VW Calls for Marchionne to Quit as Head of Auto Group

Volkswagen AG (VOW) threatened to leave the ACEA European automakers association in response to comments by Fiat SpA (F) Chief Executive Officer Sergio Marchionne, a measure of rising tensions in the industry as sales slump.

According to a report in the New York Times published yesterday, Marchionne suggested VW’s pricing strategy was creating a “bloodbath.” The newspaper said that auto executives, including Marchionne, who is also ACEA’s president, accuse the German carmaker of exploiting the debt crisis to expand its market share.

The comments “show once again that Marchionne is not qualified to be ACEA president,” VW’s chief spokesman, Stephan Gruehsem, said in an e-mailed statement, calling for his resignation from the post. VW is also considering leaving the association itself, he said. A Fiat representative said the Turin, Italy-based company didn’t have a comment.

The spat highlights the strained relationships in the European auto industry, a microcosm of the region’s debt crisis. Wolfsburg, Germany-based VW yesterday reported record first-half profit, while Fiat and PSA Peugeot Citroen (UG) of France contend with widening losses in Europe.

“VW continues to ramp up the pressure,” said Max Warburton, a London-based analyst with Sanford C. Bernstein. “Everyone in the industry comments on it and knows it. It may be ugly for those on the receiving end, but isn’t this how free markets are supposed to work?”

Capacity Conflict

Marchionne has needled Volkswagen before, suggesting German carmakers should do their share in closing excess capacity in Europe. VW, Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) resisted. Their factories are running at more than 90 percent capacity, versus rates of 60 percent to 75 percent for other auto manufacturers in the region, according to UBS analyst Philippe Houchois.

European carmakers are extending discounts to attract dwindling buyers, with ACEA predicting sales will fall to a 17- year low this year. Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg- Essen, cited price cuts of about 24 percent on VW’s Golf model in Germany.

Berstein’s Warburton said in a July 18 note that VW was using “super-normal” profits from China to subsidize a price war in Europe.

The region’s auto market faces an “elevated risk” as competition has increased “significantly,” Christian Klingler, VW’s sales chief, said on a conference call yesterday. Auto pricing in Europe is “tense” and “pressure” will continue in the coming months, he said.

Other German automakers aren’t publicly backing VW’s criticism of Marchionne. Alexander Bilgeri, a spokesman for BMW, said the Munich-based manufacturer doesn’t comment on “other company’s issues.” Florian Martens, a spokesman for Daimler in Stuttgart, didn’t immediately have a comment.

To contact the reporter on this story: Heather Harris in London at hharris5@bloomberg.net

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

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