European carmakers will need plant closures and job reductions to cut losses, says Marchionne

Article by Christian A., on March 21, 2012

To cut losses in the region, a 'painful' restructuring is required for European carmakers to undertake such as plant closures and job reductions, according to Fiat and Chrysler Group CEO Sergio Marchionne. He told reporters last Tuesday in Bruges, Belgium, that talking about reductions will initially have a negative effect on employment.

He hoped to have a “European response" about the problem since it can’t be left to the “national countries.” He added that the closure of plants has to be distributed throughout producers and countries. Marchionne is working to achieve a merger between Fiat with Chrysler so that it could boost its revenue to over 100 billion euros ($131.8 billion) in 2014.

It is relying on Chrysler to encourage growth in Europe where the group recorded a loss of around 500 million euros in the volume-car business in 2011 and had a "weak" first quarter. Presently, Fiat owns 58.5% of Chrysler.

Fiat had frozen its new European investments and delayed the release of new models in Europe since Marchionne doesn't expect the company to recover before 2013 at the earliest. Fiat had shut down its Sicilian plant at the end of 2011. He hopes that by 2014, European losses will be cut. He estimates that it would take around two years for the European carmakers to restructure their operations in the region.

Marchionne said that because of the government policies initiated by Prime Minister Mario Monti, Fiat was able to "easily" implement a plan to revamp production at its Mirafiori plant in Turin. Monti is hoping to make labor rules in the country more flexible.

Marchionne said that Monti made it possible for the investment in Mirafiori to proceed easily. In the first two months of 2012, Fiat’s sales in Europe declined by 16% to about 162,000 units as deliveries at Volkswagen remained nearly the same at around 463,000, according to data from the European Automobile Manufacturers Association based in Brussels. [source: Autonews]

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