UPDATE 1-Fiat in talks on possible capital increase -report
* Possible capital increase 1-2 bln euros - paper
* Fiat declines to comment
* Talks at informal stage - paper
MILAN, Dec 14 (Reuters) - Italian carmaker Fiat is in talks with four banks about a possible 1-2 billion euro ($1.3-$2.6 billion) capital increase next year to buy the 41.5 percent of Chrysler it does not already own, Il Messaggero reported.
Fiat declined to comment on the report.
The banks are UniCredit, Morgan Stanley, Bank of America and Goldman Sachs.
In November UBS estimated the fair value of Chrysler at between $9 billion and $13.4 billion, meaning the 41.5 percent stake is worth between $4.1 billion and $5.5 billion.
The paper, which did not cite sources, said talks were still at an informal stage and no decision had been taken.
Fiat said on Oct. 31 it had 9.8 billion euros in liquidity, and Chrysler had 10.2 billion euros.
Marchionne is determined to gain full control of Chrysler by buying the remaining 41.5 percent owned by VEBA, as this would allow Fiat to restructure debt, boost earnings and support its struggling European operations until the economy recovers.
VEBA, which covers healthcare costs for retired workers at Chrysler like similar trusts at General Motors and Ford Motor Co , took a stake in Chrysler during its restructuring. It needs to safeguard the rights of Chrysler's retired workforce.
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