By on October 10, 2012

It looks like Fiat and Chrysler CEO Sergio Marchionne does not want to be head of the European automakers association ACEA much longer.  Today, he called for a massive EU rescue package for the ailing European car industry, with coordinated capacity cuts as the centerpiece.  He also called for a stop of free trade agreements. “Let the European car industry make its adjustments… This is not the time to embrace free trade,” Marchionne said while Reuters was taking notes.

Earlier this year, Marchionne had called for a massive government intervention that would require all automakers to shed capacity, most likely with financial support from Brussels. At the time, an anonymous European auto exec predicted serious pushback from the German side, which is doing just fine, danke. The German side did not waste time. To the delight of the EU, which has other problems, the German members of the ACEA did not support Marchionne’s plan, and it went nowhere. They also started working on Marchionne’s ouster. Soon thereafter, Volkswagen demanded that Marchionne step down as the head of the lobbying group, after Marchionne accused Volkswagen of dumping.

Last month, Marchionne said that ACEA’s board agreed all members would reach their own decisions. He also hugged Volkswagen CEO Martin Winterkorn in front of cameras. “They hugged, but they did not kiss,” quipped  Daimler CEO Dieter Zetsche.

All of this seems to be forgotten, and Marchionne calls for the strong arm of Brussels again.  Marchionne also said the EU should delay signing free trade agreements. When he said this before, it earned him a serious rebuke from EU Trade Commissioner Karel De Gucht. Export-heavy German carmakers and export-heavy EU states are for FTAs. It seems like Marchionne is under a lot of stress, and the way he is going, he might be under more stress soon.

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36 Comments on “Marchionne Calls For EU Intervention, End Of Free Trade...”


  • avatar
    Landcrusher

    Wow, that’s totally out of Atlas Shrugged. Is he an investor in the movie or something?

    • 0 avatar
      dolorean

      The Lord of the Rings and Atlas Shrugged are both books that can change a 14 yr olds life. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.

      • 0 avatar
        Landcrusher

        Believe whatever you like, but this is exactly what the heads of the uncompetitive companies did in the book. Also, your critique has no validity. You might as well say reading it leads to indigestion, as you have presented no cause and effect. If you haven’t read it, you shouldn’t insult it, and if it messed up your life, then we need to understand how you blame a simple book.
        It’s amazing the critiques of Rand books are rarely actually about the books at all.

      • 0 avatar
        dolorean

        @Landcrusher, spoken like a true acolyte of the Rand monastic order. Who can’t see that the book is what it is, a great work of fiction, like the Wizard of Oz and Gulliver’s Travels; both politically based writing but without the small-minded clinging to it as gospel. I have read it, its terrifically one-sided towards the subjective view of the ‘haves’ over the ‘nots’ and that there are only two sides to anything, the middle being ‘evil’. Complete rubbish.

      • 0 avatar
        Landcrusher

        Nonsense, there are several characters representing what we call the middle class. Your charge is ridiculous. The main characters may be extreme types, but the author is trying to make her point by beating the reader over the head with it. There are good reasons for her style, so it’s forgive able even when painful.

        Also, your hyperbole about me is inappropriate and rude. That book had no effect on my life whatsoever. I pointed out a fact. Do you not agree that Marchionne’s argument mirrors those in the book?

      • 0 avatar
        dolorean

        Nonsense. The idealized world Ayn Rand has created to facilitate her wishful theorizing has no more logical connection to our real one than a world in which an author has imagined humanity ruled by intelligent sacks of suet. It’s the ultimate nerd’s revenge fantasy. You must be incredibly thin skinned to believe I had said anything personal about you. You had implied that I had not read the book without actually knowing, I said the same about your conjecture. Nothing personal meant. As for Marchionne’s argument, I do agree that his view of events do mirror the book, of which I vehemently disagree with.

      • 0 avatar
        Landcrusher

        You have still avoided the central issue. Marchionne’s comments are precisely the type made by the characters in the book. True or False?

        If objecting to being called a true acolyte of… Is thin skinned, then so be it. Personal or not, it’s still rude and has no place in civil discourse.

        I did not imply you hadn’t read the book, I merely sent your accusation back at you because you gave no reason why it would ruin anyone’s life. Did it not ruin yours? If not, then why would you think it often does so to others?

        Lastly, your characterization is wrong. The book is not about the haves and have nots. It’s about the futility of socialism and breaking the connection between creation of value and material and social rewards of doing so.

      • 0 avatar
        CJinSD

        Anyone that tries to sell the theory that Atlas Shrugged didn’t present a valid representation of the ugly face of redistibutionism ought to try some serious introspection. Rand didn’t write Sergio’s lines for him, but she could have.

  • avatar
    dcars

    I guess he doesn’t realize that the German’s don’t want the other European manufactures to survive. At least Marchionne will still have Chrysler!

