Wiping off the stain of the U.S.?

Is That Ferrari a Chrysler in Disguise?

Edward Niedermeyer, an auto-industry analyst, is the co-founder of Daily Kanban and the former editor of the blog The Truth About Cars.
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When Luca Cordero di Montezemolo took over Ferrari in 1991, the storied Italian brand and the high-end car business as a whole were set for a thrilling ride. Montezemolo re-energized Ferrari's famous Scuderia racing operations to return it to Formula 1 dominance, and parlayed the global exposure into one of the most profitable operations in the industry. With revenue pouring in from both its supercars and its lucrative licensing business -- which slaps Ferrari logos onto everything from sneakers and laptops to amusement parks -- Montezemolo's Ferrari became the gold standard for luxury car brands.

So how did it come to such an ugly end? Today, Montezemolo stepped down, after several very public clashes with chief executive officer Sergio Marchionne of parent Fiat-Chrysler. One cause was certainly failures on the racetrack. The firm's latest racing machinery, a troubled electric-hybrid system aimed at helping the low-volume automaker win races while also passing new European emission standards in consumer cars, has dimmed the brand's technological halo. But the real problem was that Ferrari's long-cherished independence has been under increasing assault from struggling Fiat, which owns 90 percent of the luxury carmaker.

Ferrari's woes on the track could be addressed easily enough by pouring its considerable profits back into the racing operation. The problem is that Fiat-Chrysler is in even greater need of those profits -- along with Ferrari's mechanical know-how and reputation -- to rescue its other businesses. To rejuvenate its Maserati and Alfa Romeo brands, Fiat is fusing its high-end Ferrari technology with more prosaic Chrysler-sourced hardware. This led Montezemolo to tell the Italian press on Monday: “Ferrari is now American."

A new report from Automotive News gives an idea of the kind of consolidation that has been brewing: to support Maserati's new lower-cost Ghibli sedan, Chrysler engine plants in Indiana have been producing V-6 engines that are then shipped to Italy and fitted with Ferrari-designed turbochargers. To imagine how this sort of attempted synergy might worry Ferrari executives and customers about the future, just recall the hilariously awful brand-mashup of the 1979 Chrysler TC by Maserati.

With a new Maserati SUV based on the Jeep Grand Cherokee in the works, and a whole Alfa Romeo lineup planned around similar technological sharing, the question is whether Fiat's new master plan will deliver enough profits to overcome the inevitable brand damage to Ferrari that comes from sharing high-end technology with lower-end cars. Early signs -- such as a review of the Ghibli asking why a Maserati has "the mediocre infotainment system from a Dodge Charger" -- indicates it may not. And despite boasts from Chrysler design boss Ralph Gilles that he consulted with "our friends in Ferrari and Maserati" to improve the new Dodge SRT Viper, the latest version of that car had to have its sticker price cut by $15,000 to improve "infinitesimal" sales.

Meanwhile, Volkswagen, the master of balancing mass-market and luxury brands, is eyeing Marchionne's brand-looting struggles hungrily. Industry insiders think it's just a matter of time before VW executes a power play over Fiat-Chrysler, primarily to get its hands on the Alfa Romeo, Jeep and Ram brands. That would probably be good news for Ferrari as well: VW successfully integrated Lamborghini into its vast brand stable and increased its sales and visibility without trading away the brand's exclusivity or independence. In fact, the Germans might even grant Ferrari the independence it craves, by spinning it off to avoid conflict with Lamborghini. So there is hope for the Ferrari faithful: Montezemolo's departure may be a step toward ownership that would keep the Prancing Horse out of the messy business of mass-market automaking.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Edward Niedermeyer at edward.niedermeyer@gmail.com

To contact the editor on this story:
Toby Harshaw at tharshaw@bloomberg.net