The Fiat Group in 2002

Quarterly Report – 3rd Quarter 2002

The Fiat Group in 2002Quarterly Report – 3rd Quarter 2002

Published by:Euphon – Turin, Italy

Editorial Coordination:Micrograf – Turin, Italy

Printed by: Puntografico – Brescia, Italy

Printed in Italy

October 200203UK

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Fiat S.p.A.

Head Office: 250 Via Nizza, Turin, Italy

Paid-in Capital: 3,082,128,000 euros

Entered in the Turin Company Register – Fiscal Code: 00469580013

Issue date: October 31, 2002

This Report is available on the Internet at the address:

www.fiatgroup.com

On the cover:

The station wagon version of the Fiat Stilo strikes a perfect balance byeffectively combining the driveability of a station wagon with theversatility and modularity of a multipurpose vehicle. This means spaceand flexibility, but also innovative solutions and systems that delivercomfort, ease of driving and safety.

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1Quarterly Report – 3rd Quarter 2002

Honorary Chairman Giovanni Agnelli

Board of Directors

Chairman and Chief Executive Officer Paolo Fresco (3)

Chief Executive Officer andChief Operating Officer Gabriele Galateri di Genola (3)

Directors Angelo Benessia (2)

Pierluigi Bernasconi

Flavio Cotti (2)

Ugo Draetta (2)

John Philip Elkann (3)

Franzo Grande Stevens (1) (3)

Hermann Josef Lamberti (2)

Virgilio Marrone

Felix George Rohatyn

John Francis Welch, Jr. (3)

(1) Secretary to the Board of Directors

(2) Member of the Audit Committee

(3) Member of the Compensation Committee

Board of Statutory Auditors

Statutory Auditors Cesare Ferrero – Chairman

Giorgio Ferrino

Lamberto Jona Celesia

Alternate Auditors Giorgio Giorgi

Natale Ignazio Girolamo

Piero Locatelli

Independent Auditors Arthur Andersen SpA

Chief Operating Officer Alessandro Barberis

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I N T R O D U C T I O N

KEY DEVELOPMENTS

As anticipated, the performance of the principal businesses of the Fiat Group in thethird quarter of 2002 was affected by typically unfavorable seasonal trends and byweak demand for automobiles in markets throughout the world. The combination ofthese negative factors had an impact on the Group’s profitability and on Fiat Auto’sin particular.

However, despite another disappointing performance in the third quarter, Fiat Autobegan to benefit from the profitability-enhancing programs launched at the beginningof the year and was able to cut its losses significantly in September.

The ongoing effort to restore the Automobile Sector’s profit margins will be bolsteredby a plan announced at the beginning of October to restructure and relaunch FiatAuto’s manufacturing organization. Starting in 2003, this plan, combined with theaccelerated implementation of programs designed to increase product innovation,improve the distribution system and reduce costs, will enable the Sector to respondmore promptly and with greater flexibility to changes in market conditions. The focusof these measures, which will require capital expenditures and R&D outlays equivalentto 10% of revenues, will be to restore Fiat Auto to financial health and give freshmomentum to its operations and the Group is firmly committed to pursuing this plan.

During the third quarter of 2002, the Group made further progress in strengtheningits balance sheet and reducing indebtedness. This was accomplished by divestingTeksid’s Aluminum Business Unit, disposing of the interest held in Europ Assistance,agreeing to sell 14% of Italenergia Bis, taking out a 3-billion-euro mandatory convertiblefacility provided by key lending banks and arranging 1.15 billion euros in financingfrom a pool of five banks led by Citigroup. This facility is secured by a put optioncovering the sale of Fiat’s remaining interest in Italenergia Bis to EDF.

PERFORMANCE IN THE THIRD QUARTER

In the third quarter of 2002, the impact of the seasonal contraction in business activitythat characterizes the summer months was exacerbated by continuing slow growth inthe global economy and its impact on market trends.

Consolidated Group revenues totaled 11,987 million euros in the third quarter of2002, or 4.4% less than the 12,535 million euros booked in the same period last year.Lower sales at Fiat Auto (-10%) are the main reason for this decline.

The Group reported an operating loss of 339 million euros, compared with operatingincome of 35 million euros in the third quarter of 2001. This year’s negative resultreflects a loss of 340 million euros incurred by Fiat Auto. However, the loss postedby the Automobile Sector was smaller than in previous quarters thanks to an improvedperformance in September, when the operating loss amounted to 51 million euros.

The Group interest in the consolidated loss came to 413 million euros,compared with interest in net income of 160 million euros in the third quarter of 2001.If extraordinary items related to divestitures are excluded, the bottom line result showslittle change from the same period last year.

At September 30, 2002, net borrowings stood at 5,844 million euros, about thesame as at the end of June 2002. This improvement was achieved despite theusual impact of seasonal factors on the resource requirements of the Group’s majorbusinesses, which was offset by the positive contribution provided by divestitures.

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3Quarterly Report – 3rd Quarter 2002

FIAT AUTO

The automobile market remained under pressure during the third quarter of 2002,contracting by 2.3% in Europe compared with the same period in 2001. In Italy, theimpact of a drop in demand (-3%) was cushioned by the environmental incentivesapproved by the government in July. The Brazilian and Polish markets emerged froma long period of crisis, posting gains of 6.8% and 9.7%, respectively.

