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
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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8 March 2012

I'd like to avoid the cynicism of Marchionne's statements afterall his company is part of the problem. He is talking sense in what he says however; a commenter here pulled me up on terminology once when I spoke of 'overcapacity' when what I meant was 'overproduction', which is also what FIAT's CEO is talking about.

Manufacturers are still collating sales projections from area/regional and global managers for the following years production. Each area the manager wants their dealers to sell more, so they push the sales targets up, which by the time the figures reach the global managers; with some manufacturers, the figures require another factory to be built. The reality is that there just isn't enough eligible customers to support that kind of production especially when these inflated figures have been reached by a score of other companies too. I believe Marchionne's calculations of a 20% excess to be a good estimate.

Maybe he should start the ball rolling and accept a fall in market share for next years model year vehicles but be happy in the knowledge that his lines are running to full capacity thus optimum profitability.

It seems that sales managers either don't know or have forgotten the fundamental rule of economics, Supply and Demand. if every EU-brand adhered to this rule then Millions of vehicles wouldn't be produced each year with no homes to go to.

8 March 2012

I have been flying the skull and x bones ever since this wide-boy/spiv Maccaroni face managed to do the deal of the century. That was using a totally bankrupt company (Fiat at the time) to buy out another totally bankrupt company (GM) in the States and managing by some very sharp double-glazing sales spiel to rip off the tax payers on both sides of considerable wads of money. (shades of Ponzi schemes seems a polite way of putting it) .

He is trying to foist rebadged Alfa's and Lancia's as one thing and Dodges etc as another on what he :thinks" is an unsuspecting joe public. His initial words of keeping facories in Italy and the UK and Germany and the USA open managed to garner political support and not too untidy funding either, whilst all along he was pushing and investing in Mexico and China. Now he is going to try and use Volvo as his next wheelbarrow to collect some more funding, when he knows full well in 24-30 months time these will all be produced in China.

Of course all the while he is making vast fortunes personally with the shares he plays with - because he is the man manipulating the market making statements and he can sell and buy at will.

OK - I am a skeptic - because I am old and have seen too much in my life to trust these type of people. I know some guys reading this are going to shoot me down - do it - I dont mind - but you will NOT change my mind on this fellah. He is the guy who invented the Eskimos to sell fridges to! All I can say is wait and see. wait and watch. It may be 5 years - certainly not more than 7, when all this will collapse, and then you will see him make his final move - selling the whole lot to China and filling his bank accounts and nice yachts for the life of Rielly - whilst the guys in the factories sit at empty entrance gates crying because they trusted him and gave their lives to him.. for what?? Rape.. surely

8 March 2012

[quote petrolheadinrussia]UK and Germany [/quote][quote petrolheadinrussia]GM[/quote]


I think you are confusing GM and Chrysler. I agree with most of the other things you say though.

It's easy for him to say that there is 20% overcapacity. It the case of FIAT it's actually more like 50%. How come VAG plants are running at full speed though? And how come existing overcapacity is not an issue when it comes to pocketing government subsidies from Serbia, Russia and possibly other Countries? How about designing decent products that can be built at existing plants and exported to those markets, thereby filling that spare capacity? Oh hold on, that would require some car making skills.

8 March 2012

The only problem this man has is he can not sell his cars,VW

are at full production and find it hard to keep up with demand.

The answer is simple,build cars people want to buy,there are times when i wonder about these people.

8 March 2012

Perhaps I am being naive but Sergio Marchionne is very poor at marketing. He is ignoring his home market; Europe, thereby already reducing his market share. He is unnecessarily delaying the 4C and the Giulia. He is trying to sell Lancias badged as Chryslers in the UK, and Alfas in the States as Dodges. All these action appear to me to be illogical. I am an Alfa owner, and would never buy a product labelled Dodge or Chrysler, when there is a possibility of buying an Alfa or Lancia.

8 March 2012

I suppose it would be in poor taste were anyone to point out that if Fiat and/or Chrysler conked out the problem of surplus capacity would be solved.

8 March 2012

[quote Londonist]I suppose it would be in poor taste were anyone to point out that if Fiat and/or Chrysler conked out the problem of surplus capacity would be solved.[/quote]

I don't think anyone would wish this on Fiat or Chrysler, however Marcionne got his act together and made the Fiat 500 Twin Air deliver on its MPG claims and not delivered such a yawning gap in the Alfa Romeo product offering and not made the Mito so facially ugly, then not enough capacity would be his problem... wake up there in Milano and smell the roses !!

9 March 2012

@ giulivo yea sorry slip of the old mind there !

[quote Londonist]if Fiat and/or Chrysler conked out [/quote]

Taking those names - YES it would be good but despite being a dyed in the wool rallynit - please add Lancia to that list. So Chrysler - Fiat - Lancia - being dumped in the rubbish bin leaving Alfa - and shaking them up to bring back some passion and even taking the cream from those being dumped - i.e, 500 multi - and rebadging it Alfa ( why not as a SUD!!!) this company would be lean and mean - and could afford to seriously invest in some RD and come up with a future worth living. Yes I know, possibly as many and 50,000 or more unemployed.. but this is business not a game to satisfy voters and bleed the tax dollars away on dying brands

9 March 2012

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

9 March 2012

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


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