Fiat reportedly clawed its way to an operating profit in the second quarter and confirmed its 2004 targets, but its core car-making division Fiat Auto posted a worse than expected loss due to still sluggish sales and a strike.

In a statement cited by Reuters on Monday, Fiat said it made a group operating profit of €18 million ($US21.88 million), slightly higher than the €12 million median forecast in the news agency's poll of 11 analysts last week. This compares with a loss of €25 million a year ago.

But Fiat Auto, which dragged the 105-year-old company into its worst crisis in 2002, reportedly continued to struggle and posted a loss of €282 million euros, worse than the €180 million expected by analysts and more than the €234 million lost in the year-ago period.

According to Reuters, Fiat said the wider loss was due to a policy of cutting dealer inventories, higher research and development costs and a three-week strike at the southern Italian Melfi plant, which lost Fiat Auto 40,000 cars.

"(The loss) reflects the impact of lower sales in Italy and the rest of Western Europe...which could not be fully offset by higher margins on new models and sales increases elsewhere in the world," Fiat reportedly said.

However, Reuters added, Fiat said it was still confident it would break even at operating level in 2004, as forecast in a recovery plan drawn up last year.

La Repubblica newspaper had reported last week that the target would be pushed back, the news agency noted.

Reuters said Fiat Auto's revenues grew just 2.6% year-on-year in April-June despite a raft of new models that have been launched to win back buyers and reverse a sales slump - in unit terms, sales were up just 2%.