Is there any stopping Volkswagen lately? The company weathered the global economic recessions brilliantly, benefiting from a stellar lineup and Cash-for-Clunkers programs in Europe.
With plans for a large expansion of the VW brand in the United States, the German automaker recently set a goal of becoming the world’s largest automaker. That goal appears to already be in sight.
Flush with cash, VW’s buying spree has continued unabated, with recent purchases of Italdesign, Karmann and the biggest of all, Porsche. The company recently expressed interest in Ferrari and rumors of a purchase of Alfa Romeo are surfacing yet again.
Automotive News reports that Fiat Chief Executive Officer Sergio Marchionne is seriously considering VW’s offer and is strategizing about the possibilities.
Fiat has been disappointed by its inability to make the brand successful – Alfa Romeo has been a consistent drag on the corporation’s bottom line for years. Furthermore, a significant investment of around $2 billion is needed for Alfa Romeo to truly compete in the global luxury marketplace.
Publicly at least, Fiat remains firmly in support of Alfa Romeo. Marchionne announced a plan recently to return Alfa to the U.S. We know, we’ve been hearing that for years – the date seems to be getting pushed farther and farther out. The plan includes boosting global sales to 500,000 units a year and launching five new Alfa Romeos between 2012 and 2014.
The brand reportedly needs to sell 300,000 units per year to become profitable, but is expected to log somewhere around 120,000 units for the year. Fiat has quite a task on its hands. VW’s interest in the brand shows the potential it has if it could ever get its act together. Many analysts have pegged Alfa Romeo as a strong competitor to Audi if it could get its lineup sorted out.
Perhaps now more than ever in recent history, Alfa Romeo has a chance at success by sharing platforms globally with Chrysler. Doing so would create greater economies of scale and save on development dollars, increasing corporate margins.
Rather than a drag, a resurgent Alfa Romeo would instead become a profit machine for Fiat, much like Audi is for VW. Thus, selling Alfa Romeo would be a short-term move to raise cash and cut losses. However, Fiat surrendering its stake in the luxury market is not a smart business decision in the long run.
At this point, we’d like to see Fiat attempt to make Alfa Romeo successful again. That plan sounds a lot better to us than having yet another storied brand gobbled up by VW.