alfa romeo 2009 company profile edition 2 - just-auto...in europe, alfa romeo‟s launch of the new...

© 2004 All content copyright Arog Ltd. All rights reserved.

2006 company profile edition 1

Alfa Romeo


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© 2009 All content copyright Aroq Ltd. All rights reserved.

Alfa Romeo


June 2009

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Page iv Table of contents


Table of contents

Single-user licence edition ..................................................................................................................... ii

Copyright statement .......................................................................................................................... ii

just-auto.com membership ................................................................................................................ iii

Table of contents .................................................................................................................................... iv

List of tables ............................................................................................................................................. v

Chapter 1 Company dossier .................................................................................................................. 1

Company name ................................................................................................................................. 1

Business activity ................................................................................................................................ 1

Stock symbol ..................................................................................................................................... 1

Key executives .................................................................................................................................. 1

Summary financials ........................................................................................................................... 2

Key competitors ................................................................................................................................. 2

Key customers ................................................................................................................................... 2

Outlook............................................................................................................................................... 2

Chapter 2 Worldwide locations.............................................................................................................. 4

Chapter 3 Financial analysis .................................................................................................................. 6

Chapter 4 Competitor analysis .............................................................................................................. 8

Chapter 5 Key events ............................................................................................................................ 11

Chapter 6 SWOT analysis ..................................................................................................................... 14

Strengths ......................................................................................................................................... 14

Weaknesses .................................................................................................................................... 14

Opportunities ................................................................................................................................... 14

Threats ............................................................................................................................................. 15

Chapter 7 Customers ............................................................................................................................ 16

Chapter 8 Products................................................................................................................................ 17

Chapter 9 Product development .......................................................................................................... 18

Chapter 10 Prospects............................................................................................................................ 24

Page v List of tables


List of tables

Table 1: Global market presence of Alfa Romeo ................................................................................ 4

Table 2: Major plants of Fiat Auto worldwide, 2008 ............................................................................ 5

Table 3: Key consolidated financial performance of Fiat Group between 2004-2008 ....................... 6

Table 4: Key competitors of Alfa Romeo ............................................................................................. 8

Table 5: Summary of key events........................................................................................................ 11

Table 6: Breakdown of Fiat Auto‟s car and light commercial vehicle sales across regions, 2007-2008

(in thousands of units) ................................................................................................. 16

Chapter 1 Company dossier



Company name

Alfa Romeo Automobiles SpA

Business activity

Alfa Romeo Automobiles SpA (Alfa Romeo), headquartered in Turin, Italy, is a

business unit of Fiat Auto SpA, which is, in turn, a subsidiary of Italy-based Fiat

Group. Alfa Romeo cars are renowned for their unorthodox design and

integrated aerodynamic styling. Alfa Romeo is also the styling leader within the

Fiat Group with features being introduced on Alfa Romeo vehicles being

incorporated in Ferrari, Maserati, Fiat and Lancia models sequentially. Alfa

Romeo branded cars are designed and developed with advanced technological

content, and have sporty features that are claimed to offer high-quality

performance, control and comfort functions. Successful vehicle models under

the brand include Alfa 147, Alfa 159, Alfa 156, Alfa GT, Alfa 166, Alfa Spider

and Alfa Brera. In fiscal 2008 (year ended 31 December 2008), the Fiat Group

generated net revenues of EUR59,380m (US$83,710m)*, an increase of about

1.5% when compared to the previous year‟s net revenues of EUR58,529m.

Notes: * Conversion rate employed is 1 EUR = 1.40953 US$ (Source: Fiat)

Stock symbol

Fiat Group‟s shares are listed and traded on the Berlin, Düsseldorf, Hanover,

Milan, Munich, Paris, Frankfurt and Stuttgart stock exchanges under the

symbol „FIA‟. The group‟s American Depositary Shares are also traded on the

New York Stock Exchange (NYSE) under the symbol „FIA‟.

Key executives

Luca Cordero di Montezemolo, chairman

John Elkann, vice chairman

Sergio Marchionne, chief executive officer, Fiat Group

Sergio Cravero, chief executive officer, Alfa Romeo Automobiles

Franzo Grande Stevens, secretary of the board

Note: All the above executives are the office bearers of the Fiat Group.



Summary financials

In millions of EUR 2006 2007 2008

Net revenue 51,832 58,529 59,380

Operating income (loss)

2,061 3,152 2,972

Net income/(loss) 1,151 2,054 1,721

Capital expenditure 4,312 4,368 5,263

Fiscal year ended 31 December Source: Fiat

Note: All figures mentioned above pertain to Fiat Auto

Key competitors

Alfa Romeo‟s major competitors include Germany-based Daimler AG, Porsche,

Volkswagen and BMW; the US-based General Motors and Ford and Japan-

based Toyota.

Key customers

Fiat Auto‟s products are sold under the brand names, Fiat, Alfa Romeo and

Lancia. Its key markets include France, Germany, the UK, Italy, Spain, Poland

and Brazil.

