The Financial Times published this article on 15 May 2002, written by Fred Kapner:

At the Ferrari plant near Modena, cars move along quiet assembly lines like pearls on string, and are then put under elegant fabric covers for delivery to their millionaire clients, most of whom wait two years to get their order filled.

Ferrari is the jewel in the crown for Fiat, the ailing car and truck maker, which said yesterday it would launch an initial public offering for the sports car maker, hoping its sex appeal can bring Fiat cash needed to lower the group's debt.

Indeed, an IPO later this year for a national icon could be one of the few bits of good news for Fiat this year. Fiat Auto, its less glamorous car division, producer of Fiat, Alfa Romeo and Lancia cars, is mired in losses, job cuts and management reorganisation.

Fiat's truck and farm and construction equipment divisions, meanwhile, struggle to break even despite numerous restructuring programmes over the past two years.

Until a few years ago, Ferrari itself was part of the problem. It began to report a net profit only in 2000 after a decade of losses - in the latter years due to massive restructuring and the creation of the sophisticated assembly line. Leading the turnround since 1993 has been Luca Cordero di Montezemolo, Ferrari's chairman and chief executive. Mr Montezemolo, 54, has become a national hero not so much for fixing Ferrari but rather its Formula One racing team.

After years of embarrassing flops, Ferrari has now won the Formula One championship for three straight years. Led by driver Michael Schumacher, it is poised to win a fourth.

Mr Montezemolo has long wished for an IPO, but was counting on doing so only in 2003 or even 2004. While Ferrari made a net profit of €47m last year on sales of €1bn ($902m), the profit was only its second year's profit in a row. More importantly for potential investors, the Maserati division continues to drain cash because of the launch of new models and a re-entry into the US market after an 11-year hiatus. "The idea was to wait for Maserati to show a profit before interest and taxes, and that isn't expected until late 2003," said a person familiar with the group.

However, Fiat's cash needs have sped up the IPO, which will raise money not only for the parent but for Ferrari. The company would use the cash to develop Ferrari theme parks via joint ventures. It has also been approached about a Ferrari hotel in Las Vegas.

The success of Ferrari's IPO depends on Maserati's track record in the US. The North American market accounts for 30 per cent of Ferrari's total sales of 4,300 vehicles. With good Maserati sales figures, analysts estimate Ferrari could be worth between €1.2bn and €1.5bn, allowing Fiat to raise around €500m.

Maserati says it has received 800 firm orders for 1,200 cars it plans to sell in the US this year. Five months ago, it said it had received 450 orders, suggesting that demand has ebbed slightly despite good reviews in the US.

The mere confirmation that Fiat planned to float Ferrari shares this year boosted Fiat's stock yesterday, even though the company announced larger first-quarter losses than expected. "If they're willing to sell their jewel, it shows that management is getting serious, and that's a sign the market has been waiting for," said Adam Collins, an analyst at Schroder Salomon Smith Barney.

Ferrari's recent success on the race track and in showrooms could not come at a better time for Fiat. Soon, Ferrari shares will have to prove themselves in the trading pits.

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