Get big or die

By P.E.

ALFA ROMEO might have become another of the car brands tossed on the industry’s scrap heap. Instead, Sergio Marchionne, boss of Fiat Chrysler Automobiles (FCA), a carmaker, plans to invest €5 billion ($5.6 billion) in the historic marque. His aim is to turn out eight new models, in a bid to increase dramatically the premium brand’s global sales to 400,000 annually by 2018. The first of those, the all-new Giulia, was revealed in Milan this week, rolling onto a stage as Andrea Bocelli, an opera singer, belted out Nessun Dorma, the tear-jerking aria from Turandot.

Can the Alfa Romeo brand hit a high note or will it all end in tears? Mr Marchionne’s plan is ambitious. And it is one that has generated plenty of scepticism, partly as it depends heavily on the marque’s relaunch in America after a 20-year absence. “Brand rebuilding can take 15 to 20 years, and there are no indications that Alfa Romeo has any advantage for short-circuiting the process,” cautions IHS Automotive, a consulting firm.

FCA insists it can pull it off with a mix of sultry Italian styling, advanced technology and new engines developed by Ferrari. FCA hopes to make substantial profits by betting heavily on its fancy Italian brands, such as Alfa Romeo, Maserati and Ferrari, which it will soon spin off. As BMW and Daimler already demonstrate, the fat profits in the industry tend to come from the premium segment, not from mainstream brands like Fiat or Chrysler.

There may be another motive for Mr Marchionne’s push to revive Alfa. If the little brand proves to have a big future it could help enhance the broader appeal for FCA as it seeks a merger or alliance partner. Mr Marchionne is an active proponent of industry consolidation, though a proposed tie-up with General Motors (GM) has been openly rejected by that firm's management.

Without an industry partner, Mr Marchionne is clearly worried that the carmaker will not have the financial firepower to meet increasing stringent health and safety regulations, or to invest in cutting-edge technology such as its "car of the future" with alternative drive trains, connectivity and self-driving capabilities. Persuading GM, or indeed anyone else, that mega-mergers, which have a long history of failure in the car industry, are the answer will be far harder than re-establishing Alfa as a big-selling brand.