Marchionne reveals a Fiat secret

Luca Ciferri is Automotive News Europe's chief correspondentLuca Ciferri is Automotive News Europe's chief correspondent
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Fiat CEO Sergio Marchionne on Wednesday revealed a long-kept company secret: how much Fiat's automotive unit lost in Europe in a particular year, which was 500 million euros in 2011. Why make the number public now? Probably to underline a point Marchionne has been making for years, which it that Europe's profit-killing overcapacity threatens the future of the automotive industry here.

Europe has capacity to make more than 20 million vehicles in a market where sales are expected to fall to 12.6 million this year. That means the use of sale incentives will rise and the profit made on each new car sold will fall.

The CEO's decision to provide the number after eight years of refusals was eye opening because Fiat actually lost 200 million euros less than analysts expected. Marchionne's move also is a refreshing change for an industry determined to try to hide bad news. Currently, only Ford provides a report on the profitability of its European business.

The Fiat boss is addressing Fiat's capacity problems at home. Last year, he spearheaded a new labor deal in Italy that increases production to 18 shifts a week from 10. It's a small step forward. Marchionne expects it will take until 2014 for Fiat's four Italian car plants to reach breakeven.

Fiat's said it capacity utilization in Italy declined to 50 percent last year from 62 percent in 2010 -- an automaker typically needs at least 80 percent utilization for a plant to be profitable. Fiat's won't reach 80 percent in 2012, but it should increase capacity use in Italy this year because it moved the high-volume Panda to its Pomigliano factory in Naples from Poland and in November closed its poor-performing factory on Sicily island.

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