Magneti Marelli Business Report FY2007

Business Highlights

Financial overview

in million dollars FY2007 FY2006 Rate of change Factors
Sales 5,000 4,455 12.2% -
Operating income 209 175 19.4% -
Sales by division
Lighting 1,614 1,402 15.1% 1)
Engine Control 947 882 7.4% 2)
Suspension System 1,182 1,103 7.2% 3)
Electric Systems 556 534 4.1% 4)
Exhaust Systems 613 533 15.0% 5)
1) Lighting
-Revenues totalled 1,614 million euros in 2007, up 15.1% from 2006.
-Sales to third parties were a significant factor in the year's performance: new products supplied to Volkswagen-Audi, featuring the world's first application of a headlamp unit using LED technology for all required functions, and to General Motors enabled the business line to carve out an even larger share of the worldwide headlamp market.
-Significant new orders were received during the year for headlamps and taillamps from Renault and Volvo, and for headlamps for the new Lancia Delta HPE, as well as for BMW and Mercedes models.

2) Engine Control
-Revenues for 2007 totalled 947 million euros, an increase of 7.3% from the previous year.
-Products showing the strongest growth included Selespeed systems and GDI gasoline direct injection units in Europe, complete systems in Brazil, and manifolds in China. The Business line's rising revenues were due to Fiat Group Automobiles and FPT Powertrain Technologies, as well as third parties.
-New launches for the year included the 1.2 litre spark ignition and 1.3 litre diesel systems for the new Fiat 500, while major achievements in product development included applications of the Pico Eco (in Brazil) and new injection systems for Volkswagen, the Selespeed system for customers in China.
-Major orders were received during the year for the Dual Dry Clutch transmission, the 2.0 litre Euro 5 diesel manifold for FPT Powertrain Technologies, and 1.3 litre SDE diesel engine control units for Tata and Suzuki Maruti.

3) Suspension Systems
-Revenues for 2007 amounted to 1,182 million euros, an increase of 150 million euro over 2006 on a comparable scope of operations achieved thanks to the success of the new products launched by the business line's main customer Fiat Group Automobiles: the Bravo in Italy, the Grande Punto in Brazil, and the Fiat in Poland. Sales to PSA and General Motors also rose.
-Major orders were booked from Fiat Group Automotive for the new Lancia Delta HPE and Alfa Junior, and as regards the US market from General Motors, and Ford.

4) Electronic Systems
-Total revenues for 2007 amounted to 556 million euros, up 4% from the previous year. Revenues from instrument panels rose by 2.1%, sales of telematic systems were substantially in line with 2006, while revenues from occupant compartment products posted a significant increase that was largely due to the production of new models for the Fiat Group.
-In addition to Fiat Group Automobiles, for which the business line launched new instrument panels for the Fiat 500 and the Fiat Linea as well as the Blue&Me Nav telematic system, PSA and Volkswagen-Audi (+ 15%) continued to number among Electronic Systems business line's major customers with the launch of instrument panels for new models.
-Orders were received for the Fiat Stop&Start system, the PSA Emergency call and radio/navigator, the instrument panels for new Volkswagen models, and the FordWorks telematic system for Ford models.

5) Exhaust Systems
-Revenues reached 613 million euros in 2007, a 15% increase over the previous year due to higher volumes from the business line's main customers: Fiat in Italy and Poland; Daimler and Seat in Spain.
-Major new orders booked included the exhaust system for Daimler in China, which will strengthen the business line's presence on the Chinese market.

Joint venture
-In September 2007, the Company signed a memorandum of understanding with Chery Automobile Co., Ltd. for the creation of a joint venture in China that will produce hydraulic components for the Selespeed AMT transmission, which will be used by Chery and other car makers.

-In October 2007, the Company, Suzuki Motor Corporation and Maruti Suzuki India Limited have signed an agreement for the creation of a joint venture in India, aimed at the production of electronic control units for diesel engines. Magneti Marelli will participate for 51% in the share capital of the new company, Suzuki for 30% and Maruti for 19%. The initial investment is expected to total approximately 15 million/竄ャ.
The start of production is scheduled for the end of 2008 and, as part of the objectives, the production capacity of this plant should reach a total of about 500,000 control units per year when working at full stretch.


R&D Expenditures

in millions Euros FY2007 FY2006 FY2005 FY2004 FY2003
Lighting N.A. N.A. N.A. 48.8 48.2
Engine Control N.A. N.A. N.A. 73.1 76.7
Cofap Automotive Suspension N.A. N.A. N.A. 17.6 15.7
Electronic Systems N.A. N.A. N.A. 35.2 -
Exhaust Systems N.A. N.A. N.A. 5.7 5.8

Total R&D Expenditure

221 217 197 193 158

Technological Alliance
In June, the Company and Russia's Avtopribor, a supplier of electronic and mechanical components, entered into an agreement to design, develop, manufacture and market electronic instrument clusters for motor vehicles.

Product Developments
1) Lighting
During the year, work continued on the development of taillamps using LED technology for all required functions and on the application of the Light Guide, highly uniform light guides.

2) Suspension Systems
In addition, functional specifications were drawn up for a new generation of shock absorbers. Innovation work concentrated on the Sector's patented U-Link suspension.

3) Electronic Systems
Major progress was also made towards an integrated GSM and GPS based telematic system.

4) Exhaust Systems
Product development addressed components for cold-end exhaust silencing systems and for emissions abatement, including the hot-end system for FPT Powertrain Technologies窶 new supercharged spark ignition engines. For diesel engines, new Euro 5-ready products were developed.

SAE 2007 World Congress
What do you want us to see?
-Multifuel- based on the innovative SFS- Software Flexfuel Sensor, these systems gives the driver the power of fuel choice making possible the use of gasoline, ethanol or a blend of both in any proportion. The evolution of the SFS System is TetraFuel, the technology able to manage four types of fuel with only one ECU, allowing the vehicle to run with gasoline, ethanol, gasohol, or compressed natural gas. TetraFuel automatically chooses the best fuel option for each driving condition, without the need of switches or power loss, to reach the optimal compromise between performance, fuel economy and lower CO2 emissions. In other words, the ECU system identifies and qualifies the mixture of alcohol and gasoline in the fuel tank, and allows the driver to run on different blends of fuel.

Models the products (s) shown are installed into?
-90% of the 2 million vehicles manufactured in Brazil are equipped with SFS- Software Flexfuel Sensor. The benefit is to help reduce CO2 emissions by 5%. Several Countries in Europe, China and the U.S. are already studying the potential development of similar technologies.

Investment Activities

Capital Expenditure

in millions Euros FY2007 FY2006 FY2005 FY2004 FY2003
Lighting N.A. N.A. N.A. 79.9 70.1
Engine Control N.A. N.A. N.A. 36.7 39.3
Cofap Automotive Suspension N.A. N.A. N.A. 43.7 29.7
Electronic Systems N.A. N.A. N.A. 16.1 -
Exhaust Systems N.A. N.A. N.A. 5.3 4.6

Total Investments

319 293 313 187 148