Bloomberg News

Fiat Still Looking for Europe Partner, May Consider Asian Tie-Up

February 28, 2012

Fiat SpA (F), the Italian carmaker that controls Chrysler Group LLC, is still looking for a partner in Europe to address overcapacity and may consider an Asian tie-up, Chief Executive Officer Sergio Marchionne said.

“There are not very many partners left in Europe,” Marchionne, who is also Chrysler’s CEO, said today in Brussels. “I’m looking at everybody.” He declined to comment on any discussions with PSA Peugeot Citroen (UG) and General Motors Co. (GM), which are said to be in talks on a partnership.

Marchionne has a strategy of merging Turin-based Fiat with Auburn Hills, Michigan-based Chrysler to boost revenue to more than 100 billion euros ($134.5 billion) in 2014. He has been seeking a manufacturer in Europe as a third partner in the group as a way to increase efficiency and cut development costs to end losses in the region.

Fiat’s volume brands lost about 500 million euros in Europe last year as the region’s debt crisis caused consumers to hold back on purchases. The Italian company led Europe’s fourth consecutive automotive market contraction in 2011, and Marchionne is among industry executives forecasting another drop for this year.

“There may be partners in Asia but it won’t fix the European problems,” Marchionne said today. Suzuki Motor Corp. (7269) and Mazda Motor Corp. (7261) are among the “many opportunities to evaluate.”

Consolidation Need

Carmakers in Europe need to consolidate to compete with Volkswagen AG (VOW3), whose market share in the region last year was 23.3 percent, Marchionne said Jan. 10. Detroit-based GM and Paris-based Peugeot are in talks on forming a broad partnership as the two automakers struggle with declining car sales in Europe, a person familiar with the discussion said Feb 22.

“Suzuki is a potentially good partner for Fiat as the Japanese carmaker is strong in Asia, especially in the small car sector, where Fiat is really weak,” said Pierluigi Bellini, an analyst at IHS Automotive in Milan.

Marchionne said European carmakers must reduce production capacity by about 20 percent. The European Commission should look at its regulatory stance to encourage the cutbacks, the CEO said. The car market in the region this year will be “relatively difficult,” he said.

“It’s essential that the European situation will be addressed,” he said. “If the Peugeot-GM hypothetical tie-up becomes a reality, I sincerely hope it deals with the overcapacity issue. It has to.”

Peugeot-GM Stake

Peugeot may announce as soon as this week plans to sell a stake of about 7 percent in the French carmaker to GM as part of a development alliance, people familiar with the matter said yesterday.

Fiat, which has moved production of its Panda subcompact to Italy from Poland, decided to slow the introduction of models in Europe because of the shrinking market, Marchionne reiterated last week. The company will present a larger version of its Fiat 500 subcompact at the Geneva auto show in March. The Italian carmaker will also sell the model in the U.S. next year.

Fiat closed its Sicilian plant at the end of last year in an effort improve productivity in Italy. Fiat targets an end to losses in Europe by 2014.

Marchionne also said today that Fiat has reached a preliminary agreement to build cars in Russia at two plants. The company, which controls a 58.5 percent stake in Chrysler, will make the U.S. division’s Jeep sport-utility vehicle at plants in Moscow and St. Petersburg. The first vehicles will be manufactured next year, he said.

To contact the reporter on this story: Tommaso Ebhardt in Brussels via tebhardt@bloomberg.net

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


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