Skeptics think Fiat CEO Sergio Marchionne's aim to triple Alfa Romeo's global sales to more than 300,000 units by 2016 is too ambitious. But Alfa's European boss, Louis-Carl Vignon, is convinced Alfa has enough fresh products to meet -- and possibly exceed -- Marchionne's target.

Currently, Alfa gets most of its volume from two aging models, the MiTo subcompact and the Giulietta compact, in a slumping European market. With fresh product and by expanding into new markets including the United States, the brand can dramatically improve sales, Vignon believes. "With our current segment coverage and our geographical footprint, we compete in about 5 percent of the global market," he said. By 2016 Vignon wants Alfa to compete in 32 percent of the global market.

Last year, Europe accounted for about 90 percent of Alfa's 101,000 global sales. To reduce its reliance on on the region, Alfa this year will return to the U.S. market it quit in 1995. "Alfa's brand awareness in the U.S. is still at a relevant level despite an absence of nearly 20 years," Vignon said.

Alfa says Europe and the United States will be its two largest markets by 2016 with Europe, Africa, Russia and the Middle East accounting for about 180,000 of its planned 300,000 sales.

Halo model

The 4C small sports car will lead Alfa's U.S. comeback. At the Geneva auto show, Alfa showed a so-called Opening Edition of the 4C coupe equipped with carbon fiber inserts in the headlamps and in the rear spoiler. Alfa will make 1,000 units of the variant and sell them at prices starting at 60,000 euros in Europe.

In June, Alfa will open the order books for the standard 4C, which will start at about 55,000 euros. Alfa plans to build about 700 4Cs this year, with deliveries in continental Europe due to start in September. Right-hand-drive variants will arrive at dealers in October. The automaker did not reveal the car's starting price for the United States, where the 4C will debut after the Los Angeles auto show in November.

By the end of 2014, a 4C targa with a small removable carbon fiber roof will join the 4C range. Alfa plans to make 26,000 units of the 4C coupe and targa during its seven-year life cycle.

Key cars

The 4C is a low volume image-booster so the brand's hopes of tripling sales hinge on the mid-sized Giulia sedan and wagon and a large-premium sedan based on the Maserati Ghibli's underpinnings. This rear-drive Alfa flagship will compete with the Audi A6 and BMW 5 series. Alfa plans annual sales of 30,000 units for the sedan, which will start at about 55,000 euros. Sales begin in 2015 in Europe, China and the United States.

That same year Alfa will launch the Giulia, which it expects to account for a third of its total volume. "A mid-sized sedan is fundamental in North America, where this type of vehicle covers 20 percent of total sales and is also crucial in Asia-Pacific, where represents almost 9 percent of demand," Vignon said.

Alfa likely will sell the Giulia wagon only in Europe where wagons account for more than 40 percent of mid-sized model sales.

Also in 2015, Alfa will launch a rear-drive two-seat roadster known as the Spider. It is being co-developed with Mazda, which will produce the Alfa roadster alongside its MX-5 in Japan.

Alfa's fifth new model will be a mid-sized SUV. "It will be a brand statement," Vignon said, adding that the SUV's width would be in the range of 4600mm to 4800mm.

TURIN -- Fiat CEO Sergio Marchionne is betting billions of euros that Alfa Romeo and Maserati will help drive the automaker's money-losing European operations back into the black by 2015-2016.

He's also counting on the underperforming sporty brands to help ignite a production boom that will turn the company's under-used European plants – particularly those in Italy – into export champions that will work around the clock to meet untapped global demand for models such as the Levante, Maserati's first SUV.

Marchionne's big gamble on Alfa and Maserati comes at a time when rivals such as PSA/Peugeot-Citroen, General Motors and Ford Motor are negotiating to close European car plants to adjust to shrinking demand and to end big financial loses in the region.

Marchionne has said for years that European volume automakers must make painful capacity reductions to become profitable in Europe again. Now the CEO has accepted that it is politically impossible for Fiat to close factories in Italy. To fully use the group's underperforming Italian plants, Marchionne aims to increase Maserati's annual sales to more than 50,000 by 2015 from about 6,000 last year, and he wants Alfa to triple sales to more over than 300,000 by 2016.

