Fiat Ponders Selling Alfa Romeo to VW

by David Kiley (RSS feed)
Dec 3rd 2010 at 8:02PM

While Sergio Marchionne, CEO of both Italian automaker Fiat and American automaker Chrysler, busies himself with fixing Chrysler and taking the mostly government-owned automaker into the public markets next year, he is wrestling with the dilemma of whether to sell Fiat's beloved, but money-losing, Alfa Romeo brand to Volkswagen.

The companies have been negotiating the possible sales, according to industry sources, confirming a report in Automotive News.

Volkswagen supervisory board chairman Ferdinand Piech has recently taken the unusual course of publicly stating that VW would like to buy Alfa, and that it believes as a company that it could turn the Italian brand around to profitability more easily than Fiat. That move was probably meant to inform industry analysts, and thus pressure Fiat to sell.

VW, of course, has made a business the last decade or more of collecting brands. Today, the VW Group includes not only VW, but Audi, Bentley, Lamborghini, Bugatti, Skoda, Seat and most recently, Porsche.

So far, Alfa Romeo has been Marchionne's biggest failure. The brand has not turned a profit in the past six years, and possibly for the past decade. Sales this year will barely surpass 120,000 units, nowhere near its goal of 300,000 units. That goal, most analysts agree, would be much more attainable with VW's distribution and resources than Fiat's.

In April, Marchionne announced a plan to boost Alfa sales to 500,000 units by 2014. But analysts are skeptical. Marchionne also has said he plans to sell the full Alfa line in the U.S. by 2012. The cost of making all the Alfas compliant with U.S. crash and emission standards is costly, and would likely delay that plan anyway. Currently, about 100 Alfas a year get sold in the U.S. through Maserati dealerships.

The selling price for Alfa would be btween 1.5 billion to 2 billion Euros, and the deal would leave Fiat Auto all but debt free, an enviable position. It would also take the annual $200 million to $300 million loss off Fiat's operating results.

The reason to keep Alfa Romeo is for future profits that could, it is argued, be produced by sharing engineering platforms emong Alfa, Chrysler and even Jeep. There is an idea that Afar Romeo cars, which are higher priced and pack bigger per-vehicle profits than Fiat vehicles, will contribute to Fiat's profit growth in the next five or six years and beyond as the company achieves greater integration among the two companies.

Take a look at the vehicles that comprise Alfa Romeo today, and could soon be part of the giant German automaker VW. It's not hard to see how Volkswagen would eventually combine its platforms with Alfa, developing the next generation VW Golf for example with the next generation Alfa Giulietta.

Gallery: Alfa Romeo On The Block

Tags: Alfa Romeo, Alfa Romeo 159, alfa romeo giulietta, alfa romeo spider, AlfaRomeoMito, chrysler, sergio marchionne, volkswagen

Filed under: Luxury Cars & Autos

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Reader Comments (Page 1 of 1)

Arthur Dec 4th 2010 3:54PM

Industry sources, eh? Who are these industry sources? I ask this because some industry sources claimed that Chrysler was going to be sold to GM years ago, and that hasn't happened. I recall reading that idea was considered, but it never happened. Bottom line, I'll wait for official confirmation from Marchionne when it comes to Alfa Romeo.

PCS Dec 11th 2010 3:13PM

Alfas are strange cars usually purchased by strange(eccentric?)people.This is my opinion as an auto tech for over 45 years.We had these at a new car dealer where I worked and they just didnt sell well.Lucky I was a Porsche/ Audi tech so I didnt have to work on them.