Fiat Auto intends to make better use of its sprawling network of factories as a way to wring more efficiencies from its assets, the Fiat automotive division's head told a German newspaper.

"Our problem is not capacity and capacity utilisation. Making two million cars with 46,000 staff is in order," Herbert Demel was cited as saying in Wednesday's edition of Boersen-Zeitung, according to Reuters. "But we have to make structural adjustments, for instance limiting the (production) area by a third. Capacity utilisation at Alfa should rise from 81% now to 90% by 2006."

A Fiat spokesman told the news agency Demel was referring to making more efficient use of its buildings and plants, perhaps by sharing property with other users. The historic Mirafiori plant in Turin, for instance, once had as many as 60,000 staff working there but now has 14,000, so it has excess space that could be used to cut costs, he said.

On other subjects, Demel reportedly said he was worried that China's booming car industry could one day become a major threat to European manufacturers by turning into an export powerhouse.

"I do not see the risk in China as the bubble bursting, but rather much more that Chinese cars will come to Europe in the future," he was quoted as saying, according to Reuters.

Asked if the European car industry had a future, he told the paper: "The auto industry has to build cars where the boom is happening. We have to get used to the idea that quality can be produced not just in Europe."

Demel reportedly said loss-making Fiat Auto, which is in the midst of a reorganisation to make it more competitive, had grown more quickly than European rivals in the first half.

"We grew 2% on average in the first six months," Demel said. "I prefer constant growth to exaggeratedly quick growth dynamism."

According to Reuters, Demel also said Fiat was on the lookout for more industrial alliances. "I can imagine working with more partners in the future."

Fiat already shares purchasing, vehicle platforms and components with General Motors, works with PSA Peugeot Citroen on light commercial vehicles, and cooperates with Suzuki on off-road vehicles, Reuters noted.