A weak European market contributed to Fiat Auto making an operating loss in the first quarter of 2001, which offset attempts to streamline the company within the GM family.

The losses prompted promises of further cost cutting.

Fiat Auto had an operating loss of £9.9m, compared with a profit of £12m one year earlier and a profit of £27m for all of last year.

Fiat said “synergies from joint efforts” with GM, which has a 20% stake in Fiat Auto, had saved the car division £24.7m, and that cost savings for the full year would be £135m. The Italian group reported overall operating profit for the quarter of £77m, up from £69.7m a year ago.

European car sales fell 5% during the first four months of the year, and Fiat Auto is now phasing out the Bravo and Brava models for replacement this autumn.

Paolo Fresco, Fiat chairman, promised increased cost-cutting, said: "We will increasingly focus on reducing product costs and lowering the break-even point for all our businesses. Synergies from alliances and acquisitions will help us in that, as will synergies between our existing sectors," he said.