Industrial group Fiat SpA aims to raise the number of job cuts in Italy to 5,000 and may spin off its car activities sooner than thought, an Italian newspaper said on Wednesday, sharply boosting its shares.

La Repubblica said Fiat, which took a stake last year in struggling U.S. carmaker Chrysler, would announce 5,000 job cuts, or 15 percent of workers employed in Italian assembly lines, when it unveils its 2010-2014 strategic plan on April 21.

This is more than envisaged in an industrial plan presented in December.

The newspaper cited union sources saying an extra 2,000 to 2,500 workers could lose their job at the Mirafiori plant in Turin, Fiat's biggest plant in Italy, and another 500 at the Pomigliano plant, bringing total layoffs to 5,000.

Fiat dismissed the report absolutely premature and groundless and said that reports on the timing, modality and scale of extraordinary operations at the group were speculation.

It was the second time this month the group had to deny a report on the possible separation of car activities from the commercial vehicle and publishing operations.

Fiat Chief Executive Sergio Marchionne said earlier this month the issue of the spin-off may be addressed at the April 21 presentation, helping fuelling speculation on the operation.

Shares in Fiat trimmed gains after Fiat's denial, but remained the best-performing stock in a flat European auto Stoxx index .SXAP. The stock rose to a two-month peak early in the day and was up 2.98 percent at 9.68 euros at 1431 GMT (10:31 a.m. EDT).

Fiat, which took a stake in struggling U.S. carmaker Chrysler to expand its international footprint, is already planning to lay off 1,500 workers at Sicily's Termini Imerese plant, scheduled to close on December 31, 2010, and a further 500 at the Cassino plant.

Rocco Palombella, secretary general at trade union Uilm, told Reuters he was not aware of any extra job cuts planned at the Mirafiori plant.

SPIN-OFF IN FOCUS

Two analysts said the shares were also being pushed up by an unsourced report in La Repubblica that a long-awaited spin-off of Fiat Group's car operations would happen as soon as this summer.

The spin-off was not expected so soon, said an analyst.

Many analysts believe Marchionne would need to have a firmer grip on Chrysler before venturing into a spin-off.

The Fiat group employs just over 80,000 people in Italy and 190,000 worldwide, according to its latest financial report.

Fiat announced in December it planned to boost Italian production by 50 percent to nearly 1 million cars.

La Repubblica also said Fiat would cut the number of car models produced to eight from 12. In the United States, the Italian group would seek to produce seven models using the brands Fiat, Lancia and Alfa Romeo for a total production of more than 350,000 units, the paper also said.

Chrysler said on Wednesday U.S. sales were up 50 percent in March from February.

(Additional reporting by Stefano Rebaudo and Nigel Tutt in Milan; Editing by David Cowell)

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