Fiat to cut investment in Europe by 500 million euros image

Fiat Spa (F), the Italian carmaker which controls Chrysler Group LLC, will cut investments in Europe by 500 million euros ($632 million), as the carmaker expects that the auto market won’t recover in the second half.

“The capital expenditure reduction is about half a billion euros from what we planned last year for 2012 in Europe,” Chief Executive Officer Sergio Marchionne said late yesterday in an interview in Madrid, where he’s heading the annual gathering of the European Automobile Manufacturers’ Association, or ACEA.

According to him, a recovery in Europe depends, among many factors, on Greece, the way the Euro currency continues and what Europe will do to sustain growth.

On Sunday, Greeks will vote for a new government in a plebiscite that is widely viewed as a referendum on whether their country should remain part of the European Union or withdraw. If the Greeks bail on the euro, many experts believe other struggling countries such as Spain and Portugal could quickly follow them out.

Europe’s car market will contract 7 percent this year, ACEA forecasts. At the same time, overcapacity in Western Europe may more than double to about 2 million vehicles in 2012 as sales fall for the fifth straight year, according to IHS Automotive.

Last week, Machionne urged the central government to interfere more openly in the matters of automobile industry and help the companies to lay extra labour off and close unprofitable factories and units.