Alfa Romeo is one of the most famous sports cars in the world, along with Porsche, Ferrari, Maserati, Corvette, Lamborghini, and Jaguar. After experiencing severe economic difficulties during the early 1990s, which resulted in the company’s pullout from the U.S. market, Alfa Romeo and its parent company, Fiat, have performed a turnaround of the legendary carmaker–booking international success with the 156 model, introduced in 1998 to universal acclaim, followed by the 166 sedan. In 2000 the company prepared for more success with the October launch of the 147. Alfa Romeo’s renewed success has not been enough for Fiat, however, which saw losses totaling more than US$100 million in 1999. In March 2000, Fiat announced a share-swap partnership agreement with General Motors Corporation (GM), giving the U.S. carmaker 20 percent of Fiat and making Italy’s dominant automaker the largest single GM shareholder, with 5.1 percent of the Detroit company. The GM-Fiat agreement has already produced a bonus for Alfa Romeo–following the agreement, Fiat announced its intention to reintroduce Alfa Romeo to the U.S. market with a new Spider design.
Founding an Automotive Legend in 1910
Alfa Romeo was founded in Portello, just north of Milan, in 1910. Cav Ugo Stella, managing director of a Portello assembly plant for the Darracq, a French automobile, decided to organize a group to purchase the plant and build a car more suitable for the harsh and mountainous Italian roads. Along with a few Milanese businessmen, he took out a loan to purchase the Darracq plant. The group named itself the Lombardy Car Manufacturing Company (Società Anonima Lombarda Fabbrica Automobili) and soon was known by its initials–ALFA.
Ugo Stella hired Giuseppi Merosi as chief automotive designer of the new company. Merosi had worked previously as a designer for Marchand, Fiat, and Bianchi car companies and was well qualified to design both touring cars and cars for the racing circuit. His first design for ALFA included a monobloc engine, high tension magneto ignition, three-bearing crankshaft, side valves, and pressure lubrication. A radiator badge also was designed for the new firm’s cars, including the soon-to-be famous red cross and snake, symbols that were part of the emblems of the city of Milan and the Visconti family. A blue border surrounded the edge of the circular badge, with the word ‘ALFA’ at the top and ‘MILANO’ at the bottom. First inscribed in brass lettering, the lettering was replaced shortly afterward with white enamel. During the first year of business, ALFA manufactured ten cars each of a 12 horsepower and a 24 horsepower model; one year later, production had increased to 40 cars of each model. By the time World War I began in 1914, ALFA was manufacturing 272 chassis a year with a staff of almost 300.
Although revenues from car sales seemed to provide adequate funds for ALFA to continue business, in 1915 the company was acquired, suddenly and surprisingly, by Nicola Romeo. From rather humble beginnings, Romeo had graduated from the University of Liege with a degree in electrical engineering. After working for a short time in Germany and then France, he returned to his native Italy and started a business in Milan in association with the American company Ingersoll-Rand. Romeo’s business was so successful that he soon formed his own firm to manufacture mining equipment. This, too, proved successful; the expansion of his company was so rapid, that the number of employees he hired increased from 100 to more than 1,200 in three months during the summer of 1915.
When Romeo purchased ALFA in 1915, there were fears among the remaining management and workers that the company was doomed for extinction. Romeo had purchased not only ALFA, but also numerous other firms in the area. His goal was to create an engineering combine that manufactured compressors, tractors, air brakes, ploughs, railway equipment, and other assorted products for use in heavy industry. Fortunately, Romeo was also a motoring enthusiast and had always dreamed of making a prestigious Italian sports car. As a result, he immediately expanded the production facilities at the ALFA factory in Portello. In February 1918, he changed the name of the firm to Società Anonima Italiana Ing. Nicola Romeo & Company. In addition, he decided to place his own name next to the well-respected ALFA name on the company’s radiator badge, and after 1918 all the firm’s cars appeared with ‘Alfa Romeo’ on the hood.
During the 1920s Alfa Romeos on the racing circuit established the company as one of the premier sports car manufacturers in the world. Alfa Romeo relied heavily on modified versions of its prewar racing cars, while designer Merosi labored frantically to design more up-to-date models. As Merosi’s new designs were introduced on the raceways, the company began to win such prestigious competitions as the Parma-Berceto, the Consuma Hill Climb, the Coppa Florio, the Aosta-Great St. Bernard Hill Climb, the Autumn Grand Prix, the Circuit of Savio race, the Circuit of Mantua race, the European Grand Prix, and many, many more. Nicola Romeo was determined to wrest the European racing crown from Italian competitor and rival Fiat, and he employed the best drivers and mechanics in order to do so. Enzo Ferrari, who was to become famous in his own right as an Italian sports car manufacturer, won the 1927 Circuit of Modena in a six-cylinder 150 Alfa Romeo. As Alfa Romeo continued to win races, the innovations that led to the successes of the racing cars directly affected the design and production of the company’s touring cars and roadsters; for example, front wheel brakes, adapted from the Alfa Romeo racing cars, were installed on touring cars for the first time.
