Fiat boss warns euro leaders are 'playing with fire'

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FIAT and Chrysler chief executive Sergio Marchionne has warned European leaders that they are "playing with fire" over a crisis that's left the car industry depressed about the prospect for sales in the region.

Marchionne, who is planning to complete a full merger between Fiat and Chrysler in 2014, said that sales in Europe over the next three years will be flat at best, as a wave of austerity sweeps across the continent.

"Europe is being called to task to solve a number of issues," Mr Marchionne said in Detroit on Tuesday. "If we don't reacquire the confidence of financial markets, the future of Europe is doubtful. We need to get serious. Really serious."

Europe's economic woes have been the one shadow over a Detroit motor show buoyed by a rebound in sales to American drivers and sustained demand in Asia.

Fiat, the company behind Alfa Romeo and Ferrari, saw sales drop 12pc to just under 900,000 in the first 11 months of 2011 compared with a year earlier.

"Making a forecast in this crisis is impossible," the Italian executive said. "We need to understand the uncertainty of the time we're living in."

The likelihood of a second recession in Europe has prompted speculation that some of the continent's biggest car makers may be forced to combine to cut costs, and better compete in an increasingly global market.

Marchionne said that there could potentially be a third partner for Fiat and Chrysler, but refused to be drawn on whether it could be with General Motor's Opel brand. "I obviously continue to watch the developments in Germany," he said.

Despite GM's public insistence that it has no intention of selling Opel, Europe's downturn has convinced many analysts that the region's industry will have to consolidate.