PREMIUM SEARCH Search by job title, geography and build a list of executive contacts
When General Motors Chairman John F. Smith Jr. announced 18 months ago that the world's largest auto maker would buy a 20% stake in troubled Fiat Auto, he revealed that the deal included a little surprise for the Italian company: Fiat's sporty and stylish Alfa Romeo will once again be sold in to the U.S., beginning in 2005. Alfa will export a completely redesigned version of its Spider two-seat convertible and, later that year, its 156 midsize sedan. The flagship 166 sedan should follow in 2006, Fiat execs say.
Well, give GM (GM
) and Fiat (FIA
) credit for being bold. The U.S. car market is already crowded, and the premium segment is no exception. Alfa Romeo will have to market its cars against the backdrop of the company's own history in the U.S., which includes a reputation for sharp-looking cars of shoddy quality. Says AutoPacific Vice-President James Hall: "They will have to completely remake the brand."
QUALITY CONTROL. That's why Fiat is moving methodically with the launch. First, the company will redesign cars for the U.S. market, rather than just foisting its European-style cars on American buyers. Next, Fiat executives aren't setting any lofty sales goals. "It's not easy to go back into the States with any brand, because the U.S. is a very competitive market," says Fiat Auto CEO Roberto Testore. "What we have to do is not run after big volumes."
Smart move. Alfa retreated from the U.S. in 1994 after sales tanked. Testore admits that Alfa Romeo's quality left a lot to be desired. And it didn't help that its cars were sold at Chrysler's Eagle dealerships. Chrysler, now DaimlerChrysler (DCX
), has since dropped the Eagle division. Using its dealerships "was not a good idea," says Giuseppe Perlo, Fiat Auto's vice-president for corporate development.
This time will be different. Fiat has been focusing on improving its quality in recent years. Alfa Romeos are now known in Europe for their sporty ride and handling, as well as sexy styling. "The product is great," says Ronald L. Zarrella, president of GM's North American Operations. The cars will likely be sold at dealerships linked with GM premium brands Saab and Cadillac.
WORLD BRAND. Fiat has big plans for Alfa Romeo. The North America reentry will give Fiat a presence in every major global market. The carmaker is also investing $10 million in a GM plant in Thailand to build Alfa Romeos for Asian markets. Fiat hopes to double worldwide Alfa sales, to 500,000 cars a year by 2008. That's part of the company's plan to boost its global auto sales a giant 60%, to 4 million cars annually by 2008, largely by expanding in emerging markets such as Asia and South America.
Those markets will be easier to conquer than the mature U.S. Even Alfa loyalists won't automatically buy the cars, says AutoPacific's Hall. Alfas are all front-wheel drive, while American luxury buyers tend toward rear-wheel or all-wheel drive. Is Testore worried? Hardly. "We sell Alfa all over the world." Including the U.S. in that claim will be easy enough. But making a big splash poses a major challenge.
By David Welch in Frankfurt Edited by Douglas Harbrecht
Get BusinessWeek directly on your desktop with our RSS feeds.
Add BusinessWeek news to your Web site with our headline feed.
Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.
To subscribe online to BusinessWeek magazine, please click here.
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
