Fiat not in Crisis, Says CEO Fresco

The head of struggling car maker Fiat sought to calm fears about the financial status of Italy's industrial giant, a day after Fiat shares plunged to a 17-year-low on talk its debt rating could be cut to "junk".

"The crisis does not exist," Fiat Chairman and co-Chief Executive Fresco told La Repubblica daily in a interview published on Saturday.

He reiterated that a three billion euro bank rescue package arranged in May had provided a substantial financial cushion. "I don't think Fiat's situation was dramatic three months ago and it certainly isn't today," he said.

Fiat has promised its creditor banks it will cut its net debt to three bilion euros by the time 2002 accounts are approved, which is likely to be in March 2003.

On Monday Fiat said its net debt stood at 5.8 billion euros, down from 6.6 billion euros at the end of March, thanks to the sale of a 34-percent stake in its sportscar unit Ferrari.

Fresco said a deal to sell part of Fiat's majority stake in energy group Italenergia would cut debt to around 4.0 billion.

"Positive cash flow in the second half will allow us to meet the target agreed with our banks," he said, adding Fiat also held $2.2 billion of bonds convertible into shares in partner General Motors, which could be sold to further ease debt.

He also poured cold water on investor jitters about Fiat's exposure to Brazil whose currency has depreciated over 17 percent in the second quarter on pre-election concerns.

"I have more confidence in Brazil than in other Latin America countries. I don't foresee Brazil having a crisis like the one in Argentina," he told the newspaper.

"Junk" Fears

Fiat shares shed 4.3 percent on Friday, crashing through the 10 euros mark to close at 9.76 euros. Traders said the fall was precipitated by fears of an imminent debt downgrade on concern Fiat is unable to meet its debt-cutting targets.

Ratings agency Moody's, which cut Fiat debt to one notch above "junk" in June, declined to comment. Rival Fitch, which cut Fiat to a negative outlook the same month, said it was not currently onsidering a downgrade, but did not rule one out.

Standard and Poor's, which only rates Fiat's short-term debt, said it was not about to revise its rating.

Fiat's financial problems have fuelled speculation it could take up a put option to sell its 80 percent stake in Fiat Auto to GM, which already holds a 20 percent stake, from 2004.

In the interview Fresco emphasised the relationship, dampening talk GM had lost interest in the Italian carmaker.

"I believe our collaboration is destined to be stronger ... I can't think GM has a plan for Fiat Auto that is any different to ours. That is to make it a solid company with an ever greater presence in the world," he said.

Fresco added he did not expect Fiat Auto's recent restructuring to yield results in the short term but that he still had confidence in the plan.

"Seeing as August is pretty much dead it is difficult to imagine we will have any growth in the third quarter but in the fourth it will be different (for the Fiat group)," he said.

Italian car sales figures for July are due out on Monday and are expected to show another heavy fall at Fiat Auto.

As part of the group debt-cutting plan, Fiat is trying to sell non-core assets. On Friday it sold the aluminium group of its Teksid castings unit for 290 million euros.

Fresco said Fiat was in talks about other sales but said its stake in media holding HdP, which owns leading Italian daily Corriere della Sera, was not for sale.