FIAT Chrysler Automobiles CEO Sergio Marchionne has warned of a perfect storm of conditions that will “cave in” shaky European car-makers unless those companies deal with chronic over-capacity and European governments back off proposed free-tree agreements and tougher CO2 emission laws.
Speaking at the Geneva motor show, Mr Marchionne said four of Europe's biggest car-makers were losing money in an unsustainable way, mainly because the European car market had shrunk by three million sales since the peak before the global financial crisis.
He said that volume was equivalent to 10 or 12 car factories which need to be shed.
“You can’t continue to do this forever, right?” he said. “Eventually this thing will cave in.
“No, nothing can support economic losses ad infinitum. And so there’s going to have to be a resolution of this and we cannot in my view wait for the recovery of the marketplace to get that done.”Mr Marchionne said a recent French government bail-out of PSA Peugeot-Citroen would stabilise that company, but it would not solve the underlying issues.
He said Fiat had largely addressed its own over-capacity by “re-pointing” its European factories with products aimed at new markets, such as the new Italian-built Jeep Renegade small SUV that will be exported to places such as North America and Australia.
But Mr Marchionne said until overcapacity and other issues were addressed, Europe should place free-trade agreement negotiations with South Korea and Japan on hold.
He said he wasn't opposed to FTAs, “but not just next Tuesday”.
Mr Marchionne said that if the gates were opened to cars imported from those countries, the European industry should “put a helmet on”.
“And then we want the euro at 1.37 (to the US dollar),” he said. “We want a strong currency. We don’t want to reduce our capacity.
“We open up the gates to everybody else and then we stand back and you look at me and say, go ahead, fix the problem.”Mr Marchionne said those issues would be compounded by an EU plan to force European car companies to meet a average CO2 emissions reading of 95 grams per car, which would make car manufacturing and development more costly.
“Pile that on and you and you’ve come up with a cocktail that is just absolutely wonderful,” he said.
Mr Marchionne pointed the finger at nationalistic responses to calls for a reduction of car factory capacity, saying Europe was not a united market.
“This inability to overcome national interest is being a real obstacle to the development of a united Europe,” he said.
“It would be much easier if the European Union was fundamentally one market in the true sense of the word and where economic and fiscal policy was determined across all the member countries.
“It is not that way today, so you’re going to end up with what I consider to be a dyslexic and uncoordinated recovery rout.”