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Good day ladies and gentlemen.

And welcome to today’s Fiat fourth quarter and full year results conference call.

For your information, today’s conference is being recorded.

At this time I would like to turn the call over to your host today, Mr. Marcello Ledda, head of Fiat Group Investor Relations.

Please go ahead sir.

Yes, good afternoon to everyone.

And welcome to Fiat 2005, fourth quarter and full year results conference call.

Sergio Marchionne, our Chief Executive Officer, and Maurizio Francescatti, our Group Treasurer, will lead the presentation today.

You should have all have received a presentation.

It is also posted in our website at www.fiatgroup.com.

After the presentation we will have time to answer all of your questions.

Before I pass on the mike to Mr. Marchionne, let me just take care of a couple of housekeeping calls.

One is the usual Safe Harbor Statement, for any forward-looking statements please refer to our 20-F file with the SEC.

And second and more importantly, I am sure that you know that we issued our press release earlier today announcing our intention to issue a benchmark bond on the market, not directed to U.S. investors.

Legal instructions are, of course, preventing us from giving any additional information on the proposed transaction that could be construed as a direct selling export to the U.S. market.

In this respect, we won’t be able to comment and present full details of the transaction.

I will begin immediately by passing the microphone to Mr. Marchionne.

Thanks very much.

We start on page two of the presentation.

These are the highlights of the year that has just ended.

I think we will go through the key issues, but I think from our standpoint the most significant item is that we posted €1b of trading profits for the year, which is 20 times the level of 2004.

And all of our businesses exceeded the margin targets that we set for them back in July of 2004 when we presented our full-year plan.

Net income for the year was about €1.420b, which is a €3b swing from ’04.

Obviously this includes a number of one-offs that we will discuss in a few moments.

But even on a pro forma basis, if you exclude all these one-off items, we broke the year in about even.

It’s a significant issue because it does set the stage for the performance targets that set for ourselves in ’06.

The other, I think, key issue is that we were able to bring our net industrial debt down to about €3.2b.

This is on the back of cash flow of about €3.4b, which is certainly ahead of target.

We are now sitting on a debt to equity ratio of 0.34:1, and this compares to roughly 2:1 back at the end of ’04.

Strong liquidity position of €7b, and we have now closed all key strategic and financial issues that were outstanding at the end of ’04.

So the remainder of the presentation hopefully will deal with industrial matters as they relate to the development of the business going forward.

And all the ’06 and ’07 targets that we also announced back in [Bellocono] in July of ’04 are confirmed.

But we will give you more details now, by business, at the end of this presentation as to what we think we will be able to accomplish in ’06.

Turning now to slide three, these are Q4 highlights.

We had, for the first time after 17 straight quarters of losses, a positive number coming out of the current side.

We broke the €21m trading profit with revenues that were up 7.5%, in at least the Group level from Q4 of ’04.

And certainly were pushed by very strong performance of the car division.

The Group trading profit was €361m, which is nearly €0.5b higher than it was in Q4 of ’04.

And on a stand alone basis, without one-offs, the Group actually posted an €84m net income, which compares to a €561m loss in the year prior.

All of this says that ’05, for us, has concluded in the most successful fashion, than we could have possibly envisioned at the end of ’04.

I don’t think there is a single item that looking in hindsight we could have probably performed better on.

I don’t know of a single item that we could have handled on a different way than which we did.

And I think we are quite satisfied with the progress that was made.

Not only in terms of the resolution of the financial and strategic matters that we faced then, but also in terms of the performance of the business.

Go on to page four.

Operating margins up 2.1% for the year.

This obviously excludes all one-off impact, and the most significant portion of the slide is the turnaround of Auto which moved by €670m from 2004.

But we are staring at €1b profit which -- €1b in trading profit, which forms the basis for our projections of roughly €1.6b to €1.8b in 2006.

Slide five, the Auto side.

I think we’ve spent quite a bit of time on previous conference calls explaining what we were doing in terms of refocusing this business.

And as you can see from the market share that we did suffer contraction of share for the first two quarters.

And we started rebuilding it at the end of the year, and you can see that 2005 numbers, in Q4, in the Italian market were in excess of 29%, and they were in excess of 6.6% on the European side in 2005.

The objective next year, is to achieve and hold an average market share of 30% in the Italian market, and about 7.2% in all of Europe including Italy.

In so doing, we’ve decided to target our efforts in four countries outside of Italy - France, Spain, Germany and the U.K.

We neither have the resources, financial or people-wise, to try and manage a penetration in excess of those four markets for 2006.

And that is the reason why I think our market expectations in terms of share for next year are as limited as they are at 7.2%.

Move on to item number six.

These are volume data.

As you can see the fourth quarter of this year was a significant shift, especially for the Fiat brand, and especially in Italy.

The target for next year is roughly 1.8m vehicles across the world, which will probably take us back, in terms of shares, back to 2003. [inaudible].

Slide number seven, the comments here relate to the launches that we have carried out which are going quite well.

The data here is especially on the Grande Punto, relates to the period ended December 31, were in excess of I think 130,000 orders received for the end of January.

I have not updated the data as in the last few days.

But the Grande Punto continues to do well.

We have also announced today that we are starting, in May, with a second line here merely to produce Punto.

And that would give us capacity, certainly to handle volumes in excess of 360,000, if our commercial efforts are a success.

We do have a significant model changeover plan for Alfa Romeo with the introduction of the 159.

We will be launching the Station Wagon in Geneva at the end of February.

And the Brera Spider, the Brera is already -- the [inaudible] has already been launched on the market, with cars being delivered from the network as we speak.

So it is a very significant year for Alfa, going forward on the basis of the fundamental rejuvenation of the product range.

Our light commercial vehicle activities are also subject to some significant changes, and we will be launching the new Ducato in the spring of 2006.

This is a project that has been in the marketplace for almost 16 years.

This project has had one facelift in that period of time, but it represents a significant investment, by both ourselves and GSA, our joint venture partner, in this activity.

And so the reason why I raise this is because obviously it will have an impact on volumes throughout the years as the model changeover happens.

It also explains why we've had a decrease in activities in Q4 of this year, mainly driven by the expectations of a new model coming on stream.

The other significant portion of the Ducato launch is that it will have an impact on profitability because the new model will cost almost €1,400 more than the old one did.

And that is because of the investment that was made in the platform and the fact that the actual component costs for the vehicle is higher.

We are now going to spend the rest of 2006 trying to bring the cost of the vehicle down to a more acceptable level.

And there is going to be some pricing consequences that we will be actioning in the spring of ’06 to offset it.

But the pricing will not be sufficient to recover the full profit margin that the old model had.

That’s probably one of the reasons why we have been cautious in terms of the forecast for Auto going forward, because it does reflect the big relation on these at factory level of the impact of commercial vehicles on the car activities.

Moving on to page eight.

As you can see we have pumped up production in Q4 ’05.

Most of this relates to the product launches, especially the Punto.

And the increase in dealer inventories is mainly due to the fact that we were delivering cars to the network as a result of the launches.

Slide number nine, which is the trading profit reconciliation.

We have tried to guide you through the way in which we shift the profit between ’04 and ’05.

The important slide I think is the one -- the important portion of the slide is the one on the right that deals with the full year impact.

We have taken a volume hit of about €160m, which has been more than offset by mix and price benefit.

Our purchasing activities continue strong.

We have done less.

I think the total number for the year was [150] of the original forecast.

So we have actually done better.

And obviously the reduction in, what I call the governance costs for the sector have yielded the desired results.

Were down by almost €300m in ’04 to ’05.

So the €281m is a good number, given the fact that we started with a loss of €322m last year.

And I think it makes us relatively comfortable for the target for ’06 of 0.5% to 1% can be achieved.

Move on to slide number 10.

As we have done for ’05 we are providing you with a forecast of where we think we will be able to gain over ’05.

Our R&D investments would go up year over year.

This is simply the impact of the depreciation of some of the investments that we have made between ’04 and ’05.

We expect to grow volumes up to a [€1.8m] and the impact of €130m.

I think we feel relatively comfortable that the purchasing efficiencies that we have been able to achieve in ’05 were -- overall the target is -- obviously the range is €100m to €200m.

Conservatively we have targeted €100m as being an achievable number for the year.

Moving on to slide 11, Ferrari, Maserati.

Ferrari had great year.

