The Prancing Horse, Inside Ferrari

The Prancing Horse, Inside Ferrari

Ferrari’s ‘Prancing Horse and its culture are everywhere in Maranello a the town of 17,000 located in an agricultural area in central Italy.

The stoplights are Ferrari Red, there is a  Ferrari restaurant just outside the factory called Ristorante Cavallino serves Ferrari Red sparking wine.

Across the street from the factory are a Ferrari store and the Ferrari museum. Also, there are several luxury hotels that cater to Ferrari enthusiasts and owners who visit.

A look inside the plant give you a sense of the flavor and culture of the famous carmaker owned by Fiat Chrysler Automobiles (NYSE:FCAU).

The residents of Maranello live and breathe Ferrari and the tourism it draws in a way that is hard to explain, except that Ferrari is the most recognized brand in the world. One of the churches in the town rings its bell when Ferrari wins Formula 1 championships. It’ is a very strong vibe that any city, anywhere in the world, would love capture and bottle.

It is  that reverence for the brand that Fiat Chrysler CEO Sergio Marchionne hopes will drive its coming IPO (initial public offering) of 10% of Ferrari stock into the multi-Billion dollar range.

Ferrari, founded in Y 1947 by Enzo Ferrari, employs about 3,000. The manufacturing campus reflects the founder’s belief that Ferrari race cars and sports cars should be built in only one place: Maranello.

Ferrari is like wine; you cannot build the Ferrari if you move the plant to another location.

Ferrari’s manufacturing campus where workers wear Red and White uniforms with Yellow Ferrari logos is not like any other automotive plant in the world. The company has always made its own engines, reflecting Ferrari’s philosophy that the engine is the heart of the car.

The campus consists of 4 buildings: engine assembly, body shop, paint shop and final assembly.

Inside the assembly plant, the tapping of hammers echos across the engine shop. Small teams quietly work. Ferrari’s cars are crafted, not assembled, in 1 large, immaculate workshop.

It means that the company puts the employee at the center of the factory, and tries to create the best working conditions.

There are 2 large areas for plants and small trees in the middle of the body shop.

In the final assembly area there are doors that lead to an outdoor walkway that leads to another large garden.

All the buildings have windows to provide natural light. Workers can leave their stations if they need to relax. There also is a high-end cafeteria for employees.

The firm owns its own racetrack for testing and development, the Fiorano Circuit, and stores dozens of used Formula 1 race cars that it has sold to some of the world’s richest car enthusiasts.

The used race cars start at $1.5-M and depending on the heritage of the car and races won can easily sell for large multiples of that number.

The company stores the supercars for the owners because they can only be driven on racetracks. Many owners store them in Maranello so they can visit a few times per year and use the test track.

Underlying all of Ferrari’s operations is a commitment to protect the value of the company. The company keeps production volumes low, quality high and bars photography inside the manufacturing campus or even inside the gift shop.

A visit to the plant at Maranello reveals why Mr. Marchionne once suggested the brand could be worth as much as $15-B.

Fiat acquired 50% of Ferrari in Y 1969 and expanded its stake to 90% in Y 1988 after the Enzo Ferrari died.

Now, Mr. Marchionne is planning to tap into some of the brands value. He announced plans for the IPO last year and plans to distribute 80% of the remaining shares to Fiat Chrysler shareholders. The last 10% of Ferrari is owned by Piero Lardi Ferrari, a son of the founder.

Despite that plan, the company will not boost production beyond the 7,000 cars the company makes annually even though demand is greater than that number.

“Always sell one car less than the market demands and maintain the value,” the mantra of Enzo Ferrari.

Stay tuned…

HeffX-LTN

Paul Ebeling

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