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Fiat third quarter profit falls even as auto unit swings to profit

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Fiat SpA reported a 76 per cent drop in third-quarter earnings Thursday compared to results inflated by one-time gains a year ago. But its core automaking division posted its fourth straight quarterly profit on strong sales of its flagship compact car, the Grande Punto.

The parent company earned 195 million euros (US$245 million) in the third quarter, down from 818 million euros a year earlier. The latest results were higher than the 160 million euros forecast by analysts.

The Turin-based automaker said profit from its auto division rose to 51 million euros ($64 million) compared with a loss of 85 million euros in the same period a year earlier.

As well as making cars, Fiat makes trucks, agricultural machinery and auto parts.

Group revenues increased 11.4 per cent to 11.8 billion euros ($14.8 billion), driven by a 28 per cent increase in Fiat Auto revenues to 5.5 billion euros ($6.9 billion).

``It has been a good quarter, a good continuation of the process that started in 2004,'' CEO Sergio Marchionne told a conference call. ``The car business has now completed a full 12-month cycle of profit generation. I think we have relatively good evidence of the fact that the car division has learned how to generate profits ... We have broken the historical trend.''

Marchionne, who also heads the auto division, has turned around the once-failing automaker with an ambitious slate of model launches, cost-cutting measures that include key industrial tie-ups and realignment of the management team. Fiat snapped a 17-quarter string of losses during the last quarter of 2005.

Symbolically closing the period of Fiat's relaunch, the automaker also introduced a new logo _ elongated lettering on a red background encased in chrome, recalling the logo used from the 1931-1968.

Fiat shares fell 3.8 per cent to close at 13.54 euros ($16.98) on the Milan stock exchange.

Patrick Juchemich, an analyst with the Sal. Oppenheim bank, said the market was disappointed that Fiat did not increase its 2006 earnings guidance of 800 million euros ($1 billion) as it headed into the traditionally strong fourth quarter.

Marchionne responded saying that while achieving the end-of-year targets would be ``relatively easy,'' it was too close to the end of the year to revise them.

The CEO acknowledged that the push for efficiency was the most pressing issue in the car business, responding to analysts concerns about margins.

``I think the single largest shift in profitability in the car side is going to come from application of some rigorous and disciplined manufacturing approaches to the Italian car plants,'' Marchionne said. ``It is the main issue. I think it has cost us a significant amount of resources, both financial and human. I think it needs to be put to bed and needs to be put to bed quickly.''

After the Fiat Punto, the next important launch will be the new Bravo, Fiat's C-Segment entry to replace the old Stilo. The Bravo will be launched on Jan. 29, with delivery to dealers expected about a week later, Marchionne said.

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Fiat third quarter profit falls even as auto unit swings to profit
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