Italian industrial giant Fiat SpA posted a fourth-quarter profit and said it had a full-year net profit for the first time since 2000, offering another sign that the restructuring plan of its chief executive, Sergio Marchionne, is gaining traction, at least in the short term.

In a reversal of fortunes, Fiat's ailing auto unit, which not long ago was considered to be an albatross around the neck of former partner General Motors Corp., returned to operating profit -- at a time when GM is deep in the red.

The Turin-based maker of cars, tractors and trucks swung to a net profit of 38 million euros ($46 million) in the fourth quarter from a net loss of 550 million euros a year earlier as gains from asset sales and progress at its core auto division helped results. Fiat posted a full-year profit of 1.33 billion euros for 2005, reversing a 1.63 billion euro loss recorded for 2004. Fiat's bottom line was helped by gains of 6.36 billion euros from a settlement with GM, the sale of its stake in energy group Italenergia and the conversion of a loan.

More significantly, its struggling car unit, Fiat Auto, which accounts for more than 40% of group revenue, posted its first operating profit, which the company terms trading profit, in the past 18 quarters. Fiat Auto ended the quarter with a profit of 21 million euros, compared with a year-earlier trading loss of 156 million euros.

Mr. Marchionne took over in June 2004, when the Italian icon was in the midst of one of its worst financial crises. Among his first challenges was how to deal with a failed joint venture with GM. Even as it seemed that the U.S. auto maker had the upper hand in the negotiations, Mr. Marchionne extracted a 1.55 billion euro payout from GM. That payout, along with new alliances with U.S. auto maker Ford Motor Co., Tata Motors Ltd. of India and others, has helped fuel Fiat's recovery as GM's fortunes have steadily declined.

Mr. Marchionne also has sent hundreds of underperforming managers packing, streamlined the group's organizational chart and put an end to rampant discounting which had eroded profitability at its auto unit.

Under his watch, the stock price has climbed back from a historic low last year, and rating concerns have improved their outlook on the company. Yesterday, Fiat's ordinary stock closed at 8.20 euros, up five cents, in Milan.

"This is still a delicate situation even if they appear to be on the right track," said Pier Luigi Bellini, a Milan-based analyst with Global Insight, an economic-analysis firm. He noted that the fact that Fiat Auto had returned to a profit after years of losses represented an "important psychological turnaround" at the company.

Yesterday, Mr. Marchionne promised to build on that momentum, forecasting a group trading profit of between 1.6 billion euros and 1.8 billion euros in 2006 and net income of 700 million euros. The company also announced it will issue a seven-year euro bond. The exact size of the issue has yet to be determined, but the deal will have a benchmark volume, suggesting a minimum size of 500 million euros.

Fiat, however, will face increasingly tough competition in the continental European markets, where it does most of its business, and must battle against an environment in which many consumers are jittery over job prospects and rising costs of living and have slowed their spending on big-ticket items such as cars in recent months. The entire auto sector is also struggling, with big players such as Ford, GM and DaimlerChrysler AG announcing job cuts in a bid to tackle overcapacity and high cost bases.

In fact, few industry analysts feel that Fiat has emerged from the tunnel. Its stronger-than-expected results at its auto unit were based on the launch of its new Grande Punto, historically its best-selling model. But the Punto will face intense competition in Europe from France's Renault SA, Toyota Motor Corp. of Japan and others.

"We are still wondering if the group is making true structural improvements or if this is something that is just happening in a couple of quarters due to the Punto," said Alexis Boyer, a Paris-based auto analyst at Deutsche Bank. "After a few strong quarters, is this company going to find itself back in trouble again?"