Fiat's Passenger Car Business: Company Introduces 23 New Models,
Aiming to Sell 1.4 million More Vehicles
Sales Target for 2010: Sell 3.5 million Vehicles
And Expand Sales in Emerging Markets

  Worldwide sales of Fiat Auto, which is responsible for the passenger car and small commercial vehicle business of Fiat Group, showed a recovery over the previous year, reaching a level of 2.1 million units sold in 2006, thanks to sales of the Alfa 159, Fiat Grande Punto and other models that were introduced in 2005 (total sales in 2005 were 1.8 million units). Sales in terms of monetary volume also increased by 21.3% to 23.7 billion euro while the company's operating profits rose from 281 million euro loss in 2005 to 291 million euro in 2006.

  As the result of Fiat Auto's recovery, sales of the Fiat Group in 2006 also increased 11.4% to 51.8 billion euro while its operating profit doubled, to 2 billion euro. Claiming to be on the road to recovery (from turnaround to growth), the Fiat Group announced that its mid-range plan is to boost sales to 67 billion euro in 2010.

  Fiat Auto, the core company of the Group, set its 2010 sales target at 3.5 million vehicles (versus the actual 2.1 million units sold in 2006) and its monetary volume at 32.5 billion euro (versus the actual 23.7 billion euro in 2006). Toward this goal, the company will launch 23 new models between 2007 and 2010, which will include launching vehicles into sectors which are new to the company. In developing these new vehicles, Fiat Auto will take a more vigorous approach to standardizing platforms and parts to increase the efficiency of both development and production activities, while beefing up its marketing network in Western Europe. In the field of light commercial vehicles, Fiat Auto will diversify partnership alliances to expand its brand lineup and increase production in low-cost countries.

  Fiat Auto has long-time partnerships with PSA, Ford, Suzuki, the Nanjing Automobile Group (based in China), and others. The company formed new alliances in 2006 with Severstal Auto (Russia), Tata (India), and Chery Automobile (China), to form a stronger organizational structure to expand into emerging markets. Fiat claims that sales volume of automobiles jointly produced with these manufacturers will reach a 700,000-unit level in 2010, out of the total 3.5 million units targeted for 2010 and versus the 120,000 units produced in 2006.

■Fiat Auto Sold 1.98 million Cars in 2006 (versus 1.7 million in 2005)

  Fiat Auto's consolidated unit-sales volume in 2006 was 1,980,000, an increase of 16.6% over the 1,698,000 sold in 2005. In addition, if the sales volume of vehicles jointly produced by its partners also were included, the sales volume would total 2,100,000 units.

  Unit sales of passenger cars in 18 Western European countries were 1,117,000 units, up 17.6% from 950,000 units in 2005. As a result, Fiat Auto's market share rose from 6.5% to 7.6%.

■Fiat Auto: Sales in 2006 Mark a 21.3% Increase; Operating Profit Recovers, Going from the Red into the Black

  Fiat Auto's monetary sales volume in 2006 rose 21.3% to 23.7 billion euro. The company put an end to the continued deficits that plagued the company between 2001 and 2005, and instead, recorded a positive figure of 291 million euro, going into the black again. Fiat Group's transportation equipment division, large commercial vehicle division (Iveco), agricultural and construction machinery division (CNH), and automotive parts division (Magneti Marelli) also ended the year with higher monetary sales and operating profits.

  With the recovery of its transportation equipment division, Fiat Group's sales in 2006 increased 11.4% to 51.8 billion euro, and its operating profit doubled, to 2 billion euro. Net profit was 1.07 billion euro but the company claims that in actuality it improved to 1.4 billion euro. (The real figure excludes extraordinary profits in 2005 such as the penalty fees paid by GM to break its contract with the company).

■Fiat Auto's Target for 2010: 137% Sales Volume Increase to 32.5 Billion Euro, and a 5% Operating Profit

  In November 2006, the Fiat Group announced its mid-range plan under which it plans to increase its monetary sales volume by an average of 7.6% per year through 2010 and reach a trading profit of 5 billion euro. (This compares with the 2 billion euro profit in 2006). The plan also calls for sales of Fiat Auto, the core company of the group, to grow from 23.7 billion euro in 2006 to 32.5 billion in 2010, and its trading profit margin to grow from 1.2% in 2006 to around 5% in 2010.

