Times of Oman
Nov 28, 2015 LAST UPDATED AT 01:16 AM GMT
Fiat Chrysler’s new lofty target for Alfa Romeo unrealistic, say experts
May 10, 2014 | 12:00 AM
Fiat Chrysler Automobiles, Alfa’s current owner, this week revealed a strategy for the sporty Italian brand to race from zero to 150,000 sales in just four years. Photo - Bloomberg file picture

Detroit: Actor Dustin Hoffman made Alfa Romeo trendy for Americans by driving a red Spider 1600 in the 1967 movie "The Graduate," but Alfa sales never took off in the North American market and the company ultimately pulled out.

Fiat Chrysler Automobiles, Alfa's current owner, this week revealed a strategy for the sporty Italian brand to race from zero to 150,000 sales in just four years. But industry experts, some citing the more than two decades it took Volkswagen's Audi brand to achieve that market level, say the plan is overly ambitious.

"It is mathematically possible for Alfa to sell 150,000 in North America by 2018, but so is winning the lottery," LMC Automotive analyst Jeff Schuster said.

Chief Executive Sergio Marchionne and his team revealed their strategy for Alfa Romeo on Tuesday as part of a five-year plan to establish Fiat Chrysler as a strong global automaker. But Fiat's shares fell so quickly on Wednesday that trading in them was suspended briefly.

Critics of the Alfa rejuvenation plan, including investors, industry analysts and bankers, cite concerns about distribution, the challenge of bringing eight new models to market in such a short time frame and the intense competition of the market.

4C sports coupe
This is not the first time Marchionne said Alfa was coming to the United States. In January 2013, he said "for sure" it would return that year with the 4C sports coupe.
The car is now expected to make it to the US market later this year, followed by a higher-volume model in late 2015.

Industry observers say Marchionne had better have his back-up plan ready. "One hundred fifty thousand sales; what's Lincoln doing this year? And they're trying," said a banker who asked not to be named, referring to Ford's luxury brand, which sold about 82,000 vehicles last year.

Fiat's plan depends on several elements that leave observers cold, starting with selling Alfa vehicles through Fiat show-rooms.

"Alfa will only work if it's got a dedicated facility or it is paired with another luxury brand," said Jim Ziegler, a US auto dealer consultant. "You can't have the same sales team selling $17,000 cars from one brand and $60,000 cars from another. It just doesn't work that way."

Fiat Chrysler is expected to sell Alfas at its best-performing Fiat dealers, as well as high-end Maserati dealers. Fiat dealers number 344 in North America, while Maserati locations total 91.

Harold Wester, CEO for Alfa and Maserati, raised eyebrows when he said eight new Alfa models would be introduced from late 2015 through 2018.

"They've got to develop in the space of four years an entire portfolio of vehicles," AutoTrends analyst Joseph Phillippi said. "That's a huge engineering challenge."

US luxury market
While the US luxury market is growing, the competition is fierce. Mirko Mikelic, senior portfolio manager for Clear Arc Capital, said it is hard to believe Alfa Romeo "will come in and start muscling out" rivals.

Among them are well-established brands such as Daimler's Mercedes-Benz and BMW, which are only making it tougher for competitors as they push down market to vehicles starting as low as $30,000, analysts and bankers say.

Alfa's planned North American return after leaving in 1996 was preceded by the re-introduction of Fiat in 2011. However, sales of the subcompact Fiat 500 have disappointed and Fiat dealers are struggling with only two models to sell. Fiat sales in the United States and Canada were about 51,000 last year.

In acknowledging that the company's overall plan for the 2014 to 2018 period is aggressive, Marchionne said he understood Wednesday's nearly 12 per cent drop in the stock price. "We've had a phenomenal run in 2014 ... and I am not surprised that people took some money off the table," he said.

Marchionne also said he can "pull the plug" on the plan to invest 5 billion euros ($7 billion) to remake Alfa.

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