Fiat Chrysler Automobiles (FCA) launched the first of a new range of Alfa Romeo cars last month with a lot of fanfare and a huge social media following. This new Alfa Romeo is the catalyst to its turnaround plan and potentially an opportunity to attract a cash-rich merger partner. Chief Executive Sergio Marchionne is betting on the 105-year-old Alfa brand to help FCA take on German rivals BMW, Audi and Mercedes-Benz in the fast-growing and high-margin market for premium cars.
The new Alfa Romeo Giulia sedan will have a six-cylinder engine derived from FCA’s top-end Ferrari brand and will draw on Alfa’s racing heritage to help it stand out against “German rivals”. But Marchionne faces an uphill battle to convince drivers that Alfa has shed a reputation for poor quality and service, and to persuade investors he has the formula and money to succeed where previous relaunches have failed.
The new Alfa and seven models expected to follow, including a sport-utility vehicle (SUV), will have to challenge well-established brands which are leaders in innovation and have the backing of financially strong parent companies. In contrast, FCA is laden with debt, its margins are under pressure in its North American profit centre where demand appears to be nearing a peak, and it is also battling a steep downturn in another major market, Brazil.
“It’s not impossible but it’s a tall order and there is no margin for error”. “Alfa has to offer all the technology and perks that are a given in those German cars and something else.” Perhaps reflecting doubts over his ability to fund his 48-billion-euro turnaround plan for FCA, Marchionne has recently stepped up a campaign to find a merger partner, and targeted General Motors (GM) in particular.
