Ferrari Profits Hit by Falling Dollar...

This article was published in the Financial Times of 6 Jan 2004



Ferrari, the Italian sportscar maker, is losing money on every car it sells in the US, its largest market, because of the plummeting value of the dollar against the euro. It is also suffering a sharp decline in Formula One racing income, since sponsors pay in dollars.

Luca di Montezemolo, chief executive, said the company, controlled by Italy's Fiat, was prepared to wait "a couple of months" to see if the dollar recovered before taking any action.
The dollar's decline casts a shadow over the 50th anniversary of the iconic carmaker's presence in the US, after it sold a record 1,350 cars there last year, up 13 per cent. Mr Montezemolo said the company made a profit last year as the dollar fell, but refused to say if it would do so this year at the dollar's level of 78 cents to the euro.

The weak dollar has already led to profit warnings from many European vehicle makers. It threatens to start causing financial problems even for BMW and Porsche, which are heavy users of hedging.

"All the European companies worry about it," Mr Montezemolo said. "Theoretically at this level it is better to sell fewer cars in the US. We lose 20-30 per cent not only from sales in the US but also from [Formula One] sponsors' revenues."

The dollar fell 16.8 per cent against the euro last year. Ferrari, the leading Formula One manufacturer's team, earns a large proportion of its income from motor racing. Sponsor income, denominated in dollars, makes up three-quarters of racing revenue.

Mr Montezemolo, who is also a director of Fiat, said there had been no progress on the flotation of the company, originally planned for last year. "Any decision regarding flotation is first of all Mediobanca's [which owns 34 per cent] and second of all with Fiat," he said.


What do think will happen to the prices??