Vittorio Jano, who replaced Merosi as head of design at Alfa Romeo in 1926, continued the tradition of improving the company’s cars through his creations for the racing circuit. Jano’s first design for general production was the NR (Nicola Romeo) touring car, which included a single overhead camshaft, coil ignition, a four-speed gearbox, and rod-operated brakes. Despite the growing success and reputation of the company, Nicola Romeo suddenly and inexplicably retired in 1928, and management of the company was assumed by the board of directors. Unfortunately, the firm began to experience financial difficulties as soon as Romeo retired.
During the early 1930s, management changed the name of the firm from Ing Nicola Romeo and Company to Societe Anonomie Alfa Romeo. Alfa Romeo’s revenues continued to diminish, and in 1933 the government-sponsored Istituto Riconstruzione Industriale (IRI) assumed control of the company. Although Alfa Romeo technically retained its status as a private corporation with its own board of directors, the company had essentially been nationalized. Under the auspices of IRI, and with the rise of Benito Mussolini as dictator of Italy, Alfa Romeo’s production facilities at Portello were expanded to include airplane engines, armaments, diesel engines, and even light aircraft. Jano continued to design touring cars and racing cars for the company through the mid-1930s, but car production became less and less important as Mussolini prepared Italy for war.
Alfa Romeo’s fortunes during World War II slipped even further. In 1936 a Spanish engineer by the name of Wilfredo Ricart was hired to replace Jano as head of the design office at Alfa Romeo. Ricart had extensive experience designing diesel engines and sports and racing cars and also had organized public transportation in the city of Valencia before arriving in Italy. Expectations of his potential for designing Alfa Romeo cars were very high. But Ricart, it was soon discovered, exhibited some very strange habits, including a penchant for wearing enormously thick rubber-soled shoes. When asked by Enzo Ferrari why he affected these shoes, Ricart replied in all seriousness that a genius’s brain must be cushioned against the harsh unevenness of the ground lest its delicate mechanics be disrupted. Upon hearing Ricart’s response, Ferrari left Alfa Romeo. During the war years, Ricart’s designs for the company never went beyond the prototype stage.
After the end of World War II, Alfa Romeo’s factory at Portello needed rebuilding because of the damage inflicted by American and British bombing raids. At the same time, the company’s board of directors decided to release Ricart from his contract and hire Orazio Satta to replace him. Satta was the last of the great Alfa Romeo designers. Educated as an aeronautical engineer, Satta guided the company into an era of racing success and economic prosperity. Satta was responsible for designing the 6C 2500 Super Sport, the 1900 Sprint, the Giulietta Sprint Special, and the famous Spider Veloce. All of these cars sold extremely well abroad, with the Spider Veloce selling especially well in both Britain and the United States. During Satta’s tenure, Alfa Romeo also continued to be successful in racing, winning such prestigious races as the 1950 and 1951 Swiss Grand Prix and the 1953 Grand Prix of Supercortmaggiore at Merano.
By the early 1960s, the factory at Portello was unable to produce enough cars to suit the growing demand of Alfa Romeo customers, so the company built a new assembly plant at Arese, about ten miles from Portello. In 1963 the first Giulia Sprint GT rolled out of the plant at Arese, and by 1970 manufacturing capacity had increased to 150,000 automobiles per year. Still striving for the best performance from its vehicles, the company built a test track at Balocco, west of Milan. Numerous prototypes were tested on this track, and Satta’s reputation as a designer continued to grow with each successful production. As sales increased, Alfa Romeo laid the foundation for a new plant just outside Naples, the place of Nicola Romeo’s birth.
In 1970 Alfa Romeo sold 109,598 cars worldwide, primarily in Europe and the United States. The company was at the height of its success, with a growing share of the sports car market in every country where it sold cars. When Satta retired, accolades were heaped upon him, both by his peers and by the Italian government. After Satta’s retirement, however, Alfa Romeo began to experience managerial and financial problems. Rising production costs and increased competition from Ferrari, Maserati, Jaguar, Porsche, and American car manufacturers led to declining revenues. In addition, the tradition of testing new Alfa Romeo models through the racing circuit was growing less important to the design office, and technical problems began to occur in cars purchased by customers expecting high levels of performance. By the early 1980s, the manufacturer’s financial position had deteriorated so rapidly that the state-owned holding company Finmeccanica had taken control of the Alfa Romeo factories.