Trading profit for Ferrari in 2004 accounted for roughly 16% of Group trading profit.

It had a good year, and will have a good year in ’06.

And Maserati had an outstanding year, especially in terms of volume penetration in the U.S., with the North American market now accounting for more than 40% of its turnover.

Maserati still lost money in ’05, and it will continue to do so until we can get volumes, in this business, up to the 70,000 vehicle range.

We are shy of that number.

We have just committed capital to the introduction of a coupe, which hopefully will happen at the end of ’06, beginning of ’07, which will complement the range.

And on that basis I think the numbers, at break even within ’07 of Maserati, is quite achievable.

Slide number 12, dealing with AG and Construction.

This is the next item on the agenda, in terms of the rejuvenation of the sector and a portion of profit.

It had a decent ’05.

Fourth quarter was relatively good.

But it was also a quarter within which we introduced some new organizational structure which effectively unbundled the brand, and has now created four distinct businesses.

Two in AG and two in Construction Equipment.

And there is a huge amount of work that has now started in terms of showing that we provide the right market identity for these brands.

And we continue to eliminate the duplication of products across the brands, while maintaining the highest possible level of efficiency both in terms of design and manufacture.

’06 is an important year for CNH because of the effort that has gone in.

We understand and have benchmarked our operations against competitors.

We understand where value leakage is occurring.

So there is a pretty aggressive plan that has been put in place to try and close the gap.

You will only get that partially done in ’06.

All benefits of all this will be visible in ’07.

Move on to page 13.

I think it is a great business.

You can see from the pricing power that the business has.

Probably unique in terms of the business sectors that Fiat is involved in.

And after the expenses, we were able to manage our position in the market place, on the price side at least, as effectively as we have.

We feel relatively comfortable that the targets that we set for ourselves in ’06 are in fact doable.

And that is visible on page 14, where you can see that we continue to push our mix and price to improve profitability.

And that is probably the single largest element of the profit improvement over 2005.

We expect the AG business in ’06 is expected to be relatively slack.

Most of the growth, if not all of it, will come from the Construction side.

And it is a market that is expected to grow globally.

So it’s not just a North American or European phenomenon.

Although Latin America on the AG side will continue to be weak, and we see little, if no, growth anywhere else in the world on the AG side.

Obviously margins need to be moved here.

We’ve targeted 7% to 7.5%.

May I remind everybody here on the call here that our best competitor is doing in excess of 10% in terms of Group margins, and so we have a long, long way to go.

The impact of our ability to achieve a 10% margin is substantial in terms of Group profitability.

And so it remains the key issue for us, in addition to the continued efforts to restore Fiat Auto to healthier sustainable profit level.

Slide 15 on Iveco.

We have a new management team in place.

We moved Mr. Monferino from CNH over to Iveco at the beginning of the year.

I think that we continue to work with Iveco in terms of finding, or looking for additional areas of growth.

It is fundamentally a Western European player, and we have now begun to work on two fronts.

One is the establishment -- is the re-establishment of the brand.

At the heavy end of the spectrum I think it does have a viable product range, especially with the introduction of the new engines in 2006.

And especially in terms of possible geographic expansion of those brands beyond the Western European side.

I think it is too early to tell, in our discussions, as to where that growth will happen.

But I think we have identified potential opportunities for the development of the business well beyond the current geographical areas that are being covered.

Slide 16.

Steady business in terms of the ability to generate profit.

We’ve had some success in terms of volume and mix.

Most of the impact, most of the green bar that you see for the €50m full year ’05, is volume and not necessarily mix.

But we have had some success also in terms of pushing price increases through.

This IAS 18 is going to require about 30 seconds of explanation.

But it does deal with the fact that mainly in Q4 of ’05 we started carrying out bills which have got – they're effectively sale lease back operations that have got -- they cannot be classified as sales under IAS.

And therefore the profit associated with those sales is not recognized in the year in which the sale occurs but it is amortized over period of the lease.

And so it has had a significant impact at the end of ’05.

It will become a lesser issue as we move forward and this becomes engrained in the fabric of the trading operations of Iveco.

In slide 17 there is an aspiration to significantly improve volumes in 2006, and that’s the explanation why the single largest driver in the profit reconciliation is mix and price.

There is also a substantial amount of work that needs to be done on the pricing of the heavy end of our equipment, which we believe we are not getting the right pricing.

So a number or pricing actions are started to reposition this product and they are going to be driving the shift in profits between 2005 and 2006.

I think there is a reference in the slide to the Euro 4/5 compliant engines that will be launched in ’06, which I think are going to help marketing position in this product substantially.

Slide 18, which deals with components.

For a business that, at least from an industry standpoint has not performed well, ours have.

We have been able to get decent margins from this business, notwithstanding the toughness of competition.

And this is true of across all three businesses, both the Marelli and Comau and Teksid.

And we expect a similar performance in ’06 with some improvement in trading margin performing.

If you move on to slide 19 which is a reconciliation, or at least the move down from trading profit and net result.

I won’t take you through all the pieces.

Most of the one-off items were visible at the nine month mark.

But obviously, as I mentioned earlier, net income swing year over year has been about €3b.

There have been no unusual charges in Q4 to speak of, and that represents the €84m in net results that we achieved for the quarter, against a pretty disastrous Q4 last year.

Debt levels have obviously come down after the repayment of the Italenergia loan, and the conversion of the Mandatory Convertible.

And so we look at 2006 with some confidence in terms of financial charges.

It is the only comment I won’t make about the bond, which is consistent with what we said in the press release.

The bond is effectively designed to -- for general corporate purposes and is really going to be used in order to repay the creditors that have, or will mature during 2006.

Slide 20 takes the €1.4b down to a number which is the pro forma adjusted net income, which removes the impact of all one-off items throughout the year.

And it shows that the Group, even without those items, was able to post a positive number.

Before my mouth gets totally dry I will pass the cash flow statement and liquidity to my friend Mr. Francescatti

In terms of cash flow the fourth quarter has been extremely positive with net industrial cash flow of €1.4b driven by partly seasonal, but largely driven by the higher level of activity for generation of cash.

On a full year basis as you already noticed in past quarters, the cash flows is partly conditioned by the extraordinary events.

However the net industrial cash flow has been on €3.4b overall, and bringing down the net debt at €3.2b at the end of ’05.

Even if you consider the €1.8b effect of the ItalenergiaBis transaction, €1.1b out of GM other small transactions, you will see that basically the Group has been generating even better these main transactions.

So at slide 22 you can see that debt to -- the net industrial debt to group equity ratio has been brought down to 0.34:1 as mentioned at the beginning of the presentation by Mr. Marchionne.

Slide 23 you will find the usual features in terms of composition of our net debt.

The €3.2b of net industrial debt is made of €9.2b in terms of gross debt, and with a cash of €5.7b.

In consolidated terms, cash available to the Group is €7b.

Slide 24 you find a further split down of the gross debt of €25.8b, according to the usual format that you should be used to seeing.

The cash maturities are around €13.6b, €5b in terms of bank balance, and almost €8b in terms of capital market exposure.

And you have at slide 25 the maturity schedule of these €13.6b which are the components which requires cash for its redemption.

The amount due in the next 12 months is €5.9b, which compares to the €7b of cash on hand.

Now I think we can move to slide 26.

We can probably move to 26, which is the outlook for 2006.

We have been relatively specific about what we expect in terms of trading profit margin for the various sectors.

I mentioned Auto already.

CNH should be between 7% and 7.5%, Iveco up to 5.5% to 6% and Components between 3.5% and 4%.

And this yields a range of trading profit expectations of between €1.6b and €1.8b.

And the bottom line impact of all this is roughly €700m net income for the year.

Most importantly, I think we continue to emphasize the cash generation capabilities of the Group.

We do expect to have net industrial cash flow positive.

One of the main drivers of that positive cash flow is the fact that we do expect the Auto business to stop burning cash in ’06, and certainly for the year to be, at worst, cash flow neutral, at least at operating level.

If we move on to slide 27, this is the confirmation again of the targets that we set for ourselves back in July of ’04.

I remind everybody that we have made the ’04 target, and we have overachieved on ’05. ’06 is an important year.

It is a year in which we should be able to achieve trading margins for the Group in excess of 3% in the range of €1.6b to €1.8b.

