The Germans blamed the Italians for a lot of the outcome of the Mediterranean Theater of Operations. The failure to conquer Egypt, thus calling for German assistance in Africa, the abysmal performance of the Italian military in Greece- again requiring German assistance, and also the cracking of the Enigma coding was unfairly blamed on the Italians. At the time of the armistace in September 1943, there were only select fronts that had joint German and Italian foces still fighting. In Greece, what occurred was what's often referred to as "the Great Disarmamanet." Italian soldiers were disarmed by German force, literally taking the small arms off their backs.

The Italians actually had some exceptional equipment that was effective and reliable that many Germans increasingly began to desire. An example is the Moschetto Beretta Modello 38A submachine gun. The MAB 38A featured a rifle stock, fluted barrel, semi and full auto capabilities that uniqly uses 2 triggers to separate them. This is significant because it is a submachine gun that is aimed like a rifle, making it particularly accurate- a characteristic that isn't very common with sub machineguns of the time. German Fallshirmjaeger LOVED this gun and there are many pictures of them preferring it over their German issued firearms.

Italian camo was also very effective and sought after by the Germans. Following the armistace, Germans began to cut uniforms using Italian camo onto pants, winter parka's, shelter halves, etc.

What I'm getting at with all of this is that the Germans, realizing the potential threat of Italians that have essentially allied with the allies, wanted to disarm as many Italians as they could get a hold of. Many Italian soldiers in Greece and Albania were taken as prisoner and sent to labor camps and even to concentration camps. The Germans occupied the North of the Peninsula (North of Rome) utilizing the defensive advantages the Italian mountains and hills provided. It has been said that the Germans were more brutal towards the Italians than the occupied countries they still controlled (at least in Western Europe, it would be hard to compare the occupation of Italy to the brutality faced in say Ukraine, but it's not far off). There was a lot of partisan activity in German occupied Italy, so the Germans responded with massacering civilians on several occasions. An example is the Via Rosella bombings which resulted in a massacre of Italian civilians as punishment for partisan activity.

There were, however, many Italians that fought with the Germans after the armistace. Mussolini (after being rescued by FJ paratroopers) installed a puppet fascist government called the Repubblica Sociale Italiana (RSI) that still had a sizeable and effective fighting force. Many pro-fascist contingents of the Regio Esercito (army before armistace) continued to fight for the Axis. These units held strict pro-fascist beliefs and included the Nembo Parachutiste, Camicia Nero/MVSN (Black shirts), Xa MAS (under Valerio Borghese, a known fascist and facilitator of the very successful raids on the British navy at Alexandria and Gibraltar in 1941), Italian 29th SS, Monte Rosa Alpini, etc. Many soldiers that had been in these units before the armistace, regardless of their political beliefs, were forced to accompany their divisions and fight for the RSI. I suppose fight with the RSI is more accurate.

Many Italian soldiers in joint operations with German units immediately prior to and following the armistace were rounded up, and forced into these crack RSI units. This made the desertion rate very high among these units, and consequently the Germans (and Italian anti-partisan units) persecuted, blamed, and impressed Italian citizens.

If you have pictures, or know of his specific division and branch at the time of the armistace I can tell you more about what may have happened to your grandfather's comrades.