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.
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Few companies are as steeped in tradition and history as Aston Martin. Following the post-World War II buyout of Aston by Sir David Brown (of DB designation), the company opened a factory, Newport Pagnell, in 1954.

The facility has seen the almost all modern Astons pass through it’s door, but as of July 19, all Astons will be built at the new facility opened in 2003 in Gaydon, Warwickshire, England.

With the recent consortium buyout of Aston Martin, coupled with the upcoming sale of Land Rover/Jaguar, the factory’s future is uncertain. From a strategic perspective, Aston will be well served by their current factory, which produces DB9s and V8 Vantages. In the future it will produce the DBS, the successor to the now retiring Vanquish line.

Jaguar and Land Rover will likely also have to move their product elsewhere, but Jaguar could probably stand to cut some production as demand has waned in recent years, in part due to a very aged product line. Both the S-type and X-type are due for major overhauls, though the lack of success in the X-type may prompt its demise from the company altogether.

Enjoying paying US$3+ for that gallon of gas? Didn’t think so. But don’t worry the Middle Easterners are more than happy to sell your their pricey car juice. And they’ll use it to buy themselves a Ferrari! Super!

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Aston Martins, Ferraris, and Lamborghinis are selling like hot cakes in the land of sand, so get yours before the list gets too long…

Photo courtesy Ferrari.

In our most recent posting we pointed out that Aston Martin was integral to Ford’s Premier Auto Group, not just because it represented Ford’s presence in the supercar market, but because it was also profitable.

Profitability is something that once eluded supercar makers such as Aston, Ferrari, and Lamborghini, even Porsche at times. We noted that Aston Martin is, according to Ford, now a profitable unit. As Ford does not publish profitability for each of the PAG’s units, we will have to take their word for it, but we do know they sold over 5000 cars in 2006.

Take a look at Lamborghini, which according to the company, pretax profits rose to €18.1 million in 2006. That’s a 4.5-fold increase from 2005 when profits were only €4.4 million. CEO Stephan Winkelmann has said, “We have a complete model range, which is the youngest we’ve ever had. We are now a real car manufacturer.” While the “real-ness” of Lamborghini’s product line may be debatable, they do have 10-cylinder and 12-cylinder models, the Gallardo and Murciélago, respectively. Both models feature a coupe and roadster version.

Part of this increase has been due to higher demand and production. In 2000, Lamborghini produced just 1 car per day, but in 2006 they had ramped up to 13 per day. This figure is still more than a bit shy of Porsche, but respectable for considering competitor Pagani has said it will make only about 20 cars for the year.

Doing very simple math, without consideration for one time write offs/sales, we can note the following per car sales for 2006:

Manufacturer	Profit (pretax)	Production (# of cars produced)	Per car profit
Lamborghini	€ 18,000,000	2095	€ 8,591.89
Ferrari	€ 183,000,000	5671	€ 32,269.44
Aston Martin	N/A	5000	N/A
Porsche	€ 1,390,000,000	86426	€ 16,083.12

Porsche is the most profitable auto manufacturer in Europe, but per car averages put Ferrari impressively on top. Aston Martin and Pagani do not post numbers officially, but Aston reports a profit, however small that may be. Bottom-line, money CAN be made in supercars!

Sources:

Bloomberg http://quote.bloomberg.com/apps/news?pid=10000080&sid=aLQlMBk2X4yM
Lamborghini
Ferrari
http://www.automotoportal.com/article/ferrari-annual-report-2006-impressive-growth-in-revenues-and-profits
http://www.autoblog.com/2006/07/04/aston-martin-makes-a-profit
Aston Martin
http://business.timesonline.co.uk/tol/business/industry_sectors/engineering/article681820.ece
Porsche
http://www.iht.com/articles/2006/11/15/bloomberg/bxporsche.php

Our friends at Winding Road magazine recently spent the time and money to go to the Geneva Motor Show, one of the top motor shows in the world. Where there, they spotted the all-new Ford Mondeo.

We noted some months ago that Ford was opting not to sell their hot hatchback Ford Focus ST and Ford Focus RS in the USA, a market that craves large engines and fast cars. It is no wonder Ferrari’s number one market is the gas-guzzling American market. The Mondeo is no gas-guzzler. It is a well-designed and well-engineered family sedan, much like the Fusion in the American market. But make no mistake, it is most definitely not the Ford Fusion. What this represents is a poor marketing effort on the part of Ford Motor Company. It also signifies a synergy lost in a global company. Ford could save money by eliminating the Fusion and using the Mondeo in the USA. A smart move, but instead the company struggles and has to sell of its profitable Aston Martin division, and brand that did not fit into the streamlined strategy of the future Ford PAG.