And it certainly should form the basis for us to hit the target in 2007 of net income between €1.6b and €2b.

This is obviously a significant shift from where we have been.

We started this activity with a debt portfolio of in excess of €10b.

We are now down to €3.2b.

We have positive cash generation from the industrial side, and the Company is again earning a net income without unusual one-off items.

So it has been a good year, and I think we are relatively confident that 2006 will be a good year and certainly in line with our projection.

I have read some of the commentaries that have come out this morning with people expecting us to move forecasts or target for ’06 and ’07.

I think we are going to do that after we have got a substantial chunk of 2006 under our belt, and we can gauge the running speed of which this organization can produce earning.

But for the time being we are only confirming ’06 and ’07.

I am pretty well done and we will take questions as they come.

Thank you sir.

Ladies and gentlemen the question and answer session will be connected electronically. [OPERATOR INSTRUCTIONS].

Our first question is coming from Thierry Huon from Exane BNP Paribas, please go ahead sir.

Yes good afternoon.

This is Thierry Huon from Exane BNP Paribas.

I have got several questions.

The first one is about Alfa.

How confident are you with the Alfa for the future?

And could you give us some color on the start of the 159, are you in line with your expectations in terms of volumes and in terms of pricing?

The second question is about CNH.

How confident are you with the 10% operating margin target given for ’07, which seems to be quite aggressive?

And for ’06 you have another aggressive target, but it seems quite difficult to close the gap with the ‘best in class’ [inaudible].

So could you explain a little bit how you will achieve that?

And the last question is about the commenced] deal which was announced this morning with Tata.

Has that changed anything for you, and for your large agreement with Tata?

And why Iveco didn’t make such a deal of the [Board] unit of your Group, didn’t make such a deal with Tata?

Thank you.

Yes, just to make sure I understood.

Your very first question had to do with Alfa?

Yes, and especially about the 159, to know what is the first results you could go to about this car in terms of volumes and in terms of pricing.

Alright.

Let me give you the general numbers on the 159 first.

When the project was approved it had an original target of between 100-120,000 units a year.

The 159, and we are not looking for lame excuses on this, but the 159 has got off to a slow start simply because of the fact of the full range, including the Station Wagon, was not available.

We do expect a significant portion of the 159 sales to be in the Station Wagon, and especially with the international 3.2ltr Q4.

Running rate for ’06 for the 159, including the Station Wagon, is between 80,000 and 85,000 units for ’06.

And we expect they will ramp up to full production of 120 by 2007.

As I stated earlier, and I stated this at the end of the -- I think at the end of the Q3 conference call, that Alfa remains our most significant repositioning task.

It’s probably the brand that has got the biggest potential.

And it is the one that we have struggled with the most in terms of repositioning.

We have done an extensive amount of work on the repositioning of the 147, and I think that is beginning to show some sizeable results, especially in the Italian market in the months of December and January.

What will help the Alfa brand going forward in terms of the strengthening and market positioning is the introduction of the Brera and the Spider in the market place.

The Spider will be visible in Geneva, as I mentioned earlier, at the end of February beginning of March.

But 2006 for us is a transition year.

I think it is the year in which all the work that has been done on the positioning of the particular models will be complete.

And the year in which I think we will begin to see the benefits of the repositioning of the brands in the four countries that I made reference to.

I think we have got average market coverage in France.

We do need to do quite a bit more work both in Germany and in Spain, and for us the U.K. is the unexploited market.

So we are devoting significant resources to repositioning of Alfa in the U.K.

In terms of the volumes on the 159, I am looking for some people to give me some data here.

In terms of the -- we sold 14,000 159 in 09.

The car was launched in June.

It actually did not hit the market until Q4 of this year in terms of substantial numbers of cars.

We had quality issues that we cleared through the plant in ’05, and the car is now stable, and therefore it is being produced certainly in sufficient volumes to continue the penetration of the European market.

The reference that you made to our relationship with Tata is unimpacted by the announcement.

I don’t think we were in a position to try and table that discussion with Tata at the time at which this alternative solution was arranged, simply because of our previous commitment that we have in India with another producer.

I think that we are working our way through that issue in ’06.

It does not change our view in terms of the long-term relationship that we have with Tata and our ability to effectively strengthen our position on engine.

I am not sure, that in terms of the projects that we started with them, that I would have put industrial engine production in the forefront of our projects.

I think there are other things that we can do with them, especially on the passenger car side first before we tackle the industrial engine side.

Oh, you wanted to know something about how we are going to get to the 10% margins by 2007.

I think we have established some track record here.

And I want to go back to our experience with Auto.

I think we have been able to do two things.

I think one is to resize or right size the governance structure of the business.

And secondly, to begin to work on volume growth by the repositioning of the brand.

The arguments are quite similar, at least in terms of the process between Auto and CNH.

Of the two businesses, the one that is the more desirable is CNH because of the limited number of competitors in the marketplace.

And I think we will be able to action a number of things in that business much faster than we have been able to do in Auto.

There has been some strategic confusion in the product offering in the brands.

I think that we are imposing a high degree of discipline now in the rationalization of the product offering, which will result in the strengthening of the particular networks across.

We have effectively by co-mingling our activities on the industrial side we effectively have left space for Ghia, Echo and other competitors to effectively occupy the space which was rightfully ours.

We have not been able to keep up in terms of market share positioning in this business for a number of years.

So we have targeted that as being the key issue.

We have made it the key objective for the sector in 2006 to halt the market share decline and hold aggressively what we have accomplished at the end of ’05.

I think we understand the value leakage pockets, and I think that one of the things that we will need to continue to do is to try and bring our product cost down, both in purchasing and in terms of the complexity of the design that we are working on.

This is going to take some time to work its way through the channels.

But you need to understand that the 10% target that we set for ourselves for ’07 is still below ‘best in class’ competitor performance.

So I think we’ve got some room to move, but it is going to take a huge amount of effort here to try and get this organization in line.

We started -- I think ’06 is the year.

We will see how much better than the 7% to 7.5% target that we’ve set for ourselves.

We can get to.

And we are going to do this in a market that is fundamentally flat.

So it’s not a very easy task.

But, certainly in terms of the strength of the brand -- of the four brands and the strength of the product portfolio, I think we feel relatively comfortable we can get it done.

We will have to measure this quarter after quarter, but I think it’s doable.

Okay.

Thank you.

Thank you.

And our next question is coming from the company UBN with Sergei Escude.

Please go ahead sir.

Good afternoon everybody.

I have three questions.

The first one is about the sales of the Punto.

Can you provide us your range of units for 2006, because it seems that you are targeting about 360,000 units?

But standing at the selling rate of the Punto, it might seem that your target is very conservative.

So if you can provide us with a range of maximum and minimum you're targeting.

The second question is, how did you improve so much your working capital in the fourth quarter, and is there any room left for an improvement in 2006?

And the third question is about CNH.

It is pretty the same question I have is how can you improve your positioning in the market without standing on advertising, promotions and the network restructuring?

Because I’ve seen on slide 14 there is no increase in that new brand organization.

What are you targeting are increasing marketing expenses?

Thank you.

Let me give you the range of the Punto.

The baseline target is 360,000.

The machine will -- our house is capable of handling easily up to 400,000 units but it is not built into the forecast.

And by the way, before we get really optimistic, and trigger happy on the Grande Punto, you need to remember that we continue to produce the old one.

So in terms of market presence between the 360,000 of the Grande Punto and the 60,000 of the old one, we are covering about 420,000 units, which is a significant portion of the market.

But having said this, if we can get to 400,000 without disturbing the presence of the old Punto I think it will be an enviable result.

In terms of working capital management, I think we are becoming quite decent at managing the working capital position.

Just in terms of ratios to sales, I think that there is limited space for improvement in ’06 going forward.

I will not count a lot, on least on a ratio basis, in terms of working capital improvement.

We leave our estimates at this level for the end of this year?

I’ll have Mr. Francescatti answer the question?

I don’t think he understood you, and neither did I. You leave your what, sorry?

The level for networking capital on sales should be set the same at the end of 2006?

The working capital to sales ratio should stay constant ’05 to ’06.

Okay.

So, I’m looking at Mr. Francescatti, I know he has an apoplectic reaction to my suggestion, but [inaudible].

The question you asked about marketing spend in CNH, the real issue from our standpoint is the question where we -– the house, for your information, I know some of my CNH colleagues are listening onto the call so I’m going to have to relatively nice to them.

