Fiat's Domestic Market Continues Shrinkage

MILAN, May 6 Reuters has reported that the struggling Italian carmaker Fiat (Milan:FIA.MI - news) saw its share of the domestic market market shrink sharply in March and April just as it is trying to turn around its loss-making operations. Figures from the Transport Ministry on Monday showed Fiat group sales in April totalled 61,340, down 21.7 percent year-on-year, cutting its market share to 32.06 percent from 35.48 percent a year earlier.

The figures also showed that in March -- when the ministry did not provide a breakdown by manufacturer -- Fiat sold 65,660 units, down 24.9 percent year-on-year and trimming its market share to 31.95 percent from 34.75 percent in March 2001.

The sales data comes at a tough time for Fiat which has recently seen its shares plunge to nine-year lows on concern over debt levels and its shrinking market share at home and elsewhere in Europe.

Fiat shares were down 1.4 percent shortly after the stock market opened on Monday morning when the Dow Jones index of European auto stocks (Zurich:^SXAP - news) was flat.

Fiat has underperformed the index by about 33 percent so far this year.

Monday's data showed that overall, new car registrations in Italy fell 13.36 percent year-on-year in April to 191,300, the fourth month in a row that sales in the euro zone's number three economy have fallen.

In month-on-month terms, the registration figure was also down from March when 205,500 new cars were sold.

TOUGH TO GET TRACTION

"Against this backdrop it's going to be harder for Fiat to gain any traction at all," said Xavier Gunner, a car sector analyst at UBS Warburg in London.

"It's not just a Fiat thing. They're against a very tough market backdrop as well. Everything's heading in the wrong direction at this moment," he said.

Gian Primo Quagliano, head of research at market study group Promotor, noted the 13.4 percent fall in total April sales was less precipitous than a drop of more than 18 percent in March.

But he said the market would remain negative for the short term at least.

Gunner said slack demand for cars was probably a "hangover" after the Italian government offered incentives for consumers to buy new vehicles last year.

On Friday, Fitch Ratings said it might cut Fiat's debt ratings by a notch, citing the poor performance of the car division as well as the pace of a plan to sell assets which is key to reducing net debt of six billion euros.

The move by Fitch came just over a week after Standard & Poor's similarly said it might cut Fiat's ratings.

Fiat Chairman Paolo Fresco last week countered speculation that Fiat Auto might have to be sold to General Motors to fend off the crisis.

GM bought a 20 percent stake in Fiat Auto two years ago when the Italian group also secured a put option allowing it to sell the remainder of the division to GM from 2004.