Fiat Chrysler Automobiles said it will spin off its Magneti Marelli SpA parts business by the end of this year or early next year.
"The separation will deliver value to FCA shareholders, while providing the operational flexibility necessary for Magneti Marelli's strategic growth in the coming years," FCA said in an April 5 statement.
Magneti Marelli has a wide-ranging product portfolio, with plastics for lighting under its Automotive Lighting joint venture, instrument clusters, interior parts — including dashboards — and major exterior systems such as bumpers and fenders.
In 2016, the company said it produced more than 21 million headlamps, 29 million rear lighting units and 4.7 million instrument clusters.
At the North American International Auto Show in Detroit in January, Magneti Marelli showed its "Smart Corner" concept, which integrates cameras, sensors, radar and lidar into headlamps and taillights.
FCA CEO Sergio Marchionne said the spinoff will allow the automaker to focus on its core portfolio and strengthen its capital position. FCA has been expected to sell or spin off the supplier for nearly two years.
"A separation of FCA and Magneti Marelli is a key ingredient of the 2018-2022 business plan, which will be communicated in June," Marchionne said in the statement. The spinoff plan gained momentum in reports last month.
FCA said the spinoff will be subject to regulatory approvals and final approval by Fiat's board of directors.
Shares of Magneti Marelli are expected to be listed on the Milan stock exchange, FCA said.
Magneti Marelli ranks No. 28 in Automotive News' list of the top 100 global suppliers with worldwide sales to automakers of $8.2bn (€6.7bn) in the 2016 fiscal year.