There is a distinct view, at least from my part that we may be overspending in areas which are considered to non-value additive to the organization.

So, what’s not visible in the chart is that we’re looking actually at a reallocation of costs in terms of central costs between one partner and the other.

I don’t have a single doubt by the way that we are spending money, an adequate amount of money on marketing and positioning of the network.

Just to give some raw data, which is contrary to what we have in Auto, but on the CNH side we probably do have a much more extensive network between CASE and New Holland than are our main competitor.

Just in terms of sheer physical location in the dealerships.

So it is not an issue of market coverage.

We’re adequately covered in the main market.

The issue is how pure have these dealerships remained since the merger with [FACE], that we allowed competition to respectfully invade our dealerships and offer competitive products.

And that’s an issue that’s going to require very delicate balance in terms of ensuring that we provide the right product portfolios for these dealers to ensure they are absolutely loyal to their brands.

And it doesn’t require money it just requires a high level of service and an ability to offer a competitive product which will allow them to remain pure CASE or pure New Holland leaders.

So a lot of the work is really is the work that has to be done by the commercial organization which has now finally being created as a stand-alone unit, under the brand.

So they’re fully accountable for this activity.

And that’s what’s being measured now from time-to-time.

So I’m not -– I can tell you now that based on numbers that I’ve seen there’s been absolutely no under-spend, no forecast under-spending in the area of network development market.

Okay.

A follow-up question if I can.

Do you think a dividend is possible for the savings shares?

Yes, and I also think a dividend is payable, is possible on the ordinary shares.

The question is if they are possible and the answer is yes.

The question whether they’re probable, is another question.

On the ordinary and savings you say.

Yes.

They’re payable on all shares.

The only thing I can tell you is the Board did not agree to a dividend payment when they met today.

It is unlikely, in my view, that it will be one that will be proposed in 2006 for ’05.

Thank you very much.

Our next question is coming from John Lawson with Citigroup Investments.

Please go ahead.

Thank you very much and good afternoon.

Thanks for all the detailed guidance for 2006.

Can I come back first to this inventory question though –- sorry the working capital question because it does jump out of the page some what, out of the results last year.

I guess, that when we see the supplier credit numbers with that big acceleration that you had in the fourth quarter in Fiat Auto production that we will see some unusually high supplier credit figures.

Would you care to quantify that for us just to give us some idea of how much pull through there might have been from that side?

Then I have two smaller issues.

You flagged up that Ducato cost issue specifically in talking about Fiat Auto’s profit.

I’m a bit confused as to where you’re consolidating that now.

You’re doing it as a joint venture still are you under IFRS?

So that means we see all of that impact in the trading profit?

And then finally on the financial —- on the net interest payable, I think we used to have a base level of around €120m of pension costs.

During the course of the year you’ve been gradually adding to amortization of the employee benefits.

So am I right in thinking the base level now is running at around €250m to €300m on the financial line before the financial net interest?

We’ll come back to your last question.

I think they’re adding up numbers to give you the definite answer on the pensions.

Thank you.

Putting in the interest line.

But let me work my way back through the other issues.

The sales of light commercial vehicles are consolidated in the results of Fiat Auto.

So you actually see the volumes and the costs associated with those sales coming through.

The joint venture itself is unconsolidated.

It sells everything is costs back to the participant, so it really has a zero equity impact on the P&L.

But the sales of the items and cost related to those items are shown through.

So we actually see the gross margin.

On the new Ducato we will see the gross margin deterioration as a result of the new product.

Okay.

Is that clear?

Yes that’s clear.

There’s nothing in the net interest line then?

That’s got zero impact on the joint venture.

That’s understood.

The other thing you asked is –- Fiat Auto does have a negative working capital position because of the way it deals with suppliers.

As the extent that production ramps up, it will actually benefit from working capital.

It will actually not explode.

And so while the benefits associated with targeting a number of 1.8m vehicles, is that it will actually improve our cash flow statement because of the impact on working capital.

Our suggestion and the ones that we have made to you is that I will assume there is going to be no improvement in working capital sales ratio at Group level, which is probably the most conservative view you can take.

And the third question that you’ve asked is the issue about the interest, which I don’t have.

Mr. Francescatti is going to give you an answer for, maybe later.

They’re trying to add it up, so just bear with us.

We’ll come back.

Perfect.

Thanks.

Thanks.

And now we move to Martino de Ambroggi with Euromobiliare Sim.

Please go ahead.

Good afternoon to everybody.

My first question is on Brazilian activity, just to understand if it is €150m the final contribution for the full year of Fiat Auto Brazil?

And what is your expectation in ’06.

I think I found in your press release that you considered flat contribution?

Second question is on the Car Component businesses.

Basically there are no improvements.

You were mentioning price pressure.

If it’s possible to have some more information on this guidance considering that overall the volume should be up year-on-year?

And if I may, just a final question on networking capital.

I would like to understand if there is something exceptional because during your last conference call it was quite clear that the €1b reduction in working capital was not easy to achieve, but you achieved €1.3b.

Just to understand if there is something for Q4?

I understand your guidance for ’06, but I would like to understand Q405.

Thank you.

Sorry, they were mumbling here trying to deal with the pension question.

You said what car or vehicle were you making a reference to when you were talking about margin pressure?

No, the Car Component business.

Your guidance is at 3.5% or 4% regional sales, while this year is already [3.7%].

So there is no improvement year-on-year?

No, I think you need to be very, very careful about the composition of the Components business.

Let me deal with that.

It’s made up of three items, one of which is Comau, which is in a business sector which is really fundamentally very ungrateful, I mean structurally.

It’s a difficult business.

Most of the competition in Comau, most of the competitors around Comau have been suffering substantial losses.

So the ability to retain a decent profit margin on that sector and hold it ’05 to ’06 is already a significant achievement.

In the case of Teksid, we have two fundamental issues.

Most of the profit generation of Teksid is Brazilian originated.

From the Brazilian side and to an extent there is a strengthening of the currency against European or North American suppliers -- the European, North American customers.

It’s going to negatively impact on performance.

That’s why we continue to be cautious.

The comment is not to be indicative of a worsening of performance in Marelli which is expect to do better year-over-year.

Okay.

Was that okay?

Yes.

Thank you.

And the other question I think Mr. Francescatti will answer.

On the working capital there is partly a seasonal effect which is linked to greater production works in terms of [payment] to supply.

And there is a certain degree of seasonality on the capital expenditure which is adding up to this effect.

But performance which has been better that expected is largely due to the higher level of activity, and especially to the Group performance in sales and registrations by Fiat Auto.

So we have been generated more cash from operations than what we were expecting for the more cautious expectations we had at that time.

Okay, there were no changes in payment conditions and so on?

Absolutely none.

Okay.

And Brazilian contribution?

€200m year-over-year improvement of which roughly €30m is exchange.

And for ‘06?

Flat on current levels.

Thank you.

Thank you.

We now move on to Mr. Jean-Marc Muller with Bank Bellevue.

Please go ahead, sir.

Just a technical question, also on Ducato and the product launches that you have had in the fourth quarter and will have in 2006.

The price difference that you mentioned of €1,400 on the Ducato, how much of that is actually cash and how much is non-cash?

I mean, how much is coming from higher depreciation amortization due to the start-up costs that you have?

That will be my first question.

Also if you could elaborate a little bit on additional product launches that you have?

How depreciation in Fiat Auto will change due to that?

And my second question actually would be on CapEx.

If you could give us a little bit of guidance on CapEx for 2006/7/8, just for us to get little be of feeling on what the cash outlook would be on the cash flow statement.

Thank you.

Just to give you a broad answer on Ducato.

Roughly €500 of the €1,400 is an actual cash cost increase over the previous model.

We’re trying collect some numbers on the CapEx side.

Did you ask anything else or did we miss it?

No, these were the two main questions.

Maybe if I may on Q4, if you could quantify launch costs for the Punto and also the Alfa and maybe the 159?

What would you expect to be extraordinary in Q4 in terms of launch costs?

Thank you very much.

I’ll prefer not to.

I’ll tell you why I don’t like to deal with that issue is because I also don’t want you to treat them as one-offs.

I’ll now tell you why because one of the fundamental problems that Fiat -– the car business of Fiat has had is I think it has underinvested in its advertising and marketing side.

