I don't know his reasons but it is another sign of instability in the group

Sergio Cofferati Italian trade union CGIL

His resignation comes as Fiat group is suffering large losses, caused mainly by sharp falls in car sales which have hit its core automotive division hard.

"After thinking about it for a long time, I decided that at this complex time for the group, and for Fiat Auto in particular, there had to be a strong break," Mr Cantarella said.

Fiat Auto, whose market share is shrinking across the world, is struggling to honour a pledge to investors to halve its net debt to 3bn euros (£1.94bn; $2.84bn) by December this year.

Mr Cantarella's resignation comes amid speculation that Fiat may exercise an option to sell its 80% stake in Fiat Auto to US car giant General Motors, which owns the remaining 20%.

Mixed reception

Fiat's shares gained on news of the resignation, even though many observers remained sceptical.

Fiat Auto's brands have dwindled

"I don't know his reasons but it is another sign of instability in the group," said Sergio Cofferati, the head of powerful Italian trade union Confederazione Generale Italiana del Lavoro (CGIL).

Xavier Gunner, car analyst at UBS Warburg, said: "I'm not overly surprised. It underlines the crisis that the car division is in.

"But his departure doesn't necessarily mean that there is a solution in sight."

Fiat chairman Paolo Fresco will take on chief executive responsibilities.