The group said in an earnings statement that it had faced "difficult market conditions" and "demand volatility" but expected "an improvement in the remainder of the year, as trading conditions stabilise."

Analysts told Dow Jones Newswires that the results were bad but better than expected. Fiat shares on the Milan stock exchange rose 0.60 percent to 7.52 euros in afternoon trading after the announcement.

The report came as an April 30 deadline set by the US administration for Chrysler and Fiat to strike a deal loomed and as German magazine Der Spiegel reported Fiat could take a majority stake in Opel.

US auto giant General Motors, which is facing potential bankruptcy in the United States and is running short of cash in Europe, owns a controlling stake in Opel and has said it is willing to cede its share.

Fiat Group Automobiles, Fiat's core business, reported a operating loss of 30 million euros and a production decline of 17.6 percent on a 12-month comparison but said that "demand trends improved during the first quarter."

Fiat Group said its car market share went up in France, Germany and Italy, and car scrapping incentives in France and Germany helped boost sales, with deliveries rising by 4.4 percent in France and 192.8 percent in Germany.

Fiat Group still lowered its net profit forecast for 2009 as a whole from 300 to 100 million euros and predicted a 20-percent slump in demand but said its trading profit would remain unchanged at more than one billion euros.

Fiat has been in intensive talks with ailing US car manufacturer Chrysler over a possible alliance seen as critical to the survival of the US company.

The US administration has given Chrysler until April 30 to sign a deal or have its bailout money cut off, which could lead to the company's collapse.

The chief executive of Fiat, Sergio Marchionne, warned earlier this month that stalled negotiations with Chrysler unions on salary reductions meant there was only a 50-percent chance that a Fiat-Chrylser accord could be reached.

He later modified his comments, saying there was no reason that a deal could not be struck by the end of the month. The New York Times reported last week that Fiat was close to a deal on Chrysler with the United Auto Workers union.

In January, the two companies signed a preliminary agreement allowing for Fiat to take a holding in Chrysler without payment, but in exchange for giving the US group access to its small-car and clean-engine technology.