Auto stocks fall as 2010 concerns outweigh robust Q3

MILAN/PARIS (Reuters) - European carmakers drew on government scrappage schemes to report robust third-quarter numbers but their shares fell as investors searched in vain for clues as to how the sector might cope once the subsidies end.

Third quarter results from Fiat (FIA.MI) met expectations but the Italian carmaker's shares gave back recent gains, dropping over 6 percent, while analysts said PSA Peugeot-Citroen's (PEUP.PA) failure to shore up production ahead of what could be a bleaker 2010 caused its shares to slide 6 percent.

By 1530 GMT Fiat shares had recovered to trade down 2.05 percent at 11.00 euros, against a DJ Stoxx European Autos index .SXAP 0.8 percent lower. Peugeot shares were down 4.78 percent at 23.07 euros.

Uncertainty about prospects for the sector without the schemes introduced in a clutch of European markets to prop up an industry battered by the economic downturn -- Germany's scheme ran out at the beginning of September -- meant investors did not take the third quarter numbers at face value, one analyst said.

"Comparison of the German market next year with this year is going to be more or less a catastrophe, and that will affect Peugeot and Fiat," he said.

Car sales for 2010 are heavily dependent on the state of the economy and while the OECD sees the euro area returning to GDP growth in the third quarter of 2009, the ECB has a 2010 forecast for gross domestic product (GDP) between -0.5 percent and +0.9 percent.

On Tuesday, Europe's biggest carmaker Volkswagen (VOWG.DE) gave a foretaste of what might happen, saying sales in Germany would slump next year after what it said was a "very good" third quarter.

Fiat said in slides released to accompany a conference call on Wednesday that it saw around 4 percent growth in the Western European car market in the fourth quarter of 2009.

Chief Executive Sergio Marchionne said he expected the group to post trading profit of around 1.5 billion euros in 2010 if Italian scrapping incentives continued.

Without the bonus scheme in Italy, trading profit at the automotive unit would be around 300 million euros less, Marchionne said.

Automotive suppliers on Tuesday posted upbeat third-quarter results as the effects of government stimulus schemes on car sales filtered through to them, but shares wilted on a sense of growing uncertainty about prospects for 2010. [nLK302107]

Moody's said the carmakers facing the biggest challenge in 2010 were volume manufacturers, including Fiat, Peugeot and VW.

"Because they benefited most from scrapping schemes in key Western European countries in 2009, they could be confronted with declining volumes in 2010," the rating agency said in a report.

'PRETTY MUCH IN LINE'

Fiat's results were "pretty much in line with what was expected," said Serge Escude, head of equity research at Cassa Lombarda.

"The market didn't see any surprises -- either negative or positive" Escude said. However, positive news was already discounted so the market took profits, he added.

Fiat also said it may write off some past investments as a result of aligning some business with Chrysler's.

At Peugeot, an easing of the decline in revenues seen in previous quarters -- sales were down 7.7 percent, compared with a 24.9 percent year-on-year drop in the first quarter, and a 18.9 percent fall in the second -- was not enough to quell disappointment.

"What we have today is a revenue disappointment and no obvious sign of the large production re-ramp that many have anticipated," said Morgan Stanley analysts in a research note. "We would expect a dose of profit-taking today."

In contrast, Germany's Daimler (DAIGn.DE), the maker of Mercedes Benz luxury cars, on Monday reported forecast-beating quarterly results, demonstrating it was weathering the downturn better than expected.

Among other parts makers, Valeo (VLOF.PA) CEO Jacques Aschenbroich told a news conference on Wednesday that the group did not yet have very clear visibility for 2010, and was remaining "cautious."

(Reporting by Helen Massy-Beresford and Jo Winterbottom; Additional Reporting by Maria Pia Quaglia, Gilles Guillaume and James Regan; editing by John Stonestreet and Karen Foster)