Europe's carmakers, desperate to beat the chronic overcapacity plaguing the industry, are seeking a pan-European fix to a problem that is eating away at profits and leaving them vulnerable to leaner overseas competitors.

European car industry association ACEA discussed how to intensify its lobbying efforts with the European Commission at a meeting in Geneva on Wednesday as car manufacturers' fears grow over the need to close plants in a withering car market.

We cannot continue endlessly deal with automotive issues at the national level, said ACEA Secretary General Ivan Hodac in an interview at the Geneva Auto Show. We need an EU-wide solution. But it is not easy.

Peugeot
Chief Executive Philippe Varin said he would support EU action to tackle the problem.

France's Peugeot has just sealed a deal with U.S. automaker General Motors targeting cost savings through production on shared platforms that it hopes will help it speed up international growth.

The alliance highlights the pressing overcapacity problem as well as workers' fears over mass job losses.

GM said on Tuesday that the two car makers would make their own decisions on sites, but the alliance would not cause any plants to close.

Varin, who formerly headed British steelmaker Corus, told reporters that Brussels should draw lessons from earlier successful intervention in that sector.

But any regional strategy, mirroring the pan-European structure of aerospace manufacturer EADS or the cross-border restructuring of the region's steel industry, would face fierce opposition from national governments as politicians jealously guard manufacturing jobs.

Europe's carmakers are battling stinging price competition in a region in which consumer spending power is stifled by austerity measures. Analysts and auto industry executives estimate the region has at least 20 percent too much car production capacity.

Adding to the manufacturers' woes, a free trade agreement with South Korea that took effect last July gave a boost to South Korean automakers' sales in the region.

South Korea exported 438,767 vehicles to the EU and imported 78,762 vehicles from the region in 2011, government data show. The ACEA is taking a tough line on possible upcoming free trade talks with India, Japan and the Mercosur.

If we continue opening borders without the possibility of having access to the other country's market it's a slippery slope, said Hodac, adding that ACEA would only support a trade agreement with India if it completely dropped its import tariffs.

The European lobby group has not yet tabled any sort of proposal for EU-wide labor measures, Hodac said, but has pressed commissioners hard for the EU to react to the increasing competitive pressure on European manufacturers in a series of meetings in recent days.

UBS analyst Philippe Houchois said: The EU traditionally has been a watchdog making sure that member states don't give unfair aid to struggling companies ... there could be an EU policy that acknowledges that downsizing would benefit the industry long term.

ACEA Chairman and Fiat chief executive Sergio Marchionne will discuss future trade agreements at a March 20 meeting with the EU trade commissioner, officials said in Geneva.

Marchionne said ACEA members had discussed overcapacity at Wednesday's meeting. We need to look at the entire overcapacity picture, he added.

Marchionne made the comparison with the steel industry. What would help is EU-wide relaxing rules for firing workers, making it less expensive, said one analyst who asked not to be identified.

It's an EU-level problem, because the EU put on a lot of C02 limits which increase costs and the EU negotiates trade agreements with Asian countries. So the EU could establish which factories need to be shut and then provide the funds.

This would sidestep the problem that such measures would be considered state aid if implemented on a national level, he added.

Not all the ACEA's members agree with the lobby group's call to arms, however.

I'm not at all calling for government aid, Bernhard Mattes, head of Ford's German operations said on Wednesday.

A restructuring of companies must be carried out by the companies, Mattes said.

Carlos Ghosn, chief executive of French carmaker Renault and its Japanese alliance partner Nissan Motor <7201.T>, meanwhile predicted the first European restructuring moves could open the floodgates to a rash of plant closures.

At the moment, all European carmakers have capacity problems, Ghosn said.

But the day somebody's able to restructure heavily in Europe, it's going to force all car makers to do it.

NATIONAL JOB WORRIES

The European auto industry has few tools at EU level that can help it deal with Europe's overcapacity problem and while ACEA may want a concerted approach, national governments are loath to cede control of such a key political issue.

British business secretary Vince Cable was at the auto show as part of a bid to save jobs in the struggling sector, his presence highlighting the sensitivity of threatened plant closures, which often mean the loss of thousands of jobs.

Britain got some good news, with Japan's Nissan Motor Co. <7201.T> pledging to build a new compact car in Sunderland, northeast England, but Cable was also due to meet GM bosses to try to convince them not to close the Vauxhall plant in Ellesmere Port in northwest England.

UBS's Houchois noted there was room for conflict between the EU and national governments on the issue.

Having said that, we've seen a change in governments willingness and ability to take action compared to before. Governments are less committed to supporting industry, he added.

The second analyst agreed: If the EU can do it for Greece, they can do it for the car industry, the analyst said. The main point is that they are starting to talk about it.

Hodac also said he had noted that the attitude in Brussels towards the auto industry was changing.

I am noticing more of a willingness to listen, he said.

(Additional reporting by Jan Schwartz, Andreas Cremer and Hyunjoo Jin; Writing by Helen Massy-Beresford; Editing by Chris Wickham and David Cowell)