Can Fiat&#x27s Makeover Increase Alfa Romeo?

Virtually a half-century in the past, Fiat’s (F:IM) Alfa Romeo brand grabbed the spotlight when its 1966 Spider Duetto served as the auto driven by the lovesick Dustin Hoffman in the movie The Graduate. Right now the Italian automaker hopes the public will yet again fall in really like with the now struggling nameplate—this time thanks to the star electrical power of sister manufacturers Ferrari and Jeep.

Fiat desires to scrap nearly all of Alfa Romeo’s existing lineup and produce a new line of premium-priced sedans and sport-utility autos that can get on the likes of BMW (BMW:GR) and Daimler’s (DAI:GR) Mercedes-Benz, men and women familiar with the plans mentioned. The models will commence to hit the market in 2016, and large-finish versions will be outfitted with motors created by Ferrari, the Fiat-owned supercar maker, mentioned the men and women, who asked not to be recognized because the discussions are personal. The revitalized brand would get a even more improve by sharing Jeep’s international dealer ne2rk.

Until now, Fiat Chief Executive Officer Sergio Marchionne’s promised turnaround of Alfa Romeo has been stalled. Considering that the executive took the reins at Fiat in 2004, Alfa Romeo’s yearly income have tumbled 56 %, to 74,000 vehicles. In 2012, Marchionne minimize the income target by forty % after Fiat’s investing freeze in Europe delayed new versions. With car demand in the area recovering and Fiat armed with a lot more resources due to the fact of its current takeover of Chrysler Group, it may possibly be now or by no means for the sporty brand.

“This is the last opportunity for Alfa Romeo,” says Giuseppe Berta, a organization professor at Bocconi University and the former head of Fiat’s archives. “Marchionne’s bet is a extended shot. To beat the German premium brand names, he demands to make Alfa exclusive. His very best chance is Ferrari engines and Italian design.”

The Italian producer is scheduled to make public its ideas for the auto brand in the course of a presentation on May possibly 6. In accordance to the folks with knowledge of the plans, which are still becoming finalized, Fiat is contemplating ditching the existing versions of Alfa Romeo’s MiTo and Giulietta hatchbacks, which accounted for 99 percent of sales final yr.

The revival of Alfa Romeo is a crucial component of Marchionne’s approach for the merged carmaker. Fiat managers say the allure of classics this kind of as the iconic Spider Duetto of the 1960s will give the Alfa Romeo brand the prospective to assist drive revenue for the parent firm in the same way that Audi (NSU:GR) does at Volkswagen (VOW:GR)—by commanding higher charges than mass-marketplace versions bearing the Chrysler, Dodge, or Fiat names. “We want to exploit Ferrari’s know-how for Alfa Romeo engines,” Marchionne explained in January. “It would be foolish not to.”

Fiat intends to roll out at least 6 Alfa versions in the next 5 many years, including 2 SUVs, to improve sales a lot more than 4fold, to 300,000 autos, in the course of that time, the folks explained. The underbodies of the automobiles will also be employed in Chrysler vehicles to spread development fees, they explained.

Fiat programs to sell Alfa Romeo versions through Jeep’s one,700 dealers outdoors North America, giving the brand a distribution ne2rk that greater competes with BMW’s 3,200 revenue outlets worldwide, the individuals said. Last 12 months 90 % of Alfas were offered in Europe, the place it has 1,200 of its one,400 dealerships globally.

The move is primarily based on the notion that each manufacturers appeal to customers seeking choices to mainstream autos and can coexist due to the fact there’s tiny likely that Jeep SUVs and overall performance-oriented Alfa Romeo cars will cannibalize each other. “The strategy to mix SUVs and sporty sedans in the very same showroom helps make sense,” says Ian Fletcher, an analyst with market place researcher IHS in London. “But success can not be taken for granted.” IHS forecasts Alfa Romeo revenue will peak in 2017 at 243,000 cars, 19 % beneath Marchionne’s purpose. Even now, that would be triple last year’s product sales and the highest amount of deliveries in much more than 10 years.

The growth would assist fill unused capacity at Fiat’s Italian factories, a primary supply of the company’s €520 million ($ 716 million) loss in Europe last yr. Marchionne expects Alfa Romeo to anchor a approach to construct upscale autos for worldwide export in Italy to return plants in the area to profitability.

The very first model in the new push will be a midsize sedan that will probably be named the Giulia, reviving a model title from the 1960s, and be assembled at Fiat’s Cassino factory close to Rome, the folks mentioned. The engines, versions of the V6 motors Ferrari created for Fiat’s exclusive Maserati brand, would be developed at websites in southern Italy, the folks stated. “Alfa Romeos have to be produced in Italy with an Italian powertrain,” Marchionne stated in March at the Geneva motor demonstrate. “Some factors belong to a spot, and Alfa belongs to Italy.”

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