Fiat SpA has rejected an offer from Volkswagen AG to buy Alfa Romeo. CEO Sergio Marchionne said that Alfa Romeo isn’t for sale. What this means is that the Italian company’s shareholders will have at least two more years of depressed profit.
Max Warburton, a Sanford C. Bernstein analyst in London, estimates that Fiat’s annual loss for the brand is about 300 million euros ($416 million). He predicts that Fiat will post earnings before interest and taxes this year of 1.77 billion euros, which are pushed up by Maserati and Ferrari sales.
Marchionne states that for the brand to turn a profit, at least 300,000 Alfa Romeos have to be sold in a year. He doesn’t believe that the brand will be able to reach this goal until 2013.
Alfa Romeo, which built its first model in 1910 and was withdrawn from the US in 1995, is Fiat’s only entry in the volume section of the luxury auto market.
Marco Santino, a consultant in Rome at A.T. Kearney, which has worked for Fiat on supply-chain operations, said that Alfa Romeo is the “only possibility for Marchionne to compete in the high-price segment.” Santino said that what Marchionne is up against is a “long-term project” and that there’s no possibility of hitting these targets “in the short run.”
Last month, supervisory board Chairman Ferdinand Piech said that Volkswagen, Europe’s largest carmaker, is interested in buying Alfa Romeo.
In response, Marchionne said that he will rebuild the brand himself by creating new models and entering the US market once again. Shareholders consider Marchionne’s plan to be very costly. [via Bloomberg]