    • 0 avatar
      dodobreeder

      I thought I read somewhere, probably the Wall Street Journal, that Chrysler was already keeping its parent company, Fiat, alive and operating. Without Chrysler and the influx of taxpayer money Fiat would have gone belly-up a long time ago.

      And even though Chrysler is enjoying a sales-resurgence at the moment because of its Daimler-inspired best sellers, this windfall of best sellers is not going to last forever.

      Once GM, Ford, Toyota, Nissan and even Honda, start to bring new and updated vehicles to the American market, we may see Chrysler sales drop back to their normal levels of the distant past. And then where would Fiat be?

      My guess, a slow death-spiral is where Fiat would be, driven by all the unions.

      But I could possibly see money coming from the East, like Russia, and Lada, which is enjoying an equally robust resurgence in new car sales, a benefit of new wealth from their oil and gas exports.

      So could Fiat and all its subsidiaries be Russian-owned at some point in the not-too-distant future?

      I’d say that’s a distinct possibility.

    • 0 avatar
      th009

      @dcars, “I guess he doesn’t realize that the German’s don’t want the other European manufactures to survive.”

      Business, like life, is all about the survival of the fittest. Currently Marchionne is the runt of the litter so he’s looking for help, but in the opposite situation he’d be all to happy to kick the other hatchlings out of the nest. (No apologies for the mixed metaphors!)

  • avatar
    jpolicke

    I thought one of the main purposes of the EU was to make the continent one large free trade zone. What is left for the to be a FTA about?

    • 0 avatar
      th009

      EU already has free trade agreements with Mexico, Chile and South Korea, among others. Canada, India, Japan, Russia and Ukraine are all in various stages of negotiation.

  • avatar
    krhodes1

    I think “Free Trade” is all fine and dandy when both partners are on an equal footing as far as wages and standard of living. US and Canada, as an example. US and Mexico? Just a recipe for losing jobs. I’d rather pay more for the product and have the jobs in the US. So I can’t blame the Europeans for a bit of protectionism.

  • avatar
    Larry P2

    TTAC “BIAS ALERT:” If this story were about the domestics, both in the headline and in the story the word “Bailout” would have been used promiscuously, repeatedly and vigorously.

  • avatar
    Larry P2

    A TTAC “Bailout” definition primer:

    European: “massive EU rescue package” Domestic: “Bailout”

    European: “ailing European car industry” Domestic: “Death Watch”

    European: “coordinated capacity cuts” Domestic: “Bailout/Market fixing”

    European: “This is not the time to embrace free trade” Domestic: “Whoring for Bailout”

    European: “Massive Government Intervention” Domestic: “Bailout”

    European: “with financial support from Brussels” Domestic: “Bailout”

    European: “calls for the strong arm of Brussels again” Domestic: “Bailout”

    European: “delay signing free trade agreements” Domestic: “Bailout”

  • avatar
    Dimwit

    Gee, remember only a few short weeks ago everyone here was convinced that he was going to ship Chryslers from Italy? Where are you now?

    This is either spindoctoring to deflect attention from the Moody’s report on him and PSA or just bad timing. FIAT and the bank are in trouble. He really needs to get his house in order and doesn’t need the germans to jog his elbow. Winterkorn and Zetsche must be laughing behind closed doors watching him squirm.

    BTW Bernard, why is BMW so quiet? You never hear anything from management on international affairs like VW and MB.

  • avatar
    stroker49

    I am paying the next highest taxes in the world here in Sweden (after the Danes). 46.4% tax revenue as percentage of GDP. To get health care, schools and such, not to bail out private companies that takes the profit in good times and ask the taxpayer for money in bad times.

    • 0 avatar
      noxioux

      In for a penny, in for a pound, stroker. You can’t have the government all up in your biz without having them all the way up in there.

      • 0 avatar
        Glen.H

        Personally, I am not against bailouts for companies,but could do without the lectures on the “evils” of government “interference” from many of the same businesses in the good times.

      • 0 avatar
        krhodes1

        I think his point is that HIS government is not in the business of bailing out companies – see Saab as a prime example. I suspect most who argue that they “don’t want the government all up in their business” would be the first to go whining to the government in the event that something unfortunate happens and they find themselves with no job, no savings, and no food.

        Realistically speaking, Sweden is a country of only 9.5 million people – they simply can’t afford to bailout companies. For reference, that is only 10% more than the population of New York City alone!

        I’ve said this here before though – in the case of the US, I really believe it was “damned if you do, damned if you don’t” with the bailout of our auto industry. If GM and Chrysler had gone down, they likely would have taken the ENTIRE US auto industry down with them due to the interconnected suppliers. And we would be in Great Depression MKII. And ultimately, a country of 315 million, with ludicrously low marginal tax rates CAN afford to do it. We will even get MOST of the money back, though I think GM and Chrysler should be subject to extra taxation to make up the difference. Only fair that if we are going to socialize losses we should socialize profits as well.

