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UPDATE 1-Fiat Chrysler CEO says spin-off his preferred option for Magneti Marelli

Marelli@ (Adds details, quotes)

MILAN, Oct 2 (Reuters) - A spin-off is the option favoured by Fiat Chrysler (FCA) Chief Executive Sergio Marchionne to unlock value from components maker Magneti Marelli, he said on Monday.

Marchionne said in July that FCA was working on a plan to streamline its portfolio and that components businesses, including Magneti Marelli, would be taken out.

Any separation of Magneti Marelli - which makes components for lighting, engines, electronics, suspension and exhausts - would also help boost FCA's finances at a time when it is aiming to become cash-positive by the end of 2018.

Marchionne said Magneti Marelli could follow the example of luxury sportscar maker Ferrari , which first listed a small stake on the market and was later spun off, with the remaining shares distributed to FCA's existing shareholders.

"Or I could just spin it (off)" and distribute Magneti Marelli's shares to FCA investors, Marchionne told journalists on the sidelines of an event in Rovereto, northern Italy.

"We will press ahead with (a separation) in 2018, it will be part of the business plan we will present next year," he added.

Marchionne reiterated it was premature to spin off FCA's Alfa Romeo and Maserati brands, adding that may not even happen during the next business plan to 2022.

FCA has been the subject of takeover speculation in recent weeks. Its share price jumped to record highs in August after reports of interest from China, while other reports mentioned possible interest from South Korea's Hyundai.

Marchionne reiterated he was not working on any big deal, and added he had had no contacts with Hyundai. His focus remains on FCA's current business plan to 2018, preparing the next strategy and finding a successor, he said.

He also said FCA did not plan to raise 2017 targets when it releases third-quarter results.

"Given the way the euro is moving, we're going to do nothing," he said, while adding the business was doing fine.

Speaking after being awarded an honorary degree by the University of Trento, the 65-year-old said the auto industry was being too slow to adapt to new challenges and had failed to embrace newcomers such as technology firms.

"The biggest fear that I see is that we will be left behind," he said.

He also warned against focusing too narrowly on electrification to solve the industry's emissions challenges, saying a combination of technologies needed to be considered.

"It's too early to assume that by itself electrification will solve the problem. It won't." (Reporting by Agnieszka Flak; Editing by Mark Potter)