimated recoverable amount from use or disposal determined by reference to our most recent corporate plans. Management believes that the estimates of these recoverable amounts are reasonable; however, estimates of future cash flows may differ from actual cash flows due to many factors, and changes in such estimates would impact the amount of the impairment charges recorded.

Since January 1, 2002, for U.S. GAAP purposes, we determine any need to record an impairment of long-lived assets, including goodwill, by applying the methodologies set forth in Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” or SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” as appropriate. For information on the effect of our adoption of these standards, see “—U.S. GAAP Reconciliation” below.

Equipment on Operating Lease Residual Values

We report as tangible assets vehicles and equipment rented or leased to customers under operating leases. We recognize income from such operating leases over the term of the lease. Our investment in operating leases is determined on the basis of the estimated residual values of the leased vehicles and equipment, which we calculate at the lease inception date on the basis of published industry information and historical experience. In particular, we record depreciation expense for vehicles subject to operating leases on a straight-line basis over the term of the lease in amounts necessary to reduce the vehicle to its estimated residual value at the end of the lease term. The total value of equipment on operating leases, net of accumulated depreciation, was€828 million at December 31, 2004 (€914 million at December 31, 2003). Realization of the residual values is dependent on our future ability to market the

vehicles and equipment under the then-prevailing market conditions. We continually evaluate whether events and circumstances have occurred which impact the estimated residual values of the vehicles and equipment on operating leases. Management therefore believes that its current estimates are reasonable, however, changes in the underlying residual values or other external factors impacting our future ability to market these assets under prevailing market conditions may impact the realization of currently-estimated residual values.

Product Warranties

We make provisions for estimated expenses related to product warranties at the time products are sold. We establish these estimates based on historical information on the nature, frequency and average cost of warranty claims. We seek to improve vehicle quality and minimize warranty claims, but we have also extended contractual warranty periods for certain classes of vehicles. Management believes that the warranty reserve is adequate; however, actual claims could differ from the original estimates and therefore necessitate an adjustment to the warranty reserve requirement.

Vehicle Residual Value Guarantees

We have made financial commitments to certain customers that guarantee the residual values of vehicles purchased from us in certain circumstances. We have set aside a specific reserve for future risks and charges based on the difference between the guaranteed residual amount and the estimated realizable value of the used asset, taking into account the probability that such option will be exercised; this reserve is set up at the time of the initial sale and adjusted periodically over the period of the contract. In making our accounting estimate, we consider the expected rate of vehicle returns subject to this form of guarantee, current vehicle market value data and actual and expected loss experience. Management therefore believes that its current estimates are reasonable; however, actual future rates of vehicle returns and loss experience may differ significantly from our current assumptions. In particular, a decline in the economy in general and in the vehicle market specifically could significantly increase our risk resulting from these commitments to guarantee vehicle residual values, thereby adversely affecting our future operating results.

Pension and Other Post-Retirement Benefits

Our companies sponsor pension and other retirement plans in various countries. In the U.S., the United Kingdom and Germany, we have major defined benefit plans. We use several statistical and judgmental factors that attempt to anticipate future events in calculating the expense and liability related to the plans. These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases and health care cost trend rates, each as determined by us within certain guidelines. In addition, our actuarial consultants also use subjective factors such as withdrawal and mortality rates in making relevant estimates. Management believes that the estimates it is currently using are reasonable; however, the actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants and changes in the actual costs of health care. Any such differences may have a significant impact on the amount of pension and other post-retirement benefit expenses we record.

Realization of Deferred Tax Assets on Tax Loss Carryforwards

As of December 31, 2004, we had gross deferred tax assets arising on tax loss carryforwards of€4,591 million and valuation reserves against these assets of€3,383 million. The corresponding totals as of year-end 2003, were€4,313 million and€3,054 million, respectively. We have recorded these valuation reserves to reduce our deferred tax assets to the amount that we are reasonably certain will be

recovered. While we have considered future taxable income and used ongoing prudent tax planning strategies in assessing the need for valuation allowances, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

Retained Interests in Securitized Receivables

We retain a residual interest in the receivables we sell in connection with our securitizations. The value of the retained interest depends on the estimated fair value of future cash flows from the sold receivables after the investors in the securitization trusts have received the return for which they contracted and other expenses of the trust are paid. Our retained interest is subordinate to the investors’ interests. The gain or loss on sale of the receivables depends in part on the fair value of the retained interests at the date of transfer; additionally, we evaluate retained interests after transfer for impairment based on the fair value of the retained interests at the evaluation date. We estimate such fair values based on the present value of future expected cash flows using our estimate of key assumptions, such as credit losses, prepayment spreads and discount rates commensurate with the risks involved. Management believes that the estimates we use are considered appropriate based on information currently available, however, differences between those estimates and actual results could be significant.

Transition to International Financial Reporting Standards

Following the coming into force of European Regulation No. 1606 dated July 19, 2002, we and other EU companies whose securities are traded on regulated markets in the EU are required to adopt IFRS (known as international accounting standards, or IAS, until May 2002) in the preparation of our 2005 consolidated financial statements. Standards introduced prior to the renaming of IAS as IFRS are still referred to as IAS; we refer to the combined body of IAS and IFRS standards as IFRS.

We published our first IFRS consolidated results in our report for the quarter ended March 31, 2005, which included prior-year comparison data recalculated in accordance with IFRS. This quarterly report also included a recalculation under IFRS of our results, including a consolidated balance sheet as at January 1 and December 31, 2004, and a consolidated income statement for the year ended December 31, 2004, which we prepared for comparative purposes in accordance with IFRS 1—First-time Adoption of IFRS, based on the IFRS applicable from January 1, 2005, as published as of December 31, 2004, as retrospectively applied. These IFRS data are subject to any adjustments that may be necessary, should revised versions or interpretations of IFRS be issued prior to publication of our full-year 2005 consolidated financial statements, possibly with retroactive effect. If this happens, it will affect the 2004 IFRS consolidated balance sheet and income statement presented in our published report for the quarter ended March 31, 2005, as well as our other IFRS results to be published during the course of the year.

As recalculated in accordance with IFRS, our stockholders’ equity (including minority interest) at December 31, 2004, was€4,928 million, compared to the€5,757 million we reported at that date under Italian GAAP; our total assets at December 31, 2004, as recalculated in accordance with IFRS, were€62,522 million, as compared to the€47,498 million we reported at that date under Italian GAAP. Our net loss for the year ended December 31, 2004, as recalculated under IFRS was€1,579 million, compared to the net loss of€1,548 million we reported for the same period under Italian GAAP.

See Item 4. “Information on the Company—Introduction—First Quarter Results” for a discussion of changes in the presentation of our financial results as reported by us under IFRS. See also Exhibit 15.1, which is an extract from our report for the first quarter of 2005 prepared in accordance with Italian reporting requirements, and includes the restated IFRS financial data referenced above, as well as a reconciliation to IFRS of our Italian GAAP financial information as at January 1, 2004, and December 31, 2004, and for the year ended December 31, 2004, and of our Italian GAAP results of operations for the three months ended March 31, 2004.

Industrial Reorganization Initiatives

In 2004, we continued to work to overcome a challenging and competitive operating environment and resolve structural problems that in recent years have contributed to the negative results recorded by certain of our sectors, particularly Fiat Auto. Measures taken, which have impacted our operations in Italy and abroad, have included plans for reductions in production capacity and related costs through the closure of certain manufacturing plants, cutbacks in production at other facilities and permanent and temporary reductions in the workforce, as well as programs to reduce owned and dealers’ inventories. In 2004, these measures continued to have a significant impact on our financial and operational results, although to a lesser extent than in prior years. Provisions and expenses for restructuring and extraordinary writedowns declined further during the year, reflecting both gains realized upon the disposal of activities and cost savings initiatives, as well as the negative effect of restructuring expenses and writedowns and other extraordinary expenses and provisions. In particular, these items include:

•

Pre-tax gains on asset disposals, net of any expenses and provisions in connection with each transaction (“net pre-tax gains”), of€154 million for the fiscal year ended December 31, 2004 (as compared to a net gain of€1,747 million in 2003), composed primarily of gains from the disposals of:

	•		our direct equity interest in Edison, Italy’s second-largest electricity company, and Edison warrants (an aggregate of€62 million),

	•		Fiat Engineering (€58 million net of transaction costs), and

	•		Midas (€28 million net of transaction costs).

			Losses on disposals of investments and other fixed assets in 2004 totaled€5 million (€50 million in 2003).

	•		Restructuring expenses and provisions of€508 million in our statement of operations for the fiscal year ended December 31, 2004 (€658 million in 2003), relating primarily to the costs incurred in connection with personnel laid-off with long-term unemployment benefits and severance incentives, as well as writedowns of property, plant and equipment and intangible fixed assets aimed at streamlining production. Of these expenses:

	•		€325 million were attributable to Fiat Auto, including costs incurred in connection with restructuring measures implemented at the Fiat-GM Powertrain joint venture (approximately€140 million), provisions and costs of themobilitáearly retirement program and other workforce reduction-related incentives (approximately€100 million), as well as writedowns of various property, plant and equipment (approximately€70 million);

	•		€65 million were attributable to CNH, mainly for costs related to the closing, selling and downsizing of existing facilities arising from divestitures, excess capacity and duplicate

			facilities, in connection with completion of the sector’s manufacturing plant rationalization program; and

	•		€118 million were largely in connection with the implementation of workforce reduction programs at various Group companies, including€45 million at Magneti Marelli,€27 million at our “other companies” sector and€23 million at Iveco.

			See Note 19 to the Consolidated Financial Statements included in Item 18 for additional information on these expenses.



	•		Consolidated restructuring reserves, as reported in our balance sheet, totaled€408 million at December 31, 2004 (€471 million at December 31, 2003), and were attributable to restructuring activities at Fiat Auto (€216 million), CNH (€36 million), Iveco (€56 million), Magneti Marelli (€59 million), Comau (€17 million), Teksid (€8 million), Business Solutions (€6 million) and other sectors (€10 million). At December 31, 2004, these restructuring reserves included amounts related primarily to employee severance incentives and other headcount reduction measures, write-offs or production cutbacks at underutilized facilities, as well as other restructuring actions. See Notes 10 and 24(n) to the Consolidated Financial Statements included in Item 18.

Results of Operations^*

The following discussion is based on financial information prepared in conformity with the accounting principles discussed in “Form and content of the consolidated financial statements” and “Principles of consolidation and significant accounting policies” in the Notes to the Consolidated Financial Statements included in Item 18, which have been prepared in accordance with Italian GAAP. These principles differ in certain respects from U.S. GAAP. The effects of such differences on consolidated net income and stockholders’ equity, as well as other disclosures required by U.S. GAAP, are included in Note 24 to the Consolidated Financial Statements included in Item 18. See also “Selected Financial Data” in Item 3 and “—Changes in the Scope of Consolidation” above. Since January 1, 2005, we prepare our financial statements in accordance with IFRS. See “—Transition to International Financial Reporting Standards” above for additional information.

2004 Compared with 2003

Our net sales and revenues, including changes in contract work in progress, totaled€46,703 million in 2004, with the 1.2% decrease from 2003 being entirely attributable to the changes in the scope of consolidation described above. As detailed in “¾Changes in the Scope of Consolidation,” on a comparable consolidation basis, our net sales and revenues for 2004 increased by 5.0% from€44,498 million in 2003, with the increase reflecting higher revenues at most of the Group’s sectors, offset in part by the negative impact of the weakening of the dollar, particularly at CNH.

Fiat Auto recorded revenues of€20,539 million for 2004, an increase of 2.6% from€20,010 million reported in 2003. This increase reflected a 4.2% increase in unit sales, which rose from approximately 1,695,000 to approximately 1,766,000 automobiles and light commercial vehicles, more than offsetting the negative effect of the deconsolidation of the results of Fidis Retail Italia and Banco Fiat SA, which carried out the sector’s European and Brazilian retail financing activities, respectively. As described in more detail below, the increase in Fiat Auto’s revenues on a comparable consolidation basis

Unless otherwise indicated, all references to revenues, operating income (loss) and net income (loss) for the individual sectors in this section are based on such measures prior to eliminations for transactions between sectors and consolidating adjustments. See the table “Operating Results by Sector” in Item 4.

was 5.5%. CNH recorded revenues of€9,796 million in 2004, an increase of 4.0% compared to 2003, notwithstanding the negative effects of the continued appreciation of the euro against the dollar. Iveco recorded revenues of€9,292 million in 2004, with the increase of 10.1% from 2003 reflecting primarily an increase of approximately 10.9% in unit sales. Ferrari-Maserati recorded revenues of€1,512 million, with the 19.9% increase over 2003 reflecting higher unit sales of both brands, largely due to the success of new models. Revenues also increased at Magneti Marelli, Teksid and Itedi, while declining at Comau and Business Solutions.

Research and development expenses, which are considered operating expenses and therefore reflected in operating income, were€1,810 million in 2004, an increase of 3.6% from the€1,747 million spent in 2003, reflecting our strategy of investing in the renewal of our product range and innovation.

In 2004, we recorded operating income of€22 million, as compared with an operating loss of€510 million in 2003. As described in more detail above, the improvement in our operating results was even more evident on a comparable consolidation basis: on this basis, we recorded an operating loss of€714 million in 2003. The positive change in our operating results was primarily attributable to increases in operating income recorded by Iveco, CNH and Magneti Marelli, as well as improved results at Comau, Teksid and Itedi, and a reduction in the operating loss of Fiat Auto. Operating income at Ferrari and Business Solutions declined.

The revenues and operating income recorded by each of our sectors prior to eliminations are summarized in the table “Operating Results by Sector” in Item 4 and analyzed in the more detailed sector-by-sector discussion appearing below.

We reported net financial expenses of€639 million in 2004, as compared to€963 million in 2003. This 33.6% decrease in net financial expenses reflected the positive impact of financial income of approximately€300 million arising from the unwinding of the total return equity swap involving GM shares we had entered into to hedge our obligations under exchangeable bonds issued in 2002, as well as declines in both the average level of our indebtedness in 2004 and lower interest rates, offset in part by the negative effect of approximately€90 million of writedowns of receivables and fixed financial assets, as well as the sales of Toro Assicurazioni and FiatAvio, each of which generated financial income in 2003 prior to its deconsolidation. For additional details on termination of our equity swap involving GM shares, see “—Off-Balance Sheet Arrangements—Derivative instruments” below.