■Fiat Auto: Sales Target Set at 3.5 million Units for 2010, Reflecting Increased Sales of 1.4 Million Units

  Fiat Auto set its sales target for 2010 at 3.5 million units (including cars manufactured by partner companies), an increase of 1.4 million units from the volume sold in 2006. The company plans to boost its product lineup and develop markets new to the company, increasing sales of Fiat-brand cars from 1.5 million in 2006 to 2.4 million in 2010; Alfa Romeo- and Lancia-brand models from 160,000 and 120,000, respectively, to 300,000 units each; and light commercial vehicles from 355,000 to 505,000 units.

  According to sales by region, the company plans to increase sales in Western Europe from 1.33 million units in 2006 to 1.9 million. Toward this goal, Fiat Auto initiated special measures to strengthen its marketing network in Western Europe outside of Italy. The company also plans to increase sales through joint venture operations in emerging markets from 120,000 in 2006 to 700,000 units, including 500,000 units to be sold in total in China, India and Russia.

■Fiat Auto: Initiatives taken to achieve its 3.5 million units sales target in 2010
■Strengthening marketing network in Western Europe outside of Italy, increasing the number of distributors to 4,800 in 2010

Now that Fiat has renewed most of its product lineup, it decided to strengthen its marketing network. Fiat in 2005 formed a team of 100 full-time members to initiate special efforts to strengthen its marketing network in Western Europe outside of Italy.

In Phase 1, Fiat focused on markets in Germany, the UK, France and Spain and acquired 90 new distributors by early 2006 which, the company claims, make it possible to sell 80,000 more cars a year. The company will continue efforts to add 100 distributors each year, for a total of 4,800 in 2010.

■Lancia brand: Enhancing product lineup to revitalize brand image and exploring new markets

The main lineup currently consists of the Ypsilon (B-Segment model) and the Musa (compact mini-van). The Delta HPE (C and D segmented model) and the Specialty will be added in 2008. By fully utilizing the cross-segment product concept (two segments covered by a single model), the company will increase its market coverage from 18% with 4 models in 2006 to 74% with 5 models in 2010.

Adding the Delta HPE and the new Specialty will contribute 100,000 more units sold a year while at the same time will revitalize the company's image, making it a premium brand.

The company will develop markets in which it hasn't marketed its vehicles yet. These include Turkey, the Scandinavian countries, Russia, Japan, and others. This will increase the sales ratio of non-Italy markets from 20% in 2006 to 40% in 2010.

■Alfa Romeo brand: Strengthening its product mix and re-entering the American market

By adding its Junior (to compete with the BMW Mini) in 2008, the Alfa 169 (higher grade model) in 2009, and the CX-Over in 2010, the company will strengthen its vehicle lineup and increase its market penetration. (The launch of the Alfa 159 in 2005 increased sales from 137,000 units in 2005 to 160,000 in 2006.

Alfa Romeo will again market its vehicles in the USA, where it withdrew in 1995, starting from the third quarter of 2009.

■Light Commercial Vehicles: Relying on alliances to enhance its product line and manufacture in low-cost countries

By fully taking advantage of its partner alliances to strengthen its product lineup, Fiat will launch three models between 2006 and 2008 through joint-development activities with PSA and others. It will also begin manufacturing in low cost countries: the Ducato in Russia, the Doblo Cargo and Minicargo in Turkey, a 1-ton pickup in Argentina, and the Strada in Brazil

Source: Fiat's Investor Presentation on Nov. 8 and 9, 2006

■By 2010 Company to Launch 23 New Models and Make 16 Model Changes of Various Degrees

  Fiat Auto plans to launch 23 new models and make "somewhat major" minor changes to 16 models, including its light commercial vehicles, in the 2007 to 2010 period. Basic new models under the Fiat brand include the Bravo (successor to the Stilo), the Linea (a new model destined for emerging markets), and the Fiat 500 (a new mini-car). Under the Lancia and Alfa Romeo brands, the company will boost its product lineup by introducing models in segments that are new to the company, while at the same time undertaking initiatives to promote these vehicles as premium brands. In the commercial vehicle segment, Fiat Auto will launch the new Scudo in 2007 and the Minicargo in 2008, which were jointly developed with PSA.

