Alfa Romeo overhaul stalls due to Fiat-Chrysler buyout

The overhaul of Alfa Romeo has stalled as Fiat boss Sergio Marchionne turns his attention to completing Fiat’s buyout of Chrysler.

These spy shots show a mule of the planned Alfa SUV heading for Fiat’s Balocco proving ground in northern Italy. That this prototype is no more advanced than the one spotted by Autocar in Los Angeles 12 months ago shows that Alfa’s mainstream models are effectively on hold.

Autocar understands that the only new Alfa currently progressing is the Mazda MX-5-based roadster. The Alfa SUV is now unlikely to appear before 2015, a delay which also holds up a planned sister SUV from Jeep. There’s no news either on the planned Fiat 500X and its related ‘baby Jeep’ model.

Analysts say Marchionne cannot fully execute his plans to create a premium car-making division from Jeep, Alfa and Maserati without access to Chrysler’s cash reserves, but Marchionne has failed to hammer out a deal with Chrysler’s co-owners.

Fiat currently owns 58.5 per cent of Chrysler. The balance of 41.5 per cent is held by the United Auto Workers Retiree Medical Benefits Trust, a holding acquired as a consequence of GM’s bankruptcy and government bailout.

The UAW wants to maximise its investment to provide funds for retiree pensions and healthcare costs. It covers ex-Ford, GM and Chrylser workers and has 860,000 people on its books.

However, Fiat and the UAW fund have failed to broker a deal after the Union valued its holding at around £3.1bn, which is perhaps understandable considering the Trust’s responsibilities. 

Last week, Marchionne said talks had failed and he wanted to see the initial public offering executed by the year’s end. One advantage for Fiat is that the move will establish market price for the shares. However, Fiat will have to ensure it ends up as the majority owner of the UAW’s stake or the merger, which is essential to the health of Fiat, will fail. 

Analysts say Marchionne might eventually have to borrow as much as £2.5bn to complete the buyout and finally invest in the much-delayed Alfa-Jeep-Maserati division.