LITTLE ROCK — Fiat Chief Executive Officer Sergio Marchionne, rejecting overtures from Volkswagen, said Alfa Romeo isn’t for sale. That likely means at least two more years of depressed profit for the Italian company’s shareholders.
Fiat is losing about $416 million annually on the brand, estimated Max Warburton, a Sanford C. Bernstein analyst in London.
Marchionne, who said he needs to sell 300,000 Alfa Romeos a year for the brand to turn a profit, doesn’t expect to reach that goal until 2013. Alfa Romeo, which made its first model in 1910 and was withdrawn from the U.S. in 1995, is Fiat’s only entry in the volume section of the luxury auto market.
“Alfa Romeo is the only possibility for Marchionne to compete in the high-price segment,” said Marco Santino, a consultant in Rome at A.T. Kearney, which has worked for Fiat on supply-chain operations. “It’s a long-term project. In the short run, he has no chance of meeting the targets.”
Volkswagen, Europe’s largest carmaker, is interested in buying Alfa Romeo, supervisory board Chairman Ferdinand Piech said last month. Marchionne responded by saying he will rebuild the brand himself by developing new models and re-enteringthe U.S. His plan will be expensive, shareholders said.
“Fiat has to invest 2 billion euros [about $2.8 billion] to revamp Alfa,” said Wolfram Mrowetz, head of investment firm Alisei SIM in Milan, Italy. “I doubt Marchionne can wait for many years before deciding to sell.”
The company is spinning off its industrial operations to focus on automaking.
Marchionne aims to raise Alfa Romeo sales fivefold to 500,000 in 2014 by reintroducing the unit to the U.S. in late 2012 with the Giulia sedan and station wagon as well as a sport utility vehicle it’s building with Chrysler Group LLC, of which Fiat owns 20 percent. Fiat, which doesn’t disclose Alfa Romeo’s earnings, declined to discuss the unit’s finances.
Alfa Romeo, maker ofthe Duetto Spider driven by Dustin Hoffman in the film The Graduate, abandoned North America 15 years ago after sales in the region plunged to 565 cars. The current Fiat CEO targets 2014 U.S. deliveries of 85,000.
“Marchionne may get ahigher price from VW for Alfa Romeo in a couple of years after the new models hit a less depressed European market and enter the U.S.,” said Emanuele Oggioni, an analyst at Saint George Capital Management in Lugano, Switzerland.
Fiat, which outbid Ford Motor Co. in 1986 to buy Alfa Romeo from the Italian government, aims to position the brand between inexpensive Fiat models and the Ferrari and Maserati divisions selling supercars costing as much as $500,000.
Alfa Romeo plans to double deliveries in 2011 on demand for its Giulietta model introduced this year. Fiat received 30,000 orders through the end of September for the hatchback, which was unveiled in Geneva in March.
Fiat in January appointed Harald Wester, the automaker’s technology chief and CEO of the Maserati and Abarth brands, to remake Alfa Romeo. Among vehicles the carmaker plans to build is a midsize sedan.
“I need more models, but it would have been foolish to launch them in such a depressed market,” Marchionne said Oct. 1. “We can’t do it without Chrysler.”
Fiat and Alfa Romeo will “more than likely” be sold in the same U.S. showrooms when the brands are reintroduced, Marchionne has said.
Business, Pages 84 on 10/24/2010