Just a few short days after a shake up at the top of Ferrari that saw Luca di Montezemolo’s departure, it appears change will not be limited to personnel but also will include strategy.
Reports suggest that new chairman Sergio Marchionne plans to reverse course on the company’s previous course of restricting production levels of Ferraris to inflate their value and see that jump hit the Italian maker’s bottom line.
Multiple media reports suggest that Marchionne plans to increase the company’s production levels by nearly 45%: from 7,000 vehicles to 10,000. In the past, di Montezemolo kept production low because he feared oversaturating the market.
However, the number of markets he put products into has been on the rise during the past several years, but he didn’t increase the build rate so it became maddeningly difficult to buy a Ferrari.
Marchionne believes increasing the run-rate to 10,000 units will not impact the perception of the brand’s exclusivity. The first model that will see a change is the F12 Berlinetta, which he believes could benefit from becoming more “available.”
While the company was only founded because Enzo Ferrari needed a way to fund his passion for racing, thus production was never prolific. It’s a fine line an executive walks when production is expanded.
There is certainly some danger in this move: Ferrari has been very profitable under di Montezemolo’s strategy, especially in the first half of this year. According to the company, its first-half revenue was 1,348.6 million euro: an increase of 14.5%.
The maker’s profit was 127.6 million euro: an increase of 9.8%. Both figures are new records for the Italian automaker. The numbers are at all-time highs despite a drop in new car sales of 3.6%.
In a recent release about the company’s first half financial results, it was noted “any comparison with H1 2013 must also take into account the fact that the Ferrari California went out of production with deliveries of the new California T beginning only in summer. Added to this was the strategic decision to cut production taken in May 2013. However, an increase of 5% in deliveries is planned by the end of the year.”
The company saw sales rise in the U.S. and Italy – both rose 13% – however sales dropped in China from 344 vehicles to 285 due to the restrictions. That region, where sales are still growing, is one where Marchionne may begin expanding sales.
(Montezemolo leaving Ferrari – and a legacy – behind. For more, Click Here.)
Ironically, it seemed that before his depature di Montezemolo realized it might be time to loosen the production reins a bit.
“It gives all of us here at Ferrari a sense of great satisfaction to continue to achieve record financial results, particularly given that production was limited. I am sure that in a few months’ time, we will be marking the end of a truly extraordinary and unprecedented year. Sales will also increase by several percentage points to avoid excessively long waiting lists,” he said in the aforementioned release.
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Di Montezemolo resigned a few weeks ago after 23 years at the helm of Ferrari. When he took over, the company was struggling on the track and in the showroom. The aristocratic boss brought the legendary mark back to success on the F1 circuit as well as with supercar aficionados.
However, the maker hasn’t won an F1 title since 2007 and since racing victories are a significant part of the standard by which he is judged the pressure on him was mounting. With no victories this year, another failure at the recent Monza race apparently brought things to a head.
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Despite having once served as Fiat chairman and still holding a seat on its board, Montezemolo was not going to retain that post after the Fiat Chrysler merger is completed.
The decision to nudge him aside was announced by John Elkann, the Agnelli family heir who succeeded Montezemolo as Fiat chairman in 2010.
“As Chairman of Ferrari, he drove the company to a new level of technological and organizational excellence which also brought with it outstanding financial results,” Marchionne said in his statement. “I want to thank Luca for all he has done for Fiat, for Ferrari and for me personally.”
Increased production should infuriate every Ferrari owner in the world.
Increased production will probably inflate the value of existing cars on the not-unreasonable belief that they won’t be building them like they used to.
Agree with both of you. One vision stuck with Mr. Ferrari’s philosophy, “Build one less than the market will buy” whereas in today’s age it’s “build everyone you can sell” As Keenan Ivory and Damon Wayans used to say “MO MONEY, MO MONEY, MO MONEY”