Alfa Romeo has been touted for years as the brand of the future. Is that future ever likely to materialise? Unless the Italians get their act together, Karl Ludvigsen has his doubts.
Go deeper with GlobalData
When I visited Fiat on a consulting assignment late in 1986, the company was mulling its options in the light of an offer by Ford to take over Alfa Romeo from the state holding company, IRI. The latter, then headed by none other than Romano Prodi, now the grande fromage of the EU Commission, was eager to rid its Finmeccanica arm of loss-making Alfa. Ford saw Alfa Romeo as an attractive way of riding a Trojan horse into the otherwise almost impenetrable Italian market. Although its offer was heavily ring-fenced with conditions, as a Ford friend told me later, the Blue Oval looked like the best candidate to take over Italy’s still-glamorous albeit underperforming maker of sporty cars.
“Should we buy Alfa Romeo?” That was the question a senior Fiat man asked me. My answer was unequivocal: “If you can buy Alfa, you have to buy it. Your greatest strength is your domination of your home market. There would be no greater risk to that domination than to let a foreign company — especially an American one — into Italy through an acquisition of Alfa. You have to do it, even if it’s more a defensive than an offensive move.” As we now know they did indeed acquire Alfa in November of 1986. Since then the saga of this once-great brand has been anything but encouraging.
Culture clash followed acquisition by Fiat
The acquisition was a culture clash of the first magnitude. Imagine Toyota acquiring Nissan? GM buying Ford? DaimlerChrysler scooping up BMW? Here were two great rivals in their home market, Alfa assuredly the minor player but very proud of his history and the prestige of its brand — perhaps too proud. The two had coexisted quasi-amicably until 1972, when Alfa Romeo aimed an Exocet into Fiat territory with its cheeky Alfasud small car, made in a factory near Naples that was built with taxpayers’ money by government-owned Alfa. Here, thought Fiat, not without reason, was unfair competition on its home ground. Though fraught with strikes and absenteeism, the Naples plant produced an attractive car conceived by Rudolf Hruska that was a lively domestic alternative to Fiats and an export success until rust ruined its reputation.
Alfa’s acquisition by Ford would have been benign by comparison. Having seized Alfa Romeo, Fiat immediately created a new company called Alfa-Lancia, forcibly marrying the Milan company with its long-time Turin rival, which Fiat had rescued from the breaker’s yard in October 1969. Famously there is no love lost between Turin and Milan; each has contempt for the other. And in naming the joint company Alfa-Lancia the proud Alfa Romeo name was mortifyingly subjugated (much like the erasing of Benz from DaimlerChrysler). When I braced senior Fiat people on this point — as I did — they feigned mystification. They were the conquerors; they could do as they liked.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataFiat Auto’s dynamic managing director, Vittorio Ghidella, was named chairman of Alfa-Lancia. In an interview he was scathing about Fiat’s new acquisition, briefing a reporter that it was ‘in serious trouble because of the strategic error of having attempted to enter the small-car market with its humble Alfasud,’ which ‘went against the image of power associated with Alfas for more than half a century. Alfa always sold well because of its exceptional performance and aggressive line until mistakes were made in recent years.’ Ghidella may indeed have been the man to put things right, engineering some commonality between Alfa Romeo and Lancia over and above the Type 4 project that created the 164 and Thema, but only two years later he was out of the Fiat group after a bitter internal clash over its allocation of resources.
Gorgeous 156 brought only temporary recovery
Missing the jet thrust of Ghidella, Alfa Romeo declined into the doldrums. Production had been just short of 200,000 in Fiat’s first year, 1987, and rose initially to 220-230,000 through 1990. Then it collapsed, tumbling to half that level in 1993, 1994 and 1996. New models based on Fiat platforms arrived, but with excruciating slowness. Only with the launch of the gorgeous 156 in 1997 did Alfa sales start to recover, with more than 200,000 made from 1999 through 2001. In 2002, however, output declined to 187,437 Alfas. Two thousand and three looks like being worse yet, with output down 5.3 percent on 2002 through November. This is hardly a success story under Fiat’s stewardship.
Most mortifying of all must be the negligible market success of Alfa Romeo’s prestige flagship, the 166. Its predecessor, the Enrico Fumia-styled 164, made a valiant effort to establish a place for Alfa in the executive-car market, selling a quarter-million over seven years, a decent annual average of 35,000. In contrast, the 166 is muddling along at annual volumes of 8,000 that Autocar called ‘pathetic’. When I saw its styling model several years before launch I though the 166 looked far too vague and flabby, and the final version was little better. Now it’s going to be facelifted, which Alfa hopes will double its sales. That’ll still be an order of magnitude less than the German rivals in its class.
Luxury cars? Italians don’t believe in them
I discussed this and the parallel problems of Lancia with a Roman friend who is highly knowledgeable in the field of auto design. ‘I think the reason that the Italians don’t do well with luxury cars is that they lack the necessary culture,’ he said. Italy has a flourishing culture in small cars and sports cars, segments in which it’s among the world’s best. But luxury cars? Italians just don’t believe in them. They’re heavily dutiable and an all-too-visible sign of wealth that attracts the tax man. Italy’s finest post-war effort in the luxury-car field, Lancia’s Flaminia, struggled vainly against these handicaps. Italy should be able to make outstanding executive cars; Lancia’s Thesis shows willing. But her designers and engineers lack a heartfelt commitment to this class of car. That they don’t like the people who drive them is all too obvious.
