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Fiat pinning its hopes on new Punto model

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Fiat pinning its hopes on new Punto model

Italian carmaker launches new model today

By Aidan Lewis / Associated Press

TURIN, Italy -- Fiat is hoping its new Punto, endowed with a few extra centimeters (inches) and dash of sporty Italian design, is the car that will lift its auto division firmly out of the doldrums.

Baptized the "Grande Punto" or "Big Punto" because of its swollen size, the car will be officially launched Tuesday, the latest in a raft of new models proposed by the Turin-based auto maker.

But the company has made it clear that as it seeks to reverse the long decline of its once-great car business, it is pinning its hopes on the Punto ahead of the rest.

"Among these new models the most important is the new Fiat Punto," said Matteo Cariglia, an analyst at Actinvest. "The management has stressed a lot the innovativeness of this new car," he said.

Fiat is investing around 18 billion euros ($22.2 billion) in 20 new models between 2005 and 2008: the Punto, which represents around a quarter of the company's car sales, is expected to be the most popular.

Fiat has sold 6 million Puntos since it first launched the car in 1993. In 1997 it became the best-selling car in Europe.

The new model comes at a critical time for Fiat, which asserted it independence in February after an alliance with Detroit-based General Motors broke off.

Under the 2000 alliance, Fiat had the option to force GM to take over its auto unit, but the American company ended up paying 1.55 billion euros ($2 billion) to get out of the deal.

Patrick Juchemich, a senior auto analyst for the Sal. Oppenheim bank, said the Punto had benefited from technical input from GM and that the car had a good chance of doing well.

Nonetheless, the Punto is a "critical car for the survival of the auto sector" at Fiat, Juchemich said.

Fiat's market share in Italy has more than halved from about 60 percent in the late 1980s, while the its share in Western Europe has dropped from 14 percent to 7 percent in the same period.

Fiat Auto SpA, which has been losing money since 2000, is aiming to be in the black starting in 2007, while the Fiat group is hoping to post a net profit this year. Fiat Auto SpA accounts for around 40 percent of Fiat group's revenues.

Last week Fiat CEO Sergio Marchionne upped the stakes, saying that following the launch of the new Punto, the final quarter of this year "is that of our turnaround."

Though heavily indebted, Fiat Auto has been showing some signs of revival in recent months. Fiat says this is partly due to a new strategy to provide its new models with more features and more design -- and at a higher price.

Marchionne has said the new Punto will cost around 2,000 euros ($2,500) more than its predecessor, which cost between 10,600 euros and 15,000 euros ($13,300-$18,800).

The company says this pricing allows Fiat Auto's bottom line to improve, even when car sales drop, as occurred in the company's second quarter results this year.

Helped by higher-than-expected sales of the Fiat Panda and the Lancia Ypsilon, both launched in Sept. 2003, Fiat Auto posted revenues of 5 billion euros ($6 billion), 2.4 percent up from the same period in 2004.

Fiat said the split with GM gave it the chance to decide its own strategy and return to its Italian roots.

But analysts have warned that, in a competitive international market, it will be hard for Fiat to recover ground in its domestic market.

In Italy, the company also faces fierce opposition from Italian labor unions, which have repeatedly staged strikes to protest the company's restructuring plans, amid fears of layoffs.

Marchionne has promised that no Italian factories will be closed, though part of the old Mirafiori plant near Turin has been sold off and Fiat has used temporary layoffs to ease production.

The new Punto will be manufactured mainly at Fiat's plant in Melfi, southern Italy, which was built specially to produce the Punto. It is aiming to produce 360,000 units of the new model each year.


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