There has been some upheaval in Italian business circles in recent days with the resignation of Diego Della Valle, the man behind the Tod’s fashion house, from the board of Ferrari, after a dispute with Sergio Marchionne, the Fiat boss, and the Agnelli family. Della Valle was upset that Fiat has cancelled plans to invest in its Italian factories and was vocally unpleasant about the abilities of Marchionne and John Elkann, the Fiat chairman. Ferrari chairman Luca di Montezemolo leapt to the defence of the pair saying that Dalla Valle’s remarks were “absolutely unacceptable”. Montezemolo said that Fiat has successfully weathered the recent crisis and is slowly strengthening its position.
Montezemolo reported at the Paris Mondial de l’Automobile that things were going very well for Ferrari and launched five new models. The company has had its best year yet with the first half results showing record revenues and a significant increase in Ferrari sales. Up to June 30 the company revenues were €1,2 billion, an increase of 11.9 percent, while a total of 3,664 road cars had been sold, an increase of 7.4 percent. Trading profits were more than €100 million, up 10 percent. Sales around the world were interesting with the US market jumping 17 percent to 851 cars, which is 23 percent of the company’s total. There were 393 cars delivered in the UK, an increase of 43 percent, while there were also hikes in Germany and Switzerland. Sales in China came close to 400, up 10 percent and 190 cars were sold in the Middle East, an increase of seven percent. There was a significant drop in sale in Italy, where only 187 cars were sold, almost half as many as a year earlier. Ferrari’s retail activities grew by four percent, with 52 stores now in operation around the world. There was also significant growth online with e-commerce revenues up by 24 percent.
Hi Joe, your thoughts on this article.. please: http://www.bbc.co.uk/sport/0/formula1/19751443
I’m interested, particularly, by the last sentence: ‘Ferrari said they had not because they preferred to deal directly with the FIA and Ecclestone.’ – Taken out of it’s context, of course.
Merci.
I have written about this before, some weeks ago,. There is a certain amount of logic in the idea. The teams and FOM share the revenues and the FIA believes that it should get more than it does. This is fair because the deal that was struck in Max Mosley’s era was heavily-weighted in favour of the commercial right holder. The reason for this was that the federation wanted to get concrete recognition of its rights not only from those involved in the sport but also the EU. This was achieved. While one can accuse Mosley of selling the family silver, I am sure that the intention was always to have a negotiation when the Concorde Agreement ended to give the federation more cash.
Handbags at 10 paces in Italy then, probably disigner handbags though.
Where’s the video clip of this Joe? It would make great entertainment.
Marchionne really has been taking it on the chin back at the home ranch. I reckon that’s unfair, and driven by a bit of jingoism because, well, just about every native of one messed up economy is sniping at the others lately. It’s cheap politics. Della Valle really isn’t your prototypical idiot, so that one perplexes me. I thought he was very down to earth for the luxury sector he’s in. And makes damned nice casual shoes. (I’ve hardly ever been able to wear formal hard top brogues due to injuries).
I’m just confused. I don’t think Marchionne is short of the top brains in auto managers, and I never got the idea Della Valle was some tantrum thrower. Maybe this is just a flash in the pan nonsense, because for sure all the really high ups in business are truly acutely aware of the economic precipices we are dangling out toes over lately. You’d think Marchionne has dealt himself some “opposition politics” strife. If Detroit / Chrysler love him, the Turn lot will have a bash, and vice versa. But I doubt he’s disturbed by any of that.
So I’ve no idea what any of this portends, but it does bug me that multinationals might become subject to cessation or even protectionist outbursts. Hardly any industry is so big and so interconnected across borders, or – more importantly – still employs really big numbers of people. You don’t want to be cutting the cords of those connective tissues just as everything is at risk in general.
Presumably there was a lot of planning and logic to build factories elsewhere than Italy this time. How many can you open at once? Maybe it’s so dull as there’s more skilled staff available elsewhere, just now. It takes a lot fo time to bbuild any factory or even a team from who you have to start, so the available talent and how that gels is a tremendous influence, really more than common sense, having a good gig setup multiplies your chances of success. (that’s Econ 101 in management, but still worth considering because projects gain momentum or stagnate and not much in between) One thing I have perceived about Marchionne, he’s decidedly someone if I could create a excuse I’d love to pitch, is he comes across pretty geek, if not absolutely technocratic. I’d be surprised if political lobbying would dissuade him from making a logical move. He’s done the opposite of letting FIAT / Chrysler go to pot.
Fiat can’t give away their little 500s here in the States.
LOADS of them here in Canada…
^ That’s not what sales figures and selling out of them would lead one to believe though.
Tim’s correct on the numbers here but we should remind all that there is a large Italian population in Ontario (built in sales no matter the quality) and in fact Sergio was raised in the area (lived down the street from my spouse in fact) – but the rest of Canada are not buying this car in any huge numbers. Your belief that the sales figures are good Tim should come with an * however. KIA sell as many small cars in one month as Chrysler imports all year from FIAT. So sales are not THAT good Tim for the rest of North America.
