ANNUAL REPORT AND FORM 20-F For the year ended December 31, 2019 2019 | ANNUAL REPORT 53 Board of DirectorsTable andof contents Auditor Table of contents Board of Directors and Auditor ....................... 5 Consolidated Financial Statements at December 31, 2019 .................................. 167 Message from the Chairman and the CEO ..... 7 Consolidated Income Statement .......................... 168 Consolidated Statement Board Report ................................................. 11 of Comprehensive Income/(Loss) ......................... 169 Consolidated Statement of Financial Position ....... 170 Introduction ........................................................... 11 Consolidated Statement of Cash Flows ............... 171 Management Report ............................................. 15 Consolidated Statement of Changes in Equity ..... 172 Selected Financial Data ...................................... 15 Notes to the Consolidated Financial Statements .. 173 Group Overview ................................................. 17 Our Business Plan .............................................. 23 Company Financial Statements Overview of Our Business .................................. 24 at December 31, 2019 .................................. 281 Sales Overview .................................................. 33 Income Statement ............................................... 282 Environmental and Other Regulatory Matters ...... 40 Statement of Financial Position ............................ 283 Financial Overview ............................................. 48 Notes to the Company Financial Statements ....... 284 Results of Operations ......................................... 55 Liquidity and Capital Resources ......................... 69 Other Information ........................................ 297 Risk Management .............................................. 73 Additional information for Netherlands Risk Factors ....................................................... 77 Corporate Governance ........................................ 298 Corporate Governance .......................................... 96 Additional Information for U.S. Listing Purposes ... 302 Remuneration Report ....................................... 131 Non-Financial Information .................................... 145 Independent Auditor’s Report ..................... 317 Controls and Procedures ..................................... 162 2020 Guidance ................................................... 165 Form 20-F Cross Reference ........................ 329 2019 | ANNUAL REPORT 5 Board of Directors and Auditor Board of Directors and Auditor BOARD OF DIRECTORS Chairman John Elkann(1) Chief Executive Offcer Michael Manley Chief Financial Offcer Richard Palmer Directors John Abbott Andrea Agnelli Tiberto Brandolini d’Adda Glenn Earle(2) Valerie A. Mars(1),,(2) (3) Ronald L. Thompson(2) Michelangelo A. Volpi(3) Patience Wheatcroft(1),(2) Ermenegildo Zegna(3) INDEPENDENT AUDITOR Ernst & Young Accountants LLP (AFM annual report fling)(4) EY S.p.A (SEC Form 20-F fling)(4) (1) Member of the Governance and Sustainability Committee (2) Member of the Audit Committee (3) Member of the Compensation Committee (4) Refer to “About this Report” for additional information relating to these regulatory filings. 6 2019 | ANNUAL REPORT 2019 | ANNUAL REPORT 7 Message from the Chairman and the CEO Message from the Chairman and the CEO 2019 was a pivotal year for our company. Not only did we achieve strong fnancial results, but we also took decisive steps to lay the groundwork for future growth and proftability as well as to ensure that our company has the scale, expertise and resources to effectively navigate through the dramatic transformation our industry is undergoing. We want to thank everyone in the FCA organization for their on-going contributions during such an important year. Their relentless hard work and professionalism is crucial to our continued success. Worldwide combined shipments totaled 4.4 million units and net revenues came in at €108.2 billion. We achieved Adjusted EBIT for the year of €6.7 billion, with a margin of 6.2 percent. Across our core business operations by region, North America posted record results for the 5th consecutive year, with Adjusted EBIT at €6.7 billion and margin at a new high of 9.1 percent. In the United States, the Ram brand reached a new sales record and, for the frst time, ranked as the number two brand in the large pickup truck segment. We also delivered another year of strong results in LATAM, with Adjusted EBIT up 40 percent to €501 million and margin increasing by 150 basis points to 5.9 percent. In Brazil, we regained overall market leadership and fnished the year in a leading position in key segments such as SUVs, pickups and light commercial vehicles. Results in APAC signifcantly improved, despite continued market challenges. Actions to improve vehicle mix and net pricing along with cost savings and restructuring actions signifcantly reduced our loss compared to prior year. In EMEA, performance was adversely affected by several factors, including continued commercial challenges and the age of our product portfolio in the region. Lower volumes and higher incentives, together with increased compliance and product costs, led to a decrease in Adjusted EBIT to near break-even. However, during 2019, we took actions to invest in EMEA and improve operating performance. We streamlined headcount and further reduced our cost-base in the region. We also continued our focus on moving away from low-margin sales channels. Finally, we announced signifcant investments in key new products, which will go a long way towards renewing our product portfolio and improving our competitiveness. Maserati results - with an Adjusted EBIT loss of €199 million - refected the impact of important actions we took to start to re-position the business. During the year, a completely new management team was installed, with key talent recruited both internally and externally. We signifcantly reduced dealer stock and committed to key investments to renew and expand Maserati’s product offering, with a regular cadence of new product launches, including a signifcant level of electrifed powertrains, through 2024. These actions give us a high level of confdence in the future trajectory of the Maserati brand. The above operating results led the company to achieve a full-year Adjusted net proft of €4.3 billion and net proft from continuing operations of €2.7 billion. These results also drove Industrial Free Cash Flows of €2.1 billion. On the basis of these strong results, the Board of Directors recommended the payment of an ordinary dividend of €1.1 billion to our shareholders, as previously indicated. Delivering such strong results is important to support the substantial investments we are making in future products, technologies and facilities. 8 2019 | ANNUAL REPORT Message from the Chairman and the CEO During 2019 we committed to key projects that are fundamental to our future, and will further strengthen our business in the years ahead. In the United States, we are investing $4.5 billion to expand the capacity of our facilities in Michigan and build a new state-of-the-art plant in Detroit that will open later this year. It’s a commitment that will add 6,500 new jobs in Southeast Michigan. In Italy, we are executing an ambitious €5 billion plan, centered around electrifcation, with key new products and a new Battery Hub located inside our historic Mirafori complex in Turin, that will assemble batteries for our growing line-up of electric models. In Brazil, we have started a signifcant new investment cycle of R$16 billion (approx. €3.4 billion), which will see a renewed product line-up for the Fiat and Jeep brands and add a new state-of-the-art fex-fuel engine plant, which will become the largest powertrain hub in Latin America. For Maserati, we are executing a major product-led transformation plan including the launch of new white-space products as well as several full battery electric and hybridized models. Undoubtedly, 2019 was another historic year in the evolution of our company because of the agreement we reached with PSA for a 50/50 merger that will create the world’s third largest automaker by revenues and a new global OEM equipped to meet the mobility challenges that lie ahead. We expect to close the transaction with PSA by the end of this year or in early 2021. In the meantime, we will maintain our focus on the fawless delivery of our commitments. Among the other highlights of the year: We fnalized the sale of Magneti Marelli, which not only signifcantly strengthened our balance sheet, but also allowed the Group to distribute a €2.0 billion extraordinary dividend to our shareholders. We strengthened our network of partnerships to develop e-mobility solutions for electric vehicles by executing agreements with Enel X and Engie Group in Europe, for both home charging stations and public charging networks. With a focus on improving our effciency and speed to market, we streamlined our Global Product Development team by bringing together vehicle and powertrain engineering under a single, global organization. We entered into an agreement to sell our cast iron components business operated through Teksid; this is another important step in the implementation of our supplier business plan and will allow the business to be further developed by a leading player in the cast iron industry. We also strengthened our product offering with several key