Rumors that Volkswagen could buy Fiat's money-losing Alfa Romeo brand resurfaced this week. Why? Because it makes a lot of sense.
If I were Fiat CEO Sergio Marchionne, I would sell Alfa. Fiat has a terrible track record with Alfa, which it bought in 1986 -- not because it wanted the brand, but to prevent Ford from buying it and becoming a rival car producer to Fiat in Italy.
There has always been a bad chemistry between Fiat and Alfa. Fiat's mass-market focus does not sit well with Alfa's great history of technical innovation and extreme performance.
In nearly 25 years, Fiat has created only two truly successful models for Alfa, the 164 large sedan launched in 1987 and the 156 mid-sized sedan and wagon introduced 10 years later, so Fiat cannot truthfully claim it has properly cared for Alfa.
If I were VW Chairman Ferdinand Piech, I would rush to buy Alfa. About a decade ago, Piech repositioned VW group's Spanish brand Seat as an Alfa competitor, even hiring Alfa's design director, Walter de' Silva, to give Seat cars a new sporty look. De' Silva had created the 156 sedan, Europe's 1998 Car of the Year.
But VW has failed with Seat, just as Fiat has with Alfa. Both brands are chronic money losers.
If VW were to buy Alfa, Piech could turn Alfa, a brand he has often privately admitted he loves, into a serious rival to BMW and refocus Audi, his pet brand where he spent the early part of his legendary career, against Mercedes-Benz.
Currently, Audi has to fight both the sportiness of BMW cars and the luxury and comfort of Mercedes models.
The timing for VW to buy Alfa is ideal. Alfa has a two-year gap until its next new models, the 159 replacement and a new crossover, go on sale in late 2012. This would allow VW time to prepare its own Alfa range.
VW can easily afford Alfa with its cash pile that stood at 17.5 billion euros (about $22 billion) on June 30. Fiat could use the money since it is 3.7 billion euros in debt.
Italian pride might prevent a sale of Alfa to a German rival. Even Marchionne, who is only half Italian, would hate to see Alfa become successful under VW.
For Marchionne, a Chinese carmaker, such as Geely, Volvo's new owner, could be the best answer to the Alfa dilemma.
But VW's offer is the only one on the table. Marchionne should think twice before refusing it.