Fiat will not survive without merger, says chief executive

Fiat's chief executive warned yesterday that Italy's leading industrial enterprise would be unable to survive on its own amid the crisis besetting the global car-making business.

Sergio Marchionne said he expected the industry to consolidate during the next couple of years, leaving only six companies to dominate the world market.

"You need [to sell] at least 5.5m to 6m cars [a year] to have a chance of making money," Marchionne was quoted in Automotive News Europe.

"Fiat is not even halfway there. So we need to aggregate, one way or another."

Fiat shares put on a sparkling performance yesterday, trading at €5.37, up 6% on the Milan bourse's Mibtel index. Some investors will have been tempted by the prospect of Fiat as a takeover target. Others, though, may have taken the view that Marchionne's remarks were calculated to persuade the Italian government to pour yet more taxpayers' money into the much-subsidised company.

The disappearance of Fiat as an independent firm would represent a devastating blow to Italian national pride.

The prime minister, Silvio Berlusconi, said in October that Europe should follow the US lead in extending loans to carmakers, but his enthusiasm has since been dampened by his finance minister, Giulio Tremonti. The government's inability to stimulate the economy is severely cramped by the interest it has to pay on its public debt - the world's third-largest.

Car makers producing more than 5m cars a year include Toyota, Volkswagen, Ford and Renault-Nissan.

Marchionne said he foresaw an industry made up of "one American house, one German, one French-Japanese, one in Japan, one in China and one other potential European player".

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