Kia, Hyundai Profits Fall, Fiat In Loan Report

South Korean car makers Hyundai and Kia posted sharp profit falls, while Fiat owners were reported to be eyeing financing for a possible tie-up with PSA Peugeot Citroen.

The severity of the crisis battering the industry globally was evident in results from Hyundai Motor Co and Kia Motors Corp , South Korea's top auto group, on Thursday as rising costs crushed margins, and cash-strapped consumers delayed major purchases. The weaker won may help the firms weather the industry storm.

However, ratings agency Moody's said on Wednesday it was placing both companies on review for possible downgrade in the light of the worsening outlook for global auto sales

Meanwhile in Europe, where there were reports of further consolidation. Italian newspaper La Repubblica reported Fiat's founding family was considering a capital increase of around 2 billion euros ($2.6 billion) with an eye to a possible merger with France's PSA Peugeot Citreon.

The Agnelli family owns about 30 percent of Fiat through its holding company Exor, and the capital increase would have the aim of keeping a significant stake in a merged company, La Repubblica said.

The news came two days after Fiat, due to report 2008 results later on Thursday, announced an alliance with struggling U.S. automaker Chrysler, seen as the weakest of Detroit's "Big Three".

Italy has been hit hard relative to Europe as a whole by the global slump in demand for cars, posting a 13.4 percent drop in full-year sales, against the 7.8 percent fall for the region as a whole, industry association ACEA said last week.

France has fared better, with sales down 0.7 percent year-on-year. The government said earlier this week it could make up to 6 billion euros available to support its auto industry.