MILAN (Reuters) - If Fiat SpA fails to clinch a deal with Chrysler LLC, it may turn to the latter’s bigger rival General Motors Corp (GM) to gain the scale it needs to survive the worst industry crisis in decades.

Visitors walk on the Fiat booth during the second media day of the 79th Geneva Car Show at the Palexpo in Geneva in this March 4, 2009 file photo. REUTERS/Denis Balibouse

GM has a strong presence in Fiat’s main markets of Europe and Latin America and already shares parts with the Italian group on models such as the Corsa and Grande Punto.

“That (a deal with GM) would make sense,” said SG Securities analyst Eric-Alain Michelis.

Fiat has more to gain from a deal with GM than with Chrysler because it is in the same market segments for small- and medium-sized cars as GM and could target greater economies of scale, Michelis said.

Chrysler, on the other hand, does not offer Fiat any cost savings because their businesses barely overlapped, he said.

PSA Peugeot-Citroen is also seen as a good match for Fiat, but a merger with the French car maker would be politically sensitive because the overlaps in their activities would lead to lay-offs and plant closures in both countries.

A deal with a premium brand like BMW or Daimler AG has been mentioned and would create a group with a product range from cheap and cheerful to costly and classy.

But the last big deal between a mass-market car maker and a premium brand was Daimler’s 1998 deal with Chrysler -- a costly combination that eventually came undone.

CASH FREE

Whatever the arrangement Fiat would work out with an alternate partner to Chrysler, no money would have to change hands, according to UBS Warburg analyst Philippe Houchois.

One reason is that nobody has any to spend.

Should car sales resume their fall, despite government incentives -- as shown by PSA’s latest sales figures -- car makers would look at other ways to make a deal to share costs and reduce cash burn.

“They can do paper deals,” Houchois said.

In the proposed Chrysler deal, no cash would change hands. Instead, Fiat is offering technology and access to foreign markets in exchange for an entry into the U.S. market and a minority stake in the struggling U.S. group.

Faced with an April 30 deadline, Fiat Chief Executive Sergio Marchionne is working to get the support of Chrysler’s reluctant creditors and unions to close the deal. If he fails, the U.S. government threatens to let Chrysler go bankrupt.

A source close to Fiat told Reuters on Tuesday the car maker was determined to get a deal, but Marchionne has said he was looking for other partners “in Europe, North America, everywhere,” in case the talks come to nothing.

Although some investors and analysts expect Fiat to try to buy Chrysler assets on the cheap if the car maker goes bust, most expect it to look elsewhere because it does not have the funds to spend on plants, let alone refit them to make its cars.

Doubts have grown about its ability to pay off the 4.8 billion euros of debt due this year. Ratings agencies, for instance, have downgraded its debt to junk.

For the first quarter, its net industrial debt is seen at 6.7 billion euros against 1.1 billion a year earlier, according to the median of analysts’ estimates compiled by Fiat ahead of the publication of results on Thursday.

COST SAVINGS

In response to growing talk of a possible deal on GM’s Opel, Fiat Chairman Luca Cordero di Montezemolo has denied any interest, and a banker has told Reuters that Fiat’s talks with GM did not involve the German unit.

But Max Warburton at brokerage Bernstein is convinced of the idea. In a report, he said a combined group would boost Fiat from No. 6 to No. 2 in terms of market share in Europe and estimated cost savings at about 1.5 billion euros compared with 225 million with Chrysler.

Another GM brand that is looking for a partner is Saab, but a Milan analyst dismissed this as a possibility for Fiat.

“After you take over Saab, what do you have? You put it together with (Fiat’s premium sports car maker) Alfa Romeo and you have two weak brands,” he said.

If Fiat still wants to enter to the United States without Chrysler, it could get its Indian partner Tata Motors to let it use its Land Rover and Jaguar dealerships to sell Alfa Romeo cars in the country.

SG’s Michelis said he would not consider it a failure if Marchionne decided to pull out of the Chrysler talks. “He’ll be able to keep his head high and say that he tried but the terms were not good enough for Fiat,” he said.