The results of our financial management activities, which we calculate based on net financial expenses but excluding any income or expenses derived from equity investments, amounted to expenses of€744 million in 2004, a decrease of 24.0% from the€979 million in expenses posted in 2003. Our management uses this non-Italian GAAP measure because it believes it is able to more meaningfully evaluate the results of its financial management activities, which include interest expenses and income, foreign exchange gains and losses and revaluations and writedowns of non-equity securities and financial receivables, when income or loss on equity investments are excluded. The following table reconciles this non-Italian GAAP measure to financial income and expenses, the most nearly comparable Italian GAAP measure. The references to Notes following particular line items in the table are to the specific Notes to the Consolidated Financial Statements included in Item 18 where these line items are presented in greater detail.


Results of financial management activities			2004		2003
		(in millions of euros)
Financial income and expenses	Note 17		(639	)	(963	)
Investment income	Note 17		(9	)	(22	)
Losses on sale of securities not held as fixed assets (*)	Note 17		—		6
Revaluations of securities held in current assets other than equity investments	Note 18		—		14


Results of financial management activities		2004			2003
		(in millions of euros)
Writedowns of:	Note 18
- financial fixed assets other than equity investments			(23	)		(1	)
- securities held in current assets other than equity investments			(2	)		(8	)
- financial receivables			(71	)		(5	)

Results of financial management activities			(744	)		(979	)

(*)

Included within losses on sale of securities in Note 17.

Total adjustments to financial assets amounted to a loss of€97 million in 2004, compared to a loss of€172 million in 2003, with the narrowing of the loss being primarily attributable to the divestiture in May 2003 of our insurance sector, which had incurred a loss of€48 million on the marking to market of its equity security portfolio in the four months of 2003 prior to its sale. The remainder of the decrease in the loss resulting from total adjustments to financial assets in 2004 amounted to€27 million, and was primarily due to lower losses at companies accounted for using the equity method, offset in part by an increase in writedowns of financial assets. Our results of equity investments, a measure our management uses to isolate the performance of our strategic and portfolio equity investments in unconsolidated entities (including adjustments to our financial assets and gains and losses on equity investments not held as fixed assets) in 2004 showed a gain of€8 million, as compared to a loss of€156 million in 2003. The following table reconciles this non-GAAP measure to adjustments to financial assets, the most nearly comparable Italian GAAP measure. The references to Notes following particular line items in the table are to the specific Notes to the Consolidated Financial Statements included in Item 18 where these line items are presented in greater detail.


Results of equity investments			2004		2003
		(in millions of euros)
Adjustments to financial assets	Note 18		(97	)	(172	)
Revaluations of securities held in current assets other than equity investments	Note 18		—		(14	)
Writedowns of:	Note 18
- financial fixed assets other than equity investments			23		1
- securities held in current assets other than equity investments			2		8
- financial receivables			71		5
Investment income	Note 17		9		22
Losses on sale of securities not held as fixed assets (*)	Note 17		—		(6	)

Results of equity investments			8		(156	)

(*)

Included within losses on sale of securities in Note 17.

We reported total extraordinary income (expenses) equal to net expenses of€863 million, compared to net extraordinary income of€347 million in 2003 (when we recorded significant pre-tax gains on divestitures). Extraordinary income totaled€316 million in 2004 (€2,017 million in 2003), of which€162 million was attributable to gains on disposals of investments and other fixed assets, primarily reflecting gains recorded on the sales of the Group’s direct equity interest in Edison and Edison warrants (an aggregate of€62 million), as well as the Group’s sale of Fiat Engineering (€60 million, or€58 million net of the related expenses classified as extraordinary expenses) and Midas (€32 million, or€28 million net of the expenses and provisions in connection with the transaction, classified as extraordinary provisions to liability reserves). These gains were more than offset by€1,179 million in extraordinary expenses in 2004, comprising:

•

€592 million in extraordinary expenses and provisions (including€18 million of changes to prior-period estimated expenses), of which the most significant individual items were€246 million related to the reorganization and rationalization of the Group’s relationships with its suppliers, in particular

			at Fiat Auto, and approximately€52 million in provisions for extraordinary maintenance costs relating to certain real estate and for other contractual risks;

	•		€508 million in restructuring expenses and provisions, as described in more detail under “¾Industrial Reorganization Initiatives” above;

	•		€39 million in taxes related to changes in estimates of prior years expenses;


	•		€35 million in writedowns in the value of other assets to reflect a change in the market outlook for certain businesses, particularly in regard to the impairment of property, plant and equipment at Fiat Auto; and


	•		€5 million in losses on disposals of investments and other fixed assets.

In 2003, the€347 million in net extraordinary income primarily reflected the significant pre-tax gains (net of the expenses and provisions in connection with each transaction) recorded on the Group’s divestiture of FiatAvio (€1,258 million), Toro Assicurazioni (€390 million) and Fiat Auto’s retail financing activities in Brazil (€103 million), which were only partially offset by costs and provisions for restructuring (approximately€658 million) and other extraordinary expenses. For additional detail on extraordinary income and expenses in 2003, see “—2003 Compared with 2002”.

The net income tax effect on our statement of operations for 2004 was a tax benefit of€29 million, as compared with a tax expense of€650 million in 2003, which charge included a reduction of€494 million in deferred tax assets, largely in connection with the gains realized upon sale of Toro Assicurazioni and FiatAvio. The change in the income tax effect for 2004 primarily reflected the positive effects of our implementation of a new Italian tax consolidation program as well as the posting of net deferred tax assets, principally for Fiat S.p.A., the recovery of which became reasonably certain as a consequence of the settlement payment received in February 2005 upon termination of the Master Agreement with GM. See Item 4. “Information on the Company—Recent Developments” for a discussion of termination of the Master Agreement. These positive effects were only partially offset by an increase in 2004 to€187 million (€31 million in 2003) for other current taxes, largely due to income recorded by Group companies operating abroad, and an increase to€128 million (€125 million in 2003) in IRAP, the regional tax on production activities in Italy.

As a result, our net loss before minority interest was€1,548 million in 2004, as compared with a loss before minority interest of€1,948 million in 2003. Our net loss in 2004 totaled€1,586 million, as compared with a net loss of€1,900 million for 2003. Earnings per ordinary share on an Italian GAAP basis were equal to a net loss per share of€1.62 in 2004, compared with a net loss per share of€2.412 in 2003.

Automobiles.Fiat Auto’s total revenues in 2004 were€20,539 million, an increase of€429 million, or 2.6%, compared with 2003, as the increase in sales volumes and higher prices more than offset the impact of the deconsolidation of the sector’s retail financing activities in Europe and Brazil. On a comparable consolidation basis, Fiat Auto’s revenues for 2004 increased by€1,062 million, or 5.5%.

Fiat Auto’s global unit sales to the dealer network, importers and other large direct customers during 2004 totaled approximately 1,766,000 vehicles, an increase of 4.2% from the 1,696,000 sold in 2003. The increase reflected increased sales in Italy, largely due to the impact of new models (including the Lancia Ypsilon, the Fiat Panda and Idea and the Alfa GT) launched during the second half of 2003 and early 2004, as well as a sharp increase in sales in Brazil, offset in part by decreased sales in the sector’s other major markets. When the contribution of unconsolidated affiliates is included, Fiat Auto’s sales totaled 1,857,000 units, an increase of 4.4% over the previous year’s total of 1,779,000 units sold.

In Western Europe, Fiat Auto sold 1,193,200 vehicles in 2004, an increase of 1.2% over 2003. New registrations in the Western European market as a whole increased by 2.1% in 2004. In Italy, the sector’s unit sales increased by 4.9% to 704,000 units, largely reflecting sales of the new models introduced in the second half of 2003 and 2004, while new registrations in the Italian market in 2004 increased by 0.5%. Fiat Auto’s share of the Italian automobile market held steady at 28.0%. Unit sales in the sector’s other principal European markets declined, by 8.9% in France, 9.1% in Germany, 6.1% in the United Kingdom and 3.7% in Spain, although overall demand in each of these markets other than the United Kingdom was stable or higher in 2004 (+0.1% in France, +0.7% in Germany and +9.8% in Spain; demand declined by 0.5% in the United Kingdom). The sector’s market share in Western Europe as a whole declined to 7.2% from 7.4% in 2003.

In Poland, Fiat Auto sold a total of 60,600 vehicles in 2004, or 13.8% fewer than in 2003, amid an overall decline in new registrations in the Polish market of 10.1%. Fiat Auto’s automobile market share in Poland declined by 0.7 percentage points to 17.1%. In Brazil, where new registrations increased by 8.5% in 2004, the sector sold a total of approximately 358,100 vehicles, a 12.7% increase from the 317,700 units sold during 2003, primarily as a result of a recovery of demand in the local market and the introduction of new models in the country. Despite these gains, Fiat Auto’s share of the Brazilian automobile market declined by 1.6 percentage points to 23.6%. In Argentina, where the economy continued to recover from the deep crisis of 2002, new registrations more than doubled during the year. Fiat Auto increased its market share in Argentina to 10.7% in 2004, up 0.3 percentage points from 2003.

Fiat Auto sold 271,000 light commercial vehicles in 2004, an increase of 9.8% from the number of units sold in 2003, although its market share in Western Europe declined by 0.5 percentage points to 10.7% from 11.2% in 2003.

In 2004, Fiat Auto’s financial services subsidiaries, which were reorganized in 2003, offered€11,090 million in financing to the distribution network and€6,342 million to the sector’s suppliers, or approximately 9.5% and 22.7% less than was offered in 2003. The decline in financing to the dealer network reflected, among other things, securitization programs made available to dealers directly by the sector’s manufacturing companies, while the decline in financing to suppliers reflected the reorganization and rationalization of the sector’s supply network begun in 2004. The sector’s financing and mobility services activities had revenues of€708 million in 2004, a decrease of 47.1% from€1,339 million in 2003, reflecting the divestitures of Fidis Retail Italia and Banco Fiat SA during the course of 2003. On a comparable consolidation basis, financing and mobility services activities recorded revenues of€667 million in 2003.

In 2004, the main focus of Fiat Auto’s rental operations continued to be on increasing the profitability of new contracts. These operations are conducted through Savarent, a wholly owned subsidiary of the automobiles sector that manages small and medium-sized rental fleets, operating through the Fiat Auto dealer network, as well as through Leasys (jointly controlled by Fiat Auto and Enel S.p.A.). As of December 31, 2004, the sector’s rental fleet numbered approximately 140,000 vehicles, or approximately 4.5% more than in 2003.

In 2004, Fiat Auto reported an operating loss of€840 million, as compared to an operating loss of€979 million in 2003 (a loss of€1,094 million on a comparable consolidation basis). The narrower operating loss reflected the increase in unit sales and an improved sales mix, reflecting the introduction of new models (particularly the new Panda, Idea and the Alfa GT), as well as the positive effect of certain pricing and discount policies and lower production costs resulting from improved process efficiency, the impact of which was offset in part by increased research and development costs.

The sector’s research and development expenses increased to€990 million (4.8% of net sales), or 5.4% compared to€939 million (4.7% of net sales) in 2003, with the increase related in particular to work on the new Ducato and Punto models, expected to be launched commercially in 2006 and the fourth quarter of 2005, respectively. The sector’s capital expenditures increased 21.0% to€1,330 million, compared to€1,100 million in 2003, reflecting the sector’s investments in product renewal and efficiency improvements.

Fiat Auto reported a net loss (including minority interest) of€2,019 million in 2004, compared to a net loss of€2,058 million in 2003. This result reflected the reduction in the magnitude of the sector’s operating losses, which more than offset an increase in net extraordinary expenses (€741 million in 2004, compared with€531 million in 2003), including approximately€325 million in restructuring charges, up from€259 million in 2003.

Agricultural and Construction Equipment.CNH’s revenues in 2004 totaled€9,796 million, with the increase of 4.0% compared to the€9,418 million recorded during 2003 being primarily attributable to gains in unit sales in the Americas in both construction and agricultural equipment (particularly of over 40 horsepower tractors and combine harvesters), as well as higher prices, the effects of which more than offset the negative impact of the continued appreciation of the euro against the dollar. Expressed in dollars, CNH’s reporting currency, and excluding the effects of changes in foreign exchange rates,the sector’s revenues increased by approximately 9%.

The following table sets forth CNH’s revenues from net sales of agricultural and construction equipment, as reported by CNH under U.S. GAAP, for the periods indicated in both U.S. dollars and euros.


Net Sales of Equipment	2004		2003
(U.S. GAAP)	(in millions of euros)
Agricultural Equipment	€	6,431	€	6,300
Construction Equipment		2,850		2,603

TOTAL	€	9,281	€	8,903


	(in millions of dollars)
Agricultural Equipment	$	8,000	$	7,125
Construction Equipment		3,545		2,944

TOTAL	$	11,545	$	10,069

CNH’s revenues from net sales of equipment under U.S. GAAP increased by 4.2% to€9,281 million, from€8,903 million in 2003, primarily reflecting increases in net sales of both agricultural and construction equipment, partially offset by the appreciation of the euro against the dollar. In dollar terms, revenues from net sales of equipment increased by $1,476 million, or approximately 15%. Excluding the effects of exchange rate changes during the year, revenues from sales of equipment in dollars would have been approximately 9% higher than in 2003.

Overall in 2004, world market demand for major agricultural equipment product lines (as measured by new registrations) was approximately 17% higher than in 2003, reflecting a worldwide increase in demand for both tractors and combines. While demand for tractors increased in all geographic markets, demand increased at a slower rate in Western Europe. Demand for combines increased in Latin America, the Rest of the World and North America, but declined in Western Europe. CNH’s overall tractor market share declined by approximately one percentage point from 2003, while its combine market share declined by approximately three and one-half percentage points. World market demand for construction equipment product lines increased by approximately 18%, with growth registered in all geographic markets, particularly in North and Latin America. World market demand for light construction equipment increased by approximately 22%, and demand for heavy construction equipment

increased by approximately 18%. On a unit basis, CNH’s construction equipment market share declined by approximately one percentage point, but in North America, the largest CNH market, the sector’s market share was consistent with that in 2003.

