By Christopher A. Sawyer
The Virtual Driver

(September 22, 2014) After 23 years at the helm, Luca Cordero di Montezemolo has left Ferrari; left as in pushed out the door. For Montezemolo it was an ironic end to a career that began with the wunderkind modernizing the Ferrari F1 team for Enzo Ferrari and leading it to success after years of failure, and ended with him lobbying for a return to rules more favorable to Maranello, as he steered Ferrari’s car division to record profits.

He jealously guarded the Prancing Horse’s image and position, but was blind to the needs of the rest of the organization as it seeks Ferrari’s help to extricate itself from a huge pile of debt.

Fiat Chrysler Automobiles (FCA) is about to embark on an IPO that will see its shares listed on the New York Stock Exchange (NYSE). Despite having the U.S. government essentially give Chrysler to Fiat for nothing, FCA has debts of nearly $3 billion and a number of stagnant brands. It needs the IPO to be a success if it is to raise the money necessary to right this ship, though it will also have to consider eliminating some brands to streamline the organization.

Floating a large minority stake in Ferrari on the NYSE should help raise at least $1.0 billion dollars, and put a significant dent in FCA’s debt. However, it can’t do that if the face of Ferrari, it’s F1 team, is struggling to finish outside of the podium positions week after week.

Montezemolo’s intransigence undoubtedly angered FCA chairman Sergio Marchionne, who once reported to the former Ferrari chairman. Rather than clean house and restructure the racing organization, Montezemolo stood by and watched as the team’s performance slipped year after year. Fernando Alonso, who probably expected to drive a Ferrari to a third Driver’s World Championship, watched as his chances at another title dwindled.

Even the switch to new hybrid powertrains, which should have put all the engine suppliers on a more even footing, did nothing to help the Italian team’s prospects. As the situation became more dire, Montezemolo did the unimaginative, he tried to hire Adrian Newey away from the all-conquering Red Bull team, a move that was as pathetic as it was useless.

Newey, who has stated on more than one occasion that he is unwilling to relocate outside of Britain, brushed off the suggestion, and announced that he would be moving to an oversight position with the F1 team in order to take on challenges in other areas of interest.

Luca Montezemolo in happier times

The current Formula One — essentially a spec. series with overly sensitive aerodynamics that have nothing in common with road cars, and powered by artificially strangled engines — leaves him unfulfilled. He is bored with the petty politics and constant sniping, two things that would have been in great abundance had he moved to Maranello.

Earlier this year Montezemolo brought the head of Ferrari North American (FNA) to Italy to replace team manager Stefano Domenicali, and put the Prancing Horse back on track. Marco Mattiacci, so the story goes, was more than happy to take the reins and help Ferrari recapture its luster, despite the fact that he has no previous experience in racing or Formula 1. It is much more likely, however, that Montezemolo was told by Marchionne to bring Mattiacci onboard, and the Ferrari chairman undoubtedly saw this as a harbinger of things to come.

Not only would Mattiacci report back to Marchionne everything he saw and heard while running the race team, he would gain experience at Ferrari headquarters before assuming the CEO role. It’s not coincidence that saw Montezemolo start suggesting that he could leave Ferrari for greener pastures as the new chairman of the Italian airline, Alitalia. He knew his days were numbered.

The flip side of this coin is that something had to be done, and now, to resurrect Ferrari’s racing fortunes. Design work is already in progress on the 2015 cars, and every moment of delay makes the chance for a turnaround that much more difficult. But racing is just part of this Italian soap opera. Ferrari can no longer sit on the sidelines separate from the rest of the organization that owns it. It must contribute more than just profits. Unfortunately for Ferrari, Marchionne’s latest plans for FCA are not that different from his previous plan, and no more realistic in terms of sales and market share.

He will be tempted to increase profitability by increasing Ferrari’s production volume from its artificially constrained 7,000 vehicles per year. This would be done by adding models and sharing vehicles between Alfa Romeo, Ferrari and Maserati.

If this happens, I believe we could see a Ferrari SUV designed to take on Bentley’s upcoming sport utility, as well as the planned competition from Rolls Royce and Range Rover. Porsche paved the way with its Cayenne, and Marchionne and Mattiacci may use this excuse, and the fact that a Ferrari SUV would compete in a market well above its German rival, to push the brand off road. Such a move also would reduce the risks associated with the Maserati Levante SUV that once was slated to be built off the platform the of Jeep Grand Cherokee, but is now to be built on a bespoke platform.

The next step would be to use Maserati’s sedan platforms to build four-door Ferraris. Up until now, only show cars (e.g. the Ferrari Pinin) and vehicles built exclusively for the über rich (like the Sultan of Brunei) have had a multiplicity of doors. Ferrari never offered and, it claimed, never would sell, a four-door sedan. That could change. Porsche has the Panamera, Mercedes and BMW are looking at ultra-expensive sedans, why not Ferrari?

Rather than dilute the brand with short-term cash grabs like an SUV or sedan, Marchionne and Mattiacci should use Ferrari as an incubator for new ideas, and an engineering resource for new powertrains, materials and electronic systems. This “Skunk Works” model would use its road car and racing experience to improve the breed, but should never be allied to deteriorate to the point where the Dodge Dart SRT wears a certain shade of red paint and “engineered by Ferrari” badging. That would destroy the brand almost overnight.

It is, however, tough to say just what Marchionne might do to shore up FCA’s short-term future. The current car sales climate has subvented leases and low-interest rate loans pulling in the very buyers who defaulted the last time around, and this is putting pressure on car companies to discount their prices in order to stabilize their marketshare.

Except for Ferrari, Jeep is the most successful and profitable division in the FCA portfolio, and Chrysler begun running ads in the Metro Detroit area offering leases for the new Chrysler 200 for as low as $110 per month. Accounting for inflation this is less than the $99 leases Ford used to offer on the Ranger in the mid 1990s. That’s insane.

If that’s not enough, the Fiat brand is stalled, selling multiple versions of the 500, and Alfa Romeo has been delayed more times than an airplane on a storm-filled night. The 4C sports car is an expensive halo car for a division with no new product and no presence in North America. If that’s not enough, Lancia still exists, and continues to suck money out of the company with little to no return on investment. It should be eliminated as soon as possible, despite the noisy protestations of the Italian government and trade unions to the contrary.

Even Dodge’s future should be up for review, although Fiat is the sicker brand. Unfortunately, the short term needs of FCA may well overrule the long-term health of Ferrari.

The Virtual Driver