  • avatar
    Bela Barenyi

    Three or four years ago Germany granted Opel a subsidised loan of EUR 1.5 billion, while France granted both Renault and PSA subsidised loans of EUR 3 billion. Nobody cried a foul at this back then.

    Germany does “subsidy” its domestic carmakers in many ways.
    For instance through purchase decisions concerning cars for the Police other other public entities/departments. EU law requires a Europe-wide tender for the procurement of such stuff/public projects etc. If there are car plants in a certain German state, than the state “tends” to buy the cars of the said manufacturer.
    For instance, in the state of “Lower Saxony”, the state police drives/buys Volkswagen, mainly Passats, as Wolfsburg lies in Lower Saxony and the state of Lower Saxony owns 20% of Volkswagen. In the the Free State of Bavaria, the police buys/drives BMW’s, mainly 3series, as BMW’s headquarter is in Munich, which is located in the Free State of Bavaria. In North Rhine Westphalia (NRW), the police mainly bought/drove Ford’s, mainly Mondeos as far as I remember, because Ford of Europe AG is headquartered in Cologne/NRW and has a plant in Cologne, but recently North Rhine Westphalia decided to purchase VW Passats for their police. In the State of Hesse, the police buys/drives Opels, because Opel is headquartered in Ruesselsheim/Hesse. How this is possible ? Well, if you know which model you want to buy, for instance VW Passats, for the police or other public departments/entities, you just take the specifications of the said car (Passat) and write them as the “required” characteristics in your “Europe-wide” tender. Of course the local carmaker will also be happy to supply you with his cars, so the bid/offer will contain some nice fleet discounts and other nice things in order to ease the decision. (I know someone who worked three decades at an public purchase and sourcing department in Germany and he told me that it works/worked like this.)

    I know, every country which has a car industry does this kind of things and favours always its domestic car makers when it comes to public purchase decisions, but it just shows that most of the “EU laws” and also other “free trade agreements” are not worth the paper they’re written on, as there are always ways around them.
    It’s just hypocrite, but this seems to be part of the human nature.

    Beside of public purchase decisions, Germany also subisidies German car makers through tax laws, as “company cars” are subject to favourable tax treatment in Germany. Most companies offer company cars as an incentive, but very often a company car is necessary for the job, for instance for sales representatives.
    Of course, in other EU countries there is also favourable tax treatment of car company cars, but in Germany it has a big impact on the sales of the domestic car makers. I recently read that three of four VW Passats which roll of the production line (in Germany) are company cars.
    There’s even an study about the effect of favourable tax treatment of company cars in Europe. Can be downloaded here:
    http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_papers/taxation_paper_22_en.pdf

    Every country supports its car companies, so nobody is really entitled to cry a foul at this.

    • 0 avatar

      I would be very careful about the company car issue. The tax treatment of company cars is regarded as an impediment to sales, not as a subsidy. If you would work for my German company, and I would give you that 50,000 company car, that can easily translate into a taxable benefit of 1,000 EUR monthly for you. What is worse, the taxable benefit is calculated not on the value of the car, but on the LIST price when new. After a few years, you really feel bad paying more in taxes than the car is worth. After learning this, I gave several cars away to my employees, it was cheaper for me and for them.

      If you want a country that favors company cars, try America. Leases can be written off as a company expense, and nobody ever bothered me with something as silly as a taxable benefit ….

      • 0 avatar
        Bela Barenyi

        Okay, subsidy was perhaps the wrong expression. If the tax treatment of company cars is regarded as an impediment to sales, why do the German carmakers not lobby against it? I mean, the domestic carmakers in Germany have a very powerful lobby (please correct me if I’m wrong). They could just ask Mr. Wissmann from the VDA to talk to “Mutti” (Mrs. Merkel).

        But you’re right, “subsidy” might be wrong term for the tax treatment of cars in Germany. The point I wanted to make was
        that German carmakers benefit from the tax treatment of company
        cars, at least that’s the impression I have.
        Of course, one could argue that Germans just prefer German car brands, so it’s natural that many company cars in Germany are from VW, Audi, BMW, Mercedes-Benz. At the companies I worked at in Germany, the choice of cars as company cars was restricted to German brands. From what I oberserve in Germany, Audi A4, BMW 3 series and the MB E-Class are somehow the “default company car” in Germany. Some companies even openly advertise their vacant job positions with the prospect of getting a certain car. For instance, Lidl, a discount supermarket chain, offers to every university graduate who starts to work as “district manager” at Lidl an Audi A4 as company car.

