Fiat has now notified 5,600 workers that they are to be laid off for up to a year as part of the company's emergency restructuring in the face of its burgeoning debt. This followed the breakdown yesterday of the latest talks between government and trade union officials.

Although the temporary redundancies look set to go ahead, negotiations are continuing between government, Fiat and union representatives to cut down the lay-off period. The plan affects workers at both Fiat Auto and Fiat-owned components companies.

Analysts are still insisting that the likeliest outcome will be the eventual purchase of Fiat Auto by GM when its put option can be exercised in January 2004. Fiat chiefs are continuing to deny claims that the carmaker will be sold.