REFILE-UPDATE 4-Fiat to spin off auto business-source

(Removes erroneous word ‘Fiat’ from beginning of paragraph 3)

* Chairman resigns day ahead of strategy presentation

* Fiat shares up nearly 9 percent, outpace sector

By Hugo Dixon, Helen Massy-Beresford and Jo Winterbottom

LONDON/TURIN, Italy, April 20 (BestGrowthStock) – Italian industrial
group Fiat SpA (FIA.MI: ) will spin off its auto business under a
new strategic plan, a source said on Tuesday, and shares surged
almost 9 percent on the possibility of a demerger.

Analysts said a spin-off would give the Italian carmaker
more flexibility to join the consolidation drive in a sector
emerging from the worst downturn in decades.

Luca Cordero di Montezemolo also said he would resign after
six years as chairman of Europe’s fifth-biggest car maker. The
announcement came a day ahead of Fiat’s strategy presentation,
its first since teaming up with U.S. car maker Chrysler.

Fiat’s board will vote on making Vice Chairman John Elkann,
the grandson of Fiat patriarch Gianni Agnelli, chairman on
Wednesday morning, Chief Executive Sergio Marchionne told a
hastily-called news conference. Elkann has long been seen as
Montezemolo’s successor.

A person familiar with Fiat’s thinking said the company was
planning to split off its automotive arm as part of the
restructuring. [ID:nLDE63J1VC]

Fiat, Italy’s biggest industrial group, also will set out
plans for the two demerged companies until 2014, said the
source, who spoke on condition of anonymity.

For a Reuters Breakingviews column, click on
[ID:nLDE63J1WE].

Marchionne, respected in the struggling auto industry for
his turnaround of Fiat, has said a spin-off will be touched on
at the strategy presentation. [ID:nLDE63F1PO]

THREE-MONTH HIGH

Fiat shares were up 8.86 percent at 10.38 euros at 1549 GMT
and hit a three-month high of 10.45 euros before paring gains.
The STOXX Europe 600 auto sector index (.SXAP: ) was up 5.38
percent, driven by positive results from Germany’s Daimler AG
(DAIGn.DE: ).

A Milan fund manager said Fiat’s shares were boosted by
market speculation the company would announce the spin-off on
Wednesday.

“A big hedge fund was buying Fiat all day yesterday and that
has helped boost speculation about the spin-off,” he said.

A trader said speculation that Ferrari could be included in
the spin-off was also helping the shares.

Industry Minister Claudio Scajola said he had spoken to
Marchionne about the plan. The centre-right government will
support it and “unions will do their part” to improve
productivity, he said in a statement.

Although best known for its autos, Fiat’s holdings include
farm equipment maker CNH Global NV (CNH.N: ), the Iveco truck unit
and Turin newspaper La Stampa.

Montezemolo said he was resigning since his task as chairman
was finished and the move was unrelated to the possible
spin-off. [ID:nWEB0835] He will stay on as a Fiat board member
and chairman of Ferrari, Fiat’s luxury sports brand.

Montezemolo, one of Italy’s best-known business figures and
the former head of business lobby Confindustria, denied
speculation he would enter politics.

Investment Research

(Additional reporting by Stefano Rebaudo, Nigel Tutt, Ian
Simpson and Stephen Jewkes; Writing by Ian Simpson; Editing by
David Cowell and Jon Loades-Carter)

REFILE-UPDATE 4-Fiat to spin off auto business-source