Loss-making Italian car maker Fiat Auto is unveiling a new recovery plan this week but many experts are already predicting its demise and say PSA Peugeot Citroen and Korean manufacturers may benefit the most, Reuters reported.

The news agency said that Fiat Auto, once Europe's biggest car maker, risks sharing the same fate as the now defunct British Leyland and cites analysts as saying the strategy to be announced on Thursday has little chance of halting a march to eventual oblivion.

"I don't see Fiat (Auto) disappearing overnight, not least because no one wants to acquire it and the Italian government won't let it suddenly go under, but we may see a fairly rapid decline and its demise certainly benefits the rest," Graeme Maxton of UK consultancy Autopolis told Reuters.

Shunned by international investors last year as the company lurched through its worst ever crisis, Fiat shares may get a short-term boost from the new plan, and the company said in May it was confident of a "real change" by early next year, Reuters noted.

But the news agency said the long run will be tough in a sector plagued by measly profit margins, overcapacity and sliding demand and where the number of players has dwindled to 12 from 52 in 40 years. "Fiat is a failing national car company and it is very, very difficult to find a way back from that situation," Karel Williams, a motor industry researcher at Manchester University, told Reuters.

According to Reuters, most analysts say its Fiat and Lancia brands have little appeal left and, with the Ferrari sports car business excluded from Fiat Auto, the sporty Alfa Romeo marque has most potential. If Fiat is willing to sell, the Alfa brand could get snapped up.

Reuters said General Motors, which owns 20% of Fiat Auto, may benefit from manufacturing economies and increased market share whether it is forced to buy the rest or not, but rival makers of small cars also stand to gain.

According to the news agency, European car makers are producing more cars than people want but that problem would be alleviated if Fiat Auto, whose plants operated at 65 to 70% of their capacity in the first quarter, were to trim production further. Last year alone, Fiat laid off 15,000 workers in a bid to cut costs, the report noted.

"They may take out some capacity and given there's 20-25% too much in Europe, that will help overall," Maxton told Reuters.

Reuters noted that Fiat production has already fallen 25% since 2000 as demand for its models slumped and its market share hit a record low – it is now Europe's sixth-biggest car maker.

Experts told the news agency that rivals will keep stealing sales from Fiat even in Italy, despite plans for fresh models, because traditional brand loyalty is waning in Europe’s third-largest market.

Reuters said that, in the last year, France's PSA Peugeot Citroen, led by its lower-margin Citroen brand, has stolen more of Fiat's market share then any other firm and experts say that trend will continue.

"PSA is a successful version of Fiat, making relatively cheap and cheerful cars," Manchester University's Williams told Reuters.

Korean and Japanese car makers are also likely to gain, the news agency added.

"A company like Hyundai is a serious threat to the European order, especially in the A and B (small car) segments where Fiat is traditionally strong," Mark Fulthorpe of motor industry forecaster CSM Worldwide told Reuters.

Acording to the news agency, Fulthorpe argues that the failure of the Stilo model, which was supposed to take Fiat up-market and boost its fortunes in the mid-sized C segment, means it must now retrench and focus on small cars suited to narrow Italian streets, which is just where Korean rivals are most threatening.

In any case, the 2.5 billion euros a year earmarked by Fiat for 20 new models until 2005 does not seem enough to compete, industry experts told Reuters.

If Fiat exercises its option to sell the remaining 80% of its car arm to GM from next year, Fiat Auto would become a fairly insignificant part of the world's biggest carmaker's sprawling empire, Reuters said, noting that GM produced 8.3 million vehicles last year while Fiat made about two million.

Few analysts expect it to survive as a fully-fledged manufacturer in its own right even if GM ultimately takes Fiat Auto under its wing as a result of a put option, the report said.

Fulthorpe told Reuters he expected a migration of Fiat products to GM-led platforms with Fiat keeping only some of its manufacturing activities.

"We think GM is the stronger partner and Fiat does not have enough money for its product development so irrespective of the final equity position the only logical way forward for Fiat is to continue to develop vehicles with GM," he said, according to the Reuters report.

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