TURIN -- Fiat showed how far it has to go to recover from its worst ever crisis on Tuesday when it unexpectedly posted a wider first-quarter loss than a year ago, hit by another lame performance at its auto unit.
The Italian group, which is drawing up a long-awaited industrial plan to move back to profit and cut debt, reported a first-quarter operating loss of 342 million euros ($393.6 million), compared with a 299 million-euro loss a year ago.
That was worse than the lowest forecast in a Reuters poll and Fiat shares, which have lost about half their value in the last year, fell two percent after the results were released. They closed 0.8 percent higher on short-covering, traders said.
"There has been no improvement in the car business or in the other parts of the group," said Patrick Juchemich, autos analyst at Sal Oppenheim in Frankfurt, who is cautious on the stock.
Most investors are looking ahead to June when the tractor-to-tools group is due to present its latest blueprint, which new Chief Executive Giuseppe Morchio said would focus on customer service, cost controls and technology.
Fiat said 2003 would be "a tough year of transition" with hard market conditions but expected its full-year operating loss to be narrower than the 762 million euros it lost last year.
But there are still dark clouds over Fiat's balance sheet as net debt jumped to 5.2 billion euros from 3.8 billion at the end of 2002, above a 3.0 billion limit set by banks last year, when they gave Fiat a three billion euro loan convertible into stock.
Credit analysts cited seasonal effects and Morchio repeated his commitment to slash debt to within the banks' targets.
The sale of insurer Toro, Fiat Avio and customer financing unit Fidis should raise about 6.5 billion euros and help cut debt, Morchio said, adding Fiat should make a capital gain of up to 900 million euros on Fiat Avio.
Analysts said high cash burn at Fiat Auto was a top problem.
"This highlights that after the divestitures of cash generative businesses, the cash burn could get worse rather than better," said Morgan Stanley analyst Adam Jonas.
Fiat Avio and Toro made 241 million euros of cash last year, helping limit group negative cash flow to 1.65 billion euros.
Fiat Auto, which cut thousands of jobs last year and whose factories are only working at 65-70 percent capacity, reported a first-quarter operating loss of 334 million euros, widening from 180 million euros in the fourth quarter.
Fiat Auto -- 20 percent-owned by General Motors -- hopes to lure back buyers with a new version of its best-selling Punto due out in June and three new models due later this year.
Morchio saw room to cut costs in Fiat's dealer network and through its partnership with GM and said he would be meeting top GM managers later this week. GM has not yet decided whether to take part in a five billion euro recapitalization of Fiat Auto.
Also hanging over Fiat is the future of its bank loan which media reported was being renegotiated. Fiat Chairman Umberto Agnelli told reporters there were no talks on changing the deal.
Fiat's results were also hit by a weak dollar, which knocked 500 million euros off revenues at its tractor and bulldozer unit Case New Holland.
German rival Volkswagen saw first-quarter profit slashed by more than two thirds by a stronger euro and a weak market while France's PSA Peugeot Citroen's sales grew, helped by its fresh model line-up.
Morchio was downbeat about the future of Fiat's key markets, which he said were unlikely to show any turnaround until at least late 2003 as the global economy bumps along.