Global Economics

Lancia's Second Stylish Century


The elegant, high-end Fiat brand seemed destined to be a forgotten car. But new leadership and strong design have brought it back

When Sergio Marchionne was brought in as the chief executive officer of Fiat (FIA) in June, 2004, the group's historic high-end brand, Lancia, was badly lagging. It had only one model with relatively strong sales—and had few sales at all outside Italy.

Yet the brand had a distinguished hundred-year legacy of top-selling models, racing victories, and film roles. Moreover, Lancia was an icon of Italian design history. "I was bombarded with advice to close down the brand," says Marchionne, who notes that although Lancia lacked volume, its profit margins weren't bad. "It had elegance, it had history. Closing it without at least attempting to relaunch it would have been an enormous mistake." (For a look at some Lancia models from the past, see BusinessWeek.com, 4/06, "Return of the High-End Fiat")

TIME FOR REINVENTION.

So after urgent Fiat group financial restructuring and a push to produce winning models for the parent brand, Marchionne turned his attention to Lancia. There, he figured, Fiat would pull out all the stops in Italian design, leveraging the company's DNA and design-team skills and investing in sales.

He brought in designer Frank Stephenson, who was working at Ferrari following the successful remake of the Mini, and put him on the Lancia project. "I loved working for Ferrari; that's every designer's dream," says Stephenson, "but I love a challenge like this one."

Stephenson went to work reinventing Lancia's two top-sellers of the last 30 years: the Ypsilon and the Delta. The company has a century-old tradition of naming cars after letters in the Greek alphabet. (For a chat with Stephenson, see BusinessWeek.com, 1/16/06, "Fiat's Sexy Designs on Success").

FUELING THE TURNAROUND.

Lancia CEO Olivier François, meanwhile, implemented a new strategy for the company that included breaking into new markets such as Russia, Britain, and Japan. He also devised customer-pleasing extras such as a VIP assistance service, where the company makes house calls for routine checkups.

Now Lancia aims to increase sales from 120,000 vehicles a year to 300,000 in 2010, and raise the international portion over the same time from 20% to 40% of the total. The company also hopes to broaden Lancia's model mix, given that 65% of Lancia sales today are from the latest version of the Ypsilon. The brand's revival is contributing to a broader turnaround at Fiat (see BusinessWeek.com, 7/26/06, "Fiat's Comeback—Is It for Real?").

Another key part of François' strategy was brand communication, which had lapsed in recent decades. The challenge was to communicate to the world that a "diva" had returned. So the company picked an unusual location to unveil the new Delta concept car and begin its second century: Venice's gilt Teatro La Fenice, one of the most famous opera houses in Europe. In a spare-no-expenses gala show, Lancia celebrated its 100th birthday inside the recently renovated theater, with its very first model, the 1907 Alpha, rising out of the stage together with the 2008 Delta.

Marchionne has raised the curtain and brought back Fiat's diva. Now it remains to be seen in numbers whether the brand will make the encore worth waiting for.

To see the latest Lancias—and some beloved antique models—view the slide show.

Kline is a correspondent for BusinessWeek in Milan .

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