Ferrari to limit production, rules out IPO

Wealthy people around the world are snapping up Ferraris and the company is worried the brand might lose its appeal as a symbol of rarefied luxury. As a result, it will scale back production to below 7000 units this year, compared with 7318 last year.

“The exclusivity of Ferrari is fundamental for the value of our products,” Chairman Luca Montezemolo told journalists at the company headquarters near Modena, in northern Italy. “We don't sell a normal product. We sell a dream.”

Ferrari sales were up 4 per cent in the first quarter, to 1800 units. Mr Montezemolo said he will provide a detailed outlook in the coming months but estimated the drop in unit sales this year will be greater than 1 per cent or 2 per cent.

Revenues in the first quarter of the year were up 8 per cent to 551 million euros (approximately $708 million), yielding a net profit of 80.5 million euros (approximately $103 million), which is an increase of 42 per cent over the same period of last year.

Mr Montezemolo said Ferrari's engine business - which supplies motors to Maserati, which is also owned by Fiat SpA - will help keep revenues on track as it scales back unit sales.

Ferrari recently invested 40 billion euros (approximately $51 billion) in a new V6 engine plant to supply Maserati. The plant began work in January with 100 workers, and there are plans to add another 100 as production builds up.

The strength of the Ferrari brand, besides generating more demand than Ferrari cares to supply, also has boosted merchandising, which last year generated 52 million euros ($67 million) in profits. But the chairman dismissed any notion that Ferrari would become a “shirt and polo” company.

Mr Montezemolo said that Fiat, Ferrari's main shareholder, supports the move to limit production. And he ruled out an IPO for Ferrari, a possibility that analysts have floated as Fiat looks to merger with its unit Chrysler.

Global demand is helping Ferrari buck the ongoing Italian recession. The company is hiring 250 blue collar workers this year as it boosts engine production for Maserati, which has launched the new Quattroporte and will follow soon with the smaller Ghibli as part of Fiat's plans to focus on higher-margin luxury cars to return its European operations to profitability.

Mr Montezemolo said Ferrari will invest another 100 million euros ($129 million) in 2013-2015 on new facilities. In all, Ferrari employs 3000 people to produce five production models based on V-8 and V-12 engines. It also makes limited edition exclusives, like the hybrid La Ferrari shown this year at the Geneva Motor Show and which has already sold out to a selected 499 clients, in addition to the Formula 1 program. 

All of it, from the foundry for engine heads to an 'atelier' where clients customise their Ferrari's down to the stitching on the leather seats, is located on a leafy green complex that employees can navigate on bicycle. The factory produces 32 cars a day, with one 8am to 5pm shift on the assembly line.

“In all of our 7000 cars a year, there doesn't exist one that is like any other,” Mr Montezemolo said.

“For me, exclusivity is the strength of the brand. I don't like to speak of luxury. I like to speak of beauty and taste.”

The United States remains Ferrari's main market in terms of unit sales, followed by Chinese-speaking nations, Germany and then Britain. Currently, Europe and the Middle East contribute 52 per cent of revenues, America 20 per cent and Asia 30 per cent. By 2017, Mr Montezemolo wants to shift the distribution to 30 per cent each from America and Asia and 40 per cent from Europe and the Middle East.

Mr Montezemolo said there are two things that Ferrari will never do as long as he is running the show: make a smaller Ferrari or an all-electric vehicle.