Europe's comeback kid

Alfa come back.

It was a simple request made at last year's Concours Italiano by hundreds of American fans who fondly remember the famous marque's Italian styling and sporty handling.

Although Alfa Romeo SpA became the '98 comeback kid in Europe, don't expect to see the company's new flagship 166 on U.S. streets, even if it was tested here.

A little more than a year ago, questions about the future of Alfa Romeo plagued the automaker. Last year the company couldn't build enough of its award-winning 156 sports sedan. Now its 166 has completed the rebirth of the famous brand owned by Fiat SpA.

"We've done all we've said we'd do," says Roberto Testore, chief executive of Fiat Auto.

Last year Alfa planned to sell 200,000 cars worldwide, quite a stretch from the 118,000 it sold in 1996. During 1998 in Western Europe, it sold 175,642 units alone. Much of the recent success is due to outstanding results of the new 156. The coupe-like sedan had 150,000 orders in 10 months - the number the company had hoped to sell in a year. By the end of 1998, sales were up 62%.

Now the 166 puts Alfa back into serious E-segment competition - a segment that totals 1.2 million cars a year in Western Europe.

"It represents the crowning moment in a design and manufacturing cycle that has seen, in a very short time, the overhaul of the entire Alfa Romeo range," Mr. Testore says.

Alfa invested ItL750 billion ($453.2 million) in the flagship, including ItL500 billion ($302.1 million) in industrial improvements and ItL250 billion ($151.1 million) in research and development.

For this investment, the company hopes to sell more than 50,000 166s worldwide annually. In the three months following its October 1998 launch, Alfa had 17,000 orders for the vehicle, which, like the 156, will be shipped to foreign markets such as Argentina, Brazil, Poland, Turkey, South Africa, Japan and Australia. The 156 and 166 share the honors of being the Alfa models sold in the largest number of countries.

"The Alfa 166 confirms its personality on the road," says Product Development Director Giuseppe Perlo, "a personality of power and control."

That personality is remembered in the U.S. where 18,000 Alfa Romeos that arrived here before the company's 1993 pullout can still be spotted. Although Mr. Testore says you can "never say never" to a U.S. return, he also says the company has not scheduled any comeback. The investment to recreate a network of dealers would be too high to conquer a market that is not growing, he explains. Instead the company will concentrate on rebuilding its brand image in Western Europe and growing one in emerging markets.

Even so, the U.S. remains an important locale for the company, says Emanuele Leveroni, chief executive officer of Fiat Auto Research and Development USA.

The company maintains corporate offices in New York and employs about 7,000 people in North America through several subsidiaries, including auto suppliers Magneti Marelli and Teksid.

Magneti Marelli's three plants in North America supply fuel injection systems, throttle bodies, solenoids and carburetors to DaimlerChrysler Corp., Ford Motor Co. and General Motors Corp. in the U.S., Volkswagen AG and General Motors Corp. in Mexico, and Fiat in Brazil and Europe.

The company's new plant in Tennessee will supply 4 million shock absorbers annually to DaimlerChrysler for use in sport/utility vehicles beginning in the first quarter of this year. The $35 million to $40 million plant will employ 250 to 350 people.

Magneti now is working to become a modular supplier in the U.S., says Fred Gopal, president and chief executive of Magneti Marelli U.S.A., Inc. The company already supplies instrument clusters to VW from its plant near Mexico City.

"It's a must for us to establish a footprint as a modular supplier in the U.S.," says Mr. Gopal.

The U.S. also is one of Teksid's most important markets. With 20% of global sales in North America, Teksid, which supplies aluminum castings to Ford, GM and DaimlerChrysler, will continue to invest in four North American plants, including Teksid Aluminum Foundry (TAF) in Dickson, TN, Teksid de Mexico, Teksid Aluminio de Mexico and Meridian Technologies Inc. in Canada, where Teksid owns a 51% share. Teksid's U.S. headquarters are located in Farmington Hills, MI, where Fiat also has an R&D center. The center, a direct extension of Fiat's engineering department, tests many of Fiat's newest cars, including the Alfa 166, this year's Punto replacement and even Ferrari's upcoming new sportscar - codenamed F131.

The facility's engineers travel with visiting Fiat engineers to hot-test vehicles in Phoenix and for cold tests in Fairbanks, AK. The U.S. is an important testing ground, says Mr. Leveroni. During September through November, there is still very hot weather in Phoenix and very cold weather in Fairbanks.

"What would take six months (in Europe) can get done here in three," he says.

The center offers valuable input on vehicles that are very close to production. For the new Punto, it was the first time the center was directly involved in the development stage of a vehicle. The center also tests Ferraris - the only Fiat vehicles still sold in the U.S. The automaker's F355 replacement, rumored to be named the 360 Fiorano, will go on sale later this year following a testing stint in Farmington Hills.

"We are sort of seen as an independent audit provider within Fiat," says Mr. Leveroni. "We are somewhat bias-free."

The center also has worked with Fiat's ambitious World Car project and its Palio vehicles. The vehicles were planned with global sales in mind, but they were primarily designed for South America, Mr. Leveroni says. His staff has helped adapt them for other markets and recently calibrated the cars for cold starting in Russia. Fiat is set to start production in Nizhny Novgorod, Russia, later this year in a joint venture with No.2 local automaker GAZ, which makes the famous Volga sedan.

"(This) year we plan to be working on development of an application for Fiat Torino," Mr. Leveroni says.

The center will work on emissions control and engine management on a 1.2L engine for the Bravo and two versions of the new Punto.

The center also stays in contact with U.S. suppliers and watches what goes on in automotive markets around the world, including Detroit. Fiat would miss a big part of the picture if it was not here, Mr. Leveroni says.

"We have to be extremely aware of the danger of being isolated," says Mr. Leveroni. "We can be independent, but we cannot work alone."