Fiat Q2 loss of euro168 million

MILAN - Italian automaker Fiat on Wednesday reported its second straight quarterly loss on slumping sales of trucks and farm equipment, while its strong small-car lineup helped stanch the losses thanks to European incentives to scrap old cars and buy new, more environmentally friendly ones.

The second-quarter net loss of euro168 million compares with a net profit of euro604 million in the same period of last year.

Still, it was an improvement from the much wider net loss of euro578 million in the first quarter.

"The second quarter was well above our own internal expectations," Fiat CEO Sergio Marchionne told an analyst conference call. He cited strict internal cost controls and reductions in production, both of which will continue.

Fiat Group SpA, which last month took a controlling stake in U.S. automaker Chrysler, said incentives for scrapping old cars for new, less-polluting models in some European countries gave a needed boost to lagging car sales amid a global contraction, helping narrow the losses.

Turin-based Fiat, which makes cars under the Fiat, Lancia and Alfa Romeo brands, said revenues were down 22.5 percent, or euro13.2 billion ($18.7 billion), compared with euro17 billion in the same period last year.

"The global economic crisis continued to have a significantly negative impact on demand levels for all the group's business, but with signs of improvement in certain markets compared with Q1 levels," Fiat said in a statement.

Fiat maintained its forecast of trading profits, or operating earnings before one-time pluses and minuses, above euro1 billion ($1.36 billion) and debt levels below euro5 billion.

Fiat shares fell 1.7 percent in Milan trading to euro7.81.

The company outperformed most competitors in the passenger car sales thanks to its lineup of smaller cars with clean engine technology, with its Panda model the best-selling small car in Europe. The scrapping incentives have tended to favor makers of small cars over more expensive, fuel-guzzling vehicles.

Revenues for Fiat Group Automobile, the company's car business which makes up about 40 percent of Fiat's sales, were down 11 percent.

The scrapping incentives helped drive Fiat deliveries in Europe up 3.4 percent to 317,000 units. Overall, Fiat passenger car deliveries were down 1.3 percent, to 514,600 units.

Addressing analyst concerns about the impact on Fiat if Italy, France and Germany discontinue the incentive plants, Marchionne said "we will manage whatever happens."

"There is not a single doubt that if the incentives are removed from the European arena, they will have a substantial impact on demand. We will weather that storm," Marchionne said, adjusting production and using the kind of cost containment measures it already has been employing.

Fiat's flashier brands, like Maserati, suffered a 46 percent decline in revenues to euro111 million on a 48 percent decrease in deliveries. Ferrari revenues were down 12 percent to euro450 million.

Sales of its Iveco brand trucks suffered especially in the economic downturn, sliding 43 percent from a year earlier to euro1.8 billion from euro3 billion. Still, it posted a trading profit of euro18 million, a steep decline from euro248 million in the same period last year.

Revenues in the agriculture equipment business, Case New Holland, were down 21 percent to euro2.9 billion, compared with euro3.6 billion in the same period a year earlier.

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