Expressed in U.S. dollars, CNH’s net sales of agricultural equipment increased to $8,000 million, up approximately 12% from the prior year. Of this increase, approximately half was attributable to favorable effects of the depreciation of the dollar against the euro, the Australian dollar, the Canadian dollar, the British pound and other currencies. The increase in net sales was also attributable to a more favorable product mix, principally of higher value combines in Latin America, increased unit sales and higher pricing, as well as to the contribution of newly introduced products.

Net sales of construction equipment increased by approximately 20% to $3,545 million, primarily due to increased wholesale unit sales, increased prices and the positive effect (accounting for four percentage points of the increase) of the translation of revenues denominated in the euro and other currencies into dollars. Strong gains in net sales were posted in North America, where CNH’s unit sales grew at a faster rate than the market as a whole, and in Latin America, but sales declined in Western Europe as a result of lower wholesale unit sales, reflecting both the difficulties associated with the transition from the Fiat-Hitachi association and dealer network to the New Holland-Kobelco network (following the formation of Fiat Kobelco, which consists of the operations of CNH’s former Fiat-Hitachi Excavator joint venture and the European operations of Kobelco) and aggressive competition from Hitachi.

The following table sets forth certain data on CNH’s revenues from net sales of equipment, as reported by CNH under U.S. GAAP, by geographic region for the periods indicated in both U.S. dollars and euros.


Net Sales of Equipment	2004		2003
(U.S. GAAP)	(in millions of euros)
North America	€	4,213	€	3,719
Western Europe		3,082		3,306
Latin America		734		630
Rest of the World		1,252		1,248

TOTAL	€	9,281	€	8,903


	(in millions of dollars)
North America	$	5,241	$	4,206
Western Europe		3,834		3,739
Latin America		913		712
Rest of the World		1,557		1,412

TOTAL	$	11,545	$	10,069

Expressed in U.S. dollars, CNH’s revenues under U.S. GAAP from net sales of equipment in North America increased by 24.6% from $4,206 million in 2003 to $5,241 million in 2004, reflecting higher sales of tractors, combines and of construction equipment.Sales of equipment in Western Europe increased by 2.5% from $3,739 million in 2003 to $3,834 million in 2004, reflecting the increase in the value of the euro and British pound as compared to the U.S. dollar. These positive effects were partially offset by a decline in unit sales of agricultural equipment and of construction equipment. Sales of equipment in Latin America increased by 28.2% from $712 million in 2003 to $913 million in 2004, principally as a result of a more favorable product mix, a slight increase in sales of agricultural equipment and strong sales of construction equipment. In the Rest of the World, sales of equipment were up 10.3%, from $1,412 million in 2003 to $1,557 million in 2004, mainly as a result of appreciation in the value of the Australian dollar and of higher unit sales of combines and tractors, while unit sales of construction equipment were little changed.

When stated in euros, our reporting currency, CNH’s revenues from net sales of equipment under U.S. GAAP increased by 13.3% in North America and 16.6% in Latin America, decreased by 6.8% in Western Europe, and were flat in the Rest of the World.

CNH reported operating income of€407 million in 2004 (4.2% of net sales), compared to€229 million (2.4% of net sales) in 2003. The 77.7% increase was primarily attributable to an increase in unit sales, higher prices and the realization of production cost savings, the positive impact of which was offset in part by higher raw materials costs (particularly for steel) and the unfavorable impact on its revenues as stated in euro of the euro’s further appreciation during the year.

CNH’s research and development expenditures declined to€214 million (2.2% of net sales) in 2004 from€229 million (2.4% of net sales) in 2003, with the 6.6% decline being entirely attributable to the appreciation of the euro against the dollar. Expressed in dollars, CNH’s reporting currency, research and development costs increased by approximately 3%. The sector’s capital expenditures also declined in euro terms in 2004, to€210 million, or by 3.2% compared to€217 million in 2003, with this decline as well being entirely attributable to the appreciation of the euro against the dollar.

The sector recorded net income (including minority interest) in 2004 of€133 million, compared to a net loss (including minority interest) of€192 million in 2003, reflecting the improvement in operating results and lower extraordinary restructuring charges, which declined from€142 million in 2003 to€65 million in 2004. The amounts of such changes recognized under the Fiat Group’s accounting principles differ from those accounted for under U.S. GAAP as adopted by CNH to present its consolidated financial results in the United States. See Note 24 to the Consolidated Financial Statements included in Item 18.

Commercial Vehicles.Iveco’s revenues for 2004 totaled€9,292 million, an increase of 10.1% from the€8,440 million recorded in 2003, reflecting both increased unit sales and increased prices for Iveco products.

During 2004, Iveco sold approximately 162,300 vehicles worldwide, or 10.9% more than in 2003. Iveco’s sales including those by associated licensees, which amounted to approximately 57,500 units (49,600 in 2003), totaled approximately 219,800 units (196,000 units in 2003).

In Western Europe, Iveco sold approximately 129,200 vehicles, or 8.3% more than the 119,300 vehicles sold in 2003, as new registrations in the Western European market for commercial vehicles (measured in terms of new registrations with a GVW of 2.8 tons or more) increased to approximately 1,064,100 units, an 11.8% increase compared to 2003 (approximately 951,400 units). Significant increases in demand were registered in the United Kingdom (+14.6%), Spain (+14.3%), France (+10.7%) and Germany (+9.6%), as well as Italy (+6.0%). In this context, Iveco reported significant increases in unit sales in France (+14.6%), Germany (+16.5%) and Spain (+13.4%), while its sales expanded at a slower rate in the United Kingdom (+5.9%) and in Italy (+1.1%). The sector’s share of the overall Western European market for vehicles with a GVW of 2.8 tons or more declined to 11.1% or by 0.4 percentage points from the level recorded in 2003.

In Eastern Europe, Iveco sold approximately 10,800 units, or 11.9% more than the 9,700 units sold in 2003. Outside Europe, Iveco’s unit sales increased by 27.7%, from approximately 17,500 vehicles in 2003 to 22,300 in 2004, with the increases being largely attributable to a strong recovery in Latin America, where Iveco’s unit sales increased by approximately 78% to 9,700 vehicles.

Irisbus, the sector’s bus unit, sold approximately 8,262 buses during the period, a reduction of 0.5% compared to 2003. Unit sales at Naveco, the sector’s 50-50 joint venture in China with the Yuejin Group, increased 2.4% to approximately 15,000 vehicles. Sales by unconsolidated licensees in India and

Turkey also increased, by 14.3% (approximately 52,000 vehicles) and 19.6% (approximately 5,300 vehicles), respectively.

Iveco sold approximately 435,000 diesel engines, an increase of 14.9% from the 379,000 sold in 2003, primarily reflecting increased sales to Fiat Auto, CNH and Sevel S.p.A., our joint venture with the PSA Group that produces light commercial vehicles. We expect Iveco’s engines activities to be transferred to Fiat Powertrain Technologies during 2005.

Iveco’s financing and rental activities recorded revenues of€637 million in 2004, a decrease of 2.7% from€655 million in 2003. At the end of 2004, the fleet of rental vehicles numbered approximately 3,770, compared to 4,600 at the end of 2003, with 155 new contracts signed during the year, compared to 1,530 in 2003.

Iveco recorded operating income of€357 million in 2004, markedly higher than the€81 million posted in 2003. Increased unit sales, the positive effect on prices of a repositioning of the sector’s product lines and progress in reducing production costs all contributed to significantly improved operating results.

Research and development expenses increased by 8.9% to€231 million (2.5% of net sales) from€212 million (2.5% of net sales) in 2003, while capital expenditures decreased 29.5% to€148 million from€210 million in 2003, reflecting the fact that a significant investment program was completed in 2003.

The sector reported net income of€109 million, compared with a loss of€258 million in 2003, reflecting both the increase in operating income and a significant decrease in net extraordinary expenses (to€35 million in 2004, compared to€166 million in 2003).

Ferrari-Maserati.Ferrari-Maserati recorded revenues of€1,512 million in 2004, an increase of 20.0% from the€1,261 million recorded in 2003. This increase reflected both higher sales of Maserati models, primarily attributable to the success of the Quattroporte model, and an increase in shipments by Ferrari despite the phase-out of its 360 Modena model, reflecting increased sales of the 360 Challenge Stradale and 612 Scaglietti, as well as the new F430 launched commercially in the last quarter of 2004. The sector recorded operating income of€6 million for the year, compared to operating income of€32 million in 2003. The sharp decline in operating income was primarily attributable to the appreciation of the euro, as well as to higher research and development expenditures, which more than offset the impact of the sector’s improved unit sales and product mix and reduced production costs. Research and development expenses increased by 13.1% to€147 million (9.7% of sales) from€130 million (10.3% of sales) in 2003, while capital expenditures decreased 28.0% to€139 million from€193 million in 2003. The sector recorded a net loss before minority interest of€27 million in 2004, compared to net income before minority interest of€2 million in 2003.

Components.Magneti Marelli’s revenues amounted to€3,804 million, or 18.7% more than the€3,206 million recorded in 2003. The increase of€598 million primarily reflected the consolidation of Electronic Systems (which contributed€476 million in revenues during the year), as well as improved sales at all business units despite relatively stable volumes, largely due to new products with a higher technology content, such as the Diesel Buy system introduced by the engine control unit and new high-intensity discharge xenon headlamps and adaptive front light systems introduced by the lighting systems unit. In addition, the sector’s suspension business reported higher sales volumes, reflecting increased sales in Poland, where Fiat Auto’s new Panda went into production. Magneti Marelli recorded operating income of€116 million, compared to€32 million in 2003, with the significant improvement reflecting increased sales and focused cost containment measures, which more than offset the impact of significant price pressures. Electronic Systems contributed approximately€26 million to Magneti Marelli’s

operating income during the year. The sector recorded net income of€55 million in 2004 (compared with a€90 million net loss in 2003), reflecting the improvements in operating income and gains on the disposal of Midas.

Production Systems.Comau recorded revenues of€1,716 million in 2004, a decline of 25.2% from the€2,293 million recorded during 2003, largely reflecting the impact of the transfer of certain dies and service activities to Fiat Auto and the former Fiat-GM Powertrain joint venture. The decline also reflected lower revenues from contract work, mostly in the NAFTA region (where sales were also negatively impacted by exchange rates) because of a smaller order backlog at the beginning of the year. In 2004, the sector received€1,463 million in new orders for contract work, an increase of 5.0% from 2003, reflecting strong growth in the volume of orders in the NAFTA region that more than offset the unfavorable effect of the depreciation of the dollar against the euro. The production systems sector posted operating income of€32 million, compared to operating income of€2 million in 2003, reflecting improved margins on contract work and a strong effort to reduce overhead and improve efficiency that more than offset the impact of the decline in revenues. The sector recorded a net loss of€15 million in 2004, compared to a loss of€164 million in the previous year, when major restructuring programs in a number of countries, including Italy, France and the United Kingdom, affected the sector’s results.

Metallurgical Products.Teksid reported revenues of€911 million, or 7.9% more than the€844 million recorded in 2003, reflecting improved sales volumes at both the cast iron business unit (+11%, due to increased demand in North America and Brazil) and magnesium business unit (+4.9%), the positive impact of which more than offset negative exchange rate effects. Teksid recorded operating income of€35 million in 2004, compared to€12 million last year. The increase in operating income reflected the higher sales, as well as the realization of production cost efficiencies, the impact of which was offset in part by the exchange rate effects and higher raw material costs. Net income before minority interest for the year amounted to€3 million, compared to a net loss of€91 million in 2003, when the sector recorded significant restructuring and other extraordinary expenses.

Services.Business Solutions reported revenues of€1,572 million for 2004, a decrease of 13.4% from the€1,816 million recorded in 2003. The decline primarily reflected the deconsolidation of Fiat Engineering following its sale in February 2004, the effect of which was only partially offset by the consolidation as of January 2004 of the telephone company Atlanet, which generated€155 million in revenues in 2004. Excluding these consolidation effects, revenues were substantially in line with those of the previous year. Operating income amounted to€36 million, as compared with€45 million in 2003, with the 20.0% decline again primarily reflecting the deconsolidation of Fiat Engineering, the impact of which was offset in part by cost reduction and efficiency measures implemented during the year. The sector recorded a net loss of€26 million in 2004, compared to a net loss of€20 million in 2003.

Publishing and Communications.Itedi’s revenues amounted to€407 million in 2004, an increase of 6.3% from the€383 million reported in 2003. The increase reflected higher advertising revenues booked by Publikompass, sales of the weekly magazine “Specchio,” which was previously a free insert inLa Stampanewspaper but for which a€0.30 surcharge was added in September 2003, as well as the success of “brand-extension” initiatives, which useLa Stampa’s nationally recognized brand name to enter new product classes, which more than offset a decline in revenues from newspaper sales, as average daily circulation decreased to 339,000 in 2004 from 358,000 in 2003. The publishing and communications sector reported operating income of€12 million, as compared with operating income of€10 million in 2003, with the improvement reflecting both the higher ad revenues at Publikompass and a decline in the cost of newsprint, as well as a company-wide cost-cutting program. Itedi recorded net income of€2 million, compared to net income of€1 million in 2003.

2003 Compared with 2002

Our net sales and revenues, including changes in contract work in progress, totaled€47,271 million, with the 15.1% decrease from 2002 being primarily attributable to changes in the scope of consolidation. As detailed in “¾Changes in the Scope of Consolidation” above, on a comparable consolidation basis, our 2003 net sales and revenues were€44,498 million, a decrease of 7.3% from€48,026 million in 2002, with the decline’s being largely attributable to a decline in sales at Fiat Auto and the appreciation of the euro, which resulted in a reduction in the value of revenues in other currencies, primarily the U.S. dollar.

