At Fiat Group's Annual General Meeting last Friday CEO Sergio Marchionne told assembled shareholders that the face of the automotive industry will change significantly in coming years due to the current recession which has hit demand for new cars but that Fiat is taking all the right steps to assure its position in the order that emerges.

Marchionne also restated the Fiat Group's target of posting a 1 billion euro trading profit (before exceptional items are taken into consideration) this year. "Notwithstanding the difficulties of the international economic situation, we are still confident to meet the target announced by the group for the entire year," he said. "We are convinced that, at the economic and global level, we have touched bottom."

Marchionne reaffirmed his stated view that there will be a raft of key mergers that will serve to change the industry's landscape in coming years and will leave just six car makers that can produce between 5 and 6 million vehicles a year, with a minimum of 1 million vehicles being derived from a platform. "To do this every automaker must adopt a Wal-Mart approach in the development and production phases and, at the same time, must be able to guarantee to customers a wide range of products," he added.

This process of consolidation in the auto industry has been forced by the global economic crisis which has seen car sales slump over the last year. "If the crisis had remained within controllable limits, the [Fiat's existing] strategy would have been sufficient. Today, evidently it is no longer the case," Marchionne commented.

He also expects to see more factory closures, particularly in Europe where production capacity far exceeds consumer demand. Given the projected lacklustre growth in volumes for the next five years, the chronic structural imbalance in our industry will become even more marked," he told shareholders, adding that "many factories will become redundant." Three Fiat factories, all located in Italy are presently under threat. The huge Mirafiori factory in Fiat's home town Turin has been reducing its capacity for many years and it currently builds an array of models including the Fiat Grande Punto and Alfa MiTo; it is threatened with closure. Also facing an uncertain future is the main Alfa Romeo plant Pomigliano d'Arco, near Naples, which assembles the Alfa 147, 159, 159 Sportwagon and GT; and the Termini Imerese factory on Sicily that builds the Lancia Ypsilon. Transportation costs of bringing components onto the island and taking the completed cars off again adds around 1,000 euros to the cost of a car and Fiat has made many attempts in recent years to close this plant.

Marchionne is however quite confident that Fiat can emerge from the recession in good shape, seeing the Chrysler alliance as highly beneficial, and that it can successfully refinance the unexpected 5 billion euros of debt that was flagged up in January when its 2008 annual report was released. "I hope that within the year we will obtain the sources of financing that will allow us to go ahead in the coming years without difficulty," he told shareholders.

He was critical of the decision taken recently by certain European governments to provide cash incentives to their domestic car industries, including France's 6 billion euro loan to Renault and PSA Peugeot-Citroën. Germany and the UK have also prepared emergency aid packages for their car makers. Marchionne described taking this option as a "very dangerous unilateral decision." In Italy the government has only gone as far as introducing incentives to scrap older vehicles, however Marchionne said that this decision is already working and has "unblocked the market and the market has seen a significant pick up in orders."