German carmakers sticking to form a united front to address overcapacity in the region

Article by Christian Andrei, on September 17, 2012

German carmakers continue to oppose a plan to create a united front to pressure the European Union to deal with overcapacity in the region, according to Fiat and Chrysler CEO Sergio Marchionne who is also the president of the European auto association ACEA. Last Friday, Marchionne told reporters that many automakers, mostly those based in Germany, don’t see the need for this move. Volkswagen Group, Daimler and BMW don’t agree with Marchionne’s proposal as they want to get the support of the EU to lessen the surplus assembly lines in the region. IHS Automotive said that overcapacity in western Europe may increase by more than double to about 2 million vehicles in 2012 with sales on track to decrease for the fifth consecutive year.

Since German carmakers build vehicles in the region that are in demand in the U.S. and China, they are not as affected by Europe’s financial difficulties. On the other hand, PSA/Peugeot-Citroen and Renault of France and Italy's Fiat are more dependent on the domestic market. UBS estimates that the cost of excess capacity in Europe amounts to 7.4 billion euros ($9.7 billion) annually. Marchionne added that as national authorities in Europe tend to guard the local jobs, not having a coordinated plan is similar to asking people ”to argue against self-interest." He added that this situation is nearly impossible. In 2011, Fiat closed a plant in Sicily. It may shut down another factory in Sicily as Marchionne anticipates that the auto market will stay at its existing level for two to three years more.

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