Fiat’s boss painted a bleak picture of the Italian auto market but said the historic brand will stay in the country, amid union warnings that Italy’s top private sector employer is set to shed jobs.

Sergio Marchionne, who also heads US auto giant Chrysler, was responding to rising concern in Italy after Fiat last week said it would not stick to its previous investment targets and would unveil a new strategic plan next month.

“Fiat has accumulated losses of €700 million in Europe and is supporting these losses thanks to success in the US and emerging markets,” Marchionne said in an interview with La Repubblica daily.

Of the €3.5 billion in operating profit Fiat expects this year, none of it will come from Italy, where there has been a collapse in sales, he said.

Asked if he saw any light at the end of the tunnel, Marchionne responded: “I don’t see anything until 2014. That’s why investing in 2012 would be lethal.”

“I am trying to profit from the recovery of the American market, exploit it to the maximum, to attain the financial security that would allow me to protect the presence of Fiat in Italy and in Europe at this dramatic moment,” he said.

Marchionne over the past few years has forged a partnership with once-troubled US giant Chrysler, which is now propping up Fiat’s results.

But the chief executive’s orientation towards the US and his repeated barbs against Italy have sparked anger in Fiat’s heartland.