Boosting exports from Italy to global markets makes sense as the European new-car market has shrunk every year since peaking at 16 million units in 2007. New-car sales dipped 8 percent to 12.5 million in Europe last year and volume is forecast to slip below 12 million this year. Analysts don't see a return to the pre-crisis sales level until the end of the decade at the soonest.

Marchionne is also wise to concentrate on the Fiat Group's higher-end brands, especially considering the success of BMW, Audi and Mercedes-Benz. The three German premium automakers have avoided the European sales declines that have plagued most volume brands over the past few years. In addition, all three have added shifts or shortened vacation periods at their European plants in recent years to keep pace with strong demand for their models in countries such as China and the United States.

"We will focus on Alfa Romeo and Maserati to access the higher end of what we consider to be a permanently polarized market now," Marchionne said last month.

Can't do both?

Analysts are skeptical about Marchionne's new plan because it will likely conflict with his other mission, which is to take full control of Chrysler Group. Industry watchers say Fiat simply does not have enough cash to buy the stake it still needs to take over Chrysler and also to invest billions to revive Alfa Romeo and Maserati.

"While Fiat adapting its product to a polarizing market makes sense, we think the market could be disappointed that capacity actions do not feature in Fiat's plans, especially given Ford, GM and PSA have all made tough capacity decisions recently," Morgan Stanley analysts wrote in a note to investors. In early February, Marchionne reiterated that Fiat won't close any Italian vehicle assembly factories. The Cassino, Melfi, Mirafiori (Turin) and Pomigliano plants have an installed capacity of 1 million units, but last year their combined output declined by 18 percent to 394,620 units, according to the Italian automakers association ANFIA.

An automaker should use from 75 percent to 80 percent of installed capacity to reach break-even, industry observers say. Last year, Fiat's capacity use rate was about 40 percent in Italy and just above 50 percent in the rest of Europe, which includes plants in Poland, Serbia and a joint venture in Turkey.

Managing capacity might get even harder for Fiat as it adds production in Italy. In January the automaker reopened an abandoned Bertone plant outside of Turin, where it plans to build up to 50,000 Maseratis a year. If Marchionne's plan to build upscale vehicles in Italy works, high-margin Alfas, Maseratis and Jeeps will offset the country's high labor costs and low labor flexibility.

2 million vehicles

The CEO envisions Fiat's European plants building about 2 million cars, SUVs and light commercial vehicles annually by 2016, up from 1.25 million units last year. At that production volume, Marchionne says that the company would break even in Europe.

By 2016, about half of the additional 750,000 units built in the company's European plants will be sold in Europe and the other half – dominated by Alfa Romeo, Maserati and Jeep models – will be sold in global markets, according to Marchionne's planning.

Analysts believe Marchionne's mission might be too costly to achieve. "Fiat's plan to move upmarket comes with a big price tag. With up to 18 billion in capital expenditures to fund over two years, net debt is unlikely to decline before 2015, meaning a full buyout for Chrysler may be off the table for some time," Morgan Stanley said.

Barclays Capital also signaled concern in a recent analyst note. The firm wonders how Fiat can succeed when most of its rivals "are pursuing the opposite strategy of trying to localize production to hedge against currency risk." The analysts also said: "Competitors have tried on numerous occasions but failed to push upscale, with the notable exception of Audi."

