Italian carmaker Fiat Auto and China's Chery Automobile Co. Ltd. announced Tuesday that they have signed a memorandum of understanding to supply gasoline engines for Fiat cars produced both in and out of China.

The two companies said they expect an annual supply exceeding 100,000 1.6 and 1.8 liter gasoline engines. Fiat SpA CEO Sergio Marchionne said the cooperation could be extended to powertrains and other automotive sectors.

"The agreement with Chery will give us the opportunity to further increase the competitiveness of our product range on the international markets," Marchionne said in a statement. "Chery is a young and modern company with a solid technical background and I am glad to welcome this further step in our strategy of targeted alliances."

The deal is expected to be finalized before the end of the year. Financial terms were not released.

Fiat shares were trading up 0.6 percent at euro13.77 (US$17.53) on the Milan stock exchange.

Marchionne has made alliances with other automakers and auto sector suppliers one of the hallmarks of his turnaround of the once-failing automaker, choosing alliances that allow Fiat to share costs while expanding into markets where Fiat has a little or no presence.

Fiat has unveiled a series of commercial alliances this year, including with SAIC of China, a unit of Shanghai Automotive Co., Severstal Avto of Russia and India's Tata Motors Ltd. In Europe, Fiat is sharing a platform with Ford Motor Co. on which Fiat will produce its new 500 and Ford its new Ka.

Fiat last week posted its fourth-straight quarter of profit, breaking a 17-quarter run of losses.

Chery Automobile, founded in 1997, produces automobiles and auto components, with an annual capacity of 400,000 vehicles and 300,000 gearboxes. The company reported a sales volume of 189,100 cars in 2005, 18,000 of those overseas.