Fiat Aims for Q4 Profit

Italian industrial group Fiat said on Friday it was confident that selling a swathe of assets would be enough to meet its target to slash debt, which is under the scrutiny of ratings agencies.

"We value the assets on sale at 4.7 billion euros ($4.3 billion) and we only have to make 2.3 billion to meet our target," Fiat Chief Executive Paolo Cantarella told an analysts' meeting in Italy.

"We think that's a good enough cushion," he said when asked if Fiat would have to increase its capital to meet its target of cutting net debt to three billion euros by the end of the year.

Fiat's debt has come under pressure partly because of a fall in its car sales, but the head of its auto unit Giancarlo Boschetti told analysts Fiat Auto should get better over the year and forecast "a positive result" in the fourth quarter.

Its debt is under review by the three main credit ratings agencies, which are focusing on how fast Fiat can sell non-core assets, such as castings unit Teksid, and generate cash flow in its key sectors.

Fiat plans to sell 11 assets, including eight industrial units, which should raise as much as 3.2 billion euros. Another billion euros would come from a capital increase at tractor unit CNH Global and a listing of sports car unit Ferrari.

Fiat had previously said it planned to raise two billion euros this year and one billion in 2003, but on Thursday presented its 2002 money-raising target as 2.3 billion euros.

"We will execute faster on debt reduction, which is a high priority," Chairman Paolo Fresco told analysts.

High costs and deep drops in car sales at home and abroad have battered Fiat's balance sheet and forced Italy's top industrial group to scale back 2002 sales forecasts for its mid-sized Stilo, which was hailed as Fiat's future when it was launched in September.

Boschetti noted the key Italian market had shrunk 13 percent in the first quarter and warned "it could be even worse in the near future".

The tough market has forced Fiat to fire almost 3,000 workers in Italy, which Boschetti said would cost about 16 million euros this year, with most of the effect between July and November.

Cantarella met Labour Minister Roberto Maroni on Friday to explain how the redundancies would work and to explain Fiat's revival plan.

Back to Black?

Boschetti was optimistic Fiat Auto, which is 20 percent owned by General Motors Corp. could make a profit in the fourth quarter but warned it would fall back into a loss in 2003 as hefty investments of 2.4 billion euros a year kicked in.

On Tuesday, Fresco said the car unit should "return to positive levels of profitability and cash generation by 2004", while Boschetti forecast a five percent drop in overhead costs both this year and next.

Fiat spent much of a two-day conference assuring analysts it was focusing on restructuring and pulling itself out of the red. In the first quarter, slow car and components sales pulled Italy's top industrial group to a 529 million euro net loss.

"Our priority is to generate cash and profit and not be distracted by other things," Fresco said, but added that if an interesting opportunity came along, Fiat could be open to it.

Last year, Fiat put its energy assets into the Italenergia group, which ended up buying electricity group Edison.

Chief Financial Officer Daniel Clermont said Fiat did not want to dilute its 38.61 percent stake in Italenergia, which is expected to announce a capital increase soon.

Elsewhere in the Fiat empire, Cantarella said its insurance group Toro was happy to stand alone, but "if something comes up and it would be better for us to have 80 percent of a bigger company than 100 percent of Toro, we would consider it".