This article was written by Luca Ciferri
for Automotive News Europe

Ferrari is doing well, both on the market and on the racetrack. But the Maserati relaunch is taking more time and money than was planned. Maserati's return to break-even has been delayed to 2006, and the addition of a fourth Maserati product, the Kubang GT wagon, could postpone it again.

Ferrari-Maserati CEO Luca Cordero di Montezemolo is not worried: There are time and resources to turn around Maserati. And the recent technical and commercial agreement with Audi AG gives Maserati the economy of scale and the additional dealers it needed. Montezemolo, who has been in his post since 1991, is the longest-serving CEO in the European auto industry. He spoke with Automotive News Europe's Luca Ciferri in Maranello, Modena.

Aston Martin with the Vanquish, Bugatti with the Veyron, Mercedes-Benz with the McLaren SLR and Porsche with the Carrera GT are aiming to steal customers from Ferrari. How much do they worry you?
I highly respect them, but I am not worried. I am in favor of challenges and of competition. Sometimes I'm scared to remain the last of the Mohicans (in making this type of car). I'm confident of our current and future product range, of our strong and continuous transfer of advanced Formula 1 technology to our road cars. We had already sold all the Enzos even before unveiling the car at the Paris show last year, something that makes me confident we have the right balance between volumes and exclusivity.

For more than 10 years, Fiat Group was your shareholder. Since the end of February you have been a Fiat Group board member. How did this change your view of the Ferrari-Maserati business?
It didn't change my view of our business, but it offers me the possibility to underline even more strongly the independence of Ferrari and Maserati from Fiat Auto in terms of image, product and commercial policy.

What could your experience and knowledge add to the other Fiat Group businesses?
I am very pleased to be part of such a heterogeneous board, which includes shareholders, bankers, businessmen and lawyers. I think it is not bad to also have someone working in the automotive business. Particularly now, as the Fiat Group refocused on being an automotive group, I am a person who deals daily with product, market and technology. In addition, I have an instinctive understanding of marketing.

You said that excellent cars only could be created by excellent people operating in an excellent working environment. How much of your time is dedicated to human resources?
The biggest part of my time is spent in motivating and putting my people in the best possible conditions to work and succeed, also applying continuous improvement into the company organization. It is important to offer everyone good opportunities for their career, and not to have what I call "dynamic stability" misinterpreted as company immobility.

Will Ferrari remain a business that produces 4,000-plus units a year?
We are not planning to increase our volume in the markets we are already in, but the opening of new markets could increase our volume. Currently we plan to remain in the 4,200-to-4,300 area. But look at China. How could you predict our potential there? We have just a showroom in Beijing, run by our Hong Kong importer, we opened 10 years ago. This year we will sell 30 units. But the long-term potential could be 100 to 150 units, maybe even 200. But if the Chinese market would reach the size of United States, we probably need another 1,000 units for China. We are also ready to officially enter the Russian market, which represents a great new opportunity especially for the new Maserati Quattroporte.

In July 1998, Ferrari gained complete control of Maserati. How much have you invested in Maserati, and how much are you planning to invest in the coming
years?
The Ferrari and Maserati businesses are still too integrated to make a meaningful split. In the past five years, the Ferrari-Maserati group invested an average 18 percent of revenues in R&D and capital expenditure, increased to 23 percent for 2002. I think these figures won't change much in the near future.

The Maserati turnaround is behind schedule. What went wrong?
First of all, in 1998 we received a brand, an outdated factory and aging product line. We had to start from scratch in rebuilding the company, its management, its factory and its product line. Initially we thought a two-product line - the Coupe and the Spyder - mainly sold by Ferrari dealers could have been enough. We instead realized we needed three products - so also the new Quattroporte sporty sedan - and a broader dealer network to reach break-even.

When will this break-even happen?
We have a couple of scenarios. The first one is based on our current three-product range and is planned for 2006. The second, implying an additional model, will include higher investments and so a later date for the break-even. My point is slightly different: Any saving in R&D for Maserati could make our balance sheet look better in the short term but won't help in rebuilding Maserati as a credible and consistent brand in the long term. Luckily, as a group Ferrari-Maserati can afford another two to three years of heavy investments to gain a very solid turnaround for Maserati.

Could you confirm that the plan is to have the Kubang built in aluminum by Audi?
Yes, but I do not want our cooperation with Audi to be reduced to the possible production of the Kubang. It is a broader cooperation of mutual benefits.

