Fiat Spa chief executive Sergio Marchionne said he expected Europe’s car crisis to drag on throughout 2012, forcing the company to hold off on investments and keep coffers full.
He analysts he planned to maintain an “abnormally high level” of liquidity for the “foreseeable future”, Reuters reported
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Fiat had said earlier it had cash and marketable securities of EUR10.2bn (US$12.56bn) at the end of June and that US unit Chrysler had a further EUR9.6bn. In addition, the combined group had committed credit lines of EUR3bn.
Marchionne said the company’s decision to hold a lot of cash was because of “uneven availability of capital markets” in the midst of Europe’s debt crisis.
“I don’t expect that to change within 2012,” he said.
Asked if he saw new partnerships in the works, he said he was happy with Fiat-Chrysler’s industrial linkup with Mazda Motor and did not see the need for a share swap with the Japanese group to cement the partnership.
Regarding future investments, Fiat confirmed its plan to spend EUR7.5bn in 2012 and also confirmed plans to open a new factory in Brazil in 2014, Reuters noted.
Investment in Europe is murky, Marchionne said, until the economic picture clears up.
“It’s highly unlikely the European market will recover in 2012,” he said.
Italian car sales for July, which will be released on Wednesday, will likely show a 20% drop, Marchionne said.
As for new models for Europe, where it is losing money, Marchionne said Fiat will “sit on the sidelines” in terms of planning an update of its aging Punto model.
“We reserve the right to deal with these issues, including the issue of closing plants, after the third quarter, when we will have a better reading of the European market,” he said.
The “frailty” of the European market means it is not a good time for the European Union to start negotiating a free trade agreement with Japan, said Marchionne.
Reuters noted that the European car industry is upset about the results of a free trade agreement with South Korea. Imports to the European Union of cars from South Korea jumped to 285,521 vehicles in the period from July 2011 to February 2012, a 67% year on year rise, while EU exports to Korea rose just 9% to 53,590.
Fiat is in the process of “revisiting our European market plan” and will release its new set of figures during its third-quarter results presentation conference call, Marchionne added.
