Fiat reportedly still has debts of 4.4bn euros

The firm's operating loss came out at 158m euros ($187m; �106m) in the first three months of 2004, down from 342m euro during the same period last year.

The results have been attributed to rising car sales, in part boosted by four new car launches since the autumn.

But Fiat's debt is reportedly 4.4bn euro, up from 3bn in December, and strikes may hit second quarter results.

Cancer diagnosis

Fiat says nonetheless it is on track to break even - as planned - by the end of the year.

The company, intends to end losses at its largest unit, Fiat Auto, by 2005 and return the entire group to profit by 2006.

(The strike) will have a negative effect on the second quarter. But we hope to get back that production in the rest of the year Giuseppe Morchio, Fiat chief executive

A meeting of the board of directors in Turin, where the company is located, announced the results.

But chairman Umberto Agnelli, the most senior member of Fiat's founding family, was not present.

The company said he had been diagnosed with cancer and is receiving treatment.

Gianni Agnelli, the legendary head of Fiat, who built the company up from a small carmaker into a sprawling industrial giant, died last year.

Reduced production

A three-week strike over pay at a key Fiat plant in southern Italy ended after negotiations between unions and management on Sunday.

Car production was allegedly reduced by about 37,000 units as a result of the strike action which analysts said could cost Fiat 100m euros.