Detroit, MI -- Microsoft and Fiat SpA have formed a partnership to develop a standardized system for designing wireless communications into vehicles made by the Italian automaker, the biggest deal yet for the American software giant's automotive business.

The goal of the alliance, announced Thursday, is to create a flexible, easy-to-use telematics system for Fiat and its Lancia and Alfa Romeo brands sold in Europe, the companies said.

The best known telematics system may be OnStar from General Motors, whose services include diagnostic information, roadside assistance and stolen-vehicle recovery capabilities.

Financial terms were not disclosed, but Microsoft marketing manager Peter Wengert said it's the largest deal of its kind for the Redmond, Wash.-based company's auto division.

Only four or five years ago telematics primarily involved navigation systems in a few high-end cars. Today, some form is available on 255 models representing 39 brands globally, according to the Minnesota-based Telematics Research Group. That is up from 200 models and 32 brands a year ago.

Wengert said Microsoft hopes to illustrate the effectiveness of standardizing systems for entire lines of vehicles with the Fiat initiative -- and sell other automakers on it. To date, Microsoft's telematics customers include Mercedes-Benz, BMW, Citroen, Honda, Hyundai, Toyota and Volvo.

"It's the first time our automotive software will be partnered with a (manufacturer) across all their brands and product lines," he said.

The Microsoft/Fiat system, expected to be available in vehicles next year, will be based on standard hardware and operate with Microsoft Windows Automotive software. Using the short-range digital wireless communications standard known as Bluetooth, it will allow motorists to integrate their cell phones and personal digital assistants with the onboard system.

Drivers also will be able to access digital music stored in personal electronic devices through a USB connection in the dashboard, as well as other information.

Phil Magney, the Telematics Research Group's principal analyst, said a standardized system should allow Fiat to offer customers a useful, cost-effective feature. Fiat has yet to determine if the system will be standard equipment in some models or entirely optional, a Microsoft representative said.

"It's a relatively simple device that augments the existing audio and electronic systems, so it's not something that's going to take over the dashboard," Magney said. "It's flexible and could be used by other (auto manufacturers) to do different things."

Magney said the potential exists for Microsoft to sell other automakers on the concept, but many already have invested heavily in their own systems. GM's OnStar service, for example, is available on more than 50 GM models and select models from six other manufacturers. It provides safety, security and information services using a Global Positioning System satellite network and wireless technology.

GM owns a small stake in Fiat Auto, the loss-making division of the Italian conglomerate. For decades, Italian consumers were highly loyal to Fiat, but many have turned to other European makes and Asian brands in recent years.

A new management team at Fiat is banking on new models as a way to turn around the auto division's fortunes. Earlier this year, Fiat Auto chief executive Herbert Demel said he hoped to halve Fiat Auto's operating loss to about 500 million euros ($620 million) in 2004.