IM: F NYSE: Expected October 2014

Michael Guichon, Columbia Business School

Investment Thesis

Recommend investors buy shares with a target share price of €16.50; over 90% upside • Market significantly underestimating transformative nature of Current Capitalization consolidation and the value of the company’s business units. Share Price (as of 5/2/14) € 8.71 Chrysler alone is conservatively worth €16.5bn and Shares outstanding (mm) 1,251 Equity Market Cap (mm) € 10,894 / are worth €6.9bn (~90% of current EV), minimizing Add: Debt (mm) € 29,306 downside Less: Cash (mm) € 19,439 • Total Enterprise Value € 20,761 Chrysler acquisition improves the firm by reducing management Add: Underfunded Pension € 6,000 distraction, leveraging future production and R&D synergies and Adjusted Total Enterprise Value € 26,761 FCA’s improved credit profile Trading Statistics 52 Week Range € 3.91 € 8.85 • FCA’s value is misunderstood due to a cumbersome capital structure, Dividend Yield 0.0% several obscured assets and economic weakness in key markets Average Daily Volume (mm) 12.2 • FCA has great brands managed by excellent capital allocators and Summary Valuation 2014E 2015E 2016E they are taking share in key markets EV/EBITDA 3.08x 2.79x 2.46x • FCA trades at 4.0x normalized earnings P/E 13.15x 8.08x 6.25x P/CPS 1.75x 1.53x 1.42x • Fair Value: €16.50 (8.0x base normalized EPS of €2.05) Note: Consensus as of 5/2/14

2 Company Overview

• FCA is the 6th largest automobile manufacturer globally1 • CEO hired in 2004 by founding family (31% owners) and encouraged to sell the Fiat Auto subsidiary • Finding no buyers interested in a low margin, Italian focused company, he began growing the business with the goal of expanding Fiat’s presence globally • Fiat acquired 20% of Chrysler after its 2009 bankruptcy. On January 21, 2014 it acquired 100% ownership • Fiat and Chrysler have been run by CEO Sergio Marchionne since 2004 and 2009 respectively FCA

North America Europe LatAm Asia-Pac Ferrari/Maserati Components and Other % of Sales: 53% % of Sales: 19% % of Sales: 11% % of Sales: 5% % of Sales: 4% % of Sales: 8% % of EBIT: 77% % of EBIT: -25% % of EBIT: 17% % of EBIT: 11% % of EBIT: 16% % of EBIT: 5% Breakdown by Geographical Breakdown of Segment Unit Volumes: Type: Mexico, 3.8% Canada, 12.1% Germany, 11.4% Other, 5.7% - Metal , 11.7% Casting, 8.5% U.K., Other, 9.9% Other, France, 9.9% 12.3% 17.4% Rest of North Europe, America, Australia, Magneti Mareli - - 20.8% China, 40.5% 22.7% China, 55.2% Auto Parts, 74.1% Automation 18.9% Systems, 18.1% US, 84.1% , 48.0% , 82.6% Europe, 23.2%

Japan, 9.8%

1By revenues 3 Source: Fiat 2013 Annual Report How the Chrysler deal is transformational

• The Chrysler purchase was a very value accretive deal; Fiat paid $4.4bn in cash for a business that generated $3.1bn in EBIT in 2013 • The addition of Chrysler changed Fiat from a regional car manufacturer into the 6th largest in the world 1. Operational synergies – a larger manufacturing base with a more diverse group of product cycles will allow the combined company to achieve higher average levels of capacity utilization and increase sales in formerly underserved areas around the world 2. The use of common components and vehicle platforms between Fiat and Chrysler will reduce design and manufacturing costs 3. Increased scale allows FCA to generate high ROI from investments in R&D, i.e. R&D synergies with Ferrari and Maserati

Marchionne inherited a loss making Italian car/tractor/parts maker in 2004 and created a global automotive giant 4 Key Drivers of Normalized Earnings Normalized Earnings Potential

• €2.05 with Europe at Breakeven (base € 3,500 € 3.00 case, expected in 2016) € 0.50 € 2.55 € 3,000 € 2.50 • €2.55 long term with modest € 0.40 € 2.05 European recovery € 2,500

€ 2.00 € 0.04

mm) € 0.24 • Normalized earnings yield € € 2,000 € 0.01

of 24%-30% € 0.37 € 1.50 EPS € 1,500 • Continued strong € 0.36 Net Income( € 1.00 performance/market share gains of € 1,000 Chrysler in North America € 0.63 € 0.50 • Return to high single digit/low double € 500

digit margins in LATAM € - € - • Cash balance reduced by €10bn to delever. Average weighted cost of debt falls 120bps to 5.3%

A return to normal earnings driven by Italian/Brazilian recoveries, Chrysler performance and capital structure 6 rationalization Capital Structure Capital Structure

• Previously, complicated ownership structure and debt covenants prevented Fiat from accessing Chrysler’s liquidity and led to an excessive cash balance at Chrysler and a highly inefficient overall capital structure • With full ownership of Chrysler, cash will start to be more fungible between Fiat and Chrysler, FCA can begin to reduce its gross debt burden • The simplified company has a much better credit profile and this has been reflected

in an improvement in credit default swap levels Capital Structure Optimization 2013A Normalized Change • FCA’s cost of 7 year debt is currently 4.3% in EUR Debt € 29,875 € 20,039 € (9,836) Cash € 19,439 € 10,000 € (9,439) Net Debt € 10,436 € 10,039 € (397) • FCA is rated BB-/B1/BB- (S&P, Moody’s, Fitch) Interest Expense € (1,995) € (1,062) € 933 Interest Income € 97 € 100 € 3 • Debt/EBITDA = 3.9x, interest coverage = 1.5x Cost of Debt 6.7% 5.3% -1.4% Income Interest Rate 0.5% 1.0% 0.5% Net Interest Margin -6.2% -4.3% 1.9% • In 2017, Debt/EBITDA = 2.4x, interest coverage = 3.4x Net Debt Expense € (1,898) € (962) € 936 ETR 40.0% 40.0% 40.0% • Future credit rating upgrades are likely Net Income Impact € (1,139) € (577) € 562 EPS Impact € (0.91) € (0.46) € 0.45

Rationalizing the company’s capital structure will increase pre-tax earnings significantly 8 North America Chrysler/North America (Value: €16.6bn)

