Ferrari Financials And Fuel Economy

ferrari-dino

Ferrari may soon find itself worrying about fuel economy numbers for its cars. Why? Because on October 30, Sergio Marchionne, CEO of Fiat/Chrysler, announced that Ferrari would sell sell 10% of its shares to the public, a move intended to raise $1 billion dollars to help out the struggling parent company.

While the timing was unexpected, the sale itself was not. In September, longtime Ferrari head Luca DiMontezemolo was forced out by Marchionne, a move that many interpreted as proof that changes in the way Ferrari does business were imminent. DiMontezemolo had run Ferrari since 1991, and was known to strongly endorse limiting the number of Ferrari automobiles produced each year in order to maintain the value of the brand.

Marchionne apparently has other ideas. On the way out the door, DiMontezemolo lamented that Ferrari “was now an American company.” Observers assume he meant that, from this point forward, profits would trump pedigree. Marchionne apparently has noticed how Porsche has grown from a niche manufacturer of superb sports cars for the privileged few to a global manufacturer selling scads of high priced sedans and SUVs. Since Ferrari’s iconic “prancing horse” logo is among the most recognized corporate symbols in the world, the market for “affordable” Ferraris could be immense.

The problem is, if Ferrari builds more than 10,000 cars a year, it will have to comply with US fuel economy standards. CAFE standards require automakers to achieve a fleet average of 34.1 mpg by 2016 and 54.5 mpg by 2025. Those numbers are not quite what they seem, though. In 2008, the EPA made its tests tougher, so most cars posted lower, but more accurate, fuel efficiency figures. But here’s the kicker; the CAFE requirements are based on the old tests, so that 34.1 mpg figure works out to about 26 mpg according to the EPA’s new test. By the same math, 54.5 mpg on the old test comes to 36 mpg on the new one. Got that?

Ferraris are many things – fantastic, fast and fun to drive –  but frugal? Oh, please. The newly introduced 2015 California T, gets just 18 MPG at best, while the 950 horsepower LaFerrari hybrid supercar manages a measly 14 mpg. And those numbers are for highway driving. What can be done?

Is This The Next Ferrari? Photo: bomba

One thing, of course, is to keep production numbers low, but that doesn’t seem to be Marchionne’s plan. The other is to build a range of less costly, more fuel efficient cars. The may not seem as crazy as it sounds. Back in 1966, Ferrari built a small, nimble and efficient car with a mid-engine design and a V6 engine when all other Ferraris had great, honking V-12’s mounted up front. The car was called the Dino, the nickname for Enzo Ferrari’s son, Alfredo, who designed the engine.

But dealers in America said they couldn’t sell a car that no one had ever heard of and so the car was offered for sale as the Fiat Dino. Years later, it was rebranded as the Ferrari Dino. It only sold in limited numbers because the sports car faithful of the era disdained the idea of driving a wimpy little car with an anemic 6 cylinder engine. Today, of course, surviving examples are exceedingly rare and worth a fortune. Perhaps Ferrari could revive the Dino brand and offer a range of efficient automobiles that would sell well and drag its CAFE numbers up?

Every manufacturer in the world is scrambling to produce new models that offer excitement and fuel economy. Turbocharging has reinvigorated the new Audi TTS, the BMW Z4 and the Alfa Romeo 4C. Volvo has just announced a triple boosted 4 cylinder that cranks out 450 hp. Even the Fiat 500 can be had in Abarth trim. Paint it red and it even looks like a Ferrari. A friend of mine has modified his 500 Abarth to put out 240 hp and says it is the most fun to drive of any car he has ever owned. And he has owned several Ferraris!

Hybrid power trains also offer a way forward. The new BMW i8 rockets to 60 mph in 4.2 seconds. Porsche’s 918 hybrid supercar just scorched its way around the Nordsdhliefe at Nurburgring faster than any production car ever. The soon to be released Acura NSX will also feature a hybrid powertrain churning out more motivation than the original car’s conventional setup could have dreamed about. So the option for Ferrari to create modern high performance, fuel efficient cars that are less costly than the multi-million dollar models it currently builds certainly exists.

The only question is, which vision of the future is correct? Is it Luca DiMontezemolo’s idea that limited production is the best way to keep the value of the Ferrari brand high? Or Sergio Marchionne’s belief that the magic of the Ferrari brand is strong enough to support greater sales without destroying it?

Either way, Marchionne is not worried about where his next meal is coming from. The day after he announced the Ferrari IPO, he exercised stock options that were worth more than 6,000,000 Euros more than they were the day before. What ever happens to Ferrari, Sergio Marchionne will be laughing all the way to the bank.

Source: Wired | Image: ermess/Shutterstock.com

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.