Fiat SpA, which expects to lose 700 million euros ($903 million) in Europe this year, will eliminate 1,500 jobs at its Polish operations to reduce production.

The cuts will come at a plant in Tychy as well as from sales staff in the country, the Turin, Italy-based carmaker said in a statement Friday.

Fiat will build fewer than 350,000 cars in 2012 in Poland, and less than 300,000 in the country next year, the company said. The European auto market is on track to hit a 17-year low in 2012. Fiat assembled 600,000 cars at the factory in 2009.

Chief Executive Officer Sergio Marchionne, who has been seeking a solution to European overcapacity, predicts demand in the region won’t recover until 2014 at the earliest. About 26 percent of European auto production capacity is surplus to the current demand, according to research firm IHS Automotive.

The Tychy plant has 5,800 workers and currently makes the Lancia Ypsilon, the Fiat 500, the old version of the Panda and Ford Motor Co.’s Ka city car. The factory is due to stop manufacturing the Panda in the coming months, Fiat said. Ford output won’t be affected and will be in line with market demand, a spokesman said in an email.

Marchionne, who is also the Chrysler Group LLC CEO, said in October that “everything is on the table” to raise capital to buy the Chrysler stake Fiat doesn’t already own.

“It’s simply easier to fire people in Poland at the moment than in Italy, where there are strong political headwinds,” said Frankfurt-based Commerzbank analyst Sascha Gommel, who has a hold rating on Fiat stock.

“They need to do more to increase their financial leverage so that they can buy the rest of Chrysler.”

Fiat, which last year moved production of the new Panda from Poland to Italy, doesn’t plan to further reduce jobs in Italy after shutting a plant in Sicily in 2011. The Italian carmaker says it will reach the break-even point in Europe in 2015 at the soonest as it begins selling more expensive models built at plants in Italy.

PSA Peugeot Citroen, Renault SA and Fiat, which don’t export from Europe to the same extent as their German rivals, are faced with a local market that’s about 20 percent below the 2007 peak.

The French government on Oct. 24 committed $9 billion in state credit guarantees to Peugeot’s finance unit to help prop up Europe’s second-largest automaker. In return, the government said it wants an “employment solution” for each of Peugeot’s workers, which may conflict with the company’s plans to close a plant in Aulnay, near Paris, and eliminate 8,000 jobs.

Ford has announced the furthest-reaching restructuring measures in the region, with plans to shutter two sites in the U.K. and one in Belgium to shed 5,700 jobs and 18 percent of its European capacity.

General Motors Co. plans to close its Bochum, Germany factory in 2016, and is cutting 2,600 jobs in the region by the end of the year. The Detroit-based carmaker, which anticipates a deficit of $1.5 billion to $1.8 billion in Europe this year, aims to break even there by 2015. 

(Bloomberg)