from the WSJ - interesting artilce from the money side... Milan Months away from a much-anticipated initial public offering, luxury-car manufacturer Ferrari SpA faces a problem with its famous red racing cars: They just dont run very fast. Ferrari didnt manage a single win in 19 Formula One races last season, the first time in two decades that F1s most iconic team has come up dry. Ferrari fired two team directors in a frustrating year that ended with Spains Fernando Alonso, a two-time world champion, leaving for rival McLaren. What Will Ferrari Be After Luca Cordero di Montezemolo? . Last year, to be blunt, was a mess, said David Cushnan, editor in chief of SportsPro magazine and its F1 publication, Black Book. La Scuderia, as the team is known, has been struggling since Germanys Michael Schumacher first retired in 2006 after piloting the Italian car to five straight F1 championships. With a new season set to start in Melbourne, Australia, on March 15, Ferrari is warning its legions of fans that success is still a ways off. Sergio Marchionne , chairman of Ferrari and chief executive of the companys majority shareholder, Fiat Chrysler Automobiles NV, said recently that 2015 would be difficult and four wins in the years 20 races would be paradise. In 2004, by contrast, Ferrari won 15 of 18 races. Marchionne in September fired Luca Cordero di Montezemolo, who had been chairman for 23 years. A wholesale housecleaning that began in the middle of last year has also seen the departure of the F1 teams director, chief designer, engineering director and a tire expert. When Marchionne makes his sales pitch to investors this spring, they will be asking themselves what all these ups and downs on the racetrack mean for Ferrari the company, which last year sold 7,255 cars and is slated to begin trading on the New York Stock Exchange by the end of June. Ferrari has been valued by analysts at 4 billion to 8 billion ($4.5 billion to $9.1 billion). F1 is at best a breakeven venture for the company, according to many analysts, despite the fact that it has the highest team budget, the most fans and the best revenue deal in the sport. Ferrari releases limited financial results, complicating any calculation of its value, but that will change as the company pulls up the veil in the run-up to the IPO. The F1 team may be prestigious and integral to the Ferrari brand, but in its current formwithout any profit or cash flow generationits hard to argue it has any value, Max Warburton, a senior analyst at Bernstein Research, wrote in a report in December. Ferrari spends all of its racing revenuean estimated 230 million ($261 million) from F1 and 200 million ($227 million) from sponsorson building race cars and moving them and its highly paid team around the world, Warburton said. Questions remain about how much Ferrari will spend on racing once it has to report copious financial details every three months. Potential investors in Ferrari can draw encouragement from a growing F1 revenue pool, driven by expansion away from traditional European venues and into places such as Singapore and Abu Dhabi. Ferrari stands to take a bigger share of the pool if it starts winning races again. But it is unclear whether the F1 expansion will last. Some of the new races are prestige attractions for governments that pay top money for the right to hold them, but half-empty stands do little to cover costs. Meanwhile, F1s TV revenue is down because fans have deserted the sport during a string of underwhelming seasons. One reason is the lackluster performance of Ferrari, the most popular team among F1 aficionados. Another is a set of regulations that were aimed at making the sport more environmentally friendly but ended up giving an edge to one particular team in each of the last few seasons, making the sport less competitive. Montezemolo railed against this in an interview last year, saying, Nobody watches racing for the efficiency, come on. F1s TV revenue peaked at $600 million in cliffhanger 2008 season, when Ferrari driver Felipe Massa lost the championship to McLarens Lewis Hamilton in the last turn of the final race. Revenue has since dropped by a third, according to Bernstein Research calculations. I have to say that Ferrari being publically traded - unless they change the story of F-1 could have a difficult time justifying the expense of $500M a year to go racing.... lets hope not!