As far as John’s comment that, ‘If Detroit / Chrysler love him…’ (said in a questioning way I assume) the facts are they don’t trust him both within the company (Chrysler management) and of course labour have a great fear that he will follow through with his Mexico comments during UAW/CAW labour talks.
Ferrari sales numbers may be pretty good, but the parent company is in real trouble and losing a lot of money per day because of over production capacity and labour contracts that saddle them with too many workers that are difficult to release due to Government regulations. These parent firm loses could hurt Ferrari at the end of the day unless the non-FIAT investors find a way to separate their firm from FIAT control. Sooner or later the rest of the shares in Ferrari will be sold for a quick profit by FIAT when they get desperate.
Any Fiat success in the US will be a long game, not just a new model… much fixing of reputation is required… people here either have no impression of them or else remember them as junk…
Hi Joe,
Figured this article might be of some interest, given the decreased Ferrari sales in Italy.
http://www.businessweek.com/articles/2012-08-23/italys-austerity-leads-to-ferrari-sell-off
All the best and safe travels over the next 7 or so weeks!
Perhaps Della Valle, in getting mad and speaking about not upgrading and investing in Italian factories to Marchionne, is code for he doesn’t agree with more investment in China at the sacrifice of Italians back home. Here he would be quite right.
There is an absolute demonic possession of Western CEOs ditching their home countries in favor of communist China over the past two decades. I was kicked out of all future audit committee meetings of very well known software company several years back after I voiced concern over wanting to set up in China. I said good luck you will not control your patents there and you’ll be giving your intellectual property away if you do.
Mind you, minutes of board meetings are kept on record. So if Della Valle did indeed speak out to something like this, well, these board types with certain anti-Western agendas that sit on multiple boards of international companies do not like being outed, I can speak from experience on this. Good on Della Valle if that is the case…stick up for your people because governments certainly do not.
> post-communist China
Fixed it for you.
As for the rest of your points, they don’t seem particularly different in kind from the complaints that were being made (in good part correctly) about Japanese business practices and the symbiosis between MITI and industry a few decades ago. There are legitimate concerns and real problems, but no corporate is going to walk away from this scale of profit opportunity on a point of principle, and everyone inevitably imagines that they’ll be the ones who are unscathed / so brilliant that they evade the potholes…
Don’t know about there, but over here it’s way different than it was with Japan… China requires factories as the price of admission to their market… nobody cared much about selling our stuff in Japan, but so-called American corporations are standing in line to do it in China… all of which has translated into the Deindustrialization of the Home Front, and that policy has reached its limit with anybody who’s got a brain…
The cover story has been what we have laughingly called “Free Trade”, but people are seeing through that scam now… the main problem is getting folks from either political party to act like they give a damn…
>China requires factories as the price of admission to their market
Standard operational economic protectionism. Not part of some communist conspiracy. The only difference here is that because China is such a huge market and such a big opportunity, they’ve got more leverage than anyone else right now. Just like the US of A had through most of the 20th century.
>nobody cared much about selling our stuff in Japan…
Depends what you mean by ‘much’. But again, look at the scale of the opportunity in China. Did you hear about the Western-manufactured skis which were banned from the Japanese market because “Japanese snow is different”? (Salomon, IIRC). This sort of thing was going on all the time, alongside blatant ripping off of foreign products and an almost complete lack of meaningful IP protection. Oh, and those few foreign cars allowed in having in practice to be sold LHD into an RHD market. Japan was pretty much synonymous in those days with the term ‘non-tariff barriers’
I forget the details, but France used to conveniently assess for tax all high value electronics imports slap bang in the middle of L’hexagone. Made for inconvenient and expensive arrangements for foreign manufacturers. Amazing what “mature, progressive, capitalist” governments can come up with . .
Another analogy is how Microsoft used to break, inadvertently or otherwise, so many third party products. Bloke called Raymond Chen has a awesome (awesome as in good but also as in fear inspiring) blog called The Old New Thing, trying to explain when cryptomaniacal programming was genuinely for real reasons. Basically one of the most useful blogs on Microsoft if you write any programmes, is the same which tries to unravel the epic amount of gotchyas. To be fair, they often contorted themselves to maintain compatibility with applications who were not using the “approved” methods. But the only two things that seem to crash my install of the Google Chrome browser are Shockwave and the Skype plugin. No surprise Google has competing tech against both . . I like to think I’m grown up a bit, but no matter how much I read of anti competition trials when I was fairly wet behind the ears takes away the fact that at one point I thought all of this meddling for a competitive angle was illogical and anathema. Joke was on me . .
>I forget the details, but France used to conveniently assess for tax all high value electronics imports slap bang in the middle of L’hexagone
Thanks for that. Yes, that’s exactly the sort of thing I’m talking about. Goes on pretty much all around the world.
I may be wrong, but I seem to recall that in that particular French example, it was a tiny two-horse town, and the office was only open on a bureaucratically-imposed timetable, etc., etc….
