MILAN -- Italy's Fiat surprised the market with a much narrower third-quarter loss for its core car unit, despite flat sales, but executives stopped short on Wednesday of revising fourth-quarter forecasts.
Fiat Auto, which is pulling back from its worst-ever crisis, made a trading loss of 85 million euros ($102.6 million), improving on last year's 282 million euro loss as it continued to slash costs. Analysts had forecast a 141 million euro loss.
"The probability of a profit (for Auto) in the fourth quarter is now very high," said analyst Philippe Houchois at JP Morgan. "Whether that puts an end to Fiat's trouble is too early to say, but it's a step in the right direction."
Net profit and sales for the quarter were a little below forecasts, however, and analysts remained worried over Fiat's ability to grow in a competitive market.
Fiat Auto expects to post a trading loss of 317 million euros in 2005, and Chief Executive Sergio Marchionne said the turnaround remained difficult.
"I don't want to discourage your imagination about what the fourth quarter will be like, but I prefer your imagination to our commitment," he told analysts during a conference call. He said he would not change full-year guidance.
Fiat posted a 232-million-euro group trading profit for the third quarter, from a 30-million-euro trading loss. Ten analysts polled by Reuters gave a median forecast of 120 million euros.
TIE-UPS AND NEW CARS
Group net profit came in at 0.8 billion euros, inflated by one-off gains from a stake sale and the conversion of a loan into equity. Six analysts had forecast on average 1.105 billion euros.
Marchionne aims to pull Fiat Auto back to profit by trimming costs and striking alliances with other carmakers such as Ford Motor Co. and Indian group Tata Motors.
Fiat is also launching new models, and Marchionne said a sales target of 360,000 new Fiat Puntos in 2006 was "decent and achievable", based on sales of 35,000 units since the car was launched in September.
But he showed less optimism over Fiat's Alfa Romeo sports car, worrying over strong competitive pressure from Germany's Volkswagen.
"We're working on technical issues with the vehicles, but that's not the answer," he said. "It's a question of finding out which versions of that car are needed to fight competition."
Fiat Auto sales rose 0.6 percent to 4.341 billion euros, below expectations of 4.495 billion-euro sales.
Marchionne was also cautious about Fiat's planned return to capital markets. He said that given the debt market's volatility, he wanted to watch reaction to other industry players before deciding on the timing and size of a bond.
Fiat's group net debt stands at 4.7 billion euros.
Results for Fiat's truck maker Iveco and farm equipment company CNH were better than expected. CNH made a trading profit of 133 million euros, up from 112 million euros last year. Iveco's trading profit was 102 million euros, from 74 million euros in the year-ago period.