Marchionne to narrow Fiat European loss as market hits bottom
Marchionne: Volume automakers probably lost 5 billion euros in Europe in 2012.
DETROIT (Bloomberg) -- Fiat plans to narrow losses in Europe this year as sales may recover in the second half.
"We are dragging the bottom, but it's the bottom" for industry sales in the region, Sergio Marchionne, chief executive officer of both Fiat and Chrysler, said on Monday at the Detroit auto show.
At the same time, "pricing is not great, and that continues to be the most troublesome part of the European market, Marchionne said. A revival in demand in the second six months of 2013 is "possible," he said.
Marchionne is relying on Chrysler to sustain group earnings as he works to make Fiat's mass-market brands in Europe profitable before merging the two manufacturers.
Fiat has forecast a 700 million-euro ($935 million) loss in 2012 in the region, where industrywide sales are at almost a two-decade low, and the CEO has said Fiat will break even there in 2015 at earliest.
Mike Tyndall, a London-based analyst at Barclays, said: "The small-cars segment is going to be challenging, so life is going to remain tough for Fiat in 2013." It will be "a year of transition, and in theory a year of spending," for Fiat in Europe, he said.
The European car market is set to contract for a sixth consecutive year in 2013 after reaching the lowest delivery figure since 1995 last year, according to trade-group estimates.
Marchionne said volume auto producers probably lost 5 billion euros in Europe in 2012 and companies need to find a "solution" to restore earnings in the region.
Marchionne said Fiat may look for another partner in Asia and he doesn't plan any combination in Europe, including with General Motors Co.'s Opel division. The CEO said in October that he hadn't spoken to GM about Opel since his unsuccessful attempt to buy Opel in 2009.
The possibility of a deal with Opel is "very, very limited, and I wouldn't count on it," Marchionne said. "Meanwhile, there are possibilities for finding new alliances in Asia."
Marchionne reiterated that Fiat and Chrysler should combine into one company, in response to a question about buying the remaining 41.5 percent stake in the U.S. carmaker owned by the United Auto Workers Retiree Medical Benefits Trust, a health- insurance fund for former employees.
Fiat may seek to buy the trust's holding before the fund stages an initial public offering in Chrysler using some of its stock, as the Italian company has no interest in "diluting" control, Marchionne said.
Chrysler is complying with the trust's demand last week to begin registration of the holdings before a possible IPO, he said.
The fourth quarter is the earliest that a share sale could occur, he said. "I understand their objective," Marchionne said. "They need to see the position monetized. If they want to do it through an IPO, we'll do an IPO." At the same time, the trust "is not a long-term shareholder," he said. "They want cash."
Magneti Marelli IPO
Fiat would have enough resources to finance a purchase of the trust's stake, and no other funds would have to be raised, Marchionne said.
An IPO that Fiat is considering for its Magneti Marelli components unit would be used to reduce debt rather than financing a Chrysler transaction, he saidContact Automotive News