Weak demand, particularly in the all-important Italian market, is one of the reasonswhy Fiat Auto’s revenues declined to 4,664 million euros, or 10.2% less than inthe third quarter of 2001. Another contributing factor was the decrease in unit salescaused by the strategic decision to increase margins by improving the quality of salesand deemphasizing the use of less profitable distribution channels. Sales of lightcommercial vehicles were up sharply, especially in Italy. Fiat Auto’s market share was 29.4% in Italy and improved to 4.2% in the rest of Europe.Thanks to the contribution of the new Ducato and Doblò Cargo, the Sector expandedits already strong presence in the market for light commercial vehicles, garnering marketshares of 12.5% in Europe and 48.8% in Italy. Outside Europe, the Sector scoredinstant successes with the Fiat Stilo in Brazil (where it was named “best domestic car”)and the Siena in China. Both models were launched in mid-September 2002.In the immediate future, Fiat Auto expects to take advantage of the sales opportunitiesthat will be created by a number of important product launches scheduled for theclosing months of the year. New products include the station wagon version of theFiat Stilo, a car that will round out the Stilo line, covering every niche of the intermediatesegment of the market; the Alfa 147 GTA, which will be the most powerful and fastestcar in its segment; and the new 1.9 JTD 16V engine, which has been designed for theAlfas 147 and 156. This powerplant will be the first engine in the world to use Multijettechnology, another innovation developed by Fiat research centers, which already havethe creation of the Unijet common-rail system to their credit. The decline in unit sales and the resulting reduction in the base available to absorbfixed production costs, combined with the impact of negative seasonal factors,caused the Sector to report an operating loss of 340 million euros. This negativeresult was also due to the higher costs incurred by extending the warranty periodto two years. On a more positive note, Fiat Auto’s losses continued to narrow, downfrom 429 million euros and 394 million euros lost, respectively, in the first and secondquarters of 2002. This improvement reflects the success of programs designed tocut overhead and lower process and product costs, as well as the beneficial impactof the synergies generated by the industrial alliance with General Motors (quantifiableat 71 million euros in the third quarter of 2002 and 248 million euros for the first ninemonths of the year).

Relaunching and Restructuring PlanSince the beginning of this year, Fiat Auto has been addressing the deterioration in unitsales and profitability with a major effort to renovate its product line in order to strengthenits presence in the more profitable areas of the market and enter those segments where theSector has not been present in the past, expand sales in the rest of Europe and reduce itsreliance on the Italian market, and increase the use of more profitable sales channels.The product renewal programs will require capital expenditures and R&D outlaystotaling 2.5 billion euros a year from 2002 to 2005. By then, the average age of FiatAuto’s models will be less than four years, which is in line with the average age ofmodels produced by top industry competitors. The Sector’s competitiveness willreceive a major boost from the components development programs that are partof the industrial alliance with General Motors. The percentage of shared componentsinstalled in new cars produced by Fiat Auto and General Motors is expected to reach50% by 2005. The collaboration with General Motors will also help both companiesto significantly streamline powertrain production. The introduction of a new generationof engines is scheduled for as early as 2003.

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Between 2002 and 2005, investments of 150 million euros a year will be earmarkedfor making the distribution system more efficient, strengthening the Sector’s salesnetworks, increasing direct sales to fleet operators, refocusing the marketing effortthrough the contribution of an enlarged staff of top-level specialists, enhancing thesales skills of Fiat Auto’s dealers and improving aftersale service.

In the cost area, in October the Group asked that Fiat Auto and certain Comau andMagneti Marelli factories that are directly impacted by the performance of Fiat Auto begiven business-in-crisis status. As previously announced, taking on business-in-crisisstatus will make the Special Temporary Layoff Benefits Fund available for one year forabout 5,000 employees of Fiat Auto and 600 employees of the components Sectorsas of December 2002. The Special Temporary Layoff Benefits Fund will be used forabout 2,000 additional employees starting in July 2003. A total of 500 employeesworking at other Group companies will be laid off with long-term unemployment benefits.

The rehiring of employees who have received special temporary layoff benefits willoccur gradually as new products are introduced and as gains in Fiat Auto’scompetitiveness and an upturn in demand produce an increase in sales.

During the third quarter of 2002, the cumulative net loss reported by Fiat Auto S.p.A.for the first nine months of the year exceeded one-third of its stockholders’ equity andtherefore Fiat Auto Holdings B.V., which is Fiat Auto’s sole stockholder and the parentcompany of the Automobile Sector, was promptly convened to a Stockholdersmeeting and ascertained the loss pursuant to Article 2446 of the Italian Civil Code.

OTHER INDUSTRIAL AND SERVICE SECTORS

The Group’s other industrial and service Sectors performed according to expectationsand reflected the impact of challenging conditions in their markets.

These Sectors had aggregate revenues of more than 7,300 million euros, about thesame as in the third quarter of 2001. The operating result was close to breakeven,compared with 155 million euros in the same period last year.

CNH Global

The market for agricultural equipment continued to expand in North America (+1.9%)and Europe (+3.5%), but the best gains occurred in the emerging markets of SouthAmerica and Asia. On the other hand, demand for construction equipment fell byan additional 4.1% in Europe and an even greater 13% in North America.

CNH had revenues of $2,240 million (this amount in U.S. dollars, the Sector’sreporting currency, is equivalent to 2,244 million euros), for a gain of 4% comparedwith the third quarter of 2001. On a comparable consolidation and foreign exchangetranslation basis, CNH’s revenues would have been down 3%. Unit sales were up foragricultural equipment and held steady at the 2001 level for construction equipmentthanks to the contribution of Kobelco’s American and European operations.CNH’s performance in the third quarter of 2002 reflects the positive contributionof new products launched in recent months and the boost provided to sales andearnings by recent acquisitions. These include Kobelco’s construction equipmentoperations in North America and Europe and Shanghai Tractor, a Chinesemanufacturer of agricultural equipment.

In the third quarter of 2002, CNH reported an operating loss of $50 million, comparedwith a loss of $36 million in the same period a year ago (losses of 59 million eurosand 40 million euros, respectively). The main reasons for this deterioration areunfavorable product and market mixes for the Sector’s construction equipment

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5Quarterly Report – 3rd Quarter 2002

operations and a $22 million increase in medical and pension costs. The impactof these negative factors was mitigated by gains in manufacturing efficiency, costreductions, better margins earned on new products and the additional savings madepossible by synergies developed through the integration of New Holland and Case,which totaled more than $35 million during the third quarter of 2002 and more than$83 million for the first nine months of the year.

