Trafficmaster made the announcement as it gave a trading update suggesting pre-tax losses for 2001 would be £16.4 million, before write-offs, on turnover of £31.5 million for the year.
In a statement, the firm said: 'In view of the increasingly competitive European market for fleet management products, Trafficmaster has taken the decision to withdraw from direct participation in this market to focus on its core traffic information business.
'Fleetstar's Italian operation has therefore been merged with Trafficmaster's joint venture with Fiat and the company is taking actions in other European markets dependent on local circumstances.'
In the UK, Trafficmaster will support the Fleetstar management, who are in discussions with a number of parties in connection with a possible management buyout of Fleetstar UK.
The two companies will remain in the same building, but the move would allow the fleet management division to focus solely on competing in the market, while still making use of Trafficmaster products, such as live congestion information.
In the US, Teletrac contributed £12.4m to group revenue since its acquisition in May 2001 and moved into profitability before sales were affected by the terrorist attacks on America on September 11.
Trafficmaster said Teletrac remained central to its strategic ambitions in the US in conjunction with technology recently acquired from US Wireless for more than £1 million.