Fiat was reported to have sent shivers through the Italian stock market yesterday on fears that the struggling car group faced difficulty meeting the terms of a €3 billion convertible loan.

The Daily Telegraph said the stock fell 11% to record lows on the Milan exchange before partly recovering after the company denied rumours sweeping the trading floors.

"Recent speculations about the fate of the €3 billion mandatory convertible loan are unfounded," Sergio Marchionne, Fiat's chief executive reportedly said.

According to the paper, he said Fiat would convert the loan into shares this September as originally planned, adding that a decision to postpone the shareholders' meeting from May to June was purely technical.

He reportedly predicted that the company would be back in profit in 2005 despite the "difficult trading environment in the first half of the year" - the stock finished the day down 3.2%.

However, Prof Garyl Rhys at Cardiff Business School told the Daily Telegraph that Fiat now appeared to be trapped in a cycle of unstoppable decline.

He told the paper: "It reminds me of what happened to Rover. once the slide began. Their strong point has always been small cars but now even the Italians want to drive bigger models, so they've seen their market share cut from 70% to 35% in their home market."

The Daily Telegraph reported that Fiat said it still expected to receive a €550m payment from General Motors next month as part of the divorce settlement after the American vehicles giant pulled out of its loss-making Italian venture.

The paper noted that Fiat's troubles followed grim figures from the European automobile association this month that showed sales down 16.9% in March compared with the same period last year, the worst of any major car group.

Fiat's share price has fallen by more than 85% over the past five years, the Daily Telegraph noted.