■Fiat Auto's model lineup plans: launch 23 new models by 2010

	2007	2008	2009	2010
Fiat	Bravo, Linea, 500	Minicargo Panorama	B Compact, Compact X-Over, Future Doblo Panorama	Future Panda, B Compact (second Body), Bravo wagon
Lancia		Delta HPE	Future Ypsilon, Specialty
Alfa Romeo	159 Crosswagon, 8C Competizione	Junior	Future C Segment, 169	CX-Over
Light Commercial Vehicle	New Scudo	Minicargo, 1t Pick-up	Future Doblo Cargo

Source:	Fiat's news release Nov. 8, 2006. And Automotive News Europe Aug. 21, Oct. 30, 2006 and other dates.
(Note) 1.	The Fiat Bravo, a 5-door hatchback and a successor to the Stilo, is scheduled to launch in January 2007. Annual sales are targeted at 120,000 units. The Bravo will be equipped with either a 1400cc turbo-charged gasoline engine or 1600cc diesel engine.
2.	The Fiat Linea is a low-end to mid-range sedan developed for emerging markets. Tofas in Turkey started production in the latter half of 2006, aiming for annual sales in the 60,000 unit range. The base model has a price tag of approx. 15,000 euro. The Fiat Linea will also be manufactured in Russia, Brazil, India and China, and as a result, the annual production capacity will reach a range of 200,000 by around 2010. The Albea, a current model being sold in emerging markets, will be streamlined to sell for 10,000 euro or less. The company says that it will manufacture the Albea in Turkey, China, India, Brazil, and other low-cost countries to compete with the Renault Logan
3.	Fiat 500, an A-segment car co-developed by Ford, is a 4-seat, 3-door car (overall length of 3.4 meters) built upon the short-wheel-based Panda. The company plans to produce 120,000 units yearly at Fiat's Tychy, Poland, plant starting in mid-2007. (The company also plans to produce 120,000 units a year of the Ka, a Ford-brand counterpart.)
4.	The Lancia Delta HPE is a sporty hatchback car with a spacious and comfortable interior. This vehicle is targeted to consumers in the upper ends of the C & D Segments and is expected to enhance the overall image of the Lancia brand. Fiat Auto plans to sell 76,000 units in 2010.
5.	Lancia's new Specialty is a high-grade specialty car. The company plans to sell 20,000 units in 2010. This vehicle too is expected to enhance the overall image of the brand. The new Ypsilon comes in both 3-door and 5-door variations to appeal to consumers who purchase vehicles in these door configurations.
6.	Alfa Romeo' s 8C Competizione is a high-end sports car and is produced in very limited volume, only a total of 500.
7.	Alfa Romeo's Junior, a 3-door car with an overall length that is less than 4m. The Junior will compete with BMW's Mini. It shares the same platform with the current Fiat Grande Punto but has its own body. It is powered by a 1800cc gasoline direct injection engine with a maximum output of 230hp. The price is expected to be no higher than 16,000 euro.
8.	Alfa Romeo's next C Segment vehicle is the successor to the 147.
9.	Alfa Romeo's 169 is a 4-door sporty sedan with an overall length of slightly more than 4.9m. It is priced between 40,000 and 55,000 euro.
10.	Alfa Romeo's CX-Over is a 5-door crossover car with SUV and coupe features. Its overall length is around 4.6m and it is priced between 28,000 and 45,000 euro.
11.	LCV's New Scudo was jointly developed by PSA and manufactured at PSA's Sevel Nord plant in France. The new, compact commercial vehicle follows the new Ducato launched in 2006. It comes in various model styles. The company targets selling 45,000 units in 2007. This is compared to the 21,000 sold of the previous model in 2006.
12.	LCV's Minicargo is an entry level commercial vehicle built on the Punto platform. It was co-developed by PSA and manufactured at Tofas in Turkey, with annual sales expected to be 40,000 units.
13.	LCV's 1-ton Pick-up is developed after the TL Sprint (a pickup truck developed by Tata in India) and manufactured in Fiat's Argentine plant. This pickup will be exported to Europe starting in 2008.

