Marchionne Issues Dim Near-Term View of Europe’s Recovery

PARIS – Fiat Chrysler CEO Sergio Marchionne does not see a full recovery taking hold in Europe until the region’s automakers further reduce production capacity.

“I’ve never been a firm believer in the strength of the European recovery,” Marchionne tells journalists during an FCA business update at the Paris auto show. “There are issues that continue to plague Europe in terms of getting convergence on objectives to get this machine restarted.”

European vehicle sales, including Russia, were up 2.2% through the first six months of the year to 9.2 million units, according to WardsAuto data. Production was up 4.6% in the January-through-June period to 10.7 million.

“Until you get a unified view of how much reform must be carried out,” he says Thursday, “you are going to go through a prolonged period of unsettled demand.”

Marchionne says FCA will proceed with a plan outlined earlier this year that sees the automaker leveraging its strengths in North America and Latin America to overcome persistent weakness in Europe.

“As much as I complain openly about the lack of will and the lack of vision on the European side to see a fundamental structural reform of the industry, in terms of taking out unneeded capacity, FCA has had to move on and reestablish its own agenda with different objectives,” he says.

“If you are the small guy in the pond you don’t stay in the same sandbox as the big guys,” Marchionne adds.

However, the executive is not entirely pessimistic about the European market, saying it has hit its low point and sales volumes should continue their recovery in 2015.

“The worst is behind us,” he says.

Speaking directly to the Russian market, Marchionne does not see a recovery within the next 12 months although he expects the crisis in the Ukraine will end soon.

Sales of passenger and light-commercial vehicles in the once-promising country through the first six months were down 8.1%. The downturn comes as Russia responds to Western economic sanctions by halting state purchases of imported vehicles and threatening a broader ban on U.S.-, European- and Japanese-branded vehicles.

“The alternatives are ugly, not just for Europe but I think in general,” he says. “Common sense will prevail, and hopefully by the end of 2015 will be back on a quasi-normal basis of commercial relationships.”

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