How Fiat S.p.A. and Chrysler Plan to Take On BMW

The 2014 Maserati Ghibli is one part of Fiat Chrysler's plan to become a global luxury-car player. Next up: Seven new Alfa Romeos, according to reports. Source: Fiat Chrysler Automobiles.

It's no secret that luxury cars have become a hugely profitable business. Nearly two-thirds of giant Volkswagen Group's  (NASDAQOTH: VLKAY  ) profits last year came from the Audi and Porsche brands, while BMW  (NASDAQOTH: BAMXF  ) and Daimler's  (NASDAQOTH: DDAIF  ) Mercedes-Benz brand continue to post strong profits year after year.

Several global automakers are making big moves to increase their presence in the global luxury-car market, and Fiat Chrysler Automobiles  (NASDAQOTH: FIATY  ) is no exception. As Fool contributor John Rosevear explains in this video, Fiat will soon move to take on BMW with not one, not two, but seven new Alfa Romeo models.

A transcript of the video is below.

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John Rosevear: Hey, Fools, it's John Rosevear, senior auto analyst for Germany's Auto Bild magazine reportedlast week that Fiat Chrysler Automobiles is planning to unveil not one, not two, but seven new Alfa Romeo models, part of a plan to relaunch the brand as a major global luxury-car brand alongside Maserati.

Officially, FCA had no comment on the report. The company is expected to reveal a detailed three-year plan on May 6. I'm sure we'll hear more about it then. According to the report, though, FCA is hoping to ramp up to selling 500,000 Alfa Romeos a year. That's about five times what they sold in 2013.

The plans include an all-new version of the Alfa Romeo Spider, that's the famous small convertible, as well as a new Giulia sedan, that'll compete with the Mercedes-Benz C-Class and the BMW 3-Series, and a sedan called the Alfetta that is one size larger, aimed at the BMW 5-Series and Mercedes E-Class. The report said that there will also be wagon versions of the Giulia and Alfetta, and two new crossover SUVs, a compact one and a bigger one.

So that makes seven, and it begs at least one obvious question: If the idea is that Alfa Romeo and Maserati add up to a more or less complete luxury lineup to compete with the German brands and Cadillac and so forth, why have both an Alfa Romeo midsize sedan and a Maserati in the same category?

Maserati already has the Ghibli, which is getting good reviews, as well as its big sedan, the Quattroporte, along with a sports car, and they're planning to introduce a high-end SUV. But this report says that Alfa Romeo will be doing a sedan to compete with the BMW 5-Series and so forth, and the Maserati Ghibli is already staking out some of that turf.

Maybe the idea is that the Alfa will cover the lower end of that market and the Maserati will cover the higher end? We'll see, but it's going to be interesting. Fiat, of course, has owned Alfa for years, since the 1980s, but they haven't really managed to do much with it in all that time.

But like most of the other global automakers, Fiat Chrysler CEO Sergio Marchionne has surely learned from the example of Volkswagen Group, which has demonstrated how profitable a successful global luxury-car lineup can be. Volkswagen made a little over $16 billion in operating profits in 2013, and 65% of that profit came from the Audi and Porsche brands, despite the fact that those brands accounted for just 18% of VW's total sales volume last year.

Luxury vehicles are booming in China and will probably be booming for several more years. They've been strong here in North America, and for FCA there's another good reason to boost Alfa Romeo and Maserati. Fiat has several factories in Italy that are high-cost factories. They have expensive labor, and it's not very profitable to build small cars there anymore, but it is profitable to build luxury cars, and, of course, everybody expects Alfas and Maseratis to be made in Italy. Thanks for watching.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 01, 2014, at 10:24 AM, anindakumars wrote:

    Alfa's have been known to be one of the most unreliable vehicles to buy, though Maserati can bring in lot of money if the proper channel is used. A key thing to keep in mind will be reputation. I won't go to a GM showroom to buy a Caddie since I know the aftersales support and services will not be at a level found in most MB or BMW dealership. So if Fiat - Chrysler is planning to sell Maseratis from Chrysler dealerships, this plan will not get much traction in the near term.

  • Report this Comment On April 03, 2014, at 10:20 PM, LouisTewl wrote:

    JR HAS to keep writing anti-FCA articles - it says right at the end of the article:

    >The Motley Fool recommends BMW.<

    I am very disappointed in TMF and their increasingly obvious, wrong-headed, and just plain wrong approach to writing about FCA. If JR and TMF had any real integrity, they would (should) have their disclaimer at the beginning of the article, not the end.

    JR and TMF are very pro-ABFCA (Anybody But FCA), but that hasn't kept FCA from blowing through it's annual high to over $12.00 per share this week, with the NYSE listing still slated for the 4th quarter 2014.

    Go back and read every one of JR's/TMF's FCA articles, whether about cars or trucks, with any eye for anti FCA slant and propaganda - it's really kind of sickening, and I am going to keep posting against it until they either bar me from commenting or stop doing it, because it is WRONG, and, more importantly, it is doing a disservice to investors -TMF's purported raison d'etre.

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John Rosevear

John Rosevear is the Fool's Senior Auto Specialist. John has been writing about the auto business and investing for over 20 years, and for The Motley Fool since 2007.

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