For the past three years, Sergio Marchionne has used the assets and resources of Italy's Fiat SpA F.MI -0.65%to turnaround Chrysler Group LLC.
Now, he's doing the reverse—employing Chrysler engineers, plants and dealers to help Fiat become a true global auto maker and break into the markets driving the future growth and profits in the auto industry.
Key to his ambitious plan is the relaunch of Fiat's sporty Alfa Romeo brand in the U.S. in 2014, starting with a new two-seater sportster and followed by an upscale sedan, called the Giulia, according to Fiat dealers who were briefed on the strategy at a private meeting earlier this month in Las Vegas.
Mr. Marchionne, the chief executive of Fiat and Chrysler, is hoping a big splash by Alfa in the U.S. market will serve as a springboard for China and other global markets, and help spur a surge in overseas sales to offset losses stemming from Fiat's exposure to Europe.
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CloseEverett Collection
The Alfa Romeo arrived in the U.S. in the 1950s. In 'The Graduate,' Dustin Hoffman drove an Alfa Romeo Spider 1600 Duetto.
."This is our opportunity to show the world that Fiat-Chrysler can achieve a level of greatness no one could have imagined just a few years ago," Mr. Marchionne said in Las Vegas, according to people who attended.
To boost its chances in the U.S., he told dealers future models would have brand-exclusive engines that rely on technology from Fiat's Maserati and Ferarri units, a bid to differentiate them from Chrysler cars and give them upscale credentials.
The new Alfa Romeos will be sold by Fiat franchises owned mainly by current Chrysler dealers, and the vehicles will be distributed in the U.S. by Chrysler. The first model will be built in Italy. But engineers at Chrysler's headquarters and proving grounds in Michigan are helping Fiat counterparts develop the second Alfa model, the Giulia. The Giulia will be built at a plant in Belvidere, Ill., where Chrysler assembles the Fiat-derived Dodge Dart, said a person with knowledge of the company's plans.
The models won't be priced until closer to the sale date.
Alfa Romeo first arrived in the U.S. in the 1950s, and enjoyed a moment of pop-culture fame when Dustin Hoffman drove an Alfa Romeo Spider 1600 Duetto in the movie "The Graduate." Fiat acquired Alfa Romeo in 1986, and in 1995, with U.S. sales sagging, it pulled the brand from the U.S.
Mr. Marchionne has been trying to boost Alfa Romeo's fortunes for several years and he originally hoped to return the brand to the U.S. this year. Europe's prolonged economic woes—auto sales are set to fall for a fifth year in a row this year—have undermined efforts. Sales of Alfa models declined 31% in the first half of 2012.
Alfa's U.S. rollout will do little to fix Fiat's biggest problem: a money-draining capacity glut at its idle Italian plants. Mr. Marchionne is expected to address the dilemma at the end of October. This week, however, he pledged not to close any of Fiat's main assembly plants in Italy after withering criticism from unions and politicians.
On Saturday, the Italian government promised to help Fiat make its Italian plants more competitive, with a goal of having them produce more vehicles for export to the U.S. and other overseas markets.
Few auto makers export cars from Europe because the euro's strength makes it difficult for them to maintain profit margins. Fiat expects to lose €700 million ($908.4 million) on its European operations this year. Because of profits from Chrysler and its Brazilian unit, it is still forecasting total operating profit of €3.5 billion.
Mr. Marchionne is trying to run Fiat and Chrysler as a single, global auto maker, sharing parts, designs and development efforts to cut costs and increase economies of scale.
Taking Alfa Romeo global, however, is a gamble. The U.S. and China are hypercompetitive and dominated by deep-pocketed competitors including Volkswagen AG, VOW.XE -0.76%General Motors Co. GM -0.55%and Toyota Motor Corp. TM -2.30%Nor will it be easy for Alfa Romeo to win luxury-car buyers loyal to BMW AG, BMW.XE +0.24%Mercedes-Benz and Lexus. Honda Motor Co.' HMC -2.36%s Acura and Nissan Motor Co.'s 7201.TO -0.15%Infiniti have tried for two decades and are still struggling in the U.S.