CNH continued its successful effort to reduce net borrowings, which have beencut nearly in half since the beginning of the year. This was accomplished thanks toa $1.5-billion capital increase carried out in recent months and to the Sector’s abilityto cut aggressively its working capital requirements, which decreased by about $400million in the third quarter of 2002.

Iveco

During the third quarter of 2002, the European market for commercial vehicles (GVWgreater than 3.5 tons) continued to contract (-6.5%). Demand was down sharply inthe heavy-range (-13.7%) and intermediate (-11%) segments, but held steady for lightmodels (-0.3%).

Iveco’s revenues totaled 2,190 million euros in the third quarter of 2002, for a gainof 14.7% over the same period in 2001. Unit sales were up 8.3%. The sector was ableto report operating income of 27 million euros (40 million euros in the third quarter of2001) despite a less favorable product mix and higher operating costs.

In Europe, higher unit sales in the face of an across-the-board drop in demandenabled Iveco to strengthen its leadership position in the intermediate segment(29.2% penetration) and improve its share of the heavy-range segment, whichincreased to 12.5% thanks to a strong showing by the new Stralis. The Sector’spenetration of the light-vehicle segment declined slightly to 17%. On an aggregatebasis, Iveco’s share of the European market was 17.1%, compared with 17.5% inthe third quarter of 2001.

Other Sectors

In the components area, weak demand from carmakers affected the performanceof Magneti Marelli, Teksid and Comau. However, each Sector reacted differently.Magneti Marelli and Teksid reported better results than in the third quarter of 2001,while Comau was impacted heavily by the lower margins earned on several orders.

FiatAvio’s operating and financial performance beat expectations in the third quarterof 2002, as weaker demand for commercial aircraft engines and maintenance serviceswas offset in part by healthy gains in government programs. Further improvements inoperating efficiency enabled the Sector to continue reporting high operatingprofitability, above expectations.

Among the service Sectors, Toro Assicurazioni was adversely affected by a decreasein life insurance business. Nevertheless, the successful implementation of programsdesigned to cut costs and improve the casualty insurance portfolio enabled theSector to earn a positive operating result. On a comparable consolidation basis,Business Solutions reported revenues and operating earnings in line with the thirdquarter of 2001.

Ferrari matched its brilliant, record-breaking performance during the racing seasonwith equally outstanding operating results. Revenues and operating income wereboth up, despite the higher costs incurred for the commercial launch of Maseratiin the United States and an increase in research and development outlays.

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PERFORMANCE IN THE FIRST NINE MONTHS OF THE YEAR

Consolidated Group revenues totaled 40,742 million euros in the first nine monthsof 2002. The decrease of 5.4% from the same period last year is due to the drop inFiat Auto’s revenues, which fell by 12.3% compared with the first nine months of 2001.

The operating loss for the first nine months of 2002 amounted to 765 million euros(operating income of 563 million euros in the same period a year ago), as the incomegenerated by the other industrial and service Sectors (398 million euros) was notenough to offset the loss incurred by Fiat Auto (-1,163 million euros).

The Group interest in net loss came to 976 million euros, compared with Groupinterest in net income of 543 million euros in the first nine months of 2001.

At September 30, 2002, net borrowings totaled 5,844 million euros, for a decreaseof about 190 million euros from December 31, 2001, as capital increases carriedout by Fiat S.p.A. (more than 1 billion euros) and CNH (contribution by minoritystockholders of about 200 million euros) during the first nine months of 2002,coupled with the positive impact of divestitures (net inflow of about 1,050 millioneuros), more than offset the loss for the period and the distribution of dividends.

OUTLOOK FOR THE BALANCE OF THE YEAR

As is the case for most major international industrial groups, the Fiat Group is facedwith weak markets, and given the uncertainties that characterize the global economy,no turnaround is likely over the near term.

The Group’s top priority is to restructure and revitalize Fiat Auto. To that end, ithas launched and is vigorously pursuing a broad range of corrective measures. As aresult, Fiat Auto, while still under pressure, should be able to accelerate the processof reducing its operating loss, cutting it further in the fourth quarter.

The Group can anticipate contributions from other operating Sectors that enjoy importantand highly valuable positions in their markets. One such Sector is CNH Global, which isexpected to close the fourth quarter in the black, as a strong performance by itsagricultural equipment operations and additional synergy-generated savings should morethan offset weakness in the construction equipment market. Iveco is also expected toprovide a positive contribution, thanks mainly to market share gains in the intermediateand heavy-range vehicle segments. All of the components Sectors will continue to beaffected by reduced demand from the major international carmakers, but FiatAvio willcontinue to perform at a level consistent with the previous quarters of 2002.

In view of the risk factors that could come into play during the closing months ofthe year, it seems reasonable to project that the Group will report a consolidatednet operating loss for the full year of about 500 to 600 million euros.

Any forecast of the Group’s 2002 full year net result must take into account theprovisions that will be booked in connection with the restructuring plans that havealready been announced. In addition, to reflect the general deterioration of the globaleconomy, 2002 net results might be impacted by adjustments to reflect permanentloss of value of certain long-lived assets. However, these adjustments will require nocash outlay.

The Group remains committed to achieving, by the time the financial statementsfor the current year are approved, the debt reduction objectives set forth in theagreement it signed with its lending banks this past July. Under the agreement, themeasurement of progress toward attaining these objectives will take into account theproceeds generated by the Italenergia transaction and by all binding contracts for thesale of assets, including those not yet finalized. A major contribution is also expectedfrom the Group’s operations, which, reflecting the normally favorable impact ofseasonal factors, are expected to generate a strong positive cash flow.

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7Quarterly Report – 3rd Quarter 2002

ACCOUNTING PRINCIPLES AND METHODS

This quarterly report has been prepared in accordance with Article 82 of the“Regulations for the Implementation of Legislative Decree No. 58 of February 24,1998 on the Activities of Issuers of Securities” (Consob Resolution No. 11971 ofMay 14, 1999, as amended).

