Fiat Sees Difficult 2003, Hopes for 2004

TURIN April 12, 2003; Jane Barrett writing for Reuters reported that Agnelli said on Saturday that 2003 would be another tough year for the carmaker but that he hoped to pull out of Fiat's worst-ever crisis in 2004.

"This year will be very difficult but next year we hope to find a way forward and work out how to resolve our problems," Agnelli told reporters at a meeting of the Italian employers federation.

"Last year was a terrible year for the company but in 2003 we should see everything coming together so that in 2004 we should reach the turnaround we all hope for," he said.

It was the first time Agnelli had given forecasts since he took over as chairman earlier this year. In 2002, a slump in car sales and high cash burn dragged Fiat Auto, and so the rest of the group, to record losses.

As Fiat battles through a restructuring plan including thousands of layoffs and plans to launch new models, analysts have said the Turin-based company should take up an option to sell its 80 percent stake in Fiat Auto to U.S. giant General Motors .

Last year, Agnelli said he could imagine a future Fiat without cars but since his brother and Fiat patriarch Gianni died and left him in charge, Agnelli has said he hopes never to exercise the "put" option to sell to GM.

"The (Fiat) group makes cars, trucks, tractors and land moving equipment. That is our history, that will be our future and that is what we are focusing all our attention on," Agnelli reiterated on Saturday.

GM bought 20 percent of Fiat Auto in 2000 and the two set up joint ventures which Agnelli said were yielding "satisfying results."

The relationship with GM is extending beyond making powertrains and buying parts together and last week Fiat announced plans to make its first sports utility vehicle (SUV) with Japan's Suzuki, also 20 percent owned by the U.S. giant.

The SUV and two new cars due to be launched later this year -- the Gingo compact car and larger Idea -- are part of a recovery plan that sees Fiat investing 2.5 billion euros a year until 2005 to launch 20 new models.

MORE MONEY?

Fiat's revival was kickstarted with a three billion-euro bank loan last year and the group has sold a spate of assets, including insurer Toro, to raise cash. But a question mark still hangs over a five billion-euro capital increase for Fiat Auto announced in February.

Fiat has already put forward three billion euros by cancelling intra-group loans but the other two billion -- some of which should come from GM -- is yet to materialize and the world's largest company has been very cool on stumping up any more cash.

Some money could drip down from Giovanni Agnelli & C., the family money box at the top of the chain of control, which has approved a 250 million-euro capital increase of its own.

Financial daily Il Sole 24 Ore reported on Saturday that the rest of the capital increase had been put on a back burner while cash from asset sales dripped into Fiat's coffers.

"The family has given an important sign of its commitment with finances, by selling other assets and with Umberto Agnelli taking over as chairman," said Gianfranco Verdini, one of the leaders of the Uilm metalworkers union in Turin.

Rainer Masera, chief executive of Fiat creditor bank Sanpaolo IMI (Milan:SPI.MI - News) said he had "full confidence" Fiat would pull through under Agnelli.