      • 0 avatar
        Pch101

        In 2008, 60% of new registrations in Germany were company cars. Along with Sweden, this was the highest rate of company car registrations in Europe.

        The US has nothing even close to this. The tax system in the US does not generally favor company cars for employees on the payroll, and the car sales market in the US is largely oriented toward private buyers using their own after-tax income to make their own car purchases or leases, independently of their employers.

        In contrast, Copenhagen Economics estimated that the Germans subsidize company cars to the tune about 23 billion euro per year. Although the value of the car is taxed, paying the equivalent compensation in the form of additional salary would be taxed at a higher rate than the fringe benefit of the car.

  • avatar
    Roberto Esponja

    Hi Bertel,

    I hate to be a grammar nanny, but this sentence needs fixin\':

    “Earlier this year, Marchionne had called for a massive government intervention that would all automakers require to shed capacity…”

    • 0 avatar
      Dimwit

      Bela, is it possible to reformat your reply. With that URL embedded half your post is lost off the page.

    • 0 avatar
      NMGOM

      Roberto Esponja…

      I think that sentence should have read: “Earlier this year, Marchionne had called for a massive government intervention that would require all automakers to shed capacity”. In other words, the word, “require”, originally just got stuck in the wrong place…

      ————

  • avatar
    svan

    I hope the government laughs Sergio out of the room. Moral hazard, sucka. Deal with it.

  • avatar
    GTAm

    I’m willing to bet that Marchionne is going to get lots of concessions from the Italian government for staying put in Italy. These requests are the precursor, knowing that nothing will happen. The EU won’t be in a position to do anything with Germany vetoing anything that threatens their control of the region – EDS/BEA merger for example. Eventually Italy and France will have to do what is required to keep their industries alive. Fiat has not much to lose by exiting Italy. Just a 5% market share and a big loss. But Italy has a lot to lose. Jobs direct and indirect.

    I have no idea why some people aren’t happy with Marchionne getting Chrysler (reading some of the comments above). They seem to forget that no one apart from him wanted Chrysler even with sweetners.

  • avatar
    schmitt trigger

    “A TTAC “Bailout” definition primer:”

    Larry, excellent primer.
    All that it is missing is to replace the word “Brussels” with “Washington”.

  • avatar
    NMGOM

    I must say, I had been a fan of the flamboyant, folksy, sweater-wearing, conversational Sergio. And A fan of his good leadership at Chrysler, including the image building SRT Viper and new Ram 1500.

    But this has gone too far. For the EU to curtail FTA’s would fly in the face of its own desire for economic progress AND influence around the world. And it certainly represents a betrayal of Sergio’s public agreement with Mr. Winterkorn. And it would again burden the people in “rich states” that have efficiently running companies, requiring them to spend their taxes saving people in poor states with car companies that can’t do well. If that isn’t ever Communism, what is?….except here among states not people. The Germans are already going to carry the bulk of the financial burden trying to save Greece.
    You certainly don’t hear about great Italian car companies like Ferrari, Lamborghini, and Pagani crying for help, do you? Maybe Fiat should take a lesson from them and start making upscale, decent cars. “stroker49″ was right.

    If the destiny of VW is to rule Europe in the automotive realm, then so be it. (I can hear BMW and Mercedes screaming already.)
    If Fiat cannot survive on its own merits, then it needs to go under: so be it.
    Carrying dead wood does little other than hurt your back and make suitable kindling.

    And, no, I was not in favor of the GM-and-Chrysler “bailout” (as formulated: the structured bankruptcy should have reverted the component divisions back into their individual original companies, — then we could have some really good competition here.)

    ————

    • 0 avatar
      th009

      Ferrari is actually owned by Fiat, Lamborghini by Volkswagen. Given Pagani’s cars are handcrafted and priced in the millions, Fiat is really the only independent manufacturer/manufacturing group in Italy.

      • 0 avatar
        NMGOM

        Yup, thanks “th009″…

        Ferrari is “loosely” owned by Fiat (meaning they keep hands off, per agreement); Lambo is quite “tightly” owned by VW and even uses Audi parts; and Pagani is indeed independent, but you can still pick up a current Zonda F (not Huayra) for only €480K in Europe. (See price list).

        A few years ago, a Zonda F (NOT the “R”) would have been about $320K, but now the price has gone up to about $600K stateside. But it has a manual transmission, and Huayra does not! (See links: the YouTube video is fun!).

        http://www.youtube.com/watch?v=zIoFnfMhq_Y
        http://www.pagani.com/it/default.aspx
        http://en.wikipedia.org/wiki/Pagani_Zonda
        http://www.insideline.com/pagani/2012-pagani-huayra-first-look.html
        http://www.germancarforum.com/community/threads/the-pagani-zonda-f-price-list.6848/

        ===============


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