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UPDATE 1-Fiat strikes deal to hire ex-Ford executive-report

(Updates with Ford no comment, background)

MILAN, Aug 25 (Reuters) - Martin Leach, who quit as head of Ford Europe this month, has reached a preliminary agreement to take over as CEO of Fiat's car division, industry publication Automotive News reported on Monday.

Automotive News, quoting industry sources, said on its Web site that Fiat was negotiating with Ford to release Leach from a non-compete clause in his Ford contract which is believed to last for six months.

Fiat declined to comment. Ford reiterated it could not comment on executives' contracts and gave no comment on the latest report.

Most auto executives have non-compete clauses but in practice it is very difficult to prevent former employees moving to a rival company if they want to.

The appointment has been expected since Leach's resignation from Ford. Leach, 46, was one of three top auto executives mentioned by media as possible replacements for Fiat Auto Chief Executive Giancarlo Boschetti, who is due to retire next year.

Leach, a prize-winning driver of Kart mini-race cars, became the youngest director of Ford Europe in 1992. He is known for his expertise in car marketing -- the kind of skills needed at Fiat, which hopes a series of new models will help reverse its plummeting sales.

The 104-year-old auto maker is set to launch its newest car, a revamped Panda, in Lisbon next Monday.