This quarterly report is consistent with the accounting principles that governthe preparation of annual financial statements, insofar as they are applicable.

INTRODUCTION

Subsequent to September 30, 2001, the Fiat Group completed several transactionsthat had an impact on its organization.

The most important transactions that affected the scope of consolidation betweenJanuary and September 2002, as compared with the same period last year, arereviewed below:

❚ Further to an agreement with Kobelco, CNH began consolidating the constructionequipment operations of Kobelco America as of January 1, 2002.

❚ Following the purchase of an additional 15% interest in Irisbus, which brought itstotal ownership to 65%, Iveco began consolidating this company on a line-by-linebasis effective January 1, 2002. Under an agreement with the Renault Group, Ivecoexpects to gain 100% ownership of Irisbus within the end of the year.

❚ As part of its program to divest its components businesses, the Group soldMagneti Marelli’s Aftermarket operations to a company established specificallyfor that purpose by RGZ, Interbanca, and Fiat. The Aftermarket operations weredeconsolidated as of the beginning of this year.

❚ As part of the same divestiture program, Magneti Marelli’s Electronic Systemsactivities in the field of electronic automotive devices were sold to Mekfin anddeconsolidated.

❚ The divestiture of non-strategic assets continued with the sale of the TeksidAluminum Business Unit on September 30, 2002 to Questor ManagementCompany, JPMorgan Partners and Private Equity Partners. The Business Unitwas thus deconsolidated, with the sole exception of its Polish operations, thesale of which should be completed within the end of the year.

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S A N D R E L A T E D N O T E S

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OPERATING PERFORMANCE

Fiscal 3rd Quarter 3rd Quarter 1/1-9/30 1/1-9/302001 (in millions of euros) 2002 2001 2002 2001

58,006 Net revenues 11,987 12,535 40,742 43,063

49,854 Cost of sales 10,527 10,837 35,585 36,603

8,152 Gross operating result 1,460 1,698 5,157 6,460

6,149 Overhead 1,341 1,374 4,461 4,558

1,817 Research and development 403 437 1,343 1,347

132 Other operating income (expenses) (55) 148 (118) 8

318 Operating result (339) 35 (765) 563

(149) Investment income (expenses) (177) (97) (280) (54)

(1,025) Financial income (expenses) (93) (325) (609) (822)

359 Extraordinary income (expenses) (6) 609 511 1,168

(497) Result before taxes (615) 222 (1,143) 855

294 Income taxes (136) 132 139 446

(791) Net result before minority interest (479) 90 (1,282) 409

(445) Group interest in net result (413) 160 (976) 543

Revenues

Consolidated revenues totaled 11,987 million euros in the third quarter of 2002, or4.4% less than in the same period last year (-5.8% on a comparable consolidationbasis). This decrease primarily reflects lower unit sales by Fiat Auto, which werepartly caused by a slump in automotive demand. Lower revenues were reportedby Magneti Marelli, which divested its Aftermarket and Electronic Systems operations,by CNH, mainly due to exchange rate effects, by Toro Assicurazioni, due to a decreasein life insurance premiums, and by FiatAvio. On the other hand, Iveco’s revenuesincreased thanks to higher unit sales and full consolidation of Irisbus, while Ferrariand Comau also recorded higher revenues.

For the entire period between January and September, consolidated revenuesamounted to 40,742 million euros (43,063 million euros in the first nine monthsof 2001), for a decline of 5.4% (-6.7% on a comparable consolidation basis).

The table below provides a breakdown of net revenues by Operating Sector:

Fiscal 3rd Quarter 3rd Quarter 1/1-9/30 1/1-9/302001 (in millions of euros) 2002 2001 2002 2001

24,440 Automobiles (Fiat Auto Holdings) 4,664 5,196 16,434 18,735

Agricultural and Construction10,777 Equipment (CNH Global) 2,244 2,424 7,935 8,101

8,650 Commercial Vehicles (Iveco) 2,190 1,909 6,698 6,247

1,058 Ferrari 281 244 868 780

1,752 Metallurgical Products (Teksid) 385 369 1,335 1,330

4,073 Components (Magneti Marelli) 626 854 2,410 3,121

2,218 Production Systems (Comau) 530 486 1,522 1,508

1,636 Aviation (FiatAvio) 316 365 1,103 1,179

347 Publishing and Communications (Itedi) 74 71 255 245

5,461 Insurance (Toro Assicurazioni) 921 1,176 3,367 3,719

1,805 Services (Business Solutions) 435 566 1,357 1,267

(4,211) Miscellanea and eliminations (679) (1,125) (2,542) (3,169)

58,006 Total for the Group 11,987 12,535 40,742 43,063

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9Quarterly Report – 3rd Quarter 2002

❚ Fiat Auto had revenues of 4,664 million euros in the third quarter of 2002, or10.2% less than in 2001 due to lower unit sales.

Although the Western European market continued to contract (-2.3% comparedwith the third quarter of 2001), the decline was less pronounced than in the first halfof 2002. In Italy, the introduction of Government incentives stimulated a recovery indemand that largely reversed the contraction in sales, limiting the decline in thethird quarter of 2002 to 3% compared with the same period of the previous year.

New vehicle registrations for Fiat Auto continued to be affected by its strategy toreduce less profitable sales, with its market share in Italy consequently falling from32.9% in the third quarter of 2001 to 29.4% in the same period this year, and inall of Western Europe, where Fiat Auto’s penetration declined from 8.3% to 7.7%.

In the third quarter of 2002, Fiat Auto sold 387,800 automobiles and light commercialvehicles, or 6.3% fewer than in the same period of 2001. In Western Europe, theSector sold 254,900 vehicles (-6.6%), reflecting an improvement from the declineposted during the first half of 2002. In Italy, this improvement is supported bysustained sales of light commercial vehicles.

