Marchionne, who heads both Fiat S.p.A. and Chrysler Group, also says he might freeze investments in money-losing Alfa Romeo after the launch of the Giulietta in 2010.
I think Marchionne is right on Lancia -- sadly -- but very wrong on Alfa. I say that having owned three Lancias but just one Alfa.
When Lancia enthusiasts -- called Lancisti here in Italy -- see a Chrysler 300C with some sort of Lancia rebadging in a few year's time, they will be up in arms, but the global auto industry has simply no more room for a largely domestic brand like Lancia.
Last year, Italians bought 93,300 Lancias and just 4,600 Chryslers. But in the rest of Europe, Chrysler outsold Lancia by almost a 20 percent margin, or 24,400 to 20,600 units.
Herbert Demel, Marchionne's predecessor as Fiat Auto CEO, wanted to scrap Lancia. Current Lancia CEO Olivier Francois has kept the brand alive the past four years with little money and many bright ideas but the Fiat-Chrysler alliance has changed the perspective.
Fiat-Chrysler cannot afford to have two near-premium niche brands in Europe. Concentrating on Chrysler is sad for true Lancisti, but an understandable business decision.
Alfa's situation is more complicated.
The brand is losing money so it has little cash to invest in future products. But its aging product lineup means that Alfa's declining sales have to be propped up with incentives -- leading to higher losses.
During Marchionne's tenure -- for financial and strategic reasons -- Alfa has not been given the weapons it was promised to boost its sales.
The Giulietta will replace the 147 next spring, a year later than planned. The 166 brand flagship was discontinued in early 2007 and the C-Xover crossover, promised for a decade and planned to launch early next year, has been put on hold again.
Marchionne will decide by next spring whether Alfa will use Chrysler platforms to replace the aging Alfa 159, the 166 and to finally create a crossover or whether to freeze all new products, which will leave Alfa with only the MiTo and Giulietta as fresh products.
Canceling new products would kill Alfa in just a few years, so Marchionne would do better to sell the brand before it goes into an agonizing decline.
Fiat would get more money for the brand while is still alive. Even with a great heritage, a dead brand is worth almost nothing.
Marchionne would find it hard to justify killing two venerable Italian brands at the same time.
Maybe a cash-rich, globally ambitious Chinese carmaker might like to have a brand like Alfa.