The conclusion is that we should not be surprised about this ill-advised move considering they have brought back the Taurus name – a name synonymous with boring sedans.

Source:http://news.windingroad.com/countriesmarkets/euro/geneva-motor-show-ford-mondeo-launches-and-we-wish-it-was-our-fusion/

On Monday, Ford announced that they sold their profitable brand Aston Martin to a consortium of buyers, including the owner of racing competitor Prodrive of the UK. This means that Aston now goes back to British ownership – at least partly. In addition, a well-known Aston Martin collector is investing in the buyout as well as two well-financed investment companies Adeem Investment Co. and Investment Dar, both of Kuwait. Ford will retain US$ 77 million (about 8.5% of the company). The whole deal is worth $925 in much needed cash for Ford Motor Company. Ford will still retain three brands in its Premier Auto Group: Volvo, Land Rover, and Jaguar. Ford has previously stated that Jaguar is losing money, and Land Rover (despite widespread quality problems) is said to be profitable. Both are known “British” companies.

As for Aston, we can expect to see some leverage on the buy-side of this deal. It is unclear if the two Kuwaiti investment companies are planning long-term investments, but a lot of leverage could mean a quick turn-around. Unlikely would be for David Richards, the chairman and founder of Prodrive, and John Sinders an Aston collector and racing backer, to resell the company in the short-term. Both seem to view this as a long-term investment.

Strategically, Ulrich Bez will remain the CEO of Aston Martin, and will continue to drive the product lineup in the future with the Rapide, a four-door Aston Martin, which will compete against the Maserati Quattroporte and the Porsche Panamera (due out in 2009). We should expect that plans for the Rapide will be accelerated to generate more revenue and better return on investment over the next few years.

On a final note, for those surprised by the Prodrive investment, we should note that Prodrive has considered investment in a production vehicle before. The well-known racing company commissioned a technologically advanced vehicle, the Prodrive P2. Prodrive couldn’t be bothered to put the sophisticated car into production, but we could view the purchase of Aston Martin as a foray into production sports cars. No doubt we could see Prodrive technology in future Aston Martins, thus giving Aston a specific product advantage.

Source:http://media.ford.com/newsroom/release_display.cfm?release=25635

The Financial Times first reported in early January that Ford was considering selling the Jaguar unit of the Ford Premier Auto Group, the Ford Company’s luxury division. Jaguar has been in the Ford stable since the 1980s, the same decade that Ford began to assemble the PAG.

Alan Mulally told the FT, “All good businesses continually review their portfolio, and we will continue to evaluate ours going forward.” Good plan Alan! With that statement Ford is on the right track. But then again this statement comes weeks after Ford announced that they were looking for buyers of the Aston Martin name, PAG’s ultra luxury supercar division. Oddly, Ford’ Don LeClair told the FT just days later that Jaguar was NOT for sale. Clearly, Ford needs to get the corporate message packaged cohesively.

And that leads use to wonder if Ford is really taking its own advice. In evaluating the reasons for the sale, it is of no doubt that Ford is looking to sell the now profitable Aston Martin because it needs cash flow. A sale would generate short-term cash flow. This much is true. Still, Ford needs to consider the long-term ramifications of this decision. Aston gives Ford some degree of legitimacy in international racing, and no doubt Aston Martin in far more profitable than it has been in the past.

Ford has done an excellent job of turning around Aston Martin, which made only 43 cars in 1993. 2006 resulted in over 5000 Aston Martin sales. This is much contrasted with Ford’s 1989 purchase of Jaguar. Jaguar has struggled since its inception, and has yet to make any money for the PAG. It does however represent a Ford’s prestige motorcar presence in the auto industry. It is the only luxury auto unit that Ford runs outside of the USA, and the only one which is known and respected worldwide.

Regardless of what happens to Aston Martin and Jaguar, you can bet that Ford’s PAG will attempt to keep Volvo and Land Rover, both of which are profitable, in its portfolio. As we have said before, a sale of Aston Martin is mistake, and as likely is a sale of Jaguar.

Yes, it’s that time of the year, the picks for the best cars as of Winter 2007.

