TURIN – Financial analysts strongly doubt Alfa Romeo will achieve Fiat S.p.A. CEO Sergio Marchionne's target of boosting annual sales above 500,000 by 2014 from 102,000 units last year.
They say the 100-year-old brand lacks the products, the global reach and the dealer network needed to achieve the goal.
If Alfa fails, it will be very difficult for Fiat's auto division to realize another important Marchionne-set 2014 target, which is to increase operating margin to between 4.1 percent and 5.1 percent of revenues from 1.8 percent last year.
”The potential of the (Alfa) brand is huge, but to multiply sales fivefold in five years they probably also will need to sell cars on the Moon and on Mars,” said Arndt Ellinghorst, global head of automotive research at Credit Suisse.
Massimo Vecchio, head of industry research at Mediobanca in Milan, agrees: ”Alfa plans to sell 85,000 units in the United States in 2014, therefore Fiat's plan really means it wants to boost sales in Europe from 100,000 units to more than 400,000. I do not see how they will be able to steal so many buyers from their German competitors.”
Alfa's rivals include BMW AG, Daimler AG's Mercedes-Benz brand and Volkswagen AG's Audi.
‘The right products'
The skepticism followed bullish comments made by Alfa Romeo CEO Harald J. Wester's at the Automotive News Europe Congress in Bilbao, Spain, last week.
Wester told the Congress that Alfa will reach its goal through a product offensive that includes the launch of six new models and two major face-lifts between now and 2014.
“In the past, you have heard Alfa promise such growth figures (See box, below), but this time we have the right conditions, the right products and the right synergies (with U.S. partner the Chrysler Group) to really get there,” Wester said.
Fiat Group took a 20 percent stake in Chrysler Group in June 2009.
Philippe Houchois, head of European auto research at UBS in London, said he applauds Fiat's efforts to rebuild the Alfa brand, but thinks the 500,000-unit target is “way too aggressive.”
“I just do not see the product to get there,” Houchois added. “And even if enough products could come, the dealer network is too weak.”
Mediobanca's Vecchio also wonders why Alfa believes the synergies with Chrysler will be better than synergies the brand had with General Motors and Saab 10 years ago.
Sporty and safe
Wester told the Congress that Alfa plans to appeal to a broader customer base by putting more emphasis on its comfort and safety offered by the sporty brand.
The Giulietta compact sedan, which went on sale this month in Italy, earned a top score of five stars in the closely watched EuroNCAP safety test. The car scored extremely well in protecting adults in the event of a crash and had a strong score in a category called “safety assist” because it offers standard electronic stability control and seat belt reminders.
Limited availability of the Giulietta will constrain Alfa's total global sales to about 120,000 units this year, Wester said. Alfa plans to boost global sales to 200,000 in 2011 and expects the Giulietta to account for half of that volume.