Chrysler chief warns broken Europe 'maiming auto industry'

http://www.guardian.co.uk/business/2013/jan/15/chrysler-chief-warns-eu-policies-hurting-car-industry

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Europe is "broken" and its leaders are "fundamentally maiming" the European auto industry's ability to recover, the boss of Chrysler and Fiat has said .

Speaking at the Detroit auto show, the US industry's leading event, Sergio Marchionne lambasted Europe's leaders and said only a united approach, ignoring national self-interest, could end the slide in Europe's car market now entering its fifth year. Marchionne said he had pushed for a European solution to the crisis, one that would "prevent national interests from coming into play". "But as you know I have been completely unsuccessful," he said. "Ultimately this whole thing will unravel because there is no basis for it to continue. If there are no cars to be bought, you cannot make cars. You do not need to go to Harvard Business School to figure this out."

While Europe is struggling to come up with a solution to its crisis, said Marchionne, "the other economies of the world have ignored Europe and moved on. Europe is going to miss a phenomenal opportunity unless it gets its act together."

The major car manufacturers continue to lose money and sales in Europe as the US market appears to be firmly in recovery. This year's Detroit auto show is the most upbeat since the US car industry's meltdown in 2009 when GM and Chrysler declared bankruptcy and were bailed out by the US government, re-emerging as far smaller employers.

Marchionne compared Europe's woes with the recovery in the US market. "Anyone who walked into this show in 2008 would have remembered there was a feeling of despair. There was almost a stench of death at the Detroit auto show," he said. "If you walk into that show today and you see the level of excitement and renewed enthusiasm shown by big car companies that were given up for dead, you realise what [the US] is capable of doing. It is capable of reconstituting itself from the ashes." In contrast, he said, Europe was "ignoring problems and sweeping them under the carpet".

"People insist that you must invest, you must do this, you must do that. The question is: who is going to buy the cars you are producing? Who is going to buy them? Some of us have been quite willing to fill up the parking lots but eventually parking lots get full. There is a level of unrealistic expectations about what this industry can and should do which is fundamentally maiming its ability to restructure and move on," he said.

Marchionne said sales volumes in the Italian market in 2012 were the same as volumes Italy recorded in 1979. "They have lost 33 years' worth of volume growth," he said.

He predicted the big car firms had lost €4bn-€5bn (£3.3bn-£4.1bn) in Europe last year – the total is still being calculated. "I may even be on the low side," he said. "That, by the way, is a situation that can not be countenanced."

"You have a successful set of businesses, including Chrysler, that are forced to deal with a European situation that is eroding the overall performance of this multinational car makers," said Marchionne.

Major manufacturers have been closing plants across Europe. Peugeot Citroen, Ford, GM and Fiat have all recently shuttered plants. But more closures are necessary, he said.

"We are beginning to go through an incredibly painful process of retrenching. But in a way that is happening in a very haphazard way and that is going to favour one nationality over another. You need to resize and reshape yourself in a way that allows you to deal with the current reality and not a hyperinflated expectation of volumes and performance that ultimately can not be sustained," he said.

"While we sit around the table and endlessly worry about the social implications of the lack of utilisation of labour, we keep on forgetting that all these plants were designed and tooled to deal with volumes and expectations that are not materialising."