Following a 23-year reign that elevated Ferrari from a decaying Italian sports car company to one of the brightest constellations in the automotive firmament, Ferrari Chairman Luca Cordero di Montezemolo was forced to step down in September after clashing with Sergio Marchionne, CEO of Ferrari’s parent, Fiat Chrysler Automobiles (FCA), about the direction of the company and the once vaunted Formula One team. “Ferrari is now American,” Montezemolo reportedly said on the way out, and he didn’t exactly mean it as a compliment.
Weeks later, Marchionne made another major shift: After 45 years Fiat announced it would spin off Ferrari, offering 10 percent of outstanding shares to the public in the US by next June. And with the stallion out of the barn, Marchionne had one more bombshell: Ferrari would be paying approximately $2.8 billion (including profit distributions and debt transfers) to FCA, a stunning measure of Ferrari’s balance sheet and FCA’s weakness.
So what does independence mean for the legendary brand? Recent Formula One results aside, Montezemolo’s strategy for Ferrari was in high gear. Ferrari’s road car programme has posted record financial returns and achieved engineering excellence only Porsche and McLaren can approach. With a hard production ceiling imposed to ensure rarity and high resale values, Ferrari has just over 7,000 buyers each year, many of them purchasing a $250,000 car merely to stay on the preferred clients list.
The first half of 2014 delivered records from the sale of only 3,631 vehicles, including revenues of $1.6 billion (up 14.5 percent), net profits of $158.4 million (up 9.8 percent) and growth of 13 percent in Ferrari’s largest market, the US.
Fueling that success are high-profit offerings like the new topless F60 America. Loosely based on the V12-powered F12berlinetta but with an as-yet-undefined power train, the one-time-only release of ten $3.1 million roadsters has already been sold, those commitments based purely on a full-scale maquette that promises Ferrari’s unique blend of art, speed and an incomparable visceral experience.
With freshly tailored lines inspired by the F60 America and a new twin-turbo 553 hp 3.9-liter V8 that may presage other Ferrari turbos, the 2015 California T is the company’s new “volume” car, now a worthy gateway to Ferrari ownership. Its performance promises to wash away criticisms of the 2008-14 California as a “lifestyle” vehicle. As an example of Ferrari’s artistic delivery of thrills, the California T’s complex, three-piece exhaust manifold is designed like a fine wind instrument to produce the operatic tenor expected of a Ferrari, not the dull, suffocated moan associated with lesser turbo engines.
Following its spin-off, Ferrari will continue to provide engineering and engine assembly services to its sister company, Maserati, which is also hitting ambitious growth targets. Without investment to expand capacity, Ferrari would be hard-pressed to provide similar services to Alfa Romeo beyond a low-volume sports car like the 2007-10 Alfa 8C Competizione. Potential expansion of engineering services may prove a lucrative adjunct to Ferrari’s road car, racing and licensing programmes, though combining engineers to create a cohesive team is a lengthy process that cannot be rushed without compromising quality.
Naturally, Ferrari cultists worry that after FCA has swept cash from the company’s balance sheet and transferred FCA debt, Ferrari may be forced to expand annual production to turn more profit by satisfying demand in markets like China, a move that might diminish long-term valuations. Public statements by FCA executives about adopting less costly construction techniques are another cause for concern.