Fiat chief Sergio Marchionne is worried about the long-term future of the European car industry if something is not done to tackle the overcapacity in many Western European factories.

Speaking at the Geneva motor show, Marchionne said western European car production (particularly of small cars) needs to be reduced by around 20 per cent, and he wanted the European Union to help tackle the problem, as “it is their issue too”.

“Some production has to be taken out of Europe,” he said. “The cost of a B-segment car is so high, and the heavy discounts cannot continue.”

Marchionne compared the current crisis in Europe to what occurred in the US in 2007/08 before the financial crash. “They too went on a discount binge and look how that ended. You can’t keep it up for long; I worry about the long-term future of the industry if we do.”

There was a further warning from Marchionne regarding the potential conflicts within the EU about moving some production to eastern Europe, where many countries are pitching to be full members of the EU.

“You have to be careful if you agree to reduce production in EU member states and build it up in fringe members,” he said. “You have to make a policy choice, but you could end up with a phenomenal recipe for disaster [if fringe members become full EU members].

“The EU needs to get a road map sorted to get this done. We can learn from the steel industry in the 1990s. We need help, or it [the EU] will be a failure and damage car manufacturing.”

Despite heavy losses in Europe in 2011, the Fiat brand “will weather the storm” due to the strength of Chrysler within the group. But “some of us won’t be around” if production issues are not addressed.Peugeot-Citroën and Renault have both recently bemoaned the high costs of producing small cars in western Europe.

Marchionne is leader of ACEA, the European automobile manufacturers’’ association, and says he expects to “get this issue on the agenda” at the EU. “I go to Brussels more than you think,” he said.