Press Releases

IAA International Press Conference
September 23, 2008

IAA International Press Conference
Paolo Monferino, Iveco CEO

Ladies & Gentlemen good afternoon,

Some men dream things that are and ask why. I dream things that aren't and ask why not.
John F. Kennedy (1917-1963)

This is a famous quotation and it is still as relevant today as it ever was.

It is a perfect fit for activities associated with innovation, the key element of Iveco’s presence at this commercial vehicle fair.

We undertake innovation activities with courage and belief in the future and this is the reason for my presentation title: “Moving change”.

In this peculiar moment of its history, Iveco has the commitment, the resources and the energy to introduce relevant technologies with the final aim to move to a new sustainable future.

Two years ago I made some promises. Today I will update you on where we are on those promises shown here and where we are going.

A company that is innovative and sustainable must be profitable; that goes without saying.
In 2006, we presented our forward financial plans to analysts and investors in Turin.

We presented very challenging targets, both on revenues and especially on trading margins.
Our revenues in 2006 and 2007 exceeded our forecast and our trading margin has met our objectives.

We are satisfied with this result but we are aware that there is still much to do.

Taking half year revenues at a time, every half year period from 2005 has been better than that preceding, actually the execution of a plan of continuous improvement

In particular I underline the tremendous growth of revenues compared to three years ago: +45% for the first 6 months of 2008 versus the same period in 2005.

Even better is trading profit and return on sales, where the increase compared to three years ago is more than three fold.

We have a plan to achieve double digit return on sales by 2010 and I am confident that we have put in place the necessary measures, assuming, of course, market conditions do not drastically deteriorate.

The results I have shown make me proud and they make Iveco people, at all levels in the company, proud.

We are on the right track.

Regarding the market for commercial vehicles, we foresee a contraction in western European demand during the second half of 2008, the area in which Iveco makes about 80% of its total revenue.

This will be partially offset by the growth in demand in other markets, in particular that of Latin America and Eastern Europe.

Of course, to sell commercial vehicle products and services to achieve the financial results that I have mentioned, essential are satisfied customers and products and services of expected quality.

The quality scenario can be reviewed in terms of warranty cost per vehicle in service.

Despite the upheaval associated with the introduction of new engines in 2006 and new cabs in 2007, the cost of warranty is constantly declining.

This important indicator demonstrates that the commitment we are making in quality driven processes is delivering the desired result.

It is well understood that quality depends very much on manufacturing processes.

World Class Manufacturing is an ambitious program involving all the Fiat Group’s factories.

It is a systematic way to improve continuously manufacturing competence by specially focusing on cost competitiveness, quality improvement by process control and short lead time to serve customers better.

The ultimate aim is zero waste, zero defects, zero breakdowns, zero inventory and absolute safety at work.

We started this program last year and we have the ambitious target to achieve full implementation of all Iveco factories around the world by 2010.

Let me now have a look at our product range evolution during the last two years.

During its history Iveco has introduced significant innovations that today are exploited by all manufacturers for the benefit of commercial vehicle users.

Some examples are:

• Front axle disc brakes on heavy range vehicles in 1992

• The introduction of the Variable Geometry Turbo-charger on heavy range vehicles in 1996

• Drive axle disc brakes on heavy range vehicles in 2002

And we don’t stand still: during the last two years we have launched 10 new models.

The new Daily was introduced to the market in 2006 and, with the introduction earlier this month of the new Campagnola and, on our stand here at Hanover, the new Eurocargo 4x4, we have completed the renewal and actually extended our product range.

Turning to after sales and financial services.

Our after sales business is showing a consistent annual growth.

This is due to the increase in size of the Iveco vehicle parc and the improvement in penetration of original Iveco spare parts.

Our strategy is centred on continuous investments to further reinforce the customer-network-manufacturer relationship and commercial initiatives centred on product quality and the professionalism of the distribution and service network.

Iveco Capital is the new brand, born only a few months ago, dedicated to our financial services.

Iveco Capital is present with dedicated companies in 16 countries, each with a full range of financial offers for dealers and vehicle buyers.

In 2008 Iveco Capital commenced operations in China, Brazil and Poland.
Iveco financial services has seen a rapid growth, increasing its level of activity by almost 30% in the last two years.

Now a subject very dear to my heart, in which Iveco, like the whole Fiat group, is making huge investments. I am talking about both environmental and social sustainability.

Iveco is aware that its products have a significant impact on the environment in which they operate.

We are assisted because of our brand name, IVECOLOGY!

Today, Iveco believes itself to be a responsible company, aware of its ecological role and for the wellbeing of its employees, partners in business, its customers and society as a whole.
Innovation is the key to limiting our environmental impact and to generating wealth for our stakeholders in a responsible and sustainable manner.

The aim of our presence in Hanover this year is to demonstrate our strong commitment to product innovation.

For Iveco, innovation means not only future concepts, but mainly affordable technological solutions, allowing vehicle operators to minimise their environmental footprint, which is a benefit to all of us.

Our SCR applications, developed in partnership with Fiat Powertrain Technologies, have
brought significant fuel savings to our customers. With Tector and Cursor engines, Euro V tail-pipe emission levels were offered to customers 4 years ahead of the legal deadline and EEV certified engines are available, the most stringent of all current standards, without the need for an exhaust filter.

