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Italy in talks to create rail group with GE's help - unions

* Finmeccanica's Ansaldo units seen joining rail group

* GE could buy stake but Hitachi still in the running

* Italian railways could have role in new entity

By Danilo Masoni

MILAN, Oct 11 (Reuters) - Italy is in talks to create a national rail group and bring in General Electric or another foreign firm as a majority investor, trade unions said on Friday, in the latest intervention by the government to help recession-hit businesses.

The plan would involve a state-owned holding company taking large minority stakes in train maker Ansaldo Breda and rail signalling firm Ansaldo STS, which are being sold by defence group Finmeccanica, they said.

Finmeccanica, in which the state owns a 30 percent stake, put its rail and other non-core assets up for sale nearly two years ago in a bid to cut its near 5 billion euros ($6.8 billion) of debt and focus on aerospace and defence.

The idea of a national rail champion had already been raised by Prime Minister Enrico Letta. Along with a bail out plan for airline Alitalia, it is another example of his government's increasingly active role in the recession-hit economy.

Finmeccanica, which agreed last week to sell its gas plant subsidiary Ansaldo Energia to the state-backed FSI fund, wholly owns cash-burning Ansaldo Breda as well as 40 percent of Ansaldo STS, which has an overall market value of 1.3 billion euros.

Finmeccanica needs to sell these assets to join in an expected consolidation of the European defence industry, which is suffering from budget cuts in mature markets.

Marco Bentivogli, national secretary of the Fim Cisl union, said the industry ministry informed unions on Friday about a government plan to create a holding company for minority stakes in the three Ansaldos, which together employ 7,000 people in Italy.

In a statement, Bentivogli said the holding company would seek an international partner for Ansaldo Breda and Ansaldo STS, building on talks already started with General Electric (GE), which said in September it was interested in buying STS.

Italy's industry ministry and GE declined to comment.

GE already has a large presence in Italy and is credited with turning round oil and gas equipment maker Nuovo Pignone, which it bought in 1993 during a round of privatisations.

Reports of a recent visit by Ansaldo STS CEO Sergio De Luca to executives of GE's transportation unit in the United States to discuss a tie-up have not been confirmed or denied.

Hitachi Rail has also been considering buying Finmeccanica's rail assets. A source familiar with the situation told Reuters on Friday the Japanese group was still seen as a possible partner.

Details of the rail project have still to be agreed. Trade unions raised concerns that the operation could lead to job cuts, a loss of technological know-how and lower investment in the sector.

Fim-Cisl, Uilm and the hard-line Fiom-Cgil trade union said in separate statements that state railway company Ferrovie dello Stato should take a leading role, and the project should also support train maker Firema, which is under special administration.

The Italian government came under fire on Friday after stitching together an emergency bailout for Alitalia that critics said should involve less taxpayer money and a longer-term strategy. Top investor Air France refused to commit to the plan.

The government has also indicated it might consider measures to safeguard national interests after Spain's Telefonica struck a deal last month that could see it gradually take full control of former state-owned phone group Telecom Italia.