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Monday, 29 July, 2002, 18:50 GMT 19:50 UK
Fiat losses set to persist
Fiat
Analysts think the group might sell the car unit to GM
Losses at Fiat's crucial car unit have shrunk, but the Italian industrial group's operating losses have still turned out worse than analysts had feared.

Fiat Auto, which has been hit by an 19% drop-off in car sales this year, suffered an operating loss of 394m euros during the April to June quarter, the group reported.

The losses pulled Fiat Group into the red with a 127m euros operating loss and a 34m euros net loss.

During the previous three months, when Fiat embarked on a major restructuring exercise, the auto unit had lost 429m euros.

Not negative

Fiat is burdened by a net debt mountain of 5.8bn euros.

That is down from 6.6bn euros in March this year.

The group has vowed to halve its debts to 3bn euros by next spring.

On Friday, its creditor banks agreed to a 3bn euros financing plan under which Fiat committed itself to further sales of assets and to boost its earnings.

The group also forecast that its full year operating loss would be in line with that seen during the first six months.

"The outlook statement might be giving some concern but I don't think it should be viewed as a negative outlook," said SSSB automotive analyst, John Lawson.

Selling cars

The continuing losses at Fiat Auto have set off whispers in the financial markets.

Many traders expect the group to sell its 80% stake in Fiat Auto to its partner General Motors which already owns the remaining 20%.

Fiat Group has a contractual right to do so.

The group said it would "aggressively pursue the turnaround of Fiat Auto with a view to becoming a stronger member of the GM federation".

In Italy, Fiat shares gained 5% on Monday, up on last week's lowest close in a decade.


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