Fiat Showing 'Clear Signs' of Improvement

Italian automaker Fiat saw "clear signs" of an upturn in the fourth quarter of 2003 thanks to sales of its new models, Chief Executive Giuseppe Morchio told reporters on Tuesday.

"On an operating level, the fourth quarter has given clear signs of improvement both on a group level and on the level of Fiat Auto," Morchio said on the sidelines of a conference.

"We had always said 2003 would be difficult, a year which had to bear the burden of restructuring costs, but we have reason to believe that we are doing the right thing."

Morchio has frequently said Fiat would change gear in the last months of 2003, allowing it to speed to recovery this year, helped by its new flat-backed Panda and the Lancia Ypsilon.

Fiat plans to hit operating break-even in 2004, while its troubled car-making unit Fiat Auto is due to break even the following year. Morchio added Fiat hoped to reach a deal with General Motors before next year, when an option allowing Fiat to sell the rest of its car arm to its US partner comes due.

Fiat Chairman Umberto Agnelli said on Monday it could give up the "put" option if the US car giant were to offer adequate compensation. GM bought 20 percent of Fiat Auto in 2000 and agreed to a deal that could have forced it to buy the rest in 2004, but since then Fiat has slid into the red.

The 2004 deadline has been pushed back a year while the companies settle a dispute over whether the put option is valid.

"I hope the revision can be done sooner than that," Agnelli told reporters. "The mood is fine. There is a lot of respect for each party's arguments."

GM said last October that moves by Fiat to raise cash - including a recapitalisation which diluted GM's holding and asset sales - had invalidated the option. GM spokeswoman Sheri Woodruff, reacting to Agnelli's comments late on Monday, said it was too soon to predict the outcome of negotiations between the two sides.

"It's way too premature to predict what the outcome of these discussions will be," Woodruff said in Detroit late on Monday. "We hope over the next several months to make a determination about how we'll resolve this between the two partners."

Analysts said the two sides would also have to decide on the value of the option and on the payment, which if okayed by GM could provide a crucial cash injection for troubled Fiat Auto.

"We would argue that if the put is still valid and Fiat wanted to exercise it, it would not be easy to determine the value for a business losing close to one billion euros a year," Deutsche Bank said in a note.