Fiat, Volkswagen & the Alfa Romeo Complexity

Fiat s.P.a. is busy tending its American offspring, attempting to ensure that its Chrysler, Jeep, Dodge and Ram brands have a secure footing going forward. That’s a tall order given the financial problems and its dearth of new products in recent years.

Sergio Marchionne, the workaholic brainchild and CEO behind Fiat and Chrysler has managed to gain hold of Chrysler without spending a single Italian lira, a feat made easier when the feds threatened Chrysler with extinction. But, Marchionne has several Italian brands to maintain including niche supercar brands Ferrari and Maserati, Lancia, Alfa Romeo and its namesake, Fiat.

We now know that General Motors had trouble maintaining eight domestic brands, tossing four in a bid to survive. Nine brands can be very difficult to maintain although Fiat’s plans seem to include matching Alfa Romeo to Chrysler and allowing Jeep and Dodge to tap Fiat for platforms and powertrains.

In recent days rumors of ten-brand Volkswagen Group interest in acquiring Alfa Romeo have surfaced with speculation being that VW wants the Italian brand to help it seize the No. 1 global automaker status from Toyota. In recent years as General Motors and Toyota have traded places as 1-2 automakers, Volkswagen sales have surged to where it is now a close third.

At present, Alfa Romeo produces just over 100,000 cars annually. That’s small potatoes, but Marchionne has said that he plans to increase that number five-fold within the next four years. Another tall order, but one he may be able to pull off if he reintroduces the brand to the U.S. market to sell alongside Fiat at select Chrysler Group dealerships.

Analysts are casting doubt that Fiat will be able to propel Alfa Romeo, but these same folks are saying that Volkswagen may be able to reach Marchionne’s goal and on time. Fiat isn’t awash in cash, while Volkswagen has money and plenty of it to burn.

Marchionne’s misgivings show that he is concerned what it would mean if Alfa Romeo left the Fiat Group fold. Chrysler would suddenly not have product available and would have to tap the Fiat brand for some of its models. Supposedly, Chrysler and Alfa Romeo are well down the road to sharing platforms and powertrains, an initiative threatened if VW acquires Alfa Romeo.

Here’s my solution: Fiat should sell Alfa Romeo to Volkswagen, but retain the right to sell the brand stateside as the exclusive distributor. In addition, Alfa Romeo and Chrysler would continue to collaborate on select products, while Volkswagen would tap Chrysler for its next generation Routan and perhaps gain access to some other models.

Does this sound far-fetched? Five years ago, maybe. But, today automakers are working together on various projects in a bid to cut costs and save their own necks. Fiat would get much needed cash, Chrysler would receive new product while Volkswagen would get a shot at automaker immortality by acquiring Alfa Romeo.

Across much of Europe and in some other markets Volkswagen and Fiat are fierce rivals, but that rivalry could be set aside just enough to allow Alfa Romeo to make a clean transfer to the German automaker.

Welcome, The Auto Writer Readers!

I announced on my The Auto Writer website on Thursday an important change which I am reiterating with you here: I’ve made Auto Trends my flagship automotive blog.

What this means is that this blog will be the beneficiary of my much more frequent updates, dispensing news daily — Monday through Friday. The Auto Writer, which I founded in February 2006 will stay around, but I’m turning it into a once weekly feature length article website.

Why the change? Because Auto Trends, founded by me in April 2008, has grown faster and it sits on its own URL. Though The Auto Writer continues to grow and shine, I’ve found that this site has the most promise of expanding in the months and, hopefully, years to come.

I’m still working out the details, but I’m thinking of including my full length car reviews on The Auto Writer while reserving all other news here. I may include a few new features here including some video clips and perhaps some job information.

What isn’t changing is this site’s emphasis: new models, concept cars & cool car stuff! I believe I’ve been hitting the first two categories spot on, but the third category needs some work. Gadgets are important part of the driving experience; I just need to find some and report about them to you.

I appreciate your stopping by here as well as on The Auto Writer. You can and probably do visit other car sites frequently (as I do) so I’m glad to have you here. Feel free to subscribe in order to keep up with the news.  Add your comments as you see fit.

Thanks again!

GM IPO Underscores Company’s Resolve

Quick! What unflattering label haunting General Motors is the company trying to lose? That would be Government Motors, a term coined by some following the Obama Administration-led bankruptcy filing on June 1, 2009.

Though GM quickly emerged from bankruptcy mere weeks later, their survival came at the expense of American and Canadian taxpayers whose governments poured more than $50 billion into the automaker in order to save it. Those monies plus a loan that has already been paid off by GM comprised a historic bail out of what still is one of the largest companies in the world.

Ever since restructuring, GM has been on a mad dash to remake itself and, apparently, is doing a good job of it. Cadillac, Buick, GMC and Chevrolet are the four remaining US brands with Saab sold and Hummer, Pontiac and Saturn retired. Of course, shareholders of the old GM have been left with worthless stock, seeing their once lofty investments turn to dust.

GM finds itself in a very uncomfortable position, thus its plan for an Initial Public Offering (IPO) of stock in order to raise $12-16 billion. On the one hand, the company is grateful that President Obama stepped in to save it. On the other hand, Obama’s poll ratings have tanked and this election cycle promises a power shift to the right.

Put off the IPO until next year and an emboldened Congress could put GM in an uncomfortable spotlight. GM is desperate to sell its cars and lose its government dependency label.  Though the IPO won’t erase that label entirely, it should help GM demonstrate that it is a private corporation and an important contributor to American (and Canadian) manufacturing.

GM also needs to get this stock offering going sooner rather than later as the economy threatens to retreat once again into a recession. The official unemployment figure is 9.5 percent, but that number does not include people who have stopped looking for work or others forced to work part-time until something better comes along.

GM also knows that the current 11 million annual U.S. car sales are a far cry from the 16-17 million units pushed in recent years, which means that the automaker must find a way to stay profitable with less. The automaker has proven that it is viable even during challenging times, an important edge GM does not want to lose.

GM stock, anyone?

Related Reading

Fortune: GM’s IPO: High Hopes and Deep Fears

The Wall Street Journal: Successful GM IPO Won’t Be Enough To Rev Up Entire Market