By Silvia Aloisi
MILAN (Reuters) - Strong U.S. sales for Chrysler and growth in Brazil will help offset a weak European market for Fiat SpA, combined financial results are set to show on Tuesday as the two car makers move closer toward a full merger.
Fiat's second-quarter results will incorporate one month's figures from Chrysler for the first time after it took over management of the U.S. number three automaker in a 2009 bailout.
Fiat CEO Sergio Marchionne, who also runs Chrysler, is expected to outline a joint management structure of 25 top executives, including four regional heads for North America, South America, Europe and Asia.
That would pave the way for a full-blown merger while making a Chrysler initial public offering less likely, analysts say.
Fiat has 53.5 percent of Chrysler after completing a deal to buy the U.S. Treasury's and Canadian government's stakes last week.
Marchionne, who has made Fiat one of Europe's top turnaround stories, wants to elevate the Italian carmaker to a global player through a revamped Chrysler. The group targets around 100 billion euros ($144.2 billion) in combined revenues by 2014.
Second-quarter results consolidating Chrysler for the month of June are expected to show a trading profit of 485 million euros, according to an analyst consensus distributed by Fiat.
Excluding Fiat's luxury brands Ferrari and Maserati, Fiat will contribute 175 million euros for the three months to June, compared with 155 million euros for Chrysler in June alone.
Fiat is known for its relatively low-cost small cars, while Chrysler earns more money per unit from its sedans and SUVs.
"Chrysler will generate a lot more cashflow and growth than Fiat very soon," said Bruno Lapierre, an analyst with Cheuvreux, explaining why Marchionne would want to take over all of it.
Chrysler's sales in the United States rose by 21 percent in the first six months of the year, while Fiat's European sales fell by 12.7 percent over the same period.
Fiat, Europe's sixth-ranked car maker, is faring better in Brazil, where it is the leader of a booming market. In a sign of the growing importance of Brazil for the company, Tuesday's board meeting will be held there.
Marchionne built up Fiat's stake in Chrysler cheaply and more quickly than expected. By the end of this year its holding will rise to 58.5 percent -- an increase linked to Chrysler developing a Fiat-based fuel-efficient midsize car.
But Fiat needs to decide what to do with the rest of Chrysler, a 41.5 percent stake that is owned by VEBA, the United Auto Workers union trust fund.
After initially planning an IPO to allow VEBA to cash in on its stake, Marchionne now seems to be aiming to buy it.
If he goes for a full takeover of Chrysler, Marchionne will need to convince ratings agencies Moody's and Fitch -- which have already warned they may downgrade Fiat's debt -- that Fiat's finances are solid enough.
That has led to speculation Fiat may float Ferrari, although Ferrari's chairman said last week there was no plan to do so.
(Additional reporting by Gianni Montani in Turin; Editing by David Cowell)