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Fiat reports higher earnings

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ROME (AP) _ Fiat SPA said Monday second-quarter earnings rose 56 per cent as it extended a turnaround and strong sales of its flagship compact car led to the third straight quarterly trading profit in the core auto unit.

The Turin-based automaker, which has sold off noncore assets and drafted an ambitious schedule of new model launches, also raised its earnings forecasts for the year.

Group net profit for the quarter came to 280 million euros (US$353 million), up from 180 million euros ($227 million) in the same period a year earlier. Revenue rose to 13.61 billion euros ($17.2 billion) from 12.1 billion euros.

The results were underpinned by the resurgence of Fiat Auto, which has been helped by sales of its Grande Punto. The auto unit posted a trading profit for the quarter of 88 million euros ($111 million) _ reversing a trading loss of 88 million euros a year earlier.

Analysts track the trading profit _ earnings before restructuring costs and one-time items from equity investments _ since net profit numbers have been skewed by asset sales.

On that basis, the auto unit exceeded by 10 million euros the amount that analysts were expecting, and chief executive Sergio Marchionne raised his full-year earnings outlook.

Fiat now sees a full-year trading profit at the auto division of 250 million euros ($316 million), up from 200 million euros expected previously, and a full year net profit at group level of about 800 million euros ($1 billion), up from the 700 million euros it previously forecast.

Last year, aided by cost-cutting, Fiat snapped a 17-quarter string of losses that threatened to shut down the crown jewel of Italian industry.

But the success of the new Grande Punto helped increase Fiat's European market share to 7.7 per cent in the first half of 2006, and Fiat Auto posted overall sales of more than one million units in the first half of the year for the first time since 2001.

Fiat had reached ``many of its objectives'' and attributed much of the success to Fiat Auto's progress, Marchionne said at a news conference.

``We still have a lot of way to go, but it is the first time that we can look at the industrial end'' positively, the CEO was quoted as saying by the Italian news agency ANSA.

Key elements in Fiat's turnaround are its partnership deals with eight companies, including PSA Peugeot and Ford Motor Co. (NYSE:F), aimed at sharing development costs and giving Fiat footholds in markets such as India and China.

In the days before the second-quarter results, there was widespread speculation that Fiat would expand its alliance with India's Tata Motors Ltd.

Marchionne said that it was ``still too early to talk about possible developments with Tata Motors,'' according to ANSA. ``At the moment, we are still working and I find it premature to talk about it now.''

But, Marchionne emphasized, alliances were a key part of Fiat's strategy.

``I think that there will be fresh announcements (about alliances), but this will come at the opportune moment,'' Marchionne was quoted as saying. ``We are working very hard. We are counting on making additional alliances.''

The company also announced Monday that it had extended its production and distribution agreement with Russia's Severstal Avto to produce its light truck Ducato model in the Elabuga area, in the Tatarstan region.

Fiat also said it signed a joint venture in the consumer credit business with French bank Credit Agricole SA. Credit Agricole and Fiat will establish a joint venture called Fiat Auto Financial Services, which will operate Fiat Auto financial services all over Europe. Fiat said the joint venture would be valued at 2 billion euros ($2.5 billion).

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Fiat reports higher earnings
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