Outlook

Alfa Romeo vehicles were reintroduced in the US after a decade long embargo

by the Fiat Group in 2008 with the launch of 8C Competizione, Alfa Romeo‟s

limited edition supercar. The car is presently being marketed through Maserati

dealers in the US. Due to the emergence of the global economic crisis, Alfa

Romeo is revisiting its plans of introducing other vehicles in the region. The

company had earlier planned to launch the face-lifted 159, Brera and Spider in

the US market in 2009. Further introductions are now expected to happen by

2011. However, Fiat‟s recent alliance with Chrysler could possibly be used to

introduce selected Alfa Romeo models with captive manufacturing at Chrysler‟s

idled facilities.

In Europe, Alfa Romeo‟s launch of the new three door super-mini, Alfa Romeo

Mi To in June 2008 was well received and is expected to generate significant

volumes in 2009. The launch of the Mi To was followed by discussions

between Fiat and BMW for exploring potential co-operation in components and

platforms for Alfa Romeo and Mini vehicles.



In fiscal 2009, Fiat Group is targeting to achieve a trading profit of more than

EUR1bn, while net profit for the group is projected to be in excess of

EUR300m. In order to attain its targets, the Fiat Group will continue to lay

stress on group-wide purchasing synergies, targeted alliances and

strengthening strategic partnerships with suppliers through long term contracts.

Chapter 2 Worldwide locations



Fiat Group Automobiles SpA (including Fiat Automobiles SpA, Alfa Romeo

Automobiles SpA, Lancia Automobiles SpA and Fiat Light Commercial

Vehicles SpA) is a subsidiary of Italy-based Fiat Group. The Fiat Group

employed about 198,348 people, as of December 2008. Alfa Romeo‟s cars are

manufactured mainly at the Pomigliano d‟Arco plant in Italy.

Table 1: Global market presence of Alfa Romeo

Region Location

Europe Albania, Austria, Belgium, Bielorussia, Bosnia Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Macedonia, Malta, the Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, the UK and Yugoslavia

Asia China, Hong Kong, Indonesia, Israel, Japan, Jordan, Korea, Kuwait, Lebanon, Malaysia, Oman, Philippines, Qatar, Singapore, Sri Lanka, Syria, Taiwan, Thailand and United Arab Emirates

Africa Egypt, Kenya, Madagascar, Mauritius, Morocco, Réunion, South Africa and Tunisia

North America

United States of America

Oceania Australia, Brunei Darussalam, New Caledonia, New Zealand and Tahiti

South America

Argentina, Brazil, Chile, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guadeloupe, Guatemala, Honduras, Martinica, Panama, Paraguay, Peru, Trinidad, Uruguay and Venezuela

Source: Alfa Romeo



Table 2: Major plants of Fiat Auto worldwide, 2008

Region Facilities Products/Models

Italy 5 Fiat Qubo, Fiat Nuova Croma, Fiat 500, Fiat Bravo, Fiat Grande Punto, Fiat Ulysse, Fiat Panda, Fiat Sedici, Fiat Idea, Fiat Multipla, Fiat Nuovo Doblò, Fiat 600 Alfa Romeo Mito, Alfa Romeo 147, Alfa Romeo Brera, Alfa Romeo 159, Alfa Romeo 159 Sportwagon, Alfa Romeo GT, Alfa Romeo Spider, Alfa Romeo 8C, Alfa Romeo 8C Spider Lancia Ypsilon, Lancia Delta, Lancia Musa, Lancia Phedra

Brazil 1 Fiat Linea, Fiat Novo Siena, Fiat Novo Palio, Fiat Novo Weekend, Fiat Novo Adventure, Fiat Novo Stilo, Fiat Novo Punto, Fiat Novo Mile Economy, Fiat Nova Strada

Poland 1 Fiat Linea, Fiat Panda, Fiat Doblò, Fiat Qubo, Fiat 500, Fiat Nova Croma, Fiat Bravo, Fiat Sedici, Fiat Grande Punto

India 1 Fiat Palio Stile, Fiat Linea, Fiat 500

Source: Fiat

Chapter 3 Financial analysis



For fiscal 2008 (year ended 31 December 2008), Fiat posted net revenues of

EUR59,380m, registering an increase of 1.5% over EUR58,529m revenues

generated in the previous fiscal year. The trading profit of Fiat totalled

EUR3,362m, which was 4% higher than the previous year‟s profit with

improvement in all major segments. This increase was an outcome of the

performance of Fiat Auto and Iveco. In 2008, the group generated operating

income of EUR2,972m as against EUR3,152m in the previous year. The

Automobile segment‟s revenue increased by 1.3% to EUR29,380m which was

attributed to higher sales volume generated by Fiat Auto. Fiat group Automobiles

reported trading profit of EUR691m (2.6% of the revenue), registering a decline

of 13.9% when compared to EUR803m (3% of revenues) recorded in fiscal 2007.

Higher trading profit was attributed to record sales registered in the first three

quarters of fiscal 2008. In the subsequent quarter sales of the Automobiles

division were comparatively lower however the decline in trading profit was

compensated by robust sales in the Agriculture and Construction equipment

division.

During the first quarter of fiscal 2009, Fiat Group‟s revenues dropped from

EUR15,078m in 2008 to EUR11,268m due to weakening of demand especially

for construction equipment and trucks. The Automobiles division recorded a

17.7% drop in sales during the period with revenues totalling EUR6,111m in

2009. The group recorded a trading loss of EUR48m compared to a trading profit

of EUR766m in fiscal 2008. The Automobiles segment recorded a trading profit

of EUR27m. For the quarter the group registered a net loss of EUR410m in 2009

compared to a net profit of EUR405m in 2010.

