The full details of...

The full details of the arrangement are not yet known, but Fiat has confirmed that talks with Ford are at an advanced stage. A company statement read: "These discussions have been progressing positively, to the point we have both signed a Memorandum of Understanding."

That paves the way for the 500 name to return, and is good news for fans of the Trepiuno concept car which debuted at the Geneva Motor Show in 2004. This previewed the styling of the new model, which is hoped to offer low prices, frugal engines and - with Ford"s involvement - first-class dynamics when it hits UK showrooms.

Fiat"s funky four-seater should also look very different to the blue oval"s offering. The official statement claims the two cars will feature "highly differentiated designs". The current Ka is the longest-serving model in Ford"s line-up and has barely changed since its introduction back in 1996. Fiat boss Sergio Marchionne revealed plans for a city model link-up at the recent launch of the Grande Punto in Turin - but didn"t disclose the other manufacturer involved. All he would say was that it wasn"t an Asian firm. General Motors wasn"t thought to be in the running, as the two have only just severed links at great cost to GM, so Ford was the main name in the frame.

Now the news is out in the open, industry experts reckon the deal is a major coup for the Italian giant, which has been struggling in recent years. In Turin, Marchionne also confirmed details of other projects, which included work on "major powertrain systems with low environmental impact".

He said: "In the next four years, we"ll be offering 20 entirely new models and 23 facelifts of cars already on the market."