TURIN, Italy (Reuters) - Italian carmaker Fiat and its U.S. unit Chrysler are still discussing how to merge the companies, Fiat Chairman John Elkann said on Tuesday.

Fiat owns 58.5 percent of Chrysler and has long made clear its desire to buy the rest of the company, though the U.S. carmaker was last week reported to be considering an initial public offering (IPO).

Asked if he preferred a Chrysler IPO to the acquisition of the 41.5 percent it does not own directly from Chrysler's minority shareholder, Elkann said that Fiat's ultimate aim is to merge the companies.

"There are various negotiations under way, the important thing is to find a way to create a single group," Elkann said on the sidelines of a car exhibition.

Elkann reiterated that Fiat's controlling shareholder Exor would not stand in the way of a Fiat-Chrysler merger even if it means that Exor's stake could be diluted.

(Reporting By Jennifer Clark; Editing by David Goodman)