I know it has zip to do with communism… even the commies don’t believe in that communism…
And I do not fault China for it one bit… they’re just being smart, that’s all… it’s the U.S. that’s being stupid about it…. the reason is that large corporations (a) own the gov’t, and (b) don’t care what’s good for the country, their decision-makers would sell their own mothers if they could make a buck doing it.
The problem is that more than half the population got conned into supporting self-destructive trade policies, in large part because both parties have been bought and paid for, one party more than the other one, but both really…
The last nation that was dumb enough to practice so-called Free Trade was England in the 19th century, which is when the U.S. ate England’s lunch and replaced them as the world’s largest economy… now, we’re doing the same dumb unilateral thing that we used to leapfrog England back then… instead of England letting us take advantage of them, now we’re letting China take advantage of us. China would be crazy to not do it… not their fault we’ve let this happen…
>large corporations (a) own the gov’t, and (b) don’t care what’s good for the country
I agree completely. Citizens United doesn’t exactly help. Nor does having Mr. ‘Corporations are people too, my friend’ looking good to be elected President after last night. (As an aside, why aren’t corporations people when they commit fraud, steal, break the law or act negligently? How come they only get the rights of people and not the responsibilities? Never mind. I know. You’ve already answered that).
I think free trade is a prisoner’s dilemma. It’s actually great, -when- everyone plays by the rules. What isn’t great is playing by the rules when no-one else is. The games theorists say we should use tit-for-tat strategies, offer free trade to everyone to the extent that they offer it to us – and no further.
Marchionne is having an eventful time of late, having just had to go head-to-head with his old mate VWs Winterkorn to retain his credibility as head of ACEA. He’s earning his stripes this year
Is LdM still on the board of DV’s company? He was an early investor…
More than that. They are partners in the new privately-owned high speed rail line in Italy. That will make things interesting … unless Luca whispered to Della Valle “Got to criticize you publicly but don’t take it seriously.” Nothing would surprise me…
Car sales <4,000. Revenues E1.2bn, profits E100m. Hmmm.
Do the figures show revenue from car sales separately? Is Ferrari primarily a carmaker any more or a purveyor of brand and 'image' rights, producing cars only to support that image?
Expected Ferrari car sales this year >7400 = 12 months.
Historically Ferrari have never separated their F1 operation from the rest of the business. This little detail was very much disliked by Britsh F1 teams in the past. Most so by Williams.
Sergio Marchionne is the man who deserves the credit for saving Fiat from bankruptcy. He is also the man who pressed through with the impressive plan of rescueing Chrysler and later merging it with Fiat. He was hired by Montezemolo during his short stint as Fiat chairman.
Marchionne started by firing lots of people starting with Herbert Demel and Karl-Heinz Kalbfell who were just shortly before called in to rescue Fiat’s car division and the Alfa Romeo brand, respectively from Steyr and BMW. This immediately set the tone for what was to be expected from him. And that was, and still is, kicking asses as long as necessary to stop doing things the Italian way. This in turn means crossing swords with nearly everybody.
He lives in a central Swiss canton, not far from Kimi Raikonen’s villa and goes to Turin without wearing a suit.
One of his biggest coup was to withdraw Fiat from Confindustria, the powerful Italian sort of CBI. He also went on to push through contract negotiation for each factory separately, one after the other, in effect ending that horribly Italian nightmare called National Work Contract. This is exactly the sort of thing which makes nation-wide strikes unavoidable, like the one going on right now in public transport. He made it possible for big factories to strike deals directly with workers, in effet by-passing the powerful unions. On many occasions he made thinly veiled threats to build cars out of Italy and this is exactly why he is viewed by many as the public enemy nr. 1.
Della Valle on the other hand is Monty’s business partner in the company called NTV, which operates a second high-speed train network. Marchionne does not have many friends because a) he does not like the petrified Italian establishment and b) he likes to do what has to be done, without consensus.
Italy needs many more people like Sergio Marchionne.
Awesome summary, Pierre. Thanks for joining the dots. So right that doing good business can mean upsetting so many constituencies. My neck of the woods, you have too many factions from agencies, luddite publishers, salesmen scared they might loose cushy commissions. I’ve banged my head against the wall plenty of times. Now, ironically, I think I might make enemies in the online game, because they are settling into what I think are anti business habits, over the medium to long term. One thing, though, I must caveat that I too sometimes default to the rules I detest, because not every deal – taken individually – gets above my lowest comfort threshold. Lately, I feel like I need a kick up the bum because with a few years of unfortunate events lately, I think I dropped the ball on being pushy and progressive, became less true to my original views to what I was aiming for. I’d not looked into Marchionne’s battles, not by far enough, and that’s some gutsy stuff you recount, thanks.
Marchionne has to do one more thing to earn my respect, though, and ‘fess up where he buys his woollens
:-0) You’re right! I’ve heard that in Italy some jokes started to circulate about that…Sergio is frequently accompanied by expensively be-suited elegant men, start with John Elkann, his brother Lapo who has become a stylist and last but least Monty himself!
The British volumes for Ferrari sales are amazing in the context of the USA given that we’re only little old England
Forgot to mention : It’s a strange coincidence that Ferrari shot up like this in England just at the time when McLaren’s street car becomes available!