+++ Sergio Marchionne does not walk on water. Nevertheless, it may require a miracle to pull off the Fiat chief’s latest gambit: Take his sporty ALFA ROMEO brand global with more expensive models and triple its sales volume by 2016, after years of losses.
To add extra spice to the challenge, which takes place as European car sales plummet to 17-year-lows, the new Alfas will be built in Italy, where labor and material costs are far higher than in the United States, Asia or Eastern Europe. The plan is however about far more than the fate of the Alfa Romeo brand. It represents Fiat’s only real hope of combating a collapse in its home market and breathing new life into idled factories. Should it fail, and the new cars flop, the company that Italians view as a cornerstone of their economy will have little choice but to put thousands of employees out of work and tip entire communities into turmoil. Marchionne has form where ailing brands are concerned. The 60-year old has been widely hailed for his 2009 acquisition and subsequent turnaround of bankrupt U.S. automaker Chrysler. However his announcement late last year of a strategic overhaul of the 103-year-old Alfa Romeo brand (which Fiat acquired in 1986 and has since failed to revive despite repeated attempts) has been greeted with skepticism. “I wouldn’t write the plan off”, said Bernstein analyst Max Warburton, noting the Alfa brand’s resilience despite years of neglect. “But get it wrong, or find consumers aren’t interested, and it will be a financial catastrophe”. Marchionne is betting on Alfa Romeo because he believes it can deliver the global profile that Fiat cannot and far greater sales volumes than Maserati. Alfa Romeo’s overhaul comes with a 1 billion euro price tag to pay for the introduction of 5 new models by 2016, and a revamp of the brand’s 2 existing cars. Leading the project is the limited-edition 4C sports car, a compact 2-seater which makes its public debut at the Geneva auto show on Tuesday and goes on sale later this year. Pricing is rumored to be around 60,000 euros. The 4C, competing with the Porsche Cayman and Boxster, will be joined in 2015 by the Spider roadster, co-developed with Mazda and priced from less than 27,500 euro, and a new sedan expected to share underpinnings with Chrysler and Ferrari-sourced engines with the new Maserati Ghibli. Another weapon will be the Giulia, which will be unveiled in 2015 and the first mainstream Alfa Romeo model to be sold in the United States since it quit that market in 1995. The Giulia sedan and SW will be followed in 2016 by replacements for the Giulietta and MiTo. Marchionne believes this strategy will help Fiat raise Alfa Romeo’s annual sales to 300,000 cars by 2016. While that goal is down dramatically from a previous target of 500,000 cars by 2014, it still looks a stretch from the 92,000 Alfas sold in 2012 (the worst showing in more than 40 years) and the brand’s previous best of just over 200,000 sales in 2000. Barclays Capital is among those doubtful of the scheme. “It’s not the first time we have heard an ambitious volume plan for Alfa Romeo” the investment bank said in a recent note to investors. “Volumes were supposed to be 400,000 in 2014 rather than the 70,000 that seems likely”. The top global auto forecasting houses are equally unconvinced. IHS Automotive and LMC Automotive are projecting annual sales of around 230,000 Alfas by 2016. “Alfa Romeo is going to have a fight on its hands in luring luxury buyers into its vehicles”, said LMC senior analyst Joseph Langley. “Charging a premium and leaning on heritage is not enough in the highly competitive luxury segments, as Jaguar and Cadillac have experienced”. Marchionne himself has said Alfa Romeo’s task will be difficult. The division has had 6 bosses since his own 2004 appointment, and none of them have been able to move the needle much. “I left Alfa Romeo because I couldn’t get the green light for a real product plan with the right motors for the right clients … who are now driving BMWs”, said an executive who ran Alfa Romeo less than a decade ago. “It was clear to me there was a lack of resources. Alfa had become an empty box”. European car demand is expected to contract even further this year, squeezing mass-market brands still harder between excess product and cut-throat pricing, while a strong euro adds further complications. Marchionne is also up against luxury buyers’ preference for well-established German premium brands such as BMW and Audi, each of which sells around 1.5 million cars a year. While Fiat has struggled to find cash for Alfa, its deep-pocketed rival Volkswagen has become the envy of the industry for its lengthy but sure-footed transformation of Audi from a dowdy also-ran to a high-tech cash