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Time running out for EU carmakers – Fiat chief

TRAVERSE CITY, August 3, 2011 (AFP) – Time is “running out” for European carmakers to address structural problems, Fiat chief Sergio Marchionne said Wednesday as he slammed government bailouts of his competitors.

“We’ve got to stop this intervention in terms of support. This is just unbearable,” Marchionne said, noting that France gave $8 billion to Renault and Peugeot in the wake of the 2008 financial crisis while Fiat “asked for nothing” and “survived the crisis on its own terms.”

“In Europe, you can’t do this if there’s an understanding that you’re violating fundamental principles of equity and competition,” he told reporters on the sidelines of an auto conference in Michigan.

“One member nation cannot favor local producers to the disadvantage of others. It’s built into the Treaty of Rome of 1957. We can’t change our minds now.”

The bailouts are just part of a broader failure by European industry and political leaders to take advantage of the crisis to deal with deep structural problems in the automotive industry, Marchionne said.

“The truth of the matter is that the auto sector was already sick before the economic crisis forced it into intensive care,” Marchionne told Michigan’s Center for Automotive Research conference.

“We had been suffering from chronic problems, but had managed to either ignore or deny their existence for far too long.”

Industrial inefficiency, production overcapacity and value-destroying market strategies “went unchecked” while corporate culture was “marked by unaccountability.”

In the United States, industry, government, labor unions and financial institutions responded to the crisis by coming to grips with the inefficiencies, realizing that “the realities of competition go beyond national borders” and working together to restructure the industry and put it on a “more solid foundation for sustainable growth.”

In Europe, however, the “lack of a common vision hampered and continues to hamper efforts to address deeply rooted structural problems” while government intervention gave an unfair advantage to some national players and artificially preserved unproductive capacity.

“These responses underscore the reality that Europe is living in a kind of halfway house, combining a peculiar notion of a monetary union with limited economic, fiscal or political convergence amongst the member states.

“There appears to be no immediate, obvious answer to the European conundrum, he added. “But time is running out for all European carmakers.”

The same lack of vision is also hampering the development of cleaner vehicles because European regulators keep trying to pick favorites among green technologies, Marchionne said.

“If we are to achieve any serious reduction in emissions levels now, it is far more practical to leverage all available technologies in a coordinated manner,” he said.

After touting hydrogen, regulators – particularly in Europe – now appear to be looking to electric cars as a “panacea.”

“Electric propulsion could be a promising long-term solution,” he said.

“But if regulators focus on promoting this solution alone, the outcome is absolutely predictable: capital overspend and sub-optimal results.”

Marchionne noted that compressed natural gas remains a good option and said there are “still many unexplored opportunities to substantially improve the efficiency of internal combustion engines.”

“Government regulations will have the greatest positive impact if they are technology neutral,” he said.

“This neutrality will ensure a rational allocation of capital – one that will drive the highest possible fuel savings and reductions in greenhouse emissions.”

That is what convinced most automakers to support U.S. President Barack Obama’s tough new emissions standards in a landmark agreement reached last Friday, he added. ■

 

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