Fiat’s H1 profit plunges 64 pc

The car division continued to prove the weak point for the group, swinging to an operating loss of 257 million euros for the first half, compared with a profit of 52 million euros in the previous year.

Despite the grim figures, Fiat suggested it hit bottom during the second quarter, saying the impact of its new strategy was already bearing fruit. The company also renewed its pledge to bring the car division back into the black by the end of thisyear.

Although Fiat’s second-quarter pre-tax profit jumped to 327 million euros from 50 million euros in the first quarter of this year, it was well below the 708 million euros posted during 1998’s second quarter.

Second-quarter group sales rose 14 per cent to 12.5 billion euros from 11 billion euros in the first quarter, although second-quarter sales were virtually flat compared with year-ago figures. Auto-sector sales were 6.45 billion euros, unchanged from the first quarter, but 8.1 per cent below the year-earlier second quarter — in part, Fiat said, because of the weakness of the Brazil’s currency, the real.

The debut of the remodelled Fiat Punto subcompact, Lancia Lybra Sedan and Iveco Daily delivery truck, along with other new products, will boost second-half sales, particularly in the fourth quarter, Fiat said.

Fiat is in the midst of a profound restructuring in an effort to meet the ever-tougher competition in its core car business, as well as other key divisions such as farm machinery,industrial vehicles and car components. It is looking to do this through internal changes aimed at cutting costs and revamping management structures as it pursues a series of mergers and acquisitions to make each of its main businesses globally competitive.

While Fiat is counting on the dual strategy of reorganisation and acquisitions to shore up the group’s overall financial performance, the second-quarter figures reflected the weakness it continues to suffer in its auto division.

The cars continue to struggle in emerging markets, despite some improvement in Poland and Brazil. In Europe, the company suffered this spring from the replacement of its flagship city car, the Punto. The old model is being phased out, but the new model won’t go on sale until September.

Fiat must wait to see the full effects of deals it closed over the past several months. A few months ago, Fiat’s farm-machinery division New Holland NV unveiled plans to take over Case Corp. of the US. But the $4.3 billion (4.04 billion euros)deal isn’t likely to become fully operative until next year, with anti-trust clearances not expected until about the third quarter. Earlier this month, Fiat also unveiled a deal with Mitsubishi Motors Corp. to produce a new sports-utility vehicle that will hit the showrooms in 2001.