Longtime Ferrari Chairman Luca di Montezemolo stepped down this week amid speculation that the regal leader of the world’s most famous sports car brand had clashed with Sergio Marchionne, CEO of Fiat, Ferrari’s corporate master.
Actually, “corporate master” is a bit misleading. Ferrari — and Montezemolo — answered to no master, which was the problem. Marchionne — who hopes to build the Fiat-Chrysler megabrand he engineered in the wake of the financial crisis into a global competitor for Volkswagen, General Motors, and Toyota — had to change that.
How can Ferrari be critical to his strategy? Because Ferrari accounts for a significant chunk of the Fiat’s profits. During the first half of the year, Ferrari printed money: Revenue was up almost 15% and profits were up almost 10%. The Prancing Stallion’s contribution to the bottom line is something like 14%.
And yet…Montezemolo didn’t want to push those numbers higher. Ferrari builds about 7,000 cars each year and is happy to make hopeful customer’s wait for their dream machines.
Montezemolo’s thinking isn’t hard to understand: Exclusivity drives excess demand, which all but ensures that if Ferrari builds the right cars — and Ferrari, of late, has always built the right cars — they buyers will come. And wait. And wait. And happily tell all their friends about waiting. And those people will join the queue. And join the happy Ferrari waiting party.
“What are you doing this weekend?”
“I’m waiting for my Ferrari.”
This dynamic of desire was clearly irritating Marchionne, who saw in Ferrari a brand that could afford to spend a bit of the equity that Montezemolo so expertly nurtured, both by building amazing cars and by perpetuating Scuderia Ferrari’s racing legacy (although, as Marchionne pointed out in jagged fashion prior to Montezemolo’s resignation, Ferrari’s more recent results on the Formula 1 track haven’t been so great).
And so within a few days of the Montezemolo Era ending at Ferrari and the Marchionne Era beginning, the Fiat CEO said that he would “gradually” increase Ferrari production, according to Bloomberg.
Fairly soon, the world could have as many as 3,000 more Ferrari’s annually.
Montezemolo and Marchionne had a profound disagreement on this score. Montezemolo believed that the world was getting exactly as many Ferraris as it needed. Marchionne believes that by not pursing the globe’s newly hyper-wealthy customers, as Bloomberg noted, the brand is leaving money — lots of money — on the table.
Marchionne couldn’t not win this argument, as he’s probably correctly assessed the market for high-end, high-performance luxury cars. The man likes his Ferraris, after all, but he doesn’t come from a racing background, as Montezemolo did. Montezemolo was, to a degree, racing aristocracy in addition to being actual aristocracy. He wanted you to feel a bit conflicted about owning a Ferrari, if you weren’t a driver in the racing sense — that tension enhanced desire.
Marchionne, one the other hand, just wants to make it easier for you to part with a million or more for the privilege of tooling around in a machine with a deep racing history — even if you never do anything more dramatic than go for a spin from Santa Monica to Malibu.
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