Fiat Auto recorded revenues of€20,010 million for 2003, with the decline of 9.6% from the€22,147 million reported in 2002 reflecting an 8.8% decrease in unit sales, which fell to approximately 1,695,000 automobiles and light commercial vehicles, as well as the deconsolidation of the results of Fidis Retail Italia and Banco Fiat SA, which carried out the sector’s European and Brazilian retail financing activities, respectively. CNH recorded revenues of€9,418 million in 2003, with the decrease of 10.4% from 2002 being primarily attributable to the appreciation of the euro against the dollar. Iveco recorded revenues of€8,440 million in 2003, with the decrease of 7.6% from 2002 being primarily attributable to the disposal of Fraikin and the sector’s switch from accounting for its 50-50 joint venture Naveco according to the proportional method to the equity method, as well as a 9.6% decrease in unit sales. Ferrari-Maserati, which was reported as a separate sector for the first time in 2002, recorded revenues of€1,261 million in 2003, with the 4.4% increase over 2002 being primarily attributable to higher sales of Ferrari models, which more than offset a decline in sales of Maserati and the negative effect of the appreciation of the euro.

In 2003, we posted an operating loss of€510 million, as compared with an operating loss of€762 million recorded in 2002. As described in more detail above, the improvement is even more evident if the result is considered on a comparable consolidation basis: On this basis, we recorded losses of€1,348 million in 2002, compared to a loss of€714 million in 2003. The reduction in the magnitude of our operating loss, which accelerated over the course of 2003, mainly reflected efficiency gains realized through activities carried out during the year in connection with our restructuring initiatives.

The revenues and operating income recorded by each of our sectors prior to eliminations are summarized in the table of “Operating Results by Sector” in Item 4 and analyzed in the more detailed sector-by-sector discussion appearing below.

We reported net financial expenses of€963 million in 2003, as compared to€671 million in 2002. This increase in net financial expenses was largely attributable to the deconsolidation of Toro Assicurazioni, which generated financial income, as well as a decline in investment income. We recorded investment income in 2003 of€22 million, compared to income of€156 million in 2002, primarily as a result of the deconsolidation of Toro Assicurazioni and lower dividends received from cost-method investments. The results of our financial management activities, which we calculate based on net financial expenses but excluding any income or expenses derived from equity investments, amounted to expenses of€979 million in 2003, as compared to€862 million in 2002. Our management uses this non-Italian GAAP measure because it believes it is able to more meaningfully evaluate the results of its financial management activities, which include interest expenses and income, foreign exchange gains and losses and revaluations and writedowns of non-equity securities and financial receivables, when income or loss on equity investments are excluded. The following table reconciles this non-Italian GAAP measure to financial income and expenses, the most nearly comparable Italian GAAP measure. The references to Notes following particular line items in the table are to the specific Notes to the Consolidated Financial Statements included in Item 18 where these line items are presented in greater detail.


Results of financial management activities		2003			2002
		(in millions of euros)
Financial income and expenses	Note 17	€	(963	)	€	(671	)
Investment income	Note 17		(22	)		(156	)
Losses on sale of securities not held as fixed assets (*)	Note 17		6			24
Revaluations of securities held in current assets other than equity investments	Note 18		14			7
Writedowns of:	Note 18
- financial fixed assets other than equity investments			(1	)		(3	)(**)
- securities held in current assets other than equity investments			(8	)		(45	)
- financial receivables			(5	)		(18	)

Results of financial management activities		€	(979	)	€	(862	)

(*)		Included within losses on sale of securities in Note 17.
(**)		For 2002, the amount shown is net of a writedown of€81 million relating to permanent impairment of treasury stock held by Toro Assicurazioni (€78 million) (Note 3) and other Group companies.

On a comparable consolidation basis, our results of financial management activities improved by less than 1%, with the slightly lower net expenses reflecting our lower average indebtedness for the period and a reduction in the level of interest rates in Europe and the United States, which were largely offset by the greater impact in 2003 of foreign exchange losses, and higher spreads on our corporate borrowings and higher fees payable to lenders. In addition, the result in 2002 benefited from the positive effects of certain interest rate risk management transactions.

Total adjustments to financial assets amounted to a loss of€172 million in 2003, compared to a loss of€881 million in 2002, with the decrease due primarily to the deconsolidation of Toro Assicurazioni, with the 2002 figure reflecting losses incurred through the year-end marking to market of the insurance sector’s equity securities portfolios, as well as a narrowing of losses at companies accounted for using the equity method. These same factors were also reflected in the results of our equity investments, a measure our management uses to isolate the performance of our strategic and portfolio equity investments in unconsolidated entities (including adjustments to our financial assets and gains and losses on equity investments not held as fixed assets). Our results of equity investments in 2003 showed a loss of€156 million, as compared to a loss of€690 million in 2002. The following table reconciles this non-GAAP measure to investment income, the most nearly comparable Italian GAAP measure. The references to Notes following particular line items in the table are to the specific Notes to the Consolidated Financial Statements included in Item 18 where these line items are presented in greater detail.


Results of equity investments		2003			2002
		(in millions of euros)
Adjustments to financial assets	Note 18	€	(172	)	€	(881	)
Revaluations of securities held in current assets other than equity investments	Note 18		(14	)		(7	)
Writedowns of:	Note 18
- financial fixed assets other than equity investments			1			3	(**)
- securities held in current assets other than equity investments			8			45
- financial receivables			5			18
Investment income	Note 17		22			156
Losses on sale of securities not held as fixed assets (*)	Note 17		(6	)		(24	)

Results of equity investments		€	(156	)	€	(690	)

(*)		Included within losses on sale of securities in Note 17.

(**)		For 2002, the amount shown is net of a writedown of€81 million relating to permanent impairment of treasury stock held by Toro Assicurazioni (€78 million) (Note 3) and by other Group companies.

Our expenses related to the results of equity investments experienced a decline of a similar magnitude in percentage terms on a comparable consolidation basis, reflecting mainly the improvement in

the performance of certain companies we value according to equity method, such as Italenergia Bis, as described above.

We reported total extraordinary income and expenses equal to net income of€347 million in 2003, as compared with net expenses of€2,503 million in 2002. Extraordinary income totaled€2,017 million in 2003, of which€1,826 million was attributable to gains on disposals of investments and other fixed assets. The most significant of these were the gains realized on the sale of FiatAvio, our former aviation sector (€1,266 million, or€1,258 million net of the expenses associated with the transaction, classified as other extraordinary expenses), Toro Assicurazioni Group (€427 million, or€390 million net of the expenses and provisions connected with the transaction, classified as other extraordinary expenses), Fiat Auto’s retail financing activities in Brazil (€103 million net of transaction costs), and sales of other investments (€30 million).

In 2002, when our aggregate capital gains on divestitures totaled€1,081 million, the most significant of these were the gains realized on the sale of 34% of Ferrari S.p.A. (€714 million, or€671 million net of the costs associated with the transaction, which were classified as non-operating expenses), the sale of 14% of Italenergia Bis S.p.A. (€189 million), the sale of our interest in Europ Assistance Holding S.A. (€83 million), the sale of a 50% interest in our Targasys S.r.l. mobility service unit (€36 million) and the sale of the aftermarket operations of Magneti Marelli (€26 million).

Other extraordinary income of€159 million in 2003 (€146 million in 2002) was primarily attributable to the release of reserves maintained by individual companies of the Group that proved to be in excess of requirements.

Our extraordinary expenses totaled€1,670 million in 2003 (as compared to€3,738 million in 2002). The primary components of the total for 2003 were:

	•		€721 million in extraordinary expenses and provisions, of which the most significant individual items were: incidental costs and other provisions connected with certain divestitures that took place in 2003 and in prior years (€139 million), including€37 million connected with the sale of the Toro Assicurazioni; damages caused by flooding at the Termoli factory in January 2003 (€71 million); expenses and provisions recorded in connection with our sale of Magneti Marelli’s former electronic systems operations, including those related to the initial purchaser’s failure to pay the full agreed purchase price (€53 million); provisions for commitments related to IPSE 2000, a telecommunications company in which Fiat S.p.A. purchased a 4% equity interest from Atlanet in connection with Fiat’s acquisition of 100% of Atlanet in 2003 (€47 million); charges associated with cutbacks in the range of vehicles available at Iveco’s Civis bus operations in France (€24 million); and commissions paid to Mediobanca for the extension of the commitments undertaken by Mediobanca under the Ferrari sale contract described in Note 14 (€16 million). Other extraordinary expenses also included changes to prior period estimated expenses of€40 million.

	•		€658 million in restructuring expenses and provisions, (€1,026 million for 2002), relating primarily to the costs incurred or provisions determined in accordance with our restructuring initiatives for personnel laid off with long-term unemployment benefits, severance incentives, and writedowns of property, plant and equipment and intangible fixed assets, can be broken down as follows:

•

A total of€259 million at Fiat Auto, of which€141 million related to reductions in production capacity at facilities outside Europe and in Italy,€52 million to the provisions and costs of the mobilitá early retirement program and other workforce reduction-related

			incentives, and the remaining€66 million to various other restructuring activities, including writedowns in the value of inventories at restructured operations;

	•		€142 million at CNH, including severance and other employee-related costs, writedowns of assets, losses on the sale of assets and businesses, as well as costs related to the closing, selling and downsizing of existing facilities arising from divestitures, excess capacity and duplicate facilities, mainly in the United States and France;

	•		€98 million at Comau, of which€76 million related to significant restructuring and redundancy programs in a number of countries (“cassa integrazione” in Italy, the “plan social” in France, and the reorganization of certain operations in the United Kingdom), and€22 million related to the an impairment charge relating to the service and dies activities which were reacquired from Comau by Fiat Auto and Fiat-GM Powertrain as of January 1, 2004; and

	•		an additional€159 million, attributable to Magneti Marelli (€50 million, primarily due to restructuring initiatives in the automotive lighting division), Iveco (€43 million, primarily for the closing of its Ikarusbus plant in Hungary), Teksid (€43 million, primarily for the impairment of fixed assets at its Italian operations and workforce reduction-related incentives), Business Solutions (€12 million, primarily for costs related to workforce reduction and the impairment of intangible assets), and Fiat S.p.A. and other Group companies (€11 million).

	•		€215 million of writedowns in the value of other assets to reflect revised estimates of future cash flows in light of changes in market prospects and new business plans (€216 million in 2002). The total was primarily attributable to impairment charges at Fiat Auto of€177 million (production lines due to a planned reduction in production volumes) and Iveco of€10 million (production lines at its Civis bus facilities in France).

	•		€50 million in losses on disposals of investments and other fixed assets; primarily reflecting the losses of€24 million incurred on the sale of Fraikin, as well as costs related to capital increases at CNH connected with its employee stock option program and losses on other minor equity investments and asset sales, compared to losses of€1,239 million in 2002. The losses in 2002 included losses on the sale at current market prices of the GM shares we had acquired in connection with the formation of our industrial alliance (€1,049 million), the sale of the electronic systems business unit of Magneti Marelli (€150 million) and the sale of the aluminum business unit of Teksid (€24 million).

	•		Taxes related to prior years, including amounts paid with respect to previously open years, amounted to€26 million in 2003 (€79 million in 2002).

The net income tax effect on our statement of operations for the year was a tax expense of€650 million, as compared with a tax benefit of€554 million in 2002. Current income taxes for fiscal 2003 included€125 million for IRAP, the regional tax on production activities in Italy (€141 million in 2002) and€31 million for other current taxes (€192 million in 2002). The change from deferred tax assets of€887 million in 2002 to deferred tax liabilities of€494 million in 2003 reflected the reversal of previously established deferred tax assets connected with the realization of gains on divestitures that took place in 2003. For additional information, see Note 20 to the Consolidated Financial Statements included in Item 18.

As a result, our net result before minority interest was a loss of€1,948 million in 2003, as compared with a loss before minority interest of€4,263 million in 2002. Our net loss amounted to€1,900 million, as compared with net loss of€3,948 million in the previous year. As a result, earnings per ordinary share on an Italian GAAP basis were equal to a net loss per share of€2.412 in 2003, as compared with net loss per share of€6.66 in 2002.

Automobiles.Fiat Auto’s global unit sales to the dealer network, importers and other large direct customers during 2003 totaled approximately 1,695,000 vehicles, a decrease of 8.8% from the 1,860,000 sold in 2002. The decrease reflected weak market demand and a decline in market share in a number of the sector’s principal markets, as well as to the limited impact on the full year figures of the new models (the Lancia Ypsilon, the Fiat Panda and Idea and the Alfa GT) launched during the second half of 2003. When the contribution of unconsolidated affiliates is included, Fiat Auto’s sales totaled approximately 1,779,000 units, a decrease of 6.9% over the previous year’s total of 1,910,000 units sold.

Western European customers bought approximately 1,179,000 vehicles, a decrease of 9.4%, as Fiat Auto’s automobile market share in Western Europe as a whole fell by 0.8 percentage points to 7.4%. The sector’s unit sales were down in all of its principal European markets with the exception of the United Kingdom and Spain, where they increased by 1.4% and 14.8%, respectively. In Italy, the sector’s unit sales declined by 11.5% to 671,000 units. Fiat Auto’s share of the Italian automobile market fell from 30.2% to 28.0%. New registrations were down 1.2% for the year as a whole. Fiat Auto’s share of the automobile market in Western Europe excluding Italy decreased from 4.0% to 3.5%.

In Poland, Fiat Auto sold a total of approximately 70,000 vehicles in 2003, or 15.9% more than in the previous year. The increase in sales in Poland was attributable to a 16.3% increase in new registrations. Fiat Auto’s automobile market share in Poland held steady at 17.8%. In Brazil, the sector sold a total of approximately 318,000 vehicles, an 11.3% decrease from the 358,000 units sold a year earlier as demand in Brazil decreased by 3.2%. Despite the greater reduction in unit sales, Fiat Auto’s share of the automobile market declined only slightly, from 25.8% in 2002 to 25.2% in 2003. In Argentina, where sales and manufacturing activities were reduced sharply during 2002 as a result of the economic crisis in that country, sales in 2003 increased as the market started to recover, with the sector selling approximately 14,700 vehicles, compared to approximately 6,800 in 2002.