Elsewhere, the Brazilian market staged a strong recovery in the third quarter, wheredemand increased by 6.8% compared with the same period in 2001. However, FiatAuto sales there continued to slide (-4.1%), partly on account of aggressive marketingprograms implemented by its competitors. In Poland, the market grew by +9.7%,bringing Sector sales and market share back up to the levels reported in the thirdquarter of 2001.

For the first nine months of 2002, Fiat Auto had revenues of 16,434 million euros(12.3% less than in the same period of 2001) and sold 1,381,500 automobiles andlight commercial vehicles (-14.1% compared with the previous year), 965,200 ofwhich in Western Europe (-13.7%).

❚ CNH Global had revenues of 2,244 million euros in the third quarter of 2002, or7.4% lower than in the same period of 2001 (-11.7% excluding the increase attributableto the consolidation of Kobelco), mainly on account of the decline of the U.S. dollarversus the euro.Stated in dollars, the Sector’s reporting currency, revenues increased by 4%with respect to the third quarter of 2001(-3% on a comparable consolidationand exchange rate basis).

Overall demand for agricultural equipment increased by 12.8% compared withthe third quarter of 2001, especially in Latin America and developing countries.In North America, demand fell in the combine and high-powered tractor segment.

Total sales of agricultural equipment climbed by 20%, with particularly strong growthon the Brazilian and Asian markets. Sales of combines in Western Europe werealso buoyant, while delays in the delivery of new tractor models reduced sales ascompared with the third quarter of 2001. In North America, combine and high-poweredtractor sales decreased in consequence of a market decline.

Demand for construction equipment continued to be affected by weakness on the NorthAmerican and Western European markets (-13% and -4.1%, respectively, comparedwith the third quarter of 2001), thus penalizing sales on these markets. However, totalSector sales in this segment remained at the same levels as the third quarter of 2001thanks to growth on Asian markets and changes in the scope of consolidation.

Between January and September, CNH had revenues of 7,935 million euros, 2%less than in the same period of 2001 (-5% on a comparable consolidation basis),primarily due to negative exchange rate effects and lower revenues in theconstruction equipment segment.

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❚ Iveco had revenues of 2,190 million euros in the third quarter of 2002. The gainof 14.7% over the same period in 2001 partly reflects the effect of the line-by-lineconsolidation of Irisbus. On a comparable consolidation basis, revenues were up7.4% thanks to higher unit sales, in particular those of light and heavy vehicles,and increased revenues from financing and service operations.

In Western Europe, the market for commercial vehicles contracted by 6.5% in the thirdquarter compared with the same period of 2001, reflecting pronounced declines indemand for medium and heavy-range vehicles in the major countries of this area. InItaly, the market for light commercial vehicles grew, while that for medium-rangevehicles held steady, also thanks to the positive effect of the Tremonti Bis law. Themarket for heavy-range vehicles contracted. In Western Europe, Iveco continued thepositive performance of the first half of 2002, maintaining its leadership in themedium-vehicle segment of the market, with an improvement of 4.2 percentagepoints over the third quarter of 2001, and increasing its market share in the heavy-range vehicle segment by 0.7 percentage points upon introduction of the new Stralismodel. Its share in the light vehicle segment slipped, partially in consequence of thedecision to reduce less profitable sales.

During the third quarter of 2002, Iveco sold a total of 38,500 vehicles, or 8.3% morethan in the same period last year. This growth, realized in part due to changes in thescope of consolidation, was particularly attributable to sales in Italy (+19.7%), whereimprovements were reported in all vehicle segments. Unit sales also increased inGreat Britain (29.7%), particularly in the light vehicle segment.

Iveco’s revenues for the first nine months of 2002 came to 6,698 million euros. Thegain of 7.2% over the same period in 2001 was made possible by the line-by-lineconsolidation of Irisbus. On a comparable basis, sales were the same as those inthe corresponding period of last year. From January to September 2002, Iveco’sunit sales totaled 116,500 vehicles, up 1.1% from the same period last year.

❚ Ferrari had revenues of 281 million euros in the third quarter of 2002, up strongly(+15.2%) from the same period a year earlier due to higher sales of Maseratiautomobiles, which were reintroduced this year on the North American market.

❚ The other automotive Sectors (Magneti Marelli, Teksid, Comau) had aggregaterevenues of 1,541 million euros in the third quarter of 2002, compared with 1,709million euros in the same period of 2001. The approximately 10% decrease derivedfrom lower revenues at Magneti Marelli (626 million euros; -26.7%) following thedivestiture of some of its operations (-13.8% on a comparable basis) and lower unitsales connected with a decrease in automotive demand.Teksid, with revenues of 385 million euros (+4.3%), continued to consolidate itsaluminum operations, sold at the end of September 2002, for the entire quarter.Revenues increased thanks to this unit, including its operations in the United States,and the higher sales by the Magnesium Business Unit, due to the success of SUVsin North America. Comau, benefiting from a recovery in orders, had higher revenues (530 millioneuros, or 9.1% more than in the third quarter of 2001), mainly due to bodyworkoperations in Europe and North America, where results for the third quarter of 2001had suffered from the downturn on the automotive market.

❚ FiatAvio posted revenues of 316 million euros in the third quarter of 2002, or 13.4%less than in the same period last year. A slowdown in the commercial aircraftmarket and a less favorable U.S. dollar-euro exchange rate account for this decline.Revenues in the space sector decreased as well, while sales of engines built underGovernment programs increased.

❚ Itedi had revenues of 74 million euros. The 4.2% gain over the third quarter of2001 is due to an increase in the price charged for newspapers and higher revenuesin certain segments of the advertising market.

