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China-FCA merger could be a win-win for everyone but politicians

NEW YORK — Fiat Chrysler boss Sergio Marchionne has said the car industry needs to come together, cut costs and stop incinerating capital. So far, his words have mostly fallen on deaf ears among competitors in Europe and North America. But it appears Marchionne has finally found a receptive audience — in China. FCA shares soared Monday after trade publication Automotive News reported the $18 billion Italian-American conglomerate controlled by the Agnelli family rebuffed a takeover from an unidentified carmaker from the Chinese mainland. As ugly as the politics of such a combination may appear at first blush, a transaction could stack up industrially, and perhaps even financially. A Sino-U.S.-European merger would create the first truly global auto group. That could push consolidation to the next level elsewhere. Moreover, China is the world's top market for the SUVs that Jeep effectively invented, so it might benefit FCA financially. A combo would certainly help upgrade the domestic manufacturer; Chinese carmakers have gotten better at making cars, but struggle to build global brands, and they need to develop export markets. Though frivolous overseas shopping excursions by Chinese enterprises are being reined in by Beijing, acquisitions that support the modernization and transformation of strategic industries still receive support, and the government considers the automotive industry to be strategic. A purchase of FCA by Guangzhou Automobile, Great Wall or Dongfeng Motors would probably get the same stamp of approval ChemChina was given for its $43 billion takeover of Syngenta. What's standing in the way? Apart from price (Automotive News said FCA's board deemed the offer insufficient) there's the not-insignificant matter of politics. Even as FCA shares soared, President Donald Trump interrupted his vacation to instruct the U.S. Trade Representative to look into whether to investigate China's trade policies on intellectual property. Seeing storied Detroit brands like Jeep, Chrysler, Ram and Dodge handed off to a Chinese company would provoke howls among Trump's economic-nationalist supporters. It might not play well in Italy, either, to see Alfa Romeo and Maserati answering to Wuhan instead of Turin — though Automotive News said they might be spun off separately. Yet, as Morgan Stanley observes, "cars don't ship across oceans easily," and political considerations increasingly demand local manufacture of valuable products.

Alfa Romeo Tonale drops the non-hybrid 2.0-liter for the U.S.

Until last week, we were expecting the Alfa Romeo Tonale to be sold with two powertrains here. When the compact crossover greeted the world for the first time in February, Alfa Romeo told us our market could expect a 2.0-liter turbocharged four-cylinder as the base option, putting out 256 horsepower through a nine-speed automatic to all four wheels. The premium choice would be a plug-in hybrid powertrain that paired a 177-hp, 1.3-liter four-cylinder turning the front axle with a 121-hp electric motor working the rear axle for a combined 275 hp. The PHEV would also be capable of 30 miles of pure-electric motoring in the U.S. Alfa Romeo boss Jean-Philippe Imparato told Automotive News Europe during the media drive that the non-hybrid 2.0-liter is no longer an option for the U.S. because Alfa Romeo needs to go especially aggressive on reducing emissions here. In Europe, the Tonale can be ordered with both powertrains as well as a diesel. Here, the California Air Resources Board (CARB) recently proposed a new set of regulations that lay out tougher benchmarks for an automaker's CO2 emissions. If the regulations pass, 35% of an automaker's sales in the state will need to be zero-emissions vehicles (ZEV) by 2026 and 100% by 2035. California, by itself, is on the cusp of passing Germany as the world's fourth-largest economy, according to Bloomberg. Furthermore, 13 states and the District of Columbia adhere to CARB emissions rules, nine of those follow California's ZEV program, and three more states will join the ZEV regulations over the next three years. Alfa Romeo sold just over 18,000 cars here last year, and it needs plenty of Tonales to offset all those Stelvios. Across the Atlantic, the Euro 7 emissions giving carmakers public fits are slated to come into force on July 1, 2025. For these reasons as well as Alfa Romeo's commitment to going all-electric this decade, Imperato told ANE the PHEV is "an existential need" in the lineup. An Alfa Romeo spokesperson in the U.S. elaborated to Car and Driver, "As a premium brand, the PHEV better aligns with what our customers want in this segment as it provides an elevated experience, greater performance, and more than 30 miles of electric range." The subtext here is that the Tonale's corporate twin, the Dodge Hornet, will offer both powertrains when it goes on sale next year.

2017 Alfa Romeo Model Year Preview and Updates

Having taken a twenty year sabbatical from the U.S. market, Fiat Chrysler Automobile's Alfa Romeo returned for the 2015 model year with the ALFA ROMEO 4C COUPE, a singularly two seat, mid-engined sports car with a carbon fiber monocoque chassis, high-performance 1.7 liter turbocharged four-cylinder powertrain and competition-inspired bodywork. Although the 4C's price point isn't inexpensive, the amount charged is pocket change relative to what is required by Ferrari, Lamborghini and Porsche. The 4C Spider was introduced for 2016, while 2017 brings a modest list of modifications to the sporting two-seater, including Alpine Premium audio, the addition of Giallo Prototipo (yellow) to the 4C Coupe, an available carbon fiber roof treatment and updated wheel selection. GIULIA/GIULIA Ti and GIULIA QUADRIFOGLIO: Although the 4C Coupe may have taken the figurative lead in Alfa Romeo's return to the US market, the substantive start will be taken in the 2017 model year by Alfa Romeo's midsize sport sedan, the Giulia. All variants of the Giulia combine a balanced chassis, responsive drivetrains and Italianate bodywork in a compelling four door package. And with a turbocharged V6 drivetrain, sub-4 second 0-60 and a record-setting lap (for a 4-door) of the Nurburgring, the Quadrifoglio will battle BMW's M3 in Europe's super-sedan segment. STELVIO (2018): While final specs are still TBD, following the Giulia later in the 2017 calendar year will be Alfa Romeo's 2018 Stelvio. Based on the Giulia platform and formally introduced to the public at the 2016 Los Angeles Auto Show, the Stelvio will tap into the country's appetite for compact and midsize crossovers with an upright – albeit curvaceous – platform, responsive four cylinder power and performance-oriented all-wheel drive. The Stelvio should arrive in US showrooms sometime in the 2017 calendar year.