Fiat's market share slips again

Fiat plans to float its Ferrari sports car unit in an effort to improve profits and cut debt

MILAN, Italy -- Struggling carmaker Fiat saw its share in the Italian market shrink again last month as the global downturn and foreign competition cut into sales.

But despite its poor performance, the group said it had no immediate plans to sell its loss-making car division.

Fiat's sales fell 16.8 percent to 64,950 units in May from a year earlier, the Transport Ministry said on Wednesday, pushing the group's market share down to 31.06 percent from 33.22 percent year-on-year.

The group -- known for the Alfa Romeo, Lancia and Ferrari brands -- has also seen its European market share decline, falling to 7.8 percent from 10 percent a year earlier.

Fiat's dwindling market share comes as other European carmakers -- such as France's Peugeot (PUG) and Renault (PRNO) and Germany's Volkswagen (FVOW) -- increased sales in Italy last month. Sales by Japanese carmaker Toyota were also higher, the ministry said.

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Car sales in Italy as a whole totalled 209,100 in May, down 11 percent from a year earlier, the ministry said. It was the fifth month in a row that sales have declined.

The weakening market and growing competition has aggravated Fiat's financial problems.

Fiat, Italy's largest industrial group, plans to layoff more than 3,000 workers, sell assets and float its sports car business Ferrari in an effort to reduce its 6.6 billion euro ($6.2 billion) debt.

Last month, Fiat's main creditor banks -- Banca di Roma SpA, IntesaBCI, Sanpaolo IMI -- agreed to a 3 billion euro finance package and said they could take control of the financial services of the loss-making Fiat Auto division.

However, there has also been growing speculation that Fiat -- which posted a first quarter loss of 529 million euros -- may be forced to sell its 80 percent stake in Fiat Auto, which has been the biggest drain on the group's finances.

Fiat has an option to sell its stake to General Motors from 2004. GM bought the other 20 percent of Fiat Auto two years ago.

On Wednesday, Fiat Chairman Paolo Fresco said the group would not sell its stake in the unit before 2004.

"We have no plan to advance the put (option) and I don't think GM has either," Fresco told the Wall Street Journal in an interview. "The put is obviously an asset, but we have not decided whether we will exercise it."

GM officials said on Monday they had no intention of buying Fiat Auto before 2004 and had not discussed pushing the option date ahead.

Fiat shares, which have fallen 26 percent so far this year, were up 1.1 percent to 13.08 euros in midday trading in Milan on Wednesday.