FCA bets on new Giulia to revive the Alfa Romeo brand

Article by Andrew Christian, on June 25, 2015

The Giulia sedan – the first of a new lineup from Alfa Romeo – iwas launched by Fiat Chrysler Automobiles on June 24. FCA is banking on this car to jumpstart the brand’s turnaround plan and to open up opportunities to draw in a wealthy merger partner for FCA. Chief Executive Officer Sergio Marchionne is putting the Alfa brand in the center of its goal to surpass German competition BMW, Audi and Mercedes-Benz in the quickly expanding and profit-generating premium car market.

A Reuters report quoted supplier sources who said that the midsize Giulia will be equipped with a top-of-the-line six-cylinder engine based on FCA's top-end Ferrari brand and will take inspiration from Alfa's racing heritage so that it will stand out from a sea of “boring German rivals."

However, Marchionne will not have an easy time of convincing potential buyers that Alfa’s relaunch will succeed and won’t be burdened with its former reputation of offering poor service and quality. Bernstein analyst Max Warburton agrees with several industry observers who think that FCA is targeting potential partners as it revives Alfa.

Warburton said that FCA’s high-stakes plan is meant to boost its credibility as it hopes to attract a “potential acquirer of FCA.” He added that the new Giulia will most likely have a great look and boast impressive power and performance but it will be cheaply developed, won’t be ready for production, and will probably not sell in huge numbers.

The new lineup of Alfa, which consists of 8 models, will have to compete with brands that are well-established, innovation leaders, and are supported by financially strong parent firms. In comparison, FCA is debt-ridden and is feeling the pressure of the demand in North America nearing its peak. It also will have to deal with the sudden decline in Brazil, one of its major markets.

Giacomo Mori, a managing director at advisory firm AlixPartners in Italy, said that while it’s “not impossible,” it is a difficult challenge and the company has no room for error. Mori thinks that Alfa will have to provide all the features and technology offered in German cars as well as “something else.”

Recently, Marchionne has stepped up his campaign to land a merger partner. It’s likely that he is hesitating whether he can acquire the funds for his $54 billion turnaround plan for FCA. He has specifically named GM as a target. So far, GM has not responded to FCA’s invitation. But it’s believed that any future merger discussions will benefit from a successful Alfa revamp.

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