Fiat Auto’s revenues totaled€20,010 million, a decrease of€2,137 million, or 9.6%, compared with 2002, with the decrease attributable primarily to the contraction in sales volumes and the deconsolidation of the sector’s retail financing activities in Europe and Brazil. In 2003, Fiat Auto reported an operating loss of€979 million, as compared to an operating loss of€1,343 million in 2002. Excluding the results of the financial companies deconsolidated in 2003, the sector’s operating loss would have been€1,094 million in 2003, compared to€1,562 million in 2002. The principal reasons for the narrower operating losses, achieved despite the declines in revenues and unit sales, as well as a 9% increase in research and development outlays to€939 million, were significant cost reductions and savings on overhead as a result of our restructuring initiatives and the industrial alliance with GM, as well as the positive effect of the new models introduced in the last few months of the year.

Fiat Auto reported a net loss of€2,058 million in 2003, compared to a net loss of€2,739 million in 2002. The narrower losses reflected the reduction in the magnitude of the sector’s operating losses, as well as lower net extraordinary expenses (€531 million in 2003, compared with€796 million in 2002), which included approximately€259 million in restructuring charges, down from€549 million in 2002. For details of these charges, see “¾Industrial Reorganization Initiatives” above.

Research and development expenditures amounted to€939 million (4.7% of net sales) in 2003, an increase from the€861 million (3.9% of net sales) recorded in 2002. The sector’s capital expenditures,

which totaled€1,100 million in 2003, as compared with€1,115 million in 2002, were devoted to the development of new products and technological innovation, as well as to the purchase of vehicles used in the sector’s increasingly popular medium- and long-term leasing operations, which accounted for approximately€286 million, or 26% of the total.

Agricultural and Construction Equipment.CNH’s revenues in 2003 totaled€9,418 million, with the decrease of 10.4% from the€10,513 million recorded in 2002 being primarily attributable to the appreciation of the euro against the dollar. Expressed in U.S. dollars, CNH’s reporting currency, revenues increased by approximately 7% over the total for 2002, principally as a result of the depreciation of the dollar, which resulted in an increase in the value of revenues in other currencies, primarily the euro. Excluding the effect of changes in foreign exchange rates, CNH’s 2003 revenues expressed in dollars were substantially in line with those recorded in 2002.

The following table sets forth CNH’s revenues from sales of agricultural and construction equipment, as reported by CNH under U.S. GAAP, for the periods included in both U.S. dollars and euros.


Net Sales of Equipment	2003		2002
(U.S. GAAP)	(in millions of euros)
Agricultural Equipment	€	6,300	€	6,782
Construction Equipment		2,603		3,098

TOTAL	€	8,903	€	9,880


	(in millions of dollars)
Agricultural Equipment	$	7,125	$	6,405
Construction Equipment		2,944		2,926

TOTAL	$	10,069	$	9,331

CNH’s revenues from sales of equipment under U.S. GAAP decreased by 9.9% to€8,903 million, from€9,880 million in 2002, primarily reflecting the appreciation of the euro against the dollar. In dollar terms, revenues from sales of equipment increased by $738 million, or approximately 8%. Of the 2003 revenues, approximately $800 million were attributable to the effect of foreign exchange rate movements, in particular the depreciation of the dollar against the euro and other currencies, so that excluding the effects of exchange rate changes during the year, revenues from sales of equipment would have been slightly lower compared to 2002.

Overall in 2003, world market demand for major agricultural equipment product lines was approximately 7% higher than in 2002, as increased worldwide demand for tractors and overall stronger demand in North America more than offset lower demand for tractor in Latin America and Western Europe. Worldwide demand for combine harvesters was steady in 2003, with declines in North America and Western Europe offset by stronger demand in Latin America. CNH’s overall tractor market share declined slightly compared with 2002, while its combine market share increased 1.5 percentage points. World market demand for construction equipment product lines increased by approximately 11%, as growth in North America and Asia were only partially offset by lower demand in Latin America and Western Europe. World market demand for backhoe loaders increased by approximately 6% and demand for heavy construction equipment increased by approximately 19%. On a unit basis, CNH’s construction equipment market share declined by approximately three percentage points, with declines in all of its major product categories in nearly every market.

Expressed in U.S. dollars, CNH’s sales of agricultural equipment increased to $7,125 million, up approximately 11% from the prior year. Of this increase, approximately 8 percentage points were attributable to favorable effects of the depreciation of the dollar against the euro, the Australian dollar, the

Canadian dollar, the British pound and other currencies, as well as increases in wholesale unit sales of combine harvesters and higher pricing, especially in Brazil. These positive factors were offset only partially by declines in tractor sales.

Sales of construction equipment increased by 1% to $2,944 million. Excluding the effects of the formation of Fiat Kobelco in the third quarter of 2002, net sales declined by 1%, as the positive effect of the translation of revenues denominated in the euro and other currencies into dollars was offset by lower wholesale unit volumes. In Western Europe, initial problems in the integration of the Fiat-Hitachi and Fiat-Kobelco sales networks following the formation of Fiat Kobelco, which consists of the operations of CNH’s former Fiat-Hitachi Excavator joint venture and the European operations of Kobelco, also contributed to the contraction. The decline in unit sales was marked by lower sales of backhoe loaders and skid steer loaders in the North American market that were offset only in part by higher unit sales of heavy construction equipment in the North America.

The following table sets forth certain data on CNH’s revenues from sales of equipment, as reported by CNH under U.S. GAAP, by geographic region for the periods indicated.


Net Sales of Equipment	2003		2002
(U.S. GAAP)	(in millions of euros)
North America	€	3,719	€	4,383
Western Europe		3,306		3,512
Latin America		630		676
Rest of the World		1,248		1,309

TOTAL	€	8,903	€	9,880


	(in millions of dollars)
North America	$	4,206	$	4,140
Western Europe		3,739		3,317
Latin America		712		638
Rest of the World		1,412		1,236

TOTAL	$	10,069	$	9,331

Expressed in U.S. dollars, CNH’s revenues from sales of equipment in North America under U.S. GAAP increased by 1.6%, from $4,140 million in 2002 to $4,206 million in 2003, reflecting slightly lower sales of tractors and of construction equipment, the effects of which were partially offset by higher combine unit sales. Sales of equipment in Western Europe increased by 12.7% from $3,317 million in 2002 to $3,739 million in 2003, reflecting higher agricultural equipment unit sales and the increase in the value of the euro and British pound as compared to the U.S. dollar, these positive effects were partially offset by a decline in unit sales of construction equipment. Sales of equipment in Latin America increased by 11.6% from $638 million in 2002 to $712 million in 2003, principally as a result of higher combine unit sales and a more favorable mix and pricing, the positive effects of which were only partially offset by a decline in the average value of Brazilian real in dollar terms and a decline in unit sales of tractors and construction equipment. In the Rest of the World, sales of equipment were up 14.2%, from $1,236 million in 2002 to $1,412 million in 2003, mainly as a result of higher unit sales of construction equipment and the increase in the value of the Australian dollar, while unit sales of combines and tractors declined.

When stated in euros, our reporting currency, revenues from sales of equipment under U.S. GAAP decreased by 15.2% in North America, by 5.9% in Western Europe, by 6.8% in Latin America and by 4.6% in the Rest of the World.

CNH reported operating income of€229 million (2.4% of net sales) in 2003, compared to€163 million (1.6% of net sales) in 2002. The increase was primarily attributable to higher prices, improved

margins on new products, the realization of cost savings arising from integration with Case and sector-related restructuring initiatives. These factors more than offset the negative impact of lower unit sales, the costs associated with the introduction of new products, and higher pension and post-retirement benefit costs for current and former CNH employees.

The sector’s net result for the year was a net loss of€192 million, as compared with a net loss of€211 million in 2002, reflecting the improvement in operating results and a reduction in financial expenses as a result of lower external borrowings; these positive factors were only partially offset by an increase in extraordinary restructuring charges to€142 million (€18 million in 2002), as described in more detail in “¾Industrial Reorganization Initiatives” above. The amounts of such changes recognized under the Fiat Group’s accounting principles differ from those accounted for under U.S. GAAP as adopted by CNH to present its consolidated financial results in the United States. See Note 24 to the Consolidated Financial Statements included in Item 18.

CNH’s research and development expenses in 2003 were€229 million (2.4% of net sales), down from€300 million (2.9% of net sales) in 2002, with the decrease attributable in part to currency translation effects.

Commercial Vehicles.In 2003, Iveco’s revenues totaled€8,440 million, a decrease of 7.6% from the€9,136 million recorded in 2002. The decrease was almost entirely attributable to Iveco’s divestiture of Fraikin at the beginning of 2003 and the change in method of accounting for the Naveco 50-50 joint venture from the proportional method to the equity method.

During 2003, Iveco sold approximately 146,000 vehicles worldwide, or approximately 9.6% less than in 2002. If the approximately 50,000 vehicles sold by unconsolidated licensees are added, total sales reach 196,000 vehicles (199,380 units in 2002).

In Western Europe, Iveco shipped approximately 119,300 vehicles, or 7.4% fewer than in 2002, as lower unit sales recorded in Italy, Germany and the United Kingdom were only partially offset by higher unit sales in France and Spain. The most significant declines in unit sales occurred in Italy (-13.6%), due to strong contraction in demand following the expiration of certain tax incentives that had been introduced in 2002, as well as in Germany (-6.7%) and in the United Kingdom (-14.9%), where Iveco was unable to benefit from overall gains in market demand as a result of insufficient competitiveness of the after-sales services package Iveco offers. Iveco’s unit sales were up slightly in France and Spain. In Eastern Europe, Iveco sold approximately 9,700 units, or approximately 1.6% more than in 2002. Outside of Europe, Iveco’s unit sales decreased by approximately 26%, from 23,600 vehicles in 2002 to 17,500 in 2003, with the decline largely attributable to the change in accounting method for Naveco, the sector’s 50-50 joint venture with the Yuejin Group in China. Unit sales at Naveco increased by approximately 1% from 2002 to approximately 14,700 in 2003. Sales by unconsolidated licensees in India and Turkey increased (by approximately 38% in India and 6.9% in Turkey), reflecting the trend of vehicle demand in the two countries and an increase in market share in India in all market segments. Irisbus sold a total of 8,307 buses during the year, a decline of 1.5% that was primarily attributable to reduced market demand from the public sector in France and Italy. Its market share in Western Europe decreased two percentage points to approximately 25%, primarily as a result of the lower sales and the fact that market demand grew primarily in countries such as the United Kingdom where Irisbus has a relatively small presence. Iveco produced approximately 379,000 diesel engines, or 4.9% more than in 2002, reflecting an increase in sales of a new line of engines to CNH for construction and agricultural machine applications and an increase in sales to Sevel. Engine sales to customers outside the Iveco sector, including to other sectors of the Group, accounted for approximately 61% of Iveco’s sales of engines, or three percentage points more than in 2002.

Iveco recorded operating income of€81 million in 2003, a decline of approximately 21% from the€102 million recorded in 2002, primarily as a result of the deconsolidation of Fraikin. Excluding the effect of these changes in the scope of consolidation, Iveco’s operating income would have declined by approximately 5%. Iveco’s operating profitability was also negatively affected by lower sales as a result of aggressive competition in Europe as well as by the appreciation of the euro, particularly against the British pound. These negative factors were only partially offset by reductions in manufacturing costs and overhead.

Iveco’s research and development expenditures of€212 million (2.5% of net sales) decreased by 11.3% from the€239 million (2.6% of net sales) recorded in 2002. Capital expenditures decreased from€587 million in 2002 to€210 million in 2003, of which€182 million was devoted to industrial investments and€28 million related to investments in vehicle fleets for contract hire activities. The significant decrease in capital expenditures primarily reflected a decrease in investments in vehicle fleets from€331 million in 2002 to€28 million in 2003, as a result of the sale of Fraikin and its leasing activities.

Ferrari-Maserati.Ferrari, which we established as a separate sector for the first time in 2002 (having been previously reported as one of our “Other Companies”), recorded revenues of€1,261 million, an increase of 4.4% from the€1,208 million recorded in 2002, reflecting higher sales of Ferrari models, which were only partially offset by a reduction in sales of Maserati models and the negative effect of the appreciation of the euro. However, the sector’s operating income declined by approximately 54% from€70 million in 2002 to€32 million in 2003, largely as a result of high research and development costs for new products and the appreciation of the euro, which move than offset an improvement in the mix of Ferrari models sold. Ferrari’s research and development expenditures of€130 million (10.3% of net sales) increased by approximately 38% from the€94 million (7.8% of net sales) recorded in 2002. Capital expenditures increased by 9.6% to€193 million in 2003.

Components.Magneti Marelli’s revenues amounted to€3,206 million, or 2.5% less than the€3,288 million recorded in 2002. The decrease was primarily attributable to the appreciation of the euro, which was only partially offset by increased sales by the sector’s engine control unit following the introduction of a new direct injection system for diesel engines, as well as by its lighting unit, also as a result of the introduction of new products. Magneti Marelli recorded operating income of€32 million in 2003, compared to an operating loss of€16 million in 2002, with the improvement being largely attributable to cost containment measures focused on raw materials costs and overhead.

Production Systems.Comau recorded revenues of€2,293 million in 2003, substantially in line with the€2,320 million recorded in 2002. Overall revenues from contract work were broadly in line with those of the previous year, both in Europe and in North America, as the negative impact of the depreciation of the dollar was largely offset by an acceleration in work carried out under existing contracts. Revenues from maintenance services were also largely unchanged with respect to 2002. The production systems sector posted operating income of€2 million, compared to a€101 million operating loss recorded in 2002, with the losses in 2002 reflecting significant cost overruns on several large contracts in Europe.

Metallurgical Products.Teksid reported revenues of€844 million, or 45.2% less than the€1,539 million recorded in 2002, largely as a result of the sale in September 2002 of Teksid’s aluminum business, for which the sector recorded revenues in 2002 of€660 million prior to the sale. In addition, Teksid’s revenues in 2003 were negatively affected by adverse exchange rate developments, including the appreciation of the euro against the dollar; these negative factors were offset only partially by higher sales volumes at both the magnesium business unit, which benefited from stronger demand from the SUV segment in the United States market, and the cast iron business unit. The metallurgical products sector

recorded operating income of€12 million in 2003, compared to€27 million in 2002. The decline reflected the deconsolidation in September 2002 of the aluminum business unit, which accounted for€17 million of Teksid’s 2002 operating income, as well as the adverse effects of exchange rate movements and a less favorable product mix, which were offset only in part by higher sales volumes and cost-cutting measures.

