This fall, Ferrari is rolling out a redesign of the California, a V-8 -powered grand touring car and the best-selling model in its history. Called the California T and carrying a base price of $201,940, its progress will be watched closely: It is the first Ferrari built with a turbo-charged engine engineered to help reduce carbon dioxide emissions.
The California’s launch will be watched closely for another reason: It will be the first sales effort under the leadership of Fiat Chrysler CEO Sergio Marchionne. Earlier this month, Marchionne declared his intention to slide into the driver’s seat at Ferrari, which is 90% owned by Fiat Chrysler.
The great worry among enthusiasts is that Marchionne, an accountant by training, will— gasp —dilute one of the few global brands that actually deserves the overused adjective “iconic. ” His sin, in their eyes, would be to ramp up production, which would make Ferraris less scarce and thereby less desirable. You’d think that he was planning to sell cars under flapping vinyl pennants next to a Walmart. Worse, there are worries he might one day consider cashing out his investment in the Italian racing car company with a sale to some well-heeled buyer who somehow would corrupt Ferrari’s heroic history of track triumphs and overall derring-do.
As to the second point, an outright sale of Ferrari isn’t likely. Marchionne has long held Ferrari as his ace in the hole – a fungible stash of rainy-day cash that is hidden behind a glass door with a sign reading “Not to be opened except in case of emergency.” Although Fiat Chrysler is not in robust financial shape, there is no sign of an emergency on the horizon.
The question of brand dilution is one that preoccupies marketing consultants, car lovers, and, yes, some automotive journalists. Anything that disrupts a familiar narrative becomes a target for attacks—some surprisingly harsh. Infractions can range from the mighty—super-luxury brands like Bentley and Jaguar adding SUVs to lineups historically restricted to passenger cars – to the miniscule, like Chevrolet (GM) using the heritage Impala name on mundane four-door sedans.
Marchionne has indicated that he wants to make Ferrari a little less exclusive by raising production about 40% to 10,000 cars a year. That hardly sounds subversive. The surging market for European luxury cars in China alone should reason enough to build more Ferraris. Even if the current generation of Asian plutocrats prefers to ride in the back seat of limousines, their children and grandchildren will want to show their independence by clubbing in their 458 Italia instead.
Shaking the foundations of the Ferrari brand has never, until recently, been considered a threat. Under the leadership of Luca Cordero di Montezemolo, who ran the company for 23 years and whom Marchionne replaced, it consciously limited production to 7,000 cars a year—a little more than one week’s output of the Ford F-150—regardless of demand. Ferraris became so exclusive that entrance to the owners club required character references as well the ability to write a check.
Raising production would reduce some of the game-playing that ensues when a potential buyer faces arrives at a Ferrari dealer. If the model sought is an older or less popular one like the unloved FF, he may be able to get a new car in a few months. For more-popular models, the wait may stretch out for years – or to never. Ferrari screens bidders for its ultra high-end cars like the $1.3 million LaFerrari to weed out speculators. It isn’t always successful. A LaFerrari was recently offered for sale by an unknown owner for $3.24 million.
“In general, the ability to buy a new Ferrari is based on the combination of having the money and communicating how passionate you are to get one,” a blogger observed.
If Marchionne isn’t going to dilute Ferrari or sell it, here’s what else the worriers think he might he do:
Some fear that Marchionne will reduce Ferrari’s involvement in racing, the heritage of which gives the brand its raison d’etre.
It’s true that when Ferrari was getting started in 1946, car sales were intended to support the racing team. Even today, one of the appeals of owning a Ferrari is the track time it makes available to weekend racers. But the business of building cars has become so profitable—despite its tiny production, Ferrari accounts for nearly one-sixth of FCA’s operating profit—and the performance of Ferrari’s teams so miserable that the relationship has been reversed. No less a branding authority than Ralph Lauren, himself the owner of several classic Ferraris, argues that racing is no longer a necessary underpinning. “I think the world has changed,” Lauren said in an interview with The Official Ferrari magazine in 2011. “[Ferrari] is not a racing team, it is a universal company that does business around the world.”
Marchionne will dilute the authenticity of future models by using off-the-shelf components.
Just as an older generation of purists fretted that Ferrari would never be the same after the death of founder Enzo Ferrari in 1988, a new wave worries that some Fiat parts may find their way into future models under Marchionne. After all, Chrysler switches and touch screens have already turned up in FCA Maseratis. But Marchionne is uniquely attuned to brand values as he proved by splitting off Ram trucks from Dodge, so he is likely to hide any parts sharing from the Ferrari customer.
Marchionne will cheapen the Ferrari brand by overextending its use and licensing.
Internationally-recognized brands like Hermès or Apple (AAPL) have long monetized their exclusivity and appeal – and Ferrari is already there alongside of them. Its prancing-horse-on-red background corporate symbol decorates more merchandise around the world than Derek Jeter’s pinstripes do in New York City, ranging from $95 T-shirts to tiny hand-made model cars that sell for as much as $6,500. In some Asian cities, Ferarri’s logo is more recognizable than the national flag. The company has already lent its name to Ferrari World Abu Dhabi, which is said to be the largest indoor amusement park in the world, replete with motor-themed thrill rides, and a second Ferrari-branded theme park will open in Spain.
If Marchionne wants a guide on how to grow Ferrari without debasing its value, he need only follow the example of Porsche. The onetime specialist in rear-engine sports cars has successfully grown its business by successfully diversifying into first mid-engine sports cars (Boxster, Cayman), then SUVs (Cayenne) and most recently four-doors (Panamera) – and with little damage to its lush profit margins. Porsche, now part of the Volkswagen Group, sold a record 162,145 cars in 2013.
Not everyone agrees that Porsche is an appropriate model for Ferrari. “Porsche was just one part of the German technical juggernaut, while Ferrari was the standard bearer of Italian passion, pride and performance,” writes Detroit-based blogger Peter De Lorenzo. “That’s a huge – and fundamental – difference.” We’ll soon find out. Marchionne will be watching sales of the redesigned California T closely to see if he can nudge the volume meter up slightly without starting a stampede away from the brand – and my betting is he can.