QoQ Chrysler Group Performance • Given Chrysler’s 2013 EBITDA of approximately €4.4bn, $30,000 15.0% FCA’s EV is trading at 5.8x Chrysler’s LTM EBITDA $20,000 10.0% • Chrysler has maintained steady margins in recent years while growing revenue in the US and Canada by taking $10,000 5.0% market share $0 0.0%

• Since Marchionne took control, North American market

Q4 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13

Q2 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 share grew from 9.2% in 2009 to 11.5% in 2013, which is Q1 '10 still below 2007 pre-crisis level of 12.6% Qtly Revenue (mm USD) EBITDA Margin EBIT Margin 1 • Chrysler’s previous underperformance can largely be Chrysler Market Share 16.00% attributable to management, which is no longer a Marchionne Takes Control concern given Marchionne’s strong track record 11.00%

6.00% 2007 2008 2009 2010 2011 2012 2013 1US, Canada and Mexico respectively represent 83%, 12% and 5% of North American Chrysler vehicles sold US Canada Mexico Total North America

Chrysler has steadily improved operations in North America versus Ford and GM … 10 Chrysler/North America (Value: €16.6bn)

Annual EBITDA (mn USD) • Were Chrysler to trade in the market on a standalone basis at $20,000 peer multiples, it would be valued significantly higher than $15,000 16.6bn $10,000 • From 2010 to 2013, Chrysler grew EBITDA at a 21.0% CAGR $5,000 versus -5% for Ford and -1% for GM $0 • Ford and GM’s TEV/EBITDA LTM are 11.5x and 4.8x respectively 2010 2011 2012 2013 • Given EV/EBIT and EV/EBITDA multiples for Ford and GM, Chrysler GM Ford Chrysler would be worth between €24.0bn and €37.1bn, or Annual EBIT (mn USD) 90% to 138% of FCA’s current EV with net pension obligations $10,000

$5,000

$0 2010 2011 2012 2013 Chrysler GM Ford

… yet still trades at a discounted valuation 11 How you improve a brand

• Chrysler’s reorganization strategy is focused on improving its products and relying on existing brands to drive consumer demand and take market share • FCA’s global reach will help Chrysler sell into new markets and increase penetration in emerging markets • Producing Chrysler brands for European markets in Italy will reduce idle capacity and have a meaningful impact on profitability

2007 Grand Cherokee V8 2014 Jeep Grand Cherokee V8 • Base price: $34,690 • Base price: $36,790 • 13 mpg city, 20 mpg highway • 18 mpg city, 26 mpg highway • 0-60 in 9 seconds • 0-60 in 7 seconds

Chrysler does not need to completely reinvent itself in order to succeed 12 Valuation of North America

• Chrysler has steadily gained market share and maintained consistent margins since Marchionne took over in 2009 • Jeep is the #1 SUV brand in the US; sales have experience double digit growth rates since 2009 • New Jeep and Ram models will help Chrysler continue top line growth

NAFTA

Segment Financials 2013A 2017E Normalized Low High Revenue € 45,777 € 54,690 € 55,000 € 50,000 € 60,000 EBIT Margin 5.0% 5.8% 5.8% 5.0% 6.5% EBIT € 2,290 € 3,149 € 3,190 € 2,500 € 3,900 EBITDA € 3,820 € 4,985 € 5,026 € 4,336 € 5,736 NOPAT € 1,489 € 2,047 € 2,074 € 1,625 € 2,535 ETR 35.0% Net Income € 968 € 1,330 € 1,348 € 1,056 € 1,648 EPS € 0.77 € 1.06 € 1.08 € 0.84 € 1.32

Fair Value Base Bear Bull EBIT Multiple 5.20x 4.23x 6.50x EBITDA Multiple 3.30x 2.44x 4.42x NOPAT Multiple 8.00x 6.50x 10.00x EV of Segment € 16,588 € 10,563 € 25,350 As % of Current Adjusted EV 62.2% 39.6% 95.0% Value Per Share € 13.26 € 8.44 € 20.27

13 International Fiat - Focus on Capacity Utilization

• A recovery in European automotive demand, particularly in Italy, will 180.0% naturally increase Fiat’s capacity 3.0%

utilization and lead to margin expansion 160.0% • Increasing demand of higher margin 1.0% luxury brands in Italy will improve 140.0% Revenue/Assets (lhs) -1.0% profitability significantly Revenue/Assets Forecast (lhs) EBIT Margin (rhs) • Plans to shut high cost production 120.0% facilities in Italy will remove the only -3.0% assets that are losing money on an 100.0% -5.0% operating basis Marchionne becomes CEO

• The forecast shown incorporates a 80.0% -7.0% further 12% drop in Brazilian sales, after 2003 2005 2007 2009 2011 2013 2015 2017 a 10% drop in 2013 from 2012, and a significant decrease in EBIT margin

In this high fixed cost business, utilization = profitability 15 Europe Fiat Europe (Value: €4.2bn) Italian Recovery

• Automotive demand has fallen more in Italy than in peer countries that avoided severe dislocation in local credit markets 2600 30% • Fiat’s Italian sales were worth €7bn in 2013 (29% market share), making it the most 2400 25% exposed to the European PIIGS among large 2200 auto manufacturers 20% 2000 • Reduced banking solvency concerns will 15% lead to a recovery in automotive financing 1800 10% • Fiat is very well placed to benefit from the 1600 5% recovery in Italian demand for durable 1400 goods Italian New Car Sales (in thousands, YTD) 1200 0% • A recovery to 2.2mn sales per year would Net Mortgage Lending (YoY % Change) imply a €5bn increase in Fiat’s revenue if 1000 -5%

market share remains roughly constant

9/1/1998 8/1/1999 7/1/2000 6/1/2001 5/1/2002 4/1/2003 3/1/2004 2/1/2005 1/1/2006 9/1/2009 8/1/2010 7/1/2011 6/1/2012 5/1/2013

12/1/1995 11/1/1996 10/1/1997 12/1/2006 11/1/2007 10/1/2008

A return to normalcy in Italian credit markets will drive a recovery in automotive demand 17 How to relaunch

• Increasing volumes of higher margin luxury brands by employing idle capacity in Italian plants will have a meaningful impact on profitability • Goal of tripling production to 300,000 units/year would add nearly €1bn of EBIT

