GENEVA - Fiat's core car unit will not hit operating break-even until 2004, its chief executive told Reuters on Tuesday, pushing back a previous forecast that it would pull out of the red in the second half of 2003.
"We should make (break-even) in 2004," Fiat Auto Chief Executive Giancarlo Boschetti said at the Geneva motor show. Asked if Europe's once largest carmaker would break even on a quarterly basis before then, he simply said: "No."
Earlier on Tuesday, ratings agency Fitch downgraded Fiat's debt to "junk" status, partly citing "the modest earnings outlook" for the group's core businesses after planned asset sales.
Boschetti last year launched a job-slashing restructuring plan to salvage Fiat Auto as it kept burning through cash while sales of its ageing model line-up slowed.
On Tuesday, he said 2002 had been a "really terrible year and 2003 doesn't look that promising, although we have reason to be a little more hopeful."
Fiat Auto's rescue plan includes investing 2.5 billion euros a year until 2005 to launch 20 new models -- three of which were unveiled earlier on Tuesday -- which Fiat hopes will win back market share it has lost to sexier models from foreign competitors.
"From June, we'll start launching the new cars and we'll begin to reap the results in September, by which time the restructuring plan also will have yielded a big part of the benefits we are looking for," Boschetti said.
In its report, Fitch said it could cut Fiat's rating again if Fiat Auto did not meet cost-cutting targets this year. Fellow ratings agency Moody's downgraded Fiat to non-investment level in December while Standard & Poor's is reviewing its rating.
BAD START TO 2003
Fiat Auto -- 20 percent owned by General Motors -- booked a worst-ever operating loss of 1.34 billion euros in 2002, and on Friday, Fiat announced it would recapitalize the unit by as much as five billion euros to fund its turnaround.
But the troubles are not over, and 2003 got off to a bad start as heavy winter rains flooded an engine factory in the Adriatic town of Termoli, cutting output by 40,000 cars.
Earlier this week, Fiat said the effect of the flood would squeeze its share of the Italian market to 27.5 percent in February from 31.2 percent in January.
"We have insurance against the flood, but it is not clear what the final effect will be on the first quarter results," Boschetti said. Last week, he forecast Fiat Auto's first-quarter results would be worse than the 180 million-euro loss made in the fourth quarter.
Fiat Auto -- which includes the Lancia and Alfa Romeo marques -- is aiming for 30 percent of new car sales in Italy this year. Boschetti said its chunk of the Western European market should rise to 8.5-8.8 percent from 8.2 percent in 2002.
Earlier in the day, the head of Alfa Romeo said sales should nudge up to 200,000 this year from 190,000 in 2002 but that new models should then help sales soar to 300,000 by 2005.
EYES ON THE "PUT"
But while the maker of historic cars like the Cinquecento battles competitors, most investors are fixed on how the five billion-euro recapitalizsation is going to work and what, if any, role GM will play.
Last week, Fiat said it would pump three billion euros into the holding that owns Fiat Auto by canceling inter-group debts. To avoid diluting its 20 percent stake in Fiat Auto Holding, GM would need to put forward 750 million euros.
But top managers from both companies have been locked in talks for weeks, and on Tuesday, GM CEO Rick Wagoner said the U.S. giant had "made no decision and no commitment to add capital to Fiat at this time."
When GM bought its stake in Fiat Auto in 2000, it agreed to a "put" option that allows Fiat to sell GM the other 80 percent from next year. A dilution of GM's stake could annul the put.
Media have reported GM is demanding the "put" be delayed or canceled in return for injecting up to two billion euros into Fiat Auto. Reports also have said GM has asked for Alfa Romeo or Fiat's Brazilian operations in return for fresh cash.
Fiat also stands to pocket about four billion euros from selling two of its best performing units -- insurer Toro and aviation group Fiat Avio. On Friday, Fiat said it expected to receive final bids by the end of the first half.