Fiat sells aerospace unit for $1.7bn

Fiat Avio will provide parts for Boeing 777s

Fiat, the struggling Italian conglomerate, has agreed to sell its aviation business Fiat Avio in order to help cut debt and finance its restructuring.

The unit is being sold to US private equity fund the Carlyle Group and Italian state-controlled defence firm Finmeccania in a deal which values the unit at 1.5bn euros ($1.7bn; £1.05bn).

Fiat said the sale would cut its net debt by about 1.4bn euros.

The deal is part of Fiat's major restructuring plan, announced last week, which aims to return the company's ailing car business to profitability.

It needs the money from the sale of Fiat Avio, together with the sale of its Toro Insurance unit and customer finance arm Fidis, to help fund the revamp.

Fiat intends to cut 12,300 jobs by 2006 and close 12 factories over the next couple of years.

Profit generator

Fiat Avio was the most profitable part of the Italian group's empire last year, turning in operating profits of 210m euros from 1.5bn euros of revenue.

The unit makes parts for jet engines and provides components for projects such as the US Joint Strike Fighter project.

It has also signed deals to provide parts for engines used on the Boeing 777 and Airbus A380.

In an interview with the Reuters news agency, the managing director of the Carlyle Group, Peter Clare, said the unit's contracts meant it was well positioned to take advantage of any upturn in the civil aviation market.