MILAN (Bloomberg) -- Fiat S.p.A. CEO Sergio Marchionne has rejected overtures from Volkswagen AG and says Alfa Romeo isn't for sale. That means at least two more years of depressed profit for the Italian company's shareholders.
Fiat is currently losing about 300 million euros ($416 million annually on the brand, estimates Max Warburton, a Sanford C. Bernstein analyst in London.
Marchionne, who says he needs to sell 300,000 Alfa Romeos a year for the brand to turn a profit, doesn't expect to reach that goal until 2013. Alfa Romeo, which made its first model in 1910 and was withdrawn from the U.S. in 1995, is Fiat's only entry in the volume section of the luxury auto market.
“Alfa Romeo is the only possibility for Marchionne to compete in the high-price segment,” said Marco Santino, a consultant in Rome at A.T. Kearney, which has worked for Fiat on supply-chain operations. “It's a long-term project. In the short run, he has no chance of meeting the targets.”
Volkswagen is interested in buying Alfa Romeo, supervisory board Chairman Ferdinand Piech said last month. Marchionne responded by saying he will rebuild the brand himself by developing new models and reentering the U.S. His plan will be expensive, shareholders said.
“Fiat has to invest 2 billion euros to revamp Alfa,” said Wolfram Mrowetz, who oversees 200 million euros in investments as head of Alisei SIM in Milan, including Fiat shares. “I doubt Marchionne can wait for many years before deciding to sell.”
Marchionne aims to raise Alfa Romeo sales fivefold to 500,000 in 2014 by reintroducing the unit to the U.S. in late 2012 with the Giulia sedan and station wagon as well as a sport-utility vehicle it's building with Chrysler Group, of which Fiat owns 20 percent. Fiat, which doesn't disclose Alfa Romeo's earnings, declined to discuss the unit's finances.
Alfa abandoned North America 15 years ago after sales in the region plunged to 565 cars. The CEO targets 2014 U.S. deliveries of 85,000.
“Marchionne may get a higher price from VW for Alfa in a couple of years after the new models hit a less depressed European market and enter the U.S.,” said Emanuele Oggioni, who manages 650 million euros, including Fiat and VW shares, at Saint George Capital Management in Lugano, Switzerland.
The brand, whose nine-month European deliveries fell 7 percent to 80,000 cars, could be worth as much as 4 billion euros if it reaches its 2014 goal, said Warburton, who first predicted VW's interest in December 2009.