cow. The upscale VW brand’s rebirth may now serve as a role model for Alfa Romeo salespeople. VW Chairman Ferdinand Piech has made no secret he thinks Alfa would be a good fit within the group’s expansive portfolio of brands, where it could benefit from their pooled vehicle architectures and technology. But Marchionne has refused to sell Alfa Romeo, and observers think he is unlikely to change his mind. That’s because he sees Alfa as the lynchpin of his broader plan to boost European production by 800,000 cars a year. He expects Alfa to account for nearly 40 percent of that additional output, with many of those being higher-margin cars shipped to North America and other export markets. Industry observers aren’t convinced the strategy will play out as the Fiat boss envisages. “Moving Alfa Romeo away from the mass market is the biggest risk in Fiat’s turnaround plan” said a fund manager. “Until now, all their plans for Alfa Romeo have fallen below target”. +++
+++ The BMW i3 Concept Coupe, which was launched at the Los Angeles Motor Show last November, will make its European debut at the 2013 Geneva Motor Show alongside the i8 Concept Spyder. This time, though, the Bavarian carmaker is not dwelling on the concepts so much as on the eDrive technology that will form the nucleus of all models in its “i” sub-brand. According to BMW, all eDrive powertrains will comprise an electric motor, a lithium-ion battery and an “intelligent” management. Buyers will get their first taste in the production version of the i3, which will go on sale later this year. Having covered more than 20 million km in 10 countries since 2008 with over 1,000 “pilot” customers driving the BMW ActiveE and Mini E vehicles across 3 continents (Europe, Asia and the USA), BMW has fine-tuned its technology adding some range-enhancing solutions. The original target set by BMW was that typical commuting from home to the workplace and back would require charging the battery of the i3 all-electric city car only once every 2 to 3 days. The real-world trials showed that the i3 exceeds this goal, with a range of 130-160 km in such operation and is also able to cope “comfortably” with out-of-town journeys. That’s due to the high-voltage lithium-ion battery being less affected by temperature changes than comparable batteries as its “intelligent” heating/cooling system keeps it at an optimal operating temperature, improving performance, range and life expectancy. Other features, such as the cabin heating that operates on the heat pump principle and results in 30 percent savings in energy consumption, and the LED internal and external lighting, contribute to what BMW calls a “range security”. The i3 will offer 3 modes, named Comfort, Eco Pro and Eco Pro+. The internet-enabled navigation system utilizes a dynamic range display that takes into account which mode is selected at any time, as well as real-time traffic data, and displays two different versions of the range graph. It can also “suggest” that the driver changes to another mode, like the Eco Pro+ that’s 25 percent more efficient than the Comfort setting, when necessary, and show charging stations until the destination. BMW claims that, in “fast charging” mode, the battery of the i3 can be charged for an additional 120 km “in the time it takes to stop for a cup of coffee”, while an optional range extender than increases driving range to around 300 km will be available.. +++
+++ JAGUAR Land Rover is investigating an overhaul which would put an end to UK factories supplying parts to its Indian plants as the company looks to build on growth in emerging markets. The British luxury carmaker, owned by Indian carmaker Tata Motors, has ridden a wave of surging demand in China and other emerging markets to post record profits over the past year, and is “actively exploring the possibility” of building cars from scratch in India, one company source told. “The idea is being looked into, with the Jaguar XF and Land Rover Freelander the obvious candidates”, said another source with knowledge of the matter. The British brands, which already assemble 2 models in India using parts and engines shipped from factories in the UK, will also begin assembling its popular Evoque in the country soon, the first source said without providing details. Building cars in India, which has developed into an emerging market export hub for many global carmakers, would allow JLR to skirt high import taxes on luxury cars, which the country’s finance minister proposed raising to 100 percent from 75 percent in his budget speech last week. “Jaguar Land Rover has ambitious plans to expand its manufacturing footprint and increase production in markets outside Britain”, Del Sehmar, a Mumbai-based spokesman for the company, told