Fiat CEO Sergio Marchionne warned that the euro single currency system could "go off the rails" unless European leaders effectively resolve the current debt crisis.
Marchionne, who also runs Chrysler, said the markets were showing little confidence in Europe's ability to draw a line under the crisis, which has spread to his homeland Italy after engulfing Greece, Ireland, Portugal and Spain.
"I think there is a possibility, if the wrong steps are taken, that the system goes off the rails," Marchionne told reporters at the Frankfurt auto show when asked about whether the survival of the euro single currency was at risk.
"The problems must be confronted in a serious way. It is not pleasant right now. We are not totally calm about this instability and the way in which the European crisis is being managed," he said.
Speaking about the European car market this year and next, Marchionne added: "It will be a difficult year in 2011, and 2012 will not be great unless we start giving certainties to financial markets, building a bit of confidence in the system that at the moment is lacking."
Marchionne said Italy, which is in the process of pushing through an unpopular austerity package to try to avoid being the next domino to fall in the debt crisis, was "risking it all".
"The world is watching us. I have met financial people here in Frankfurt, and they are all watching Italy and how the problems are resolved," he said.
"The important thing is to be totally credible at the international level."
Turning to possible alliances, Marchionne said Suzuki Motor , which is seeking to end its alliance with Volkswagen , could be an interesting partner for Fiat on the Asian markets, particularly China and India.
Fiat shares have lost nearly half of their value since the end of July, hit by a sell-off in Italian assets and concerns about a global economic slowdown.
Marchionne said he was still not cutting his 2011 forecasts for either Fiat or Chrysler sales and profits.
"For Chrysler, nothing changes; the forecasts I made in 2009 for 2011 and 2012 were modest," he said, reiterating a target for a $2 billion operating profit. He also confirmed his forecasts for total U.S. sales of 12.7 million units this year, and over 13 million next year.
Fiat's performance was also "in line" with his targets, he said, although European sales were "less than I expected … because of the heavy reliance on the Italian side. It's not an easy market, and it won't be an easy market in 2012."
Marchionne said that because of the turbulent financial markets, he was not in talks with the VEBA union trust fund, which holds a 41.5 percent stake in Chrysler, about how to cash in on that holding.
Fiat will own 58.5 percent by year end.
"With markets like these you can't do an IPO of anything. The market is closed, not just for VEBA but for everybody," Marchionne said.