Alfa wants the 4C to help boost its brand image.   Another skeptic is Max Warburton of Bernstein Research. He wrote: "Perhaps it is possible to grow Maserati, Alfa, the [Fiat] 500 [range] and Jeep, but it will take time, capital and success is obviously far from assured." Warburton noted that Marchionne's strategy results from pressure from the Italian government to pursue growth when the pragmatic choice would be to rationalize. Rubik's Cube Marchionne knows that the revival of Alfa and Maserati will take time. His challenge is to exploit the brands' potential, which is something that has eluded him. In my first interview with Marchionne in October 2005, he shared this view on Alfa: "The Alfa issue is complicated and simple at the same time. Alfa is a great, world-renowned brand, but it is selling fewer cars than planned." Seven and a half years and two unsuccessful relaunches later, Alfa remains a Rubik's Cube that the workaholic CEO just can't seem to solve. In 2012, global sales slipped 27 percent to 101,000, which was Alfa's lowest total since 1969. Last October, Marchionne announced a new plan for Alfa that calls for the introduction of nine all-new or replacement models in the next four years to boost sales to 300,000 by 2016. To reach this goal the CEO has committed more than 1 billion euros to Alfa for 2012 to 2014. Barclays analysts have doubts about the Alfa plan because, as they said in a note to investors: "It is not the first time we have heard an ambitious volume plan for Alfa." In the past, Marchionne was even more bullish with his Alfa sales predictions. He said in April 2010 that he wanted the brand's annual sales to reach 500,000 by 2014. Just keeping Alfa's sales steady will be tough. At the Geneva auto show this month, Alfa will debut the production version of the 4C sports car, but the automaker won't get a significant sales boost from the coupe because output will be limited to 2,500 units. Until 2015, Alfa will offer just two aging models: the MiTo subcompact and the Giulietta compact hatchback. Massimo Vecchio, a financial analyst with Mediobanca Securities in Milan, said the new Alfa plan will not succeed because the competition is too tough. "Even if it reaches the planned 300,000 units, Alfa will continue to lose money and remain a pygmy in the battle of titans between the German premium brands, which are already selling well over a 1 million units a year," Vecchio said.

Tough target

Marchionne is investing more than 1 billion euros in Maserati to double its product range to six models from three. Those additional models are expected to boost sales eightfold by 2015 compared with last year's 6,288 units. Maserati is already an export-oriented brand, with 2,904 units sold last year in the United States, the brand's biggest market, and 930 in China, its No 2 market.

The first model in Maserati's product offensive is the Quattroporte. The Quattroporte went on sale in Europe in February starting at 149,000 euros in Italy for the top-of-the-range V-8 model. The car's U.S. and Asian rollouts happen this summer. The company aims to sell from 12,000 to 15,000 Quattroportes this year, which is more than twice the previous Quattroporte's 5,088-unit peak in 2007.

Maserati plans to unveil a mid-sized four-door sedan called the Ghibli at the Shanghai auto show in April. At about 5000mm long, the Ghibli will compete with sporty sedan offerings including the Audi A6, BMW 5 series and Mercedes E class. The Ghibli will start at about 70,000 euros when it goes on sale in Europe this summer.

A third model, the Levante SUV, will be built at Fiat's Mirafiori plant in Turin using underpinnings shared with the Jeep Grand Cherokee. Production will begin in 2014. Combined volume for the Quattroporte and Ghibli is about 35,000 units a year at full capacity. The Levante would account for another 20,000 units.

Marchionne believes that the only thing that could keep Maserati from reaching its ambitious goal would be poor product execution, "which is highly unlikely," he added.

Mediobanca's Vecchio agrees: "In the years to come, Maserati looks to become a success story. This relaunch was long overdue."

GENEVA/DETROIT (Reuters) -- Sergio Marchionne does not walk on water. Nevertheless, it may require a miracle to pull off the Fiat chief's latest gambit: Take his sporty Alfa Romeo brand global with more expensive models and triple its sales volume by 2016 -- after years of losses.

To add extra spice to the challenge, which takes place as European car sales plummet to 17-year-lows, the new Alfas will be built in Italy, where labor and material costs are far higher than in the United States, Asia or Eastern Europe.

The plan is however about far more than the fate of the Alfa brand. It represents Fiat's only real hope of combating a collapse in its home market and breathing new life into idled factories. Should it fail, and the new cars flop, the company that Italians view as a cornerstone of their economy will have little choice but to put thousands of employees out of work and tip entire communities into turmoil.

Marchionne has form where ailing brands are concerned. The 60-year old has been widely hailed for his 2009 acquisition and subsequent turnaround of bankrupt U.S. automaker Chrysler. However his announcement late last year of a strategic overhaul of the 103-year-old Alfa Romeo brand -- which Fiat acquired in 1986 and has since failed to revive despite repeated attempts -- has been greeted with skepticism.