Table 3: Key consolidated financial performance of Fiat Group between 2004-2008

(Figures are in millions of EUR)

2004 2005 2006 2007 2008

Net revenues 45,637 46,544 51,832 58,529 59,380

Operating income/(loss) (585) 2,215 2,061 3,152 2,972

Net income/(loss) (1,579) 1,420 1,151 2,054 1,721



Capital expenditures 3,322 3,520 ,4,312 4,368 5,263

Stockholders' equity (before minority interest)

4,928 9,413 10,036 11,279 11,101

Total assets 62,522 62,454 58,303 60,136 61,772

Fiscal year ended 31 December Source: Fiat

Note: All figures mentioned above pertain to the results of Fiat Group. While the figures for fiscal

2004, 2005, 2006 and 2007 are in accordance with the IFRS accounting standards, the financial results for fiscal 2002 and 2003 have been reported as per the Italian GAAP.

Chapter 4 Competitor analysis



Alfa Romeo essentially competes in the sub-super car, supercar, mini and sub-

compact segments. Alfa Romeo had a market share of 0.9% in Western Europe,

as of 2008. The company‟s top-selling model, Alfa Romeo 147, a small

family/compact car, competes with Audi A3, BMW 1 Series, Citroën C4, Ford

Focus, Honda Civic, Hyundai Elantra, Hyundai i30, Mitsubishi Lancer,

Opel/Saturn Astra, Peugeot 307, Pontiac G5, Renault Mégane, SEAT León,

Škoda Octavia, Toyota Auris, Toyota Corolla, Volkswagen Golf, Volkswagen

Jetta, Volkswagen New Beetle and Volvo C30. Alfa Romeo‟s another successful

model, the 159, a compact executive/entry-level luxury car, competes with Audi

A4, BMW 3 Series, Cadillac BLS, Cadillac CTS, Lexus ES, Lexus IS, Mercedes-

Benz C-Class, Saab 9-3, Volvo S40, Volvo S60 and Volvo V50. In the early

months of 2007, Alfa Romeo began sale of the diesel version of the Alfa Spider.

The Alfa 147 Murphy&Nye version of the Alfa 147 was introduced, while the

sporty and aggressive looking Alfa 147 Ducati Corse was presented at the

Bologna Motor Show in December.

Alfa Romeo‟s major competitor, Daimler, headquartered at Stuttgart, Germany, is

one of the pioneers in automotive manufacturing. Its major brands in the

passenger car market include Mercedes-Benz, Maybach and smart. Another

major competitor of Alfa Romeo, Volkswagen AG, headquartered at Wolfsburg,

Germany, operates under four business lines, namely, Volkswagen brand group,

Audi brand group, Commercial vehicles and Remaining companies. The

Volkswagen brand group comprises Volkswagen passenger cars, Škoda, Bugatti

and Bentley brands, while the Audi brand group includes the Audi, Lamborghini

and SEAT brands.

Table 4: Key competitors of Alfa Romeo

Key competitors

Product/Technology focus of the competitor

Region/Market focus of the competitor

Major brands that compete with Alfa Romeo

Daimler AG Low-emission engines (BLUETEC technology);

Current major markets –

Mercedes-Benz C-Class Saloon,



Drive System-technologies; fuel-cell drives; car-to-car communication technology; hybrid drives; active brake assist

Western Europe, NAFTA

C-Class Estate, C-Class Sports Coupé, CLK-Class Coupé, CLK-Class Cabriolet, CL-Class Coupé, CLS-Class Coupé, E-Class Saloon and E-Class Estate

Targeted markets – China and India

Volkswagen AG

Hybrid concept with electric drive and petrol engine; fuel cell technology; diesel powered racing cars; side assist and lane assist safety systems; adaptive cruise control; LED rear lights, Euro-5 compliance, lower carbon dioxide and NOx emissions

Current major markets – Germany, the US and the UK

Audi A3/S3, A4/S4 and A6/S6; Škoda Octavia and Superb; VW Golf, Rabbit, Bora, Jetta, Passat and Phaeton; SEAT León and Toledo

Targeted markets – Russia, China, India, Indonesia and Brazil

BMW Hydrogen – H2R (1 and 2) hydrogen combustion engine and the straight-six petrol engine – 3; straight six cylinders Otto Engine; Valvetronics; multi-stage turbo-charged diesel engine; brake force display, tyre defect indicator; dynamic stability control (DSC) and electronic damper control (EDC)

Current major markets – The US, Germany and the UK

BMW 1 Series – E81, E82, E87 and E88; 3 Series – E 90 and E93 Targeted

markets – Asia, Latin America and Eastern Europe

Source: Alpha Romeo, Other published sources and Company reports

Volkswagen is currently focusing on the development of energy-efficient

automobiles with advanced engine technologies that would reduce emissions. To

this end, the group has launched the innovative „Clean TDI‟ system, which would

help in achieving lower emissions levels. The product, if successfully launched,

would particularly keep carbon dioxide emissions low, apart from reducing the

NOx emissions by 90%. Some of the important product development initiatives

made by Volkswagen in 2006 include the new Volkswagen Eos Convertible

Coupé, additional features in the Touran and Touareg models, Audi braking

guard and the new generation of adaptive cruise controls (ACCs).



