Buyout by Chrysler is Fiat buffer in Europe

Chief executive confident of riding out storm

D e t r o i t L a s t Mo n d a y evening, several of the global car industry’s chief executives met for dinner on the 38th floor of General Motors headquarters i n downtown Detroit.

The gathering, held annually at one of the world’s big auto shows, this year i ncluded t he bosses of GM, Ford Motor, Daimler, Renault/nissan, PSA Peugeot Citroën, and Porsche. As fellow attendee Sergio Marchionne, Fiat’s chief executive, tells it, the discussion was not very relaxed, given the CEOS’ need to watch their words.

“Have you ever seen the anti-trust lawyers in these meetings?” Marchionne joked in an interview later at the Detroit auto show. “They sit there with cattle prods, ready to whack you across the forehead in case you bring up anything that has to do with volumes, cars and pricing.”

Fiat is dangerously exposed to Europe’s debt cri s i s , given dwindling consumer confidence in Italy, whose car market, after recording its lowest sales since 1995 last year, is due to shrink further in 2012.

Buffer

However, Fiat now has a buffer from its reliance on Europe in the form of Chrysler, its US arm, which is due to generate the bulk of its profit as the US car market grows further to about 14 million units in 2012.

In 2008, as the banking crisis was starting, Marchionne predicted a massive shakeout in the global car industry that would leave it with just five or six big players.

If you’d looked at the combined market share of Opel and Fiat at the time it would have been just marginally below where Volkswagen is in Europe.” Sergio Marchionne

Fiat chief executive

However, the world’s big carmakers survived.

Marchionne became the i ndustry’s only CEO to complete an acquisition during the downturn when Fiat acquired a controlling stake in Chrysler. He also bid to acquire Opel from GM, but failed.

“If you’d looked at the combined market share of Opel and Fiat at the time it would have been just marginally below where Volkswagen is in Europe,” Marchionne said.

Today, Fiat and Chrysler together sell more than 4 million vehicles, about half the volume of industry leaders GM and VW, but enough — Marchionne claimed — to deal with any looming industry shakeout on its own terms.

“Whoever’s left at the table is going to be f ighting for scraps of food,” he said.

He said that Fiat was preparing itself for all contingencies in the Eurozone by making sure it was fully hedged. “Keep the cash and de-long the exposure on the other side, and eventually it will wash out hopefully,” he said.

— Financial Times