Marchionne's Risky Gambit: Bet Everything On Alfa

Bertel Schmitt
by Bertel Schmitt
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“It may require a miracle to pull off the Fiat chief’s latest gambit,” Reuters writes. To get Fiat out of its rut, Sergio Marchionne has a risky plan: “Take his sporty Alfa Romeo brand global with more expensive models and triple its sales volume by 2016 – after years of losses.”

That plan, says Reuters, “represents Fiat’s only real hope of combating a collapse in its home market and breathing new life into idled factories.” What if it turns out as a bust? “Should it fail, and the new cars flop, the company that Italians view as a cornerstone of their economy will have little choice but to put thousands of employees out of work and tip entire communities into turmoil.”

Reuters and analysts are shaking their heads:

  • The new Alfas will be built in Italy, where labor and material costs are far higher than in the United States, Asia or Eastern Europe.
  • “Get it wrong, or find consumers aren’t interested, and it will be a financial catastrophe,” says Bernstein analyst Max Warburton.
  • Barclays Capital: “It’s not the first time we have heard an ambitious volume plan for Alfa, Volumes were supposed to be 400,000 in 2014 rather than the 70,000 that seems likely.”
  • LMC senior analyst Joseph Langley: “Alfa is going to have a fight on its hands in luring luxury buyers into its vehicles, Charging a premium and leaning on heritage is not enough in the highly competitive luxury segments, as Cadillac and Lincoln have experienced.”
Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Blowfish Blowfish on Mar 04, 2013

    lets hope sergio can pull this off and not the case of able was i ere i saw elba. perhaps he should cut making cars in the boot country. is like 20 yrs ago i looked at products amway pushes,they were 10-20% higher than buying them at a store. probably easier to tell my friends to support my coke habit!

  • Oldyak Oldyak on Mar 05, 2013

    There was a time when Alfa Romeo had the market in its hands... The Guila GTV era. In the middle to late 60s this car was the pinnacle of what a small european coupe could be! twin cam all aluminum engine with sodium cooled exhaust valves,5 speed trans.four wheel discs.excellent build quality..and a really cool cigarette lighter(u dropped the cig in the lighter and pressed down)an a host of other wonderful things I have forgotten..BUT not my first ride in one!! Find one REAL veteran enthusiast who hasn't owned one. All I want for Christmas is a MiTo.... Thanks for reading..if u bothered.

  • GTAm GTAm on Mar 05, 2013

    If a single model subcompact - Fiat 500 can sell close to 50k in the NAFTA region, I would say they can quite easily sell 150k Alfa sedans and hatch backs in the US considering the extensive Chrysler dealer network. In Europe they sold 92,000 cars in 2012 with just 02 models. If they have a fuller range 150k will be quite easy even in a weak market. That's 300k. China and Asia could easily take another 100k (just look at the volumes of China for premium cars). If at all the 300k target is conservative. Remember how lots of people panned the Fiat 500 in the US as a mega flop when the news first came? Remember how the analysts said that Fiat will not be able to turnaround Chrysler?

  • LDMAN1 LDMAN1 on Apr 09, 2013

    Sergio needs to sort out the existing dealer network first. In the US and EU I don't doubt that the Fiat or Maserati dealer network is relevant but in the rest of the world I would be that there are exclusive (as was the norm then) and dormant 20 year old Alfa Romeo contracts with moribund companies that will be very expensive to Alfa Romeo to break. Luca (De Meo) could not pull a return to America when he was in charge. I doubt that Fiat/Alfa Romeo's current management will be able to succeed. Launching new products is expensive. I don't think that Fiat has the money right now.