* Fiat earnings aided by strong Chrysler performance
* Chrysler maintains 2012 guidance of $1.5 bln profit
* To begin sales of key product Dodge Dart in 2nd qtr
* Fiat shares down about 5 pct in Italy
By Bernie Woodall and Jennifer Clark
DETROIT/MILAN, April 26 (Reuters) - Italian carmaker Fiat SpA beat analysts' forecasts for first-quarter earnings as U.S. unit Chrysler Group LLC posted its best quarterly profit since its 2009 bankruptcy, once again compensating for declining sales in Europe.
Without profits from Chrysler, Fiat would have just broken even in the quarter because of volume declines in Europe, compared with a trading profit of 251 million euros ($330.92 million) in the first quarter of 2011.
The results show Fiat-Chrysler continues to be a "two speed" company, with sharply different performances between the Italian and U.S. units. When Fiat took management control of Chrysler in 2009, analysts said the U.S. automaker would be a major drag. Instead it has become Fiat's chief source of strength.
Despite revenue in Europe falling by 13.1 percent to 4.5 billion euros, Fiat said it is on track with its business plan and confirmed all of its targets for 2012.
Chrysler's auto sales increased by 33 percent to 523,000 vehicles in the quarter, led by its home U.S. market where it gained market share on a first-quarter sales jump of 36 percent versus the industry-wide gain of 13 percent.
"Another positive quarter - built on sales gains that have surpassed the industry average - is affirmation that the Chrysler team is maintaining its focus," said Sergio Marchionne, chief executive of both Chrysler and Fiat.
Fiat now owns 58.5 percent of Chrysler. The rest is owned by a retiree healthcare trust affiliated with the United Auto Workers union. Marchionne initially said Chrysler would pursue an initial public offering, but he stepped away from that stance last year.
"We have made no decisions on the IPO," Marchionne told analysts on a conference call to discuss Chrysler results. "It's unlikely that it's a 2012 event, if it's an event at all."
Fiat's shares were down 4.8 percent at 3.74 euros at 1454 GMT.
Carmakers like Fiat that rely heavily on European sales are struggling with cutthroat price competition in a dwindling market as budget cuts, weak wage growth and rising unemployment depress consumer spending power.
French carmaker PSA Peugeot Citroen said on Wednesday its car sales in terms of volume fell 20 percent in the first quarter from the year before, exceeding Fiat's 18 percent decline.
In Europe overall, the passenger car market was down 7.3 percent in the first quarter. Fiat's trading loss in Europe rose to 207 million euros in the quarter, nearly double the 106 million-euro loss it posted in the first quarter of 2011.
The European scenario is likely to affect Ford Motor Co and General Motors Co results when they report quarterly results on Friday and May 3, respectively.
The United States is another story.
In the nearly three years since its bankruptcy, No. 3 U.S. automaker Chrysler has overhauled its lineup and boosted sales.
It has lured customers through a series of unconventional Super Bowl television advertisements, including one recently featuring Academy Award-winning actor and director Clint Eastwood.
Next month, the company will fill the void in its lineup for a highly fuel-efficient small car with the launch of the Dodge Dart as U.S. drivers feel the pain of high gasoline prices.
Group revenue for both Fiat and Chrysler was 20.2 billion euros for the quarter, and trading profit was 866 million euros.
Net industrial debt was 5.77 billion euros, a tad lower than the 5.8 billion analysts were forecasting, while the group's cash cushion rose to 21.4 billion euros from 20.7 billion at the end of 2011, with 12 billion related to Fiat excluding Chrysler.
Chrysler said its quarterly revenue of $16.35 billion was an improvement over $13.12 billion a year earlier. The automaker also reported modified operating profit of $740 million, up from $477 million a year ago.
Chrysler confirmed 2012 guidance made in January of achieving net income of about $1.5 billion, eight times the 2011 net profit of $183 million. Last year's profit was the first annual profit for Chrysler since 2005 when it was owned by Germany's Daimler AG.
In Latin America, where Fiat is a leader in Brazil, revenue rose to 2.57 million euros, while trading profit fell 50 million euros to 235 million, as price pressure from imports by other carmakers bit.
Chrysler said on Wednesday that it will allow its pact with Ally Financial Inc to expire at the end of April 2013. Seeking another auto financing arrangement could allow it to offer better financing to more consumers in the rising U.S. auto market.
Marchionne said he did not rule out creating a captive finance unit, but said Chrysler would not suffer if it lacked such a unit.
Chrysler is in talks with several banks including Ally to construct a better deal for Chrysler auto dealers and consumers.