Fiat CEO Sergio Marchionne sees economies of scale to be achieved by widespread platform sharing between Fiat and Opel. This strategy would include the A-segment Opel Agila (bottom), B-segment Opel Corsa (top) and C-segment Opel Astra (middle).

Fiat CEO Sergio Marchionne is in Germany today outlining ambitious plans to spin Fiat Group Automobiles out of the Fiat Group and merge it with GM's Vauxhall/Opel division and its 20 percent stake in Chrysler. Marchionne will be making his case today to German government ministers as well as the key union leaders at Opel for the creation of a new carmaker that will be second only to VW Group in Europe in terms of size.

The Fiat boss will outline his ambitious strategy to create a new carmaking giant this afternoon in Berlin in front of Frank-Walter Steinmeier, the German Vice-Chancellor, and Karl-Theodor zu Guttenberg, the Economy Minister, while also present at the meeting will be Klaus Franz, the Co-Chairman of Opel’s supervisory board and head of its works council. Last week. Taking a stake in Opel could result in the German government offering up to 3.3 billion euros in loans. Marchionne said that Opel was an "ideal partner".

Marchionne, who has turned Fiat's fortunes around since he took charge five years ago, has long made it clear that he sees the need for a carmaker to be able to produce more than six million vehicles a year in order to achieve the required economies of scale to be profitable. Merging Fiat's auto division (which comprises of the Fiat, Fiat Professional, Lancia, Alfa Romeo and Abarth divisions) with GM's European manufacturing operations (Vauxhall, Opel and possibly Saab) plus Fiat's stake in Chrysler would create a company with around US$106 billion in annual revenues and sales of 6-7 million vehicles a year. The resulting entity would be bigger than Ford, GM or Renault/Nissan and only Toyota globally would have a bigger reach.

Marchionne believes that merging Fiat with Opel would create a new car manufacturer that would be a "perfect fit", despite widespread fears emanating from the German company's unions that it could result in massive job cuts and plant closures. “From an engineering and industrial point of view, this is a marriage made in heaven," he told Financial Times today in an interview.

Marchionne said Fiat and Opel would achieve cost saving of around 1 billion euros a year by merging their B- and C- segment platforms as well as amalgamating Fiat's A-segment platform, that underpins the Panda and 500, with Opel's similar size architecture. Fiat and Opel already share platforms and engines across B-segment (the Fiat Grande Punto and Opel/Vauxhall Corsa) as the legacy of a previous agreement. "It’s an incredibly simple solution to a very thorny problem," Marchionne told FT.

According to FT Marchionne plans that the new group, tentatively called Opel/Fiat, will be publically listed, possibly as early as later this month. He has often said that he would spin Fiat's carmaking operations out of the Fiat Group when the time was right, and this would leave a rump of companies that include CNH Global (agricultural and construction machinery), Iveco (large vans, trucks and buses), Ferrari/Maserati (niche luxury/sports cars), Magneti Marelli (electronics and components) plus other niche divisions such as Comau and Teksid.

In Germany later on today Marchionne will try to allay fears of job cuts, an issue that is sensitive with a general election due in the autumn. He is expected to guarantee no plant closures in Germany and that Italy will share in the brunt of any job cuts. GM has 10 plants in Europe while Fiat has 11 that are mostly clustered in Italy. Fiat Group Automobiles employs 39,000 staff while GM Europe has 54,500.