Sergio Marchionne, chief executive of both Fiat and Chrysler, has become the loudest preacher in the automobile business on the need to slash capacity and allow only profitable brands to survive. His gospel not only applies to the industry as a whole but especially to his own portfolio of brands.

For each marque must now show it can keep its place in his expanded Fiat and Chrysler universe.

If they can’t justify their existence, they will simply have to accept the consequences and disappear.

This is music to the ears of investors, but it is also designed as a sharp warning to Alfa Romeo’s managers to pull up their socks or risk one day seeing Mr Marchionne wielding the scalpel. For the Fiat boss is becoming increasingly frustrated with Alfa Romeo’s performance – or rather non performance.

Fiat absorbed the historic brand in 1986 to avoid Ford taking it over. But Alfa Romeo, which will be celebrating its centenary next June, has proved not only a disappointment but a steady source of losses for Fiat.

When Mr Marchionne was brought in to rescue the Italian car group he set Alfa Romeo the target of returning to profit and doubling in size.
This has not been the case.

New products and new dealers were supposed to increase annual sales to 300,000 cars a year.

This year the division is likely to sell 125,000 cars at best. And Mr Marchionne recently remarked that Fiat’s sporty iconic brand had undergone too many failed resurrections in recent years, adding rather cryptically: “You cannot be a new born Christian every four years.”

But Mr Marchionne is not about to scrap Alfa Romeo or sell it to a competitor.

He is giving the brand one last chance by integrating it more closely with Chrysler.

The idea is for new top end Alfa Romeo models to be developed on Chrysler platforms while the smaller ones would continue to be produced in Italy.

Similarly, Mr Marchionne intends to use the new Chrysler connection to try to boost the performance and prospects of his other venerable, but lingering, Italian marque – Lancia.

However, Lancia appears to pose less of a challenge given that it is in overall better shape than Alfa Romeo.

So the spotlight is on Alfa Romeo and here Mr Marchionne appears to have another big stick to motivate the Alfa Romeo troops. For lurking in the wings, there seems to be a ready buyer for the Italian brand.

In a note on Thursday, Max Warburton, a car industry analyst at Sanford Bernstein, argues that Volkswagen’s veteran chief Ferdinand Piëch could well be interested in Alfa Romeo to add a 12th brand to his portfolio. After all, he says, there are historic links between Alfa Romeo with Porsche and VW.

Other industry experts not a thousand miles away from Turin go even further and suggest that VW has been interested in Alfa Romeo for some time. Alfa Romeo could help reinvigorate VW’s underperforming Spanish brand Seat – which VW in the past said it wanted to transform into “a Mediterranean, emotional, sporting brand” like Alfa Romeo.

But more interestingly, it could provide a solution to VW’s current strategic dilemma facing its highly successful Audi brand. For Mr Piëch apparently increasingly feels Audi is being forced to cover too much ground in its efforts to compete against both Mercedes, with its more staid luxury sedan cars, and BMW, with its sporty image. This risks diluting Audi’s strategic focus and hence it would be perhaps best to allow Audi to concentrate wholly on competing against Mercedes. So acquiring Alfa Romeo would give VW a new vehicle to take on BMW.

Mr Piëch is in buying mode and VW is on a roll. After Porsche and Suzuki and perhaps MAN, Alfa Romeo – if the Italian marque fails to perform to Mr Marchionne’s exacting standards – could also end up in two or three years’ time in VW’s fold. That would raise another interesting question.

Will VW, with its new galaxy of different global brands, ultimately find itself in the same uncomfortable shoes as General Motors? Part of the reason why the US auto giant collapsed was because it was no longer able to cope with all the brands in its stable.

Mr Marchionne has also shown a taste for empire building by unsuccessfully bidding for GM’s European assets while buying into Chrysler. But he has always been consistent about one thing. He is no car industry romantic. What counts is making profits and if any component of his group shows it cannot do that, he will presumably get rid of it at some stage. His own reputation in the market hinges on delivering just that.