Thanks to the growing demand and the low-cost production advantage in the

Asian markets, including China and India, Volkswagen foresees a huge

opportunity for expansion in these regions. To cash in on this, the group is setting

up new facilities in these emerging auto markets. Following the establishment of

a new production facility at Changchun, China, with an annual production

capacity of 330,000 vehicles, Volkswagen announced in November 2006 that a

new plant would be established at Pune, India. In addition, the group announced

its plans to set up an independent sales company in India.

Chapter 5 Key events



Table 5: Summary of key events

Year Event

February 2007

Launch of a new diesel version of Alfa Romeo‟s Spider convertible

2005 Launch of Alfa Romeo‟s new model, Brera

2004 Launch of Alfa Crosswagon and Q4

2003 Launch of new versions of Alfa 156, 166, GTV and Spider

2002 Launch of 156, Sportwagon and 147 models

1998 The car model 156 wins the “Car of the Year” award

1986 Take-over of Alfa Romeo by Fiat Group

1978 Implementation of a new restructuring programme

1964 Establishment of Autodelta for developing racing cars

1958 Agreement with Renault for manufacturing Dauphine saloon

1945 Production of naval engines, aviation engines and electric cookers

1932 Take-over of Alfa Romeo by Institute for Industrial Reconstruction (IRI)

1920 Production of Torpedo 20-30 HP, the first car under the Alfa Romeo logo

1910 Establishment of "Anonima Lombarda Fabbrica Automobili" in Milan, Italy

Source: Alfa Romeo

Anonima Lombarda Fabbrica Automobili (A.L.F.A.) was established in 1910 in

Milan, Italy. Under the leadership of Cavalier Ugo Stella, the company started

producing a series of vehicles, with 24 HP being the first car to be launched

under the Alfa brand name. It was soon followed by the 40 HP and the 60 HP car

models that featured more powerful engines. Alfa, which became a part of the

Nicola Romeo group of companies in the mid-1910s, was engaged in producing

military hardware during the First World War. Torpedo 20-30 HP was the first car

to be launched under the Alfa Romeo brand name in 1920.

Alfa Romeo was entangled in a major crisis with its majority shareholder, the

Banca Italiana di Sconto, and was facing a threat of closure during the late

1920s. However, the company survived the crisis and kept going, thanks to the

reputation it had built with its powerful, high-performance cars and the strong

brand image that it had carved for itself in both the domestic and overseas

markets. The company launched the lighter and faster six-cylinder cars in 1928,

and also initiated mass production of vehicles.



The Institute for Industrial Reconstruction (IRI) took over Alfa Romeo in 1932.

The company‟s plants were modernised, and production of lorries and buses

started during the first half of the 1930s. The late 1930s witnessed an intensified

production of aircraft engines and the construction of a facility at Pomigliano

d'Arco.

Alfa Romeo‟s production operations were severely affected during the Second

World War due to a scarcity of supplies and the bombing of its factories. Putting

the ordeal of the war behind it, the company slowly started to diversify its product

base by manufacturing aviation and naval engines and electric cookers, in

addition to cars. The 158 and 6C 2500 were the first cars to be launched by the

company after the war. The late 1940s witnessed the launch of a variety of

special edition cars of the 2500 model.

Alfa Romeo focused mainly on producing cars during the early 1950s. The

company, which was capitalising on its sporting success, was working on

establishing an assembly-line production process. The company was promoting

the “Made in Italy” image and was also producing one-off models and limited

editions in association with famous stylists during the period. Successful

launches during the 1950s included that of Giulietta Sprint and the police

“panther” version of the 1900 model cars. The company entered into an

agreement with France-based Renault in 1958 for manufacturing the Dauphine

saloon vehicles.

In 1960, the company commenced construction of a new factory at Arese. This

facility started its operations in 1963, producing the Giulia cars. While the early

1960s witnessed the launch of two versions of the Giulietta range, the SS and

the SZ models, the late 1960s saw the construction of the Alfasud factory at

Pomigliano d'Arco. Autodelta, established in 1964 for developing racing cars,

collaborated with McLaren in 1970 for supplying 8V 3000 engines for Formula 1.

Successful sporting cars launched during the 1960s were the Giulia GTA (Gran

Turismo Alleggerita) and the Duetto.

Operating under severe energy crisis in the 1970s had led to several

management problems at Alfa Romeo. The company‟s financial situation was



badly hurt, as it could not meet market demands. A new restructuring programme

was implemented in 1978 to bring the company back on track.

As its joint-venture car manufacturing operations with Japan-based Nissan did

not produce the expected results, Alfa Romeo‟s business continued to struggle

during the early 1980s. Fiat, which took over Alfa Romeo in 1986, grouped it with

Lancia to form Alfa Lancia SpA, which began operations in 1987. Many new Alfa

Romeo models with several technological advancements were developed and

launched during the 1980s, which further strengthened the company‟s brand

image.

