Harald Wester faces a tough challenge with Alfa Romeo. His task is to breathe new life into the Italian premium brand and develop it into a competitor against the German leaders in the luxury car segment, Audi, BMW and Mercedes.
Mr. Wester, a German national, is an old hand at Fiat-Chrysler, which makes the Alfa Romeo as well as Jeep, Dodge and other cars. He has worked for the group for 11 years and has managed the luxury Maserati brand since 2008. Alfa was added to his responsibility two years later.
Alfa Romeo was ahead of its German rivals in the 1960s but it lost its edge the following decades. Its new Giulia model, a 5-door sedan sports car, should herald the brand’s comeback and return it among the top luxury producers by 2018.
In an interview with Handelsblatt, the German auto executive explains why he is convinced that the Italians’ premium plan will succeed this time.
Handelsblatt: Mr. Wester, Alfa Romeo is supposed to become a global premium brand in a few years. That makes you the most important man at Fiat-Chrysler, doesn’t it?
Mr. Wester: The answer is quite simply no. We don’t have what you would call most important men. In our business, no one gets anywhere without a good team. Besides, in my many professional years, I have learned that it’s a good idea not to be too full of yourself.
But your plans with Alfa Romeo and Maserati are pretty ambitious. Doesn’t that make you nervous?
Many market observers say that the goals are too optimistic. What’s your argument against that?
Mathematics. Simple mathematics.
Mr. Wester reaches for a pen and a piece of paper. “Allora,” he says. Then he talks to his assistant. Minutes elapse before he finally begins to write. He jots down the number 88, followed by four dashes and several abbreviations.
Can you explain this diagram?
Eighty-eight million cars were sold in 2014, of which eight million are premium. Four segments make up two-thirds of the market: top-of-the-line sedans, large SUVs, mid-range sedans and medium-sized SUVs. We are planning eight models between now and 2018. About 400,000 vehicles is our global sales goal. This means that with an absolutely competitive product line in a large market, I only need to convince 6.5 out of 100 customers to buy one of our cars. We can do that.
The premium brands of Toyota and Nissan, Lexus and Infiniti, have been trying precisely this approach for a while now…
I don’t want to disparage other brands. All I can say is this: If we capture only a 6.5-percent market share in each segment with our products, we have already reached our goal.
For that you need models suitable for the masses. The Giulia, with a 510-horsepower engine, is still overpowered. What’s next for this model?
The Giulia will have as much power as its competitors. We will sell four-cylinder cars in Europe, preferably with 150 to 180 horsepower. The high-volume models will be introduced in Europe in the second quarter of 2016, and a few months later in the rest of the world.
Does Alfa even stand a chance of attacking Audi, BMW and Daimler in their home market?
Yes. And even if doesn’t, it won’t be the end of the world. It’s important to take a global view of things. We believe that we will sell about 35 percent of our cars in Europe, 35 percent in the United States and the remaining 30 percent in Asia and the rest of the world. We will maintain a presence in the lion’s den, but we certainly won’t be bending over backwards. Besides, the German market is too crowded for that. We didn’t rejuvenate Alfa to capture Germany. I’m looking at other markets here, like Great Britain and France.
In addition to sales, Alfa Romeo also needs to generate enough profits to keep your parent company, Fiat-Chrysler, happy.
We want to make our contribution, of course. But it certainly won’t be at the level of the top competitors yet, because there is quite simply a lot of preparatory work still to be done at this point.
So how high should the return be?
I’m familiar with the numbers, of course, but I don’t want to share them with you.
Where will these cars be built in the future, especially if you are focusing so clearly on the American market?
Italy. Only Italy. The plants exist and can be modernized at a significantly lower cost than new construction.
Is the cost structure correct? After all, you won’t be producing large numbers of cars, especially at the beginning.
We have a very workable platform strategy and we have a high percentage of carry-over parts. Perhaps not at the level of Volkswagen and Toyota yet, but they aren’t our competitors in the premium market, either. Our main competitors in this market are Audi, BMW, Mercedes and perhaps Lexus, Infiniti and Cadillac.
How much patience does Fiat have with Alfa Romeo? It took Audi 30 years to become a premium brand.
But we don’t need to build a premium brand. We have one. It’s just that we’ve painfully missed the chance it in the last few decades to build adequate products.
Do you see Jaguar as a role model?
To some degree. I don’t think they do a bad job. However, it isn’t a good idea to sell a product of equal value at a lower price.
So you want to use your German competitors’ pricing as a benchmark?
There are clear economic reasons to do that. But there are also product-related and marketing reasons. If I do a lot of development work to launch equivalent and to some extent better products, why should I sell them more cheaply? You can never dig yourself out of that hole.
How high are the annual development costs for Alfa Romeo?
We have always stressed that we intend to invest a total of €5 billion ($5.5 billion) in development in the coming years – 95 percent of that for the current series.
Other brands are currently breaking with tradition. Porsche, for example, plans to build an electric car.
Perhaps because they don’t know what to do with their marketing budget.
You think it’s a marketing ploy?
Do you know anyone who is making money with this?
See – I don’t either. We too don’t see a market there at the moment, which is why we aren’t doing it.
How is Alfa positioning itself for the future? Everyone is talking about alternative engines and driverless cars at the moment. Alfa isn’t saying much about these things.
Wester clearly doesn’t like this question. Apparently he feels that the question is presumptuous. He turns to his assistant and curses a little in Italian. “Ah, il tedesci,” “Ah, these Germans.” Finally, he turns back to the interviewer.
I believe this is unavoidable and a fixed component of the mobility of tomorrow and the day after tomorrow. However, it will not fundamentally change driving. We will experience a divided, individual mobility. There are already situations today in which sitting at the wheel is boring – in traffic jams, for example. That’s where driverless cars provide safety and quality of life. We will see how quickly this happens, and whether it will truly turn the automobile industry upside down. However, I think the notion that all we will see on tomorrow’s road are electric cars made by Google and Apple, and that we will be shutting down our business, is nonsense.
Lukas Bay is an editor with Handelsblatt’s companies and markets desk. To contact the author: email@example.com