Alfa faces product freeze under a review of the struggling brand
Luca Ciferri
Automotive News Europe
December 1, 2009 15:25 CET

TURIN -- Fiat S.p.A. could freeze new investment in Alfa Romeo under a strategic review of the money-losing brand ordered by CEO Sergio Marchionne.



A product freeze is one of two alternatives that Fiat is considering to end years of losses and declining sales at its sporty premium brand.

The other option is to refresh Alfa's lineup using Chrysler platforms to replace the aging Alfa 159 sedan and wagon and the discontinued 166 flagship sedan.

Alfa's new-car sales have declined steeply in the past decade as its range became older and new products were delayed.

Now it seems that Marchionne is losing patience with the struggling brand.

Marchionne has ordered a review of Alfa to find out whether to allow the marque a final rebirth through Fiat's alliance with Chrysler or to leave the brand as it is with no new substantial investments after the introduction of the Giulietta lower-medium car in 2010.

"We need to work a lot harder on Alfa to make an intelligent decision that effectively preserves the highest possible value to Fiat," Marchionne told Automotive News Europe in an interview at Fiat's headquarters here.

Too many reinventions

Marchionne said Alfa had undergone too many reinventions.

"We need to stop doing it. You cannot be a newborn Christian every four years. It's the same religion, eventually you need to own a religion and carry it to conclusion," he said.

The two options for Alfa are:

• Replacing the 159 with a D-segment sedan and the 166 with an E-segment sedan built in North America on Chrysler platforms, but unique to Alfa and sold by Alfa worldwide.

• Freezing investment in the brand after the 147 hatchback is replaced by the Giulietta. This means that the 166 will not be replaced, leaving the brand with the Giulietta and the MiTo, Alfa's first small car, as its only fresh models. The rest of the Alfa range -- the 159, the Brera coupe, the Spider and the GT coupe will continue to be sold.

Last year, Alfa sold 103,000 new cars compared with 203,000 in 2000. The brand has lost between 200 million and 400 million euros a year in the past 10 years, sources said. Fiat does not release separate financial results for any of its brands.

Marchionne said Fiat's alliance with Chrysler could allow a high level of commonality between Alfa and the Chrysler platforms for the replacement of the 159 and 166, which was discontinued in 2007.

"Certainly the availability of D and E segment (platforms) in the United States which are capable of being Alfa Romeoized is there. We need to look at the economics of that opportunity," Marchionne said.

No Alfa-Dodge merger

Marchionne is expected to announce the future of Alfa early next year, when the Italian automaker presents its 2010 to 2014 business plan.

"By then we will know a lot more about what those architectures in the U.S. are capable of doing for Alfa," Marchionne said.

He said Alfa will not integrate with Chrysler's Dodge brand, which has been speculated in some press reports.

"The heritage of the Alfa and Dodge brands is completely different, the DNA is completely different. We would lose a lot of the appeal of Alfa Romeo if we try to Americanize it through a merger with Dodge," Marchionne said.

Marchionne said he is pleased with the Mito, which was introduced in July 2008, and the Giulietta, which is due in March 2010.

These two new products "are going to do a lot in advancing the DNA and the quality of the (Alfa) brand," he said.

Past failures

Fiat tried to reinvent Alfa with the introduction of the 156 in 1997. The 156 was hailed as a great-looking car. It had a platform specific to Alfa and was a huge success. Sales peaked at almost 120,000 units in 2000, but the 156 did not lead to an Alfa turnaround because no truly successful products followed it.

The 156-based 147 hatchback got off a good start after its launch in 2000 with over 100,000 units sold from 2001 to 2003.

But the arrival of German premium offerings such as the new Audi A3 in 2003 and the BMW 1-series in 2004 hit sales, forcing Alfa to lower the 147 market positioning to rival the VW Golf, a move that failed to halt the 147's sales slide.

In 2005, Fiat tried another reinvention for Alfa with the 159, Brera and Spider range.

These cars were based on a new platform but were plagued by excessive weight and low quality that always kept sales well below initial expectations of 120,000 units a year.

Sales of the 159, Brera and Spider range peaked at almost 80,000 units in 2007.

FIAT a ingropat Alfa si acum nu stie pe unde sa scoata camasa . Vreti sa va dau eu un scenariu mult mai trist ? Nu , nu vreti si nici eu nu vreau . Numai ca imi bazaie nasol in minte cum suna Rover in chineza .

Un lucru destul de corect, daca dau bani de bmw/vag pe ea, vreau SA NU SE STRICE si sa scirtiie pe interior si sa se degradeze ca o bucata de carne la soare.

AR este mai atractiva sh decat noua

Other industry experts not a thousand miles away from Turin go even further and suggest that VW has been interested in Alfa Romeo for some time. Alfa Romeo could help reinvigorate VW’s underperforming Spanish brand Seat – which VW in the past said it wanted to transform into “a Mediterranean, emotional, sporting brand” like Alfa Romeo.

Mr Piëch is in buying mode and VW is on a roll. After Porsche and Suzuki and perhaps MAN, Alfa Romeo – if the Italian marque fails to perform to Mr Marchionne’s exacting standards – could also end up in two or three years’ time in VW’s fold. That would raise another interesting question.

Fiat S.p.A. CEO Sergio Marchionne outlined plans for the automakers' plants in Italy that he said would require hefty investments and labor flexibility. He confirmed auto production would stop at the Termini Imerese plant in Sicily in December 2011 and suggested production of its Panda small car could move to a plant in Pomigliano d'Arco plant, near Naples, southern Italy.
"Building the future Panda at Pomigliano would guarantee very high volumes ... (but) you are talking about a radical intervention which would require huge resources," Marchionne said Dec. 22.
Fiat produces 650,000 cars a year in Italy at its five plants, with 22,000 workers out of a total work force in the country of about 30,000, according to Marchionne's presentation.

The following are key details of Fiat's plans:

MIRAFIORI, Turin (Started producing in 1939)

Work force: 5,840

Production: about 178,000 vehicles in 2009

Current Models/Products: Fiat Punto, Idea, Multipla; Alfa Romeo MiTo; Lancia Musa.

Plans:

-- Cut production of Fiat Punto and Multipla

-- Add production of Fiat LO 5 seater, Fiat LO 7 seater

-- Reorganize plant to install a new production line

-- Improve logistics for component delivery

TERMINI IMERESE, Palermo (production started in 1970)

Work force: 1,400

Models/Products: Lancia Ypsilon

Plans:

-- End car production in December, 2011

GIAMBATTISTA VICO, Pomigliano, Naples (production started in 1968)

Work force: 5,200

Production: about 36,000 vehicles in 2009

Current Models/Products: Alfa Romeo 147, GT, 159 Berlina, 159 Sportwagon.

Plans:

-- Introduce Panda production, currently at 290,000 units

-- will cost "hundreds and hundreds of millions of euros"

-- will mean more temporary layoffs

-- needs investment of 40 million euros for retraining

-- "flexibility" in work force needed to meet demand changes

CASSINO, Frosinone (production started in 1972)

Work force: 4,300

Production: about 105,000 units in 2009

Models/Products: Fiat Croma, Bravo; Lancia Delta.

Plans:

-- Fiat Croma to end production

-- New Alfa Giulietta to be produced here

MELFI, Potenza (production started in 1993)

Work force: 5,280

Production: about 280,000 units in 2009

Current Models/Products: Fiat Grande Punto, Punto Evo.

Plans:

-- Both models to continue, but mix will shift toward newer Punto Evo