Aviation.We divested FiatAvio as of July 1, 2003. FiatAvio’s revenues in the period prior to its sale amounted to€625 million, compared to the€1,534 million recorded in 2002. FiatAvio recorded operating income in the 2003 period of€53 million, compared to€210 million in 2002.

Insurance.We divested Toro Assicurazioni as of May 2, 2003. Toro Assicurazioni’s revenues (equal to premiums earned) in the period prior to its sale amounted to€1,654 million, compared to the€4,916 million recorded in 2002. Toro Assicurazioni recorded income before taxes in the 2003 period of€85 million, compared to€14 million in 2002.

Services.Business Solutions reported revenues of€1,816 million for 2003, a decrease of 7.6% from the€1,965 million recorded in 2002. This decrease was primarily attributable to the divestiture in 2003 of a majority interest in IPI S.p.A. (which had€31 million of revenues in 2002) and other minor operations, as well as an overall contraction in the services market and a strategic decision to refocus the sector’s activities on serving other Group companies. Operating income amounted to€45 million, a decrease of 32.8% from€67 million in 2002, mainly as a result of the divestitures of a majority interest in IPI S.p.A. (which generated€21 million in operating income in 2002) and other minor operations. These divestitures were offset only partially by cost-cutting measures implemented during the year.

Publishing and Communications.Itedi’s net sales and revenues amounted to€383 million in 2003, an increase of 6.4% from the€360 million reported in 2002. The increase reflected higher advertising revenues, “brand-stretching” initiatives and sales of the weekly “Specchio,” for which a surcharge was added in September 2003, which more than offset a decline in daily newspaper sales. The publishing and communications sector reported operating income of€10 million, as compared with an operating income of€3 million in 2002. This improvement was a result of measures to improve efficiency and rationalize costs in all business areas, margins on sales to new newspaper customers and a decline in the cost of newsprint.

Effect of Inflation

Management believes that the impact of inflation was not material to our net sales and revenues, operating result or consolidated net loss in the years ended December 31, 2004, 2003 and 2002.

U.S. GAAP Reconciliation

For fiscal years beginning on or after January 1, 2005, the Company is required to prepare its consolidated financial statements in accordance with IFRS, instead of Italian GAAP. The transition to IFRS has required the dedication of significant Company resources and detailed analysis of the Company’s financial reporting methods and systems, as well as the implementation of new systems, over an extended period of time. It has also entailed the review and analysis of many previously recorded transactions in order to determine their proper accounting and classification under IFRS.

As a result of the IFRS transition process and the review and analysis of previously recorded transactions inherent therein, the Company re-evaluated its application of U.S. GAAP to certain transactions, so as to ensure the appropriate identification and reflection of differences and similarities between the two sets of accounting standards. On the completion of this evaluation process, which was carried out subsequent to the issuance of the Group’s Consolidated Financial Statements for 2003, the Company concluded that it was necessary to restate its net loss under U.S. GAAP for each of the years 2003 and 2002 and stockholders’ equity under U.S. GAAP at December 31, 2003, with the related U.S. GAAP restatements regarding years prior to 2002 being implemented by restating opening stockholders’ equity at January 1, 2002. The discussion below in respect of the U.S. GAAP reconciliation relates to these restated amounts. These U.S. GAAP restatements had no impact on the Group’s Italian GAAP results and financial position as previously reported. For a more detailed discussion of the principal differences between Italian GAAP and U.S. GAAP as they relate to our consolidated net losses and stockholders’ equity, see Note 24 to the Consolidated Financial Statements included in Item 18. Additional information on the restatement of our net loss and stockholders’ equity described above is provided in Note 24(iv) to our Consolidated Financial Statements.

Our consolidated net losses determined in accordance with U.S. GAAP were€2,100 million,€2,934 million and€3,906 million for the years ended December 31, 2004, 2003 and 2002, respectively, as compared with net losses of€1,586 million,€1,900 million and€3,948 million, respectively, for the same periods, as determined under Italian GAAP.

The net loss for the year ended December 31, 2004 under U.S. GAAP was€514 million higher than the net loss reported under Italian GAAP due to the net effects of:

	•		lower U.S. GAAP income from derivative financial instruments of€452 million, the largest single component of this difference being attributable to the valuation of the total return equity swap on GM shares, terminated in 2004. Under Italian GAAP, this financial instrument was treated as an off-balance sheet item, whereas under U.S. GAAP it was recorded at its fair value. On the termination of the swap in 2004, the amount of the unrealized gain determined in the fair value measurement process and recorded under U.S. GAAP at December 31, 2003 was recorded under Italian GAAP;

	•		the elimination of goodwill amortization recorded under Italian GAAP but not required under U.S. GAAP of€134 million;

	•		higher U.S. GAAP restructuring charges of€111 million, representing amounts which had been recorded in prior periods for Italian GAAP;

	•		lower U.S. GAAP income of€92 million, regarding an adjustment of the allocation of the purchase price for the acquisition of the Case Group, credited to income for Italian GAAP but recorded as a reduction of goodwill for U.S. GAAP;

	•		other differences which decreased the U.S. GAAP net loss by a net amount of€7 million, due primarily to differences in accounting for deferred costs and employee benefits, the tax effects of reconciling items and other minor differences.

The net loss for the year ended December 31, 2003, under U.S. GAAP was€1,034 million higher than the loss reported under Italian GAAP due to the net effects of:

	•		lower U.S. GAAP capital gains on disposals of investments of€589 million, caused by differences between the U.S. GAAP value of the assets disposed of and the corresponding Italian GAAP amounts; such differences were due primarily to differences in accounting for goodwill and, for Toro Assicurazioni, insurance reserves;

	•		higher U.S. GAAP income from derivative financial instruments of€457 million; the largest single component of this difference being attributable to the valuation at fair value of the total return equity swap on GM shares, treated as an off-balance sheet item under Italian GAAP;

	•		higher U.S. GAAP operating costs for€217 million related to certain start-up, capital increase and development costs which are deferred and amortized for Italian GAAP but expensed when incurred for U.S. GAAP;

	•		the elimination of goodwill amortization recorded under Italian GAAP but not required under U.S. GAAP of€178 million;

	•		higher U.S. GAAP restructuring charges of€139 million, representing amounts which had been recorded in prior periods for Italian GAAP;

	•		higher deferred income tax expense of€436 million, due primarily to higher valuation allowances provided against deferred tax assets under U.S. GAAP;

	•		deferred revenue recognition under U.S. GAAP of€119 million, related primarily to sales recorded under Italian GAAP for which certain risks and rewards are retained by the seller, such as vehicle sales where the customer has options to return the vehicle at a specified future date for a guaranteed repurchase price;

	•		other differences which increased the U.S. GAAP net loss by a net amount of€169 million, due primarily to differences in accounting for vehicle sales incentives and employee benefits, the tax effects of reconciling items and other minor differences.

The net loss for the year ended December 31, 2002, under U.S. GAAP was€42 million lower than the loss reported under Italian GAAP, after a charge for a change in accounting principle of€586 million arising on first time application of SFAS No. 142. In the aggregate, the remaining differences had a positive effect on the U.S. GAAP net loss of€628 million due to the net effects of:

	•		a lower U.S. GAAP loss on disposal of investments of€358 million, related to a difference in the carrying value of the GM shares sold at the end of that year which originated in the year of acquisition (2000);

	•		elimination of goodwill amortization recorded under Italian GAAP but not required under U.S. GAAP (€254 million) and other differences in goodwill impairment charges arising from adoption of SFAS No. 142 (€124 million).

	•		higher U.S. GAAP losses of€ 197 million due to the differences in accounting for the transfer of a 14% shareholding in Italenergia Bis to other stockholders;

	•		elimination of write-downs of treasury stock of€ 107 million, which are charged to income under Italian GAAP but to a stockholders’ equity account under U.S. GAAP;

	•		other differences that increased the U.S. GAAP loss by a net amount of€18 million, due primarily to differences relating to the period in which revenue and restructuring provisions are recognized, the tax effects of reconciling items and other minor items.

Stockholders’ equity determined in accordance with U.S. GAAP was€2,718 million and€4,935 million at December 31, 2004 and 2003, respectively, as compared with€5,099 million and€6,793 million, respectively, under Italian GAAP.

The reduction in stockholders’ equity under U.S. GAAP as compared with Italian GAAP at December 31, 2004 amounted to€2,381 million (€1,858 million at December 31, 2003) and was the result of:

	•		higher U.S. GAAP liabilities for employee benefits of€647 million (€558 million as of December 31, 2003) due primarily to the recognition of minimum pension liabilities as a deduction from U.S. GAAP equity;

	•		higher U.S. GAAP goodwill amounts for€505 million (€472 million as of December 31, 2003) related to differences in accounting for goodwill recognition, amortization and impairment;

	•		lower U.S. GAAP equity of€455 million (€462 million as of December 31, 2003) due to differences in the timing of revenue recognition under U.S. GAAP as compared with Italian GAAP;

	•		lower U.S. GAAP intangible fixed assets of€411 million (€492 million as of December 31, 2003) due to differences in accounting for start-up and other costs (including capital increase expenses) which are deferred and amortized under Italian GAAP;

	•		lower U.S. GAAP deferred tax assets of€388 million (€378 million as of December 31, 2003) due primarily to differences in the criteria for determination of valuation allowances and to the tax effects of the taxable U.S. GAAP adjustments;

	•		lower U.S. GAAP equity of€271 million (€260 million as of December 31, 2003) due to differences in accounting for vehicle sales incentives;

	•		lower U.S. GAAP fixed assets of€239 million (€244 million as of December 31, 2003) due to the revaluation of certain assets recognized under Italian GAAP which is not permitted under U.S. GAAP;

	•		lower U.S. GAAP equity of€146 million (€142 million as of December 31, 2003), due to differences in accounting for a special purpose entity under U.S. GAAP and Italian GAAP;

	•		lower U.S. GAAP equity of€122 million (€158 million as of December 31, 2003), relating to the recognition of the sale of a portion of an equity interest and the resulting gain, which was recognized for Italian GAAP but deferred under U.S. GAAP;

	•		higher U.S. GAAP equity of€120 million due to differences in the valuation criteria for derivative financial instruments (€23 million) and available-for-sale and other financial instruments (€97 million); as of December 31, 2003, such valuation differences resulted in higher U.S. GAAP equity of a total of€507 million, of which€425 million related to derivative financial instruments and€82 million to other financial instruments;

	•		lower U.S. GAAP equity of€327 million due to the net total of other less significant differences; the net total of such other less significant differences had resulted in lower U.S. GAAP equity of€143 million as of December 31, 2003.

Liquidity and Capital Resources

Cash and marketable securities are our most liquid assets. As indicated in the table below, at December 31, 2004, we had cash of€3,164 million, roughly in line with the€3,211 million recorded on our balance sheet at the end of 2003. See “—Cash Flow Analysis” below for a detailed discussion of our cash flows in 2004. However, at December 31, 2004, we had marketable securities (financial assets not held as fixed assets, comprising mainly short-term bonds and commercial paper and highly rated bank liquidity funds, net of securities held by Group-owned insurance companies to cover policy liabilities and accruals) of€2,126 million, compared to a total of€3,789 million at the end of 2003. Accordingly, the total amount of our most liquid assets decreased by approximately€1.7 billion, to approximately€5,290 billion at December 31, 2004. Our year-end net financial position (cash, marketable securities and finance receivables, less financial payables comprising short-, medium- and long-term debt), a non-GAAP measure of liquidity that our lending banks use to monitor our performance and for which targets are set under our main loan agreements, showed a negative net balance of€4,961 million at December 31, 2004, an increase of€1,933 million, or 63.4%, from the negative net balance of€3,028 million at December 31, 2003. The increase in the negative net balance compared to December 31, 2003, was primarily attributable to the net loss incurred in 2004, a decrease of approximately€500 million in the amount of trade receivables sold and an increase in working capital requirements in 2004, as discussed in more detail in “—Cash Flow Analysis—Net Cash Used in Operating Activities.”

The following table details our net financial position at the end of each of the three most recent years and provides a reconciliation of this non-GAAP measure to “cash,” the most directly comparable Italian GAAP measure appearing in our consolidated statements of cash flows. It also details our calculation of marketable securities. The references to Notes following particular line items in the table are to the specific Notes to our Consolidated Financial Statements included in Item 18, where these line items are presented in greater detail.


	At December 31,
	2004			2003			2002
	(in millions of euros)
Cash (Note 7)	€	3,164		€	3,211		€	3,489
Financial assets not held as fixed assets - Other securities (Note 6)		2,184			3,845			6,769
Securities held by insurance to cover policy liabilities and accruals(*)		(58	)		(56	)		(5,262	)

Marketable securities		2,126			3,789			1,507
Amounts due from stockholders for shares subscribed but not called		—			—			1
Financial fixed assets—Receivables (Note 3)		19			29			47
Financial fixed assets—Assets leased (Note 3)		1,727			1,797			2,947
Financial assets not held as fixed assets—Financial receivables (Note 6)		7,151			10,750			18,411

Financial receivables and investments in leases		8,897			12,576			21,406
Financial accrued income (Note 8)		234			301			543
Financial deferred income (Note 13)		(209	)		(363	)		(1,135	)

Total financial assets		14,212			19,514			25,810
Short-term debt (Note 12)(**)		(9,810	)		(6,616	)		(8,310	)
Medium-and long-term debt (Note 12)(**)		(8,933	)		(15,418	)		(20,613	)
Financial accrued expenses (Note 13)		(523	)		(593	)		(785	)
Financial prepaid expenses (Note 8)		93			85			118

Total financial liabilities()**		(19,173	)		(22,542	)		(29,590	)
Group’s net financial position	€	(4,961	)	€	(3,028	)	€	(3,780	)

(*)		For the year 2002, the amounts shown are derived from the consolidated financial statements of Toro Assicurazioni and Neptunia Assicurazioni Marittime S.A. For 2003 and 2004, the amount shown is related to Neptunia Assicurazioni Marittime S.A. and reported in our Consolidated Financial Statements under “Other companies.”