Which European cars are by matter of fact, “the best”? Find out below:

Best Supercar over $500,000: Bugatti Veyron 16.4

Best Supercar under $500,000: Lamborghini Gallardo Spyder

Best Ultra Luxury Convertible: Rolls-Royce Phantom Drophead Coupé

Best Ultra Luxury Sedan: Rolls-Royce Phantom

Best Ultra Luxury Coupé: Bentley GT

Best Hot Hatchback: VW GTI

Best Hot Sedan: Audi S8

Best sound: (tie) Ferrari 599 GTB/Ferrari F430

Best sports car under $100,000: Porsche 911 Carrera S

Best sports car over $100,000: Aston Martin DB9 Volante

Best new sports car: Aston Martin V8 Vantage

Best Small Car: Mini Cooper S (John Cooper Works Edition)

Best Old Car Experience: Caterham Lotus 7 SV

Most economical and fun sports car: Lotus Elise

Mid-sized Sedan: BMW M5

Best Car for Old People Who Don’t Give a Damn: Mercedes-Benz S65 AMG

Best SUV: Mercedes-Benz G55 AMG

Best minivan/mpv (yes, I’m ACTUALLY including this category): Mercedes-Benz R63 AMG

Within the past week the Guardian Unlimited (a UK news source) has reported that up to 30 bidders could be vying to take over Aston Martin from Ford Motor Company. The source reported that this could raise the price of Aston to over $1.9 billion (£1 billion).

The revelation is not unexpected as Aston has been on the chopping block at Ford’s Premier Auto Group, which incidentally was the second largest segment for Ford Motor Company in the 2nd Quarter of 2006. A number of companies have passed including BMW and the Japanese companies. Some speculation had also been that management in a MBO would buy the company, but that seems unlikely now. The resounding sentiment seems to be that no existing, large car manufacturer needs to buy such a niche sports car maker to add to its stable. BMW did seem a likely buyer, as it also owns ultra-luxury maker Rolls-Royce and could have an ultra-luxury sports car maker. VW is obviously out as is Fiat since they have Lamborghini and Ferrari, respectively.

Again BeyondtheKM ask the big question, why not keep Aston Martin? As we’ve said in previous posts, Ford stands to benefit from having a sporty marque within PAG. They currently have a luxury SUV maker (Land Rover), a luxury car maker (Jaguar), and Volvo, which is mid-high end (and brand identified as “safe”) vehicle. Additionally, they have Aston Martin, a company that was really evolved and made it profitable and highly desirable. In short, Aston Martin is everything that the other Ford and PAG brands are not. They are an important piece of Ford’s diversification in the auto industry.

Like it or not, money or not, axing Aston Martin is the WRONG move. If anything Ford should look at home to its Lincoln and Mercury brands to find ways to sell them or cut them altogether and save money. Ford must also do a better job of integrating technologies and platforms with Volvo and even Jaguar. For sportier cars, Ford must borrow technologies from Aston. This serves to bring more buyers to Ford through a “halo” effect and it serves to keep Ford diversified and send money back to Ford through PAG, the most profitable companies of which are Aston and Land Rover – the “jewels of Ford,” if you will.

In 1986, Ford Motor Company bought 75 per cent of Aston Martin. In 1993, they bought the rest of the company from Victor Gauntlett. Since then, Aston Martin has been turned upside down. Barely is the company recognizable to fans of the Aston of yesteryear. Today the company is lean, innovative, and more or less profitable. The brand is stronger than ever, as are the sales figures.

In a lot of ways, the acquisition of Aston into Ford’s Premier Automotive Group was strategically sound long-term investment. Ford had needed a well-known company to purchase, one which could be bought on the cheap and turned around to reap long-term profits. The secondary benefit is that Aston brought a super car to the company that lacked one. Additionally technology that has started in Aston as motorsports technology has filtered down. Some technology has also been filtered to other companies in the Premier Auto Group portfolio. The Aston shares many design concepts and parts with Jaguar. Both companies are located in the West Midlands in what was long considered the heart of the British auto industry.

Aston Martin also had long-term potential in motorsports. In fact, Aston announced in 2003 that they would bring the marque to Le Mans starting in 2005. The efforts in motorsports and in rejuvenating the production car lineup have proven fruitful in adding value to the brand.

Despite all of the benefits of having Aston in the Premier Auto Group, Ford announced at the end of October plans to sell the luxury sports carmaker in an effort to raise capital. The question is: “is now the best time?” Hindsight is always 20/20, but the question is certainly valid. Ford has serious financial problems, to be sure, but dumping companies in which they have invested serious time and money to resolve short-term problems seems absurd. The fact is, Ford isn’t suffering because of Aston Martin, they are benefiting from having the company in the portfolio. Selling this company at this juncture with growth almost certain would be a bad move.

In a future posting, BeyondTheKM will examine the strategic moves that Ford may take in securing the future of the Premier Auto Group.