Ford bid for (Alfa) Romeo cross'd by Fiat

Just as a deal between Ford and Italy's Alfa Romeo was entering its final stages, Fiat has swerved into the roadway. Ford is understood to be in the final stages of preparing an offer for Italy's financially beleaguered sports-car maker. The No. 2 American auto company made an initial offer last spring to buy a majority stake in Alfa.

But Fiat, Italy's most powerful industrial group, last week said it planned to make a counterbid aimed at bailing the state-owned Alfa out of debt.

Still, the terms of Ford's offer might well prove hard to beat. Though negotiations were kept under close wraps, Il Sole 24 Ore, Italy's financial daily, has reported that Ford is prepared to acquire a 20 percent interest in Alfa, with a binding option to purchase 31 percent more in three years.

Ford would be committed to maintaining Alfa's distinctive designs, continuing current levels of employment, doubling productivity, and investing heavily in a company that has been in the red for the past 10 years.

Ford stands to gain an inroad into Europe's car market as well as a snappy sports car for its inventory. Alfa, in turn, can hope to tap Ford's vast network of dealers to ensure that the additional 200,000 cars that will be produced when its plants are running at full capacity can be sold.

But Alfa is not expected to turn a profit until 1990 and needs major capital investment over the next decade. Alfa's fortunes have consistently run counter to those of the rest of the country.

Most analysts agree that the once glamorous carmaker's financial woes began at the height of Italy's economic boom in the 1960s with the construction of a plant outside Naples. Operations at Alfa's Pomigliano factory never got off the ground and until a few years ago registered one of the lowest productivity rates in the industrialized world.

Last year, as Alfa's survival and the livelihood of its 28,500 employees at its two plants faced an immediate threat, Italy's giant holding company, IRI (Institute for National Reconstruction), which owns Alfa, began shopping for a buyer.

IRI president Romano Prodi first turned to Fiat but was leery of Fiat's proposal to form a joint venture that, in essence, would have divided Alfa's more vital half in Arese from its troubled plant in the south. Then Fiat withdrew from the talks, somewhat indignantly, when Alfa was approached by Ford.

Despite Prodi's enthusiasm for a deal with Ford, it is the Italian government, not Prodi, that has the final say in choosing Alfa's partner. Should Fiat come forward with a more enticing proposal, the Italian government will be hard pressed to choose a foreign suitor over a native son.

Fiat's Giovanni Agnelli is something of a national hero for his success in lifting Italy's car industry into first place in Europe. Recent industry figures show that Fiat controls 13.5 percent of the European market; Volkswagen is No. 2; and General Motors and Ford are tied for third. But considering the precariousness of Fiat's lead, it is not surprising that Mr. Agnelli is marshaling his economic and political force to prevent Ford from gaining a competitive edge.

Agnelli has firsthand experience in international matchmaking. Part of his strategy was to link up with a foreign carmaker that would share technology as well as the burden of costly investments.

That corporation was Ford. Fiat and Ford were locked in a long and stormy courtship last year, during which the possibility of a full-scale merger was examined. But after a year of talks and a major feasibility study -- much like the one recently completed between Alfa and Ford -- negotiations were scuttled.

Fiat and Ford subsidiaries have since formed a joint venture on neutral territory in England to sell heavy trucks, but talk of full-scale cooperation between the two carmakers in Europe was never revived.

Meanwhile, other carmakers in Detroit have been busy wooing their Italian counterparts in an attempt to upgrade design and workmanship of American models. And like Ford, they hope to gain a firmer foothold in Europe.

In June, Maserati and Chrysler signed an agreement that increased the US carmaker's share in the Modena-based company from 3.5 percent to 15.6 percent. Chrysler has reserved the option to purchase a controlling interest in Maserati in 10 years.

The Chrysler-Maserati deal was in part the product of a friendship between Chrysler chairman Lee Iacocca and Maserati managing director Alessandro De Tomaso. Next spring, the relationship is expected to bear its first fruit: a smart, small convertible that will carry a hefty $30,000 tag.

General Motors, the world's No. 1 carmaker, has even turned to Italian designers to refurbish the car that was once considered the classic status symbol in the United States.

Pininfarina, famous for its designs of Ferrari bodies, has been at work since 1982 creating a new Cadillac -- a streamlined two-seater convertible that will sell for about $50,000 in US dealerships next January.

But the Ford-Alfa deal is much more controversial.

In coming weeks, Fiat is likely to play on fears that Alfa will be swallowed up by the US colossus.

It was precisely these fears that led to the collapse earlier this year of a similar offer by Ford to purchase Britain's Austin-Rover, which, like Alfa, is state-owned and in financial straits.