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Alfa Romeo price tag drops by 80 billion euros – but it is still way too expensive


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Alfa Romeo price tag drops by 80 billion euros – but it is still way too expensive

November 19, 2010 - 12:01 am ET

Alfa Romeo's selling price dropped by 80 percent this week when Fiat CEO Sergio Marchionne told journalists at the Los Angeles auto show that he wants 20 billion euros for the money-losing automaker. That's down from the 100 billion euros ($136 billion) Marchionne said he wanted for the Fiat subsidiary at the Paris auto show a month and a half ago.

At this rate of decline, by the time the Geneva auto show rolls around in March 2011 Alfa's asking price might sink to a level that would force its most ardent suitor – Volkswagen Group – to make an offer.

But seriously, the old price and the new price are pure fantasy.

Alfa's current valuation is 2 billion euros, or 10 times below Marchionne's latest figure.

Marchionne feels that Alfa and Jeep are the only brands in the Fiat-Chrysler alliance that could have a global appeal, therefore he plans a major relaunch for both.

The problem is that Fiat would need to invest at least 1.5 billion euros to turn around Alfa and should expect to lose another billion euros before earning a profit in 2013.

Alfa has a great heritage but with annual global sales of about 100,000 cars, the brand has been losing between 300 million euros and 500 million euros a year for the last decade.

If Fiat gets a solid offer for Alfa, it saves on the investment costs, avoids the heavy losses expected for the next two years and gets a nice pile of cash. The overall benefit to Fiat's balance sheet could be about 4.5 billion euros.

That's a number that could change Marchionne's mind.

You can reach Luca Ciferri at lciferri@crain.com.

Read more: http://www.autonews.com/article/20101119/BLOG12/311209999/1193#ixzz15kDCRzzE

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