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Fiat betting on bold new Alfa plans

Published: March 4, 2013 | 8:57 am
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Sergio Marchionne does not walk on water.

Nevertheless, it may require a miracle to pull off the Fiat chief’s latest gambit: Take his sporty Alfa Romeo brand global with more expensive models and triple its sales volume by 2016 – after years of losses.

To add extra spice to the challenge, which takes place as European car sales plummet to 17-year lows, the new Alfas will be built in Italy, where labour and material costs are far higher than in the United States, Asia or Eastern Europe.

The plan is however about far more than the fate of the Alfa brand. It represents Fiat’s only real hope of combating a collapse in its home market and breathing new life into idled factories. Should it fail, and the new cars flop, the company that Italians view as a cornerstone of their economy will have little choice but to put thousands of employees out of work and tip entire communities into turmoil.


Marchionne has form where ailing brands are concerned. The outgoing 60-year old has been widely hailed for his 2009 acquisition and subsequent turnaround of bankrupt US automaker Chrysler. However his announcement late last year of a strategic overhaul of the 103-year-old Alfa Romeo brand – which Fiat acquired in 1986 and has since failed to revive despite repeated attempts – has been greeted with scepticism.

“I wouldn’t write the plan off,” said Bernstein analyst Max Warburton, noting the Alfa brand’s resilience despite years of neglect. “But get it wrong, or find consumers aren’t interested, and it will be a financial catastrophe.”


Marchionne is betting on Alfa because he believes it can deliver the global profile that Fiat cannot and far greater sales volumes than Maserati.

Alfa’s overhaul comes with a €1 billion (11.8 billion) pricetag to pay for the introduction of five new models by 2016, and a revamp of the brand’s two existing compact cars.

Leading the project is the limited-edition 4C sports car, a compact two-seater which is due to make its public debut at the Geneva auto show on Tuesday and goes on sale later this year. US pricing is rumoured to be €50 000 – €60 000 (R590 00-R710 000).

The 4C, competing with the Porsche Cayman and Boxster, will be joined in 2015 by the Spider roadster, co-developed with Mazda and priced from less than €23 000 (R270 000), and a new sedan expected to share underpinnings with Chrysler and Ferrari-sourced engines with the new Maserati Ghibli.


Another weapon will be the Giulia, which will be unveiled in 2015 and the first mainstream Alfa model to be sold in the United States since it quit that market in 1995. The Giulia sedan and wagon will be followed in 2016 by replacements for the Giulietta and MiTo hatchbacks.

Marchionne believes this strategy will help Fiat raise Alfa’s annual sales to 300 000 cars by 2016. While that goal is down dramatically from a previous target of 500 000 cars by 2014, it still looks a stretch from the 92 000 Alfas sold in 2012 – the worst showing in more than 40 years – and the brand’s previous best of just over 200 000 sales in 2000.

Marchionne himself has said Alfa’s task will be difficult. The division has had six bosses since his own 2004 appointment, and none of them have been able to move the needle much.

An executive who ran Alfa less than a decade ago said: “I left Alfa because I couldn’t get the green light for a real product plan with the right cars for the right clients – who are now driving BMWs.

“It was clear to me there was a lack of resources. Alfa had become an empty box.”


European car demand is expected to contract even further this year, squeezing mass-market brands still harder between excess product and cut-throat pricing.

Marchionne is also up against luxury buyers’ preference for well-established German premium brands such as BMW and Audi, each of which sells around 1.5 million cars a year.

While Fiat has struggled to find cash for Alfa, its deep-pocketed rival Volkswagen has become the envy of the industry for its lengthy but sure-footed transformation of Audi from a dowdy also-ran to a high-tech cash cow.

The upscale Volkswagen brand’s rebirth may now serve as a role model for Alfa salespeople.

Chairman Ferdinand Piech has made no secret he thinks Alfa would be a good fit within the group’s expansive portfolio of brands, where it could benefit from their pooled vehicle architectures and technology. But Marchionne has refused to sell Alfa, and observers think he is unlikely to change his mind.

That’s because he sees Alfa as the lynchpin of his broader plan to boost European production by 800 000 cars a year. He expects Alfa to account for nearly 40 percent of that additional output, with many of those being higher-margin cars shipped to North America and other export markets.

Industry observers aren’t convinced the strategy will play out as the Fiat boss envisages.

“Moving Alfa away from the mass market is the biggest risk in Fiat’s turnaround plan” said a fund manager who owns Fiat stock. “Until now, all their plans for Alfa Romeo have fallen below target.”


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