Fiat SpA is expected to report on Friday that its troubled car making unit Fiat Auto has cut its fourth-quarter operating losses to nearly break-even, helping the full-year group operating loss narrow substantially in 2003.

A Dow Jones report said that, according to the average of eight analysts' estimates, Fiat is forecast to report €104 million in earnings before interest and taxes, or EBIT, for the last three months of 2003, compared with €3 million in the same period a year ago.

That improvement comes from Fiat Auto, which is expected to report that its operating loss narrowed to €25 million for the fourth quarter, compared with a €180 million loss in the same period a year ago, the report said.

Dow Jones said that analysts expect the reduced Fiat Auto losses and profitable performances at all other divisions to help narrow Fiat's full-year group EBIT loss to €544 million from €762 million.

According to the report, Fiat Auto's full-year operating loss is forecast at €901 million compared with €1.34 billion, boosted by cost-cutting in the first half of the year and sales of new models in the second.

Dow Jones noted that the last three months of 2003 were the first period during which the fully redesigned new Panda and restyled and updated Punto models, both big-selling small cars, were available for an entire reporting fiscal quarter.

Two analysts polled by the news agency expect Fiat Auto to be out of the red for the quarter, while two expected a loss of more than €60 million.

Caboto analyst Monica Bosio told Dow Jones that, as long as the unit's operating loss is less than €50 million, failure to break even for the quarter "makes no difference, since in both cases the credibility of the business plan is enhanced."

The report said analysts expect Fiat to report a consolidated net loss of €1.26 billion, less than a third of the €4.3 billion loss reported for 2002. Forecasts spanned a broad range, due to varying estimates of how many restructuring charges the company will take in its 2003 accounts. The average was around €1.2 billion in charges, against around €560 million in capital gains on asset sales.

Consolidated group revenue is expected to drop 14% to €47.7 billion from €55.6 billion a year earlier, reflecting Fiat's sale in 2003 of its profitable insurance and avionics divisions. Fiat Auto revenue is expected to decline 9.1% to €20.1 billion from €22.1 billion following production cuts to boost margins, the report added.

Dow Jones said the full-year EBIT forecast indicates that analysts expect combined operating profit of €357 million for the full year and €129 million for the quarter from units other than Fiat Auto, which range from a tractor maker to a small publishing concern. Those figures are up more than 50% from 2002, factoring out the Toro insurance, Avio avionics and Fraikin truck-leasing businesses that Fiat sold last year.

Chief Executive Giuseppe Morchio's turnaround plan, the group's third since 2001, foresees group operating break-even this year and the same at Fiat Auto in 2005, Dow Jones added.

According to the report, analysts say the next two quarters will be crucial for Fiat Auto, which in January began selling a new small multipurpose vehicle dubbed the Idea and has no other volume car launch until 2005.

They reportedly forecast Fiat's net debt at the end of 2003 at €2.8 billion, a slight reduction from €2.95 billion at the end of September.