* Fiat CEO Marchionne sees large deal in auto industry
* Need to share costs for fuel-sapping engines to spur deal
* Opel CEO rules out deal with Fiat (Adds comments by Opel CEO, bankers and analysts)
By Alberto Sisto and Edward Taylor
MELFI, Italy/RUESSELSHEIM, Germany, May 28 (Reuters) - Fiat Chrysler's chief executive is convinced there will be another merger deal in the carmaking industry within the next three years, he said on Thursday, even though General Motors specifically ruled out a tie-up with Fiat.
"I am absolutely certain that before 2018 there will be a merger," Sergio Marchionne said during a visit to Fiat's Melfi plant in southern Italy, in response to a question about whether he saw consolidation in the auto industry. He did not specify whether such a merger would involve his group.
Sources familiar with the situation told Reuters in April that Marchionne was hoping to seal a big deal for FCA, possibly in the United States, but might struggle to find a partner.
In particular Fiat's current valuation and its track record as a partner with General Motors stand in the way, bankers and car executives say.
But generally, access to debt financing, and continued growth in markets means the current appetite for mergers and acquisitions in the industry is high.
In a survey this week, Ernst & Young said 70 percent of automotive executives are expecting to pursue acquisitions in the next 12 months.
Tougher emissions rules are forcing car companies to make huge investments to develop hybrid and electric drivetrains and to reduce the size of engines in an industry with cut-throat margins.
And keen to share research costs, Marchionne is reported to have already made an approach to General Motors.
Marchionne said he could not confirm a report in the New York Times on Saturday that he had sent an email to GM Chief Executive Mary Barra in March suggesting that the two companies combine, but was rebuffed.
"I write lots of emails, one does not talk about those things this way," he said.
NO MERGER
However, Karl-Thomas Neumann, chief executive of GM's European arm Opel, also ruled out a deal with Fiat on Thursday, citing the difficulty in closing factories in Europe as one of the obstacles, even if there is a case for better economies of scale in research and development.
"In principle Marchionne is right, the auto industry develops the same things 10 times over," Neumann said, referring to efforts to make more efficient engines, as well as hybrid drivetrains.
But Opel is working on ways to improve volume, scale and utilisation by sharing more common parts with its U.S. parent as well as Peugeot, Neumann said.
Fiat and Opel have a long history of attempted cooperation. Fiat bid to buy Opel in 2009 but lost out to a rival offer before GM abandoned the sale process altogether.
The two had already formed an equity-based alliance back in 2000, sharing costs on engines and components, but relations soured as Fiat's losses mounted. In 2005 GM had to pay Fiat $2 billion not to exercise a put option to sell the entire auto division to the U.S. carmaker, "and there's been bad blood since", one person familiar with the matter said.
And at least for now Fiat is unlikely to be welcomed with open arms by any other major rival, bankers and analysts say.
"It has very limited profitability, it is loaded with debt, it makes little in the way of earnings, it is burning cash and it is not able to pay dividends," Bernstein research analyst Max Warburton said in a note on the company on May 5. The company's shares should be trading at 6.25 euros, rather than the current 14.70 euros, Bernstein said.
A senior car industry executive who declined to be named, said it was a well known fact that Fiat was looking for a deal.
"What is smarter for us to do? Make an offer for Fiat now, or wait for it to run into trouble and try to grab market share once it starts paring back its operations?" the executive said. (Writing by Agnieszka Flak; Editing by Greg Mahlich)