Letter from the Chief Executive Officer

Sergio MarchionneDear Shareholders,

The 2012 Annual Report is the first to consolidate Chrysler Group’s results for a full year and starts to reflect the benefits of our alliance.

What Fiat and Chrysler have accomplished over the past three and a half years in terms of sharing and integrating know-how, best practices, experience and traditions is evident not only in the financial results, but also at the commercial, industrial and cultural level.

We now rank as the 7th largest automaker globally.

During 2012, we made significant progress regarding the further convergence of key products on to the Group’s three principal global architectures with the launch of the Fiat Panda and the Fiat 500L in Europe (EMEA), the Dodge Dart in North America (NAFTA) and the Fiat Viaggio in the Asia-Pacific region (APAC).

With our newly established global presence and wealth of resources and talent, we are finally in a position to engage in competition with the best in the sector.

With all full-year targets reached or exceeded, our financial results for 2012 reflect a global organization focused on growth in volumes and profitability.

Revenues were up 12% to €84 billion and trading profit was in excess of €3.8 billion, the highest ever in the Group’s history.

Net profit was €1.4 billion and total available liquidity remained strong at €20.8 billion.

These results were achieved despite conditions in Europe, where the prolonged crisis in the auto sector, which posted its fifth straight year of decline, was further exacerbated by the broader economic crisis.

The solid financial and commercial results achieved in every other operating region for the massmarket brands enabled us to minimize the impact of the volume declines and operating losses recorded in EMEA. Growth for Luxury and Performance brands continued and the Components business also contributed positively.

In NAFTA, we continued to outpace all other domestic automakers in terms of sales growth.

In the U.S., we posted our 33rd consecutive month of sales growth in December, and in Canada, we are on the verge of becoming the number one automaker.

Trading profit for the region was up 59% over the prior year to €2.7 billion.

In Latin America (LATAM), the Group recorded another year of very strong results, posting €1.1 billion of trading profit and a double-digit trading margin.

We capitalized on good trading conditions, particularly in the second semester of the year, and outperformed the market, closing the year with the highest volumes ever recorded in Fiat’s long and successful history in Latin America.

In Brazil, we gained a full percentage point in market share, further strengthening the leadership position that we have now held for 11 years.

In APAC, we turned in a very strong performance on the back of higher demand in almost all our key markets, with revenues up 50% and trading profit nearly double the prior year’s level.

In China, we opened a new plant in Changsha and began local production of the Fiat Viaggio, representing just the first step in our plans for development in the world’s largest car market.

In India, we undertook several initiatives to strengthen our presence, including establishment of a new Group-owned distribution company to take over direct management of our commercial activities and reorganize the dealer network.

Those results were possible because of what Fiat and Chrysler are today.

A strong, competitive group that possesses some of the most innovative technologies and one of the most extensive product ranges in the world.

A flexible yet cohesive group, solid enough to cope with any unexpected changes in market conditions and with a global footprint reducing the risk of overdependency on any one single market or region.

A group that draws its strength from the diversity of talent, experience and culture of its people – individuals working towards the future every day with the determination that marks them as leaders.

We closed 2012 with a sense of accomplishment for the milestones reached and the platform they give us for the next phase of development.

At the same time, we have retained our sense of urgency, because we know it is just the beginning.

In Europe, we have partially reoriented our strategy in response to current market difficulties and trends in customer demand and preferences.

As announced on 30 October 2012, we plan to leverage the potential of our luxury and performance businesses to expand into the more profitable premium end of the market and increasingly utilize the Group’s EMEA production base to develop our global brands, Alfa Romeo, Maserati, Jeep and the Fiat pillar vehicles derived from the 500 “family” and the Panda.

This strategic path is open to us not only because of the prestige and quality associated with Group brands such as Ferrari, Maserati and Alfa Romeo, but also because of the transformation that Fiat has undergone as a result of its alliance with Chrysler.

Over the past three years, the sharing of technical know-how has enabled us to develop relevant architectures and baseline powertrains that allow us to be at the cutting edge of the premium end of the business and to shift a significant portion of our product portfolio towards better margin opportunities.

Our increased global reach provides the opportunity to utilize some of our excess production capacity in Europe to service export markets outside Europe.

That will enable us to redeploy the current production overcapacity from the mass-market segment and achieve breakeven in Europe by 2015-2016.

This process just kicked-off with the start of production of the New Maserati Quattroporte at the Avv. Giovanni Agnelli plant (Grugliasco), which will be followed by the Maserati Ghibli in the summer of 2013. Investments have already started at the Melfi plant to install a new modular architecture for production of the Fiat 500X and a new Jeep brand Sport Utility Vehicle, both destined for global markets in 2014.

In other regions, our efforts will focus on strengthening the business and expanding our geographic presence.

In NAFTA, we have established an ambitious product plan, with the launch of over 50 all-new or significantly refreshed models during the 2012-16 period.

In LATAM, our priority is to build on our leadership position through greater diversification of our product offering, while maintaining strong profitability. Our future plans include development of the new industrial complex in Pernambuco, which is projected to reach a production between 200,000 and 250,000 vehicles per year and will also allow the extension of the Group’s product range into growing segments of the market.

In APAC, we have positioned ourselves to benefit from growing market demand, including continuing to capitalize on the success already achieved by the Jeep brand whose sales nearly double in 2012 over the prior year and accounted for 64% of total Group sales in the region. In China, we are developing our distribution capability and expect to double the number of dealers by the end of 2013. In India, we are also expanding our independent dealer network.

For 2013, we expect market conditions in NAFTA, LATAM and APAC will continue to support our financial projections.

In Europe, however, the market will continue to be subject to significant levels of uncertainty.

In order to maintain a high level of liquidity and given the restrictions on Chrysler’s ability to pay dividends to its members, the Board of Directors has decided not to recommend a dividend on Fiat shares for 2012.

On the basis of the updated financial plan presented at the end of Q3, the Group confirms the targets for 2013: revenues in the €88-92 billion range; trading profit in the €4.0-4.5 billion range; net profit between €1.2-1.5 billion; and net industrial debt of approximately €7.0 billion.

We will work towards achieving these targets with the same spirit that has brought us this far, with attention to the needs of local communities and the environment, as well as to the legacy that we intend to leave future generations.

Our commitment to operating responsibly and promoting a model of sustainable development is part of the tradition and values of the Group that continue to be recognized internationally.

For the fourth consecutive year, Fiat Group was included in the prestigious Dow Jones Sustainability Indexes World and Europe, which only admit companies that are best-in-class in terms of economic, environmental and social performance.

As further recognition of its efforts in addressing climate change, Fiat Group was also admitted to the Italy 100 Carbon Disclosure Leadership Index (CDLI) and the Italy 100 Carbon Performance Leadership Index (CPLI), achieving the highest score of all participating companies.

Our business philosophy, where product excellence goes hand-in-hand with acting responsibly, involves everyone throughout the entire organization. Nearly 215,000 people around the world put that philosophy into practice every day through their commitment and dedication to making us a strong and competitive group, while never losing sight of our moral obligation to contribute to the well-being of society as a whole and to the construction of a better future.

I want to thank all the women and men in our Group for their professional and personal contribution, for the dedication and passion that they give every day to the creation of a better future.

I also want to express my thanks to our shareholders for standing by us as we have grown and transformed the business and for continuing to support us as we move to the next phase of the Group’s development.

20 February 2013

/s/ Sergio Marchionne

Sergio Marchionne


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