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11Quarterly Report – 3rd Quarter 2002

❚ At 921 million euros, premiums earned by Toro Assicurazioni in the third quarterof 2002 were 21.7% less than in the third quarter of 2001. The performance of theSector was penalized by a drop in life insurance premiums, as a result of therestructuring of the Banca di Roma distribution network currently underway followingits merger with the Bipop-Carire banking group. Casualty insurance business wasup in both Italy and France.

❚ Business Solutions had 435 million euros in revenues in the third quarter of 2002,with non-captive customers accounting for 42% of total revenues. The decreaseover the figures posted in the third quarter of 2001 is mainly due to changes in thescope of consolidation. On a comparable consolidation basis, revenues would havebeen mainly in line with last year’s results. Increases concentrated in the areas ofinformation technology and temporary employment agency services.

Operating Result

In the third quarter of 2002, the Fiat Group lost 339 million euros on an operatingbasis, compared with operating income of 35 million euros in the same period lastyear, principally due to an unfavorable performance of the automotive sectors.

Between January and September of 2002, the operating loss came to 765 millioneuros, compared with an operating income of 563 million euros in the first ninemonths of 2001.

Fiscal 3rd Quarter 3rd Quarter 1/1-9/30 1/1-9/302001 (in millions of euros) 2002 2001 2002 2001

(549) Automobiles (Fiat Auto Holdings) (340) (120) (1,163) (117)

Agricultural and Construction209 Equipment (CNH Global) (59) (40) 102 187

271 Commercial Vehicles (Iveco) 27 40 63 190

62 Ferrari 22 20 32 37

15 Metallurgical Products (Teksid) 14 7 26 40

(74) Components (Magneti Marelli) (6) (24) (16) (39)

60 Production Systems (Comau) (21) 18 (26) 36

186 Aviation (FiatAvio) 35 41 154 138

(2) Publishing and Communications (Itedi) (5) (8) (6) (11)

68 Insurance (Toro Assicurazioni) 2 25 107 50

73 Services (Business Solutions) 7 15 45 41

(1) Miscellanea and Eliminations (15) 61 (83) 11

318 Total for the Group (339) 35 (765) 563

❚ Fiat Auto posted an operating loss of 340 million euros, compared with an operatingloss of 120 million euros in the third quarter of 2001. The third quarter 2002 resultwas penalized by a decline in unit sales partially compensated by an improvedproduct mix, strong downward price pressures, and higher provisions to coverextension of the product warranty to two years. Savings on product costs andoverhead were made possible by the synergies generated by the industrial alliancewith General Motors, the efficiency enhancements developed through the ProgramNext, and the cost-cutting program launched at the end of the first half 2002.

❚ CNH Global closed the third quarter of 2002 with an operating loss of 59 millioneuros (compared with an operating loss of 40 million euros in 2001). The decreaseis largely attributable to the higher social security and employee medical costsespecially in the U.S.A. The negative mix/volume effect stemming from lower sales of construction equipmentand the impact of costs associated with the launch of new products were offset by the

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12

benefits deriving from improved margins on new products in the agricultural equipmentsegment and additional synergies realized through integration with Case ($35 million).

❚ Iveco’s operating income continued to be in the positive in the third quarter of2002, although it fell from the 40 million euros reported in the third quarter of 2001to 27 million euros. The positive effect of increased unit sales was offset by anunfavorable product mix and other operating costs.

❚ Ferrari generated operating income of 22 million euros during the third quarter of2002, reflecting a slight improvement over the 20 million euros in operating incomefor the same period in 2001 due to the positive effect of higher unit sales of Maseratiautomobiles, which was partially offset by higher spending on research anddevelopment projects.

❚ The aggregate operating loss of the other automotive Sectors (Magneti Marelli,Teksid, Comau) in the third quarter of 2002 was 13 million euros, compared with abreak-even result in the same period a year earlier. This result reflected the poorperformance of Comau (operating loss of 21 million euros, compared with operatingincome of 18 million euros in 2001), due to the reduced profitability of major existingorders. Teksid had operating income of 14 million euros, compared with 7 millioneuros in 2001, due to the positive effect of increased unit sales and efficiency gains.Notwithstanding lower unit sales, Magneti Marelli posted an operating loss of 6million euros during the third quarter of 2002 reflecting an improvement over theoperating loss of 24 million euros reported in the third quarter of 2001, thanks tothe positive impact of the divestiture of unprofitable operations.

❚ In the third quarter of 2002, FiatAvio continued making a positive contribution,earning operating income of 35 million euros. The slowdown in sales and negativeforeign exchange effects, which were partially offset by higher prices, made itimpossible to achieve the same result (operating income of 41 million euros)posted in the third quarter of last year.

❚ Toro Assicurazioni closed the third quarter of 2002 with operating income of 2million euros, down from 25 million euros in operating income in the same periodlast year. Lower life insurance revenues were mainly offset by improvementsstemming from efforts to streamline the underwriting portfolio of casualty insuranceand reduction in the frequency of claims. However, the third quarter result wasnegatively impacted by a decrease in gains from the sale of real estate assets.

❚ In the third quarter of 2002 Itedi reported an operating loss of 5 million euroscompared with an operating loss of 8 million euros in the same period last year.The improvement is mainly attributable to gains in operating efficiencies.

❚ Business Solutions had operating income of 7 million euros in the third quarterof 2002. The decrease from the operating income of 15 million euros in the sameperiod last year is attributable to changes in the scope of consolidation.

Investment Income and Expenses

In the third quarter of 2002, net investment expenses totaled 177 million euros, comparedwith net investment expenses of 97 million euros in the same period last year. The highercharges primarily reflect the third quarter results of some associated companies andwritedowns taken to mark to market the portfolio of certain listed securities.

The same factors account for the negative performance recorded for the first ninemonths of 2002, with investment expenses exceeding investment income by 280million euros, or 226 million euros more than the net investment expenses of 54million euros posted in September 2001.

