MILAN -- Fiat SpA and General Motors Corp. head for a showdown this week as a one-year truce expires, opening the way for them to go to court over whether the Italian industrial group can force the U.S. giant to buy its loss-mired car unit.

Both sides are playing hardball over the Fiat Auto put option, and the atmosphere will be charged when top managers meet in Zurich tomorrow, a day before the moratorium ends.

Fiat has an option to sell its 90-per-cent share of Fiat Auto to GM from Jan. 24. But GM argues the put option was invalidated by the sale of part of Fiat Auto's financing arm Fidis and a capital injection Fiat gave to keep its car maker going during a crisis.

Fiat chief executive officer Sergio Marchionne rejects that, saying last week there is a "real live possibility" of exercising the put to GM, which owns 10 per cent of Fiat Auto. Sources close to Fiat say Mr. Marchionne could take GM to court to prove the validity of the put, a key part of Fiat's valuation and a parachute that persuaded banks to finance its restructuring.

On the weekend, media reported that Fiat could exercise a call option to buy back the 51 per cent of Fidis it sold to its banks, thus wiping out one of GM's cases against the put. Analysts say the row over the put could be tied up in court for months.

A quicker way out of the stalemate could be for GM to pay cash to erase the put and to loosen terms of the alliance the two groups signed in 2000, allowing Fiat to forge new partnerships with other car makers.

Workers and politicians in Fiat's home town of Turin are worried about potential job losses if Fiat Auto is sold, and some are calling on the government to intervene.

It remains to be seen if Fiat's founding Agnelli family, which still controls Italy's largest private employer, would agree to sell the 105-year-old car maker.

Mr. Marchionne, who works with an Agnelli as vice-president, said he wants what's best for the car business and to create the highest possible value for Fiat stakeholders.

The Agnellis are due to be briefed by managers from Fiat and holding company Ifil today to get an up-to-date snapshot of their truck-to-retail empire and discuss strategy.

Analysts say the two firms' joint ventures are too precious to be jeopardized by the spat over the put. GM needs the joint ventures to keep costs down as it battles to turn around its loss-making European business.

GM vice-chairman Bob Lutz has said savings from the joint ventures "more than justified the amount of capital that we put in."

But in the middle of its own European job cuts and soaring U.S. health care costs, GM cannot afford another unprofitable, indebted car company and looks set to fight the put to the end.