UPDATE: Chrysler spokesman Scott Brown has told us that rumors that Lancia will be shut down are false. Lancia will continue on in Europe, with the Epsilon made in Italy, and the rest of its models built by Chrysler in North America.

"What was said by Marchionne is that Lancia Epsilon will continue to be made in Italy and the rest of Lancia portfolio will be developed together with the Chrysler Brand and those vehicles will be made in North America," said Brown, "A development has been announced, NOT the end of Lancia."

Lancia, the storied Italian automaker known for producing such enthusiast favorites as the Stratos, 037, and Delta Integrale, might be no more, according to German automotive news source Automobilwoche. That's not all either. Rumor has it that Fiat will be reorganizing itself to better compete with Mini, and Jeep will be expanding its global reach.

The report comes out of a recent conference call Fiat and Chrysler chief Sergio Marchionne held in Europe. If true, the biggest change to Fiat's operations would be the discontinuation of Lancia, which has been struggling in Europe for years -- essentially dead weight to Fiat amid the current European economic struggles. The brand currently sells a mix of compact cars and rebadged Chryslers to European customers. "We must rid ourselves of the illusion that we can build [a]new Lancia," Marchionne said in the conference call, according to Automobilwoche.

To plug the gap Lancia leaves in the Fiat lineup, Fiat would allegedly move Maserati slightly down-market and Alfa Romeo slightly upmarket so that the two brands would together cover the entire spectrum of the ever-important premium segment.

As for Fiat, it would reportedly team with Chrysler to provide a full spectrum of mainstream vehicles - Fiat would focus on small cars, anchored by the 500 and Panda, while Chrysler would focus on larger sedans. Fiat looks to already be on this path, with the 500L, a stretched four-door 500, and the 500X, a compact crossover. With the 500 lineup expanding, Fiat will be targeting BMW's successful Mini brand.

Lastly, Fiat would leverage Jeep's global appeal to expand the brand's model range into smaller segments. The Jeeps at the forefront of this new plan would likely be the next-generation Liberty/Cherokee, and the 2014 Jeepster. Both models will be built on platforms shared with Alfa Romeo and Fiat, respectively, and would likely be built for the European market in Europe, especially considering the Jeep factory in Ohio is currently over capacity.

Do you think Fiat should go through with the above plans? Share your thought with us on Lancia's fate in the comments below.