FIAT CEO bets billions on Alfa and Maserati revival

Fiat CEO Sergio Marchionne is betting billions of euros that Alfa Romeo and Maserati will help drive the automaker’s money-losing European operations back into the black by 2015-2016. He’s also counting on the underperforming sporty brands to help ignite a production boom that will turn the company’s under-used European plants – particularly those in Italy – into export champions that will work around the clock to meet untapped global demand for models such as the Levante, Maserati’s first SUV.
Marchionne’s big gamble on Alfa and Maserati comes at a time when rivals such as PSA/Peugeot-Citroen are negotiating to close European car plants to adjust to shrinking demand and to end big financial loses in the region.
Marchionne has said for years that European volume automakers must make painful capacity reductions to become profitable in Europe again. Now the CEO has accepted that it is politically impossible for Fiat to close factories in Italy. To fully use the group’s underperforming Italian plants, Marchionne aims to increase Maserati’s annual sales to more than 50,000 by 2015 from about 6,000 last year, and he wants Alfa to triple sales to more over than 300,000 by 2016.
Boosting exports from Italy to global markets makes sense as the European new-car market has shrunk every year since peaking at 16 million units in 2007. New-car sales dipped 8 percent to 12.5 million in Europe last year and volume is forecast to slip below 12 million this year. Analysts don’t see a return to the pre-crisis sales level until the end of the decade at the soonest.
Marchionne is also wise to concentrate on the Fiat Group’s higher-end brands, especially considering the success of BMW, Audi and Mercedes-Benz. The three German premium automakers have avoided the European sales declines that have plagued most volume brands over the past few years. In addition, all three have added shifts or shortened vacation periods at their European plants in recent years to keep pace with strong demand for their models in countries such as China and the United States.
“We will focus on Alfa Romeo and Maserati to access the higher end of what we consider to be a permanently polarized market now,” Marchionne said last month.