The 1990s witnessed the rebirth of the company with many new car models

being introduced, including the 155, 145 and 146 produced at its Pomigliano

d'Arco plant; and the Spider and GTV produced at its Arese plant. The 156 and

147 models won the “Car of the Year 1998” and the “Car of the Year 2001” titles,

respectively. In the early 2000s, the company launched GTAs 156, Sportwagon

and 147 in 2002; newer versions of Alfa 156, 166, GTV and Spider in 2003; and

Alfa GT and Alfa Crosswagon in 2004.

In April 2005, Fiat transferred the ownership of Maserati from Ferrari to Fiat, to

enable better cooperation between Maserati and Alfa Romeo on both technical

and commercial operations. In the latter half of 2005, Fiat announced its plans to

invest around EUR200m in Alfa Romeo‟s new model, Brera, which was launched

in the market in November 2005. In the same month, Alfa Romeo 159 was

honoured with the L'Automobile pi Bella del Mondo award, in the most beautiful

sports sedan category.

Fiat Auto's name was changed to Fiat Group Automobiles SpA in February 2007.

It was also announced that four new companies would be formed, as 100%

owned companies of Fiat Group Automobiles SpA, under the names, “Fiat

Automobiles SpA”, “Alfa Romeo Automobiles SpA”, “Lancia Automobiles SpA”

and “Fiat Light Commercial Vehicles SpA”. Also in the same month, a new diesel

version of Alfa Romeo‟s Spider convertible was launched in the UK, Germany

and Italy.

Chapter 6 SWOT analysis



Strengths

Alfa Romeo is a part of Fiat Group, which is one of the major manufacturers of

automobiles worldwide. Alfa Romeo, is one of the leaders in the Italian

automobiles market and is known for its unique unorthodox styling. Over the

years, Alfa Romeo‟s cars have earned a reputation for stylish designs and high

product quality, offering top-class performance and control features in addition to

enhanced safety and comfort.

Alfa Romeo, which has enjoyed success in the racing arena, has been able to

successfully transfer its racing technologies to its passenger cars. The company

also derives product synergies and economies of scale by sharing technological

and commercial capabilities with other brands of Fiat Group, specially Maserati

after Fiat acquired full control of the brand.

Weaknesses

Though Fiat has a global sales footprint, a major part of its revenue is generated

mainly from Western Europe. Alfa Romeo being a niche brand has a limited

presence beyond Europe. After the company‟s withdrawal from the US in1995,

Alfa Romeo‟s has primarily been marketed only in Europe and has a weak

presence in other markets.

Opportunities

Fiat‟s strategy of entering into industrial co-operation with major partners has

paid rich dividends in recent years. Citing the success of these associations, Fiat

has already formed an alliance with Chrysler. Specifically in Alfa Romeo‟s case,

the company is evaluating the possibility of component and platform co-operation

with BMW‟s Mini. Fiat has indicated that it would use Alfa Romeo‟s platform and

powertrain while preparing small and sub-compact vehicles for Chrysler. This

could also lead to the production of select Alfa Romeo models at Chrysler‟s idled

facilities. Fiat Group has also been strengthening its presence in low-cost

countries, such as India and Turkey, through joint ventures and partnerships.

Moreover, Fiat is focusing on expansion in the Latin American region by investing



heavily on the development of new vehicles and automotive technologies in

Brazil.

Alfa Romeo will benefit from the well-established and expanding distribution

channels and sales network of the Fiat Group. The transfer of Maserati‟s

ownership from Ferrari to Fiat Partecipazioni has also resulted in better

cooperation between Maserati and Alfa Romeo brands in both technological and

commercial terms. This is also expected to reinforce Alfa Romeo‟s leadership in

the racing arena, in addition to expanding its operations in other key international

markets.

Threats

Fiat had faced significant labour problems in 2007 and brief work stoppages in

2008. Earlier, due to the labour unrest in 2005, Fiat had to temporarily halt

operations at three of its plants, which faced storage capacity problems. In the

same year, Fiat Auto suffered car shipment blockages due to disagreements

between the companies that transport its vehicles and the owner/operator

subcontractors of the transporting companies. Such issues cause serious

damages to the company, in terms of employee morale, sales loss and disruption

of distribution networks. Any such occurrences in the future can affect the sales

and economic well-being of Alfa Romeo also. Foreign investment regulations,

trade restrictions and currency exchange rate fluctuations, in addition to soaring

raw material, energy and fuel costs, continue to pose a threat to Alfa Romeo‟s

operations and business.

Chapter 7 Customers


Chapter 7 Customers

In fiscal 2008, Fiat Group Automobiles delivered a total of 2,152,500 automobiles

and light commercial vehicles, down 3.6% (approximately 233,800 units) from

2007. In Western Europe deliveries were1,237,500 units. Volumes dropped

sharply in all major European countries: 16% in Italy, 38.7% in Spain, , 8.1% in

Great Britain. But strong growth of 30.7% was achieved in France. In addition,

growth of 14.4% was witnessed in Germany. Fiat Group Automobiles‟ share of

the automobile market improved to reach 31.9% in Italy (increase by 0.6

percentage points) and 8.2% in Western Europe (increase by 0.2 percentage

points). In Brazil, where automobile market demand continued to be particularly

buoyant, Fiat Group Automobiles achieved a 10.6% increase in deliveries and a

24.9% share of the automobile market (decrease by 1.0 percentage points), thus

confirming its leadership position. In Poland, deliveries increased by 6.5%, with a

market share of 10.1% (decrease by 0.2 percentage points).