(**)		The “Total financial liabilities” presented in this table are equivalent to our “gross indebtedness,” a non-Italian GAAP measure discussed below. “Total financial liabilities” at December 31, 2004 includes our “Total financial payables” of€18,743 million (€22,034 million at year end 2003 and€28,923 million at year end 2002), as set forth in Note 12 to our

Consolidated Financial Statements included in Item 18, the most nearly comparable Italian GAAP measure, as well as “Financial accrued expenses” and “Financial prepaid expenses”, as set forth in the table above and Notes 13 and 8 to our Consolidated Financial Statements included in Item 18, respectively. For purposes of this table, “Total financial payables” is broken down into separate short-term and medium- and long-term debt components to provide additional information about the nature of our liabilities.

At December 31, 2004, we were not in compliance with the target for net financial position set under our€3 billion “mandatory convertible” loan, which requires that our negative net financial position not exceed€3.6 billion (€3 billion plus an allowed margin of 20%). For purposes of the convertible loan agreement, the calculation of net financial position excludes our€1.15 billion loan arranged by Citigroup described in “—Capital Resources” below; this loan is included in the medium- and long-term debt presented in the table above. The “mandatory convertible” loan also requires that our “gross indebtedness,” as calculated pursuant to the agreement, be no greater than€28.3 billion (€23.6 billion plus an allowed margin of 20%). For these purposes, “gross indebtedness” is equal to our total financial payables minus financial accrued and financial prepaid expenses (equivalent to the “Total Financial Liabilities” set forth in the reconciliation of net financial position above), and it continued to be within the contractual target at December 31, 2004. In April 2005, the main lending banks confirmed their intention to proceed with conversion of the loan into equity upon its maturity on September 20, 2005.

Cash Flow Analysis

In 2004, our cash flows, as set forth in our consolidated statement of cash flows, were as follows:

Net Cash Used in Operating Activities

Cash used in operating activities in 2004 totaled€358 million (compared with€1,947 million in cash used in 2003). The single largest cash item affecting cash flow from operations was our€1,548 million net loss before minority interest (€1,948 million in 2003). Also affecting operating cash flow was an increase in working capital (the sum of trade receivables, net inventories, trade payables, and other payables, receivables, accruals and deferrals) that resulted in a use of cash in an amount of€608 million (a decrease in working capital had provided cash in the amount of€872 million in 2003). The increase in working capital primarily reflected a decline in trade payables (which used cash of€531 million in 2004, compared to cash provided of€6 million in 2003), largely due to the normalization of output levels at Fiat Auto following an increase during the last quarter of 2003 in connection with the launch of new models, as well as an increase in trade receivables (which used cash of€259 million in 2004, compared to cash provided of€125 million in 2003), largely reflecting the increases in revenues at Iveco (of approximately 10%) and Ferrari-Maserati (of approximately 20%). The impact on the overall figure of these increased uses of cash was offset only in part by lower inventories (which provided cash of€464 million in 2004, compared to a use of cash of€389 million in 2003), largely reflecting a reduction by Fiat Auto of its stock of new and used vehicles by more than 20% during the year, as well as a lower negative balance of other receivables/payables (cash used of€282 million in 2004, compared to cash used of€614 million in 2003). The effect of adjustments for non-cash items also had significant impact on our cash flow statement for operating activities in 2004. These effects included:

	•		amortization and depreciation totaling€2,168 million (€2,269 million in 2003);

	•		net gains from divestitures of€162 million (€1,873 million in 2003) which were deducted from operating cash flows to reflect the fact that they are accounted for as cash provided by investing activities;

	•		expenses mainly for writedowns that did not involve cash outlays of€147 million (€424 million in 2003); and

•

a negative change in deferred income taxes of€319 million (a positive change of€422 million in 2003).

Net Cash Provided by Investing Activities

Cash flow provided by investing activities was€3,045 million in 2004 (€2,897 million in cash provided in 2003). The results for 2004 were driven primarily by a net decrease in financial receivables (which provided€2,976 million in cash in 2004, compared to€1,146 million in cash provided in 2003), reflecting in part a decrease in financings extended by our financial services companies, and of receivables from third parties owed to our manufacturing and treasury subsidiaries, as well as a change in marketable securities held (which largely represent short-term investments of liquid funds) that provided€1,684 million in cash (compared to a use of cash of€3,065 million in 2003, reflecting the temporary investment of the proceeds of our significant asset disposals during the year) and distributions of reserves (€184 million compared to none in 2003), mainly dividends received from BUC—Banca Unione Credito, which is accounted for using the equity method. Proceeds from the sale of fixed assets generated cash in 2004 of€358 million, compared to€4,167 million in 2003, which amount in 2003 included proceeds from the disposal of investments, including Toro Assicurazioni, FiatAvio and Fidis Retail Italia. The principal uses of funds during the year consisted of€2,112 million in investments in fixed assets (€2,011 million in 2003), including investments in vehicles to be leased on a long-term basis of€408 million (€358 million in 2003). Other uses of cash during the year included€239 million in expenses for the purchase of equity investments (a use of€212 million in cash in 2003), as well as€237 million in investments in intangible assets (a use of€488 million in cash in 2003).

The following table summarizes our capital expenditures by geographical area for each of the years indicated:


	2004		2003		2002
	(in millions of euros)
Europe	€	1,811	€	1,723	€	2,225
North America		170		138		313
Mercosur		104		120		150
Other areas		27		30		83

Total	€	2,112	€	2,011	€	2,771

We incurred these capital expenditures to acquire property, plant and equipment necessary to introduce and manufacture new products, enhance manufacturing efficiency and further environmental and safety programs, as well as for long-term leasing services for automobiles, commercial vehicles, and agricultural and construction equipment.

Net Cash Used in Financing Activities

Cash flow used in financing activities was€2,374 million in 2004 (€1,228 million in 2003), primarily reflecting net repayments of medium- and long-term debt of€3,448 million (compared to net new borrowings in 2003 of€4,189 million). The net repayments reflect a total of€4,704 million of medium- and long-term debt that was repaid in 2004, including:

•

redemption of a€1 billion five-year-bond issued by Fiat Finance and Trade Ltd. S.A. in March 1999;

	•		repurchase for cancellation during the first quarter of 2004 of $540 million (approximately€400 million) of the bonds issued by Fiat Finance Luxembourg S.A. exchangeable for shares of GM; and

	•		redemption of an additional $1,672 million (approximately€1.4 billion) of these Fiat Finance Luxembourg S.A. exchangeable bonds from holders who exercised their option to sell the securities back to us in July 2004. As of December 31, 2004, there were approximately $17 million of these notes outstanding. See “—Capital Resources.”

These repayments were partially offset by new medium- and long-term borrowings in 2004 in the amount of€1,256 million, including a bond issuance by Case New Holland Inc., a subsidiary of CNH, during the second quarter 2004 with a face value of $500 million, as well as by a net increase in short-term indebtedness of€713 million. For additional information, see “—Capital Resources.”

Capital Resources

The cash flows, funding requirements and liquidity of Group companies are managed on a standard and centralized basis, under the control of our central treasury. This centralized system is aimed at optimizing the efficiency and effectiveness of our management of capital resources. It also guarantees the efficiency and security of treasury management processes.

Fiat Group companies participate in a group-wide cash management system, which we operate in a number of jurisdictions. Under this system, the cash balances of all Group companies are aggregated at the end of each business day to central pooling accounts.

The Central Treasury guarantees to the Group high levels of professional financial and systems expertise, and in the performance of its activities, it provides both services and consulting to our business sectors.

The following table details our calculation of gross indebtedness and net indebtedness as at the end of each of the three most recent years and provides a reconciliation of these non-Italian GAAP measures to “Total financial payables,” a component of total payables as set forth in our consolidated balance sheet (see Note 12 to our Consolidated Financial Statements included in Item 18), the most directly comparable Italian GAAP measure. The references to Notes following particular line items in the table are to the specific Notes to our Consolidated Financial Statements included in Item 18, where these line items are presented in greater detail.


	At December 31,
	2004			2003			2002
	(in millions of euros)
Total financial payables (Note 12)		(18,743	)	€	(22,034	)	€	(28,923	)
Financial accrued expenses (Note 13)		(523	)		(593	)		(785	)
Financial prepaid expenses (Note 8)		93			85			118

Gross indebtedness		(19,173	)	€	(22,542	)	€	(29,590	)
Cash (Note 7)		3,164			3,211			3,489
Marketable securities (*)		2,126			3,789			1,507

Net indebtedness	€	(13,883	)	€	(15,542	)	€	(24,594	)

(*)

See “—Liquidity and Capital Resources” above for more information on our marketable securities.

At December 31, 2004, we had total financial payables of€18,743 million, compared to€22,034 million at December 31, 2003. Our net indebtedness (calculated as our total financial payables less

financial accrued expenses and financial prepaid expenses, less cash and marketable securities) at December 31, 2004, amounted to€13,883 million, compared to€15,542 million at December 31, 2003. Management believes net indebtedness is a useful measure for analyzing the Group’s debt and managing its liquidity, as it demonstrates how much indebtedness would remain if all of our available liquid resources were applied to the repayment of debt. The decline in our net indebtedness reflected a decrease in financings extended to the dealer network by Fiat Auto (accounting for approximately€800 million of the decline), the transfer of our auto financing operations in the United Kingdom to Fidis Retail Italia in the fourth quarter of 2004 (accounting for approximately€690 million of the decline), as well as a decline in financing to suppliers.

At December 31, 2004, we had more than€1,700 million in unused committed lines of credit available, primarily in U.S. dollars. The equivalent figure at December 31, 2003 was approximately€2,000 million, with the reduction primarily reflecting the appreciation of the euro against the dollar and other currencies in which certain of the lines are denominated. We also had aggregate borrowings from banks of€8,764 million at December 31, 2004 (€9,384 million at year end 2003). This amount includes, among other borrowings, the€3 billion mandatory convertible facility and the approximately€1.15 billion loan arranged by Citigroup and secured by our agreements with EDF as part of the Italenergia Bis transaction. See Item 4. “Information on the Company—Introduction—Strategies and Programs” and Note 12 to the Consolidated Financial Statements included in Item 18 for additional information on these loans.

We have short-term borrowing and commercial paper programs in certain countries in which we operate. As of December 31, 2004 and 2003, the total amount outstanding under these programs was approximately€200 million and€216 million, respectively. Our short-term commercial paper rating is currently “Not Prime” from Moody’s, and is “B” from each of Standard & Poor’s and Fitch Ratings.

The commercial paper programs of New Holland Credit Company ($1.5 billion) and our Canadian commercial paper program (C$750 million) were cancelled in October 2003 and February 2004, respectively.

We also have a global medium-term note program, which had a total authorized amount of€15 billion at December 31, 2004, of which approximately€7 billion was outstanding at each of December 31, 2004 and 2003. The issuers under the program are Fiat Finance & Trade Ltd. S.A. (for an amount outstanding, at December 31, 2004, of approximately€6,800 million), Fiat Finance Canada Ltd. (€80 million) and Fiat Finance North America Inc. (€65 million). All of these issuances are guaranteed by Fiat S.p.A., which is currently rated Ba3 by Moody’s, BB- by Standard & Poor’s and BB by Fitch Ratings.

In addition, we had other debt securities outstanding in an aggregate amount of€1,878 million at December 31, 2004 (€4,322 million at year end 2003), including:

	•		40 billion yen principal amount (equivalent to approximately€287 million) of 1.5% notes due June 27, 2005, issued by Fiat Finance and Trade Ltd. S.A. and guaranteed by Fiat S.p.A.; we expect to repay these bonds in full in cash on the maturity date using available liquid resources;

	•		$1,050 million principal amount (equivalent to approximately€771 million) of 9.25% notes due August 1, 2011, issued by CNH’s subsidiary Case New Holland Inc. during the third quarter of 2003 and guaranteed by CNH and certain of its other subsidiaries, subject to an indenture containing certain standard restrictive covenants for high-yield securities;

	•		$500 million principal amount (equivalent to approximately€367 million) of 6% senior notes due June 1, 2009, issued by CNH’s subsidiary Case New Holland Inc. in May 2004 and guaranteed by CNH and certain of its other subsidiaries, subject to an indenture containing certain standard restrictive covenants for high-yield securities;

	•		Other notes issued by CNH’s subsidiaries CNH America LLC and CNH Capital America LLC with an aggregate amount outstanding of $599 million (equivalent to approximately€440 million); and

	•		$17.2 million (equivalent to approximately€13 million) of 3.25% notes due January 9, 2007 exchangeable into shares of GM issued by our subsidiary Fiat Finance Luxembourg Société Anonyme. The notes were issued in an aggregate principal amount of $2,229 million in January 2002 and are guaranteed by Fiat. As of May 26, 2004, there were $1,689 million of these notes outstanding following our repurchase on the market and cancellation of $540 million in principal amount of notes in early 2004. From May 26, 2004, through June 17, 2004, noteholders had the right to request that we redeem their securities for cash at face value, for payment on July 9, 2004. During that period, investors requested repayment of $1,672 million in principal amount of outstanding notes, which amount we duly paid. The $17.2 million in aggregate principal amount of the exchangeable bonds that remain outstanding constitute less than one percent of the original total issued.

As discussed in more detail in Note 12 to the Consolidated Financial Statements included in Item 18, the majority of the Group’s indebtedness contains standard commitments on the part of the issuer and, in some cases, by Fiat, as the guarantor, including in certain instances negative pledges or cross-default clauses, but not ratings triggers or financial ratio targets. In addition, the 9.25% notes due 2011 and the 6% senior notes due 2009 issued by Case New Holland Inc. contain financial covenants restricting, among other things, the ability of the issuer and certain companies of the CNH group to secure new debt, conclude sale and leaseback transactions, and sell certain fixed assets. The indentures governing this indebtedness also include financial covenants imposing a maximum limit on further indebtedness by the CNH group companies, which cannot exceed a specific ratio of cash flows to dividend payments and financial expenses. These covenants are subject to various exceptions and limitations, and certain of these restrictions fall away in the event the bonds, currently rated below investment grade, are assigned an investment-grade rating by Standard & Poor’s and/or Moody’s.

