WASHINGTON D.C. -- France, Germany and other European nations have created overcapacity by subsidizing the auto industry, a problem that should be fixed by streamlining the sector as the United States has done, Fiat S.p.A. and Chrysler Group CEO Sergio Marchionne said Monday.
“The need for rationalization is now undeniable,” Marchionne told the Peterson Institute for International Economics in Washington D.C. “They're looking at the trees but they aren't seeing the forest.”
He said the Obama administration solved domestic overcapacity by shepherding General Motors Co. and Chrysler through bankruptcy last spring.
“There was a courageous structural shift in the U.S.,” Marchionne said. GM and Chrysler emerged from bankruptcy “clean, with no overhang,” he said.
He complained about France's decision to protected domestic automakers Renault SA and PSA/Peugeot-Citroen by providing each with a 3 billion euro low-interest loan earlier this year.
"These unilateral interventions are by their very nature dangerous because they put a few players in a position of advantage while the remainder, such as Fiat, are forced to compete with their hands tied behind their backs," Marchionne said. "All of this is being done in a common market."
He said that individual European government subsidies have led to 30 percent production overcapacity in Europe and redundant factories.
Marchionne's comments come as he faces government pressure to increase Fiat's output in Italy to 900,000 units a year, a goal the CEO earlier this month said is reachable despite plans to stop car production at the automaker's Termini Imerese plant in Sicily by 2011.