Bad times for consumers, Good times for Ferrari
Are Ferrari and most other supercar makers immune to economic recession? That was the question that everyone wanted an answer to because the “just how bad is it?” gets answered when we financial figures.
Ferrari released this press statement verbatim on October 27:
“Maranello, October 27th, 2008 – The Board of Directors of Ferrari SpA met today under the chairmanship of Luca di Montezemolo, to examine the third quarter results. Ferrari recorded 450 million in revenues (up 22.3 percent year-over-year), and a trading profit of 79 million (17.6 percent of revenues), up 41.1 percent from the 56 million figure (15.2 percent of revenues) for Q3 2007.
“The Board of Directors also examined the proposed changes to the Formula One regulations, in the light of the current global economic crisis.
“Whilst reiterating its wholehearted commitment to a substantial and needed reduction in costs in Formula One, starting with propulsion, the Ferrari Board of Directors expressed strong concerns regarding plans to standardise engines as it felt that such a move would detract from the entire raison of a sport with which Ferrari has been involved continuously since 1950, a raison d’etre based principally on competition and technological development.
“The Board of Directors expressed the opinion that should these key elements be diminished, it would have to re-evaluate, with its partners the viability of continuing its presence in the sport.”
Impressive numbers, revenue up 22% whilst profits were up a whopping 41%. Not too many companies, at least ones the size of Ferrari, can claim this figure. Lamborghini has also reported doing well recently, and we have yet to see the latest quarterly numbers for them. Ferrari has a good thing going with its progressively long customer waiting lists. So long is the list of customers waiting for their cars, that Ferrari may just be able to weather the storm.
But what is more curious is Ferrari’s closing paragraphs in which they speak out against Formula’s One proposal that engine development be standardized in the sports. I tend to agree with Ferrari on this one. The FIA is possibly correct in stating that there are benefits and fairness issues associated with creating “standard engines”. Ferrari enjoys a clear competitive edge in F1 because of their independent engine development and manufacturing. To look at it another way, F1 is a sport that leads to great technological development. Many performance and safety enhancements, including braking and fuel conservation, have come directly from that sport into the product cars of it’s participants, including Mercedes, Ferrari, Honda, and Toyota. Should engines become standardized, it may serve as one less avenue for technological development in the automotive industry. In the world of US$3/gallon gasoline and SUVs, any competitive edge in sport lends a competitive edge to the consumer.
Or perhaps there isn’t really a recession at all, rather it’s a perception of a recession, which has spelled dire consequences for Wall Street. You have to imagine that at $175,000+ per car, Ferrari, Aston Martin, Lamborghini, and others lists of potential clients must be relatively small. The list likely dwindles we when consider only those looking to splash out on such an expensive gift when the economy is weak and the stock market volatile.
Whatever the economic outlook, business executives, especially in the transportation industry, should look at the key strategic decisions of Ferrari and apply them to their own businesses. The economy will rebound, but only for those companies sure-footed enough to weather the storm.