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How will Fiat's purchase affect Ferrari?

Posted Feb 16th 2005 6:05PM by Steven Diver

Ferrari F2003-GAWhen Ferrari took over the Maserati brand in 1997, it's aim was putting more money into their bank account. Something they have had difficulty doing in recent years. With Ferrari wanting to limit their production numbers to keep their cars exclusive and desirable, there was a ceiling as to how much money they could bring in. But with their acquision of Maserati, there was suddenly another source of income for the Maranello based manufacturer. Over several years, new models were introduced which would use Ferrari technology, and rebuilt the brand's credibility. Of course, reading between the lines, the acquisition of Maserati was a way for Ferrari to feed their massive, nearly $500 million per year, Formula One budget. With Fiat's purchase, the money that Maserati generated for Ferrari will no longer exist. So where will that money come from? Ferrari will surely have a pile of crash from Fiat to spend on F1 and develop new models, but they will be weaker in the long run as the purpose of Maserati was to help pay for their F1 program.

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Bsadighi

Bsadighi @ Dec 18th 2005 11:02PM

I'm not very well read when it comes to F1. Does anyone know what kind of money Ferrari is pulling in yearly from their F1 winnings, sponsorships, etc.? I mean it must be lucrative for them to put in half a billion a year, right? What happens to that money?

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Steven Diver

Steven Diver @ Dec 18th 2005 11:02PM

Nothing is made public as to how much money Ferrari actually spend annually in F1, but most every estimate seems to be in the $500 million per year ballpark. Sponsorship money is rolled into the money spent each year, and figures prominently into an F1 team's budget.

Sponsorship costs are a closely guarded secret, but Ferrari's title sponsor Marlboro likely spends in excess of $80 million per year to have their logo in the most prominent positions on the car. Starting in mid-2005 tobacco advertising will be outlawed at certain races on the F1 calendar, yet rumor has it that Marlboro may purchase all the advertising space on the 2006 Ferrari F1 car for $150 million per year. They will simply run the car without the Marlboro name on the car, but keep a likeness of the logo on the car.

The cost of F1 is astromonical, especially when you consider that the entire grid spends an estimated $2+ billion dollars per year.

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Karl Gunnarsson

Karl Gunnarsson @ Dec 18th 2005 11:02PM

Still, I don't really get this. Fiat owns Ferrari and in actuality Maserati, right? Still, Ferrari doesn't fall under Fiat Auto but the Fiat holding company, and Maserati was in effect moved from Fiat Auto to become a subsidiary of Ferrari in 1997. Has this changed recently?

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Karl Gunnarsson

Karl Gunnarsson @ Dec 18th 2005 11:02PM

Well, duh... and the answer was on the next page all along. I promise to keep up better with Autoblog in the future :)

Oh, and nice job you guys, if I could only check one automotive site out daily, it would be Autoblog.

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chris

chris @ Dec 18th 2005 11:02PM

Whoever wrote this didn't do their homework.

Maserati hasn't made a profit since 1990 while the licensing arm of Ferrari, a huge profit generator, has been sticking the name on everything from laptops to fountain pens.

This article was written by Luca Ciferri and first appeared
on the Automotive News Europe website

"Hoping to improve its balance sheet, sports car maker Ferrari is expected to approve Monday the spin-off of its loss-making Maserati luxury sports car subsidiary to Fiat group.

The move is seen as a preliminary step toward an initial public offering of Ferrari shares later this spring. Ferrari's IPO has been rumored for years, but chronic losses at Maserati have forced a delay in the company's plans to go public. Fiat group controls 56 percent of Ferrari S.p.A., which in turn owns 100 percent of Maserati.

Terms of the planned sale aren't available, but Fiat group is expected to pay Ferrari in cash for Maserati. Ferrari originally paid 15.4 million euros for Maserati when it bought the company from Fiat in a transaction completed in November, 1999. Maserati had been in the red since Fiat bought it from Alejandro De Tomaso in January, 1990.

In 2004, Ferrari-Maserati production surpassed 9,500 units, boosting revenues to 1.5 billion euros. That was up almost 20 percent from 1.26 billion euros in 2003.

Ferrari-Maserati lost 57 million euros in the first nine months of 2004, mainly due to the strong euro and heavy investments in Maserati. The combined company hopes to break even for the full year 2004. In 2003, it reported a 32 million euro operating profit.

Though Ferrari doesn't break out Maserati results, it is clear that, without Maserati, Ferrari would show a substantial profit.


Maserati production rose almost 60 percent to 4,600 units, a level which doesn't allow it to break event yet. The company made substantial investments to launch two new models last year, the new Quattroporte sporty sedan and the MC12 limited-edition supercar."

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chris bevan

chris bevan @ Dec 18th 2005 11:02PM

I agree chris.

This is a strategic move to pave the way for the long talked about Ferrari IPO, something that was not possible whilst they were spending all their money ramping up Maserati.

Another related article on BBCnews.com: http://news.bbc.co.uk/1/hi/business/4269587.stm

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DCSBeemer

DCSBeemer @ Dec 18th 2005 11:02PM

Even if this means a "loss" of income from losing Maserati to Fiat, Ferrari landed a sweet deal with Bernie Ecclestone & the FIA which sees them pocketing more cash than any other team. I assume this is regardless of whether they actually win or not.

BUT Ferrari might still find themselves neck-deep in the stinky brown stuff as it seems none of the other F1 teams are hurrying to sign up to a motorsport-formula where Ferrari will clearly be the teacher's pet.

Anyone interested in watching F1 with only 1 team participating, namely Ferrari? Didn't think so.

I really hope GPWC takes of and kicks the FIA in the berries!

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Steven Diver

Steven Diver @ Dec 18th 2005 11:02PM

If I were Ferrari I'd be worried about an IPO. That just spells disaster. How are they then going to justify spending half a billion dollars per year on Formula One racing to investors who would see that as higher stock prices? Sure, it would be a great way to raise money for their F1 program initally. But as we saw with Jaguar F1, running an F1 team via a board of directors interested in the bottom line doesn't work. It would hurt Ferrari in the long run.

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David G. Hong

David G. Hong @ Dec 18th 2005 11:02PM

I am going to Melbourne for F1 Grand Prix. That's what matter me the most. Go Ferrari!

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