Microsoft and Fiat have formed a partnership to develop a standardized telematics system for the struggling Italian auto maker, the biggest deal yet for the American software giant's automotive business. The goal of the alliance is to create a flexible, easy-to-use telematics system for Fiat and its Lancia and Alfa Romeo brands sold in Europe, the companies said.

Telematics refers to wireless communications products designed into vehicles. To date, Microsoft's telematics customers include Mercedes-Benz, BMW, Citroen, Honda, Hyundai, Toyota and Volvo.

The Microsoft/Fiat system, expected to be available in vehicles next year, will be based on standard hardware and operate with Microsoft Windows Automotive software.

Using the short-range digital wireless communications standard known as Bluetooth, it will allow motorists to integrate their cell phones and personal digital assistants with the onboard system.

Drivers also will be able to access digital music stored in personal electronic devices through a USB connection in the dashboard, as well as other information.