By Giancarlo Navach

Fiat and BMW are also considering developing a new family of gasoline and diesel engines, the magazine said in a report posted on its website.

The report came as Fiat Chief Executive Officer Sergio Marchionne told reporters it would sign an industrial alliance in the car sector on Wednesday, though he did not identify the partner.

"We've been working on it for a good while. It's something simple," he said on the sidelines of a session to test drive the Abarth version of the Cinquecento (500) city car.

Fiat and BMW press officers declined to comment on the report.

Car makers are involved in many alliances to share production and other costs in the highly competitive sector known for its meager profit margins.

A decline in sales amid a rise in raw materials prices have put a further strain on the sector, but Marchionne once again confirmed Fiat's targets for the year, which include a higher trading profit of 3.4-3.6 billion euros.

"From what I can see, there is no reason to postpone the 2008 targets," said Marchionne.

"We are about to close the quarter and the results are all in line with the targets and we don't see anything coming up for the rest of the year, barring any disastrous events in the next six months.

"What's important is to see how the third and fourth quarters will go," he said.

At 7:13 a.m. EDT, Fiat shares were down 4.79 percent at 9.84 euros, underperforming the DJ Stoxx index of automotive stocks <.SXAP>, which was down 2.3 percent. BMW was down 1.3 percent at 29.60 euros.

"Brazil and Latin America continue to go strongly and we don't see any dark clouds on the horizon," Marchionne added. "2008 and 2009 will be exceptional years."

Analysts cite the region as Fiat's saving grace because its sales are declining in Italy and other parts of western Europe.

Other car makers like General Motors Corp are having a much harder time, and the U.S. giant is considering selling brands like Dodge, Buick, Pontiac, and Hummer.

Marchionne dismissed the recurring suggestion of spinning off Fiat's car business, and said the company would not buy any of the brands that GM might put up for sale.

"Fiat is not interested in any of the American group's brands."

(Additional reporting by Gilles Castonguay in Milan, editing by Will Waterman)