Fiat hopes to sell about 360,000 Puntos in 2006

The carmaker said its profit for the final three months of 2005 was 21m euros (�14m), a turnaround from a 156m euro loss in the previous year.

Fiat Auto said sales of its new Punto car had helped to improve its fortunes.

However, the Turin-based carmaker still reported a full-year loss for the year of 281m euros.

Ford alliance

Fiat Auto has for some time been a drag on the overall performance of its parent company, which also has interests in agricultural machinery, lorries and construction equipment.

But as well as investing in new models, the company has recently been cutting costs and forging new alliances in an attempt to return to profit.

In September, Fiat and US carmaker Ford said they planned to co-operate on producing and developing new small cars.

Fiat's new Punto model was unveiled during the same month, and the company hopes to sell 360,000 in 2006.

However, Fiat will face stiff competition from European rivals Peugeot and Opel when both firms launch the latest models of their small cars later this year.