Volkswagen, Peugeot and Fiat defy sector gloom

By Marcel Michelson and Christiaan Hetzner

PARIS/FRANKFURT (Reuters) - Volkswagen led a trio of European automakers in posting surprisingly strong results and reiterating their targets on Wednesday, sending their shares higher despite analysts warning the second half would be tough.

Volkswagen (VOWG.DE), Europe's No. 1 and the world's No. 4 car maker, posted a 22 percent rise in second-quarter operating profit to 2.12 billion euros, easily topping market expectations.

Its margin rose to 7.2 percent -- its best in recent memory -- thanks to streamlining its cost base and boosting productivity.

Credit Suisse's Arndt Ellinghorst said the gap over expectations was driven by VW's so-called "other operating profit" line that accounts for factors such as currency hedging gains or releases from warranty provision.

Volkswagen stuck to its guidance for improved results over last year's record figures, although it gave no specific targets. For a story, double-click on [nL23606503].

France's PSA Peugeot Citroen (PEUP.PA) reported a 32.4 percent higher recurring operating income of 1.115 billion euros, giving it a margin of 3.6 percent.

It repeated its 2008 margin target of 3.5 percent, confounding analysts who had expected a trimmed target. For a story, double-click on [nL22100333].

Fiat (FIA.MI) in Italy confirmed its targets for this year and the next after posting a 19.6 percent rise in quarterly profit to 1.13 billion euros, a record that beat market expectations. For a story, double-click on [nL23392794].