Fiat's chairman will step down to be replaced by the vice chairman, and shares hit a three-month high on Tuesday on speculation the car maker would announce a spin-off of its auto business.

Chairman Luca Cordero di Montezemolo plans to step down, Fiat said in a statement. A source said he would be replaced by Vice-Chairman John Elkann, who represents Fiat's controlling Agnelli dynasty.

The announcement that Montezemolo would resign after six years as chairman of Europe's fifth-biggest car maker by market share comes a day ahead of Fiat's strategy presentation, its first since teaming up with U.S. car maker Chrysler.

Montezemolo was resigning since he had completed the task shareholders had given him when he took on the job, Fiat said.

He will stay on as a Fiat board member and chairman of Ferrari, Fiat's luxury sports brand, it said.

Montezemolo will announce his resignation at a news conference at 1400 GMT in Turin, Fiat's hometown, it said. Elkann, who represents Fiat's controlling Agnelli family, and Chief Executive Sergio Marchionne will also be at the conference.

Elkann will take over as chairman of the group, a source close to the matter said.

Fiat shares were up 8.9 percent at 10.39 euros at 1355 GMT and hit a three-month high of 10.45 euros before paring gains. The STOXX Europe 600 auto sector index .SXAP was up 5.45 percent, driven by positive results from Germany's Daimler AG.

A Milan fund manager said Fiat's shares were boosted by speculation that the company would announce the spin-off of its auto business on Wednesday.

A big hedge fund was buying Fiat all day yesterday and that has helped boost speculation about the spin-off, he said.

A second trader said speculation that Ferrari could be included in the spin-off was also helping the shares.

Marchionne has said the spin-off will be touched on at the strategy presentation. When Elkann was nominated vice chairman it was expected that sooner or later he would become chairman. It is not surprising or totally unexpected, said a Milan-based Fiat analyst who asked not to be named.

Montezemolo, a former head of Italy's business lobby Confindustria, has been asked countless times by reporters if he was interested in entering politics. He has denied he planned such a step.

Me in politics? If I were reborn, in another life, Montezemolo said on Sunday in answer to questions from attendees at a meeting in Florence, ANSA news agency said.

(Reporting by Stefano Rebaudo, Nigel Tutt and Ian Simpson; Writing by Ian Simpson; Editing by Erica Billingham and Sharon Lindores)