26.07.2004 Fiat have revealed an overall group operating profit for the second quarter of the year, but the positive news was slightly tinged by a worse than expected result for the struggling car division

Fiat have revealed an overall group operating profit for the second quarter of the year, but the positive news was slightly tinged by a worse than expected result for the struggling car division.

Fiat, in an announcement to the stock exchanges early this morning, that a a group operating profit of €18 million, almost a third higher than most analysts had been predicting, had been achieved.

The auto division still continued to under perform, ratcheting up a first six months €282 million loss, surprising most industry who watchers were expecting it to in the sub-€200 million bracket.

Year on year the auto division loss was €234 million. Meanwhile group net loss rose to €464 million, while sales fell slightly year-on-year, from €12.5 billion to €12.3 billion.

The second quarter loss was partly as a result of a three week strike at the Italian Melfi plant, which cost the production loss around 40,000 cars, coupled with higher research and development costs. Sluggish sales in Fiat's key domestic market also helped widen the loss, but the carmaker, historically over reliant on the Italian market, is working to widen its global penetration in order to ease this trend.

However, Fiat are still confident of reaching their target of operating break even by the end of the year.

Fiat recently appointed the Ferrari-Maserati President Luca di Montezemolo to the job of Group Chairman, following the death of Umberto Agnelli, and after the resignation of CEO Guiseppe Morchio in quick succession, Sergio Marchionne, the highly regarded CEO of Swiss company SGS was appointed as replacement.

Montezemolo and Marchionne have committed themselves to implementing the existing recovery plan, which centres around a rationalisation of the auto division's factories, the shedding of workers, heavy investment into R&D, and a raft of new models being introduced.

Fiat's share of the Western European car market rose to 7.7% during the first six months of this year, up from 7.6% year-on-year, while sales grew by 5%, with a shade over 600,000 vehicles produced, comfortably outperforming the overall market which saw sales rise by 3%.

The Ferrari-Maserati Group posted a first six months operating loss of €12 million, down from a profit of €7 million in 2003, the result of the heavy continuing costs involved in relaunching the Maserati brand. Income for the sportcar brand rose to €399 million, well up from €340 million last year.

Elsewhere in the industrial conglomerate, operating profits were significantly up at Iveco, the truck division recording a €102 million profit, up from €20 million last year, and at CNH Global, the agricultural division, which has undergone significant restructuring, also seeing profits sharply rise to €83 million.

Generally, analysts were satisfied with the report, happy that Fiat believes that its restructuring timescale is still in place, and reflecting this mood, shares rose on the stock exchanges this morning, gaining a shade over two and a quarter percent on the Italian bourse in early trading.