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13Quarterly Report – 3rd Quarter 2002

Financial Income and Expenses

Net financial expenses amounted to 93 million euros in the third quarter of 2002,reflecting an improvement over the 325 million euros in net financial expensesrecorded in the same period last year, thanks to lower interest rates on the mainfinancial markets and the positive effect of exchange and interest rate hedging.The third quarter of 2001 was impacted by a higher average level of indebtednessand the unfavorable effect of high interest rates in the Mercosur area (particularlyArgentina).

Similar reasons account for the 213 million euro improvement in net financialexpenses during the first nine months of 2002, totaling 609 million euros,notwithstanding the widening spread paid on bank debt and higher averageindebtedness during the first nine months of 2002.

Extraordinary Income and Expenses

In the third quarter of 2002, net extraordinary expenses totaled 6 million euros. Duringthe quarter, the gains deriving from the sale of the investment in Europ Assistance (83million euros) and the finalizing of the sale of a 9.33% stake in Italenergia Bis toSanPaoloIMI and IntesaBCI in the framework of the agreement for the sale of the 14%interest held in Italenergia Bis (126 million euros) were entirely offset by the provisionsset aside upon disposal of the Teksid Aluminum Business Unit (98 million euros) andby other restructuring costs and extraordinary provisions to reserves.

In the third quarter of 2001, the net extraordinary income of 609 million euros mainlyderived from the capital gain realized upon formation of Italenergia (sale of Fenice toEDF and contribution of power generation plants).

Net extraordinary income for the first nine months of 2002 was 511 million euros(1,168 million euros at September 2001) and includes both the capital gains realizedin the third quarter of 2002 and those realized upon the sale of a 34% stake in Ferrari(671 million euros net of transaction costs).

Net Result

In the third quarter of 2002, the Group had a loss before taxes of 615 million euros,compared with income before taxes of 222 million euros in the same period last year.The total decrease of 837 million euros is attributable to a deterioration in the operatingresult and reduced extraordinary income, which were only partially offset by lowerfinancial expenses.

The consolidated net loss before minority interest totaled 479 million euros in the thirdquarter of 2002, as against net income of 90 million euros in the same quarter last year.

The Group interest in net loss came to 413 million euros, compared with net incomeof 160 million euros in the third quarter of 2001.

For the first nine months of the year, the loss before taxes amounted to 1,143 millioneuros, compared with income before taxes of 855 million euros at September 30,2001. The Group interest in net loss for 2002 was 976 million euros, compared withnet income of 543 million euros in the first nine months of 2001.

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BALANCE SHEET

30-09-2001 (in millions of euros) 30-09-2002 30-06-2002 31-12-2001

8,562 Net inventories (*) 7,907 8,396 8,375

6,787 Trade receivables 5,267 6,427 6,466

(11,366) Trade payables (12,159) (13,472) (13,520)

(1,404) Other receivables (payables), net (*) (1,818) (2,144) (2,713)

2,579 Working capital (803) (793) (1,392)

13,909 Net property, plant, and equipment 12,204 12,750 13,887

26,576 Other fixed assets 27,973 28,414 28,523

1,179 Deferred-tax assets 1,516 1,439 1,595

(22,041) Technical reserves of insurance companies (23,100) (23,159) (22,971)

22,202 Net invested capital 17,790 18,651 19,642

(7,501) Net financial position (5,844) (5,788) (6,035)

14,701 Stockholders' equity before minority interest 11,946 12,863 13,607

13,111 Group interest in stockholders' equity 10,753 11,526 12,170

(*) Starting in 2002, the advances received for work on the High-Speed Railway Project, which were previously listed as other paya-bles, are deducted directly from the value of work in progress, which is part of inventories. The corresponding amounts for the2001 fiscal year have been reclassified accordingly.

Working Capital

At September 30, 2002, the Group had negative working capital of 803 million euros,down 10 million euros from the negative working capital of 793 million euros reportedat June 30, 2002.

No significant changes in working capital were recorded during the third quarter of2002. Changes at the level of individual items included a sharp decline in the tradereceivables of CNH, due to seasonal variations in sales, and Fiat Auto, due to dealernetwork inventory reductions and lower levels of activity. Inventory cutbacks in boththese Sectors had a positive effect.Reduced factoring of receivables and lower trade payables, especially at Fiat Auto,connected with production cutbacks and the summer holiday factory closures in Italyalso had an impact.

Compared with the end of 2001, working capital at September 30, 2002 was up by 589million euros. The increase was mainly due to a reduction of the negative balance of otherreceivables and payables, which is attributable to a rebalancing by Fiat Auto of the assetsand liabilities contributed to Fiat-GM Powertrain (approximately 450 million euros).

At September 30, 2002, the Group had assigned trade receivables and other receivablesmaturing after the end of the third quarter. The receivables assigned with recourse totaled2,617 million euros (2,618 million euros at June 30, 2002), while those assigned withoutrecourse totaled 4,308 million euros (4,958 million euros at June 30, 2002).

Additional factoring transactions that did not have an impact on working capitaland the net financial position include the assignment of financial receivables (chieflyamounts owed by retail customers to the Group’s financial services companies)maturing after September 30, 2002. As of the end of the third quarter, 75 millioneuros were assigned with recourse (129 million euros at June 30, 2002), and 7,585million euros were assigned without recourse (7,785 million euros at June 30, 2002).

Net Invested Capital

At September 30, 2002, net invested capital totaled 17,790 million euros, or 861 millioneuros less than at June 30, 2002. This decrease reflects the following reductions:

❚ “Net property, plant, and equipment” declined by 546 million euros, due mainlyto currency conversion differences in the value of South American company assets

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15Quarterly Report – 3rd Quarter 2002

and deconsolidation of the Teksid Aluminum Business Unit operations. In the thirdquarter of 2002, investments in property, plant, and equipment totaled 572 millioneuros, including 171 million euros attributable to long-term leasing operations,compared with 727 million euros in the third quarter of 2001 (including 309 millioneuros attributable to long-term leasing operations). Depreciation of fixed assetsduring the period totaled 478 million euros (517 million euros in 2001).

