Alliances the buzz word for Europe auto survival

By Colleen Barry

Associated Press

Published: Wednesday, March 7 2012 9:55 a.m. MST

Varin said that the benefits would be evident in five years — and that the deal did not address the issue of idled factories, a point also made by Opel chief Karl-Friedrich Stracke.

Marchionne has warned that unless automakers can take out installed capacity by closing factories to meet current and expected demand levels, one or more automotive companies risk failure. He urged European Union officials to provide a road map in their capacity as the guardians of the single market.

Against that very real possibility of future bankruptcies, analysts believe that Peugeot and GM's Opel subsidiary in Germany will move to close factories first.

"First you need to address the fundamental issue, and that is overcapacity," said senior analyst Tim Urquhart at IHS Automotive.

The Paris-based carmaker lost €439 million ($578 million) on its car business last year, and is heavily exposed in Europe where it makes half of its annual sales.

GM's European business lost around €700 million ($940 million) last year, which it is equally determined to turn around.

Varin dampened any speculation that the alliance would be expanded to include other players, saying making it successful will consume a lot of energy.

"Everybody has to focus on the synergies of $2 billion in five years that we have to do," Varin said.

Marchionne said his constant pursuit of new partners is based on the desire to avoid capital waste. The three-year-old Chrysler alliance is keeping Fiat profitable, even as the European business is losing money.

Marchionne jumped at a reporter's suggestion that Volvo was looking for a partner for small engines, and said he was speaking to both Suzuki Motor Corp. and Mazda Motor Corp on possible future cooperation in Asia.

"I am interested in talking to anyone who is interested in sharing anything I have," Marchionne said.

In an example of a successful alliance, Marchionne said Fiat has provided the platform and engine to Ford for its subcompact Ka, and produces it for them in Poland, where Fiat makes the 500, which occupies the same segment.

"I don't think it has impacted one single iota the fact that I actually make that car for Ford," Marchionne said.

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