TURIN - Fiat Auto returned to profit at the operating level in 2000, but is expected to show a net loss for the year when final financial numbers are announced on March 29.
The company has so far seen little net savings from its purchasing and powertrain joint ventures with General Motors. The alliance is expected to show its first substantial cost benefits in 2001.
Fiat SpA's passenger-car unit posted a E44 million operating profit in 2000, compared with a loss of E121 million in 1999. Revenues rose 5.2 percent to E25.36 billion.
But fourth quarter results deteriorated. Fiat Auto reported an operating profit of E66 million in the quarter, compared with a E197 million profit in the same period of 1999.
In a statement, Fiat said it increased fourth quarter spending on advertising and incentives by E150 million, compared with the same period in 1999.
Fiat also said that research and development spending grew by E67 million last year, but that it found ways to lower costs. Manufacturing costs were lowered by E350 million and other costs by E150 million.
Fiat Auto's alliance with General Motors signed in March 2000 resulted in E20 million in savings on parts purchasing. But the alliance added E30 million in costs needed to set up the companies' purchasing and powertrain joint ventures.
Fiat Auto said the alliance is expected to generate 'over E200 million' in savings in 2001, down from a forecast of E250 million when the deal was announced.
'Purchasing synergies are already showing savings higher than originally planned,' said a Fiat insider. 'On the powertrain side, the savings also look higher than what was expected. But they will take longer to be cashed in.'
Fiat Auto and GM's Opel will share more engines and transmissions than originally planned, said the source. 'But modifying existing products means engineering updates and vehicle testing that takes time and additional money,' he said.
Fiat Auto ended 2000 with 2,439,000 vehicle units sold, up 2.2 percent compared with 1999. It plans around 2.7 million for 2001. At the Geneva auto show, Managing Director Roberto Testore said the company plans to reach sales of 3 million units in 2004.
Fiat Auto's best year was in 1997, when it sold 2,739,000 units. In late 1997, Testore predicted sales of 3.2 million to 3.5 million units by 2004. The current lower forecast largely reflects the slowdown in Fiat's emerging markets. The company's 178 world car series was expected to rise to over 1 million units by 2001. But sales have stuck at around 500,000.
Fiat said the second-generation Punto, which was launched in September 1999, is off to a strong start. It needed just 19 months to reach 1 million units built. That compares to 22 months for the original Punto. In its first year, the Fiat sold 543,000 units of the second Punto, compared with 482,000 for the original Punto in its first year.