If anything, France being contracted to mass produce Italian equipment would give them more justification for giving Germany the bare minimum. The Germans sure wouldn't like it (which would greatly please the French), but there's not much that they could do about it because it's still helping them overall. Some of the Italian things they'd be producing would be superior to their German equivalents such as the G.55 and Beretta modello 38, and forcing France away from the deal with Italy to produce for Germany would have serious repercussions on Germany and Italy's relationship.
You are counting on a lot more autonomy than Vichy had historically. The French would have to have done a lot better in the spring/summer of 1940 to force such a conclusion.
There were a number of things that could have supplied Italy but the G.55 was not one of them, it showed up too late and it needs to have an engine swap (H-S 12Z?) instead of the DB 605. That or get the French to build DB 605s but with the degree if autonomy you want the French to have that may not happen. The more autonomy your version of Vichy has, the less likely the Germans are going to give any production information for new weapons/engines to them.
The timing for the Beretta 38 is also off. Good as the Beretta was a submachine gun, submachine guns are not what is wanted for desert fighting. They are much better in hills, woods and in cities/towns.
French could have built FM 24/29s LMGs for the Italians. The Italians never had enough Breda M 30s and since the Breda M 30 was one of the worst LMGs ever built by anybody. It is a double win.
French could have built mortars for the Italians. Not sexy but the Standard Brandt 60mm mortar would have been a useful addition to the Italian forces. Pretty much the same as the US 60mm (Americans had licensed it). Brandt was a bit ahead of his time and was working on mortars that were adopted around the world although not so much in France. Brandt 120mm mortars were used in Russian-Japanese border incidents and accelerated Russian interest in the 120mm mortar. For the artillery poor Italians this seems like another double win. Brandt was cataloging 3 different 120mm mortars before WW II shut him down.
I've heard a different story.
What I've read is that the 135 was a very good engine once they fixed its teething issues, and that the entire Alfa radial line was based around the Bristol Jupiter / Pegasus. I lack information that would allow me to reach a definitive conclusion, but I believe that should the 135 and particularly the 136 be mass produced, they'd be very capable engines.
A Mercury was a short stoke Jupiter, and the Pegasus was a Mercury that had the stroke restored to the original length. Some accounts claim the 136 never made it off of paper.
The US had several engines (at least 3) that looked good on paper and were a total waste of money, manpower and raw materials when they built them.
One of the most common phrases/sentences you find in books discussing aircraft engines is " It was a very good engine once they had fixed it's teething issues, right before they canceled it".
Oh so France wasn't making 100 Octane, they were importing it? I was under the impression that they were producing it and that they just didn't have enough time to make enough of it. Dang, I had no idea.
I may have been in error.
There may well have been a refinery making 100 octane on French soil, or capable of making 100 octane. There were two major refineries on French soil. Both were relatively new.
French had a few problems though, The French had been trying to refine just about all of the products for domestic French consumption at these refineries and importing very little refined product. Not sure how well they could shift production over from one product to another.
There was a very, very small domestic crude production in France, just about all crude was imported. France was very late to the "game" of oil production/exploration and most of their consumption was was from a consortium/partnership of 4 major companies, France being one of the four. But without overseas oil France was lucky they could keep the street lights on.
The next problem is "what is 100 octane?"
There are literally 100s of recipes for 100 octane fuel. Everybody knew that 100% isooctane would give you 100% octane rated fuel, except 100% isooctane fuel was very, very expensive per gallon/liter. And there are other qualities you need for aviation fuel. Like vapor pressure and few other things. You can use a few other types of compounds and soup them up with lead and/or other additives. Which is what the British and Americans did but in 1939-40 they were NOT making the same fuel. 100 octane only refers to the lean rating.
US 100 octane fuel of 1939/40 would, in a liquid cooled engine limit you to 15-20% less manifold pressure than British 100 octane fuel. For air cooled engines the difference was much less.
So..................What were the French planning on making? and when? and after the French surrender, how? Getting tankers into French ports is not going to go well. Basically it is coming from the Mideast.