Marchionne Sees ’Painful’ Restructuring for EU Carmakers

Fiat SpA (F) and Chrysler Group LLC Chief Executive Officer Sergio Marchionne said a ‘painful’ restructuring is needed for European carmakers, including plant closures and job cuts, to end losses in the region.

“It has to be painful, when you are talking about reductions, it’s going to have initially a negative impact on employment,” Marchionne told reporters today in Bruges, Belgium. “I need a European response” on the issue because “if you leave it to the national countries, it won’t happen. You have to distribute” the closure of plants across countries and producers, he said.

Marchionne, who aims to merge Fiat with Chrysler to boost revenue to more than 100 billion euros ($131.8 billion) in 2014, is counting on the American carmaker to propel growth in Europe, where the group lost about 500 million euros in the volume-car business last year and had a “weak” first quarter. Fiat owns 58.5 percent of Chrysler.

Fiat froze new European investments and postponed the release of new models in Europe as Marchionne doesn’t expect a recovery before at least next year. Fiat, which closed its Sicilian plant at the end of 2011, aims to end losses in Europe by 2014. It may take European carmakers about two years to restructure their operations in the region, he said.

Labor Rules

Marchionne said Fiat wouldn’t have “easily” implemented a plan to revamp production at its Mirafiori plant in Turin if it weren’t for the policies of the government of Prime Minister Mario Monti, who is working to approve more flexible labor rules in the country. “I can say honestly, if it weren’t that Monti was there as prime minister, the investment in Mirafiori would not have gone ahead very easily,” he said today.

Fiat sales in Europe fell 16 percent to about 162,000 in the first two months of 2012 as deliveries at Volkswagen AG (VOW3), Europe biggest carmaker, were little changed at about 463,000, according to the European Automobile Manufacturers Association in Brussels. Marchionne sees sales in Italy hitting the lowest since 1985 this year.

Marchionne said last month that European carmakers must reduce production capacity by about 20 percent. The European Commission should look at its regulatory stance to encourage the cutbacks, he said. Marchionne, who is also chairman of the European Automobile Manufacturers Association, is working on a common proposal among carmakers to address the issue.

Marchionne also called on the European Union to change the direction of trade negotiations and to help strengthen domestic producers.

Marchionne, who opposed the free trade agreement between Europe and South Korea, said South Korea’s automotive industry exports to Europe rose by 45 percent, or 150,000 cars, in 2011 while Europe carmakers boosted sales in the country by just 15,000 units, after the free trade deal was signed.

To contact the reporter on this story: Tommaso Ebhardt in Bruges via tebhardt@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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