Rumors Persist about Volkswagen Acquisition of Alfa Romeo

Volkswagen AG is on an acquisition spree in its bid to dethrone Toyota Motor Corporation as the world’s No. 1 automaker. According to two VW executives who asked not to be identified, the German automaker is “seriously interested” in acquiring Fiat S.p.A.’s troubled Alfa Romeo brand.

Fiat, however, has other plans for the brand. Earlier this month, a top Fiat executive said, “We have no intention at all of selling the brand to VW.”

Last April, Fiat CEO Sergio Marchionne laid out the company’s strategy for reviving Alfa as part of its broader five-year plan.

Marchionne plans to add six new models to the Alfa line and to build it into a “full-line premium carmaker” with annual sales of 500,000 by 2014. In 2009, Alfa sales reached 102,000 units.

The rumors about Volkswagen’s interest in Alfa are in stark contrast with statements made by the company’s CEO, Martin Winterkorn, as recently as last spring. Speaking with reporters in April, Winterkorn said he admired the Alfa brand but that VW had no intention of adding another sports car brand to its group. Volkswagen is currently in the process of acquiring Porsche.

In 1998, VW purchased another Italian automaker, Lamborghini S.p.A. and acquired a 90% stake in the Italian design house, Italdesign Giugiaro, earlier this year. According to Winterkorn, “Our appetite for buying in Italy is fully satisfied.”

Despite Winterkorn’s statements, the acquisition of Alfa would appear to be a good fit. Two former Alfa executives have been recruited by VW in recent years. Walter de’ Silva is now the German automaker’s chief designer, and Luca De Meo serves as its head of marketing and VW’s chairman, Ferdinand Piech is a fan of the Italian brand.

As for Marchionne’s plans for the brand, there is widespread doubt that Alfa can reach his ambitious sales target of 500,000 annual sales. Credit Suisse’s global head of automotive research, Arndt Ellinghorst said,”Maybe Alfa could get to a half million unit sales a year, but only after the brand is sold to Volkswagen.”

Milan-based Mediobanca’s head of industry research, Massimo Vecchio, agrees. Vecchio said, ”Alfa plans to sell 85,000 units in the United States in 2014, therefore Fiat’s plan really means it wants to boost sales in Europe from 100,000 units to more than 400,000. I do not see how they will be able to steal so many buyers from their German competitors.”

Over the last decade, Alfa is estimated to have lost 200 to 400 million euros.

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