Fiat and Ferrari, a weird relationship

Fiat and FerrariThere are several types of marriages and partnerships. In automotive world it’s common to hear about merges, acquisitions and divorces among car makers that look to survive. There are strong ties such as Peugeot and Citroen, VW and Audi, Fiat and Alfa Romeo/Lancia, Chevrolet and Cadillac, Hyundai and Kia, and so on. There are other with more difficulties, like GM and Opel, or VW and Seat/Suzuki. But perhaps there’s only one with the most weird situation: Fiat and Ferrari. Few people know that the fantastic super car manufacturer makes part of Fiat, and there are many reasons that explain this. First of all, Fiat’s automotive division is divided into two mainly parts: Fiat Group Automobiles, which includes Fiat brand, Fiat Professional, Lancia, Alfa Romeo, Abarth, Jeep, and Mopar. And Luxury and Performance brands that include Ferrari and Maserati. This is the way the group works now, but it will change as soon as Fiat buys the remaining part of Chrysler (latest news indicate that Fiat may switch from the Milan exchange to NY one’s once the purchase operation is completed).

Fiat Auto in EuropeThe division between Fiat and Ferrari includes different legal societies, events, management, marketing, and finance (their results make part of the same report but their operations and details are separated). That’s how Fiat headquarters in Turin are not involved in Ferrari’s day-to-day activities. There are a lot of reasons for this split (economic and politic), but, in my opinion, it doesn’t seem to be the best thing. Ferrari is maybe the world’s best-known car brand with the highest number of fans (more than 11 million in Facebook). It is the referent of sporty and high performance cars, and is one of the brands to lead in technology field. This amazing car brand is also an example of how to do the best marketing. Unfortunately these good aspects of Ferrari don’t make part of the other brands of the group. It seems like Ferrari lives in its own territory away from the troubled FGA. The situation between Ferrari and Fiat is like the son that became rich and doesn’t want to know anything from its poor and complicated family. It’s quite understandable Ferrari’s position as it wants to protect its image staying distant from the mess in FGA (problems with sales registrations, bad quality of some of its cars, management problems). Part of the success of Ferrari is not only the cars they produce, but the brilliant way the sell and promote them. Part of the problem of Fiat is the bad image it has among many buyers.

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But I think this weird relationship must change. It makes no sense to have one brand suffering because of image, and another one making use of it. Ferrari gained its good reputation thanks to hard work and excellent cars. Then it should help its troubled brothers so they can make use of its experience and improve their position in the market. Yes, it is not possible to place Fiat brand/Lancia/Fiat Professional and Ferrari in the same place. They are completely different brands with different targets. But Ferrari’s know how could be an extremely valuable asset for them. There should be more cooperation between them and just as it happens with Ferrari and Maserati (they share some engines and technologies), the same should happen with Alfa Romeo and Abarth. Besides this collaboration, which may not be the best thing for Ferrari, Fiat Group should work more on associating Ferrari’s name with the other brands. I mean, people should realize that the group that makes the awesome Ferraris is the same one that builds the popular Fiat 500. It means that the group should focus on more communication efforts to outline that they are all Italians and they can do the best high performance cars, but also the best city cars. Is like VW and its brands. Most people know that Audi, Porsche, Seat and Skoda share components, technologies and platforms but it doesn’t mean that the image of each one of them is negatively affected.

The Italian crisis and the extinction of Ferraris

The tittle may be shocking, but it explains what is going on in the troubled Italy with expensive cars. According to Bloomberg news the situation with luxury cars is becoming dramatic in Italy because of the financial crisis and governments measures. It is not only a matter of new car sales figures, which are down an incredible 20%, but is also about the impossibility of having the Ferraris, Maserati, Porsche or Lambos in a country where new taxes appear every day and the fight against tax evaders has become an official duty. That’s why many Italians are exporting their super cars in order to avoid tax payments or the persecution of police. According to the article, the number of secondhand high performance cars exported from Italy was up 177% in the first 5 months of 2012, when 13.633 cars were taken out of the country. Italian authorities began a raid against all tax evaders going to exclusive places where all the millionaires go with their supercars. By doing it they could know who was really declaring the right income and therefore paying enough taxes. And as expected, Italian police has found several people enjoying their ‘toys’ and having the ‘dolce vita’ without paying the right amount of taxes. It is certainly a pity in a country known by its supercars in its wonderful roads.

Ferrari and Maserati sales figures in their main markets during 2011. They are Fiat’s most profitable brands. Source: Ferrari Annual Report via Torque News.

The rise on taxes to luxury cars has affected for the first time high performance luxury brands. Most of the times, this kind of cars is more resilient to economic crisis as millionaires are the last ones to suffer the consequences of a recession.  But in Italy things are different and Ferrari for example forecasts a fall on its new car sales of 47%, while they keep increasing their exports to China, the Middle East and the US. Eventhough local market is decreasing for Ferrari and Maserati, they keep being Fiat Group’s most profitable brands. Just in the first half of the year both brands had a combined operational profit of 175 million euros, with an awesome margin of 12.2%, beating BMW’s 11.6%, and helping Fiat Group to decrease its losses. It seems Italian economic crisis is not only affecting the small Panda and 500 but also the gorgeous Ferrari 458 and Maserati Gran Turismo.

New engines for the bottom and top of the line

Good news arrive from Fiat Powertrain Technologies (FPT) regarding two extremes of the model range of Fiat Group: the small and efficient Fiat engines and the powerful Ferrari ones. In the first case, FPT has announced than soon small Fiats (Panda, 500 and Punto) will be also offered with TwinAir Natural Power engine that allows the car to use either gas or methane without any inconvenient. This new engine will be available in 2 sizes, the basic one with 80 hp and the Turbo one, with 105 hp that might be also available in the coming Fiat 500L. Fiat guys say that Turbo version of the new B-segment minivan will have fuel efficiency of 4.7L/100 km with emissions of 112 g/km, not bad for a 4.15m length MPV. These engines will slowly replace the current 85hp and 105hp common gas ones as the fuel efficiency and emissions will be much better. An Hybrid version is also coming. The TwinAir Hybrid, which might be ready in one year, will be a very efficient small engine capable to use gas and Compressed Natural Gas (CNG) allowing an optimal consumption of 4.0L/100km and emissions from 80 g/km with gas up to 69 g/km with CNG. Did anyone hear about Italian incentives?

Fiat TwinAir engine. International Engine of the Year Award 2011

In the opposite side, FPT is also working on the replacement of the current 4 cylinders 1.750 cc Gasoline and 235 hp(used by the Alfa Romeo Giulietta Quadrifoglio Verde). The new version will arrive at the begining of 2013 and will be able to be installed on longitudinal or transversal engines offerinf 1.800 cc and up to 300 hp that will certainly add excellent performance to C and D-segment models in Europe and America. But it won’t be the only big engine to come. For the top of the line, Ferrari, Maserati and a big Alfa Romeo, Ferrari is investing $50 million Euro in the development of 2 engines: a V6 double turbo and up to 450 hp, and a V8. Both engines will have the task to move some awesome Ferarris, the next generation of Maserati Quattroporte (to be presented in Paris 2012), the Maserati Kubang and the future E-segment of Maserati and Alfa Romeo.