2007 Alfa Romeo GT Q2 2014 • Base price: $42,400 • Base price: $55,000 • 0-60 in 8.2 seconds • 0-60 in 4.2 seconds

A timeless brand and key technology from Ferrari/Maserati gives Marchionne the wherewithal to turn around Alfa Romeo 18 Valuation of Europe

• Improved capacity utilization and gradual rollbacks of sales incentives should lead a return to profitability • Operational synergies with Chrysler will improve overall efficiency and allow for higher normalized EBIT margins in the future

Europe Prior Peak Segment Financials 2007A 2013A 2017E Normalized Low High Revenue € 26,812 € 17,420 € 24,911 € 23,000 € 21,000 € 27,000 EBIT Margin 3.0% -4.2% 3.7% 3.3% 2.5% 4.0% EBIT € 803 € (737) € 910 € 748 € 525 € 1,080 EBITDA € 180 € 2,414 € 2,251 € 2,029 € 2,584 NOPAT € 562 € (516) € 637 € 523 € 368 € 756 ETR 30.0% Net Income € 393 € (361) € 446 € 366 € 257 € 529 EPS 31.5% € (0.29) € 0.36 € 0.29 € 0.21 € 0.42

Fair Value Base Bear Bull EBIT Multiple 5.60x 4.55x 7.00x EBITDA Multiple 1.86x 1.18x 2.93x NOPAT Multiple 8.00x 6.50x 10.00x EV of Segment € 4,186 € 2,389 € 7,560 As % of Current Adjusted EV 15.7% 9.0% 28.3% Value Per Share € 3.35 € 1.91 € 6.04

19 Latin America Latin America/Brazil (Value: €5.5bn)

100.0%

• Fiat is the largest auto manufacturer 90.0% in Brazil and had the highest reported profit in the region in 2013 80.0% • In Brazil, low interest rates led to 70.0% unsustainable growth in consumer 60.0% and business lending 50.0%

• The coming recession will likely 40.0% involve sharp increases in non- performing loans and a significant 30.0% reduction in the availability of credit 20.0% Government Debt/GDP Private Debt/GDP 10.0% • Long-term fundamentals of Brazilian Total Debt/GDP automotive demand (growing 0.0% population and gradually increasing

living standards) remain positive

8/1/1997 6/1/1998 4/1/1999 2/1/2000 8/1/2002 6/1/2003 4/1/2004 2/1/2005 8/1/2007 6/1/2008 4/1/2009 2/1/2010 8/1/2012 6/1/2013

12/1/1995 10/1/1996 12/1/2000 10/1/2001 12/1/2005 10/1/2006 12/1/2010 10/1/2011

Fiat has a dominant position in Brazil where long term fundamentals remain positive 21 Valuation of Latin America

• Fiat’s Brazilian business has a history of being fast growing and consistently profitable with high returns on capital, and it deserves a higher multiple • Fiat has 22% market share in Brazil and a large domestic manufacturing base – a necessity in a country with high local content requirements

Latin America Prior Peak Segment Financials 2011A 2013A 2017E Normalized Low High Revenue € 11,068 € 9,973 € 12,125 € 12,000 € 11,000 € 14,000 EBIT Margin 12.5% 4.9% 8.6% 8.5% 7.5% 11.0% EBIT € 1,385 € 492 € 1,040 € 1,020 € 825 € 1,540 EBITDA € 1,890 € 1,136 € 1,673 € 1,654 € 1,459 € 2,174 NOPAT € 928 € 330 € 696 € 683 € 553 € 1,032 ETR 33.0% Net Income € 622 € 221 € 467 € 458 € 370 € 691 EPS € 0.50 € 0.18 € 0.37 € 0.37 € 0.30 € 0.55

Fair Value Base Bear Bull EBIT Multiple 5.36x 4.36x 6.70x EBITDA Multiple 3.31x 2.46x 4.75x NOPAT Multiple 8.00x 6.50x 10.00x EV of Segment € 5,467 € 3,593 € 10,318 As % of Current Adjusted EV 20.5% 13.5% 38.7% Value Per Share € 4.37 € 2.87 € 8.25

While 2011 EBIT margins may not be sustainable, the Brazilian business is very profitable and total market demand will 22 grow Luxury & Performance Brands Luxury Brands – Ferrari & Maserati (Value: €6.9bn)

• Stable, high margin business with real pricing power • Very attractive R&D synergies found using 2-3 year old Ferrari technology in Maserati • Uncertain if Fiat willing to monetize but given margin, growth and pricing power Ferrari is a €4bn - €7bn asset (€3.50- €5.50/sh) 1,2 • has been supportive of value maximizing spinoffs (Fiat Industrial spun off to shareholders in late 2010) • Using the valuation of Ferrari peer Aston Martin’s sale of 37.5% of the company to Investindustrial in 2013 would value Ferrari alone at €7bn 3 • Successful relaunching of Maserati in 2002 gives confidence in Fiat’s ability to reestablish the Alfa Romeo brand outside of Europe

1Net to Fiat’s 90% ownership of Ferrari. 2No true public comparable companies exist. Toyota and BMW have the highest margins of public automakers (9.5- 10.5%) and trade at 9.0-9.5x EBIT Multiples 3http://www.bloomberg.com/news/2012-12-07/investindustrial-to-purchase-37-5-stake-in-aston-martin.html

A unique, obscured asset with the best operating and financial performance in the industry 24 Luxury Brands – Ferrari & Maserati (Value: €6.9bn) Ferrari € 3,000 35.0% • EBIT to grow from €535mm in 2013 to €923mm in € 2,500 30.0% 2015 as Maserati production increases from 15,400 25.0% € 2,000 units/year – 50,000 units/year (all capacity is online 20.0% € 1,500 and Maserati gross margins now higher than Ferrari) 15.0% € 1,000 10.0% • Pricing power: € 500 5.0% • 12% and growing EBIT margin business (vs. € 0 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3.5% for FCA) Revenue (lhs) EBITDA (lhs) FCF EBITDA Margin (rhs) FCF to sales (rhs) • Two year waiting list for Ferrari (intentionally Maserati limiting sales to 7,000 units/year) € 2,000 30.0% 1 20.0% • 22,500 orders outstanding for Maserati € 1,500 10.0%

