Originally Posted by Enzo250GTO
Is there a solution for Ferrari? I am really interested in hearing your opinion on this as I don't know Ferrari's financials very well. Do you see a way to have both a low production number of cars and be profitable?
This is a good question. The brand's strength is an enormous asset, but it is being diluted in merchandising items. Your question however implies that low production quantities are a starting point. I don't believe they should be, I wonder if they can be. This is the kind of taboo that would, in my opinion, have to be challenged. Why would it be an end it itself ? Is there solid evidence that the business model would crumble if Ferrari ramped progressively to 8-9000 cars a year ? Residuals, exclusivity, etc ... but I was at Ferrari, I'd rather sell these cars than seeing them sold
by Aston. Customers will get tired of waiting years to get their cars.
I've already ranted on this before, there are not many ways you can increase profitability:
- reduce your operating expenses, but investing less will be a killer at a time where competition is stiffening
- increase your margins, but this implies inevitably higher volumes
If the new front-engined Dino is a real project, I think it embodies the fact that it's not sustainable anymore to let Aston & Porsche squeeze Ferrari from the high end AND the 'low' end.
If you take Porsche, a mainstream strategy executed poorly (924, 944) almost ruined them, but a mainstream strategy well executed (Boxster) saved the company.
To balance this, Ferrari's 2005 results to date are nowhere as bad as year 2004. We'll have to see whether this trend continues.
Originally Posted by Enzo250GTO
Why do all companies have to grow these days? If you can maintain a decent profit year after year but they do not grow why is this a bad thing (I'm not saying this is Ferrari's case)? The last two questions are just philosophical questions.
It is a philosophical question indeed, but an interesting one.
I believe that the alternative to growth is decline, there's just no in-between you can drive an organisation (Ferrari Spa employees, the subsidiaries, the dealer network and the suppliers) to excel at.
Another dimension is competition. It would be complacent to consider Ferrari as an isolated bubble. I believe that a broad slice of the customer base, the people who buy new cars at MSRP or above, is volatile. If Porsche, Lamborghini, Aston Martin & others keep on investing, they will end up making cars which are as desirable, if not more.
Bottom line growth generates the cash allowing you to sustain R&D investments. Volumes are the key to component costs, and to quality as well. I think that Ferrari is in a terrible spot with their 4-5Kea/y semi-industrial production: too small to implement large volume manufacturing quality mgt practices, too large to be operated in a craftsman mode.
I've not yet visited the new assembly line, but the new engine plant and the paint shop are large facilities, with a lot of spare room to grow.
The Maserati merger/spin-off is a corporate joke, and is probably partly responsible for Ferrari's poor financial results. Big investments, and cars which do not sell. I am pretty sure too that it made a big mess in the dealer network. Yet I do not think that sending over Maser to Alfa (which makes sense to me, Alfa design applied to the Maserati segment with Ferrari-designed powertrains could be really effective) will resolve everything.
The Fiat Group financials are posted at fiatgroup.com and worth reading. Fiat Group is a large conglomerate, but their top line is flat and their measly bottom line is growing only because Fiat Auto is lowering losses. Still at 1.8% for the first 6 months and 3.1% for the 2nd quarter, "trading profit" is not that great. If you want financial might, look elsewhere.