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Fiat, the Italian industrial group, yesterday agreed with General Motors to delay by one year a put option that would have allowed it to sell Fiat Auto, its heavily loss-making car division, to the US carmaker as early as next January.

GM had threatened to take legal action to block the exercise of the option, claiming Fiat's sale this year of its automobile financing unit had breached the option's terms.

The two companies agreed not initiate any legal proceedings over the alleged breach before December 15, 2004, and to attempt to iron out their differences in the meantime.

Fiat had between January 24, 2004, and July 24, 2009, to exercise the option agreed on when GM paid $2.4bn for 20 per cent of Fiat Auto three years ago. GM wrote off most of that investment one year ago and reduced its stake to 10 per cent when it declined to take part in a recapitalisation of the troubled unit.

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