■Company Consolidating to Six Platforms, Standardizing Components to Improve Development Activities and Enhance Production Efficiencies

  Fiat Auto will strengthen its operations framework to mass-market its new vehicles. It will shorten the development lead time by lowering costs and increasing production efficiency and introducing modular platforms and standardized parts. The platforms that existed prior to 2002 will be replaced by new modular platforms introduced after 2002 so that all models will be built upon six new platforms by 2012. The average number of vehicles per platform will be increased from 150,000 units in 2006 to 450,000 units in 2010.

■Fiat's platform standardization plan

		End of 2006	End of 2008	End of 2010	End of 2012
No. of platforms	Before 2002	13	10	5	0
	New after 2002	6	6	6	6
	Total	19	16	11	6
No. of models per platform		1.7	2.7	3.7
Average no. of vehicles per platform (note 2)		150,000	270,000	450,000

Source: Fiat's Investor Presentation on Nov. 8 & 9, 2006
(Note) 1.	At Fiat, "platform" is referred to as "architecture."
2.	Average numbers of production include vehicles manufactured by partner manufacturers.
3.	Fiat is hoping to achieve the synergy effects from standardizing platforms (accounting for 30 to 35% of manufacturing costs), powertrains (25 to 30%) and other sharable components (10 to 15%). (The remaining 25 to 30% of manufacturing costs are model-specific components.)
4.	In the case of C Segment vehicles, four mid-sizes cars, namely the Fiat Stilo, the Fiat Multipla, the Alfa 147 and the Lancia Lybra, were being built on four different platforms as of 2005 and the percentage of standardized components then was less than 10%. In the future, the next C-segment models (the Fiat Bravo, Fiat Compact X-Over and Alfa) and the C and D Segment models (the Lancia) will share a single modular architecture and over 50% of components.
5.	A shorter lead time for development is also being sought. The Bravo (the successor to the Fiat Stilo), being launched in 2007 shares the same platform with the Stilo and 60% of its components. As a result, along with the benefits achieved through virtual development, i.e., without the use of prototypes, the company was able to produce the Bravo only 18 months after the design was finalized. This is in contrast to the 26 months needed, from design to production, for the Stilo that was launched in 2001.

■Diversification of partnerships: Fiat forms new alliances in Russia, India and China starting in 2006

  After dissolving the comprehensive partnership it had with GM in February 2005, Fiat announced a series of new partnerships in limited areas that included the joint development and production with PSA of the Minicargo, an entry level commercial vehicle. (For reference, the company began joint-development activities with PSA in the minivan and light-commercial-vehicle segments in 1978.) Fiat also jointly developed A-segment vehicles with Ford and conducted joint supplying of transmissions to PSA in Argentina. In 2006, Fiat entered into new partnerships agreement with Severstal Auto in Russia, Tata Motors in India, and Chery Automobile in China.

  In early 2006, Fiat started marketing the Sedici, a compact SUV co-developed with Suzuki; while Suzuki started manufacturing 1300cc diesel engines in India toward the end of 2006 under a license agreement by Fiat. The company also plans to start producing 1900cc diesel engines in Asia in 2010.

  As far as its relations with GM are concerned, the two companies are jointly operating a plant in Poland where 1300cc diesel engines are being manufactured. Fiat is using platforms co-developed with GM to produce B Segment vehicles such as the Fiat Punto; and D segment vehicles such as the Fiat Croma.

■Russia: Joint Production with Severstal to Start in 2007; Annual Production of 120,000 Units Targeted in 2012

  In 2006, Fiat entered into a partnership with Severstal Auto of Russia. The Russian company began importing Fiat vehicles in August and will start CKD production of the Fiat Albea, Linea, and Doblo in 2007 and local production of the Ducato, a light commercial vehicle, toward the end of 2007. A licensing agreement for the production of diesel engines is also planned.

