The hyped Fiat Stilo failed to impress

Chief executive Giuseppe Morchio said the group planned to cut 12,300 jobs by 2006 and close 12 factories in 2003 and 2004, most of them outside Italy.

The carmaker, one of Italy's biggest companies, also plans to invest 19.5bn euros ($22.3bn; �13.4bn) in new products following poor sales of its latest designs.

Fiat is preparing a 1.8bn euro rights issue, issuing new shares to raise funds for its restructuring, the third attempt to turn around its fortunes in two years.

The group said it did not expect to report a net profit until 2006 as it recovers from record losses last year.

Missed the boat?

Fiat, once a successful national icon, has blamed much of its woes on the struggling Fiat Auto division - maker of the Lancia, Alfa Romeo and Fiat brands.

Fiat has had quite a lot of targets in the past and they failed to achieve them Arndt Ellinghorst, WestLB Panmure

It reported a net loss of 4.3bn euros for 2002 and the death of its legendary leader Gianni Agnelli in January sparked concerns over the company's future direction.

Analysts say the group lost its way when it broke from its traditional low-cost market and tried to enter the more expensive market.

"They aren't making cars that people want to buy," Jay Nagley, managing director of the car industry consultancy Spyder Automotive, told BBC News Online.

"They're more expensive than Fiats tradionally were...they're trying to compete with the Germans."

Mr Nagley said Italy, once Fiat's loyal core market, had now been opened up to foreign competition while Fiat had failed to make an impression overseas.

"A lot of its investment decisions abroad have been wrong

"They're living in a goldfish bowl."

Missing targets

Have Mr Morchio's plans come too late?

Mr Morchio said most cuts would be outside Italy - complying with the Italian government's call to keep domestic job losses to a minimum.

"This is the point of departure, not the point of arrival," said Mr Morchio.

"This is a realistic and achievable plan."

Analysts were less convinced.

"Fiat has had quite a lot of targets in the past and they failed to achieve them," said Arndt Ellinghorst, an analyst at WestLB Panmure.

Sell-off

Fiat's targets include breaking even at an operating level by 2004 and a return to net profit by 2006.

I think their future lies in a good deal with another car company Jay Nagley

The group is issuing 368.5 million new shares priced at five euros each to raise much-needed cash for its attempted turnaround.

Fiat shares closed at 6.71 euros on Wednesday before being suspended ahead of the restructuring announcement.

Mr Morchio said Fiat would be strengthening its position in Brazil and China while some factories in Europe would close.

But Mr Nagley said the carmaker had "missed the boat in China" where the German group Volkswagen has already cornered 50% of the market.

He suggested Fiat needed to "recapture its heritage", adding: "People want a bit of flair and imagination."

But Mr Nagley said the group may have left it too late.