• Maserati currently participates in only 22% of luxury € 1,000 0.0% market segments -10.0% € 500 -20.0% • Launch of Luxury SUV and E segment high end -30.0% € 0 in 2015 provides exposure to 100% of 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -40.0% 1 million unit/year market -€ 500 -50.0% Revenue (lhs) EBITDA (lhs) FCF EBITDA Margin (rhs) FCF to sales (rhs) 1October 15, 2013 Fiat Group Luxury and Finance – Borsa Italiana, Milan

After relaunching in the US in 2002, Maserati has now primed the market for even more rapid, profitable growth 25 Valuation of Luxury Brands - Ferrari

• Business deserves premium multiple given brand is one of the few with real pricing power • Margins are highly resilient • Ferrari intentionally supplying below actual demand, models assumes no growth in units

Ferrari Prior Peak Segment Financials 2008A 2013A 2015E Normalized Low High Revenue € 1,921 € 2,300 € 2,569 € 2,575 € 2,200 € 3,000 EBIT Margin 17.6% 15.8% 16.0% 16.0% 15.0% 18.0% EBIT € 339 € 364 € 412 € 413 € 330 € 540 EBITDA € 497 € 406 € 710 € 711 € 628 € 838 NOPAT € 220 € 237 € 268 € 268 € 215 € 351 ETR 35.0% Net Income € 143 € 154 € 174 € 174 € 139 € 228 EPS € 0.11 € 0.12 € 0.14 € 0.14 € 0.11 € 0.18

Fair Value Base Bear Bull EBIT Multiple 9.30x 8.57x 9.78x EBITDA Multiple 6.00x 5.00x 7.00x NOPAT Multiple 14.31x 13.18x 15.05x EV of Segment1 € 3,839 € 2,827 € 5,281 As % of Current Adjusted EV 14.4% 10.6% 19.8% Value Per Share € 3.07 € 2.26 € 4.22 1Net to Fiat’s 90% ownership

Conservative multiples relative to peers yields significant value 26 Valuation of Luxury Brands - Maserati

• Maserati was relaunched in the US in 2002, and after absorbing several years of start up costs now exhibits similar gross margins as Ferrari • Capacity has been expanded to support 50,000 units/year in 2015 from 15,400 last year • Significantly higher room for growth in this segment of the market Maserati Annualized Segment Financials 4Q13 2013A 2015E Normalized Low High Revenue € 3,104 € 1,659 € 4,911 € 5,000 € 4,000 € 5,750 EBIT Margin 7.5% 6.4% 10.0% 10.0% 7.5% 15.0% EBIT € 232 € 106 € 491 € 500 € 300 € 863 EBITDA € 424 € 298 € 683 € 692 € 492 € 1,054 NOPAT € 151 € 69 € 319 € 325 € 195 € 561 ETR 35.0% Net Income € 98 € 45 € 208 € 211 € 127 € 364 EPS € 0.08 € 0.04 € 0.17 € 0.17 € 0.10 € 0.29

Fair Value Base Bear Bull EBIT Multiple 6.23x 4.92x 6.11x EBITDA Multiple 4.50x 3.00x 5.00x NOPAT Multiple 9.58x 7.57x 9.40x EV of Segment € 3,113 € 1,476 € 5,272 As % of Current Adjusted EV 11.7% 5.5% 19.8% Value Per Share € 2.49 € 1.18 € 4.21

A highly profitable, high growth business 27 Asia Valuation of Asian Business

• Despite being late to Asia, the Jeep products have been hugely successful in recent years and consumer demand remains very strong • Shipments increased 58% year over year to 163,000 in 2013 • FCA has sales points in 126 Chinese cities and there are nearly 500 cities with populations over

500,000 Asia-Pacific Prior Peak Segment Financials 2011A 2013A 2017E Normalized Low High Revenue € 2,086 € 4,621 € 5,670 € 5,600 € 5,000 € 8,000 EBIT Margin 6.2% 6.9% 7.9% 7.5% 6.75% 8.0% EBIT € 129 € 319 € 448 € 420 € 338 € 640 EBITDA € 224 € 617 € 790 € 762 € 680 € 982 NOPAT € 97 € 239 € 336 € 315 € 253 € 480 ETR 25.0% Net Income € 73 € 179 € 252 € 236 € 190 € 360 EPS € 0.06 € 0.14 € 0.20 € 0.19 € 0.15 € 0.29

Fair Value Base Bear Bull EBIT Multiple 6.00x 4.88x 7.50x EBITDA Multiple 3.31x 2.42x 4.89x NOPAT Multiple 8.00x 6.50x 10.00x EV of Segment € 2,520 € 1,645 € 4,800 As % of Current Adjusted EV 9.4% 6.2% 18.0% Value Per Share € 2.01 € 1.32 € 3.84

Current penetration only focused on 1st tier cities, future growth to be driven by build out in 2nd and 3rd tier cities 29 Management Track Record Management & Track Record

• Fiat under Marchionne has a great track record of CAGR (2004-2013) creating value for shareholders 15%

9% • Some market participants point to missed goals from 10% 8% 6% the 2010 5-year plan as a sign that management is 5% unreliable, but this is unfair because the Euro crisis 5% 3% 0% could not have been predicted by management a 0% year in advance Fiat Ford Toyota VW -5% 0% -1% • Marchionne’s incentives are fully aligned with -10% shareholders as he has vested options on 5mn -9% -9% shares with a strike price of €13.37 in addition to 10.7mn shares with a strike of €6.583 -15% Revenue/Share EBITDA/Share

Under Marchionne’s stewardship, FCA has generated best in class financial performance 31 Valuation Sum-of-the-Parts

Recommend investors buy Fiat shares with a target share price of €16.50; over 90% upside

