Sustainability Report 2016

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Letter from the Chairman and CEO

A RECORD FINANCIAL YEAR WITH ALL KEY METRICS IN EXCESS OF GUIDANCE

FCA closed 2016 with another record financial performance, while continuing to be recognized for its sustainable operating model.

We exceeded our full-year guidance in all key metrics, made all the more significant by the fact that our targets were revised upward twice during the year. In addition, all of our segments were profitable and showed improvement over the prior year.

Adjusted EBIT for the year climbed 26 percent to €6.1 billion. We posted a Net profit of €1.8 billion, significantly improving from €93 million the prior year, and our Adjusted net profit was up 47 percent to €2.5 billion. We also reduced Net industrial debt further to €4.6 billion, which represents almost a half billion euro improvement from year-end 2015.

With these results, we have achieved or exceeded all the key targets in the first three years of our five-year business plan.

Worldwide combined shipments in 2016 were in line with the prior year at 4.7 million units, with Jeep brand combined shipments up 9 percent to more than 1.4 million units, representing the fifth straight annual record.

Net revenues came in at €111 billion, in line with 2015.

Alfa Romeo Giulia Quadrifoglio

B
NET REVENUES
M
COMBINED VEHICLE SHIPMENTS
B
ADJUSTED EBIT

Jeep® Compass Trailhawk

Looking at our mass-market operations by region, NAFTA posted a strong performance with a 15 percent increase in Adjusted EBIT and margins improving from 6.4 percent to 7.4 percent. The 5 percent decrease in shipments was primarily due to the planned phase-out of the Chrysler 200 and Dodge Dart models as part of our NAFTA capacity realignment. Our manufacturing footprint in NAFTA is being retooled to increase production of Jeep and Ram vehicles and capitalize on the strength of those brands as demand continues to shift towards their core product segments.

In LATAM, we posted an Adjusted EBIT of €5 million, reversing the prior year’s loss of €87 million. This improvement was despite the continued poor market conditions in Brazil, where we have held the position of market leader for 15 years. The launch of the all-new Jeep Compass in September marked the final piece of our industrialization plan at our new plant in Pernambuco which is also producing the Jeep Renegade and Fiat Toro pickup truck.

In APAC, Adjusted EBIT doubled to €105 million and margin rose to 2.9 percent from 1.1 percent on the strength of favorable product mix and improved results from our Chinese joint venture. That joint venture is now fully operational with the production of three Jeep brand SUVs.

During the year, there was a significant improvement in the contribution from EMEA, which grew sales, market share, revenues and margin. Adjusted EBIT rose 154 percent to €540 million with the margin more than double the previous year at 2.5 percent.

Maserati posted a record Adjusted EBIT of €339 million, more than three times the prior year’s level, reflecting significantly higher revenues following the successful launch of the all-new Levante SUV. Full year Adjusted EBIT margin more than doubled to 9.7 percent, while reaching 12 percent in the second half of the year.

Our Components segment came in with a 13 percent increase in Adjusted EBIT for the year, to €445 million, with margin rising to 4.6 percent from 4 percent largely as a result of a strong performance by Magneti Marelli, which continues to improve both volumes and margins.

Maserati Levante

2017 Chrysler Pacifica Hybrid

Nine all-new products launched worldwide

On the product side, we launched nine all-new products worldwide, six of which were white-space additions to our portfolio. They include the Maserati Levante, Alfa Romeo Giulia and the Fiat Tipo, Toro, Fullback and 124 Spider. At the Los Angeles Auto Show in November, we unveiled the Stelvio, Alfa Romeo’s first-ever SUV, and the all-new Jeep Compass made its North American debut, following up on its successful launch in Latin America.

FCA also made several key moves to stay at the forefront of the rapid technological changes that are transforming the industry.

The Windsor Assembly Plant in Canada began producing the all-new Chrysler Pacifica Hybrid, the industry’s first electrified minivan and the most fuel-efficient ever with a U.S. EPA rating of 84 miles-per-gallon equivalent.

In 2016, we also announced a collaboration with Waymo (formerly the Google Self-Driving Car Project) and the completion of 100 Chrysler Pacifica Hybrid vehicles purpose built for fully self-driving operations. This marked the first time that Google has worked directly with an automaker to integrate its self-driving system, including sensors and software, into a passenger vehicle.

To begin 2017, at the CES in Las Vegas, we revealed the Chrysler Portal concept, a semi-autonomous electric vehicle that is engineered to be upgradeable as advances in technology enable higher levels of autonomy and designed to grow with millennials through their life stages.

