When Carlos Tavares was talking about the way brands carry passion after Fiat Chrysler Automobiles and the maker of Peugeot moved closer to a merger on Wednesday, he could have been talking about Alfa Romeo.
The FCA brand with the racing heritage, heart-pounding driving experience and Italian styling oozes passion, the kind of intangible Tavares, the man slated to become CEO of the new company, could have been thinking of when he was waxing poetic in a conference call Wednesday about the history and emotion of car brands.
That energetic spirit is even on display in the shape of a bright green Giulia romping along scenery-laden Italian streets in the latest Ryan Reynolds’ vehicle, “6 Underground.”
And yet, the ultimate place for Alfa, a brand with enough historical eye candy to fill an actual museum in Italy, seems to be a bit unclear.
In one of the final major events before Sergio Marchionne’s unexpected passing last year, FCA placed Alfa Romeo on a similar footing with its two most profitable brands, Jeep and Ram. The three, along with Maserati, were designated as FCA’s four global brands, with a mission to carry the company forward and in turn secure a larger share of investment than the likes of Dodge, Chrysler and Fiat.
But the year following the Capital Markets Day at FCA’s Balocco Proving Grounds in Italy, Alfa is shrinking from that dominant placement, and the company has signaled a less ambitious vision, scaling back planned vehicle launches amid a sales slump. Maserati has had its own struggles, but the company is continuing to bet on the brand, especially in the realm of high-performance electrification.
Through the end of the third quarter this year, U.S. Alfa sales from its three models — Giulia sedan, Stelvio SUV and 4C two-seater — were down 27%, to 13,347. That followed a clearly more promising 2018, which saw sales almost double the previous year to 23,820, thanks largely to a boost from Stelvio sales.
When journalists got a close-up view of the Stelvio in Nashville in June 2017, Reid Bigland, who was then head of Alfa but is now in charge of the Ram brand and U.S. sales for the company, predicted that the brand’s reintroduction to the U.S. market would be going well by now.
“It’s a brand that has been fundamentally absent from the U.S. for well over 20 years, and there’s still many people that have never heard of Alfa Romeo … and it just takes time, it takes time,” Bigland said then. “We’re looking to build great vehicles, great experience and be patient and not get into brand-eroding or vehicle-eroding value practices.”
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Despite vehicles that have often been cheered by driving enthusiasts in practically gushing terms even as their quirks and reliability raised questions, the company is clearly backing away from its earlier expectations for the brand.
In its third-quarter 2019 presentation, FCA noted Alfa’s challenges and said that the brand would focus on its current market strengths, “with reduced global reach and overlap with other group brands,” and that planned capital spending was being reduced. Currently, midcycle refreshes are planned for both Giulia and Stelvio in 2021 and two utility vehicles are planned in 2021 and 2022.
The 4C is out as is a planned 700-horsepower supercar.
Carla Bailo, president and CEO of the Center for Automotive Research in Ann Arbor, suggested the company simplify the Alfa portfolio and focus on understanding its target market. The brand’s prices — a Giulia might start at less than $40,000 but a Giulia Quadrifoglio will push the starting price over $74,000 — pose a challenge, too, she said.
Despite that, Bailo said she hopes the brand sticks around.
“The cars really are fabulous,” Bailo said.
Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions, said Alfa Romeo needs to be “relatively high volume” to compete with brands like BMW and Jaguar.
“The slow market acceptance of the Giulia and Stelvio have put the damper on the brand’s grand ambitions and FCA knows it will take billions of euros more to break into this market,” Fiorani said.
The brand’s best hope for needed investment could be the merger with PSA Groupe, or not, Fiorani said.
“Alfa Romeo fills a profitable niche that FCA needs. However, the billions it will take to round out its whole lineup would probably be too much for FCA to handle on its own. Possibly with the support of PSA, Alfa Romeo could remain in the market long enough to become a near luxury alternative to the more established brands. If the new company needs to reduce expenses, Alfa Romeo could be among the first things cut,” Fiorani said.
Contact Eric D. Lawrence: elawrence@freepress.com or (313) 223-4272. Follow him on Twitter: @_ericdlawrence.
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