Whatever one-off costs were included in terms of product launches, you need to consider as being necessary to reposition the brands in the four countries I talked about.

So assume that it will continue.

For purposes of your analysis do not assume there is going to be decrease in those numbers.

And I’ll try to give you some numbers on CapEx in a few minutes.

We’re just trying to collect.

Thanks.

Thank you.

We now move to Sabine Blumel with Banca IMI.

Please go ahead.

Hi, Sabine, can you just hold off a minute.

Can we go back to John Lawson’s question about pensions?

The number is about €100m in 2006.

Sabine Blumel, your line is now open.

Okay, thank you very much.

Good afternoon.

Could you give us some indication about the gross impact of higher raw material costs in 2005?

I think for Fiat Auto you were targeting for or expecting a gross impact of €250m in 2005, Has this come in as high as expected.

What is your outlook for Fiat Auto?

And how much of higher costs were you able to pass on to customers at CNH and at Iveco in 2005?

Let me give you the stripped down version of the answer to your last question.

I think that there’s over a 12 month cycle, there’s a 100% capability to pass on prices at Iveco and CNH.

Is that helpful?

Yes.

I'm surprised that it is so high at Iveco.

You were indicating early on –- your pricing position in Iveco, you mentioned earlier is not positive.

So how on earth could you have passed on 100% of the higher raw material costs?

What I mentioned earlier is that our price position for the product was inadequate, and it certainly did not reflect value for what we were delivering, especially in the medium to high end of the spectrum.

Our ability to pass through raw material price increases in those sectors, both in Iveco and CNH, is actually quite healthy.

The repositioning, the price repositioning of these products is going to accomplish a lot of the recovery that we’re making reference to.

In addition to which the only sector which had a negative purchasing efficiency number was of the big sectors has been CNH in 2005.

I think from our standpoint it’s fundamentally a management issue which we’re addressing.

We’ve made some substantial changes in terms of the management structure of CNH to try and rectify the problem for ’06 going forward.

And I must admit I’ve lost the first question.

There’s a lot of noise in this room with people trying to get data so could you repeat your first question?

My first question was that before taking into account your measures of improvement efficiency, you quoted for Fiat Auto an expected negative impact on raw materials of €250m for 2005.

Did this figure come in as expected and how do you quantify the headwinds in raw materials going forward for 2006/2007?

For 2006/2007 to be perfectly I couldn’t give you.

I haven’t got the foggiest idea.

I really don’t know. ’06 to ’07, you’re talking about 12 months from now.

How are your settlements on the steel side developing?

Are you able to contain the price increases for steel for instance?

The answer is absolutely yes and it’s an issue that’s not just Auto specific.

Our ability to buy steel now is across the three big sectors.

So we’ve been able to leverage the purchasing capabilities across the three organizations.

So we’re talking about a purchasing leverage on a €40b business as opposed to the car side which is limited at €20b.

But the steel negotiations are obviously quite sensitive.

I do not expect them to have an adverse impact on profitability in the sectors in ’06, nor do I expect us to be exposed at the end of ’06 versus of ’07, just in terms of relationships we’re developing with suppliers.

Thank you.

That is all, I guess.

Thank you.

Thank you Sabine.

Thank you. [OPERATOR INSTRUCTIONS].

We now move to Adam Jonas with Morgan Stanley.

Please go ahead.

Thanks, good evening.

Two questions.

The first is on the fourth quarter, trying to relate the trends in vehicle production at Fiat Auto with the profit development.

My understanding, reviewing notes from the third quarter, you expected fourth quarter production to be up sequentially obviously, but to be more or less stable year-on-year.

Now, it looks like, I haven’t seen production data officially from you for Q4, but based on Western European data at least, Fiat, the Group, putting all brands up over 20% year-on-year, clearly a pretty positive momentum.

And I think you might have eluded that had something to do with the surprise factor.

That might have had something to do with why the working capital source was a bit greyer than perhaps you anticipated.

But where do we see that on the profit?

I mean, Fiat Auto did a bit better, may be €20m, €30m than you expected in your original target.

But given that level of production surprise, if that is in any way accurate, I would have expected more of a monster quarter from Q4.

Now, coupling that with what I see at this provision level, this provision source in the cash flow statement that you provided where it looks like there was about €360m, did we see some of what would have been a profit showing in Q4 maybe smoothed out or somehow stunted because of the provisions, or what is other issues such as the Ducato?

I’m sorry if that’s something of a convoluted first question, but that’s my first question.

It is a convoluted question.

There was no provisions made in the Ducato in Q4 in case you’re wondering about profit.

They will issue in ’06.

So, the quarter as you see it stands on its own terms and it stands -– and it reflects the data that went on slide 8 in terms of production.

I’m not sure that I can reconcile your statement about the fact that we were expected to have a monster quarter because of the fact that we ramped plans to the rate that we did.

It’s understandable because the absorption issue.

Let’s go to slide 9, which deals with the issue of absorptions and you look at the impact of absorption on what you call your monster quarter.

Your monster quarter had a €30m impact absorption Q4 last year to this year.

And when you go back to slide 8 and you compare Q4 ’04 production of 434m to 483m the difference is roughly 50,000 cars.

Some of which -– which obviously reflect, gave rise to €30m variance.

So I’m not sure that we did not understand that number.

It certainly wasn’t our plan at the time at which we targeted the reduction of €500m in losses.

So it is fair to say that production did surpass your expectations during the quarter?

No, it did not surpass any expectations.

I think that what was surpassed was ’04, which is the only thing I ever benchmarked.

I benchmarked ’04 performance against expected ’05 performance.

Okay.

And we knew that by running the plants at this rate, in view of the product launches, we would absorb in excess of what we absorbed in ’04.

Okay.

If I could just move to have a second question.

On the Auto target for 2006, where you have a margin target of 0.5% to 1%, I just to confirm.

I think you made it clear in your presentation, but I just wanted to confirm it.

That’s Autos including Fiat Auto, Powertrain, Ferrari and Maserati, correct?

No.

Just Fiat Auto then?

That’s Fiat Auto.

So in that slide -–

Which, by the way, also relates to €281m loss which is purely Fiat Auto.

It excludes Powertrain.

It excludes Maserati etc.

Okay.

So one way we can interpret your target is that the level of quarterly profit perhaps in 2006 will be even slightly above what you’ve done in the fourth quarter with production?

Yes, the other way of looking at it is that it’s a €400m shift in trading profit between ’05 and ’06.

We’ve done €500m ‘04 to ’05.

We’re doing another €400m ’05 to ’06.

Okay.

That’s very clear.

Thank you very much.

Your next question is coming from [inaudible] with [inaudible] Brokers.

Please go ahead.

Good afternoon to everybody and congratulations for a good result.

I have three questions on 2006.

I was starting to feel lonely over here.

We’ve probably had the best year we’ve had in I don’t know how many years and not one of you guys have even congratulations.

Thank you.

I feel much better now.

Okay, okay.

I have three questions on the indication for 2006/7.

The first one is on the price contribution to Fiat Auto trading profit which I think you are indicating will be range of €60m.

This compares with €293m positive contribution in 2005.

I wanted to know whether is this amount is low because of the negative impact from LCV or because of pricing pressure on the old models?

The second question is with regards to the trends of EBIT in 2006.

Given the good trends for Grande Punto and the not negative impact in the first quarter from LCV, should we expect a breakeven EBIT for Fiat Auto?

And third one is on 2007.

How would you reach the 2 to 4% Fiat Auto margin in 2004 from a 0.5/1% indication for 2006?

Are you expecting a strong increase in volumes, much better prices, or again other cost cutting?

Thank you.

Let me deal with the issue of the margins first going forward.

I think that Fiat Auto, to be perfectly honest I couldn’t be any harsher than we’re being on the cost structure of Fiat Auto than we have been in ’05.

I think we’ve been pretty rigorous at digging out all the non-value added costs out of this business.

There’s no doubt there are some that are yet unexplored, but I think that they are small in size.

So don’t count on additional cost cutting delivering it.

Okay.

This house -- just to give you an idea, I think this house is relatively sensitive to volume.

I think that there is, what we have seen is that the run rate of both production and sales in Q4 of ’05 has given you a natural breakeven point for the house.

I mean, 21m is a positive number.

It does not take a large number of cars from that point on to try and drive profit.

