Fiat Takes Major Step Towards Global Megagroup

The 'demerger' calls for truck maker Iveco, agricultural and construction machines manufacturer Case New Holland and a part of engine maker Fiat Powertrain Technologies to be part of a new group to be called Fiat Industrial.

With board approval for a spinoff of its non-car activities, Fiat moved closer towards the dream of its ambitious chief Sergio Marchionne to become a global megagroup. The maverick chief executive is seen to be positioning the group to join the fray as major world automakers seek new alliances, a year and a half after orchestrating a hook-up with Chrysler.

Marchionne has said the two companies combined would produce six million vehicles by 2014 from four million today.

Analysts expect the new structure to help Fiat not only to integrate with Chrysler, but also to form other alliances as new players come onto the scene from emerging economies such as Russia and India.

The "demerger" calls for truck maker Iveco, agricultural and construction machines manufacturer Case New Holland and a part of engine maker Fiat Powertrain Technologies to be part of a new group to be called Fiat Industrial.

The operation will leave a car-only Fiat with its own brand plus Ferrari, Lancia, Alfa Romeo, Maserati and its components and motor activities.

Fiat said the move would "provide strategic and financial clarity to both businesses and enable them to strategically develop independently of each other."

The change will also "allow for the proper valuation in the capital markets of these two businesses," Fiat said in a statement following the board meeting, which was held in Chrysler's home base of Detroit, Michigan.

Also on July 21 , the group announced a return to black ink in the second quarter, posting a net profit of 113 million euros (US$145 million) compared with a loss of 179 million euros in the same period last year.

In 2009, the group lost 848 million euros as the global auto industry was devastated by the world financial crisis, and in the first quarter of 2010 it posted a net loss of 21 million euros.

Chrysler meanwhile posted a loss of $3.8 billion for the period between June 10 last year -- when it left bankruptcy protection -- and December 31 but narrowed its 2010 first-quarter net loss to $197 million dollars from $2.5 billion a year earlier.

Buoyed by the second-quarter results and citing improved demand, Fiat said it would "very likely" revise its targets upwards once third-quarter results are in.

Current targets include a turnover in excess of 50 billion euros and an operating profit of no more than 1.2 billion euros and a net result at or near the break-even point.

Fiat's "demerger," first announced in April, will take effect on January 1, 2011, said the group, Italy's biggest private employer with a national workforce of some 80,000.

Copyright Agence France-Presse, 2010

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