Sept. 30 (Bloomberg) -- European incentives to encourage consumers to buy more efficient cars could pose a risk to automakers and should be phased out gradually, Fiat SpA Chief Executive Officer Sergio Marchionne said.

“The EU has no reason to put the car market at risk,” Marchionne said today at a conference in Rome. European Union guidelines “do not take reality into account.”

Marchionne, who is also CEO of Chrysler Group LLC, said yesterday that regulators “need to allow for the system to adjust gradually until the markets recover.” Marchionne, speaking at the introduction of Fiat’s Punto Evo model in La Spezia, Italy, said that otherwise “you’re going to see a substantial drop in demand in 2010 and a phenomenal impact on production.”

Incentives to get consumers to buy fuel-efficient new cars and dispose of older models have improved CO2 emissions, Marchionne said in La Spezia.

The CEO has called for the continuation of government incentives across Europe to help keep car factories open and protect jobs. Incentives in Germany, where Fiat made gains against other European brands, ended last month. Decisions on similar programs in the U.K., Italy and France have yet to be taken.

‘Gradual Reduction’

“If it were me, I would be planning for a gradual reduction of incentives over 2010 and 2011,” Marchionne said.

He said he agrees with Italian Finance Minister Giulio Tremonti that scrapping incentives should be addressed with a European solution. If France and the U.K. continue to offer incentives, Italy shouldn’t hold back, he said.

Marchionne said today he “appreciates” Italian Prime Minister Silvio Berlusconi’s willingness to extend incentives “for this year and next.”

Automakers probably will build 17.7 million cars in Europe this year, or 10.4 million fewer than their factories are capable of churning out, according to IHS Global Insight. General Motors Co.’s European operations may use less than 62 percent of production capacity, according to a June estimate by the research firm.

Even with the incentives, utilization rates in Europe will probably fall 20 percentage points to a range of 60 percent to 65 percent by the end of 2009, Deutsche Bank AG analyst Jochen Gehrke said in a Sept. 11 report.

Punto Evo

Fiat’s Punto Evo, which goes on sale Oct. 10 in Italy, replaces the Grande Punto, which was introduced in 2005. The Punto hatchback, in 3- and 5-door versions, is Fiat’s best- selling model. Fiat brand CEO Lorenzo Sistino said he expects to sell more of the new Punto cars than the 310,000 to 315,000 a year it currently delivers.

The model will be offered with Fiat’s new Multi Air valve control technology that permits the reduction of consumption and emissions by at least 10 percent and by as much as 17 percent, Sistino said.

Marchionne said today the “most credible forecasts” are for European car sales to fall to 12.5 million units next year from an estimate of 13.5 million units this year.

Car sales in Italy could fall below 2 million units next year if government incentives to trade in older cars aren’t extended, he added.

Results In Line

The CEO said today that Fiat’s third-quarter results were in line with expectations, declining to give details.

Marchionne presented his strategy for Auburn Hills, Michigan-based Chrysler, in which Fiat has a 20 percent stake, to the board of the U.S. carmaker on Sept. 25. Marchionne said yesterday that the plan will be presented to the U.S. auto task force before the end of October. He added today that news on Chrysler’s profitability would be available in November.

Fiat will let a contract expire under which Magna International Inc. builds Chrysler vehicles in Europe and move that production to a factory in Italy, a Fiat spokesman said, confirming comments by Marchionne yesterday.

Fiat rose as much as 3.4 cents, or 0.8 percent, to 8.77 euros as of 1:55 p.m. in Milan trading. The Turin-based company has gained 91 percent this year.

To contact the reporter on this story: Sara Gay Forden in La Spezia, Italy via sforden@bloomberg.net

Last Updated: September 30, 2009 07:59 EDT