So to the extent where we have targeted 8.8m cars for ’06, which is designed to give you a market margin of anywhere between a 0.5% and 1%, to get to a 2% market share, we’re talking a marginal increase of volume.

Effectively our 2008 target for Western Europe is about 8.5%, and we’ve targeted 7.2%.

If we get to 8% at the end of ’07 we would well have exceeded the 2% threshold.

The issue with Autos is that when it was floundering in the negative numbers, apart from the cost governance issue, I don’t think it ever targeted a number as being a survival number.

I think we feel relatively comfortable that we found it.

And so that number must be defended at all costs now.

Okay.

Was there more?

You asked about the pricing.

Yes, thank you.

We’re not pushing prices on the car side.

I think a lot of the clean up that we have done in terms of the repositioning of the vehicles has happened in ’05, and we don’t have what I call really product launches in ’06 which would justify a pricing realignment.

A lot of these things have happened as a result of the launch of Grande Punto and of the new range in the Alfa range.

There is nothing significant enough to be push pricing outside of normal positioning, that’s why the number is as low as it is.

Okay.

We now move to Mr. Philippe Houchois from J.P. Morgan.

Please go ahead.

Yes, good afternoon and yes, indeed, congratulations on my part.

I had a couple of questions please.

One is, I think you mentioned this morning that you were looking for another alliance in 2006.

Can you put that in context in terms of how many alliances you’re looking for at Fiat Auto, whether those future partners, or that future partner in particular, will be more coming from established car makers from the Western world or more emerging markets?

And if you can quantify to what extent, what kind of savings in terms of CapEx and R&D you’re able to achieve by having those partners versus pursuing a standalone strategy?

Give us an idea of what kind of impact you might expect to see in terms of return of capital employed for the Auto division and for the Group as a whole?

And if I can carry on with a more general question, I think what you’ve done in ’05 was very impressive.

Butt was also made possible because you’ve had very, very low operating leverage as a result of different measures that we’ve discussed in the past.

In terms of -- that means that on the way up you also had very low operating leverage and if you look at where your normalized margin could be in terms of margin range, when we see general Japanese car maker the margin range goes from 1% to 4/5% on a sunny day.

And do you think that you’re precluded from reaching those levels and if that’s the case, is it more due to your product mix, or is due also to the lack of operating leverage as a result of your fixed cost base?

Thank you.

Before I answer the question, you answer one me though.

Tell me where you got the notion of the fact that we’ve got very low operating leverage?

Your statement runs smack against what I said a few minutes ago.

This house is incredibly volume sensitive.

Yes, but my view on Fiat Auto, I think we’ve discussed in the past, is that you’ve, over time, Fiat Auto has been able to benefit from a very low fixed cost base through 1, deconsolidation of the partnering business for a while, 2, asset write-downs and also that you’ve been able to use Powertrain for a number of quarters to accommodate lower production.

And as a result you’ve been able to accommodate lower volumes, lower revenues and still you see the operating loss which normally car makers cannot achieve.

And I agree that going forward you are weakening some operating leverage by reconsolidating the Powertrain, by also taking back in your P&L some of the people that were off balance sheet in effect through [inaudible].

But still have lower operating leverage than most other car makers.

Maybe we can have this conversation offline.

I fundamentally disagree with everything you said.

Okay.

That’s the first remark.

I do not think that we’ve got operating leverage.

One has to be careful of the answer.

I’m not sure that unless I see our competitors’ operating leverage framework that I can answer your question.

I can tell you that ours is not low.

And I can also tell you that it’s incredibly sensitive to volume shift.

So for the margining point our ability to hit an 8.5% market share number in Western Europe is going to change, significantly change the profit profile -- profitability profile of Fiat Auto.

I’ll be more than glad to have this conservation where we can work through some numbers and I can tell you what I think the impact of the operating leverage on our house.

You need to understand the variable cost here, on the labor side, which is your argument over [inaudible] is an incredibly small portion of power costs.

But that operating leverage argument, at least at that level, doesn’t work very much.

The question is what am –- if I was looking at this from a standpoint of another industry, if I was looking at what the so-called value-added portion of contribution from sales would be, what I can impact after material costs, then the numbers is not as low as you think.

So to the extent that I can apply volume considerations to a value-added number it significantly changes the profitability of the sector.

Let me deal with the issue of the partnerships, and how many we need or how many we need to get done.

As a rule of thumb, and I would use this not only for ourselves but I would is as a similar argument to what I think our competitors would use, is that for an investment that can be shared, we’re looking for an investment that will cost each one of us €100.

We can probably get the same investment done for between €120 and €140 for both buys, which entails that our investment in that project would go from 100% down to 60% or 70% of what the original would be.

And that’s a significant improvement in terms of capital commitment against what we would have from a standalone standpoint.

Our issue is that volume per platform is inadequate compared to the competitive landscape.

So we need to cure that gap.

And to the extent that I can’t provide the volumes for our own distribution, I must be able to share it with someone else.

And that is one of the benefits of having done the Chico Quento with Ford Ka, with Ford and Ka because it gives use effectively a volume of anywhere between 220,000 and 250,000 off the platform, which I could not have gotten to on my own.

So the number of partnerships that we can do is fundamentally unlimited.

I’m willing to partner on all the platforms that we have and all the models that we own as long as it doesn’t impact on the distinctiveness of the brand.

So -- and what I did say this morning is that we were targeting at least one by the end of ’06, and we may do more.

[And --]

Does that answer your question?

Yes.

And this will finally be other partner for ’06?

I prefer not to discuss that.

I think that we’re going to end up trying to shave.

I made a mistake last year I think in the Troy Data Show when I told somebody that it was a European American plant.

And everybody guessed it was a GM.

Down Detroit yes.

Yes, no.

Yes, it was not pretty smart.

It was a moment of weakness.

So, I’m going to refrain from sounding stupid again.

Yes, fair enough.

Thank you very much.

Thank you.

We now move to Mr. Eric Michelis with SG Securities.

Please go ahead sir.

Good afternoon and congratulations for these numbers.

I would have a question on tax losses.

What’s the status on the tax losses?

And what you think that the tax rate should be going forward?

And my second question will be on financial expenses.

Can you give us a feel for what do you think in 2006 we should pencil in as far as financial expenses are concerned?

Thank you.

Hello?

Yes, I’m back.

We’re trying to give you the right answer to your interest question.

Sorry.

The number is between €600 and €700m in interest, of which roughly €100m related to the pension on interest for 2006.

The issue about the tax rate is a complicated question, because it -- from a P&L standpoint the consolidated tax rate of this house is really horrible.

And a lot of this has to do with the fact that -- to the extent that we have losses originating in countries where we have had a history of losses, we have booked no tax benefit associated with the losses.

And so, for example, on -- for Fiat Auto to the extent that it lost money in 2005, the tax benefit associated with those losses has not been reported in the financials.

And so what it ends up doing is it ends up distorting the Group rate to the where it’s incomprehensible.

The tax rate is going to start making sense I think to the extent that we start generating profits from these jurisdiction.

And 2006 maybe the year in which the Italian operations at least are not providing a negative impact on that -- on the calculation.

But one of the issues that we need to do is that we need to find ways in which we can effectively access this world tax loss at a Group level, because they are large.

Some of them are reported.

Some of them are not, because we have stopped booking debits on these jurisdictions now for a while.

And it is truly a complicated question.

I don’t have an easy answer for you.

I -- what I do know is that from a cash standpoint all efforts are being made to minimize the cash payment across the jurisdiction that Fiat operates in.

The fundamental problem remains the Italian side.

And so we need to I think invest some time in resources to find ways in which we can intelligently access them.

Does that answer your question?

Yes, thank you.

I would have just an initial follow up question.

What’s the total amount of tax losses that you have on the balance sheet for the time being?

You want an -- I give you the deferred tax debit associated with those things.

And then we -- if you give us two minutes we can probably give you the raw number.

Hold on a second.

Thanks.

We’ll come back to you on that question.

Okay, thanks.

Thank you.

We now move to Mr. Ricardo [Ricciardelli] with Banca Profilo.

Please go ahead.

Yes, good afternoon everybody and first congratulations.

Four very good questions if I may.

On slide 20 which portion of restructuring charges and other unusual charges refer to the parent company and which one to the consolidated level?