Table 6: Breakdown of Fiat Auto‟s car and light commercial vehicle sales across regions, 2007-2008 (in thousands of units)

Regions 2007 2008

Italy 854.6 718.1

Germany 107.3 122.8

France 94.7 123.8

Spain 79.4 48.7

The UK 77.7 71.4

Rest of Western Europe 143.3 153.1

Brazil 613.1 665.6

Poland 39.1 41.6

Rest of the world 224.6 207.4

Sales by associated companies 90.6 76.5

Total unit sales 2,324.4 2,229

Source: Fiat

Chapter 8 Products


Chapter 8 Products

Alfa Romeo‟s current line-up of vehicle models includes the Alfa Romeo MiTo in

the sub-compact sports car category; Alfa Romeo Spider, Alfa Romeo 8Cand

Alfa Romeo 8C Spider in the sportscar category; Alfa Romeo GT Sports Coupé,

Alfa Crosswagon, Alfa 159 and Alfa 159 Sportwagon in the intermediate

category; Alfa 147 in the intermediate/compact category; and Alfa Brera and Alfa

166 in the full-sized category.

The Alfa Romeo MiTo, (abbervation for Milan and Turin) was first introduced in

Milan in 2008 and internationally launched in June 2008 at the British Motor

Show. The three door hatchback is the first sub-compact sports car and

competes with the BMW Mini and the upcoming Audi A1. The Mi To is built on

the Fiat/GM SCSS platform which is also used on the Fiat Grande Punto and

Opel/Vauxhall Corsa D. The car sports the new Alfa DNA system which permits

the driver to select from three driving settings. By choosing between the

Dynamic, Normal and All-Weather settings, the driver can control the

performance of the engine, brakes, suspension, steering and transmission. The

MiTO was well received with 23,000 initial orders.

Alfa Spider, which was premiered at the Geneva Motor Show, won the “Cabrio of

the Year 2006” award in March 2006, from the Comité Cabriolet (a jury of 23

specialised journalists from 12 different nations). The Spider, a two-seater with a

spacious luggage compartment, has a highly sophisticated and comfortable

interior that features high-class technological contents, including automatic twin-

zone climate control systems, steering-wheel mounted controls, vehicle dynamic

control (VDC) and cruise controls.

The limited edition, two-seater super sports car, Alfa Romeo 8C Competizione,

was premiered at the Paris Motor Show in September 2006. The car, designed at

Alfa Romeo Style Centre in Arese and developed in association with Maserati,

features a steel chassis that supports a carbon fibre body. This rear-wheel drive

sports car has a six-speed robotic gearbox and runs on a 4.7-litre, eight-cylinder

90°V engine, which delivers 450 horsepower.

Chapter 9 Product development



Fiat Group‟s overall research and development activities involve some 14,500

people at 118 centers. The Fiat Group organizes its advanced research and

innovation work through two companies, the CRF - Centro Ricerche Fiat (Fiat

Research Centre) and Elasis, whose strategies are coordinated by the Technical

Committee of the Group Executive Council. CRF is headquartered at Orbassano

on the outskirts of Turin and has key centres located at Bari, Trento and Foggia.

CRF also has controlling interest in CRP, Fiat‟s plastics and optics research

centre in Udine, which focuses on advanced research in optics and plastics for

automotive lighting systems. CRF core group has 850 employees with broad

technical skills and some of the most advanced laboratories. For powertrain

systems testing, electromagnetic compatibility investigations, NVH analyses,

driving simulations, materials and process development, optoelectronics and

micro technologies. Further CRF also partners with 150 universities and 1,000

industrial partners globally.

Elasis is a highly specialized research center focused on technology innovation,

complete vehicle development, mobility and its environmental impact, and traffic

safety. In 2008, Elasis acquired Comau‟s Engineering division in Turin. Elasis

has research and development facilities at Pomigliano d‟Arco, Elasis Product &

Process Development in Turin, and the Elasis Centre in Lecce. Elasis employs

some 1,200 associates and is equipped with sophisticated computer aided

design and measurement tools and advanced physical and virtual testing

equipment. Like CRF, at Elasis work on engines and transmissions is carried out

as part of Fiat Powertrain Technologies‟ development projects. Elasis also works

with consortia of universities and private institutions in basic research and

training on the issues related to mobility and its environmental impact.

Despite the challenging market conditions in 2008, Fiat Group spent

approximately EUR2bn or 3.4% of net revenues of industrial activities on

research and development activities. In 2008, more than 2 million cars, 2 million

transmissions, 2.5 million engines and a number of commercial vehicles, tractors

and units of construction equipment were produced in the group‟s factories. CRF

company filed 51 new patents in 2008, raising its total number of patents



registered to over 2,300 and has over 600 patents pending for approval with

authorities.

Fiscal 2008 saw the launch of several key offerings to the product range,

particularly for Lancia and Alfa Romeo. Also a number of Fiat group Automobiles‟

models received major international awards.

