Fiat have made huge inroads into reducing the losses of the Auto Division, their second quarter financial report revealed this morning, delighting financial analysts and sending their share price sharply upwards in early trading. "Efforts aimed at achieving the turnaround are bearing fruit" the Fiat report said.

Fiat revealed that the group's revenues as a whole had remained stable, at 12.1 billion euros, while actual trading profit had doubled to 360 million euros (from 181 million euros in 2004), although this was helped in part by the inclusion of the final separation payment received from General Motors.

In somewhat of a shock, the Auto Division - where all eyes were focused - announced that trading losses had been chopped down to just 88 million euros (from 238 million euros in 2004). It caught financial analysts completely by surprise, and in fact a poll by Reuters of ten analysts who closely follow the car marker's fortunes, had forecast Fit to announce a loss of around 141 million euros. "It's incredible what they did with Fiat Auto. Unit sales fell and they slashed losses? This is absolutely mind-boggling," Reuters quoted Eric-Alain Michelis, an auto analyst at SG Securities, as saying after reading the report.

Losses were stemmed at Fiat Auto despite a 4.8 percent second quarter fall in sales, attributed mainly to the effects of the month-long Italian car transporter driver's strike in May. Although sales actually fell, revenue rose by 2.4 pct (on April-June 2004) as Fiat CEO Sergio Marchionne's policy of concentrating on more profitable sales - as opposed to the usual automotive industry's policy of churning out heavily discounted volumes - reaped its dividends.
 

Strong performers in the Fiat Group included Iveco which posted a 110 million euro trading profit, while CNL Global - the agricultural division - recorded a trading proft of 281 million euros (although with a turnover of 2.84 billion there is much scope for this division. Currency fluctuations helped maximise profits from the burgeoning Brazilian and Polish operations, while the commercial vehicle sector made strong gains. All sectors in fact showed an improved performance year-on-year, with the exception of the components division.

As Fiat reconfirmed their financial targets for 2005, the next big test - looking swiftly forward - will be the arrival of the new Grande Punto in September. Fiat's bestselling car, the all-new Punto 'supermini' (developed in conjunction with GM) was officially previewed this morning ahead of its arrival on the market, now due in less than two months time. "When Marchionne came in to Fiat, there was a culture of losers, but if the Punto and the new Alfa 159 are successful, the culture of losers will be galvanised and could start a virtuous circle," Reuters quoted Philippe Huchois, an analyst at JP Morgan, as commenting this afternoon.

"Though we are cautiously optimistic about the future, Fiat Auto is by far not yet out of the wood and all the efforts to improve its structural efficiency will further intensify," the Fiat report stated as it looked forward to the rest of the year, before adding, "At the same time, other businesses have yet to reach fully satisfactory operating performances. In the second half of the year, most of Fiat’s business sectors expect to continue operating in a competitive economic climate. Nonetheless, the Group confirms its commitment to the achievement of its stated 2005 financial objectives."