• Market significantly underestimating transformative Sum of the Parts Fair Value Base Bear Bull nature of Chrysler consolidation. Chrysler alone is TEV Per Share TEV Per Share TEV Per Share Chrysler € 16,588 € 13.26 € 10,563 € 8.44 € 25,350 € 20.27 conservatively worth €16.5bn and Ferrari/Maserati are Fiat-Europe € 4,186 € 3.35 € 2,389 € 1.91 € 7,560 € 6.04 worth €6.9bn, which minimizes downside Fiat-Brazil € 5,467 € 4.37 € 3,593 € 2.87 € 10,318 € 8.25 Asia-Pac € 2,520 € 2.01 € 1,645 € 1.32 € 4,800 € 3.84 Luxury Brands1 € 6,952 € 5.56 € 4,303 € 3.44 € 10,553 € 8.44 • Chrysler acquisition improves the firm by reducing Parts € 1,000 € 0.80 € - € - € 2,000 € 1.60 management distraction, leveraging future production Total € 36,714 € 29.35 € 22,492 € 17.98 € 60,581 € 48.43 and R&D synergies and FCA’s improved credit profile 2013A TEV Per Share TEV Per Share TEV Per Share Less: Debt € (29,306) € (23.43) € (29,306) € (23.43) € (29,306) € (23.43) • FCA’s value is misunderstood due to a complicated Add: Cash € 19,439 € 15.54 € 19,439 € 15.54 € 19,439 € 15.54 capital structure and several obscured assets Total Equity Value € 26,847 € 21.46 € 12,625 € 10.09 € 50,714 € 40.55 Less: Underfunded Pension € (6,000) € (4.80) € (6,000) € (4.80) € (6,000) € (4.80) Adjusted Total € 20,847 € 16.67 € 6,625 € 5.30 € 44,714 € 35.75 • FCA has great brands managed by excellent capital Equity Value allocators and they are taking share in key markets % Upside 91.4% 91.4% -39.2% -39.2% 310.4% 310.4% • FCA trades at sub 4.0x normalized earnings • Fair Value: €16.50 (8.0x base normalized EPS of €2.05) 1Net to Fiat’s 90% ownership of Ferrari

33 Special Thanks To

Thomas Schweitzer [email protected]

Sam White [email protected]

34 Appendix Relative Valuation

'14 EV / '15 EV / '16 EV / '14 EV / '15 EV / '16 EV / Gross EBIT NI Ticker Name CUR EV '14 P/E '15 P/E '16 P/E EBIT EBIT EBIT EBITDA EBITDA EBITDA Margin Margin Margin VOW GR AG € 165,980 8.31 7.39 6.80 13.05 11.30 10.34 6.59 6.10 5.66 18.1% 6.3% 4.6% 7203 JT TOYOTA MOTOR CORP € 219,355 9.42 8.80 7.97 12.63 11.37 10.39 9.28 8.44 7.80 18.8% 9.4% 4.4% DAI GR DAIMLER AG € 143,601 11.81 10.06 9.19 14.88 12.87 11.80 9.81 8.74 8.03 21.6% 6.7% 5.8% GM CO € 38,617 9.20 6.95 6.17 6.64 5.15 4.90 3.82 3.18 2.95 13.2% 3.6% 3.4% F FORD MOTOR CO € 44,495 11.80 8.51 8.01 9.44 6.24 4.58 5.93 4.60 4.48 12.8% 3.7% 4.9% BMW GR BAYERISCHE MOTOREN WERK € 114,009 10.53 10.02 9.67 13.64 13.19 12.84 9.38 9.06 7.94 20.1% 10.4% 7.0% 7201 JT NISSAN MOTOR CO LTD € 60,110 10.59 8.95 7.69 16.43 13.10 11.33 9.28 8.10 7.38 16.9% 4.7% 3.6% UG FP SA € 28,342 11.22 8.37 64.63 24.33 18.50 10.08 7.81 6.63 15.0% -0.3% -4.3% RNO FP RENAULT SA € 43,632 9.29 7.10 6.14 31.48 22.39 18.09 9.80 8.54 7.88 17.9% 3.0% 1.4%

F IM FIAT SPA € 31,138 13.15 8.08 6.25 8.61 7.34 6.49 3.59 3.26 2.87 14.1% 3.9% 1.0%

Mean Peer Group (EX FIAT): 10.12 8.78 7.78 20.31 13.33 11.42 8.22 7.17 6.53 17.2% 5.3% 3.4% FIAT Valuation Differential vs. peer group: 29.9% -7.9% -19.6% -57.6% -45.0% -43.2% -56.3% -54.6% -56.1% -17.8% -26.0% -69.6%

Fiat Ex Luxury Brands € 24,186 7.72 4.04 2.87 8.47 7.24 6.21 3.15 2.96 2.56 14.1% 3.0% 1.0%

Mean Peer Group (EX FIAT): 10.12 8.78 7.78 20.31 13.33 11.42 8.22 7.17 6.53 17.2% 5.3% 3.4% FIAT Valuation Differential vs. peer group: -23.7% -54.0% -63.1% -58.3% -45.7% -45.7% -61.6% -58.7% -60.9% -17.8% -42.8% -71.4%

Source: Bloomberg as of 5/2/2014. Luxury Brands valued at €6.952bn

Across most metrics, Fiat trades at a sizeable discount to peers 36 Bear Case

• Despite success of Chrysler, FCA remains free cash flow negative and the company needs a recovery in Europe to return to positive cash flow • FCA is operating in a cyclical and capital intensive industry and the company carries substantial leverage • Obstructive European labor laws will prevent FCA from rationalizing production and achieving high levels of capacity utilization • Credit overhang and rising non-performing loans could lead to a funding stop in Brazil • High expectations for Jeep and Maserati leave room to disappoint

37 Risks and Mitigants

• Continued troubles in the global economy, particularly Italy and Brazil, could hurt automobile sales • Consumers will eventually need to purchase new cars as maintaining older ones becomes prohibitively expensive • Large ownership by Agnelli family – approximately 31% of the company. If they look to exit their position, problems could arise • , who is ’s grandson, is Chairman of the company. The family has mostly been passive, but is looking to maintain its large stake. Elkann has demonstrated considerable faith in Marchionne’s abilities • Marchionne has said he will stay through 2016, but it is uncertain what will happen if he decides to leave then. He said it is highly likely that his successor will be an internal candidate • Marchionne’s options give him substantial incentives to stay and improve shareholder value • There are large pension liabilities, with approximately €6bn in unfunded employee benefits and other provisions • The trend here is positive as unfunded amount decreased from €8bn in 2012 to €6bn in 2013 • Should the company issue debt, there could be potential dilution in share value • Unsubstantiated rumor, no real need for additional equity in the business

