VW takes on Fiat boss over 'bloodbath'

Sergio Marchionne. Photo / AP

Volkswagen has threatened to leave the ACEA European car makers association in response to comments by Fiat boss Sergio Marchionne over rising tensions and falling sales in the industry as sales slump.

According to a New York Times report published at the weekend, Marchionne suggested VW's pricing strategy was creating a "bloodbath".

It said that executives, including Marchionne, also ACEA's president, accuse the German carmaker of exploiting the debt crisis to expand its market share.

The comments "show once again that Marchionne is not qualified to be ACEA president", VW spokesman, Stephan Gruehsem said, calling for his resignation. VW is also considering leaving the association itself, he said. The spat highlights the strained relationships in the European auto industry.

VW has reported record first-half profits, while Fiat and PSA Peugeot Citroen contend with rising European losses.

"VW continues to ramp up the pressure," said Max Warburton, an analyst with Sanford C. Bernstein. "Everyone in the industry comments on it and knows it. It may be ugly for those on the receiving end, but isn't this how free markets are supposed to work?"

Marchionne has needled VW before, suggesting German carmakers should do their share in closing excess capacity in Europe. VW, BMW and Daimler resisted European carmakers are extending discounts to attract dwindling buyers, with ACEA predicting sales will fall to a 17-year low this year. Berstein's Warburton said VW was using "super-normal" profits from China subsidise a price war in Europe.