By Gilles Castonguay

PARIS - Italy's Fiat is ready to pull out of ACEA, the association which represents the auto industry before the European Commission, an industry trade publication reported on Friday.

Citing people familiar with the matter, Automotive News Europe also said ACEA's board had in addition agreed to a joint approach by the association's members before the European Commission for a 40 billion euro (S$79 billion) loan to develop environmentally friendly products.

The idea of the loan was mentioned by Fiat's chief executive to reporters while visiting the stands at the Paris autoshow on Friday. He said it would resemble the one that the United States was preparing for its own car makers.

Automotive News Europe said Fiat was prepared to quit ACEA because the car maker did not think its interests were properly represented by the association.

ACEA is negotiating with the Commission over a controversial proposal to set strict limits on carbon dioxide (CO2) emissions from cars.

And Fiat's departure would expose deep divisions between it and other members of the association regarding ACEA's position on the proposal to cut CO2 emissions from cars by 18 percent to 130 grams per km by 2012.

Automotive News Europe said Fiat's Marchionne had threatened to pull the Italian car maker out of the association at the board meeting, held earlier in the day on the sidelines of the Paris autoshow.

It cited sources as saying the meeting was "stormy".

ACEA Secretary General Ivan Hodac denied the report.

"I am not at all aware of Fiat wanting to leave ACEA," he told Reuters by phone, adding that the meeting was not "stormy" as described by the publication. "There are no divisions."

Fiat was not immediately available for comment.

Marchionne has been open about his frustrations with the negotiations, often saying the latest version of the proposal favoured big car makers in Germany at the expense of small car makers like Fiat.

Germany, home to Mercedes and BMW whose cars emit more greenhouse gases, has been pushing for a softening of the Commission's original proposal.

Manufacturers in Italy and France would have less trouble meeting the limits because they make smaller cars that are more fuel efficient and pollute less.

Marchionne has criticised France and Germany for dominating the political process, saying the draft rules favoured heavy cars by linking emissions caps to weight. "(It) is the result of political pressure aimed at protecting particular interests of a few market participants in the car sector," he told reporters on the sidelines of a conference in Rome earlier this week.

ACEA has argued that a rush to legislate the proposal would put jobs and export earnings at risk because there was no guarantee consumers would buy greener cars when they are put on the market.

It has also said car makers needed more time to upgrade their fleet.