38 Chrysler Acquisition

Fiat Ownership Stake • Fiat acquired Chrysler through a series of transactions between June 2009 and January 2014 for a total cash outlay of approximately $4.4bn 20% 363 Bankruptcy Sale (4/30/2009) • The initial transaction was a Section 363 bankruptcy sale for 20% of Chrysler, which occurred after it declared Chapter 11 bankruptcy 5% Performance Event 1 (1/10/2011) • Creditors appealed the sale, but were eventually overruled to preserve going concern value and prevent liquidation 5% Performance Event 2 (4/11/2011) • Fiat increased its ownership by meeting performance targets and shrewd UST Call Options (5/24/2011) negotiating with the US Treasury, Canadian Government and VEBA Trust 16% • Fiat purchased the remaining 41.5% from VEBA trust for $4.35bn in January 2014, which included $1.75bn in cash from Fiat, $1.9bn from 7.5% Remaining Call Options (7/21/2011) Chrysler and an additional $700mn in contributions over the next four 5% Performance Event 3 (1/5/2012) years • Fiat’s cash outlay of approximately $4.4bn compares with $7.4bn that Cerberus paid for 80% of the company in 2006 and $37bn that Daimler- Benz paid in 1998, although these amounts include Chrysler Financial, 41.5% which Cerberus sold to TD for $6.3bn in December 2010 Purchase From VEBA Trust (1/5/2014)

Marchionne’s negotiating prowess secured Chrysler at an extremely attractive valuation 39 Overview of Ownership

• The Agnelli family is the largest shareholder in the company, holding just under 31% • Once the firm lists on the NYSE (expected in October), there will likely be a large shift in shareholder base

Common % of Market Value Holder Stock Held Common (EUR in mm) e C. S.a.p.az. 375,972,150 30.9% € 3,267.6 Baillie Gifford & Co. 61,286,212 5.0% € 532.6 BlackRock, Inc. (NYSE:BLK) 38,449,885 3.2% € 334.2 Norges Bank Investment Management 25,139,854 2.1% € 218.5 Capital Research and Management Company 22,982,403 1.9% € 199.7 Grantham, Mayo, Van Otterloo & Co. LLC 12,992,183 1.1% € 112.9 Oldfield Partners LLP 11,880,608 1.0% € 103.3 The Vanguard Group, Inc. 11,034,209 0.9% € 95.9 Sunamerica Asset Management, LLC 11,028,138 0.9% € 95.8 Bessemer Investment Management LLC 5,734,633 0.5% € 49.8

Source: Capital IQ

Agnelli family has a history of supporting value creative initiatives at its companies 40 Overview of Management

• Sergio Marchionne: • Has been CEO of Fiat since 2004 and has led Chrysler since 2009 • Oversaw the turnaround of SGS1, which is the world’s leading inspection, verification, testing and certification company, over 13 years. The Agnelli family sold its 15 percent SGS holding in 2013 at a 14x EBITDA valuation for €2bn, netting a capital gain of €1.5bn • Unusually nonconformist style and acts as an owner of the business • Focuses on creating a more collaborative culture between units to enhance shareholder value

• John Elkann: • Grandson of Gianni Agnelli and current scion of the Agnelli dynasty • Has served as Chairman of Fiat SpA since 2010 • He is currently CEO and Chairman of Exor2 • Member of the Board of Directors of News Corp and is a board member of Fiat Industrial, The Economist Group and Banca Leonardo 1Agnelli family portfolio company 2Agnelli family for Fiat, Fiat Industrial shares

Best in class management operating business as an owner 41 CEO Incentives

• Marchionne currently has options to purchase 10,670,000 shares at a strike of €6.583 per share with expiration of January 1, 2016 and other options to purchase 5,000,000 shares at a strike of €13.37 per share with expiration of November 3, 2014

Current Bear Base Bull Option Number of Shares Strike Expiry € 8.65 € 5.30 € 16.50 € 35.75 1 10,670,000 € 6.583 1-Jan-16 € 22,054,890 € - € 105,814,390 € 311,211,890 2 5,000,000 € 13.370 3-Nov-14 € - € - € 15,650,000 € 111,900,000 Total: 15,670,000 € 8.749 € 22,054,890 € - € 121,464,390 € 423,111,890 % Change: -100.0% 450.7% 1818.4%

Management’s interests are well aligned with shareholders 42 Debt Maturity Schedule

Corporate Debt Maturity Schedule (€ bn) Weighted Average Interest Rate: 6.7% € 5.00 € 4.50 € 4.00 € 3.50 € 3.00 € 2.50 € 2.00 € 1.50 € 1.00 € 0.50 € 0.00 2014 2015 2016 2017 2018 2019 2020 2021

43 Summary Model 2011 2012 2013 2014 2015 2016 2017 2018 2019 FY FY FY FY FY FY FY FY FY (€ million) 365 366 365 365 365 366 365 365 365 Income Statement Net revenues € 59,559 € 83,957 € 86,816 € 93,321 € 97,749 € 98,545 € 104,403 € 105,199 € 110,167 % Grow th 66.0% 41.0% 3.4% 7.5% 4.7% 0.8% 5.9% 0.8% 4.7%

Cost of sales 50,704 71,474 74,570 80,537 83,191 83,219 87,636 88,133 92,291 SG&A 5,047 6,731 6,689 7,094 7,430 7,491 7,936 7,997 8,374 Research and development costs 1,367 1,835 2,231 2,498 2,617 2,638 2,795 2,816 2,949 Other income/(expenses) (49) (103) 68 ------TRADING PROFIT/(LOSS) 2,392 3,814 3,394 3,440 4,745 5,414 6,253 6,470 6,770

Result from investments: Share of equity method the profit/(loss) 146 94 87 ------Other income/(expenses) from investments (15) 13 10 ------Gains/(losses) on the disposal of investments 21 (91) 8 ------Restructuring costs (102) (15) (28) ------Other unusual income/(expenses) 1,025 (138) (499) (300) - - - - - Total 1,075 (137) (422) (300) - - - - -

EBIT 3,467 3,677 2,972 3,140 4,745 5,414 6,253 6,470 6,770

DD&A 3,358 4,134 4,574 4,822 5,055 5,272 5,489 5,705 5,922 EBITDA 6,825 7,811 7,546 7,962 9,800 10,686 11,741 12,175 12,692