Secondly, and linked to this, I couldn’t get the difference you made between possibility and likelihood of a dividend, especially for the savings share.

There is a right accumulated by this class of shares, unless you are referring to your accounting policy relating to your loss guide for -- of about €950m for the parent company?

Thirdly, on new Punto I come to know that the 74,000 vacancies invoiced were basically constrained by your capacity -- industrial capacity, sorry.

So, what would you have been able to sell if you were not so constrained by your industrial capacity?

And finally, is there any guidance you could give or an indication about labor costs following the renegotiation of the national contract over the recent weeks?

Thanks.

Okay, just -- the answer to the Punto issue.

The best way to give you an answer is to tell you that when we finished ’05 we were looking at a back order of roughly six weeks on the Punto.

So, that’s how much there was in terms of unproduced, unfilled orders coming out of the year.

And that number has been dwindling down as we keep on pushing production up.

We’re still looking at roughly four weeks on the Punto in terms of backlog.

Labor cost, the impact year over year is going to be between 3 and 4% --

Decrease?

3 to 4% on the labor side after the settlement for the year.

And this figure includes the one off payment that was designed to offset prior year exposures.

The other question that you asked is you asked the restructuring charges for --

Any unusual ones?

No, no, I know.

But, sorry, this is on slide 20, right?

Yes.

You were asking me about what part of the €502m is -- sorry.

Is attributable to the parent company and which one to other consolidated companies?

And other consolidated companies?

Yes.

Do you mean how many of them referred to the holding?

Sorry?

How many relate to the holding company and how many relate to outside -- to the operating units?

Okay, and for the unusual charges?

No, I understand this.

But the question -- you want to know what portion of these related to the holding company and how many of them related to operating companies, or?

No, no, no.

I am just interested in the SpA. -- in the listed SpA.

In Fiat SpA.?

Exactly.

Okay.

I’ll get you that.

Hold on a second.

Thanks.

It’s €20m for Fiat SpA of the €500m.

Most of them have been operating here in terms of the restructuring of operations.

Okay.

So, we have unbooked assets -- unbooked tax assets of between €6.6 to €7b in carry forward losses, and what has been booked is €1.7b.

And then we have roughly, as I mentioned, €6.5 to €7b in unbooked tax losses and €2.1b in tax assets, which when you gross them up should be close to about €4 to €4.5b in underlying tax losses.

That makes sense to you?

No, it makes -- sure, of course.

My point was as you said that you will be able to post a profit and then there will be a possibility to a dividend, but not a probability, there will be in this case accounting policy acting on the dividend.

That’s not -- no, let’s agree on one thing.

We will not be drawn on the discussion as to whether the Board should or should not declare a dividend in 2005 and 2006.

The only thing I said was that the Board today did not authorize a dividend payment on anything when it met.

And obviously it would respect whatever the preferential rights are on dividend distributions on the various classes of shares.

But the Board did not deliberate it.

And the only thing that I’ve said was that it was possible that dividends could be declared.

I told you that it was unlikely that it would be declared.

It would not -- it was improbable.

Yes, okay, thanks.

But that’s -- this become a very difficult issue because then it starts -- it causes a large amount of activity in terms of the various classes of shares in the market place.

And so, I will not be drawn into a discussion as to whether Fiat will or will not pay a dividend on the preference, and -- responding on anything else.

We wait until the Board makes its deliberations at the meeting that it has at the end of February.

Okay, thanks.

At which point it will call -- it will -- whenever it calls a shareholders’ meeting.

Is that clear?

Yes, yes.

Okay, thanks.

Thank you.

Thank you.

We now move on to Mr. Fredrik Westin with West LB.

Please go ahead.

Yes, good afternoon.

Also from my side congratulations on the very impressive especially Q4 results.

Two questions for you on the Iveco business, could you supply us with the share of Euro 4 and Euro 5 compliant engines that you sold in Q4 2005, so obviously unit sales?

And the second question is keeping this in mind, and looking at the price mix development you had in Q4, you seem very confident on the pricing of your Euro 4 and 5 engines in 2006.

So, could you maybe a bit more specific on how you intend to achieve the mix in price improvement of €153m that you’re supplying in your presentation?

Thank you.

I have no idea how many Euro 4 or Euro 5 engines that are sold in Q4.

But Mr. Ledda will come back to you and tell you.

I’m not sure that it’s helpful, but I will tell you.

I think that the issue about pricing of the Iveco products is more complicated than the Euro 4 Euro 5 discussion.

I think our ability to rely on Euro 4 and Euro 5 compliant engine in ’05 -- in ’06 is part of the argument that supports a price repositioning of the products that we have.

What we know is that it’s a heavy -- especially at the heavy end and less so at the medium end.

But certainly in the medium to heavy end of the spectrum we have not been achieving the right price positioning for our products.

And one of the things that we -- and this is purely based, not on internal costs, but it’s based on positioning of the product against the competition.

So, one of the efforts that’s underway now is to effectively achieve adequate pricing on those products in ’06.

And it’s being done -- Euro 4 Euro 5 compliant engine argument is supportive of that price positioning, but it is not the cause.

Okay.

And then by the way, if you’re looking for a list of to do items to support the pricing, we’re going to second guess the commercial activities of the organization.

What I’m telling you is that that’s what we’re targeting.

We’re targeting a pricing improvement on that level.

And I think we’ll have to measure our success as we working our way through quarters.

And you don’t assume that this will have any volume implications for you?

Actually not at all, because to be perfectly honest I think we have left this area relatively untouched to the competition for quite a while, while we have been sitting.

One we have invested in the product range.

And secondly, we have not marketed it successfully.

So, I’m not sure that we are at risk of losing volume against the competition.

Other people have been having a field day.

Okay, maybe one more question on Fiat Auto.

If we look at your target markets for 2006, and I focus on Germany, your market share now in Germany is close to 1.8%.

And this is also the case with private consumers.

So, it’s not only that you’ve closed, or that you’ve been -- or have showed decline in unit sales on unprofitable sales channels, but also on the profitable sales channel, which is the private consumer.

Could you maybe be a bit more specific on how you intend to turn this around in 2006, except now for the product momentum that you have, and more looking at the dealer network?

Thank you.

Well, I’m not sure I agree with your statement that our retail channel in Germany was a profitable channel in all forums.

I think the problem with us was the fact that we were actually discounting cars across the board.

And so, what we have stopped in the market place is the proliferation of those commercial practices.

I also don’t think to be honest that our distribution network is as deficient as some people make it out to be.

We talk about the closing of open points.

The fundamental issue is that we’re not getting enough volume per dealer of our products.

And this is a result of a variety of things, including the fact that we have not supported these operations from a commercial standpoint, in terms of marketing and positioning of the product.

And that’s what’s on the table now.

It’s how -- and by the way, we also have a relatively large number of dealerships in Germany which are company owned, and which have not done a good job of promoting the respective brand.

So, all this is being -- is being turned.

A large portion of our volume in Germany emanates from our own dealers.

These are dealers that we own and that we’ve been managing, and we’ve been managing unsuccessfully for a number of years.

So, I -- there’s -- the question on market share gain from a number below 2% in Germany is a significant issue.

But I can tell you right now that we could not have supported previous volumes on the pricing structure that we had in place.

It was effectively destroying whatever value was in the brand.

And so, we need to be very selective in terms of what we bring to Germany.

And we need to be very, very selective in terms of the practices that we use in marketing the product.

But it’s going to be a long haul and Germany’s a very tough market.

It’s much, much easier for us to play in countries such as France or Spain than it is in Germany.

But I acknowledge the issue as being one of the most difficult.

And we’ll have to deal with it.

Okay, thank you.

Thank you.

We now move to the question of Mr. [Derek] Ferguson with Morgan Stanley.

Please go ahead.

Thank you.

Just two quick questions hopefully.

First of all, I may have missed it, but did you give us an idea of what the CapEx spend is likely to be in 2006?

€2.8m.

Okay, thank you.

And the second one is you’ve given us some guidance for cash flow before the spending of CapEx and that’s to be positive in ’06.

Is it likely to be positive after CapEx as well?

Yes.

And presumably a little bit more positive in ’07?

That’s the trend.

But -- yes, somehow there’s a perceived view here that at least pre interest, pre taxes that this machine is not producing cash.

And that’s something that is untrue.

