Fiat, Ford tie up to make small cars

Lapo Elkann, in charge of brand promotion at the Turin-based car company, told Italian radio that the alliance was created for a single product.

"What I can say is that Fiat and Ford are allied because they will make utilitarian cars together," Elkann told Radio24. He said the car would be made on the platform of the Fiat Panda.

"The industrial agreement will be on one line of product," he added. "I can't tell if they will do more as they are still in talks."

Fiat CEO Sergio Marchionne had said earlier this week that Fiat would announce its first "targeted" alliance by the end of the year.

A broad-based alliance between Fiat and Detroit-based General Motors Corporation collapsed in February.

Since then, the Italian company has been looking for an industrial partner to help cut costs in the competitive auto market, which is plagued with over capacity.

Fiat Auto is investing around $12.5 billion in 20 new models between 2005 and 2008.

The auto unit, which accounts for around 40 per cent of the Fiat group's revenues and has been losing money since 2000, is aiming to be in the black starting in 2007.