By Chang-Ran Kim and Marcel Michelson
MILAN/PARIS (Reuters) - Italy's FIAT (F.IT)confirmed it was in talks with Chrysler over taking a stake in its U.S. rival as France prepared to announce an injection of state funds to revive its carmakers.
Meanwhile, Toyota Motor Corp named the grandson of the company's founder to steer it through the global crisis crippling the auto industry.
Peugeot, which warned on Monday that 2009 would be a "terrible year," awaited news of conditions it and French rival Renault would have to meet to qualify for government aid.
Fiat's vice-chairman John Elkann said the company was in talks with Chrysler after reports said they could lead to the Italian carmaker buying a stake in its beleaguered U.S. rival and the two companies looking to slash costs by combining production platforms.
The stake could be up to 35 percent, Automotive News Europe reported on its website (http://www.autonews.com).
"Between the two groups, there is talk about Chrysler possibly using Fiat technology in exchange for a stake," a source told Reuters, speaking on condition of anonymity.
The source told Reuters a deal with Fiat would help Chrysler make vehicles that produce fewer harmful emissions, improving its case for accessing U.S. government funding.
Chrysler, the No. 3 U.S.-based automaker behind General Motors Corp and Ford Motor Co received $4 billion of U.S. government loans to avert collapse and Chief Executive Bob Nardelli said last week it was counting on $3 billion more.
Ahead of a meeting on Tuesday in Paris at which aid measures from the French government could be announced, industry minister Luc Chatel said France could take stakes in its carmakers in exchange for financial assistance to the battered industry.
On Monday, Peugeot chief executive Christian Streiff was quoted as telling Le Figaro that Europe's second-biggest carmaker would experience a "terribly difficult" 2009 and could not say if it would be profitable.
On Tuesday, his counterpart at Renault-Nissan, Carlos Ghosn, warned the auto sector crisis will be a long one.
In Japan, Toyota said on Tuesday it named Akio Toyoda to replace 66-year-old Katsuaki Watanabe as president in June as part of a management reshuffle, as the world's largest carmaker heads for its first ever operating loss in the year to March.
Toyota and its rivals are grappling with slumping sales in North America, Europe and Japan amid a spreading recession in rich countries, with sales also slowing in emerging markets such as China and Russia.
Dutch car navigation systems company TomTom on Tuesday reflected the impact of the sharp sales decline on ancillary manufacturers as it cut its 2008 revenue and profit outlook.
(Additional reporting by David Dolan Nathan Layne and Gianni Montani; writing by John Stonestreet; Editing by Mike Nesbit)
