Fiat write-down drives GM deeper into loss in Europe

General Motors' profits tumbled by 37 per cent in the final quarter of last year after it wrote down the remaining value of its stake in the Italian car maker Fiat, helping drive GM's European operations deeper into the red.

General Motors' profits tumbled by 37 per cent in the final quarter of last year after it wrote down the remaining value of its stake in the Italian car maker Fiat, helping drive GM's European operations deeper into the red.

The world's biggest car maker yesterday reported a decline in fourth-quarter earnings from $838m (£448m) to $569m after a series of one-off items and increased healthcare costs. It also warned it might only break even in the first quarter of this year.

Losses at GM Europe, which includes the Opel and Vauxhall brands, increased from $66m to $345m for the quarter, resulting in a deficit for the year of $742m compared with $286m in 2003.

The increased losses were due in part to the write-off on GM's 20 per cent stake in Fiat and charges associated with a restructuring programme involving a total of 12,000 job losses - about one-fifth of GM's European workforce.

GM wrote down the value of its $2.4bn investment in Fiat to just $220m in 2002 and wrote off the remainder in the final quarter of last year.

The write-down comes as GM and Fiat executives prepare to hold further talks over an agreement signed in 2000 which allows the Italian car maker to force GM to take it over. Fiat maintains that the put option remains "effective and exercisable" from next Monday. But GM says it is now invalid because since the agreement was signed, Fiat Auto has sold off some of its assets.

The two companies agreed to go to mediation late last year in an attempt to settle the dispute out of court before the end of this month. Reports yesterday said that Rick Wagoner, the chief executive of GM, and his opposite number at Fiat, Sergio Marchionne, would meet in the US over the next two days.

GM's profits last year reached $3.6bn but this was driven largely by a record performance from its finance division which reported earnings of $2.9bn. Its car-making operations made a $1.2bn profit on worldwide sales of 9.1 million units.

Mr Wagoner said he expected earnings this year to be between $4 and $5 a share compared with $6.40 last year, based on solid worldwide economic growth which would lift global sales to 62 million units.