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Marchionne, Reilly will be first -- but not the last -- to face the heat

Fiat boss Sergio Marchionne and General Motors Europe President Nick Reilly are doing what is right, regardless of how many people they are going to upset.

Marchionne will shut down Fiat's expensive-to-run plant in Sicily in mid-2011 to help keep his company competitive.

As part of a plan to cut 8,300 jobs in Europe, Reilly probably will close a plant in Belgium to help GM subsidiary Opel/Vauxhall survive.

Saab and its plant in Trollhatten, Sweden, also may soon be gone for good.

This is all happening because there is way too much production capacity in Europe and not enough demand.

Capacity utilization at Europe's car assembly plants was an estimated 57 percent last year, according to J.D. Power Automotive Forecasting.

That is a terrible result. The plant-usage break-even point is about 65 percent to 68 percent -- a number that J.D. Power Automotive Forecasting doesn't see the industry reaching until after 2011 at the earliest. (See Capacity Use chart, above)

What this means is that automakers will lose billion in 2009 and perhaps lose further billions in the next two years unless drastic steps are taken.

The market researcher doesn't provide a plant-by-plant breakdown to show which European factories are working above or below capacity. Even if the company provided them, such numbers can be misleading because a marginally productive Renault plant outside of France always will be on shakier ground than an under-performing factory in France.

The French government has a 15 percent share of Renault and already is furious at the automaker because of a report last week that it plans to pull the next-generation Clio compact from France and have it made in Turkey to reduce costs.

J.D. Power Automotive Forecasting expects Europe auto production to be higher in 2010, but improving on one of the worst years in history is not much of an achievement. (See Production Results chart, above)

Like all automakers with plants in Europe, Renault will have to make very unpopular choices in the next few years.

Reilly and Marchionne will be among the first to face this difficult task. Other European auto CEOs will not be far behind because the only thing worse than making these cuts would be deciding not to make them.GM's factory in Antwerp, Belgium, (shown) is just one of the European plants at risk of closure.

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