The European Commission Wednesday launched an investigation into state aids of some dlrs 15.6 million which the Italian government proposed to give to Italian carmaker Fiat SpA's truck unit Iveco.

"The case concerns research and development aid in the automotive sector and the proposed aid amounts to 32.27 billion lire (dlrs 15.6 million)," the European Union's executive office said in a statement.

The proposed aid was to fund a project to renew and expand Iveco's range of light van production which accounts for 20 percent of its sales. The Fiat subsidiary produces mainly light commercial vehicles, buses and diesel engines the Commission said.

Iveco manufactured 137,000 vehicles and 363,000 engines, in 29 production plants in 1998.

The Commission is concerned that the proposed aid would violate EU rules on government help for the auto sector, giving Fiat an unfair competitive edge over its competitors.

Fiat is Italy's No. 1 carmaker and the country's leading private employer. Car-making is Fiat's core business but the company is also involved in other activities including insurance, agricultural machinery and trucks.

The Turin-based group, which employs 220,000 people around the world, announced a strategic alliance with U.S. automaker General Motors Corp. in March.

Fiat expects its 2000 revenues to be between 57 billion euros (dlrs 53.5 billion) and 58 billion euros (dlrs 54.3 billion).

There was no immediate comment from the Italian government on the Commission probe.

The Commission said it would need 18 months to conclude its investigation.