Luca De Meo is used to tough assignments from his boss. In 2004, Fiat Group CEO Sergio Marchionne asked the then-37-year-old executive to turn around the struggling Fiat brand. De Meo succeeded.

De Meo's doubters

Marchionne, who appointed De Meo to run Alfa in December following the resignation of Antonio Baravalle, said, " The commitment, passion and determination with which Luca De Meo faces great challenges is the best guarantee for Alfa Romeo's relaunch plan."

Analysts, many of whom didn't think that De Meo could fix Fiat, doubt that Alfa Romeo's sales goal can be reached by 2010.

-- " I do not think even Marchionne still believes this target is achievable. The new management and financial resources he is pouring in demonstrates he knows he needs much more to take Alfa there," said Max Warburton, European auto analyst at UBS' office in London.

-- " We believe this target will be very hard to reach, as the new product plan for Alfa Romeo features a new B-segment car, but the launch of the new 149 (expected to be the brand's top seller) has been postponed until 2009, and the Alfa 159 is performing below expectations," said Marco Cristofori, an equity analyst at Cheuvreux in Milan.

-- " We see Alfa at 250,000 units by 2010, but generating just 3 percent in operating margin, thus well below Fiat Group Automobiles as a whole, for which Marchionne had set a 4.5 percent to 5.3 percent margin target for 2010," said Jens Schattner, senior analyst at Oppenheim Automotive Research in Frankfurt.

Despite the doubts, Marchionne told ANE last month that he will not change his targets for Alfa Romeo.

The other challenges

Boosting sales to 300,000 is not the only target De Meo has been asked to achieve. He also is expected to make the chronic money loser profitable. Fiat Group Automobiles does not report individual results for its brands, but financial analysts polled by ANE say Alfa loses about €1 million per working day.

De Meo starts his tenure at Alfa at a rough time. The automaker's plant in Pomigliano d'Arco, southern Italy, will be closed January and February. Pomigliano, which makes the Alfa 147, 159 sedan, 159 Sportwagon and GT coupe, accounts for 91 percent of Alfa's output. The shutdown will cost Fiat €40 million in missed revenues.In addition, parent Fiat will pay €70 million to update the plant's assembly lines and retrain its 5,000-person staff. The plant will switch to Fiat's so-called World Class Manufacturing system. It is the automaker's interpretation of Toyota's legendary Toyota Production System. The aim of both systems is to reduce waste, cut costs and improve quality.

The automaker does not comment on the performance of individual plants, but sources say Pomigliano ranks as one of the company's worst factories. It is plagued by absenteeism and erratic quality -- on average each vehicle made in Pomigliano has more than 10 defects, sources say.

Unsatisfied customers

Fiat is not satisfied with the quality of the models built in the plant. Neither are customers. Alfa Romeo scored below the industry average for customer satisfaction in surveys done by J.D. Power and Associates for Germany, France and UK this year. In the UK, Alfa ranked 31st out of 33 brands.

While De Meo waits for production to resume in Pomigliano he will work on the marketing strategies for the launch of the Alfa Junior small car and automaker's return to the US. The Junior, a three-door hatchback based on the Fiat Grande Punto, is Alfa's first small-segment car. It will compete against the Mini when sales start in September. De Meo, who also is Fiat group's chief marketing officer, successfully positioned the new Fiat 500 as an upscale minicar. With the Junior, he must find a way to keep sales high without hurting the car's profit margin. Alfa wants to sell 75,000 Juniors a year. The sales goal for the last four months of this year is 15,000 to 20,000 sales.

Alfa will return to the US in late 2009 after a 14-year absence. Without being more specific, Fiat says Alfa should reach 20,000 annual sales in the short term and 50,000 units in the medium term. Marchionne told ANE last month that 20,000 units will not be enough for Alfa to make a profit.

Said Marchionne: " Including all the elements of the re-entry, the re-positioning of the brand, the advertising and marketing support, [Alfa's return to the US] will cost between €70 million and €100 million."

Source: Automotive News Europe