Another handicap for Alfa Romeo is the brand’s insularity. All but a handful of its cars are sold in Europe; the rest of the world doesn’t exist. Even at that the picture in Europe is not reassuring; Alfa Romeo’s share of Europe is a wafer-thin 1.14 percent, down from 2002’s 1.18 percent. A key market, Germany, has seen a steady decline from 2001’s 25,700 units to 19,000 in 2002 and 15,000 in 2003. It’s not easy to prevail in Germany against ‘noble’ Mercedes-Benz and BMW and ‘semi-noble’ Audi, as Jaguar has found, but with the right product Alfa Romeo has a brand that could succeed there.
Alfa in America is not a pretty story
The story of Alfa Romeo in North America is not a pretty one. A friend was an Alfa dealer in Cleveland; in the 1960s he went two years without cars and Milan didn’t seem to think that was anything out of the ordinary. Alfa relied on the fact that it had a core of dealers in America who were so dedicated to the marque that they would put up with anything, including indifferent quality and elusive parts supplies. Those days are long gone, of course, now that dealers have been badly spoiled by the Japanese. And the attitude of Alfa’s men in America didn’t help. ‘What’s the matter with these Americans?’ one grumbled to me in frustration. ‘Don’t they know this is an Alfa Romeo?’ No wonder most of them seemed to be bought by Italian-Americans. They knew what they were.
I breathed a big sigh of relief when I heard that the original plan to return Alfa Romeos to America in 2003 was postponed. In the wake of Fiat’s ‘strategic alliance’ with General Motors in 2000 the first signs were that Alfa would be back in jig time but with a minimal model range, a sure-fire recipe for disaster. It was likely too that Alfas would piggy-back on the GM dealer network, a concept that brought back memories of the ill-fated partnership between Chrysler and Alfa Romeo in the late 1980s. This was a vestige of the failed talks between Chrysler and Fiat Auto that had hoped to achieve an alliance. Against goals of selling up to 30,000 cars a year, the effort struggled to move 8,000. Alfa carried on alone and sold 414 cars in its final year in the States, 1995.
Now the plan is to return to America in 2007 with a full line of new cars that will be launched in Europe in 2005 and 2006. The goal will be annual sales in the 50-60,000 bracket, which should be enough to allow a small and focused network to survive. However, I’m very nervous about the mooted plan to give the Alfa Romeo franchise to Cadillac, Saab and Saturn dealers. Saab might have a fighting chance, but otherwise these are not dealerships that would attract people who’d consider an Alfa Romeo. If the new Alfa range is broad and deep enough-as it threatens to be-and if quality is at competitive levels, its dealers everywhere should be stand-alone outlets backed by people who understand the sporty-car market. They’re out there; whether they want to sign on for another exciting ride with Alfa Romeo remains to be seen.
Sad state of Arese
One of the saddest sights in Alfa Romeo’s universe is its plant at Arese outside Milan. Once an ultra-modern facility, it’s now moribund. Alfas have not been made there since 2000 and even Arese’s last production of multi-fuel Fiat Multiplas has been halted. Still on the site are Alfa’s magnificent museum and archive and its styling centre, where Walter da Silva established Alfa’s latest design direction before being lured away to Seat by Volkswagen. Most of the rest of the site has already been sold to a property developer, who’ll tear down the factory to make an ‘Alfa Business Park’ if and when the courts will let him.
Speaking of Walter da Silva reminds me that when I first met him he handed me his business card. Nowhere to be seen was the handsome Alfa Romeo badge. Alfa, like Jaguar in the bad old days of BL, has been relegated to a business unit. Since then some effort has been made to rediscover the brand’s soul. Alfa-Lancia is no more; Alfa Romeo is able to make decisions on its own. Leading that effort is Daniele Bandiera, who has been looking after the Alfa business unit since February 2002. A manufacturing engineer, Bandiera is well qualified to fight for the much higher level of quality that Alfa will need to achieve its goals. The prototypes it has shown, such as its own Kamal and 8C Competizione and Italdesign’s Brera, suggest that its new chief designer Wolfgang Egger is leading it in the right direction. A return to rear-wheel drive for the 167, successor to the 166, will be good news for serious Alfa drivers.
Daniele Bandiera must be looking over his shoulder at Luca di Montezemolo, who has made no secret of his interest in Alfa Romeo. The charismatic boss of Ferrari and Maserati envisions Alfa completing a hat trick of companies that would represent the very best of Italian design and engineering. The internationally minded di Montezemolo has forged a technological alliance with Audi that would be very beneficial if rolled out to Alfa as well. Maserati is already providing the power train for a production prototype of the sexsational 8C Competizione that will make its bow at Geneva in March. If priced as planned at £80,000 this sleek two-seat coupe would be a worthy flagship for a revitalised Alfa Romeo.
In this product-led industry, Alfa’s plans look good. Will they look good enough to attract the dealers that Alfa Romeo needs? The business unit is planning to invest 200 million euros in dealer development to lift its world-wide network from less than 1,000 dealer principals today to almost 1,100 in 2005. Much-needed upgrading of existing dealers is also on the cards, says Alfa sales chief Roberto Zuccato. He hopes to bring the network up to standard along with the cars. If he, Bandiera and Egger can achieve this, it will reward the commitment of the Agnellis to a former rival and bring a much-deserved boon to those of us who remember and respect Alfa Romeo’s salad days. It could even happen.
Karl Ludvigsen is an award-winning author, historian and consultant who has worked in senior positions for GM, Fiat and Ford. In the 1980s and 1990s he ran the London-based motor-industry management consultancy, Ludvigsen Associates. He is currently an independent consultant and the author of more than three dozen books about cars and the motor industry, including Creating the Customer-Driven Car Company.
