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Ferrari Profits Hit by Falling Dollar

Discussion in 'Ferrari Discussion (not model specific)' started by kenyon, Jan 7, 2004.

  1. kenyon

    kenyon F1 Rookie

    Oct 7, 2002
    2,836
    East Yorkshire
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    Justin Kenyon
    Ferrari Profits Hit by Falling Dollar
    7.1.04--------------



    This article, written by James Mackintosh, 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.


    http://www.ferrariownersclub.co.uk/happenings/2004/january/ft_article.asp
     
  2. f355

    f355 Karting

    Oct 5, 2002
    116
    Lets see if they try to raise prices. With severe competition coming on both Maserati and Ferrari, I doubt they'd be stupid enough to price themselves out of the market especially with Maserati.
     
  3. Brian C. Stradale

    Brian C. Stradale F1 Rookie
    Lifetime Rossa

    Mar 17, 2002
    3,603
    Dallas, TX, USA
    As a form of hedge, Ferrari should just pay Schumacher and the other Formula One invoices in US$, then it wouldn't matter too much. ;)
     
  4. amenasce

    amenasce Two Time F1 World Champ
    Silver Subscribed

    Oct 17, 2001
    26,234
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    Andrew Menasce
    Its the same **** for every ferrari competitor though...
     
  5. BigTex

    BigTex Seven Time F1 World Champ
    Rossa Subscribed Owner

    Dec 6, 2002
    70,451
    Houston, Texas
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    Bubba
    Well, it's effecting my price on my matching Schedoni luggage set too!

    It cuts both ways.

    That's why I didn't go to Gstaad. LOL!
     
  6. jimpo1

    jimpo1 Two Time F1 World Champ
    Silver Subscribed Owner

    Jul 30, 2001
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    Jim E
    Stand by for a rise in parts prices from your dealer!
     
  7. BigTex

    BigTex Seven Time F1 World Champ
    Rossa Subscribed Owner

    Dec 6, 2002
    70,451
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    Bubba
    My water pump was $800. Can they go higher than THAT!!!????
     
  8. saiid

    saiid Karting

    Jan 6, 2004
    52
    London, UK
    Porsche is in a similar position to Ferrari. It makes most of its cars in Europe (i.e. costs are mostly in euros) but a large proprtion of revenues come from US sales. So, Porsche uses financial hedging to minimise the impact of currency swings. I don't understand why Ferrari has not hedged against the dollar. This seems very foolish. BMW is in a better position than most in that it has created natural hedges by producing cars in America (and Britain which is handy as a hedge when sterling weakens vs. euro).
     
  9. flashman

    flashman Formula Junior
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    Jan 5, 2004
    479
    Star Valley, Arizona
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    William Rappaport
    I just replaced mine last week to the tune of $895!
     
  10. Gilles27

    Gilles27 F1 World Champ

    Mar 16, 2002
    13,337
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    Jack
    Hmmm. My tears are on standby, awaiting further notice.
     
  11. loungedog

    loungedog Formula Junior

    Nov 6, 2003
    286
    New Market, Ontario
    I guess I will see everyone at the Chevy dealer same time next year for a Vett.

    The new 360 Modena in 05/06 will be around $220,000 to $235,000 if dollar hits .70 against the euro 30 % for dollar drop and 10 % for new model intro :( :(
     
  12. TimN88

    TimN88 F1 Veteran

    Jun 12, 2001
    5,029
    Northeast
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    Tim
    They barely sell any of them as it is. Used coupes are in the 60's and drop tops are in the 70's. No one will buy them if they increase the price. Do they even sell for msrp at the dealers?
     
  13. Noel

    Noel F1 Veteran
    Rossa Subscribed Owner

    i'm sure that the good people at ferrari are smart enough to hedge their porfits with eurodollar futures.
     
  14. Doody

    Doody F1 Veteran

    Nov 16, 2001
    6,099
    MA USA
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    Mr. Doody
    ROTFLMFAO :)

    doody.
     
  15. AMA328

    AMA328 F1 Rookie

    Nov 12, 2002
    2,518
    ABQ-67me68-OKC :)
    gee, when the dollar was gaining on the Euro few yrs ago, i don't remember seeing any
    articles in the press or posts on the board speculating on whether Ferrari would
    be REDUCING prices in the U.S. due to EXCESSIVE profits...

    guess it's ok to gouge customers, not ok to give 'em a bargain discount :)
     
  16. ze_shark

    ze_shark Formula 3

    Jul 13, 2003
    1,270
    Switzerland (NW)
    Has anybody seen a financial report for CY03Q4 ?
    On Fiat group's site, there's only Q3 info available (http://www.fiatgroup.com/eng/finanza/trimestraleingl.pdf)

    9m€ operating profit in Q3 over revenues of 297m€, that's 3%. No data disclosed on net income.
    "This was mainly due to the negative foreign exchange effect and higher research and development expenses for future models, which were partly offset by the effect of higher volumes and improved product mix of the Ferrari brand."

    If Q3 was that good, I am sure Q4 will look lovely.
    Ferrari already had 7m€ of operating loss YTD in Q3, I don't quite see how they could have closed the year on a profit, as di Montezemolo hints in the article below, with the US$ which took a deeper dive in Q4.

    ... unless they decided to re-allocate US-bound Stradales to the €-zone to crank up their margins and finish the year in the black ;-)
     

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