We have made significant progress since unveiling our five-year strategic plan in 2014, and for 2017 we have issued guidance that confirms our conviction in achieving the key targets we have set for 2018. For full-year 2017, we expect Net revenues of between €115 billion and €120 billion, Adjusted EBIT in excess of €7 billion, Adjusted net profit of more than €3 billion and Net industrial debt to be further reduced to below €2.5 billion by year-end.

Our approach to achieving profitable growth includes expanding our business globally, while always remaining mindful of how our actions affect the world in which we operate. This commitment to playing a positive role is fundamental to the character of our Group. It reflects our core belief that achieving sustainable economic results requires a balanced approach that also contributes to the environment and society as a whole.

We are convinced that the objectives we have set for the future, together with the significant steps we have already taken, are clear evidence that our approach to sustainability is not only pragmatic, but it is deeply rooted in our culture and central to our mission.

Chrysler Portal Concept

...a balanced approach that also contributes to the environment and society as a whole

Solar Panels at Cassino Assembly Plant (Italy)

In fact, our efforts have been recognized by the world’s leading sustainability rating agencies.

In addition, our targets are aligned with the inspirational principles that drive the United Nations Sustainable Development Goals (SDGs) initiative, which addresses the global challenge of sustainable development. And, our global sustainable best practices are aligned with the European Union Commission’s efforts to stimulate the transition towards a circular economy that maximizes the value and use of materials, products and waste.

To cite just a few examples, during 2016 we implemented more than 4,400 new environmental projects at our plants worldwide, leading to a reduction in carbon footprint and about €70 million in savings. Projects targeted at reducing water consumption at our facilities resulted in 2.2 billion m3 of water being saved and €4.5 million in cost savings, with the recycling index reaching 98.9 percent.

Our plants also achieved a 5.5 percent reduction in waste generated and a 2.4 percent reduction in CO2 emissions in 2016. As a result of continuous improvements over the years, the percentage of electric energy used in our manufacturing activities that is derived from renewable sources reached 26.1 percent in 2016, and FCA automotive plants in Italy and Brazil now operate entirely on renewable energy.

Work-related injuries decreased by 17 percent at plants worldwide, marking the 10th consecutive year of improvement.

FCA encourages its employees to volunteer their time and skills to help build strong, self-reliant communities. In 2016, approximately 200,000 hours were volunteered worldwide by FCA employees. The Group also committed about €24 million to local communities around the world.

FCA continues in its commitment to reducing the environmental impact of its products over their entire life cycle, while responding to consumer demands in each market.

FCA has been a leader in natural gas vehicles for more than 15 years, and in 2016 we presented the Fiat 500 M15, the first retail-ready Euro 6 compliant vehicle that can also run on a blend of gasoline and methanol (up to 15 percent).

Biodiversity Project at Goiana Assembly Plant (Brazil)

Firefly Global Small Engine Family

We are also focused on improving our gasoline engines, and we have developed all-new global small and medium gasoline engine families, including the new three-cylinder Firefly engine launched in 2016.

As part of that mission and as an integral part of FCA’s long-term business plans, FCA is committed to complying with all applicable laws and regulations relating to vehicle emissions.

Finally, we aim to offer our employees a diverse and inclusive work environment. We are pleased that several third-party organizations have recognized our efforts in this area.

Our approach to business and to sustainable development are not two different things. They are guided by the same spirit and values, those values upon which we have built FCA: commitment, respect, integrity, and responsibility.

We have come a long way the past few years because we have nourished this spirit and we have held on to our values, recognizing that we have a vital stake in each other’s success.

Our unique strength as a company resides in our work ethic as well as our diversity, our openness, the accountability to deliver on our promises, and the way we respect each other. These values are what define us.

We continue in our commitment to building an organization that will stand the test of time by constantly innovating, remaining resilient in the face of changing circumstances, and focusing intensely on how to create a better future for our group, our communities and all of our stakeholders, inside and outside the Company.

We wish to thank everyone in the FCA organization for their hard work, their commitment to excel and their openness with each other across borders to achieve our goal of creating such an organization. We know there is immense talent within our company, and we will be able to leverage it to the extent that we continue to foster a collaborative environment that brings out the best in each other.

We also wish to thank our shareholders and all of our stakeholders for your continued support as we seek to build a stronger future for all of us.

  • John Elkann
  • Chairman
  • Sergio Marchionne
  • Chief Executive Officer