CRF made the following innovations in 2008:

Multijet II: Development work on the successor to the MultiJet I, which is

amongst the best performing diesel engines in the contemporary market was

completed in 2008. The new engine 1.3L small diesel engine (SDE) is Euro 5

compliant and uses solenoid injectors. Multijet II will enter production in 2009

on the 95 hp Euro 5 1.3-litre SDE Lancia Musa, and will later be installed on

all Euro 5-compliant applications with 75 and 95 horsepower 1.3-litre SDE

engines. CRF is also studying the potential of the Multijet framework for

commercial vehicle applications.

Multiair: Developed on 1.4-litre 16-valve FIRE gasoline engine and the new

900 cc two-cylinder SI engine in the Small Gasoline Engine (SGE) family,

Multiair will enter commercial production in 2009. The Multiair technology has

also been tested on Diesel engines leading to flexible and precise air

metering and internal EGR exhaust gas recirculation. Further benefits include

higher low-end torque, smoother cold weather operation, more even torque

delivery, and no engine shake at shut-off. The additional cost of installing the

system on a diesel engine is largely offset by the fact that all external HP-

EGR high-pressure exhaust gas recirculation components and the throttle

valve can be eliminated, while lower noble metal content is required in the

catalytic converter.

Hybrid city car propulsion: In 2008, CRF commenced development work on a

hybrid propulsion system for city cars. The proposed hybrid drive setup

consists of the 900 cc two-cylinder SI engine from the SGE family, combined

with a DDCT Dual Dry Clutch Transmission featuring an electric motor

coupled to one of its two mainshafts. The SGE engine‟s small size makes it

possible to use a simple, efficient transmission architecture, while coupling

the motor downstream of the clutches means that all the characteristic

functions of a parallel hybrid propulsion system, including electric drive,

regenerative braking and torque boost from the two motors, can be provided



in a compact, lightweight package: essential for small urban runabouts. The

hybrid propulsion system uses air-cooled lithium ion batteries housed in the

car‟s trunk. Other features include plug-in traction battery recharging and an

HVAC system that can be powered by either the IC engine or the electric

motor, using whichever unit provides peak efficiency at any given time.

Driving advisor: is essentially a lane departure warning system with haptic

interface and was launched on the new Lancia Delta in 2008. The system

becomes active above 55kph and signals the driver when the car is about to

drift out of its lane by applying variable resistance on the steering. The

system uses a T camera and image processing software that relays

information about the road, scanning ahead up to 30 metres. The video

device tracks the lines marking the edges of the lane and indicates the

vehicle‟s position in terms of both orientation and movement away from the

center of the lane. The processing unit then selects an actuation command

that will be sent to the steering system. Electric power steering, guided by the

actuation motor and the torque/steering wheel angle sensors required for

correct operation, carries out the control order.

Telematic platforms: CRF is also involved in developing next generation

telematic platforms both individually and through joint development programs

of automakers in the European Union. CRF and Fiat Automobiles are part of

the Car-2-Car Communication Consortium, whose objectives is to establish a

European industry standard for car-to-car communication systems based on

wireless LAN components and to promote the establishment of a royalty-free

frequency band for road safety applications. This frequency band was

assigned in August 2008. At the 2008 Car-2-Car Forum, Fiat Group

Automobiles and CRF. presented their first road safety applications for

signalling hazardous situations such as a stationary vehicle in the road. CRF

is also working to establish the requirements and preliminary design for an

inter-Sectoral platform which, would make it possible to offer advanced

services and functions in the future. The platform would provide enhanced

performance and extended processing and memory capacity and be fully

integrated with latest-generation telecommunications standards (3G, satellite,

etc.), with evolving wireless standards (Bluetooth 2.0, Wi-Fi), and with

consumer electronics interfaces (smartphones, memory cards, etc.). In

addition, the platform would make it possible to view graphical interfaces on

different types of display, thus ensuring maximum design flexibility. The



platform‟s modular approach would also reduce costs through end-product

scalability.

Low environmental impact air conditioning systems: regulates the

compressor activation threshold while the control algorithm cuts the amount

of fuel consumed by air conditioning around 30%. CRF developed and

installed the Energy Saving control for air conditioning system compressors

on Fiat Group subcompacts vehicles in 2008 and is studying its applications

on other Group vehicles. CRF also conducted research work on new

refrigerants with low global warming potential that comply with the European

Union‟s new F-Gas Regulation, which calls for phasing out fluorinated gases

such as today‟s R-134a refrigerant.

PERFECTS software: Developed in the first half of 2008 by CRF,

PERFECTS is a new proprietary fuel consumption simulation tool based on

existing software and earlier experience by CRF, FPT Powertrain

Technologies, Fiat Group Automobiles and Iveco.

Environmentally friendly and recycled plastics. During 2008, CRF continued

its study pertain to the use of environmentally friendly plastics for vehicle

interior components. These plastics are reinforced with vegetable fibres

rather than mineral fibres, providing environmental benefits over the entire

product life cycle: the fibres come from plants that absorb CO2 as they grow,

while the methods used to process and mold vegetable fibre are more

environmentally and energy efficient. These benefits continue in the end-of-

life vehicle dismantling – an increasingly critical stage – where plastics with

vegetable fibers offer higher potential for energy recovery.

