It will also result in Alfa Romeo returning to the US in 2005 with initial projected sales of 7,000-8,000 a year. This could rise to 20,000 a year or more, but only if the group is fully satisfied it can provide adequate after-sales service to demanding North American buyers, said Mr Testore.

"We will start in the big cities. It could go to 20,000 a year - we will have to see. But we have to be modest in our goals to survive, as we must have good support infrastructure."

The return will be led by the next-generation Spider two-seater, the first Alfa Romeo to be designed to comply with both North American legislation and tastes and European markets. All models following the Spider will be required to meet the same criteria.

Alfa Romeo's sales this year are expected to reach 230,000-240,000, well up from 150,000 a year in the late 1990s. "But in my opinion this is nothing, we can do much, much better. The brand is fantastic," said Mr Testore.

As part of the drive, Alfa Romeo is to relaunch its Gran Turismo Alleggerita (GTA) designation - last used in the 1960s - for high-performance versions of its models to be introduced progressively over the next year or two.

Fiat as a group is planning to launch 19 completely new models by the end of 2005 at a total cost of E14bn ($11.9bn).

Under the strategy, Lancia is progressively to return to its roots as a non-sporting, executive and luxury brand. It is planned to provide Fiat with a hierarchy of brands catering to all segments of the market - from the cheapest small Fiats to its flagship Maserati and Ferrari marques.

The new vision for Lancia should bring to a close an awkward chapter in Fiat's history, during which Lancia and Alfa Romeo, counter-productively, have been competing with each other.

Fiat bought Lancia in 1969 and transformed it into a rival for then-independently owned Alfa Romeo. Fiat's subsequent purchase of Alfa Romeo in 1987 has left it seeking to rationalise the product ranges and develop separate market identities. The first new-generation Lancia to reflect its new role, the luxury Thesis, will be launched towards the end of this year.

There will also be a big push to revive Lancia as a brand outside of Italy, where Lancia sales currently are heavily concentrated. Even without adding right-hand drive models, it should be possible to lift Lancia production to more than 300,000 in the next three to four years, says Mr Testore.

In the longer term, Fiat envisages two-thirds of the further increase towards 4m will come from emerging markets such as India and China, and from future generations of its Palio models developed specifically for emerging markets. Some 450,000 are expected to be sold this year.

In Europe, development of the Fiat brand is to concentrate on securing a larger share of the lower and upper medium family car sectors typified by Ford's Focus and Peugeot's 406 models. Together, these two sectors account for about 60 per cent of the market, but Fiat's strength has been in small cars. It will soon launch the Stilo, the replacement for its current Bravo/Brava range.

Fiat's partnership with General Motors will play a significant role in the strategy. The partners are already developing a joint platform to provide new Alfa Romeo and Lancia models for Fiat, and a new generation of Saabs for GM.

Fiat executives insist the resulting cars will vary much more widely than was the case with an earlier and much-criticised joint platform shared between Lancia, Saab, Fiat and Alfa Romeo models in the 1980s.

Fiat made an operating loss of E16m in this year's first quarter, mainly because of problems in emerging markets, and the second quarter is proving "difficult" for similar reasons, according to Mr Testore. However the group is projecting operating profits for the year well above last year's E44m.