Fiat scales back Lancia as brand is banished to Italy

In the 1950s and 1960s, luxurious Lancia coupes such as the Flaminia, pictured, went head-to-head with Jaguar and Maserati.
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MILAN (Bloomberg) -- Lancia, the Italian car brand that once glided up the streets of Saint-Tropez alongside Brigitte Bardot, has seen its last days on the French Riviera.

Fiat Chrysler Automobiles CEO Sergio Marchionne will reduce the nameplate within two years to a single model that will be sold only in Italy as part of plans completed after Fiat's merger with Chrysler Group.

With Fiat's global ambitions at stake, Lancia became expendable as its allure faded after cameos with the French sex symbol Bardot in the 1950s and 1960s.

"Marchionne is performing Lancia's final requiem," said Gianluca Spina, dean of Milan Polytechnic's business school. "It's a rational decision for a global carmaker. The brand has no appeal outside Italy."

To end losses in Europe and boost profit globally, Marchionne is expanding the range of upscale Alfa Romeo and Maserati models and rolling out Jeep vehicles worldwide. Even with 55 billion euros ($75 billion) budgeted for investments in the five-year plan, there wasn't money available to overhaul Lancia, which lacks name recognition outside Europe.

While the Italian brand once produced curvy roadsters such as the Aurelia Spider that appeared with Bardot in the 1956 film "And God Created Woman," it has been declining for decades. The marque's modern-day lineup was reduced to basic hatchbacks. An effort to revive demand by slapping the badge on Chrysler models failed, as Lancia's sales in the region tumbled 20 percent last year.

Just Ypsilon

By 2016, Lancia will consist of just the no-frills 12,650 euro Ypsilon subcompact, said a person familiar with the plan. Sales of the 23,890 euro Delta -- the only other model built exclusively for Lancia -- will end this year and the Voyager minivan next year, as Chrysler stops re-badging models for the brand, said the person, who asked not to be identified because the moves haven't been officially announced.

The Italian carmaker intends to invest in restyling the Ypsilon next year as the model has been one of the top sellers in Italy over the past decade.

Fiat declined to comment.

At a presentation of Fiat Chrysler's strategy earlier this month near Detroit, plans to limit Lancia to Italy were little more than an aside after six hours of discussions.

The brand is now grouped with Chrysler and Dodge in Europe, and Fiat expects them to sell 80,000 vehicles combined in 2018. That compares with about 75,000 deliveries for Lancia last year, little more than a rounding error for a group that intends to increase sales 61 percent to 7 million cars worldwide in five years.

Terminally ill

The modest target is a harsh about-face for Marchionne, who planned to boost Lancia's sales to 300,000 vehicles this year under a plan presented in 2010. Lancia's demise has angered fans. More than 3,000 of the so-called Lancisti signed an online petition to save the brand, which was founded in 1906 in Turin by Fiat racecar driver Vincenzo Lancia.

A Facebook page titled "Yes to Lancia, No to Marchionne" received almost 9,000 likes, while on Twitter "Occupy Lancia" sends messages to Fiat such as "Lancia will end Delta production: shame on you."

"I've been a Lancia fan since I was a kid and now I feel like I'm terminally ill," said Pierluigi Gallo, a 34-year-old from outside Milan who owns four Lancias and has memorabilia, including a coffee table made from the engine of a Beta coupe. "Only a miracle can save our brand."

Reducing a carmaker to a single vehicle line makes long-term survival a challenge. Even ultra-luxury brands such as Lamborghini and Rolls-Royce have multiple models, and Daimler partnered with Renault to help the German carmaker expand its Smart unit beyond the iconic two-seat microcar.

Short-term salvation

Aside from the challenges of a limited lineup, few brands can thrive a single market. General Motors Co. decided in December to end production at its Holden unit in Australia after 69 years.

Putting Lancia on life support, rather than shutting it down outright, helps Fiat keep its options open until other models hit the market to fill the gap, said Ian Fletcher, an analyst with IHS in London. "It looks like a tactical short-term move," said Fletcher. "Marchionne may wait for Alfa Romeo's strategy to yield its first results before killing the brand."

Lancia's decline stems from an inconsistent strategy that vacillated between the upscale and mass-market segments over the years. In the 1950s and 1960s, its luxurious coupes such as the Flaminia and Flavia went head-to-head with Jaguar and Maserati. In a testament to past glories, a 1928 Lancia Lambda tipo 221 won the Mille Miglia classic car race in Italy this month, beating an Alfa Romeo.

Richard Gere

After being acquired by Fiat in 1969, Lancia models veered between sporty hatchbacks like the Delta and big-box sedans such as the Thema. In the 1990s, the brand dipped down market with the Y compact. Fiat tried to reintroduce Bardot-like glamour into the brand by hiring actor Richard Gere and singer Carla Bruni to promote Lancia in commercials in recent years.

The linkup with Chrysler provided Lancia with another chance to widen its appeal. The merger of the two brands began in 2011, when Marchionne pulled the U.S. nameplate from continental Europe in favor of Lancia, which sold re-badged versions of the Chrysler 300 sedan, 200 convertible and Voyager minivan.

The new Lancia models were unveiled in the historic Carignano Theater in Turin. Still, the brand's focus on the European car market, which is slowly recovering from a six-year contraction, ended up being its downfall. And now the show's all but over.

"I'm still negative on Europe," Marchionne said at the May 6 presentation near Detroit. In Fiat-Chrysler's strategy, "unless we have certainty or quasi certainty of the recovery of our investment, we will not do it,” the CEO added.

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