Interesting story. Thanks for posting! Not quite sure I agree with his #'s though..... "We" seem to believe PM gives 'Em somewhere around $150-160MM. Bernie generally pretty much matches that, even when they suck. Throw in, what, $80MM in licensing etc and they've got a $400MM budget....... Not 500, and I don't think even the Cans or Merc are spending *that* much......(?) It will certainly be interesting to get a peek at the financials when the time comes though. Cheers, Ian
They have a short memory of the firm's history. Ferrari went thru a YEARS long F1 "dry spell", and yet the company survived.. They did screw the pooch firing Luca though. Ferraris are about passion and personality. No one wants to drive an accountant's fuzzy sweater! My .02.
I think this is bad news all around for Ferrari. This is what they do, build cars to make money, spend money racing, build cars to generate more money, etc., etc. It's an on going cycle and once they are public and all about profit for the shareholders they are going to go down in flames.
A poorly researched article with clear factual errors, i.e. Ferrari does not have the biggest budget in F1, they are at most 3rd. The writer has completely missed where the value exists. There is almost no mention of the the stellar steady profits the company produces. The article reflects poorly on the WSJ
I believe the 2014 budgets were Red Bull first, Ferrari second, and MB third. Red Bull was over 400 million Euro, so much for saving money...
Regardless of the research, The WSJ is indicative of they finance types that will ultimately drive Ferrari. that is THE problem. Ferrari SPA the car mfg, makes a profit, however they dont finance the F-1 team per se. so that is the issue. how will Ferrari continue to race - and build the brand - while making a profit? in the other down years - FIAT kept Ferrari afloat - and Mr. Ferrari kept his money in the team.
That pretty much what they used to spend about 10 years ago. The top teams i meant, Ferrari, Toyota, etc. This so called cost saving thing just isn't working, IMO.
They are only going to sell 10% of Ferrari, the other 80% shares of Ferrari will go to current FIAT Chrysler Automobiles stock owners, and Piero Ferrari will retain his 10% of Ferrari. The IPO will bring in X amount of money, which FIAT can then use to either pay down debt, or help finance building up Alfa and Maserati. To me, the bottom line is that not much changes, Ferrari's performance on the F1 circuit probably doesn't impact road car sales, and the road cars will continue to sell and be profitable.
WSJ clown lost all credibility within 20 seconds when he said Ferrari hadn't won since Schumacher >>cough<< KIMI >>cough<< Ferrari: Stuck in the Slow Lane
I think WSJ should go back to be free. With the paid subscrition formula they feel compelled to make up BS to please Murdoch's finances.
STUCK IN SLOW LANE Let us hope SF gets the message and actually does something about it. Will Kimi and Vettle push the team like Schumi did? Looks like another long year for the Tifosi. Hope I am wrong.
While they will be offering ten% of the stock to new investors a majority of the company will be held by the public not the Agnellis and Sig. Ferrari. The company will have to answer to the market.
Spot on. 90% of the ownership of Ferrari will stay in exactly the same hands after the IPO. Meaning they will be answerable to exactly the same people as they are answerable to now.
Not quite. Previously Fiat had direct control over Ferrari's future. Now it will be in the hands of shareholders. While a good chunk will remain in family hands there will be enough shares (by some reckoning an absolute majority) held by the mass market that the company direction will be determined by the market not the old guard.
from the excerpt above: "La Scuderia, as the team is known, has been struggling since Germany’s Michael Schumacher first retired in 2006 after piloting the Italian car to five straight F1 championships." so "struggling" includes winning a championship.
0:24-0:33 in the video "Well Ferrari pretty much ever since Michael Schumacher left the team in 2006 has had a tough time at it, they haven't won a title since then..."
From what I remember, Paolo Ferrari, the Agnelli Family, and Marchione will have over 50% of Ferrari's voting rights, so don't expect any big changes.
When the market calls the shots everything is on the table. When Enzo ran things Ferrari built cars so they could race. When Fiat took over they raced because of the tradition, because they were Italian and to sell cars. Now it will be about the bottom line and quarterly numbers. Sad, but its a bit amazing that the company has stayed as it is for this long.
