Marchionne said to plan first Alfa Romeo SUV as Fiat losses mount
MILAN (Bloomberg) -- Fiat Group plans to introduce the first Alfa Romeo SUV in the latest effort to transform the languishing nameplate into a global luxury brand to challenge Audi.
The SUV is slated to hit showrooms in 2015, said three people familiar with the matter, who asked not to be identified before a public announcement of the vehicle. The car, one of nine new Alfa models due to be rolled out over the next four years, is aimed at helping reach the brand's goal of tripling sales by 2016.
Alfa, a symbol of Italian auto styling and performance for decades, is the centerpiece of Fiat CEO Sergio Marchionne's strategy to end losses in Europe. Fiat's European turnaround plan calls for 16 upscale models to start production by 2016 at under-used assembly plants in Italy.
"Alfa is the only brand that can boost margins for the group," said Roberto Ferrari, owner of Fiat dealer Sprintauto, near Milan. If the right models get rolled out, "Alfa could become the Apple of the car industry. We just need our equivalent of the iPhone."
The new Alfa SUV, which could bolster a planned return to the United States this year after an absence of almost two decades, will be based on technology and parts used in the Dodge Dart, the people said. The model is set to be built at the Mirafiori plant near Fiat's headquarters in Turin, they added.
A Fiat representative declined to comment on the possible new car.
Fiat 2012 results
Alfa's image gives it potential to appeal to a global audience and charge higher prices for cars that share technology with mass-market models, lifting the group's profit like Audi does for Volkswagen.
Fiat's need for an Alfa revival may be evident on Wednesday, when the company releases 2012 results. Losses in Europe probably widened 49 percent to 743 million euros ($998 million), according to Kepler Capital Markets. Fiat doesn't break out Alfa results.
"Given Fiat's intention to maintain its production capacity in Italy, the new focus on the premium segment is probably the sole and best strategy," said Monica Bosio, an analyst at Intesa Sanpaolo in Milan. "But there's a very high risk" that the plan will fail.
The SUV will face tough competition. BMW, which already has four SUVs, is developing the new X4. Mercedes-Benz is also planning a compact SUV to add to its lineup. At the upper end, VW's Lamborghini and Bentley are both developing SUVs.
Fiat has said it needs to fix its European business before finalizing a planned merger with Chrysler Group. To show progress in the turnaround, Marchionne and Fiat Chairman John Elkann will inaugurate a factory on Wednesday in Grugliasco, northern Italy, home of the revamped Maserati Quattroporte.
Maserati and Chrysler's Jeep represent the other pillars of Marchionne's strategy to shift to higher-end cars. The goal is to reduce Fiat's reliance on Europe, where auto demand is headed for a sixth straight annual decline this year.
Total earnings before interest, taxes and one-time items, which Fiat calls trading profit, probably rose 57 percent to 3.75 billion euros on the first full year of contributions from Chrysler, according to a Bloomberg survey of 16 analyst estimates. Intesa's Bosio estimates that 3.03 billion euros came from Chrysler, which Fiat controls.
Fiat shares have risen 25 percent this year, to 4.72 euros, giving the company a market value of 5.9 billion euros.
Marchionne said in a Jan. 14 interview that Fiat may reduce its losses in Europe in 2013 as car sales in the region may start recovering by the end of the year.
Alfa carries most of the weight of the turnaround, with the company planning to invest 1 billion euros from 2012 to 2014 to transform Alfa into a global premium brand. Fiat Group is aiming for deliveries of more than 300,000 vehicles from Alfa by 2016, compared with 50,000 Maseratis by 2015.
Alfa's potential is based on an image stemming from luxury cars in the 1930s and racing success in the 1950s. The brand became part of pop culture when Dustin Hoffman drove a Duetto Spider in the film "The Graduate" in the 1960s.
The reputation hasn't translated into commercial success. A lack of recent investment in new models and little exposure to markets outside Europe caused sales to slump to 101,000 vehicles last year, about half the 2001 peak. Audi, which makes three SUVs, sold 1.45 million autos last year.
The 4C sports car, which will go on sale in Europe and the United States this year, marks the start of "the resurrection of Alfa," Marchionne told reporters this month in Detroit. The next steps in Alfa's turnaround include a full-sized sedan based on the Maserati Ghibli and the mid-sized Giulia sedan and wagon, which could be built at Fiat's Cassino plant near Rome, two of the people said.
A new version of the roadster featured in "The Graduate" will be made in Japan starting in 2015 in a partnership with Mazda Motor Corp.
Alfa showed an SUV concept in 2003 that was never built, and since taking over Fiat in 2004, Marchionne has twice failed to meet targets of selling more than 300,000 Alfas annually. In 2007, he said the target could be met in 2010, while three years ago, he aimed to increase sales to about 400,000 in 2013. Marchionne's latest effort could again fall short.
Researcher IHS Automotive predicts Alfa sales will rise to 231,300 cars by 2016, 23 percent shy of the CEO's target. "You always have to take Marchionne's forecast with a pinch of salt," said Ian Fletcher, an IHS analyst in London. "He has to find customers who will decide to leave Audi, BMW or Mercedes to drive an Alfa, which is a tremendous brand but it has to prove it will offer a complete lineup."Contact Automotive News