Fiat's car division turns a corner

Fiat HAS marked a continued improvement in its fortunes, predicting that it would be "relatively easy" to meet its profitability target for the whole of 2006.

The Italian industrial group's car division is now a firm favourite of investors warming to a turnaround story, told by Sergio Marchionne, Fiat chief executive. Presenting Fiat's results for the third quarter earlier this month, Mr Marchionne said the company "had broken the historical trend". He said he believed, after the car division had completed a profitable 12-month cycle, that it had shown it knew how to make money.

The relaunched Punto car, he said, was set easily to surpass its full-year sales target of 360,000. Dealer order numbers from a few days before pointed to sales nearer to 400,000. Fiat shares, which were trading at about €4.70 just 18 months ago, are now near €14 each.

Much now depends on some high-profile car launches over the next 18 months if the momentum from the Punto is to be maintained. At the end of January Fiat is launching a new Bravo, a name it has used before, to replace the Stilo. Fiat said it hoped to sell 120,000 Bravos a year in an important larger car segment of the market that accounts for 25 per cent of European car sales.

Mr Marchionne said Fiat's performance in the segment had been "uneven" and that the Bravo would be part of efforts to "rebuild our credibility in this sector".

New Alfa and Lancia models in the same market will follow and next year will also see the much anticipated return of the iconic Fiat 500.

Fiat hopes to post an operating profit from its ordinary businesses for 2006 of €1.9 billion, with net income of €800 million not including one-off gains. Net income in the third quarter was €200 million before one-off items, an improvement on the €200 million loss posted in the same quarter in 2005.