For Euro VI, expected in 2014 according to the European Commission’s proposals, our plans are well under way to provide certified products to our customers similarly ahead of legal requirements.

Hydrogen, long hailed as the renewable fuel of the future and able to provide zero tail-pipe emissions does not seem to be nearer to a reality than it was 20 years ago. For this reason, Iveco concentrates its resources on advanced technological innovations achievable today to provide fuel efficient vehicles.

On our stand is our full range natural gas vehicle offer. This is the result of real innovation, engines achieving virtually Euro VI emissions today, in reality, negligible emissions of all pollutants.

In this category of vehicle, Iveco is the European leader with more than 10,000 vehicles in circulation.

Also with hybrid vehicle technology, we aren’t talking about concept or futuristic vehicles.
For a number of years we have been delivering urban buses powered by Diesel-electric hybrid technology and these are operating in a number of French and Italian cities.

10 Diesel-electric hybrid vans have already been delivered to one of the major global logistics operators under an extended vehicle acceptance trial. This product will enter into full production during 2009.

Also with our medium range product, Eurocargo, we have begun field trials with a Diesel-electric hybrid power train

This is an example of advanced innovations to achieve noteworthy fuel consumption and hence CO2 emission savings, up to 30% depending on the vehicle mission.

Full electric traction has been applied to urban buses for a number of years and is now also available with Daily van models.

Actually, being a zero emissions vehicle. the electric Daily is highly appropriate for urban operations

Of course, safety is an essential part of our sustainability strategy and we have available such advanced driver assistance systems as Autonomous cruise control, lane departure warning, stability control, blind spot monitoring, to name but a few, serving to reduce the occurrence of road accidents.

These systems are present on our Stralis Engage concept vehicle that you will see on our stand.

Additionally important for road safety is driver comfort is also vitally important and this issue is addressed by new seating, cab interior lighting and also improved controls and improved driver information systems: the real benefit of the Human – Machine interface

All wheel drive vehicles form a new Iveco family of products, crossing all our traditional ranges.
Starting from Massif, there is the Daily, the new Eurocargo 4x4 and the Trakker. Not seen everyday is the by now famous LMV that has achieved hero status in its peace keeping roles in some inhospitable parts of the world and the Astra ADT40 the quarry and construction sector 6x6 articulated dumper truck with a total mass of 66 tonnes.

Two years ago we announced our intention to significantly extend our activities beyond our European homeland.

China is the principal developing market to which we have made significant commitments in the last few years.

Iveco is present in China since 1985 but since 2006 we have completely redefined our strategy in this market.

Now, we have three joint venture companies to increase our exposure to a wide range of vehicle segments.

With these joint ventures today we are able to participate in all commercial vehicle segments.
In particular, in the mainstream segment with Yuejin for the light and medium range, and Hongyan in the heavy range.

The premium segment is covered by Naveco, with the PowerDaily and by a Chinese version of the Iveco heavy product.
With the configuration I have shown to you, we have increased our operational activities from the 20000 units we sold in 2006 to 94000 units in 2007 and a forecast for 2008 of 115000 units. The goal in two to three years time is 150000 units.

One of our strategic pillars in China is leveraging on China-based production as a global export platform and on the Iveco strong international distribution network.

As you see, we have planned significant volumes – over 70 thousand units – for markets such as Africa, Russia, Latin America and Asia Pacific.

Turning to Russia, at the end of 2007 we entered into a joint venture agreement in Nizhniy Novgorod, called Saveco, to achieve local production of the Daily product range.
The factory will produce both Daily van and chassis cabs.

The production capacity of this factory will be 25,000 units per year which will be achieved by 2015; production activities will start during 2009.
Across the globe to Latin America, the region that has given us considerable success in recent years.

In this region two years ago we took a bold step, adopting the unique strategy of introducing European models to the market.
This has paid off and today we are achieving sales results that I can only describe as extraordinary.

Iveco sales in Latin America in 2007 reached 17,500 units, a record for us in this area.

In Brazil, our sales have seen a tremendous growth, more than double that of 2006.

Also in Argentina and Venezuela we have had noteworthy success with an annual growth in sales of 24% and 39% respectively.

From January to July of this year, Iveco sales in Latin America have grown by a further 37% versus the same period for 2007.

Following these exceptional results, Iveco has announced an increase of 60% in production and distribution capacity within the near future.

Our globalisation strategy does not finish here, we continue to evaluate additional potential markets around the world.

Two years ago we identified in our growth strategy the values of the Iveco brand, a key element for the growth of the company income.

During the last two years, the resources and the effort that we have invested in our brand, including memorable sport sponsorships, have resulted in an exponential growth in our brand value.

Two years ago the Iveco brand was seen as functional even though our products were seen as of good quality.

Today, our brand has become more prestigious in the market, communicating quality and emotion and this reflects on the value of our products.

Please allow me to believe that this result is the fruit of the innovation in our products and our brand management.

In conclusion, for a company to be sustainable in itself, it needs not only to change from one stable state to another, the change must be continuous, following a consistently moving target, hence the title of this presentation, Moving Change. For Iveco, the engine driving this change is innovation in everything we do. I hope I have demonstrated to you that Iveco has picked up the ball called moving change, we are running with it and we have no intention of letting it go!

September 23, 2008