About half of Fiat's sales come from Europe and 35% from Brazil. Elsewhere, Fiat is a minor player. In the first half of 2012, total industry sales for the U.S. and China were than more than 14 million cars combined. In those markets, the world's two largest, Fiat sold just 43,800 vehicles.
That has long worried Mr. Marchionne. Even before Fiat took control of Chrysler in 2009, Mr. Marchionne often said Fiat could survive long term only as part of an auto group that produces at least six million vehicles a year. Last year, Fiat and Chrysler sold a combined 4.1 million cars.
In Las Vegas, Mr. Marchionne provided Chrysler dealers with a glimpse of the two Alfa Romeo models he's counting on to help drive sales higher down the road. The 4C sports car will kick off Alfa's return to the U.S., Mr. Marchionne told his audience.The Giulia sedan, which sported narrow, angular headlights, will follow later in 2014, he said.
"You can see they have vehicles like Audi and BMW in mind," said Brad Tonkin, a Portland, Ore., Fiat dealer who attended the event. His family's dealership sold Alfa Romeos from the late 1960s to mid-1990s.
Fiat dealers currently sell only one model—the Fiat 500 subcompact, built at a Chrysler plant in Mexico—and need additional models to reach sales level at which they can generate steady profits.
Enlarge Image
Close.Keith Martin, publisher of Sports Car Market magazine, said he and other Alfisti—Alfa Romeo enthusiasts—are eagerly awaiting the brand's U.S. return.
Asked if he would consider buying one of the new Alfas, he said: "I'd have to drive one and see if it speaks Alfa to me."
Write to Christina Rogers at christina.rogers@wsj.com and Gilles Castonguay at gilles.castonguay@dowjones.com
A version of this article appeared September 24, 2012, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Alfa Romeo Plots Return to America.
Now, he's doing the reverse—employing Chrysler engineers, plants and dealers to help Fiat become a true global auto maker and break into the markets driving the future growth and profits in the auto industry.
Key to his ambitious plan is the relaunch of Fiat's sporty Alfa Romeo brand in the U.S. in 2014, starting with a new two-seater sportster and followed by an upscale sedan, called the Giulia, according to Fiat dealers who were briefed on the strategy at a private meeting earlier this month in Las Vegas.
Mr. Marchionne, the chief executive of Fiat and Chrysler, is hoping a big splash by Alfa in the U.S. market will serve as a springboard for China and other global markets, and help spur a surge in overseas sales to offset losses stemming from Fiat's exposure to Europe.
Enlarge Image
CloseEverett Collection
The Alfa Romeo arrived in the U.S. in the 1950s. In 'The Graduate,' Dustin Hoffman drove an Alfa Romeo Spider 1600 Duetto.
."This is our opportunity to show the world that Fiat-Chrysler can achieve a level of greatness no one could have imagined just a few years ago," Mr. Marchionne said in Las Vegas, according to people who attended.
To boost its chances in the U.S., he told dealers future models would have brand-exclusive engines that rely on technology from Fiat's Maserati and Ferarri units, a bid to differentiate them from Chrysler cars and give them upscale credentials.
The new Alfa Romeos will be sold by Fiat franchises owned mainly by current Chrysler dealers, and the vehicles will be distributed in the U.S. by Chrysler. The first model will be built in Italy. But engineers at Chrysler's headquarters and proving grounds in Michigan are helping Fiat counterparts develop the second Alfa model, the Giulia. The Giulia will be built at a plant in Belvidere, Ill., where Chrysler assembles the Fiat-derived Dodge Dart, said a person with knowledge of the company's plans.
The models won't be priced until closer to the sale date.