Ecofactory: initiative of the CRF was conceived to improve energy efficiency

in production. In 2008, there was a focus on improving energy efficiency at

the Iveco plant in Suzzara and Fiat Group Automobiles‟ Mirafiori plant, with

energy audits and other metrics. This program will be extended and

improved in the coming years, when the Ecofactory model‟s energy-savings

criteria and low environmental impact technologies will be applied to system,

process and facility design, construction and refurbishment.

The new Alfa Romeo MiTo launched in June 2008 sports the Alfa DNA system

which permits the driver to select from three driving settings. By choosing

between the Dynamic, Normal and All-Weather settings, the driver can control

the performance of the engine, brakes, suspension, steering and transmission.



In 2007, the company‟s vehicle research work concentrated on the Alfa 8C -

Competizione project and development of the new Fiat Fiorino. In developing the

Alfa 8C, Elasis (a Fiat Group‟s research agency that promotes innovative

development and its application in projects, products and processes) followed up

on the experience it gained in building the prototype for this car in 2004.

Alfa Romeo‟s new sports saloon, the 159, successfully cleared the stringent

EuroNCAP safety tests in January 2006. The car won five-star ratings for its

occupant protection systems and four-star ratings for child safety systems. It was

also named as one of the safest cars in the world. The car‟s safety equipment

features several advanced passive safety devices, including window bags, side

and knee bags, dual-stage front airbags, safety belts with load limiters and

pretensioners, active head restraints and Isofix fittings for child seats. While the

car‟s body was constructed using high-strength dual-phase steels, its doors were

equipped with ultra-high strength steel reinforcements.

In June 2006, Alfa Romeo presented the 2.4 JTD 200 bhp and 1.9 JTD 150 bhp

variants of the Alfa 159 car range, equipped with Q-Tronic automatic gearbox

systems. The Q-Tronic is an autonomous control unit, engineered to improve the

control of the car, driving comfort, active safety and sporting behaviour, while

simultaneously reducing fuel consumption. The Q-Tronic offers four driving

modes, namely, Default, Sport, Winter and Sequential. The Sport mode offers

fixed gear shifting ratios at high engine speeds, thereby imparting a sporty feel to

the drive. While the Winter mode enables starting and running in low grip

conditions, the Sequential mode facilitates manual gear shifting. Various other

features available with the Q-Tronic are the Up & Down slope function that

adapts appropriate gear ratios according to the slope of the road and the Braking

Assist function that decelerates the vehicle when shifting down gears.

Also, in 2006, Alfa Romeo had designed and developed the Q2 self-locking

differential system that ensures maximum traction and control under all driving

conditions. The Q2, available on the Alfa 147 and the Alfa GT, is a Torsen

mechanical-type limited-slip differential that divides the torque between the

driving wheels according to grip conditions. It enhances road-holding by

improving traction, reducing the understeering effect upon acceleration and

maximising stability on deceleration. This innovative system helps improve active

safety, control and driving pleasure.



Early 2007 witnessed the launch of a new diesel version of Alfa Romeo‟s Spider

convertible, which was powered by a 200 bhp, 20-valve, 2.4-litre diesel engine,

featured a six-speed manual gearbox and was claimed to reach a top speed of

more than 228 km/h. The Multijet diesel engine featuring a particulate filter in the

exhaust system was designed to comply with the current Euro 4 and the

proposed Euro 5 emissions legislations.

Chapter 10 Prospects



In fiscal 2009, the Fiat Group targets to achieve trading profit of more than

EUR1bn while net profit for the group is projected to be in excess of EUR300m.

In order to attain its targets, the Fiat Group will continue to lay stress on group-

wide purchasing synergies, targeted alliances and strengthening strategic

partnerships with suppliers through long term contracts.

During 2008, the group worked intensively on renewing its product range,

improving industrial processes, strengthening brand image and accelerating

international expansion including targeted alliances. The group also signed a

letter of intent with Chrysler and Cerberus Capital Management for the creation

of a global strategic alliance. According to the alliance, Fiat received an equity

interest in Chrysler and gained access to new markets while Chrysler gained

access to competitive platforms for fuel-efficient vehicles, engines, transmissions

and components where Fiat is already well-established. Specifically in Alfa

Romeo‟s case, the company is evaluating the possibility of component and

platform co-operation with BMW‟s Mini. Fiat has indicated that it would use Alfa

Romeo‟s platform and powertrain while preparing small and sub-compact

vehicles for Chrysler. This could also lead to the production of select Alfa Romeo

models at Chrysler‟s idled facilities. Alfa Romeo vehicles were reintroduced in the

US after a decade long embargo by the Fiat Group in 2008 with the launch of 8C

Competizione, Alfa Romeo‟s limited edition supercar. The car is presently being

marketed through Maserati dealers in the US. Due to the emergence of the

global economic crisis, Alfa Romeo is revisiting its plans of introducing other

vehicles in the region. The company had earlier planned to launch the face-lifted

159, Brera and Spider in the US market in 2009. Further introductions are now

expected to happen by 2011.

Fiat Group Automobiles (Fiat), as a part of the 2007-2010 growth and margin

expansion plan, seeks to transform the group into a significant international

industrial enterprise. To achieve this, the group is considering various business

opportunities, which include focusing on strategic alliances in emerging markets

such as Russia, India and China and introducing new products. In the context of

the global economic crisis, Fiat is keen to selectively enter alliances which would



help the company in achieving its growth objectives without committing extensive

capital.

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