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To: X Y Zebra who wrote (48583)	11/1/2003 12:26:07 PM
From: X Y Zebra	Respond to of 57110

Red is synonymous with Italian race cars... but it has other uses in the Italian car industry too... -g Fiat Losses Worse than Expected Friday October 31st, 2003 Fiat narrowed its losses for the second quarter running in July-September, but the car business that had dragged the Italian industrial group into crisis posted disappointing results and pulled its shares lower. Fiat Auto on Friday posted a third-quarter operating loss of 314 million euros, better than last year's 340 million euro loss but worse than the gloomiest estimate in a Reuters poll of analysts, which had forecast the unit would be 272 million euros in the red. For the group, the third-quarter operating loss narrowed to 285 million euros ($333.6 million) from 339 million euros a year ago. A Reuters poll of 11 analysts had forecast a 246 million euro loss. A steep slide in car sales and huge debts dragged Fiat into its worst-ever crisis last year, forcing a spate of asset sales and capital increases to fund a turnaround that aims to push the group to breakeven next year and Fiat Auto into the black in 2005. Earlier this month, Fiat Chief Executive Giuseppe Morchio told Reuters the third quarter would only be "slightly better" than a year ago. "The auto loss appears to be greater than expected, but I don't see much of a reason to get more negative about 2004," said Adam Jonas, an analyst at Morgan Stanley. Fiat reiterated that two new cars that have come on sale in the last few weeks should allow the truck-to-components group to make a "significant improvement" in the fourth quarter and repeated that its full-year loss should narrow from last year's. "The stock took a bit of a hit on the results, but the test starts now and our eyes have to be on what's left of this year and early 2004. For example, I doubt they can make their market share targets," said a Milan-based analyst. Fiat shares were down 1.4 percent at 6.71 euros by 1257 GMT, underperforming a 0.7 percent rise in European auto stocks, after earlier falling by more than two percent. Revenues Fall Fiat group revenue fell 18 percent to 9.837 billion euros in the third quarter, reduced by the sale of its most profitable units, insurer Toro and aviation arm Fiat Avio, to help fund a turnaround at Fiat Auto. At Fiat Auto, which is battling to reverse a slump in sales that caused its crisis, turnover fell 11 percent to 4.155 billion euros. In unit terms, sales dropped 6.8 percent. "Fiat Auto might be improving its costs, but it still faces huge challenges to the top line," said Morgan Stanley's Jonas. Analysts also were concerned by low margins at Fiat's other units. Sports car unit Ferrari had a three percent operating profit margin, while tractor unit Case New Holland, battling through a long restructuring, posted a 1.1 percent margin. "The other units are just breaking even and are definitely not generating the cash-flow that Avio and Toro used to. It really just makes Fiat much more dependent on Fiat Auto's recovery than at any time over the past decade," Jonas said. The group net loss for the third quarter came in at 84 million euros against a net loss of 413 million a year ago, boosted by a 781 million euro net capital gain on the sale of Fiat Avio. Net debt fell below a key three billion euro mark for the first time in months at 2.952 billion euros at end-September. atlasf1.com