■India: Joint Production of Passenger Cars and Powertrains with Tata Motors

  In India, Fiat reopened the Ranjangaon plant, which was idled, and began producing the Palio and Adventure in early 2007. Earlier, in September 2005, Fiat reached an agreement with Tata Motors of India to enter into a cooperative relationship. In 2006, Tata Motors began marketing Fiat brand vehicles under its local sales network. The two companies established a new joint-production company within the premises of Fiat's Ranjangaon plant and announced that the new company would start producing 100,000 units annually of B- and C- segment passenger cars and 200,000 engines and transmissions yearly in 2008.

■Fiat: New partnerships formed in Russia and India
■Joint production with Severstal Auto will lead to 120,000 units in 2010

	Summary
CKD production of passenger cars	In January 2006, Fiat announced a new partnership with Severstal Auto in Russia. Under the agreement KD production of the Fiat Linea and Albea would start at the Naberejniye Chelni plant in Russia. (Later, the Fiat Doblo was added to this production plan in February). Severstal Auto began importing and marketing the Fiat Panda, Grande Punto and other vehicles in August 2006.
Compact commercial vehicles	An agreement was reached for Severstal to manufacture Fiat's light commercial vehicle, the older model Ducato, starting in the fourth quarter of 2007. The company will produce 75,000 units annually, part of which will be delivered to Fiat for export. All necessary investments were borne by Severstal.
Diesel engines	In December 2006, an agreement was reached to establish a joint company with Severstal to manufacture Fiat's diesel engines (the F1A), which will be installed in the Ducato, a light commercial vehicle to be manufactured by Severstal, and the UAZ Patriot, which is Severstal's new SUV. The official agreement is scheduled to be finalized during the first quarter of 2007.

Source: Fiat's press releases on Jan. 3, Feb. 8, Mar. 3, Jul. 24, Dec. 21, 2006 and others.
■Joint production of 100,000 passenger cars and powertrains with Tata Motors of India

	Summary
Basic agreement	In September 2005, an agreement was reached between Fiat and Tata Motors of India to study the feasibility of establishing a cooperative alliance for the development of assembled cars and powertrains and mutually supplying each other with products.
Tata Motors' marketing network	In March 2006, Tata started selling the Fiat Palio and other Fiat vehicles under its dealership network at certain selected distributors, which operate under Tata's and Fiat's logos. The number of these Tata-Fiat dealers will be increased from 45 at the end of 2006 to 200 in 2009.
Joint production of passenger cars	In July 2006, the two companies announced that they had formed a joint-venture company within Fiat's Ranjangaon plant in the state of Maharashtra in India. The new company will manufacture 100,000 Fiat/Tata brand passenger cars based on the Fiat Punto and Fiat Linea platforms. It will also manufacture 200,000 engines yearly and include 1,300cc diesel engines, 1400cc gasoline engines, and 1200cc gasoline engines, in addition to transmissions too. The total investment is expected to exceed 665 million euro.
Production of Tata vehicles in Argentine	In July 2006, the two companies announced they had reached an agreement to conduct cooperative operations in Central and South America. Fiat's Cordoba plant in Argentina, which stopped vehicle manufacruing in 2002, will produce 25,000 Tata pickup trucks starting in the second quarter of 2008. These will be sold under both the Fiat and Tata brands in Central and South America. They also plan to export the trucks to Europe to be sold under the Fiat brand.

Source: Fiat's press releases on Jan.13, May 11., Jul. 24, Dec. 14, 2006, and others

■China: Reconstructing the Nanjing Fiat Operations with Aim of Selling 300,000 Units in 2010

  The Nanjing operations stagnated during Fiat's restructuring period. Since then, as way to revitalize its Chinese business, Fiat decided to launch new models every year starting in 2006. It targets selling 300,000 units in 2010. In October 2006, a new partnership was announced with Chery Automobile, which will supply gasoline engines to Fiat.

