Fiat Group shares have been suspended on the Milan bourse this morning ahead of a statement by the company to the stock exchange regarding swirling reports yesterday that the Italian carmaker was deep in talks with Chrysler LLC about forming a strategic partnership. The statement from Fiat will be issued at noon.

Fiat Vice Chairman John Elknann confirmed this morning that talks were going on with Chrysler LLC, telling Italian media sources on the sidelines of a business event: "It is not a mystery we are talking with Chrysler," but without elaborating with any further details.

The media reports that broke yesterday revealed that the talks between Fiat and Chrysler could result in the former providing the struggling American carmaker with a comprehensive range of its small to medium architecture, its fuel efficient and low-emissions engines, and transmissions; and in exchange Fiat could get up to a 30-35 pct stake with the option for a controlling 55 pct position in the longer term.

Chrysler, majority owned by private equity firm Cerebus Capital Management, is in desperate need to find new smaller, efficient models to plug into its ageing and inefficient range and bring them to the market as quickly as possible. The ailing carmaker, which owns several niche brands such as Dodge and Jeep, has seen its North American sales slump by 30 pct in 2008, and it recently received US$4 billion in emergency funding from the US Congress just to keep in operation. It has until March 31 to show Congress that it has a viable plan for the future. Chrysler executives have recently indicated that they are seeking a further US$3 billion. In a statement issued yesterday Chrysler refused to comment on the reports that it was talking to Fiat. "In today’s economic environment, talks are going on between companies in all industries, ours is no different," said the statement. "Chrysler as a matter of policy, however, does not confirm or disclose the nature of its private business meetings."

Reports have emerged that Fiat has had a team at Chrysler's headquarters in Auburn Hills, Michigan, working closely with executives from the carmaker and its owners Cerebus for some months now, with the Financial Times claiming a deal was signed last Friday (January 16). German carmaker Daimler AG still owns 19.9 pct of Chrysler and they indicated yesterday that they would be happy to sell their minority stake.