Alfa-Bits: US Launch Delayed, Strategy Problems Arise

A report from Automotive News Europe [sub] says that Alfa-Romeo’s return to the US market has been delayed from late 2012 to 2013, as its parent company Fiat struggles to work out a satisfying turnaround strategy for the sporting brand. According to ANE’s sources,

In a presentation to bond holders held on March 29, [Fiat CEO Sergio] Marchionne showed a slide that said the Giulia sedan and wagon, which will replace the 159 sedan and Sportwagon, would be made in the United States starting in 2013. A year ago that slide, which was part of Fiat Group’s presentation of its five-year strategic plan, showed the Giulia models being built in Italy and debuting in North America in late 2012 as part of the brand’s return there. The Fiat spokesman now says the company still needs to decide where the make the Giulia.

Once again, Fiat finds itself torn between competing government backers. Should Fiat build the Giulia, which will be closely related to the replacement for the Chrysler 200 and Dodge Avenger, in the US (as a thank-you for receiving a bailed-out Chrysler) or in Italy (to keep jealous politicians and labor unions happy)? But it turns out that this isn’t even the extent of Alfa’s problems…

The Giulia’s delay is only partially due to Fiat’s political choice… the main reason is that “Sergio Marchionne is not satisfied with the design of the cars that will lead the brand’s comeback in the crucial market.” The report explains:

Alfa parent Fiat S.p.A. has pushed back the arrival of the Giulia models to mid-2013 from late 2012, the sources said. They blamed the delay on manufacturing and styling issues with the cars, adding that Marchionne was not pleased with proposals he has seen from Alfa’s creative team in Turin. A Fiat spokesman declined to comment when asked about the delay. Another factor slowing the Giulia’s launch, the sources said, is that Marchionne is not happy with the design proposals he’s seen from Chrysler’s U.S.-based stylists in Auburn Hills, Michigan, for the Giulia’s two siblings, the replacements for the Chrysler 200 and Dodge Avenger, which are due in 2013. The timing of the three mid-sized models is linked because they will share a platform, powertrains and major subsystems. Fiat owns 25 percent of Chrysler Group and is working to integrate the Italian and U.S. automakers.

On the one hand, this is fairly good news: having rushed the 200 into production as a stop-gap replacement for the much-maligned Sebring, it’s heartening to hear that Marchionne is taking the time to get its replacements right. After all, without a legitimate D-Segment competitor, neither Chrysler nor Dodge will ever regain their status as mainstream brands, and Alfa’s re-introduction to the US could yield little in the way of new volume. On the other hand, both Chrysler and Dodge need these models yesterday… and so does Alfa. ANE notes that, with the MiTo, Giulietta and 159, Alfa’s lineup has now been shrunk to Saab’s size. And it won’t get any new models until a C-segment crossover/SUV goes into production in late 2012.

With analysts estimating Alfa’s annual losses in the €200m+ range, the lack of forthcoming new products is raising serious questions about Alfa’s viability even in the short-to-middle term. Max Warburton of Bernstein Research notes

The Alfa plan looks more and more overambitious by the day. With just the Mito and Giulietta in the next few years, there’s probably not a robust enough platform of customers and dealers to power up to 500,000 units. Conquest sales in Europe and the U.S. will need to be massive to hit the target. Entering a new market means losing money for some year. And we all know conquest sales even in existing markets like Europe are horrendously expensive to achieve.

Meanwhile, Alfa’s volume ambitions must also be weighed against its enthusiast and brand-building ambitions. Alfa’s $60k+, 1,500-units-per-year Porsche Cayman-competitor, the 4C, could well be another money-loser for the brand, offering a Dallara-designed carbon-fiber tub construction at a price far lower than any other similarly-built car on the market. VW Chairman Ferdinand Piech has reportedly offered €800m for the Alfa brand, in order to wrap the 4C’s Italian styling around its turbo-flat-four “Baby Boxster,” an option that woud rid Fiat of a problem brand while complicating VW’s already-convoluted sports car strategy. But until Piech offers something closer to €2b for the brand, Fiat isn’t likely to bite. Which means Alfa’s future could remain up in the air for some time to come.