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Is now an opportune moment for Ferrari to announce permanent production cuts?

Discussion in 'Ferrari Discussion (not model specific)' started by SirPouyan, Apr 4, 2020.

  1. SirPouyan

    SirPouyan Karting

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    There are probably serious discussions (via Zoom) in the boardroom right now about whether the massive ramp up in production was a stupid idea - and in any case impossible to implement going forward in light of corona.

    Most on this board seemed to think - even before corona - that a ramp up in production and tons of new models was going to kill the brand. So is now the right time for the the sane voices inside the boardroom to speak up and argue for sub 10,000 annual units, and fewer models (and certainly no SUV)?

    Wouldn't such an announcement be viewed positively by the stock market. And even if the stock drops a few points, wouldn't now be the opportune time to do it? The stock drops by $5 or more on any given day anyway.
     
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  2. rotaryrocket7

    rotaryrocket7 Formula Junior

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    Porsche forums probably had the same conversations.
     
  3. Korr

    Korr F1 World Champ
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    They have shareholders to please. Expect production #'s to increase.
     
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  4. Yellow Compass

    Yellow Compass F1 Rookie
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    Brian good question!
    I’ll tell ya what I think a good solution would be. I think Ferrari should manufacture one expensive model per year such as the Pista
    with A limited number of units of course !
    But in my opinion here is the new meat and potatoes !! or bread and butter !! for Ferrari going forward in the future .
    To start.
    They should produce a resto-mod Dino GTS
    It would look identical!! to the old school car, it would be a stick shift !! It would have an updated power plant beneath the skin of around 450 HP , Roll down windows with a handle , and no radio , with a pull cord to open door .
    Back to basic car that they offer
    For between $130-$150,000 True reliable get into the game kinda car!!
    Then The next thing they should try is a re-issue of the 355GTS Same car as the old school except updated power plant of around 450 hp
    Of course it has the stick shift and they should make available 355 units !! they will sell out in one day !! If this existed I would buy both of these cars in a millisecond

    Just my thoughts
    Everyone please stay safe
    Mike
     
  5. jjp11

    jjp11 Karting

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    I mentioned this before, but I believe the supercar SUV fad is a byproduct of a prosperous global economy. There's so much wealth out there, people are running out of stuff to spend money on; Especially the Middle East and Asia. This, I believe, led to the supercar SUV being born. If this virus wipes out a good portion of that excess global wealth and sends the world into a recession, I don't think the SUVs all these sports car manufacturers are pumping out will be the boon they were all expecting. I believe some might wind up discontinued much earlier than anyone could have imagined.

    Sent from my SM-G960U using FerrariChat.com mobile app
     
  6. Jdubbya

    Jdubbya Two Time F1 World Champ
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    The Dino idea has been floating around the intrawebs for a LONG time but I too like the idea!!
     
  7. Nospinzone

    Nospinzone F1 Rookie

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    I think bringing back the Dino is a terrible idea. The "retrofuturistic" Thunderbird didn't work out too well for Ford.
     
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  8. Gh21631

    Gh21631 F1 Rookie
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    Not anywhere close to the same thing. A small lightweight well designed sportscar will sell.
     
  9. Yellow Compass

    Yellow Compass F1 Rookie
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    Paul I’m talking about re-introducing the Dino as it looked when it first came out .
     
  10. jm2

    jm2 F1 World Champ
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    Why?
     
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  11. Nospinzone

    Nospinzone F1 Rookie

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    I'm talking about the same thing. The last generation Thunderbird was the same design as the original.

    And I don't doubt that a small lightweight well designed sports car will sell, just create a new design.
     
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  12. Yellow Compass

    Yellow Compass F1 Rookie
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    Because the Dino GTS wood be a sexy affordable reliable stick shift get into the Ferrari game car for not alot of bread!! if they were able to bring it to market for around $130-$150 ish. Just saying. :) Stay Safe my Brothers!!!
     
  13. arizonaitalian

    arizonaitalian F1 World Champ
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    #13 arizonaitalian, Apr 5, 2020
    Last edited: Apr 5, 2020
    yeah, but..."profit"

    Ferrari's stock has risen due to rising profits of course, but also importantly due to rising sales volumes and expanding profit margins, and thus expectations of future increases in absolute dollar profits.

    more dollars of gross profit requires more sales of higher margin products.

    That is precisely what Ferrari has done.

    (that's why no dino or cheaper car, yes that is also due to image, but also simply math)

    Pretty hard to put "exclusivity" on the financial statements. Heck, its even hard to think thru what the direct financial implications of losing some of it are...

