MILAN, January 30: Italian automaker Fiat SpA's annual letter to shareholders on Friday is set to confirm the company's prediction of record sales and profits for 1997, analysts said.They said Fiat is expected to achieve sales of between 88 trillion and 90 trillion lire ($50.3 billion) in 1997 and post a pretax profit of about four trillion lire.
"I think that 1997 will be a peak year for Fiat in terms of both sales and profitability," said Gianluca Pediconi, an analyst at Milan brokerage Milla & Co.
"The coming year will see a return to tough competition from other European automakers launching new models, as well as the end of the Italian government's car sales incentives scheme."
Chairman Cesare Romiti's last letter to Fiat shareholders is unlikely to produce any surprises now that Romiti's decision to retire from Italy's biggest company has been made public.
The Fiat board is expected to confirm the appointment of General Electric vice president Paolo Fresco as Romiti's replacement.
Fiatenjoyed a boom year in 1997 as an Italian government car sales incentive plan triggered growth in sales for the first time since 1992. Total car sales soared by 39.2 per cent in 1997 over the previous year and Fiat itself sold 2.8 million vehicles.
Fiat Auto president and CEO Roberto Testore said last week that the company's worldwide car and truck sales would likely turn out flat this year.
Analysts said they think sales will be down by no more than three per cent as declines in Italian car sales, due largely to the ending in July of the sales incentive programme, are offset by gains elsewhere in Europe.
Sales in the Brazilian car market, where Fiat has a 31-per cent share, are expected to fall by a full 10 per cent this year -- but sales in Eastern Europe, and particularly in Poland, will continue to grow.
But analysts saw growing challenges ahead. Profit margins will be squeezed in 1998, which could force Fiat to sell off non-core assets such as chemicals company Snia BPD or publishing unitRizzoli-Corriere della Sera, they said.
Moreover, a raft of competitors are launching new car models in 1998, including Renault's new Clio and Twingo, Volkswagen's new Golf and Beetle, Mercedes Benz's A Class and Smart and a new Opel Astra from General Motors, as well as new models from Daewoo, Hyundai and Toyota.
Competitors from Korea and the Far East will have an edge because of lower prices following their currency devaluations, said analysts.
Another factor behind intensifying competition in coming years will be the opening of Italy's auto market to imports from Japan in 2000 as part of a Japan-EU agreement.
Fiat is well-positioned to face tougher competition because it is ahead of the curve on both globalisation and the creation of new models, analysts said.
As well as producing cars in Brazil, Argentina and Poland, it manufactures trucks through a joint venture in India and is in negotiations for a joint venture in China -- a crucial market for the future. Its Russian joint venture with Gatzwill begin producing its Palio and Siena world cars at the end of 1998.
"Our ambition is to sell three million vehicles by the end of the century -- 25 per cent in Italy, 25 per cent in Europe, 25 per cent in Latin American and 25 per cent in other markets," Fiat Auto SpA marketing director Loic Caperan said earlier in January.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