On April 29, 2005, Case New Holland Inc. filed a registration statement with the Securities and Exchange Commission for an offer to exchange its outstanding 9.25% notes due 2011 and its 6% senior notes due 2009 for substantially identical notes that are registered under the Securities Act. The exchange offer expired on June 27, 2005, at which time virtually all of these notes had been tendered for exchange.

For more information on our outstanding indebtedness, see Note 12 and Note 24 to the Consolidated Financial Statements included in Item 18.

We also sell certain of our finance, trade and tax receivables to third parties in order to improve liquidity, to take advantage of market opportunities and, in certain circumstances, to reduce credit and concentration risk in accordance with our risk management objectives. See “—Concentrations of Credit Risk” below. At December 31, 2004 and 2003, outstanding receivables sold with recourse were€1,696 million and€2,203 million, respectively, including€1,613 million of trade receivables and other receivables (€2,144 million at December 31, 2003) and€83 million of financial receivables (€59 million at December 31, 2003). The total volume of receivables sold with recourse during the course of 2004 amounted to€13,178 million, as compared with a total of€15,341 million in 2003. We also securitize

and sell certain trade and financial receivables without recourse. In 2004 and 2003, the amount of receivables sold or securitized without recourse with maturity dates beyond year end amounted to€9,809 million and€9,852 million respectively. Receivables sold or securitized without recourse at December 31, 2004, included€4,689 million of trade receivables and other receivables (€4,638 million at December 31, 2003) and€5,120 million of financial receivables (€5,214 million at December 31, 2003). The sale of financial receivables is executed primarily through securitization transactions and involves mainly accounts receivable from final (retail) customers and from the network of dealers to our financial services companies. The amounts of securitized assets reported above do not include any retained interest of the seller, which amount may vary depending on the transaction and is included either in “Other receivables” or in “Financial receivables” according to the Group’s accounting rules. The total volume of receivables sold or securitized without recourse was€27,540 million in 2004 (€33,298 million in 2003). For additional details on our securitization programs, see Note 24(v)(l) to the Consolidated Financial Statements included in Item 18.

Future Liquidity

We have adopted formal policies and decision-making processes aimed at optimizing our overall financial situation and the allocation of financial funds, cash management processes and financial risk management. In 2004, we continued to take opportunities where they arose to engage in financing transactions aimed at extending the average maturity of our debt and strengthening our overall financial structure.

As noted above, new borrowings during the year totaled€1,256 million, including a bond issuance by Case New Holland Inc. during the second quarter 2004 with a face value of $500 million. Short-term indebtedness increased by€713 million.

Our liquidity needs could increase in the event of an extended economic slowdown or recession that would reduce cash flow from operations and would impair the ability of our dealers and retail customers to meet their payment obligations. In addition, we estimate that we will assume approximately€500 million in debt in connection with the unwinding of our joint ventures with GM. Increased supplies of used cars, trucks and equipment may affect resale prices and result in decreased cash flows. Any further reduction of our credit ratings would increase the cost of funding and potentially limit our access to these and other sources of financing.

Notwithstanding the current difficult market conditions, management believes that funds available under our current liquidity facilities (including loan agreements and lines of credit), those realized under existing and planned asset-backed securitization programs and those expected from the ordinary course refinancing of existing credit facilities, and the proceeds of the€1.56 billion in payments received in connection with the February 2005 termination of the Master Agreement with GM, will allow the Group to satisfy its working capital and debt service requirements through the end of 2005. In addition, in June 2005, as part of the creation of the new Iveco Finance Holdings joint venture with Barclays, the deconsolidated entities that are now part of Iveco Finance Holdings repaid to Fiat more than€2 billion in intercompany indebtedness.

Off-Balance Sheet Arrangements

We use certain off-balance sheet arrangements with unconsolidated third parties in the ordinary course of business, including financial guarantees, indemnification agreements, the sale of receivables and other arrangements under which we have or may have continuing obligations. Our arrangements in each of these categories are described in more detail below. For additional information, see Note 24(v)(l) to the Consolidated Financial Statements included in Item 18.

Financial guarantees

Our financial guarantees require us to make contingent payments upon the occurrence of certain events or changes in an underlying instrument that is related to an asset, a liability or the equity of the guaranteed party. These guarantees include arrangements that are direct obligations, giving the party receiving the guarantee a direct claim against us, as well as indirect obligations, under which we have agreed to provide the funds necessary for another party to satisfy an obligation.

At December 31, 2004, we had granted guarantees totaling€5,520 million (€6,430 million at December 31, 2003), including:

	•		suretyships totaling€2,719 million (€3,060 million at December 31, 2003). Of these suretyships,€1,008 million related to supplemental guarantees provided in connection with notes issued by a former finance subsidiary of Fiat Auto to finance its retail financing activities, which subsidiary was contributed to Fidis Retail Italia. Fiat considers its potential exposure under these supplemental guarantees to be remote, as payments on the underlying receivables are covered by insurance or the right to repossess the financed vehicles. The decline of€341 million compared to year-end 2003 was primarily due to the deconsolidation of Fiat Engineering and the maturity of certain obligations of associated companies with respect to which suretyships had been granted. Our other suretyships at year end are mainly related to guarantees granted by our operating companies as performance bonds in connection with contract work in progress, guarantees to tax authorities associated with value-added tax, customs duty and other tax-related liabilities and suretyships granted in connection with financial obligations of associated companies.

	•		Other unsecured guarantees of€2,534 million (€3,075 million at December 31, 2003), including commitments of approximately€1,696 million with respect to receivables sold with recourse, as described under “—Liquidity and Capital Resources” above. Our remaining obligations in this category included guarantees of the types discussed above and other financial obligations.

Indemnities

Fiat S.p.A. and other Group companies have provided indemnities to purchasers in connection with the asset divestitures carried out in 2004 and prior years, with the maximum amount of potential liability under these contracts generally capped at a percentage of the purchase price. These indemnities primarily relate to potential liabilities arising from contingent liabilities in existence at the time of the sale, as well as breach of representations and warranties provided in the contracts and, in certain instances, environmental or tax matters, generally for a limited period of time. As of December 31, 2004, our potential obligations with respect to these indemnities were approximately€850 million, unchanged from the level at December 31, 2003. We have provided certain other indemnifications that do not limit potential payment; we are unable to estimate a maximum amount of potential future payments that could result from claims made under these indemnities. See Note 24(v)(t.v) to the Consolidated Financial Statements included in Item 18.

Retained or Contingent Interests

As described in “—Critical Accounting Policies” above, we have a retained interest in certain of our finance, trade and tax receivables that we have sold to third parties without recourse in order to improve liquidity, to take advantage of market opportunities and, in certain circumstances, to reduce credit and concentration risk in accordance with our risk management objectives. See “-Capital

Resources” above and Note 24(v)(l) to the Consolidated Financial Statements included in Item 18 for a detailed description of these transactions.

Sale-Leaseback Transactions

The Group has in the past entered into certain real estate sale and leaseback transactions, relating primarily to commercial and certain non-strategic industrial properties. These leases expire between 2006 and 2020. We made aggregate rental payments in connection with these contracts in 2004 of approximately€23 million. See Note 24(v)(i) to the Consolidated Financial Statements included in Item 18.

Derivative Instruments

We do not hold or issue derivative financial instruments for trading purposes. However, in 2003, certain of the derivatives we held were not eligible for hedge accounting under Italian GAAP or other applicable accounting principles. In particular, in December 2002, we entered into a “total return equity swap” with Merrill Lynch with respect to GM shares in order to hedge risk associated with our $2.2 billion bond issue exchangeable into GM shares. During the first four months of 2004, we exercised our right to terminate this equity swap. In a related transaction, we repurchased on the market $540 million in principal amount of the exchangeable bonds, which we then cancelled. To hedge our exposure under the approximately $1.7 billion in exchangeable bonds still outstanding following these transactions, we purchased call options on GM shares. Together, these 2004 transactions resulted in a pre-tax gain for us of approximately€302 million. In June 2004, investors holding $1,672 million in principal amount of the outstanding exchangeable bonds exercised their right to require us to redeem their bonds for cash at face value in July 2004. See “—Capital Resources” above. See Notes 14 and 24(k.iii) to the Consolidated Financial Statements in Item 18 for additional information on the characteristics and accounting treatment of the total return equity swap and our other derivative instruments that do not qualify for hedge accounting, including those relating to outstanding stock options.

Variable Interests

In 2001, we participated with a specialist logistics operator and other financial investors in the formation of Società di Comercializzazione e Distribuzione Ricambi S.p.A. (“SCDR”), a company whose principal activity is the purchase of spare parts from Fiat Auto for sale to end customers. Our investment in SCDR represents 19% of SCDR��s capital and is accounted for in our Italian GAAP financial statements under the equity method. In its balance sheet as of December 31, 2004, SCDR recorded inventories for€0.6 million purchased from Fiat Auto and bank loans of€0.5 million, the latter of which are secured by SCDR’s inventories and receivables. Fiat Auto has committed to indemnify SCDR against any losses that could occur in the event that inventory purchased through December 31, 2004, is scrapped in the future, and has made provision in its financial statements for risks arising from that commitment.

In performing the reconciliation from Italian GAAP to U.S. GAAP presented in Note 24 of the Consolidated Financial Statements in Item 18, in 2001 we determined that, due to the nature of the contractual arrangements in place, the sale of inventories from Fiat Auto to SCDR did not transfer all of the risks and rewards of ownership of the assets to SCDR, and therefore did not allow recognition of the related revenue by Fiat Auto for U.S. GAAP reporting purposes; instead, the transfer of inventories was considered a financing transaction and related revenue recorded in the Italian GAAP financial statements was deferred for U.S. GAAP purposes until the assets were sold to end customers. In the reconciliation from Italian GAAP to U.S. GAAP as of and for the year ended December 31, 2004, SCDR has been considered a variable interest entity in accordance with FIN 46R. This change in accounting principle under U.S. GAAP had no cumulative effect on opening stockholders’ equity for the year. See Note 24(v)(h.ii) to the Consolidated Financial Statements in Item 18.

Contractual Obligations

The following table sets forth our contractual obligations and commercial commitments with definitive payment terms that will require significant cash outlays in the future, as of December 31, 2004:


	Payments due by period
			Less than
	Total		1 year		1-3 years		3-5 years		After 5 years
	(in millions of euro)
Contractual Obligations
Long-Term Debt Obligations*	€	16,186	€	7,253	€	4,003	€	896		€	4,034
Capital (Finance) Lease Obligations**		—		—		—		—			—
Operating Lease Obligations		303		63		95		63			82
Purchase Obligations		1,981		1,177		550		73			181
Other Long-Term Obligations under Italian GAAP		10,936		200		10,634		94			8

Total	€	29,406	€	8,693	€	15,282	€	1,126		€	4,305

*		Amounts presented exclude the related interest expense that will be paid when due.
**		In accordance with Italian GAAP, we do not account separately for capital (finance) lease obligations, but rather include such obligations as part of our indebtedness. As a result, these commitments are included in the item “Long-term debt obligations.”

Long-Term Debt Obligations

For information on our long-term debt obligations, see “—Capital Resources” above and Note 12 to the Consolidated Financial Statements included in Item 18.

Operating Leases

Our operating leases consist mainly of leases for commercial and industrial properties used in carrying out our businesses. The amounts reported above under “Operating Lease Obligations” include the minimal rental and payment commitments due under such leases.

Purchase Obligations

Our purchase obligations at December 31, 2004, included the following:

	•		financial commitments to certain customers guaranteeing specified residual values of vehicles purchased from us in certain circumstances (“buy back” commitments), in an aggregate amount of approximately€1,570 million;

	•		commitments to purchase tangible fixed assets, largely in connection with planned capital expenditures of various Group companies, in an aggregate amount of approximately€408 million of the total; and

	•		obligations to purchase various other fixed assets, in an aggregate amount of approximately€3 million.

Other Long-Term Obligations

Our other long-term obligations at December 31, 2004, primarily comprised commitments of€10,261 million under the contracts between Fiat S.p.A. (as general contractor) and Treno Alta Velocità T.A.V. S.p.A. for the design and construction of high-speed railway lines between Bologna and Florence and between Turin and Milan. See Note 14 to the Consolidated Financial Statements included in Item 18.

Research and Development

For a discussion of our research and development policies and related expenditures, see “Research and Development” in Item 4.

Trend Information

For a discussion of the most significant recent trends affecting our businesses, see “Introduction—Recent Developments” and “Introduction—Outlook” in Item 4.

Concentrations of Credit Risk

In connection with our various operating and investment subsidiaries, we maintain investments in trade and finance receivables and marketable securities. With respect to these investments, management believes that our financial policies and the distribution of our investments tend to mitigate significantly our exposure to credit risk. Among the factors reducing such risk is the widely distributed nature of our trade and finance receivables among the many of our automotive, commercial vehicle and agricultural and construction equipment customers located in Italy, the rest of Europe, North and South America and the rest of the world. Management believes that concentration of credit risk is also minimized with respect to our investments in marketable securities, given that such investments consist primarily of widely traded or other liquid securities issued by highly rated institutions located in our various markets.

Although European countries other than Italy are the principal markets for our exports, we also sell products in other regions where political, economic and financial risk can render the collection of receivables difficult. We take a number of steps on a regular basis to reduce this risk, including maintaining political risk insurance, liquidating a portion of our receivables on a non-recourse basis at a discount through the banking system, arranging buyer’s credits in favor of the importers, which allows for regular payments, as well as utilizing other techniques, including countertrade agreements, that are aimed at protecting us from financial losses in our trade relations with countries that have suspended payments abroad.

ITEM 19. EXHIBITS

Index to Exhibits filed with this Amendment No. 1


12.1		CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

12.2		CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

13.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements of filing on Form 20-F/A and has duly caused and authorized the undersigned to sign this annual report on its behalf.


	FIAT S.p.A.
	(Registrant)
	/s/ Luigi Gubitosi
	LUIGI GUBITOSI
	Chief Financial Officer

Date: July 7, 2005

Fiat S P A (FIADF) Inactive 20-F/A2004 FY Annual report (foreign) (amended)