❚ “Other fixed assets” fell by 441 million euros, due mainly to the disposal ofinvestments during the third quarter (Europ Assistance and a 9.33% interest heldin Italenergia Bis) and changes in the scope of consolidation.

Compared with December 31, 2001, net invested capital decreased by 1,852 millioneuros. The rise in working capital was more than offset by declines in other items,the largest of which was a drop of 1,683 million euros in “Net property, plant, andequipment,” which was caused by currency conversion differences, divestitures, andchanges in the scope of consolidation during the first nine months of 2002.

From January to September 2002, additions to fixed assets totaled 1,729 millioneuros (2,211 million euros in the first nine months of 2001), including 652 million eurosearmarked for long-term leasing operations (831 million euros in the same period of2001). In the first nine months of 2002, depreciation of fixed assets came to 1,565million euros, down from 1,763 million euros in 2001.

Net Financial Position

At September 30, 2002, the Group’s net indebtedness totaled 5,844 million euros,almost the same as at June 30, 2002 and down from 6,035 million euros atDecember 31, 2001.

The table below shows the most significant changes that affected the Group’s netfinancial position during the first nine months of the year:

(in millions of euros)

Net financial position at December 31, 2001 (6,035)

Increase in working capital (589)

Investments in property, plant, and equipment and intangible assets (2,026)

Cash flow 715

Capital increase by Fiat S.p.A. 1,020

Capital increase by CNH Global N.V. (third parties' quota) 195

Dividends (228)

Other changes 1,104

Total change 191

Net financial position at September 30, 2002 (5,844)

“Other changes” include the net balance of divestitures and acquisitions duringthe first nine months of 2002, including the sale of an interest in Ferrari S.p.A.,the divestiture of Magneti Marelli’s Aftermarket and Electronic Systems operations,divestiture of Teksid’s Aluminum Business Unit, and proceeds relating to the sale ofa 9.33% interest in Italenergia Bis.

These proceeds were partly offset by the outlays made by CNH to acquire Kobelcoand by Iveco to acquire an additional interest in Irisbus.

Other developments that had a positive effect were the capital increases carried outby Fiat S.p.A. at the beginning of the year and by CNH Global N.V. during the secondquarter of 2002, and the approximately 300 million euro gain deriving from conversioninto euros of positions denominated in other currencies.

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A breakdown of the net financial position, which is provided in the following table,shows how the financial structure of the Fiat Group has strengthened since December31, 2001. More specifically, short-term debt fell by 5,148 million euros, while long-term debt due beyond twelve months increased by 4,538 million euros.The net financial position at September 30, 2002 also reflects the positive effect ofthe financial reinforcement plan implemented by the Group, particularly the mandatoryconvertible facility agreement and the Citigroup (lead manager of a syndicate of fivebanks) financing secured by the agreements with EDF as part of the Italenergia Bistransaction.Both of these loans were partially used to consolidate short-term debt.

Balance at

30-09-2001 (in millions of euros) 30-09-2002 30-06-2002 31-12-2001

1,238 Cash 4,161 3,558 2,133

2,035 Marketable securities 971 1,284 2,000

25,865 Financial receivables and investments in leases 22,620 23,349 24,686

484 Accrued financial income 707 629 560

(1,861) Deferred financial income (1,470) (1,704) (2,057)

27,761 Total financial fixed assets (A) 26,989 27,116 27,322

(16,885) Short-term debt due within twelve months (9,260) (11,904) (14,408)

(18,160) Long-term debt due beyond twelve months (22,827) (20,306) (18,289)

(575) Accrued financial expenses (832) (790) (797)

358 Prepaid financial expenses 86 96 137

(35,262) Total financial liabilities (B) (32,833) (32,904) (33,357)

(7,501) Net financial position of the Group (A-B) (5,844) (5,788) (6,035)

Stockholders’ Equity

At September 30, 2002, stockholders’ equity before minority interest totaled11,946 million euros, down from 13,607 million euros at December 31, 2001. Thedecrease is due to the loss for the period, the distribution of dividends, and thecurrency conversion differences caused by the appreciation of the euro, offset onlyin part by the capital increases carried out during 2002.

At September 30, 2002, Group interest in stockholders’ equity was 10,753 millioneuros, 1,417 million euros less than the 12,170 million euros at December 31, 2001.

The net debt/equity ratio was 0.49, compared with 0.44 at December 31, 2001.

PERSONNEL

At September 30, 2002, the Group had 191,857 employees, or 8,811 less thanthe 200,668 employees at June 30, 2002 and 6,907 employees less than at thebeginning of the year.The decreases that occurred during the third quarter of 2002 are attributable primarilyto the divestiture of Teksid’s Aluminum Business Unit and the decrease in employees,principally at Fiat Auto, in part due to the implementation of the staff reduction plan,which was agreed to by company and labor union representatives in July and envisageslaying off excess personnel in Italy and granting them long-term unemployment benefits.

In the first nine months of the year, approximately 2,800 employees left the Group dueto changes in the scope of consolidation following divestiture of Teksid’s AluminumBusiness Unit and Magneti Marelli’s Aftermarket and Electronic Systems operations,which were partially offset by increases at Iveco (line-by-line consolidation of Irisbus)and CNH (acquisition of Kobelco). The further decrease of approximately 4,100employees includes the separation of approximately 400 persons upon outsourcingof operations and actual reductions concentrated at Fiat Auto, CNH, and Iveco.

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The Fiat Group in 2002

Quarterly Report – 3rd Quarter 2002

The Fiat Group in 2002Quarterly Report – 3rd Quarter 2002

Published by:Euphon – Turin, Italy

Editorial Coordination:Micrograf – Turin, Italy

Printed by: Puntografico – Brescia, Italy

Printed in Italy

October 200203UK

Copert. 3° trim. 2002 UK 31-10-2002 17:28 Pagina 1