GENEVA - Italy's Fiat unveils the Alfa Romeo Giulietta at this week's Geneva auto show, and while analysts do not believe the brand is under threat, they say the new hatchback is a test of its revival.
Fiat has acknowledged the need to address the flagging brand, appointing a new Alfa Romeo chief executive and pondering a relaunch in the U.S. market, where the cars have not been sold since 1985.
Fiat is getting ready to outline its strategy in April, and analysts believe the Giulietta may be the 100-year-old brand's chance to show it can make a winning model.
Fiat CEO Sergio Marchionne said in January that the Alfa brand was not up for sale, but pledged to determine a new strategy for it.
Credit Suisse analyst Stuart Pearson said he thought Fiat would stick by Alfa.
Alfa should be a good brand, Pearson said. They're starting to get some decent products, and with Chrysler it finally has the opportunity to get some scale, so I think it would be strange to abandon it now.
But it does need to boost sales. Alfa needs to get back to a couple of hundred thousand level, he said.
A U.S. presence could help, but it will still be a tall order.
Alfa Romeo sold around 110,000 vehicles last year worldwide; most of those sales were in Europe.
IHS Global Insight analyst Carlos Da Silva agreed that Fiat was not likely to abandon Alfa, which it has owned since 1986.
We have been saying that Alfa Romeo is dying for the past 20-30 years. I would be surprised if they abandoned Alfa Romeo, because even if in terms of sheer size they're nothing more than a very small brand, they have such an image for Fiat, Da Silva said.
Alfa has this wonderful racing heritage, Nomura autos specialist Michael Tyndall said. It was widely renowned for making cars that were fantastic to drive, but it's been a very long time since Alfa won a race or made a car that the motoring press has said is fantastic.
The public and press perception of this new car is critical to Alfa Romeo's future, Tyndall added.
Fiat's media-savvy CEO Marchionne will not be at the Giulietta's unveiling, instead attending a ceremony marking an investment of around $557 million (1 billion Brazilian reais) in a new factory for its CNH construction and agricultural equipment unit.
The event, also attended by Brazilian President Luiz Inacio Lula da Silva, is a chance for Fiat to strengthen its ties in the booming Brazilian market where it holds a 24.5 percent share.
Marchionne's absence from Geneva underlines the importance of Brazil for the group, where the recession was short-lived and auto sales rose 11.4 percent in 2009, a turbulent year for many other markets.
In January, the group forecast that the Brazilian market as a whole should rise 2-3 percent this year. Marchionne said at the time that his own view of the market was more optimistic.
($1=1.7950 Brazilian Real)
(Additional Reporting by Cesar Bianconi and Jo Winterbottom, editing by Leslie Gevirtz)