Alfa Romeo to Return to the U.S.

Italian automaker Fiat (FIA.MI) is looking for partners to manufacture its Alfa Romeo brand and its 500 subcompact in North America. Although the company hasn't finalized plans for its return to the U.S. market, an announcement could come later this year, Fiat Group CEO Sergio Marchionne said Friday. "The U.S. market is very large, and we're not looking to occupy a premier position," Marchionne said. "But I think we do have a couple of brands and products that we can sell successfully there."

Marchionne didn't lay out any precise schedule for the return to the U.S., though he said he expects to be producing one of the brands by 2010 at the latest. "We need to make sure that when we enter the U.S. we're able to produce what we need," he said in an interview at a meeting of the Council for the United States & Italy in Venice.

Partnering Up

Marchionne believes the only way to sell Fiats profitably in the U.S. is to build them in North America. He said he's "having discussions with everybody," though he also didn't rule out building a factory. While Fiat has an existing partnerships with Ford (F), another potential alliance partners is Mercedes-Benz (DAI), which is interested in building passenger cars in North America in addition to the SUVs it builds in Alabama. Nissan (NSANY) has excess plant capacity at its Mississippi plant, and seems interested in replacing some of the SUV capacity it has there with passenger cars. Fiat already shares engineering with Ford on the U.S. automaker's Ka minicar in Europe. Ford is expanding its small car manufacturing in Mexico to build the Ford Fiesta, and would also be a logical partner.

But it's not as though Fiat has to go begging for a partner. In fact, says David Cole, chairman of the Ann Arbor (Mich.)-based Center for Automotive Studies, with an established and successful small car platform in the 500, and U.S. automakers looking to increase their small car offerings as gas prices climb, "Fiat isn't having any problems getting a meeting." Cole says Chrysler and Ford are the most likely partners for Fiat among U.S. carmakers, since General Motors had a painful and expensive divorce from an alliance with Fiat a few years ago.

South America Stronghold

Fiat, though it left the U.S. market in 1983, has remained a powerful force in South America. In Brazil, the company has a leading 25% market share and last year produced 800,000 vehicles at one plant, making it the largest single auto plant in the world. (The plant receives 6,000 delivery trucks a day, and 240,000 loaves of bread every week for its cafeteria.)

But Marchionne said he'd be unlikely to export cars from there to the U.S., given the scale of the operation and the domestic demand in Brazil. "I have no space in Brazil, and I think it would be unwise to concentrate more production capacity on that site," he said. In any event, he said, the 500 and the Alfas will be built in different locations. Fiat also manufactures in Argentina, but it is focused on using those plants to build up its sales and market share in South America, Central America, Mexico, and the Caribbean to a combined 15%. Outside Brazil, it only has about 3% to 4% of those markets.

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