Fiat CEO Cantarella Resigns Amid Crisis

Paolo Cantarella resigned as chief executive of Fiat on Monday as the Italian industrial group struggled with slumping sales and widening losses.

Fiat, owners of the Ferrari marquee, said Chairman Paolo Fresco would take on the responsibilities of CEO.

"After thinking about it for a long time, I decided that at this complex time for the group, and for Fiat Auto in particular, there had to be a strong break," Cantarella said in a statement.

Fiat shares rose in after-hours trading as high as 13.34 euros from 12.92 when the news broke and by 1740 GMT they had settled back to 13.20 euros, up about two percent from the close of the main session.

"I'm not overly surprised. It underlines the crisis that the car division is in," said Xavier Gunner, a car sector analyst with UBS Warburg in London. "But his departure doesn't necessarily mean that there is a solution in sight," he added.

Fiat is in the doldrums as its core car-making unit Fiat Auto sees its market share snatched away at home and elsewhere in Europe, eroding revenues and leaving it with a heavy debt pile which is under credit watch by top ratings agencies.

Speculation has mounted that Fiat could take up an option to sell its 80 percent stake in loss-making Fiat Auto to partner General Motors Corp. which bought the other 20 percent two years ago.

Almost at the same time as Cantarella announced his resignation, Standard & Poor's said it affirmed Fiat's short-term debt rating at "A-3" - the first of the three leading credit rating agencies to give the group a breathing space after they all recently said they might downgrade it.

S&P said recent steps by Fiat - which late last month clinched a three billion-euro lifeline from creditor banks - would have a "material effect" on debt and cashflow this year.

But, S&P warned, the ratings could be lowered in a year if Fiat did not meet debt and cashflow targets. Fiat has pledged it will halve net debt to three billion euros in December this year.

Fiat's powerful Honorary Chairman Gianni Agnelli paid tribute to Cantarella's 25 years in the company, including more than five years as CEO of Fiat Auto. He has been CEO of the Fiat Group and chairman of Fiat Auto since 1996.

Sergio Cofferati, the head of powerful Italian trade union CGIL, said Cantarella's resignation showed Fiat was still weak.

"I don't know his reasons but it is another sign of instability in the group," he said.