Europe automakers must cut capacity: Fiat chief

“If volumes stay where they are, I think if you took out 10 to 15 percent of the capacity, maybe 20 percent of the capacity in Europe,” it would result in a sustainable level of production, Marchionne told reporters late Wednesday.

Asked what his forecast is for European vehicle demand, Marchionne said he expects it to “stay flat through 2014.”

Such a dramatic reduction — which would require mass layoffs at a time when Europe is reeling from economic turmoil and has not yet resolved its crippling government debt problems — would be very difficult to achieve, he said.

“It's a tough discussion,” Marchionne said on the sidelines of the Automotive News World Congress in Detroit.

“I guarantee you're going to have some very negative reactions from industrial European countries to my suggestion.”

Fiat's Italian plants are currently operating at less than 60 percent capacity, a situation Marchionne said is untenable and is mirrored by other European automakers.

The Italian automaker reached a “historic” agreement with its labor unions last month that allowed Fiat to bring production of the Panda back to Italy from Poland.

“If the commitment is made by the trade unions, and if we are given an opportunity to effectively develop manufacturing infrastructure to the point where it can be competitive against international competitors, then I think we will continue to do that,” Marchionne told the press conference.

“If they keep on blocking the process — and I hope they do not — then I think Fiat will have no choice but to prepare reduce its footprint. It's for its own survival. We have zero choice.”

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