TURIN, Italy -- Fiat Group is negotiating with Chrysler LLC to form a strategic partnership that could include a Fiat equity stake in the ailing U.S. carmaker.

 

According to people familiar with the matter in Europe and Detroit, Fiat could give Chrysler access to its mini, small and mid-sized car platforms, engines and transmissions.

 

This would allow Chrysler to quickly build a new range of front-wheel-drive, low-emission vehicles.

 

If the deal is completed, Fiat would own about one-third of Chrysler in exchange for Fiat's platform, engines and transmission technology, sources told Automotive News Europe. The Financial Times reports that the two companies have signed a memorandum of understanding on the alliance, which could be announced within days.

 

Chrysler and Fiat declined to comment.

 

Chrysler, which was acquired by private equity firm Cerberus in 2007, saw its sales drop 30 percent last year. It received $4 billion in emergency U.S. government loans this month and plans to seek another $3 billion.

 

Detroit's other carmakers, General Motors and Ford Motor Co., also plan to introduce a range of mini, small and mid-sized vehicles based on their designs now sold in Europe or being developed there. These cars would be ready in 2010 or 2011.

 

Chrysler, which does not have a similar range of products built in Europe, has been looking for a partner to quickly provide such vehicles.

 

A deal to with China's Chery Automobile Co. to produce a small car for Chrysler fell through in December.

 

Possible extensions of the Fiat-Chrysler deal could include access for Fiat to Chrysler's North American manufacturing operations and distribution network.