    - less sales? Maybe, but they were still selling less than they could overall. The goal is to make 1 less car than demand...making 1000 less doesn't help profits much...

    - raise prices as exclusivity increases? are people that are lucky to get one of the "fewer" ferrari's then sold going to pay 30% more for the privilege? (there is already a lot of push-back on some of the price levels of the newer cars, and not just because of the larger volumes hitting aftermarket prices. In a tougher economic scenario, is raising prices a tenable plan? If not, then lower volumes equals lower revenue and then much lower profits do to loss of leverage on fixed costs).

    - lower end pricing to customers? A bunch of that could come out of dealer profits before it comes out of factory-to-dealer prices. So, maybe the factory is somewhat okay with the dealers margins getting squeezed a bit on new car sales if the market on the margin doesn't have the demand to move all volumes as is.
     
  14. papou

    papou Formula Junior
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    Safety regulations would never allow that.
     
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  15. SirPouyan

    SirPouyan Karting

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    Korr, do you think increasing production is possible, post corona? The best way to kill the stock is to make more cars than the channel can handle. A significant percentage of deposits with dealers will be forfeited for cars currently on order. Sure the factory will re-open soon and those the backlog of cars will be made. But when the buyers can't afford to complete the purchase at the dealerships, what happens then? How will the dealers move those cars?

    The short seller who wrote a nasty piece on Ferrari in Seeking Alpha (which was posted somewhere on this board last month) will get his wish - a tanking stock. IMO Ferrari can not afford to maintain the production levels. Overproduction will kill the stock far more than maintaining current levels.

    Ferrari buyers are not immune to the economic wipeout. Well, maybe a few LOL. For those guys, keep producing the limited run models and the expensive GTS's. But pumping out thousands and thousands of SUV's, Roma's, PF's, and F-8's, I don't think that will work out too well.
     
  16. AlfistaPortoghese

    AlfistaPortoghese Moderator
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    I expect production to keep increasing, because of a combination of factors, namely:

    - Shareholders.
    - Market is cyclical, so it will get back to normal.
    - The strategic decision to launch dozens of new models requires hundreds of millions to put into effect, thousands of jobs, years to prepare. That’s how multinational corporations work. Strategy is like making a 747 or a submarine turn. Requires preparation and foresight, anticipation. It’s a process. It’s not a fighter jet. It’s not reversible or nimble.

    Kind regards,

    Nuno.
     
  17. SirPouyan

    SirPouyan Karting

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    There is no "if" on this virus wiping out a portion of the excess global wealth. It has already happened. The excess wealth was key to Ferrari delivering the increasing volumes of cars and increasing margin per car. The excess is now gone. So how does Ferrari NOT change its production numbers going forward?
     
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  18. Borrow’d Mine

    Borrow’d Mine Formula Junior
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    Thoughtful reply AZI. And I agree with you. Specifically, sell 1 less than demand each year. Also, a $150k retro entry will require more units (opposite of how this thread started) to generate profits and my guess it’s not that strong a market. I like DCT and modern tech, including windows that do things on their own. I bet those buying new F- cars today agree with me. Backwards isn’t progress.


    Sent from my iPhone using FerrariChat.com mobile app
     
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  19. AlfistaPortoghese

    AlfistaPortoghese Moderator
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    Plus:

    You may look at this from two different angles: a fan of the brand (owner or not) and a shareholder.

    Ferrari’s worry are shareholders, and can you imagine what it would do to the future of a multinational telling its shareholders: “Gentlemen, remember the several hundred millions we told we’d spend on new cars, expanding the factory and hiring people, and all the work we’ve done over the last 5 or so years to prepare the next decade?

    Scratch all that. Afterall we got it wrong. We’ll go back to making manual cars, back to the 1990s philosophy, make fewer cars because we’re not just about turning a profit. The Coronavirus really caught us with our pants down, sorry”.

    I’m not a shareholder, I’m an owner and a fan. And even I don’t like the sound of that.

    Kind regards,

    Nuno.
     
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  20. SirPouyan

    SirPouyan Karting

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    Nuno, you are exactly right on long term strategy. But nobody at Ferrari was expecting global wealth to get seriously clipped. Nobody could have accounted for that when formulating strategy.

    Next year at this time, do you think the cars will be moving through the channel as easily as they have been the past two years absent a serious cut in production? My guess is they will seriously lower production because not doing so will risk a pile up of unsold inventory with dealers across the globe - and this would be the absolute worst possible outcome for the strategists in Maranello.
     
