UPDATE 1-Train unit problems mean Finmeccanica won't reach core earnings goal
* Sees 2013 EBITA 5-10 pct below target
* "Discontinuity" needed with AnsaldoBreda unit
* Cuts free operating cash flow target (Recasts lead, adds detail)
MILAN, Nov 7 (Reuters) - Italian air defense group Finmeccanica will miss its core earnings target for the year because of continued problems at its train-making unit AnsaldoBreda.
The state-controlled group said in a statement it expected earnings before interest, tax and amortisation (EBITA) to be some 5-10 percent below a 1 billion euro ($1.3 billion) target set previously and adjusted for the recent sale of its Ansaldo Energia unit.
Chief Executive Alessandro Pansa recently told trade unions the group was in talks with foreign manufacturing companies to sell loss-making AnsaldoBreda as part of an asset disposal plan to strengthen its balance sheet.
The company gave another signal of its intentions on Thursday, saying it was necessary "to introduce a strategic and operational discontinuity within AnsaldoBreda".
Finmeccanica, Italy's second largest employer, has struggled to carry out planned sales due to political opposition to foreign takeovers at a time when the economic crisis has forced many Italian entrepreneurs to put their businesses on the block.
Finmeccanica is 30 percent owned by the Italian state and needs government backing for sensitive strategic issues such as disposals. Delays in its asset disposal plans have prompted ratings agencies to downgrade Finmeccanica to junk.
The company said it expected negative free operating cash flow for the year to the tune of 350 million-450 million, from previous cash positive guidance of 100 million euros, due to AnsaldoBreda.
The core aerospace and defence businesses remained cash positive, Finmeccanica said, adding it expected to post a net profit for the year due to the sale of Ansaldo Energia. Finmeccanica agreed in October to sell the gas plant subsidiary to the state-backed FSI fund.
In the first nine months EBITA fell 3 percent to 11.343 billion euros. ($1 = 0.7472 euros) (Reporting by Stephen Jewkes; Editing by Anthony Barker)