Fiat eyes would-be partners as Europe stagnates

BRUSSELS Tue Feb 28, 2012 1:28pm EST

Sergio Marchionne, CEO of Fiat and Chrysler Group, speaks to journalists during a presentation of the new Panda car at the Fiat plant in Pomigliano D'Arco, near Naples, December 14, 2011. REUTERS/Alessandro Bianchi

Sergio Marchionne, CEO of Fiat and Chrysler Group, speaks to journalists during a presentation of the new Panda car at the Fiat plant in Pomigliano D'Arco, near Naples, December 14, 2011.

Credit: Reuters/Alessandro Bianchi

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BRUSSELS (Reuters) - Fiat-Chrysler (FIA.MI) is searching for possible automotive alliances in the face of a flat and oversupplied European market, the chief executive of the two companies said on Tuesday.

"We're on the move," Sergio Marchionne told reporters on the sidelines of an industry event in Brussels. "We can be an active partner everywhere around the world."

"We're talking to everyone," he continued.

Marchionne said there were not many would-be partners left in Europe. Asked specifically about a possible alliance with Suzuki (7269.T) or Mazda (7261.T), he replied: "There are many opportunities to look at, including those."

Marchionne spoke after reports that General Motors (GM.N) was in advanced talks to buy a small stake in French automaker PSA Peugeot Citroen (PEUP.PA) as part of their proposed alliance in Europe and elsewhere.

"It is key that the situation in Europe is addressed. If the potential Peogeot-GM tie-up becomes reality, I sincerely hope it deals with the overcapacity issue. It has to," he said.

Marchionne, speaking in his capacity as president of the European Automobile Manufacturers Association, talked at length about the problems of car production in Europe.

"Roughly, we're looking at a number in the neighborhood of 20 percent of installed capacity that may be viewed in terms of being structurally redundant," he said.

Marchionne said 2012 would be 'relatively difficult', with a likely decline of volumes in Europe. Car production grew by 2.7 percent in the European Union in 2011.

Indeed, the most optimistic forecasts were for new vehicle sales in Europe to be flat through 2014, he said.

Overcapacity and flat markets were not the only problems in the region. Chief among them was labor flexibility, Marchionne said -- a far greater problem than labor cost. Fiat has fought a long-running battle over flexible labor contracts in Italy.

Marchionne said this was in contrast to the situation in the United States, where unions had accepted multi-shift production.

"America fixed the problem in 2008 and 2009... Capacity has been taken out and the workforce has become incredibly flexible."

(Reporting by Philip Blenkinsop and Francesco Guarascio; Editing by Elaine Hardcastle)

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