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Fiat pumps $2.5B into car unit
MILAN, Italy (CNN) -- Fiat, the loss-making Italian industrial giant, plans to splash 2.5 billion euros ($2.5 billion) in cash into its crisis-hit car unit. The company made the announcement on Thursday as it posted a third-quarter operating loss of 339 million euros, with Fiat Auto continuing to bleed cash. Analysts polled by Reuters had expected an operating loss of 156 million euros for the three months to September 30. Fiat warned losses for the full year would be between 500 million and 600 million euros. Those figures are worse than analysts' and Fiat's own forecasts. The group's Fiat Auto business had been expected to narrow operating losses in the fourth quarter.
Sales at Fiat Auto fell 10.2 percent to 4.66 billion euros in the third quarter of 2002. "I do not believe the auto unit will be able to break even in the fourth quarter. I just don't see how it can do it," Partrick Juchemich, auto analayst at Sal Oppenheim, told Reuters. Fiat -- the maker of Alfa Romeo, Lancia and Fiat models -- plans to cut 8,100 jobs to restore profitability. But it needs the Italian government to give it "crisis status" before it can implement the job cuts. Fiat Auto Chief Executive Giancarlo Boschetti has said the company will spend up to 2.5 billion euros annually to develop new cars. The company had hoped the new Stilo would boost sales but it has failed to galvanise European consumers. Fiat Auto posted an operating loss of 823 million euros in the first half this year. The company declined to say how it would raise the cash to pump into Fiat Auto. Banks are reluctant to loan more money after giving it more than 3 billion euro and the Italian government has dashed the hopes of the union and workers that it would step in to take a stake in the business to protect jobs. GM, which paid $2.4 billion to buy 20 percent of Fiat in 2000 and has an option to acquire the remainder of the automaker in 2004, is also reluctant to lend more money. GM is struggling to contain losses at its European operations and taking on Fiat now would complicate efforts. Fiat's stock, which has been more than halved this year, rose 0.25 percent to 8.00 euros in early afternoon trading on Thursday.
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