European car industry 'could unravel'

 

Europe's car industry is in danger of "unravelling" unless the European Union takes action, according to the boss of Fiat.

Sergio Marchionne, who is CEO of both Italian manufacturer Fiat and US brand Chrysler, believes steps need to be taken to cut capacity across the continent to deal with falling demand.

He estimated that last year the largest car makers in Europe lost around 5 billion euros (£4.15bn) as overall sales fell for the fifth year in a row.

This trend is set to continue this year, with many industry experts echoing Mr Marchionne's pleas for a blanket policy to adjust the industry for the new consumer landscape.

"Ultimately, this whole thing will unravel," he told the Detroit Car Show. "If there are no cars to be bought, you can't make cars. You don't need to go to Harvard Business School to figure this out."

Mr Marchionne explained there should be intervention in the sector across Europe to ensure there is equitable distribution of the cuts across all countries.

Without it, he believes cuts will merely be seen in a "haphazard" fashion as individual governments put their own national interests ahead of the industry's fortunes as a whole.

Leading brands Renault, Peugeot-Citreon and Fiat have all estimated that the European car industry could do with pruning around 20% of its capacity.

They highlighted that although there have only been a limited number of factory and plant closures, that is mainly down to European governments putting pressure on firms to not take hasty action.

Mr Marchionne's Fiat brand, which acquired a controlling stake in Chrysler in 2009 when the US firm fell into bankruptcy, is expected to have lost 700 million euros (£581m) in Europe during 2012.

In contrast to Europe's ailing fortunes, the US and Asian markets are positively brimming with optimism.

At the Detroit show executives were excited about their growth prospects for this year, with Mr Marchionne highlighting how the US has set out the perfect blueprint for Europe to follow.

Back in 2008 the US car industry was left licking its wounds after a massive collapse saw Chrysler, General Motors and Ford all restructure.

He described how, as a result, the Detroit show back in 2009 had a "stench of death", but the actions taken in the country since then had turned the mood around completely.

He added: "The more difficult question is whether Europe is willing to learn the lesson. You need to rebase your business and resize. That allows you to deal with the current reality and not a hyper-inflated expectation of volume."

Got a question for us?

If you require further assistance, our team of Customer Advisors are here to help. We're open six days a week - you can view our opening hours here - and we're more than happy to answer your questions.