The Ferrari of CEOs

Too often the people who run car companies look more like accountants than race car drivers. That might explain why some of these companies have a hard time coming up with cars that consumers want to buy. Ferrari does not have that problem.

That's because its CEO, Luca Cordero di Montezemolo, is a former race car driver. The stylish, 62-year-old Italian, who is also chairman of Fiat (FIA.MI), has panache in spades. He looks like the sort of man who could not only own a Ferrari but also know how to drive one. Neither of which is a small feat.

But beneath the playboy looks beats the heart of a businessman. Descended from Piedmontese aristocracy, di Montezemolo earned a law degree from Sapienza-Università di Roma in 1971 and studied for an MBA at Columbia University in Manhattan. After practicing at a Wall Street law firm, he returned to Italy to work as special assistant to Enzo Ferrari, where he became the race team manager. He then joined Fiat in a variety of positions, including being responsible for international public affairs, then moved to become CEO of aperitif maker Cinzano (also a Fiat company) and was chairman of the organization of soccer's 1990 FIFA World Cup in Italy.

In 1990, di Montezemolo returned to Ferrari as chairman and CEO—and subsequently CEO of Maserati—charged with making the company financially successful and the Ferrari Formula One team a winner. In short order he accomplished both. Even during the recent economic downturn the company posted only a slight decrease in sales and sees continued growth in the U.S. and new opportunities in expanding markets such as China.

During the recently concluded Frankfurt Motor Show, di Montezemolo spoke to BusinessWeek about the future of Ferrari, the strategic importance of Formula One, Fiat's plans for Chrysler, and why Ferrari will never build a hybrid.

Given the state of the automobile business worldwide, how was Ferrari's business in the first six months of the year?

We are slightly down—8%—from last year, but that included the best six months in the history of Ferrari, and last year was a record year for Ferrari. In the first half of 2009 we sold 3,221 Ferraris around the world with a value of €891 million and profits of €124 million. Our merchandising and licensing revenues were up 27% in the first half, and our market share went from 22% to 53%.

What are the key parts of Ferrari's businesses?

The business of the Ferrari brand around the world has three main activities, road cars, racing cars, and Formula One cars for annual sales of $1.5 billion. Our licensing, merchandising, and e-commerce businesses, facilitated by our Formula One team activities—the most winning—amounts to $600 million.

How has Ferrari been able to continue selling its expensive automobiles?

I always tell our people, "We do not sell a car, we sell a dream" and we sell 6,500 Ferraris a year. Buying a Ferrari is different than buying a normal car. And so we are lucky because we are out from the crowd and even with this recent financial storm we are not in the middle of the storm.

Where are your strongest markets?

The U.S. is our largest market, yet this is a country with very strong speed limits and in which Formula One is not as popular as it is elsewhere in the world. So it is the brand, the beauty of the car, the exclusivity, the technology, and the fame of the Ferrari dream. We also sell well in Italy, the Middle East, and we have a growing market in China.

Are there problems selling your cars in China?

In China this year we will sell 201 cars despite a very high tax. Today if you want to buy a Ferrari in China, you will pay double! Exactly double. Yet despite high taxes, there is still a strong demand for our cars.

Why is Formula One so important to you and to Ferrari?

Because Ferrari is extreme technology. With Formula One technology we can win and have the most winning teams. We use extreme technology as an advanced research center for added value.

Formula One has lost a couple of manufacturers because of the high costs associated with racing. What are your expectations?

I want Formula One to pay or break even. The extreme technology of these cars which includes gear box, engine, aerodynamics, and electronics has many applications to us and to Fiat.

Does Ferrari have any plans to develop smaller or more affordable vehicles?

No, for two reasons. First of all, the dream has to be in exclusivity which is exactly the opposite of your customers. I think we have an extreme sportive car, like the California. It is not our capability to go down. There is also another reason. Our group, in the Fiat Group is Ferrari, Maserati, and Alfa Romeo. Even without Maserati and Alfa Romeo we have no intention of four-door cars or a lower level of cars. To do a small Ferrari is to do a Ferrari with less technology.

Do you believe Fiat can bring its technology to Chrysler in the U.S.?

We have given Fiat some good technology such as the Formula One gearbox that was introduced for the road cars is now on Fiat's. I think Fiat has got many tools and technology for Chrysler, particularly small engines, small cars, and lower emissions. So this is the reason why I think Fiat will be very successful in the U.S. and the rest of the world.

Will Fiat CEO Sergio Marchionne be able to manage both Fiat and Chrysler?

I think he can play a very good role to maintain a strong presence in the U.S. at the beginning and a strong presence in Italy with a first-class team. He can manage both as Carlos Ghosn does with Renault (RENA.PA) and Nissan (NSANY). I think he can have fun with both because we now have good people in charge—go around the show and see Maserati, Lancia, Fiat, Alfa Romeo—there are very good people and good stands.

Last question, what is Ferrari's position on hybrids?

Hybrids—electric…we will never have a taxi-driver car. We demand technology, performance, acceleration, braking, and exclusivity.

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