January 14, 2010 / 5:04 AM / in 9 years

UPDATE 1-Marchionne, hit by protest, says Fiat plant to shut

* Protesters target Fiat CEO speech in Detroit

* Marchionne says Fiat to shutter Sicily plant

* Says European auto market ‘distorted’ by govt support

By Soyoung Kim and Kevin Krolicki

DETROIT, Jan 13 (Reuters) - Fiat SpA FIA.MI Chief Executive Sergio Marchionne said the Italian automaker will not reverse a controversial decision to close a plant in Sicily, arguing the European auto industry needs to slash capacity without government interference.

Marchionne, who was the keynote speaker at an industry event in Detroit on Wednesday, was interrupted twice by protesters as he delivered a somber overview of the problems still facing established automakers even after a financial crisis that sent Chrysler and GM into bankruptcy last year.

One man repeatedly shouted “Shame!” in Italian before being escorted from the room by security. Other protesters released a banner tied to helium balloons in the downtown ballroom.

Marchionne, who also heads Detroit-based Chrysler, said Fiat had nothing further to say to workers who have taken a series of industrial actions to protect jobs at a Sicilian production site known as Termini Imerese.

The plant is scheduled to close after 2011.

“We have decided to shut down a plant in Sicily,” Marchionne said. “That decision is irreversible.”

He said the Sicilian plant could not be made competitive and Fiat was losing money “on every car we make there.”

Marchionne said European governments, including Germany, were wrong to intervene in the auto industry in an attempt to preserve jobs.

“We are the largest industrial organization in Italy but we do not have the responsibility to govern the country,” Marchionne said of Fiat.

“The argument stops there,” he said at the Automotive News World Congress.

Marchionne said the capacity utilization rate of the European auto industry could fall to 65 percent in 2010 from 75 percent last year, with sales widely expected to decline.

“The reason, simply put, is that European manufacturers simply do not close plants. In fact, they’re often paid not to,” he said, referring to government subsidies he said had “distorted” the European car market.

MARCHIONNE: ONLY SIX SURVIVE

He repeated his forecast that only six major automakers at the most could survive to become global competitors over the next decade. “I think there will be five or six people who rule the roost,” he said.

Separately, Marchionne also said Chrysler was considering a court challenge to U.S. legislation passed in November that allows dealers rejected as part of its bankruptcy to negotiate with the company to maintain their franchise agreements.

He said that Chrysler was considering whether to challenge that measure on the grounds that it was not “constitutional.”

“We can’t unwind history. It was done. We’ve done it properly,” he said. “It’s impossible to try to maintain dealers that can’t make returns on capital.”

Chrysler terminated franchise agreements with about 790 U.S. dealerships, or 25 percent of its U.S. dealerships.

Fiat was given control of Chrysler by the Obama administration as part of a restructuring of the U.S. automaker in a government-funded bankruptcy.

Marchionne said Chrysler’s cash position was higher than it was in November, at around $6 billion. “This has to be a hibernation story. We are very, very prudent,” he said.

At the end of Marchionne’s remarks, a woman who said her mother had been killed in an accident involving a Chrysler vehicle, seized the microphone before being walked away by a security guard.

“My mother died because of a defective Chrysler product,” said the woman. “If it was your mother, you would be up here, too.”

The woman, who identified herself as Christina Catalano, led a group that tried to meet with Marchionne last summer to protest a change in Chrysler’s product liability.

Under the terms of the Chrysler’s 2009 bankruptcy, owners of pre-bankruptcy Chrysler vehicles and accident victims are not able to sue the reorganized company for damages.

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