Financial income/(expenses) (1,282) (1,641) (1,964) (1,859) (1,600) (1,351) (1,120) (987) (987) EBT 2,185 2,036 1,008 1,281 3,145 4,063 5,133 5,483 5,783 Income taxes (534) (625) (943) (513) (1,258) (1,625) (2,053) (2,193) (2,313) ETR 24% 31% 94% 40% 40% 40% 40% 40% 40% PROFIT/(LOSS) FROM CONTINUING OPERATIONS 1,651 1,411 1,951 769 1,887 2,438 3,080 3,290 3,470 Post‐tax profit/(loss) from Discontinued Operations - - (943) ------PROFIT/(LOSS) FOR THE PERIOD 1,651 1,411 1,008 769 1,887 2,438 3,080 3,290 3,470

PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO: Ow ners of the parent 1,334 348 904 769 1,887 2,438 3,080 3,290 3,470 Non‐controlling interests 317 1,063 1,047 ------

(in €) BASIC EARNINGS/(LOSS) PER ORDINARY SHARE € 1.10 € 0.29 € 0.74 € 0.63 € 1.55 € 2.01 € 2.53 € 2.71 € 2.85

45 2011 2012 2013 2014 2015 2016 2017 2018 2019 FY FY FY FY FY FY FY FY FY (€ million) 365 366 365 365 365 366 365 365 365 STATEMENT OF CASHFLOWS CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES: Profit/(loss) for the period € 1,651 € 1,411 € 1,951 € 769 € 1,887 € 2,438 € 3,080 € 3,290 € 3,470 Amortisation and depreciation 3,358 4,134 4,574 4,822 5,055 5,272 5,489 5,705 5,922 (Gains)/losses from disposal of non‐current assets - 105 23 Other non‐cash items (1,106) 47 522 Dividends received 105 89 92 Change in provisions (116) 77 444 Change in deferred income taxes (19) (72) (1,578) Change in items due to buy‐back commitments (62) (51) 92 Change in operating lease items (28) (10) 1 Change in w orking capital 1,412 714 1,468 122 830 150 - - - TOTAL CASH FLOWS FROM OPERATING ACTIVITIES: 5,195 6,444 7,589 5,713 7,772 7,860 8,568 8,995 9,392

CASH FLOWS FROM/(USED IN) INVESTMENT ACTIVITIES: Investments in: Property, plant and equipment and intangible assets (5,528) (7,534) (7,440) (7,000) (6,500) (6,500) (6,500) (6,500) (6,500) Investments in consolidated subsidiaries and other investments (22) - (19) Proceeds from the sale of non‐current assets 329 139 48 Net change in receivables from financing activities (1,218) (24) (449) Change in other current securities (43) (64) (10) Other changes 5,624 (30) (216) TOTAL CASH FLOWS FROM INVESTMENT ACTIVITIES: (858) (7,513) (8,086) (7,000) (6,500) (6,500) (6,500) (6,500) (6,500)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES: Issuance of bonds 2,500 2,535 2,866 1,750 (2,500) (2,500) (2,500) (2,500) - Repayment of bonds (2,448) (1,450) (1,000) Issuance of medium‐term borrow ings 2,149 1,925 3,188 Repayment of medium‐term borrow ings (3,895) (1,528) (2,549) Net change in other financial payables and other financial assets/liabilities 2,761 197 686 Capital increase 143 22 4 Dividends paid 41 (58) (1) Distribution for tax w ithholding obligations on behalf of non‐ controlling (181) interests (6) Purchase of ow nership interests in subsidiaries (438) TOTAL CASH FLOWS FROM FINANCING ACTIVITIES: 632 1,643 3,188 1,750 (2,500) (2,500) (2,500) (2,500) -

Translation exchange differences (419) (909) ------

TOTAL CHANGE IN CASH AND CASH EQUIVALENTS 4,969 155 1,782 463 (1,228) (1,140) (432) (5) 2,892 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,967 17,526 17,657 19,439 19,902 18,674 17,534 17,102 17,097 CASH AND CASH EQUIVALENTS AT END OF PERIOD 17,526 17,657 19,439 19,902 18,674 17,534 17,102 17,097 19,989

46 2011 2012 2013 2014 2015 2016 2017 2018 2019 FY FY FY FY FY FY FY FY FY (€ million) 365 366 365 365 365 366 365 365 365 BALANCE SHEET ASSETS Inventories € 9,123 € 9,295 € 10,230 € 10,997 € 11,518 € 11,612 € 12,302 € 12,396 € 12,982 Trade receivables 2,625 2,702 2,406 2,586 2,709 2,731 2,893 2,915 3,053 Receivables from financing activities 3,968 3,727 3,671 3,946 4,133 4,167 4,415 4,448 4,658 Current tax receivables 369 236 291 291 291 291 291 291 291 Other current assets 2,088 2,163 2,302 2,302 2,302 2,302 2,302 2,302 2,302 Current financial assets: 789 807 815 815 815 815 815 815 815 Current investments 33 32 35 35 35 35 35 35 35 Current securities 199 256 247 247 247 247 247 247 247 Other financial assets 557 519 533 533 533 533 533 533 533 Cash and cash equivalents 17,526 17,657 19,439 19,902 18,674 17,534 17,102 17,097 19,989 Total Current assets 36,488 36,587 39,154 40,839 40,442 39,452 40,121 40,265 44,090

Intangible assets 18,200 19,284 19,509 19,509 19,509 19,509 19,509 19,509 19,509 Property, plant and equipment 13,213 22,061 22,843 25,021 26,466 27,694 28,705 29,500 30,078 Investments and other financial assets: 4,987 2,287 2,260 2,260 2,260 2,260 2,260 2,260 2,260 Investments accounted for using the equity method 20,785 1,507 1,561 1,561 1,561 1,561 1,561 1,561 1,561 Other investments and financial assets 2,660 780 699 699 699 699 699 699 699 Leased assets 1,579 1 1 1 1 1 1 1 1 Defined benefit plan assets 1,081 93 105 105 105 105 105 105 105 Deferred tax assets 45 1,738 2,893 2,893 2,893 2,893 2,893 2,893 2,893 Total Non‐current assets 39,105 45,464 47,611 49,789 51,234 52,462 53,473 54,268 54,846 Assets held for sale 1,690 55 9 ------TOTAL ASSETS 77,283 82,106 86,774 90,628 91,676 91,914 93,594 94,533 98,936

