TURIN (Bloomberg) — Fiat Industrial SpA, the truck and tractor unit of Fiat SpA, may be a better investment bet than the car-making business, reflecting faster profit growth next year as investors approved CEO Sergio Marchionne's spinoff proposal yesterday.

"Fiat Industrial is undervalued by investors and will benefit from a recovery of the capital goods market," said Gabriele Gambarova of Banca Akros SpA, who is ranked No. 1 among Fiat analysts tracked by Bloomberg and based on relative returns of the stocks they covered in the past year. "Investors will be more cautious on Fiat auto, which will have to invest to complete its commercial offer."

Fiat Industrial, which will start trading in Milan next January, may be valued at 8.38 euros a share, according to the average projection of five analysts surveyed by Bloomberg News. That's 49 percent more than the 5.64 euro value estimated by the analysts for the new Fiat SpA, which will include auto-making operations and the Ferrari and Maserati luxury brands.

Chairman John Elkann announced the approval by Fiat shareholders after a meeting in Turin yesterday. Marchionne said the spinoff plan, the most sweeping corporate reorganisation in Fiat's 111-year history, will resolve a "thorn in the side" issue for Italy's largest carmaker. Marchionne, 58, will name a CEO for Fiat Industrial before year-end and aims to use the separation to focus on carmaking after acquiring a 20 percent stake in Chrysler Group LLC in June last year.

Before yesterday, Fiat had risen 34 percent since the Chrysler deal and was down 1.6 percent since the spinoff announcement on April 21. The stock fell 20 cents, or 1.9 percent, to 10.24 euros yesterday afternoon in Milan. It's the second-worst performer in the Bloomberg EMEA Auto Manufacturers Index in 2010.

Fiat Industrial will probably increase trading profit, measured by earnings before interest, taxes and one-time gains or costs, by 133 percent to 1.4 billion euros in 2011, while Fiat auto may double its trading profit to 1.2 billion euros, according to the business plan presented in April. The forecasts do not include any contribution from Chrysler. A recovery in sales of Iveco trucks and New Holland tractors helped Fiat return to a profit in the second quarter. Fiat said on July 21 that it will probably raise its full-year earnings target when it presents third-quarter results.

European auto sales fell for a fifth consecutive month in August, led by Fiat, Ford Motor Co. and Toyota Motor Corp. Fiat recorded the biggest decline among the major manufacturers, with sales falling 24 percent, according to figures released by the European Automobile Manufacturers' Association today.

"The success of Marchionne's strategy with Chrysler is vital for the long-term perspective of the auto unit," said Milan-based Gambarova, who has a "buy" recommendation on Fiat with a target estimate of 15.50 euros. He values Fiat Industrial at 8 euros and the new Fiat SpA at 7.50 euros.

CNH Global NV, whose stock trades on the New York Stock Exchange, and Iveco SpA are among units that will become part of Fiat Industrial. Fiat shareholders will get one share in the new unit, which will be listed on the Milan stock exchange on the first trading session of 2011, for every Fiat share they own.

"The spin-off and the creation of two entities will finally solve one of the strategic questions that has been a thorn in the side for Fiat," Marchionne told shareholders today.

Fiat plans to split its debt in half, with Fiat Industrial starting with a net industrial debt of 2.5 billion euros, according to the slides of a speech by the CEO distributed to reporters. Fiat plans to transfer one billion euros of bilateral credit lines to Fiat Industrial before the spin-off.

The new Fiat SpA will get ten billion euros of cash while three billion euros will go to Fiat Industrial, the CEO said. Fiat SpA will have outstanding bonds for nine billion euros, while Fiat Industrial will have two billion euros in bonds.

"Cash flows and profitability will help Fiat Industrial to control its debt better than the Auto unit," said Emanuele Vizzini, who helps manage about $1 billion at Investitori SGR in Milan, including Fiat shares.

"We see the industrial business of Fiat as a jewel inside the group," Jochen Gehrke, an analyst at Deutsche Bank AG, wrote in a note on Tuesday. "The implied Fiat auto equity value remains negative at the current share price."

Gehrke, who recommends buying Fiat shares with a price estimate of 13 euros, said the spinoff will enable Fiat to focus on "productivity problems" at the automotive business such as Italian car factories that are underused. Fiat Industrial's market value could reach about 13 billion euros, compared with 3 billion euros for Fiat SpA, he wrote.

Fiat plans to merge Auburn Hills, Michigan-based Chrysler with its Lancia brand while positioning the US division's Jeep sport-utility vehicle unit as a global brand. Cost savings and sales growth stemming from Fiat's partnership with Chrysler, the third-largest US carmaker, will reach 1.5 billion euros by 2014, with combined sales totalling six million cars.

Dozens of workers demonstrated in front of Fiat's headquarters in Turin against Marchionne's strategy and his salary. Protesters played Bob Dylan's "Hurricane" on loud speakers while policemen kept them in order.

Marchionne received 41 percent more compensation last year as his total pay rose to 4.8 million euros, according to Fiat's annual report.

My salary is justified by "market reason", said Marchionne as he entered the building with Elkann.