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Car crisis: Six players will survive

2008-12-08 15:14

Gilles Castonguay and Chang-Ran Kim

Italian carmaker Fiat said it is too small to survive alone, heightening prospects of mergers in an industry battered by the economic crisis as Sweden reportedly mulled a rescue package for Volvo and Saab.

Fiat's chief executive Sergio Marchionne was quoted as saying over the weekend that only six big players would be left following the crisis.

He said just one of those would be in the United States, where negotiators were seeking on Sunday to finalize an emergency rescue package for the 'big three' manufacturers after data showed vehicle sales in what is the world's largest market plunged in November to the lowest level since 1982.

With carmakers across the globe slashing output as tight credit conditions and deepening consumer uncertainty cripple sales, unions at Chrysler LLC said they would consider an alliance with a rival if it helped save jobs, while a German magazine said India's Tata Motors was mulling closer cooperation with Daimler.

The world's biggest carmaker, Toyota, set up an emergency committee, chaired by President Katsuaki Watanabe, aimed at boosting profitability over the next few months to avoid further cuts to earnings forecasts.

The Japanese giant is also considering cutting capital spending in the year starting next April by 30-40 percent, the Nikkan Kogyo newspaper reported on Monday. Last month, it slashed its annual operating profit forecast by 1 trillion yen ($10.78 billion) to 600 billion yen.

The Swedish government is expected to offer loans and loan guarantees worth several billion Swedish crowns to struggling Volvo Cars and Saab Automobile, owned by Ford and General Motors respectively, daily Dagens Industri reported on Monday, citing an unidentified source.

The US carmakers both said they want to sell their Swedish units and have held talks with the Swedish government on what kind of support it might offer.

Can’t go alone

Fiat's Marchionne said in an interview published on Monday on the website of Automotive News that he expects consolidation in the industry to get under way next year, and that the Italian group needs to take part in order to survive.

"I need a much larger machine to help me. I need a shared machine," he was quoted as saying by the industry publication.
"You need at least 5.5 million to 6 million cars (a year) to have a chance of making money ... Fiat is not even halfway there. And we are not alone in this."

He declined to name possible partners for Fiat, but said in an extract from the interview published on Saturday that only six big players would be left in the aftermath of the crisis.

They would consist of one mass producer in the United States, one in Germany, a French-Japanese maker with a possible extension in the United States, one in Japan, one in China and one other potential European player, he said.

The German one would be Europe's biggest maker Volkswagen and the French Japanese one the Renault-Nissan alliance which also has a stake in Russia's AvtoVAZ. The Japanese one would be Toyota.

Fiat has in the past been in alliance talks with both Ford and GM and currently has two joint commercial vehicle plants with PSA Peugeot Citroen.

In Germany, Focus magazine said without citing sources that Tata had discussed closer cooperation with Daimler managers in recent weeks.
In Detroit, United Auto Workers vice president told Reuters at the weekend that the union is open to moves by Chrysler to ally with a rival provided it saves as many jobs as possible.

A South Korean newspaper also added to the gloom, reporting that Kia Motors, the country's No. 2 automaker, was expecting a 9 percent fall in sales volumes next year. A company spokeswoman said no official target had been set yet.

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