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General Motors Corp. will pay Italy's Fiat SpA $2 billion to nullify an agreement that could have forced the U.S. automaker to buy Fiat's money-losing auto operations, the companies said in a statement Sunday.

Under the settlement, GM will return its 10 percent stake in Fiat Auto to the parent company, GM and Fiat will dissolve two joint ventures, and GM will acquire an interest in Fiat's diesel engine business.

As a result of the agreement, GM, the world's largest automaker, will take a charge of $840 million after tax, or $1.49 a share.

The settlement was in line with estimates in news reports.

A mediation process to sort out the dispute ended in stalemate earlier this month but people close to the situation said GM and Fiat continued to negotiate a settlement to avoid a lengthy, distracting court battle.

GM insisted Fiat had invalidated its option to sell 90 percent of Fiat Auto because of restructuring moves at the Italian carmaker. Fiat rejected that and promised to defend the option.

For its part, Fiat will look at focused alliances after ending its partnership with GM and not at wide-ranging tie-ups, the company's CEO Sergio Marchionne said Sunday.

"General alliances do not work, in the future we need to look to focused alliances," Marchionne told reporters in Turin.

He added Fiat's targets for 2005 were unchanged, and that the settlement would improve Fiat's financial position.

Fiat Chairman Luca di Montezemolo said Fiat would have exercised its option to sell its money-losing auto operations to GM this week, had a settlement not been reached.

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