European Auto Industry Slowly Reviving – But Uncertainty Remains, Warns Marchionne

CEO says he's "generally optimistic" about the industry.

by on Mar.05, 2014

Marchionne tempered his optimism during his Geneva appearance, warning the Ukranian crisis could set back the European automotive revival.

There may be some light at the end of the tunnel – but there’s also a possibility it’s another oncoming train, warned Fiat Chrysler Sergio Marchionne, during a media reception at the 2014 Geneva Motor Show.

The outspoken executive took on a variety of topics, from the crisis in Europe that has left key automakers struggling for survival, to the newly completed merger of the U.S. and Italian makers that began in the wake of Chrysler’s 2009 bankruptcy.

Insight!

Sounding at least a bit more optimistic than he did during appearances at the Geneva Motor Show last year, Marchionne said he is “generally optimistic” about the recovery of the European automotive market which only now appears to be slowly climbing out of its worst recession in decades. The downturn, he said, has taken out about 3 million units of volume annually, the equivalent of a dozen auto assembly plants.

The Maserati Alfieri Concept.

The problem, Marchionne said, is that the European car industry has not matched that by shutting down a dozen plants.  And with individual countries propping up their plants rather than trying to solve the problem as a European whole, the CEO warned, “the supply issue continues to be a big problem for Europe.”

It is one of the reasons, he noted that four key players, the Fiat side of FCA, Peugeot, General Motors Europe and Ford Europe, continue to run up losses.  The challenge for the industry as a whole is “You can’t do this forever.  Eventually, this thing will cave in.”

A full European recovery is “a long way from coming,” added Marchionne, though at least the trend is in the right direction.  That said, he cautioned that a number of factors could still scuttle a turnaround.  And right now, “There is not a single doubt in my mind” that if the situation between Ukraine and Russia gets worse, “it will dampen(new car) demand in Europe.”

Marchionne was much more upbeat when asked about the challenges of blending the corporate cultures of Fiat and Chrysler now that the de facto merger has been completed.  For one thing, he said the alliance was critical, adding that it would have been “impossible” for Fiat itself to be doing as well, an ironic turnaround considering that it took the Italian maker to help Chrysler emerge from Chapter 11 protection by guaranteeing a U.S. government bailout.

Among other things, having the American ally has allowed Fiat to avoid still more plant closures of its own.  One of its key factories, the Melfi assembly line, will soon become a primary source for the new Jeep Renegade model that will anchor the SUV brand’s global expansion effort.

(For more on the Jeep Renegade’s Geneva Motor Show debut, Click Here.)

If anything, the merged organization, Marchionne suggested, has done a good job of promoting the cultural differences that lie behind each brand.  Alfa, for example, has got to further emphasize its Italian heritage and will continue to build cars in that country, he stressed.  The same goes for Maserati.  Both makers had major debuts in Geneva, the Alfa Romeo 4C Spider “Design Preview,” and the Maserati Alfieri Concept.

(Click Here to check out the Maserati Alfieri 2+2 Concept.)

(Click Here for a first look at the new Alfa Romeo 4C Spider.)

As for Chrysler, the reason its fortunes are improving so rapidly – it was, Marchionne noted, the only Detroit maker to post a sales gain in February – is that “Chrysler was never dis-Americanized.”

The unexpected downturn in U.S. sales for the last two months has largely been blamed on the freakishly bad winter that has pummeled much of the country. But it has also raised concerns that makers might return to past practices to boost sales by flooding the market with profit-busting incentives.

While a few models have gotten lavish givebacks, Marchionne said he did not “see any evidence of the undisciplined, erratic pricing behavior of the past.” And even if that were to happen, he suggested, Fiat Chrysler would try to stay out of that game as long as possible.

(Click Here for TheDetroitBureau.com’s complete Geneva Motor Show round-up.)

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