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The Globe and Mail

Fiat's Marchionne calls for EU action on auto oversupply

Fiat CEO Sergio Marchionne has called on the European Union to forge a common solution to take out overcapacity in the continent’s chronically oversupplied car market.


Sergio Marchionne has called on the European Union to forge a common solution to take out overcapacity in the continent's chronically oversupplied car market.

Fiat SpA's chief executive said Brussels needed to take a lead role in rationalizing car makers' excess capacity across the continent to "distribute the pain and suffering across all the member states."

Mr. Marchionne, who also holds the rotating presidency of the European auto makers' association Acea, made the remarks at the Geneva auto show, overshadowed this year by a declining local car market which has driven several mass-market car makers into financial losses and sparked a new round of consolidation talks.

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He drew a parallel between the "dysfunctional" behaviour of the U.S. car market in 2007-08, before the restructuring in bankruptcy of General Motors Co. and Fiat partner Chrysler Group LLC, and the situation in Europe now.

"There needs to be a structural fix which is local, and which needs to be managed and addressed by the European Union as the holder and repository of the notion of the single market," Mr. Marchionne said. "This is fundamental."

Fiat, PSA Peugeot Citroën, and Renault all estimate that Europe's oversupply stands at 20 per cent or 3 million cars, when calculated on two shifts.

Renault chief operating officer Carlos Tavares told the Financial Times in Geneva that when calculated on a three-shift basis, the continent's car industry had the capacity to make 11 million units more than it could sell.

Peugeot and GM, which last week formed an alliance aimed at cutting costs by $2-billion (U.S.) a year, have recently hinted they will close plants in Europe.

While neither company has outlined its plans, European governments are already intervening on behalf of the plants on their soil. British Business Secretary Vince Cable visited the U.S. last week to urge GM's senior management to keep its two U.K. plants open.

During the recent financial crisis, the industry saw two plants shut: Fiat's in Sicily and GM's in Antwerp, Belgium. France's government lent Peugeot and Renault €6-billion in 2009 on condition that they preserve jobs and plants.

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"[Europe]needs to provide a unified, concerted road map to get this done," Mr. Marchionne said. "Look at what happened with the steel industries in the '90s, and copy that example."

Fiat's chief executive is the European car industry's most vocal advocate of consolidation and rationalization.

In 2009, Mr. Marchionne proposed merging Fiat with GM's European Opel business and now-bankrupt Saab brand, and dividing plant and job cuts between the three businesses. The plan failed after opposition from Germany's government and GM's unions at Opel.

"I was effectively trying to do what the EU should be doing, which is bringing everyone around the table and saying, 'We're all going to get a haircut,' " Mr. Marchionne said. "Everybody is going to have hair which is an inch shorter, but everyone's going to get the same haircut."

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