Ferrari will become a stand-alone company by Tuesday, ending Fiat Chrysler Automobiles’ major stake that dates to 1969, when Fiat bought half of the financially struggling racing and sports car company. The separation won’t exactly herald a new direction, or even new leadership. It’s part of FCA CEO and Ferrari Chairman Sergio Marchionne’s plan to elevate Ferrari’s profile as a global luxury goods company so that Wall Street can more accurately value and evaluate the company.
Marchionne’s pitch to Wall Street is that Ferrari’s financial performance is less tied to the automotive industry’s fluctuations because of the company’s small production volume as well as its high transaction prices and profit margins. Marchionne believes the company should be valued more like luxury brands Burberry, Hermes or Tiffany.
“I think it would be really a crying shame if we did not find a way to extract additional value from a brand as unique as Ferrari,” Marchionne said in October. “Without impacting on the exclusivity and the uniqueness of the car brand, we need to find a way to build business around this to leverage it and use it properly.”
Marchionne plans to boost Ferrari’s annual production from about 7,255 cars in 2014 to more than 9,000 per year, expand its retails sales of apparel and restore Ferrari’s racing prowess.
The company also is building a second theme park called FerrariLand that is expected to open at the PortAventura resort near Barcelona in Spain in 2016. It will be the Italian carmaker’s second theme park, joining FerrariWorld, which opened in Abu Dhabi in 2010. Eventually, Ferrari plans to open theme parks in each of the main geographic areas it does business, including North America and Asia.
With prices that can range from about $200,000 for the Ferrari California T to more than $1 million for the Ferrari LaFerrari, the company is often compared with automotive brands such as Aston Martin, Bentley, Bugatti, Lamborghini, and McLaren.
“A luxury brand is also able to combine a strong global recognition with the perception of scarcity and exclusivity … Ferrari, in our view, embeds all of these characteristics but stands out in particular for its true rarity and exclusivity perception, where it ranks very favorably versus most other luxury goods brands,” Morgan Stanley analyst Adam Jonas said in a report in December.
That ownership structure is now changing radically.
On Tuesday, FCA will transfer 80% of the shares in Ferrari it still owns to its investors. FCA shareholders will receive one share of Ferrari stock for every 10 shares of stock they hold in FCA and will get one special voting share for every 10 shares they own in FCA. The scheme is designed to reward shareholders who have been loyal to Fiat and Fiat Chrysler.
Over the years, Ferrari has won more titles and awards than any other brand in Formula 1 racing history. It has 223 Grand Prix wins, 16 Constructor Championships, and 15 Drivers Championships, according to Jonas.
However, Ferrari has not won a Formula 1 driver championship since 2007, largely because of the emergence of competitive teams from Red Bull and Mercedes-Benz. Marchionne has said repeatedly that Ferrari’s commitment to racing will not waver.
Ferrari’s stock hasn’t performed as well as hoped. Ferrari’s shares hit a high of $56.75 on Oct. 22 but have since dropped to $48.45 as of Thursday afternoon.
While Ferrari will become an independent company, traded on both the New York and Milan stock exchanges, Marchionne and the Agnelli family will continue to wield a great deal of influence over Ferrari.
Exor and Piero Ferrari said on Dec. 23 that they have reached an agreement to consult with each other to form common viewpoints and positions on Ferrari shareholder issues.
“First Fiat, and then FCA, together with Piero, have supported the development of Ferrari, always seeking to respect Enzo’s extraordinary legacy, to see it become what it is today: a phenomenon without equal worldwide,” Elkann said in a statement. “Now that Ferrari is beginning a new chapter in its story, our two families have signed this agreement in order to provide all the stability necessary to guarantee Ferrari’s strength and its uniqueness for the future.”
By Brent Snavely @BrentSnavely Courtesy Detroit Free Press