EQUITY AND LIABILITIES Equity: Equity attributable to ow ners of the parent 8,727 6,187 8,326 12,623 15,262 17,836 20,813 24,089 27,472 Non‐controlling interest 3,533 2,182 4,258 750 750 750 750 750 750 Provisions: Employee benefits 7,026 11,486 8,265 8,265 8,265 8,265 8,265 8,265 8,265 Other provisions 8,598 8,790 9,095 9,095 9,095 9,095 9,095 9,095 9,095 Debt: Asset‐backed financing 710 449 596 596 596 596 596 596 596 Other debt 26,062 27,440 29,306 31,056 28,556 26,056 23,556 21,056 21,056 Other financial liabilities 429 201 137 137 137 137 137 137 137 Trade payables 16,418 16,558 17,235 18,526 19,405 19,563 20,726 20,884 21,871 Current tax payables 230 231 314 338 354 356 378 380 398 Deferred tax liabilities 760 801 278 299 313 316 334 337 353 Other current liabilities 7,538 7,781 8,943 8,943 8,943 8,943 8,943 8,943 8,943 Liabilities held for sale - 21 ------TOTAL EQUITY AND LIABILITIES 80,031 82,106 86,774 90,628 91,676 91,914 93,594 94,533 98,936

47 2011 2012 2013 2014 2015 2016 2017 2018 2019 FY FY FY FY FY FY FY FY FY (€ million) 365 366 365 365 365 366 365 365 365 Segment Economics Revenues: NAFTA € 33,800 € 43,521 € 45,777 € 49,091 € 52,644 € 51,136 € 54,690 € 53,182 € 56,735 LATAM 11,068 11,062 9,973 8,976 9,448 9,973 10,498 11,023 11,548 APAC 2,086 3,128 4,621 5,670 5,670 5,670 5,670 5,670 5,670 EMEA 20,078 17,800 17,420 19,573 21,352 23,132 24,911 26,691 27,580 Luxury Brands 4,000 8,512 7,134 7,134 7,134 7,134 7,134 Components and Production Systems 1,500 1,500 1,500 1,500 1,500 1,500 Other activities Unallocated items & adjustments Total net Revenues 67,032 75,511 81,791 93,321 97,749 98,545 104,403 105,199 110,167

EBIT: NAFTA 1770 € 2,491 € 2,290 € 2,456 € 2,891 € 2,944 € 3,149 € 3,062 € 3,267 LATAM 1385 1,025 492 € 269 € 373 € 570 € 800 € 945 € 990 APAC 119 255 318 € 390 € 410 € 430 € 450 € 470 € 490 EMEA -897 (470) (737) € (489) € 120 € 520 € 910 € 1,050 € 1,085 Luxury Brands € 470 € 762 € 903 € 903 € 903 € 903 € 903 Components and Production Systems 146 145 145 145 145 145 145 Other activities Unallocated items & adjustments € (93) € (98) € (99) € (104) € (105) € (110) EBIT: 2,377 3,301 2,979 3,440 4,745 5,414 6,253 6,470 6,770

EBIT Margin (%): NAFTA 5.2% 5.7% 5.0% 5.0% 5.5% 5.8% 5.8% 5.8% 5.8% LATAM 12.5% 9.3% 4.9% 3.0% 4.0% 5.7% 7.6% 8.6% 8.6% APAC 5.7% 8.2% 6.9% 6.9% 7.2% 7.6% 7.9% 8.3% 8.6% EMEA -4.5% -2.6% -4.2% -2.5% 0.6% 2.2% 3.7% 3.9% 3.9% Luxury Brands 11.8% 15.0% 12.7% 12.7% 12.7% 12.7% 12.7% Components and Production Systems Other activities Unallocated items & adjustments (as % of revenue) 0.0% 0.0% 0.0% -0.1% -0.1% -0.1% -0.1% -0.1% -0.1% EBIT Margin (%): 3.5% 4.4% 3.6% 3.7% 4.9% 5.5% 6.0% 6.2% 6.1%

48 2011 2012 2013 2014 2015 2016 2017 2018 2019 FY FY FY FY FY FY FY FY FY (€ million) 365 366 365 365 365 366 365 365 365 Vehicle Economics Vehicle Shipments (000s) NAFTA 1783 2,115 2,238 2,400 2,574 2,500 2,674 2,600 2,774 LATAM 929 979 950 855 900 950 1,000 1,050 1,100 APAC 74 103 163 200 200 200 200 200 200 EMEA 1180 1,012 979 1,100 1,200 1,300 1,400 1,500 1,550 Luxury Brands - 22 48 57 57 57 57 57 Vehicle Shipments (000s) 3,966 4,209 4,352 4,603 4,931 5,007 5,331 5,407 5,681

Revenues per vehicle: NAFTA € 20,577 € 20,454 € 20,454 € 20,454 € 20,454 € 20,454 € 20,454 € 20,454 LATAM € 11,299 € 10,498 € 10,498 € 10,498 € 10,498 € 10,498 € 10,498 € 10,498 APAC € 30,369 € 28,350 € 28,350 € 28,350 € 28,350 € 28,350 € 28,350 € 28,350 EMEA € 17,589 € 17,794 € 17,794 € 17,794 € 17,794 € 17,794 € 17,794 € 17,794 Luxury Brands € 179,195 € 179,195 € 125,163 € 125,163 € 125,163 € 125,163 € 125,163 Total net Revenues € 17,940 € 18,792 € 20,276 € 19,824 € 19,681 € 19,585 € 19,456 € 19,393

EBIT per vehicle: NAFTA € 993 € 1,178 € 1,023 € 1,023 € 1,123 € 1,178 € 1,178 € 1,178 € 1,178 LATAM € 1,491 € 1,047 € 518 € 315 € 415 € 600 € 800 € 900 € 900 APAC € 1,608 € 2,476 € 1,951 € 1,951 € 2,051 € 2,151 € 2,251 € 2,351 € 2,451 EMEA € (760) € (464) € (753) € (445) € 100 € 400 € 650 € 700 € 700 Luxury Brands € 21,055 € 16,050 € 15,840 € 15,840 € 15,840 € 15,840 € 15,840 EBIT: € 599 € 784 € 684 € 747 € 962 € 1,081 € 1,173 € 1,197 € 1,192

49