Smiles hide the strains between Europe's carmakers

Fri Sep 28, 2012 8:54am EDT
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By Jennifer Clark and Andreas Cremer

PARIS (Reuters) - Fiat and Volkswagen patched up some of their differences on Friday, with the Italian firm's boss staying on as head of the European carmakers' association, though tensions over pricing and capacity continue to simmer in a struggling car market.

A row between Fiat FIA.MI boss Sergio Marchionne and his Volkswagen (VOWG_p.DE: Quote) counterpart Martin Winterkorn broke out in July, underlining carmakers' diverging views on issues ranging from CO2 regulations and trade policy to, crucially, how to solve the long-running problem of excess production capacity.

Too many factories making too few cars has been hurting company profits in Europe, where competition is fierce and sales are falling as austerity keeps drivers away from showrooms.

Relations between German automakers and others are strained by their contrasting situations - with overcapacity concentrated among mid-market carmakers in France, Spain and Italy, while German carmakers benefit from higher-margin cars and exports.

Total European car sales fell 6.6 percent in the period from January to August. Within that, the Volkswagen (VW) group swelled its market share to 25 percent, compared with 11.9 percent for European number two PSA Peugeot Citroen (PEUP.PA: Quote) and 6.5 percent for the Fiat group.

At their height, the tensions between Fiat and VW saw the German group call for Marchionne to stand down as head of the European automakers' industry group ACEA.

Marchionne confirmed after an ACEA board meeting at the Paris auto show on Friday that he had not quit.

"We're good friends," he said, referring to Winterkorn as they embraced for a photo.   Continued...