Could you outline these benefits for both sides?
For Maserati, we have access to high-performance four-wheel-drive systems, to high-displacement, high-output diesel engines and to electronic systems, which our economy of scale would make too expensive to develop in-house. In addition, we could add the Maserati franchise to Audi dealers all over the world. Finally, we are talking about using Audi financial services for Maserati, something crucial because in this segment competitors such as BMW, Jaguar, Mercedes and Porsche worldwide lease about 80 percent of their sales. For Audi, producing an aluminum vehicle for Maserati will help them to better use their installed capacity. The VW group now has a number of low-volume brands and could benefit from Ferrari and Maserati know-how for low-volume production.

Finally, there is the Quattroporte system they are evaluating. The VW group drove and was very impressed by the new Maserati Quattroporte. They are considering our Quattroporte as a base for a new rear-drive model they are planning.

I'm very proud of this attention from VW, which means we did a great job with the Quattroporte, a model which was developed totally in-house with no carryovers from the past generation, or from other brands of Fiat Group.

Before the announcement of Maserati's cooperation with Audi, it was rumored VW also would buy a minority stake in Maserati, said to be between 40 percent and 49 percent. Why didn't this happen?
We didn't talk of selling a stake of Maserati. Together with the VW group, we agreed that a technical cooperation was the best solution for both sides.

What is the medium-term target for Maserati, excluding the Kubang, which is not approved yet?
We plan 8,000 to 10,000 units by 2006, but the volumes are also related to the market performances. In the past two years, Maserati's segment shrunk in our two biggest markets: U.S.A. and Germany.

What could China mean for Maserati?
We have big plans for China. We are negotiating with local partners to appoint a local distributor, which could be operative by the middle of next year. It will handle also Ferrari distribution. But the great opportunity there is for Maserati. We plan to begin with seven to 10 dealers pointing to 200 to 250 units in the first full year of operations. We have great expectations for China, but to give long-term predictions for a brand that has still to enter that market would be pure gambling.

The IPO of Ferrari has been on and off in the past two years. The Italian press speculates spring 2004 could be the right time. Is this correct?
I will repeat what was said by Fiat Group Chairman Umberto Agnelli: Ask Mediobanca. The point in fact is very simple: In June 2002, Mediobanca bought from Fiat Group a 34 percent stake of Ferrari, with a plan to make an IPO of it. Right now, for us, Mediobanca is just a minority shareholder we have excellent relations with.

If Mediobanca won't float this stake in June 2004, Fiat Group has the right to buy it back. What do you think will happen?
Again, I'm not the right person to answer the question, which has to be addressed to Giuseppe Morchio, Fiat Group CEO. Anyway, I really wish this could happen, because it means Fiat Group would have returned to a very strong cash flow.

Ferrari just won five maker and four driver world championships in a row. How much does it cost to lead Formula One? Press reports vary from (euro) 300 million to (euro) 500 million a year.
We spend less than the automotive giants involved in F1. I never said how much we spend, and I won't change my rule, but I can add this. We directly cover 30 percent of our F1 budget, another 60 percent comes from our sponsors, while the remaining 10 percent is made of TV rights, prizes and so on. This makes very clear that, without the help of our sponsors, we cannot afford F1.

Carmakers want a bigger share of the Formula One television and ticket sale revenues. They have organized themselves in order to create a series by 2008. How is this project evolving?
The project, called Grand Prix World Championship, GPWC in short, is at a standstill. We are still talking, but we have not finalized anything yet. The current F1 organizer, SLEC, will have all the player contracts elapsing at the end of 2007. Consequently, its value would be reduced to zero. It would be like a movie director with no actors to play.

At the Tokyo show, you said you are talking with Bentley, Jaguar and Porsche to create an international GT championship. Could you give us some more details?
Our aim is to verify with other carmakers the possibility of proposing to car racing authorities a new GT series that could be a real world championship for carmakers. Right now we have different series, from FIA GT championship to the European Le Mans to the American Le Mans series. The idea is a truly worldwide championship with cars derived from production vehicles, as you should build at least 25 units to compete. Suppliers look for volume in any component application. How could you get the best technology from suppliers when the biggest contract you can award them is for 2,000 to 3,000 pieces a year?

I rather prefer to call them partners instead of suppliers, because we really co-design any part we use on our cars. We offer them prestige, marketing appeal, strong connection with F1, and a very quick development and testing method that permits immediate follow up for them.

If you could meet Enzo Ferrari today, what would you say him?
I would say I think he could be satisfied with today's Ferrari.

Just as he and his team had been exceptional in creating Ferrari, I think we did a great job in creating the Ferrari of the new millennium. We entered the new millennium with an astonishing series of business and racing results that would give him the same pride he obtained from the startup of his own company.