"I wouldn't write the plan off," said Bernstein analyst Max Warburton, noting the Alfa brand's resilience despite years of neglect. "But get it wrong, or find consumers aren't interested, and it will be a financial catastrophe."

Resurrection scheme

Marchionne is betting on Alfa because he believes it can deliver the global profile that Fiat cannot and far greater sales volumes than Maserati.

Alfa's overhaul comes with a 1 billion euro ($1.3 billion) price tag to pay for the introduction of five new models by 2016, and a revamp of the brand's two existing compact cars.

Leading the project is the limited-edition 4C sports car, a compact two-seater which makes its public debut at the Geneva auto show on Tuesday and goes on sale later this year. Pricing is rumored to be between 50,000 and 60,000 euros.

The 4C, competing with the Porsche Cayman and Boxster, will be joined in 2015 by the Spider roadster, co-developed with Mazda and priced from less than 23,000 euros ($30,000), and a new sedan expected to share underpinnings with Chrysler and Ferrari-sourced engines with the new Maserati Ghibli.

Another weapon will be the Giulia, which will be unveiled in 2015 and the first mainstream Alfa model to be sold in the United States since it quit that market in 1995. The Giulia sedan and wagon will be followed in 2016 by replacements for the Giulietta and MiTo hatchbacks.

Marchionne believes this strategy will help Fiat raise Alfa's annual sales to 300,000 cars by 2016. While that goal is down dramatically from a previous target of 500,000 cars by 2014, it still looks a stretch from the 92,000 Alfas sold in 2012 -- the worst showing in more than 40 years -- and the brand's previous best of just over 200,000 sales in 2000.

Barclays Capital is among those doubtful of the scheme.

"It's not the first time we have heard an ambitious volume plan for Alfa," the investment bank said in a recent note to investors. "Volumes were supposed to be 400,000 in 2014 rather than the 70,000 that seems likely."

The top global auto forecasting houses are equally unconvinced. IHS Automotive and LMC Automotive are projecting annual sales of around 230,000 Alfas by 2016.

"Alfa is going to have a fight on its hands in luring luxury buyers into its vehicles," said LMC senior analyst Joseph Langley. "Charging a premium and leaning on heritage is not enough in the highly competitive luxury segments, as Cadillac [and] Lincoln have experienced."

Marchionne himself has said Alfa's task will be difficult. The division has had six bosses since his own 2004 appointment, and none of them have been able to move the needle much.

"I left Alfa because I couldn't get the green light for a real product plan with the right motors for the right clients ... who are now driving BMWs," said an executive who ran Alfa less than a decade ago.

"It was clear to me there was a lack of resources. Alfa had become an empty box."

Eye on Audi

European car demand is expected to contract even further this year, squeezing mass-market brands still harder between excess product and cut-throat pricing, while a strong euro adds further complications.

Marchionne is also up against luxury buyers' preference for well-established German premium brands such as BMW and Audi, each of which sells around 1.5 million cars a year.

While Fiat has struggled to find cash for Alfa, its deep-pocketed rival Volkswagen has become the envy of the industry for its lengthy but sure-footed transformation of Audi from a dowdy also-ran to a high-tech cash cow.

The upscale VW brand's rebirth may now serve as a role model for Alfa salespeople.

VW Chairman Ferdinand Piech has made no secret he thinks Alfa would be a good fit within the group's expansive portfolio of brands, where it could benefit from their pooled vehicle architectures and technology. But Marchionne has refused to sell Alfa, and observers think he is unlikely to change his mind.

That's because he sees Alfa as the lynchpin of his broader plan to boost European production by 800,000 cars a year. He expects Alfa to account for nearly 40 percent of that additional output, with many of those being higher-margin cars shipped to North America and other export markets.

Industry observers aren't convinced the strategy will play out as the Fiat boss envisages.

"Moving Alfa away from the mass market is the biggest risk in Fiat's turnaround plan" said a fund manager. "Until now, all their plans for Alfa Romeo have fallen below target."