Alfa Romeo first arrived in the U.S. in the 1950s, and enjoyed a moment of pop-culture fame when Dustin Hoffman drove an Alfa Romeo Spider 1600 Duetto in the movie "The Graduate." Fiat acquired Alfa Romeo in 1986, and in 1995, with U.S. sales sagging, it pulled the brand from the U.S.
Mr. Marchionne has been trying to boost Alfa Romeo's fortunes for several years and he originally hoped to return the brand to the U.S. this year. Europe's prolonged economic woes—auto sales are set to fall for a fifth year in a row this year—have undermined efforts. Sales of Alfa models declined 31% in the first half of 2012.
Alfa's U.S. rollout will do little to fix Fiat's biggest problem: a money-draining capacity glut at its idle Italian plants. Mr. Marchionne is expected to address the dilemma at the end of October. This week, however, he pledged not to close any of Fiat's main assembly plants in Italy after withering criticism from unions and politicians.
On Saturday, the Italian government promised to help Fiat make its Italian plants more competitive, with a goal of having them produce more vehicles for export to the U.S. and other overseas markets.
Few auto makers export cars from Europe because the euro's strength makes it difficult for them to maintain profit margins. Fiat expects to lose €700 million ($908.4 million) on its European operations this year. Because of profits from Chrysler and its Brazilian unit, it is still forecasting total operating profit of €3.5 billion.
Mr. Marchionne is trying to run Fiat and Chrysler as a single, global auto maker, sharing parts, designs and development efforts to cut costs and increase economies of scale.
Taking Alfa Romeo global, however, is a gamble. The U.S. and China are hypercompetitive and dominated by deep-pocketed competitors including Volkswagen AG, VOW.XE -0.76%General Motors Co. GM -0.55%and Toyota Motor Corp. TM -2.30%Nor will it be easy for Alfa Romeo to win luxury-car buyers loyal to BMW AG, BMW.XE +0.24%Mercedes-Benz and Lexus. Honda Motor Co.' HMC -2.36%s Acura and Nissan Motor Co.'s 7201.TO -0.15%Infiniti have tried for two decades and are still struggling in the U.S.
About half of Fiat's sales come from Europe and 35% from Brazil. Elsewhere, Fiat is a minor player. In the first half of 2012, total industry sales for the U.S. and China were than more than 14 million cars combined. In those markets, the world's two largest, Fiat sold just 43,800 vehicles.
That has long worried Mr. Marchionne. Even before Fiat took control of Chrysler in 2009, Mr. Marchionne often said Fiat could survive long term only as part of an auto group that produces at least six million vehicles a year. Last year, Fiat and Chrysler sold a combined 4.1 million cars.
In Las Vegas, Mr. Marchionne provided Chrysler dealers with a glimpse of the two Alfa Romeo models he's counting on to help drive sales higher down the road. The 4C sports car will kick off Alfa's return to the U.S., Mr. Marchionne told his audience.The Giulia sedan, which sported narrow, angular headlights, will follow later in 2014, he said.
"You can see they have vehicles like Audi and BMW in mind," said Brad Tonkin, a Portland, Ore., Fiat dealer who attended the event. His family's dealership sold Alfa Romeos from the late 1960s to mid-1990s.
Fiat dealers currently sell only one model—the Fiat 500 subcompact, built at a Chrysler plant in Mexico—and need additional models to reach sales level at which they can generate steady profits.
Enlarge Image
Close.Keith Martin, publisher of Sports Car Market magazine, said he and other Alfisti—Alfa Romeo enthusiasts—are eagerly awaiting the brand's U.S. return.
Asked if he would consider buying one of the new Alfas, he said: "I'd have to drive one and see if it speaks Alfa to me."
Write to Christina Rogers at christina.rogers@wsj.com and Gilles Castonguay at gilles.castonguay@dowjones.com
A version of this article appeared September 24, 2012, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Alfa Romeo Plots Return to America.
