The struggling Italian car maker Fiat has said its chief executive Gabriele Galateri will step down as soon as a replacement can be found.

Fiat issued a statement on Tuesday saying that a new chief executive would be announced at a board meeting "to be called as soon as possible".

There had been speculation that Fiat's chairman Paolo Fresco would also resign, but Fiat said the board had expressed its confidence in Mr Fresco and the rest of the company's management.

Fiat been under fire recently for its decision to lay off thousands of workers, in an attempt to pull itself out of the red.

Restructuring

Fiat began the first round of redundancies on Monday, as part of a restructuring plan in which 8,000 workers will be laid off.

The lay-offs began on Monday

The car maker has said the redundancies are only temporary and that most workers will be re-employed within a year.

But unions have disputed the claim and have led a number of protests at Fiat factories.

The drastic measures have focused attention on the troubles facing Fiat.

The once-mighty car maker has been criticised for increasing debt levels in order to diversify out of auto production.

Fiat has an option to sell its Fiat Auto division - which includes the Fiat, Lancia and Alfa Romeo brands but not Ferrari - to US car maker General Motors in 2004.

GM already has a 20% stake in the business, but Mr Galateri said last week that Fiat would "remain Italian".

However, some analysts have said that the selling Fiat Auto is Fiat's only chance of returning to profit.

New plan

Italian press reports on Tuesday suggested that the GM deal could be scuppered by a plan being put together by the Italian bank Mediobanca.

The bank took a stake in Fiat's Ferrari-Maserati business in June and media reports said it favoured moving the Alfa Romeo brand to the luxury group and out of Fiat Auto.

Observers said a restructuring at the top of Fiat could give the bank a chance to push the plan through.

Dividing Alfa Romeo from Fiat Auto might cancel the option Fiat has to sell its 80% to GM.