Head of Alfa Resigns!

[Scott Farquharson]

MILAN, Jan 12 (Reuters) - The head of Alfa Romeo quit unexpectedly on Monday, delivering a blow to Fiat's (FIA.MI) efforts to turn around the premium sports car brand as the Italian group faces one of the worst industry crises in decades.

Fiat's stock fell on the news, first broken by industry publication Automotive News Europe, ending 3.45 percent lower at 5.45 euros in Milan.

"It is a bad sign," said UBS Warburg analyst Philippe Houchois. "Things might not be going well for Alfa Romeo."

Luca De Meo's departure comes as Fiat and the rest of the car industry face plunging sales amid a global economic downturn.

Such is the severity of the crisis that Fiat Chief Executive Sergio Marchionne has said the group's core car business needs a partner because it is too small to survive by itself.

Although Alfa Romeo is a small part within the group's various divisions, De Meo's resignation is still a blow that will be felt hard, said Commerzbank analyst Gregor Claussen.

"It's more psychological than anything really fundamental," he said.

De Meo said in a statement he had decided to pursue other professional interests after seven years at Fiat, and a source close to the group told Reuters on condition of anonymity that De Meo had received an "very interesting offer from abroad".

Fiat did not name a successor.

The other brands within the division are Fiat and Lancia.

The last executive departure from the group was Roberto Ronchi at luxury sports brand Maserati in July.

LEAVING A VACUUM

At 41, De Meo was the group's youngest executive as well as one of its rising stars.

After successfully launching the Cinquecento as head of the Fiat car brand, he took charge of Alfa Romeo on the hopes that he could work his magic to revive a moribund brand whose sales trailed behind those of BMW (BMWG.DE) and other rivals.

Despite being an icon of Italian style and speed, Alfa Romeo has suffered for years from a tarnished image of poor-quality parts and service.

Even Marchionne had once acknowledged Alfa Romeo as being the group's most difficult brand to turn around.

"Alfa Romeo is definitely loss-making and will continue to be loss-making within the next two to three years," said Claussen at Commerzbank. "If the head is leaving at a time like this, he is leaving a vacuum."

De Meo had overseen last summer's launch of the MiTo, a hatchback aimed at young drivers, but the model seemed to have arrived too late to make much of a difference in light of the crisis besetting the industry.

Alfa Romeo's highly anticipated return to North America has also been postponed beyond 2010.

It has had a hard time fighting the competition in its home market. In 2008, its sales fell 28.21 percent to 52,822 units, giving it a market share of 2.45 percent against 2.84 percent for Volkswagen's (VOWG.DE) Audi and BMW's 3.16 percent.

De Meo, who had a number of roles within the Italian industrial group, also resigned as chief executive of the Abarth sports brand as well as chief marketing officer for all of Fiat.

Fiat also owns luxury car makers Ferrari and Maserati. (Additional reporting by Gianni Montani in Turin; Reporting by Gilles Castonguay; Editing by David Cowell)