Fiat will next week threaten General Motors with legal action as the Italian industrial group asserts its right to compel the US manufacturer to buy its troubled car division.
The Italian company will move to clear up the conflict with GM over whether its four-year-old "put" option, giving Fiat the right to sell its car arm, is valid.
People close to Fiat, which would not comment on Monday, said legal action would not necessarily mean the sale of Fiat Auto, but the establishment of the right to do so. GM has claimed repeatedly that the option can no longer be exercised.
It is important to Fiat to have the put option available in case the problems at Fiat Auto, which lost €744 million at the operating level in the first nine months of the year, escalate further.
The company has been keeping the option in reserve to allow it to dump the car division on GM if turnround efforts fail. But Fiat wants to be sure the option is valid because its terms are preventing the company striking deals with other manufacturers.
Any sale to GM is expected to create controversy in Italy as well as face fierce resistance by GM, which is struggling to repair its existing European operations.
GM yesterday reiterated its position that the "put" can be contested because of restructuring at Fiat Auto and a capital injection.
Sergio Marchionne, Fiat chief executive, plans to tell Rick Wagoner, chairman and chief executive of GM, that the company will not accept another delay after the standstill agreement expires on Wednesday.
The two will meet in Zurich on Tuesday on the sidelines of the quarterly steering committee of their engines joint venture. "There will not be an extension to the standstill agreement," said one person close to Fiat.
GM succeeded in delaying the option by 12 months to January 24th, and both sides promised not to take any legal action until the middle of next week.
Mr Marchionne and Luca di Montezemolo, Fiat chairman, have been much less committed to Fiat Auto in public than previous management.
Before their arrival this summer the Agnelli family, which controls Fiat, had insisted that the company did not want to surrender the business started by Giovanni Agnelli in 1899. The family will meet on Monday, but are not expected to make a decision on selling Fiat Auto.
The amount GM would have to pay if the "put" were exercised is determined at the time. But Fiat watchers believe it would not pay anything as the division has close to €4 billion of debt and is worth only €2 to €2.5 billion.
GM owns 10 per cent of Fiat Auto, although it has written off almost all its $2.4 (€1.8) billion investment in the company.