Reuters. “We continue to examine options to expand our range of locally assembled products”, he said, referring to India. JLR will exhibit a new 9-speed automatic Evoque and an electric-powered version of its Land Rover Defender at the Geneva Motor Show. Bought by Tata for 1,7 billion euro from Ford in 2008, JLR has defied those sceptical of its future under Indian ownership to roar back into profit over the past 3 years as the main growth driver for its now-struggling parent. Continued growth in emerging markets such as India and China, which accounted for 22,3 percent of its sales in the December quarter, is key for JLR as it embarks on an expensive overhaul of its production and product clout. The carmaker is investing 1,5 billion euro with local partner Chery Automobile in a factory in China. JLR lags rivals BMW , Volkswagen, Audi and Daimler Mercedes-Benz in assembling cars in India, where the luxury market is expected to swell by around six times by 2020 to 300,000 cars a year, according to business consultancy Frost & Sullivan. JLR, with sleek saloons favoured by British prime ministers and luxury SUVs born of desert and jungle combat, has factories working around the clock in England to meet demand, bucking the trend of sluggish demand for European automakers. The company has repeatedly stressed that its overseas ambitions will not lead to job losses in Britain. JLR employed close to 24,000 people at the end of March last year. Earlier this year JLR started the assembly of the 2.2-litre diesel version of the Jaguar XF saloon at a plant in Pune, west India, tucked away in a corner of a sprawling production site where Tata builds its heavy duty trucks and hatchbacks. Screwed together using engines and components shipped from JLR’s Castle Bromwich plant in Birmingham, central England, the company has also been assembling its Freelander in Pune since May 2011. The XF and the Freelander are JLR’s best-selling models in India, where it sold 2,288 cars in the year to March 2012, up 157 percent from the previous year. The carmaker, which warned in January of negative free cash flow next year as it invests in production facilities, is also exploring the feasibility of a factory in Saudi Arabia. After the signing of a deal with JLR in December, the Saudi commerce and industry ministry said the 1,0 billion euro plant would start making vehicles by 2017. “At the moment, we’ve signed a letter of intent to do a study”, Kenneth Gregor, JLR chief financial officer, said last month. “That is and remains a study”. +++
+++ LAND ROVER has started work on a new entry-level SUV. The new model would be aimed primarily at ‘emerging markets’ such as India and China. Although the engineering work is taking place in the UK, a number of Tata engineers are said to be involved in the project. The car was described as the ‘smallest’ SUV yet from the company, and that it would have an engine of ‘around a 2.0-litre’ capacity. This project may well be the “white space product” described earlier this year by Land Rover design boss Gerry McGovern. He told that the vehicle would help push the brand into new markets. There’s no news on how it might look, but the DC100 concept could provide inspiration. This future model may also be built in India and use components which are substantially sourced from India. It would make sense that a new entry-level model, designed primarily to break into emerging markets, would be made locally. Indeed, JLR is thought to be planning to build a copy of its new Wolverhampton engine factory in India. The model could also be the basis of a three-way co-operation with owners Tata and Chinese partners Chery. The same basic platform and running gear could be used to underpin cheaper Tata and Chery SUVs, while the Land Rover version could be plusher and more upmarket. However, if Land Rover is pushing for serious volume growth, it could also re-export the car to Europe, where the market for entry-level SUVs is booming. Certainly, Land Rover and its dealers would benefit from a compact model priced against upper-end versions of the new Mini, whose line up is expected to include a proper SUV. +++