With a profit target of [16] to [18], it is impossible, even if we were really diligent to chew up all the cash that’s generated.

It would take a real big effort to do it.

Let’s be blunt.

We’d have to be utterly stupid not to produce cash at these levels of profit generation.

And I understand that Fiat may have had a bad history of not delivering cash.

But the bigger issues where they were delivery top line profits out of this, which are supporting a cash flow statement.

And if we start off with a positive number from the top it makes the cash flow statement somewhat different.

And I’m not trying to be insulting in the process.

I’m just telling you that the businesses will generate cash in ’06 and ’07.

No, sure and thank you.

I guess if you look back far enough that’s what we’re struggling with.

Yes, well, I --

But the recent track record has been different.

Yes, I agree.

And I apologize for that track record.

It’s one that I don’t know.

So, I -- the only thing I know is what this machine is capable of producing today and it will be positive in ’06.

Okay, thank you.

Thank you.

We now move to a question from Mr. Georges Dieng with Dexia Securities.

Please go ahead.

Yes, hello, good afternoon gentlemen.

I have three very quick questions.

First of all, coming back to the issue of tax rate, what is the implied tax rate that you use for your ’06 and ’07 guidance?

You must have some idea of what the tax rate could be to get to the €700m in ’06, for example.

The second question has to do with the restructuring and more precisely the cash out from restructuring.

Could we expect some important cash out for previously made provisions in ’06?

And final question on the Powertrain division.

Should we assume that at some point Iveco will be transferring its -- part of its engine business to the Powertrain entity?

And if so, when will it take place?

Thank you.

Built in tax rate until the ’06 number is roughly 40%.

This is on a pre tax -- it’s 40% of pre tax.

And in terms of your question about the Iveco industrial engine, they are currently being managed jointly with the Passenger side.

It will be reported that way starting Q1 ’06 with comparative numbers going back to ’05.

And your second question was?

On the cash out from --

On the restructuring?

On your restructuring.

Okay.

I’ll come back to this.

I’ve lost the Controller.

He went back to check on the numbers.

So, as soon as he comes back I’ll give it to you.

Okay.

Mr. Francescatti has it.

Yes, we had around €450m in ’05 for restructuring, you see.

I’m sorry the line was very bad.

It makes that -- this amount to come in ’06.

Hello, could you hear me?

I’m afraid the line was very faint.

Okay.

So, could you repeat this?

Cash absorption for restructuring unusual was around €450m in ’05.

A similar amount expected for ’06 and coming out for previous years.

Okay, thank you.

It’s not a big number.

Alright, thank you.

Thank you.

We now move to Owen Griffiths with Deutsche Bank.

Please go ahead.

Mr. or Mrs. Owen Griffiths with Deutsche Bank your line is open now.

Probably he liked the answer so far.

We now move to Mr. Thierry Huon with Exane BNP Paribas.

This is Thierry again.

I’m coming back to the figures as given by Mr. Francescatti, because I didn’t get it.

Could you repeat the numbers for the cash out coming from the unusual in ’06?

We expect a similar amount to ’05.

So in the range of €450m.

Okay, thanks.

We have now another following question from Mr. Serge Escude with UBM.

Please go ahead.

A very quick one.

First just question very quick, what is in your budget the number of Pandas you are expecting to sell in 2006?

And a second, you think the market should be flat in Europe.

In that environment -- you say the market will be difficult.

In that environment what is the pricing, that pressure you are feeling from your competitors, especially the French ones which have some models that are not working, or they’re doing as they were expecting?

And the very last question is on the quality.

Do you think that most of the problem in the quality are now sorted out, or there is still some room for improving quality across the range, except the new models?

Thank you.

The answer to the first question on Panda is about 220,000.

220,000.

Yes.

And that includes the Q4 the 4x4 version.

The 4x4 is included in that?

Yes.

Okay.

And the answer to your question about [hoarding], then we’ll move to the second one, which I’ve only partially got.

The answer to your question is one, we’re not done.

What I can tell you is all the work that needed to get done in order to ensure the competitive level of quality on all product launches in ’06 was done.

And we have now begun to work our way back into the current product range to ensure that we achieve the same level of quality in France.

Our expectations are that this exercise will bring the portfolio of Fiat Auto at the end of ’07 in a level which is excess of European competitors.

But we have now been able to start -- we have now started to go back into the existing product range to ensure that we apply the same discipline to what was currently in production prior to the launches in ’05.

The second question that you asked had to do with competitors, right?

Yes, exactly.

The price pressure you are now having from especially the French competitors that aren’t expecting you to have this.

And they should put pressure on you, because you’re clearly leading the segments where the Punto was launched.

So, we are -- we’re expecting a reaction from there.

Well, we expect a reaction from all our competitors.

And we understand that it is causing some dislocation on the other side.

I think that we will continue to fight to maintain market positioning.

I think that we do not have excessive or unrealistic market share ambition in terms of both the Italian market and the rest of Europe.

And, therefore, I think we should be able to hold targets that we set for ourselves.

Obviously, this is going to have some negative impact on volumes on the competitive side.

But Italy -- the Italian car manufacturers -- our Company has been suffering market share decline now for a number of years all to the benefit of others, and especially the French, who I think have occupied a large portion of the relevant market in which Fiat has been operating.

Yes.

I think our ability to restore some presence in some of these markets is -- should not be -- come as an unexpected event to our competitors.

And I think that we will continue to compete as effectively as we can.

I don’t have a quick answer to your question other than the fact that I think that we’ve got a viable competitive product.

So, I think they can win on their merits.

And I think that we need to see each other out in the market place and to the extent it is competitive pressures, we will respond.

These issues about volume gains at all costs are, as you well know, are a very insufficient answer to the problem.

And Fiat Auto is a classic example, where I think attempts to hang on to share at any price have been disastrous.

So, I do not expect the competition to engage in what I call a fully fledged war to try and maintain share.

I think that will naturally gravitate.

Let it go.

Okay, thank you very much.

Thank you Serge.

We will take one more final question please.

Thank you gentlemen.

Our final question is with Marc Gouget from Natexis.

Please go ahead.

Yes, good evening.

You have target to reduce Fiat Auto purchasing cut by €240m in ’06.

On -- you explained on the slide number 10 that this will come from purchasing efficiencies.

What do you mean by purchasing efficiencies?

Do you mean price pressures on a third party supplier?

No, these relate -- and this is the end result of a variety of initiatives, which include more tactical savings, the actual work on the component parts to try and take cost out of the component absolutely.

And then it also involves negotiations and aggregation of volumes.

Negotiations with suppliers and negotiations of volumes across the whole Fiat sector range.

So, it’s a composite number.

It’s the result of a number of initiatives to try and bring component cost down, which have got a variety of causes.

So, it’s not just bashing of competitors.

It’s only a very small portion of that number.

I’m sorry I think that the question has been asked already.

But could you tell us what could be the impact of raw materials for Fiat Auto in ’06, because your competitors are giving -- well, warning figures about that?

So, could you be more specific on that -- on this point?

I think that slide --

I don’t hear you very well, sorry.

No, but I think there is a slide in which we have tried to analyze the impact of purchasing in ’06 in Autos.

And it’s on page 10.

Sorry, I don’t hear you at all.

Just a moment.

Okay.

We need to come back to you on that question.

We can’t reconcile the numbers at the moment.

Okay, thank you.

Okay, we can give you the number now.

And this is a -- there’s a high level of aggregation.

So, take it for what it is.

Yesterday the raw material increased pre interventions €380m.

That’s how much we think we will be able to get from the supplier base.

And against it we have been hit with a €240m raw material price increase.

That’s what being passed and accepted by the system, which yields -- sorry, we give you the wrong number.

Yes, the hit was €130m.

Okay, we’ve got the number now.

It’s €370m worth of real savings.

Raw material price increases are €130m for a net saving of €240m.

€130m for -- from the [total].

That’s --

Okay.

That’s what’s in the plan, right?

And our competitors have been saying what?

They cannot recover it?

Well, maybe we can do purchasing.

I think I will send you the figures by mail.

Alright, thank you very much for speaking to the call guys.

Thank you.

Bye Marc.

I will -- this will end the session.

Thank you very much for participating.

We’ll be talking to each other pretty soon.

Bye bye.

Ladies and gentlemen that concludes today’s conference call.

Thank you for your participation and I wish you a very good evening.