Fiat's Timely Bet On Chrysler as European Crisis For Cars Continues

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Continued from Part One.

Fiat’s Sergio Marchionne is coming under political pressure, according to an FT article. Understandably, his response was blunt.

“Would you invest in a market overwhelmed by the crisis in which not only do you not have the certainty of making one euro of profit, but risk losing the money invested?” he is reported as saying.

Marchionne’s investment in Chrysler looks brilliantly prescient today as its profitable US partner props up loss-making Fiat.

The US carmaker’s 11 North American plants are running at full capacity while Fiat’s five Italian plants running at just 55 percent of capacity are all losing money and the company is privately said to be looking at closing one of them, unions and government permitting.

Even so, Fiat’s sales in Europe fell “only” 18 percent last year, although with no new models to speak of, the trend is certain to continue.

Europe’s auto industry has gone through a similar contraction to the US’, which went through post-Lehman, but whereas the US is on the rise, Europe is still contracting. New car registrations are said to be just 14 million units per year, down from 18 million a few years ago.

With no end in sight to the European debt crisis, it is a brave firm that continues to invest heavily in new models, but that is what Ford is doing. The firm says it plans to bring out 15 new or substantially revamped models over the next five years in Europe, aimed at maintaining its No. 2 position behind VW as Europe’s second-largest brand.

Aluminum sheet and casting suppliers are hoping much of that investment will be going into development of fuel-saving, low-weight paneling and components to maintain the healthy demand for aluminum products in the auto industry and offset falling unit production.

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