Marchionne Picks Over U.S. Wreckage to Build European Car Group

(Bloomberg) -- Fiat SpA Chief Executive Officer Sergio Marchionne is setting out to build a pan-European car company from the rubble of the U.S. auto industry.

The car industry is in turmoil, and Marchionne, the 56-year-old deputy chairman of UBS AG, says he sees opportunity. He’s taking over Chrysler LLC after a U.S.-arranged bankruptcy and seeking to incorporate units owned by General Motors Corp., including three European brands, Opel, Vauxhall and Saab, and some Latin American operations.

“The sector produces 90 million vehicles against a demand of 60 million,” Marchionne said in an interview yesterday. “This overcapacity has to be managed and the American approach proved to be very efficient,” he said, referring to the U.S. administration’s readiness to lend $23.9 billion to Chrysler and GM on the condition that they cut costs.

Blending automakers to gain scale and geographic scope has been tried before. Chrysler and Daimler AG split up after a decade together. Carlos Ghosn “has had a hard time running Renault and Nissan,” as CEO of the allied automakers, said Tom Stallkamp, a former Chrysler president who is now a managing partner at Ripplewood Holdings LLC.

“Chrysler is going to be a full-time job in itself,” said Stallkamp, who warned that financing such a sprawling company will be difficult. “On paper, this probably makes sense, numbers wise, but it’s a cultural and logistical nightmare to make it all work.”

New CEO

For Marchionne and Turin, Italy-based Fiat, it’s a chance to save Chrysler, rescue Saab and pick up Opel to assemble a 6.8-million vehicle per year auto company.

“Chrysler is on track to re-emerge from bankruptcy in 60 days,” he said. “I will become Chrysler CEO after that.” The idea has been discussed in meetings with the Treasury, he said.

Saab is another matter. The Swedish carmaker sought protection from creditors Feb. 20 after General Motors Corp. said it would sever ties with the unit by 2010 as part of its own reorganization.

“Saab is an interesting opportunity, the brand is, however, too small for the auto mass market,” Marchionne said. “We could combine Saab with another brand. In the U.S., there’s a Saab dealership network. It would be a pity to give that up.”

He has said that a global auto group needs 5.5 million to 6 million vehicles annually to have the economies of scale to compete.

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