MILAN: Fiat Chrysler Automobiles (FCA) will launch the first of a new range of Alfa Romeo cars on Wednesday, the lynchpin of its turnaround plan and potentially an opportunity to attract a cash-rich merger partner. Chief Executive Sergio Marchionne is betting on the 105-year-old Alfa brand to help FCA take on German rivals BMW, Audi and Mercedes-Benz in the fast-growing and high-margin market for premium cars.
The new mid-sized sedan will have a six-cylinder engine derived from FCA's top-end Ferrari brand and will draw on Alfa's racing heritage to help it stand out against "boring German rivals," supplier sources told Reuters.
But Marchionne faces an uphill battle to convince drivers that Alfa has shed a reputation for poor quality and service, and to persuade investors he has the formula -- and money -- to succeed where previous relaunches have failed. The new Alfa and seven models expected to follow, including a sport-utility vehicle (SUV), will have to challenge well-established brands which are leaders in innovation and have the backing of financially strong parent companies.
In contrast, FCA is laden with debt, its margins are under pressure in its North American profit centre where demand appears to be nearing a peak, and it is also battling a steep downturn in another major market, Brazil.
"It's not impossible but it's a tall order and there is no margin for error," said Giacomo Mori, a managing director at advisory firm AlixPartners in Italy. "Alfa has to offer all the technology and perks that are a given in those German cars and something else."
Perhaps reflecting doubts over his ability to fund his 48-billion-euro ($54 billion) turnaround plan for FCA, Marchionne has recently stepped up a campaign to find a merger partner, and targeted General Motors (GM) in particular.
GM, which will be talking up a new Chevrolet line-up at a separate event on Wednesday, has so far spurned FCA's advances. But a strong Alfa revamp would give FCA more credibility in any future merger talks.
Bernstein analyst Max Warburton, who has an "underperform" rating on FCA shares, believes potential partners are the real audience the company will be targeting with the Alfa relaunch.
While the new car will probably "look great and boast huge power and performance we think it is still developed on the cheap, far from production ready and unlikely to sell in large quantities", he said.
"It is a high-stakes plan, aimed at building credibility with any potential acquirer of FCA."
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