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Fiat Net Profit Soars as Automaker Promises the First Dividend Since 2002

Fiat reported Thursday that its net profit soared in the fourth quarter as the core auto division posted a nearly five-fold earnings gain, allowing it to pay a dividend for the first time since 2002 to cap its turnaround.

The Turin-based maker of cars and trucks said net profit in the fourth quarter of 2006 ended Dec. 31 was 452 million euros($587 million), from 38 million euros a year earlier, lifted by one-time asset sales.

Trading profit at the auto unit, which accounts for some 80% of group earnings, jumped from 95 million euros($123 million) in the fourth quarter from 21 million euros in the same period a year earlier on strong sales of its flagship compact car, the Grande Punto.

Fiat shares, which have been gaining in recent days on earnings expectations and company news, were down 1.1% in afternoon trading at 15.91 euros ($20.66).

"I don't think the historic numbers are what matters. There was nothing of controversy in the numbers. What matters are the promises for 2007 and 2008. The key thing is, can Fiat Auto continue to progress in Europe and in Brazil in 2007," said Max Warburton, an analyst at UBS, which last week raised its earnings guidance on Fiat to 20 euros ($26) a share.

Full-year 2006 net profit at Europe's sixth-largest automaker by sales was down 20% from a year earlier, at 1.07 billion euros ($1.38 billion) from 1.33 billion in 2005, when more assets were sold.

Fiat also announced it will pay a dividend for the first time since 2002. The automaker intends to pay a total of 276 million euros ($358 million) in dividends across all share classes, with a dividend of .155 euros (20 cents) per ordinary share. The dividends are subject to board approval at a meeting Feb. 20.

Revenues were up more than 11% in 2006, reaching 52 billion euros ($67 billion), with a trading profit of 2 billion euros ($2.6 billion), double the 2005 levels, Fiat said. Fourth quarter revenues were up 5.5% to 14 million euros ($18 million) from 13.1 million euros a year earlier.

The once-failing automaker, which makes cars under the Fiat, Lancia and Alfa Romeo brands as well as trucks and agricultural and construction vehicles, returned to profitability in 2005 under the stewardship of CEO Sergio Marchionne, who took over in 2004.

NEW SLATE

Fiat noted that 2006 marked the end of the automaker's turnaround, achieved through "a clean break with the past."

Marchionne jettisoned noncore businesses, has pursued a strategy of targeted alliances after successfully negotiating Fiat out of a broader alliance with General Motors, and has set an ambitious slate of new car releases.

On the strength of new releases, Fiat reported deliveries up 16.7% to nearly 2 million units _ outperforming the overall market. Fiat increased deliveries by 17% to 1.2 million units in a flat Western Europe market with sales in Italy and Germany four and five times higher, respectively, than the market demand and by 15% in Brazil, where the market expanded by 13%.

Looking ahead, Fiat aims to roll out 23 new models through 2010 in a move to improve its mix and increase sales to 2.8 million a year. New cars due out in 2007 include the new Bravo, Fiat's attempt to get a foothold in the profitable mid-size market, which goes on sale Feb. 1, and the new Fiat 500, due out in September.

"With year 2007 starts the launch of an ambitious growth and profitability plan, which by its completion in 2010 will have seen the rebuilding of Fiat into a significant international industrial enterprise," the company said.

Fiat announced this week that it is reorganizing its automobile business, creating four new companies for its auto brands and renaming the auto division Fiat Group Automobiles. For some, the move suggested that Fiat may be preparing to spin off its auto business into a separately listed unit.

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