■Fiat: Rebuilding Nanjing Fiat's product lineup in China with the goal of selling 300,000 units in 2010

	Summary
Partnership with Nanjing Automobile: Beefing up Nanjing Fiat's product lineup	In August 2006, Fiat began marketing the Perla developed in China on the Fiat Siena platform. It will launch the Fiat Doblo, Grande Punto, and Linea in between 2007 and 2009 under its plan to launch new models every year. The company also plans to increase the number of distributors to 135 in 2010 (90 in 2006) with the aim of selling 300,000 units in 2010 (versus 33,000 sold in 2005 and 29,000 in January to November, 2006).
Partnership with Chery Automobile: Supplying gasoline- fueled engines to Fiat	In October 2006, Fiat and Chery Automobile signed a memorandum under which Chery Automobile will supply its 1600cc and 1800cc gasoline engines for vehicles manufactured by Fiat both in and out of China. The two companies plan to eventually increase the supply volume to 100,000 a year. The two companies are studying the feasibility of producing Alfa Romeo brand vehicles too in China.

Source: Fiat's press releases on July 24, Sep. 14, Oct. 13, 2006 and others
(Note) 1.	Fiat Group announced an agreement in September 2006 regarding its commercial vehicle operations. Under the agreement, NAC-Iveco, established jointly by Iveco and Nanjing Automobile Naveco and producing 20,000 commercial vehicles a year, acquired Yuejin Vehicle, which produces 50,000 commercial vehicles a year, from Nanjing Automobile Group.
2.	Fiat Group also reached an agreement with SAIC Motor Corp in June 2006 under which the two companies would establish a new company, SAIC Iveco Commercial Vehicle Investment, and buy 67% of Chongqing Hongyan Automobile that belongs to Chongqing Heavy Duty Vehicle Group. They will build a new plant in Chongqing under a mid-term target of expanding production of large commercial vehicles at Chongqing Hongyan Automobile, with production volume to reach a level of around 40,000 units (versus 15,000 units now). In July 2006, Fiat Group also signed a memorandum with SAIC Motor Corp regarding a long-range partnership involving the production of medium to large-size diesel engines.

■Central and South America: Maintaining a 25% Share in Brazil; Expanding Market Share in other Regions

  Brazil, where over half a million Fiat vehicles are manufactured and over 400,000 units are sold a year, is an important market in Fiat's worldwide expansion plan. Fiat is making special efforts to build a solid foundation in Brazil while at the same making headway into other Latin American markets.

  The number of local production manufacturers in Brazil rose from five in 1996 to 13 in 2005. Fiat has a very strong marketing network there with 250 dealers including 450 locations where Fiats are sold. The company plans to maintain its 25.5% market share beyond 2006 by introducing the Adventure series, which includes various derivatives of a "city car + off-road performance car".

  In 2002, Fiat's Cordoba plant in Argentina discontinued producing vehicles in order to focus on producing engines. Under Fiat's new plan, however, this plant will produce 140,000 transmissions a year for PSA starting in 2007, and 25,000 1-ton pickup trucks based on Tata's pickup platform, starting in 2008.

■Fiat Group's light vehicle production in 2010 will amount to 2.7 million units (Based on CSM's Worldwide Forecast)

  According to CSM Worldwide, the production volume of light vehicles for which Fiat is the design parent will be 3.3 million units in 2010 (including 970,000 sold under non-Fiat brands). Also, CSM forecasts that vehicles sold under the Fiat brand, but which were manufactured by other companies as the design parents, will be 360,000 units. This means production of light vehicles carrying Fiat Group's brands will amount to 2.7 million units (some of which are Iveco brand vehicles).

  As far as the production of light vehicles for which Fiat is the design parent is concerned, the volume the company will produce in Italy will again grow, reaching a level of million in 2009. Production in Brazil will continue to increase slowly but steadily from 530,000 units in 2006 to 690,000 units in 2012.

  Fiat will see a slow increase in China, from 38,000 units in 2006 to 61,000 units in 2012. Production in India and Iran, where annual production was no greater than 10,000 units in 2006, will rise to over 50,000 units in 2009 but Fiat will only see rather slow growth there after that. Production in Russia, where production will begin in 2007, will mount to 60,000 units in 2009, or 100,000 units combined with the Fiat-brand vehicles produced by PSA.

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