Ferrari Can't Be A Luxury Brand If It Just Makes Cars

Illustration for article titled Ferrari Can't Be A Luxury Brand If It Just Makes Cars
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1st Gear: Sergio's Gamble

The 'sale' of Ferrari and the separate IPO is basically a ploy by FCA Sergio Marchionne to extract as much value out of his existing portfolio in order to build a global company that can compete with the Volkswagens of the world (or at least merge with one of them). It could be a smart move, but it relies on Ferrari being worth it to investors.


Certainly, Ferrari is one of the most valuable names in the world and is extremely profitable from the perspective of a carmaker. However, it is not extremely profitable from the perspective of a luxury brand when you consider that other luxury brands manage to sell cheap textiles made in developing nations for insane markups.

So, what's the solution? This Reuters article does a great job of going through all the various options, including merchandsing, design, and a luxury alliance.

Analysts, meanwhile, have pointed to the potential for exclusive clubs and hotels for the super-rich or Ferrari moving into high-value motorcycles and boats.

However, Bernstein analyst Max Warburton remains skeptical, suggesting that the Ferrari brand could be extended at a luxury premium only to watches, perfumes and eyewear.

"A sports car maker has little competitive advantage when it comes to producing and selling personal luxury goods," he said.

Which gets back to the original problem of making an investment. Do you want to invest in a brand that's going to have to spend a lot of their IPO cash trying to figure out how to make more money?

2nd Gear: Honda Gets It

Illustration for article titled Ferrari Can't Be A Luxury Brand If It Just Makes Cars

The pursuit of global expansion and higher sales almost always results in the kind of extreme moves that end up sacrificing something, and that something is often quality (Toyota) or brand presence (Volkswagen). GM was the biggest automaker in the world before it went bankrupt, remember.

We mentioned yesterday Honda CEO Takanobu Ito was taking some shit from the old guard over quality, and now it seems like he took that lesson to heart.


From Bloomberg via Auto News:

Beset by the biggest quality problems under his stewardship, Ito, 61, has said he will bring the company back to basics and signaled that Honda will no longer pursue business expansion as its main target. He said today that it has no intention of rescuing Takata financially and will work with the company to identify the root cause for the air-bag flaws in order to end the crisis.

Ito has sought inspiration in Honda founder Soichiro Honda, who used to stand on a tangerine box to exhort employees to make good products, by replicating the ritual with workers in November in Japan.


This. This x1000. Honda needs to be Honda, and not Toyota.

3rd Gear: Let It Go, Chrysler

Illustration for article titled Ferrari Can't Be A Luxury Brand If It Just Makes Cars

I don't know if 2016 is going to be a huge year for the auto industry, but it's a safe assumption that 2015 will be a good one if the economy doesn't suddenly stumble in some unpredictable way.

David Shepardson has the Chicago Auto Show roundup of people saying things are going to be awesome this year, but this sticks out from Chrysler, who has been bragging about their 59 months of year-over-year growth:

Internally, FCA LLC says the "streak" is a big deal even though it doesn't really impact profitability. Gardner conceded that the company will face challenges keeping the streak intact through the year. "There are certain months that are really hard — and they are pinpointed and circled," Gardner said, saying it is "an internal rallying cry. It's something we're very focused on but at the end of the day we're here to make money. If it ends, it ends."


I think that time is coming soon. Margins are more important.

4th Gear: Paying Out To Shareholders Could Hurt GM's Credit

Illustration for article titled Ferrari Can't Be A Luxury Brand If It Just Makes Cars

Everyone is greedy. Everyone is lying. Trust no one.

Now that we've gotten that out of the way, GM is crying "you'll screw up our credit" over Harry Wilson's plan to take about an $8 billion chunk out of the company to boost shareholder value and cash out while there's still a growing car market.


From the WSJ:

Two ratings firms this week indicated the proposed buyback could hurt GM’s current credit rating, which is one notch above junk grade. The two left open the possibility of downgrades or refusing to upgrade its rating depending on the outcome of discussions with Mr. Wilson. Standard & Poor’s called Mr. Wilson’s activism “detrimental to credit quality,” adding that an $8 billion share repurchase could prompt it to reconsider its GM assessment.


Access to credit is important to automakers because they use it for much of their lending.

5th Gear: Japan Has More Chargers Than Gas Stations

Illustration for article titled Ferrari Can't Be A Luxury Brand If It Just Makes Cars

Fun fact of the day from Bloomberg:

That surprising discovery comes from Nissan Motor Co., which reported that the number of power points in Japan, including fast-chargers and those in homes, has surged to 40,000, surpassing the nation’s 34,000 gas stations.

The figure shows that in the relatively brief time since electric vehicles were introduced, the infrastructure to support them has become bigger than what the oil industry built over decades in the world’s third-biggest economy — at least by this one measure.


One big caveat here is that a gas station often has more than a single gas pump, so there are probably more "refilling points" than "charging points." Still, we're starting to see the rapid expansion of the charging infrastructure in Europe, the U.S., China, and Japan.

Reverse: Remember When This Happened?

On February 13, 2008, a California judge rules that the actor Mel Gibson, star of such movies as the Academy Award-winning "Braveheart" and the "Mad Max" and "Lethal Weapon" series, has successfully completed the terms of his no-contest plea to misdemeanor drunk driving.



Neutral: Would You Buy A Ferrari Boat? They sell hats, but what other Ferrari-branded items would you buy?


Photo Credit: Getty Images

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Neutral: A Ferrari fire extinguisher would be a hot item to have.