Fiat CEO Marchionne believes that a slump in Europe is even more drastic than a classic recession

Article by Christian Andrei, on October 10, 2011

Fiat-Chrysler CEO Sergio Marchionne is worried that bad handling of the sovereign debt crisis may force Europe to enter a slump that’s more severe than a "classic recession.” However, he doesn’t think that Europe's troubles will result to a chain reaction. In an interview with Automotive News Europe, Marchionne said that a “global recession is … possible but unlikely."

He explained that by taking major steps during the worldwide economic downturn in 2008 to 2009, the automakers in Europe may live through a recession of around a year.

Some of the steps taken include protecting cash reserves, reducing inventories and improving labor flexibility, says Autonews.

The CEO is concerned that the elected officials in Europe will mismanage the debt crisis and the euro would fail. He explained that if there’s mishandling, there may be “consequences that are beyond the recession argument."

He added that the recession would only be in Europe since other parts of the globe are “totally immune” by now. He believes that Latin America, North America and China won’t be directly affected if the European economic system fails.

There are various predictions on just how bad the new-car sales decline will be in Europe for 2012. According to J.D. Power Automotive Forecasting, western European passenger cars sales will fall by 1.3% next year to 12.62 million from an estimated 12.79 million this year, lower by 1.4% on sales of 12.98 million units in 2010.

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