Currently reading: Geneva motor show 2012: Marchionne worried by overcapacity
Fiat chief Sergio Marchionne is worried about the long-term future of the European car industry
Mark Tisshaw
News
2 mins read
8 March 2012

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.

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Monk 13 March 2012

Re: Marchionne worried by overcapacity

As well as the sales teams adding to the problem, it must also come down to the designers and engineers in each company. No salesman is going to go to the board and tell them the product is sub standard and they will be lucky to sell a handful, that would be professional suicide. Likewise the designers and engineers promise the board the next model is a segment leader, years ahead of the opposition. They are not going to turn up, tell the board that they have just spent $500m or more on a replacement model that is not as good as the existing market leaders four year old car. Then the marketing men get involved and believe the sales team and the engineers. They then decide that as they have the new market leader they should charge a small premium over the top of the existing market leaders price. We then end up with a Chrysler Delta or Honda Civic or Astra, and many other examples. The management are the only people in the world who think they are worth more than a Golf. Six months later, with a car park full of unsold models, they start the discounting back to the prices they should have assessed as possible in the first place. Emperors new clothes syndrome is alive and well and operating in the car industry

brian245 9 March 2012

Re: Marchionne worried by overcapacity

If Sergio Marchionne is worried about his empty factories, he should talk to Dr Piech who needs more capacity to meet his demand.

thebaldgit 9 March 2012

Re: Marchionne worried by overcapacity

there has been overproduction in Europe for years but which turkeys are going to vote for christmas by cutting production?

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