Under the auspices of Finmeccanica, Alfa Romeo’s fortunes fared no better. Management was unable to stop the company’s financial hemorrhaging and, as a result, Alfa Romeo became an attractive takeover target. Ford Motor Company expressed interest, but in 1986 Fiat outbid Ford, acquiring Alfa Romeo and all its holdings for US$1.75 billion. Fiat, a well-established Italian car manufacturer owned by the Agnelli family, regarded Alfa Romeo as the perfect complement to its own line of European sports cars.
Alfa Romeo benefited from Fiat’s largesse–Fiat decided to invest more than US$1 billion in rehabilitating and improving the company’s manufacturing plants in Portello, Naples, and Arese, while more than US$1.25 billion was earmarked for research and development. Yet Fiat’s direct management and supervision of Alfa Romeo car production and distribution was unable to reverse the company’s fortunes. In 1989 Fiat formed Alfa Romeo Distributors of North America, a 50–50 joint venture with Chrysler. This arrangement, it was hoped, would enable Alfa Romeo to increase its presence in the American automobile market. Since Alfa Romeo had sold 8,201 cars in 1986 in the United States, it was not an unwarranted prediction that annual sales would increase to 12,000 by 1991. With new designs ready to roll from the company’s Italian factories, Chrysler and Fiat were even confident enough to project annual sales figures of US$40,000 to US$50,000 by 1995. Fiat depended on Chrysler’s knowledge of the American car market and gave Chrysler management a free hand in advertising and distributing Alfa Romeo cars.
Falling and Rising in the 1990s
From the beginning of the collaboration, however, almost nothing went according to plan. The first Alfa Romeo car produced under Fiat ownership, the 164 sedan, was delayed so that Fiat engineers could improve its quality and add a 2.0-liter turbo engine. The delay lasted months longer than expected, and distributors in the United States were left with nothing to sell except the Milano sedan and the old version of the Spider convertible. Unfortunately, the Alfa Romeo Milano, another design significantly influenced by Fiat engineers, was plagued with mechanical problems and quickly developed a reputation for unreliability. Chrysler, dissatisfied with the results of the joint venture, decided to dissolve the partnership in 1991. Chrysler’s withdrawal left Fiat to market Alfa Romeo cars alone in the United States and, as a result, Alfa Romeo’s presence in the United States began to decline dramatically. During 1991 only 649 Alfa Romeo cars were sold in the United States.
In an attempt to improve Alfa Romeo’s dwindling market share, Fiat engineers conceived the 155, introducing the car in Europe in 1992. The car did not sell well, however, which industry analysts attributed to the lackluster exterior and interior design. With earnings decreasing and debt rising for its U.S. operation, Fiat decided not to export the 155 to the United States. In 1993 Alfa Romeo’s car production dropped 24 percent to only 109,598 units, most of which were sold in Europe. A decision by Fiat management not to sell the new Spider convertible, the Spider coupe, or the newly designed 145 hatchback in the United States confirmed the company’s decision to pull out of the U.S. market.
Nonetheless, Fiat had far from abandoned the legendary Alfa Romeo name. Throughout the 1990s, the company initiated a retooling of the Alfa Romeo, aimed at winning back customers through an increased commitment to quality in manufacturing as well as a return to the design excellence that had built the Alfa Romeo name. By 1998, Alfa Romeo was officially ‘back’: in that year the company’s new 156 sedan won the European Car of the Year award, sparking a rush of orders. By the end of 1998, the success of the 156 was confirmed, with orders nearing 200,000 cars from 60 countries.
Alfa Romeo celebrated its 90th anniversary in 1999 with another success, the launch of the 166 sedan, designed to compete in the same class as the Mercedes E series. The 166 proved as successful as the 156, and in Europe, at least, Alfa Romeo had once again become a favorite among car buyers. The return of the Alfa Romeo image was not enough to rescue the failing Fiat, however. After posting losses of more than US$100 million in 1999, Fiat acknowledged that it was seeking a ‘partner’ automotive company.
In March 2000, the company reached a partnership agreement with General Motors. In a share-swap agreement, which gave GM 20 percent of Fiat and Fiat 5.1 percent of GM–making the Italian company the largest GM shareholder–the two companies announced their intention to join forces to enhance their positions in the European and Latin American markets. At the same time, Fiat acknowledged its intention to return Alfa Romeo to the U.S. market as early as 2004, with a new Spider model especially designed for the U.S. car market. With the backing of Fiat, Italy’s largest industrial concern, and GM, the world’s largest automaker, the Alfa Romeo name seemed certain to continue thrilling sports car enthusiasts well into the 21st century.