  21. AlfistaPortoghese

    AlfistaPortoghese Moderator
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    Brian,

    No doubt you’re making a fair, valid and articulate point.

    Although I’m the first to recognize this crisis has little or nothing to do with the financial crisis, my guess is that the current crisis, however severe, won’t dent Ferrari’s plans. My guess is that they’re already thinking of how to make more money once this passes. They’re at least thinking two steps ahead. My guess is that they’ll pursue their present line of reasoning, for better or worse. They may event adapt it in terms of its timeline, but the end result will be the same.

    One thing is an unforeseen health crisis, the other is market trends. This crisis makes people lose money and have to worry about immediate needs: toilet paper, soap, canned goods, etc. But once this crisis that has nothing to do with cars (in the sense that the car industry didn’t start it, it’s just being affected like the tourism industry, restaurants, airlines, etc), the demand for SUVs, hybrids, etc (to which I most certainly DON’T subscribe) will be there, and they’ll press forward.

    It’s a pandora’s box, a slippery slope. The problem to begin with is a company committing to follow market trends instead of creating them. Ferrari went there and now I think there’s no turning back to less cars, manual transmissions, you name it. Not in the face of a Coronavirus or anything else, other than people simply stopping to buy SUVs or hybrids. And the demand is there, Ferrari knows they’ll make more money than ever before, it’s just a question of waiting.

    For the record, I have no interest in SUVs, hybrids or electric cars.

    Kindest regards and stay safe out there.

    Nuno.
     
  22. APA#1

    APA#1 Formula 3
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    Imagine a Rolls Royce that went new for 350K you can now but for cheap 10 years later. Same thing, 10-20 cents on the dollar.
     
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  23. LVP488

    LVP488 F1 Rookie

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    The real issue for Ferrari is that they made their apparently winning strategy just surfing on a speculative bubble - I would not blame them for wanting to make more money (that's a legitimate goal for any company, independently of shareholders or stock market) but I suspect they favoured the short term and the model is not sustainable - and it would have been clear at some point, this crisis will just make it happen sooner.
    Eventually one cannot charge for exclusivity and mass produce at the same time - it simply does not work.
     
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  24. 2Velocebro

    2Velocebro Rookie

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    I like the Dino idea a lot, but maybe not taking it that retro. I think it would be hard, if not impossible, to produce a car that looks identical to the Dino due to safety standards in design these days. A Dino in spirit though would probably sell very well. A beautiful, small, lightweight, V6 powered car from Ferrari, sub $150k, would be amazing. I definitely agree with it having a gated manual, but it would make sense to offer a DCT option as well to help boost sales and justify costs of a model that won't have huge profit margins. Also, I think having roll up windows would be really cool, but that doesn't seem likely to have a lot of appeal to a younger professional buyer, whom this would ideally be targeted to.

    I think Maserati is trying to gets its foot into this market with the Maserati MC12 that is supposed to debut sometime this year (it was supposed to debut at this year's Geneva motorshow, but the debut has been delayed for obvious reasons). Its based on the Alfa Romeo 4C's chassis/carbon tub, and is supposed to have a mid-mounted V6 and be priced in the same range you mentioned. Unfortunately, it probably won't be available with a manual.

    The V6 would make sense, for historical and pricing purposes, but also I have heard Ferrari is developing a new V6 hybrid setup for some up coming models. They could use the V6 already being developed in a non-hybrid form, and help offset some of the development costs with greater scale.

    A less expensive sports car definitely makes sense to get a younger group of enthusiasts into the brand. I know the Portofino and Roma are like the "entry level" entries to the brand, but they don't seem to get young enthusiasts, especially ones with good paying professional jobs and could realistically buy one, excited in the way a less expensive, lower performance, mid-engined sports car would. I see all of the hype around the new Corvette and its shift to a mid-engined design. I feel like Ferrari could steal some of that thunder with a competitor like a new Dino.
     
  25. SirPouyan

    SirPouyan Karting

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    Agreed but we will never know whether or not Ferrari was making that mistake pre-Corona. The model was working.

    Going forward, this model can not work - unless all the Corona damage we anticipate happening to Ferrari buyers is temporary or non-existent. If in fact there is real damage to the Ferrari buyer pool, a cut in the number of regular production models is the best way for the brand to maintain its exclusivity. And the stock market will not punish the stock much if a cut is announced soon.
     
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