Fiat-Chrysler CEO: euro system could derail
By Silvia Aloisi and Stefano Rebaudo
FRANKFURT (Reuters) - The euro single-currency system could be derailed unless European leaders resolve the debt crisis, a situation that has already prompted Fiat SpA <FIA.MI> and its affiliate Chrysler Group LLC to examine the timing of vehicle introductions, Fiat's CEO said on Tuesday.
"We are reviewing volumes and the timing of new products to see when it is really necessary to launch them," Fiat and Chrysler Group LLC Chief Executive Sergio Marchionne said on Tuesday. When asked whether the company was primarily looking at launches in Europe, he said: "No, I'm talking globally."
The markets are showing little confidence in Europe's ability to draw a line under the crisis, which has spread to his homeland Italy after engulfing Greece, Ireland, Portugal and Spain, said Marchionne, who has been the leader of both companies since 2009, when Chrysler emerged from a government-financed bankruptcy restructuring.
"I think there is a possibility, if the wrong steps are taken, that the system goes off the rails," Marchionne told reporters at the Frankfurt auto show when asked whether the survival of the euro zone single currency was at risk.
"The problems must be confronted in a serious way. It is not pleasant right now. We are not totally calm about this instability and the way in which the European crisis is being managed," he said.
Speaking about the European car market this year and next, Marchionne said: "It will be a difficult year in 2011, and 2012 will not be great unless we start giving certainties to financial markets, building a bit of confidence in the system that at the moment is lacking."
Marchionne said Italy, which is in the process of pushing through an unpopular austerity package to try to avoid being the next domino to fall in the debt crisis, was "risking it all."
"The world is watching us. I have met financial people here in Frankfurt, and they are all watching Italy and how the problems are resolved," he said.
"The important thing is to be totally credible at the international level," he said. Commenting on reports that Italy wanted China to buy a significant amount of its bonds, Marchionne said: "If the Chinese are willing to invest, God bless them. But the fact that we had to go there (asking for money) is not a good sign."
TARGETS CONFIRMED DESPITE WEAK EUROPE
Since concerns about an economic slowdown and a possible recession in Europe and the U.S. intensified last month, analysts have cut their outlook for European car makers, and Fiat has been no exception.
"We remain skeptical about Fiat's ability to navigate a downturn," Credit Suisse analysts said in a report last week, "making it a risky proposition for investors right now."
They expect that "at some stage over the next six months, the company will need to step away from its five-year plan presented in 2010 which calls for 21 percent growth for Fiat Auto in 2012."
Barclays Capital took an equally gloomy view: "We think the recovery in European auto sales will be delayed to 2013 ... Consumers that are worried about their jobs and watching their personal wealth diminishing are unlikely to buy a new car," a recent analyst report said, calling Fiat's consensus estimates for 2011 and 2012 "worryingly high."
Fiat shares have lost nearly half of their value since the end of July, hit by a sell-off in Italian assets and concerns about a global economic downturn.
Marchionne said he did not "give a damn" about the shares' fall, but hinted that investments in Italy, and particularly a 1 billion euro investment at Fiat's flagship Turin plant, would be on hold until the dust settled.
"We are looking at the euro/dollar exchange rate and the impact of the crisis before we decide what to do," he said.
Fiat is seen as particularly vulnerable because of its exposure to the U.S. market through its majority holding in Chrysler, a nearly 13 percent fall in European sales in the first half of 2011 and fears of a slowdown in its top growth market, Brazil.
Marchionne said, however, he was not cutting his 2011 forecasts for either Fiat or Chrysler sales and profits.
"For Chrysler, nothing changes; the forecasts I made in 2009 for 2011 and 2012 were modest," he said, reiterating a target for a $2 billion operating profit.
He also confirmed his forecasts for total U.S. sales of 12.7 million units this year, and over 13 million next year.
Fiat's performance was also "in line" with his targets, he said, although European sales were "less than I expected, because of the heavy reliance on the Italian side. It's not an easy market, and it won't be an easy market in 2012."
In Italy, he said, "we had already forecast a very weak market of around 1.8 million vehicles. We have not seen these numbers since the 1980s."
SUZUKI COULD BE INTERESTING PARTNER
Turning to possible alliances, Marchionne said Suzuki Motor Corp <7269.T>, which is seeking to end its alliance with Volkswagen AG <VOWG_p.DE>, could be an interesting partner for Fiat on the Asian markets, particularly China and India.
"With Suzuki we have had an industrial cooperation for a long time. The problems with Volkswagen have nothing to do with us," he said, referring to a deal with the Japanese group for the supply of a Fiat diesel engine that has angered Volkswagen.
Marchionne said because of the turbulent financial markets, he was not in talks with the VEBA union trust fund, which holds a 41.5 percent stake in Chrysler, about how to cash in on that holding.
Fiat's 53.5 percent stake in Chrysler is set to rise to 58.5 percent by year-end, and Marchionne had initially planned an initial public offering for the Chrysler stake held by VEBA. Similarly he dismissed speculation that Fiat is planning to float sports car icon Ferrari to raise cash and reduce its growing debt.
(Editing by Will Waterman and Mike Nesbit)