+++ New OPEL CEO Karl-Thomas Neumann is standing behind Opel’s restructuring. Neumann has seen the Drive 2022 plan and wants to implement it without major changes. Opel was the major contributor to parent General Motors’ 1.6 billio euro operating loss in Europe last year. GM wants to reach break-even in Europe by 2015/2016 and reduce fixed costs at Opel by about $500 million this year compared with 2012. An Opel spokesman said this will be achieved through a more thorough integration of financial services provider GMAC into GM, among other measures. Another key part of Drive 2022 is a new car-pricing structure for Opel. This will stop short of being an across-the-board change in pricing or brand positioning, the spokesman said. At the same time, more than 90 percent utilization of Opel’s factories is envisioned by 2022. This will probably not be feasible without closing vehicle production in Bochum, Germany. As a result, Neumann wants to persuade employees to grant concessions. According to the restructuring plan, vehicles sold in Europe will be manufactured in Europe whenever possible. The Mokka’s successor could be built in Eisenach, Germany, or Gliwice, Poland, instead of South Korea, the spokesman said, adding that no final decision has been made. On the other hand, there are “no European localization plans” for the U.S.-built Ampera or the South Korean-built Antara. In addition to growth in Russia, the plan’s third phase, Opel envisions an increase in the brand’s desirability by reaching the top5 in customer satisfaction surveys. Neumann is likely to be a tough enforcer of the Drive 22 plan. The 51-year-old electrical engineer does not bend easily, sources say. As CEO at Continental, Neumann’s youthful charm initially helped him with his major shareholder, Maria-Elisabeth Schaeffler. But he defied Schaeffler more than once over the supplier’s crushing debt and left in 2009. Neumann moved to Volkswagen, where he helped create vehicles such as the e-Up and the e-Golf and was seen as a possible successor to CEO Martin Winterkorn. In 2010 Neumann was named VW’s top China executive. But sources say he struggled while toiling far from headquarters. He was blamed for problems with transmission production in China, which his supporters say resulted from decisions made before he came. +++
+++ RENAULT and PSA (Peugeot-Citroen) will use the Geneva auto show as the launching pad for models that are forecast to go to the top of Europe’s fast-growing small SUV segment. Starting in 2014, the Peugeot 2008 and Renault Captur will rank No. 1 and No. 2 in the segment, dropping the current leader, the Nissan Juke, to third place, predicts analyst IHS Automotive. Meanwhile, Ford’s Geneva stand will include the EcoSport, which is expected to rank sixth in the small SUV segment in 2014. The models arrive at a crucial time for the three brands, all of which suffered double-digit European sales declines in both 2012 and the first month of 2013. Strong demand for the Opel/Vauxhal Mokka, which debuted last October, shows that small SUVs can help a brand reverse declining sales. Opel’s European sales were up 4 percent in January. The arrival of 4 all-new vehicles within a 12-month period is expected to boost small SUV sales in Europe to more than 500,000 by 2015 from 154,461 last year, according to IHS. “The sector has staying power”, senior analyst Ian Fletcher said in an interview. “Many customers love the thought of owning SUVs and cross-overs because of their high riding position and the perception of their off-road abilities. These vehicles offer this without fuel economy or CO2 pitfalls”. Fletcher said vehicles such as the 2008 and Captur will be a popular with car buyers looking for a change, but their decision to move to a different model will affect the French brands’ sales of the traditional hatchbacks. “There will be some cannibalization from other models in the brand”, he said. \”The 208, for example, is not a bad car but if a buyer is looking for something a bit different, the 2008 is probably perfect”. Unlike larger SUVs, the CO2 emissions for both the 2008 and Captur will start below 100 grams per kilometer, the automakers say. By comparison, the best CO2 result from the Peugeot 4007 is 189 gram/km while it is 166 gram/km for the compact-sized Renault Koleos. According to Renault, the Captur will offer the “expressive styling and driving position of an SUV with the cabin space and modular interior of a MPV”. Sales of Renault’s small MPV, the Modus, fell 37 percent last year to 30,315, which is why the automaker is replacing the Modus with the Captur. Other automakers will use Geneva to showcase their entries for the small SUV segment. Honda will unveil the Urban concept that previews a small SUV that is due to arrive in Europe next year. The car will be based on the Jazz. Another small SUV set to due in Europe in 2014 is the Fiat 500X, which will share its underpinnings with a new entry-level model for the Jeep brand. More rivals are due in 2015, including one from Volkswagen that will borrow from the Taigun concept the automaker showed last year in Brazil. IHS expects that Toyota, Mazda and Hyundai also will launch small SUVs by 2015. Despite the strong competition, IHS predicts the 2008 will remain No. 1 and the Captur will hold on to second place in European small SUV sales by 2016 with