Fiat CEO to Resign Once Replacement Found

Fiat is due to bring in a third CEO in six months after Gabriele Galateri handed in his notice today but the crisis-riddled industrial group reiterated its confidence in embattled Chairman Paolo Fresco.

Both executives had been expected to resign at a board meeting today.

Fiat said Galateri would stay until a replacement was named "at a new board meeting to be called as soon as possible" which Industry Minister Antonio Marzano said would be on Thursday.

Enrico Bondi, a manager close to Mediobanca was widely reported to be waiting in the wings to take over as CEO, potentially increasing the Milan-based investment bank's influence over Fiat.

Mediobanca, which scooped up a stake in Fiat's Ferrari in June, to favour splitting Alfa Romeo out of the core Fiat Auto unit and creating a luxury pool. But that could scupper an option for Fiat to sell Fiat Auto to General Motors Corp. from 2004.

Fiat's top creditors, four of Italy's leading banks, said a shake-up in Fiat's plans and management could constitute "a substantial violation of the agreements reached last May" and could compromise Fiat's restructuring plan.

The banks gave Fiat a three billion-euro loan in May, setting strict debt-cutting targets for the former icon of Italian industry which has been pulled deep into loss by slow car sales. Galateri, who was appointed in June, had been the banks' main point man within Fiat although the emergency funding agreement was struck before he joined.

Fiat shares fell as much as 4.7 percent, but had trimmed their losses to 2.63 percent to 8.81 euros by 1557 GMT. The DJ Stoxx index of European auto stocks was up 2.18 percent.

Both Galateri and Fresco had been expected to quit amid mounting criticism, including a public lambasting from Prime Minister Silvio Berlusconi, as the once-great carmaker laid off thousands of workers this week to slash costs.

But Industry Minister Antonio Marzano said the management shake-up at Fiat revealed a "new commitment by the company's main shareholder in the car sector".