the VW entry at No. 3 followed by the Juke in fourth place and Hyundai’s model rounding out the top5. Interest in the sector is already strong today in Europe, where Opel/Vauxhall sold almost 5,500 Mokkas in January, according to figures from JATO Dynamics, with demand outstripping supply. “We will be supply constrained this year. We will probably have to close the order books for a while in the second quarter”, a Vauxhall spokesman said. The Mokka and its sister model, the Chevrolet Trax, are built in South Korea, which means “the pipeline is rather long, so that adds to the frustration”, the spokesman said. The automakers are counting on the small SUVs to appeal well beyond Europe. Peugeot will build the 2008 in Mulhouse, France, as well as in China and Brazil. “The 2008 is the Peugeot brand’s first model simultaneously designed from the outset by and for several geographies”, the automaker said in a statement in January. Peugeot plans to increase its sales outside of Europe to 50 percent by 2015, up from 33 percent in 2011. The Ford EcoSport first went on sale in Brazil and the model for Europe, which debuted in Barcelona last month, is very similar. Ford will announce production plans for the EcoSport at Geneva. Honda has announced it will sell its small SUV globally, including the United States, where the cars will come from Mexico. Honda has not named its production base for small SUVs sold in Europe, although its factory in Swindon, England, is one possibility. Another attraction of the sector is the chance to leverage the appeal of SUVs to increase profits. PSA has said the 2008 is one of its new models that “will contribute to the upmarket strategy in 2013” alongside the 208 GTI, 208 XY and the Citroen DS3 Cabrio. Along with the move upmarket, PSA is cutting jobs and closing a plant in France after burning through 3 billion euros in 2012. The Mokka is one of the models GM is counting on to lead a revival in Europe, where the automaker had a 1.6 billion euro operating loss last year. Ford also is struggling in Europe, where it estimates that its loss will widen to 1.7 billion euro this year from 1.6 billion euro in 2012. The potential for profits in the sector is also attracting smaller automakers. Qoros, backed by Chinese automaker Chery, will sell a model starting in 2015, IHS predicts. And Korean automaker SsangYong will show a small SUV concept this month in Geneva. +++
+++ TOYOTA aims to sell more cars in Europe this year and increase market share, in spite of what the head of the Japanese company’s European division says will be distinctly gloomy overall market conditions. Didier Leroy said in an interview that the company was planning to achieve a European market share of 4.8 per cent in 2013, above the comparable 4.5 per cent figure for 2012 and in a year when there will be further large falls in the total number of vehicles sold across the continent. Mr Leroy was speaking on the eve of the Geneva car show, a key event in which most of the world’s big carmakers are showing off their wares against the backdrop of plummeting profit margins and plant cuts in Europe. “In the first 2 months of the year, conditions across Europe for selling cars have continued to be extremely depressed, which makes me think the overall market for vehicles could fall 5-10 per cent this year”, Mr Leroy said. Toyota has increased the efficiency of the company’s production and sales operations across the continent plus intrdouced a new line-up of cars from its European and Japanese plants. “We have been achieving good results in Europe in spite of the difficult conditions partly because we have a new set of cars that look more exciting and appeal to the emotions”, Mr Leroy said. Despite Toyota last year being the world’s biggest carmaker by volume, it has struggled to gain the same foothold in vehicle sales in Europe to match its achievements in Japan and the US. In 2007 (prior to the global financial crisis) Toyota gained a market share in Europe of 5.6 per cent, its highest ever. But then over the next few years it lost ground, with the market share falling to 4.2 per cent in 2011. In the 4 years between the start of 2007 and the end of 2010 the company chalked up cumulative operating losses of some Â€1bn in its European division. According to Mr Leroy, the weaknesses in earnings have been addressed and last year the European arm of the company made an operating profit of more than 100 million euro. “There is no point in targeting a better market share if the company is making losses”, Mr Leroy said. He hopes Toyota would sell about 850,000 cars in Europe this year, up from 838,000 in 2012. The plan was for the company to regain a market share of 5 per cent or above either in 2014 or 2015. +++