Ferrari IPO Expected Next Month According to Fiat Chrysler Chairman

Ferrari-IPOFiat Chrysler Automobiles N.V. (NYSE:FCAU), or FCA, and its CEO Sergio Marchionne have been the undisputed protagonists of the automobile industry in 2015. However, the FCA group is not about to give up the limelight. In mid-October, the group’s crown jewel, Automobili Ferrari N.V., or simply Ferrari, will make its Wall Street debut. John Elkann, president of FCA, said that the Ferrari IPO date would be in the second half of October.

As to whether the sports and racing carmaker would be valued at over $10.0 billion, as has been rumored, Elkann replied a sober yet confident: “let’s see,” as reported. Fiat-Chrysler has already filed a formal request and all related documents with the SEC as announced in a press release last June. The IPO will not change Ferrari in any measurable way. (Source: Fiat Chrysler chairman sees Ferrari IPO in second half of October, Reuters, September 14, 2015.)

Employment levels will stay the same—or actually increase—given the slew of new models the company is introducing between now and 2017. These include a new V6 entry level GT car (a rather steep entry at $175,000 or so), and special versions of its existing lineup.

Ferrari will continue to make cars exclusively in Maranello, where founder Enzo Ferrari opened the factory in the 1930s, to manage the Alfa Romeo racing team. Even as a more mainstream corporate entity, Ferrari will not lose its character and structure—even if its soul has been diluted through marketing over the past few years.

Ferrari will also keep its exclusivity. It will only float 10 percent of its shares to be listed. Fiat Chrysler plans to use the funds to pay down its corporate debt and possibly to launch a hostile takeover of General Motors Company (NYSE:GM). In June, Marchionne said he expected Ferrari to raise about $6.0 billion, although this figure could be dwarfed by the actual amount.

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There have been persistent rumors of 10.0 billion euros or some $12.0 billion, and Marchionne himself believes that the Ferrari cachet alone will draw the company’s many fans around the world. While unable to afford a Ferrari, these fans may buy a little piece of the legendary car maker.

In February, Marchionne told Bloomberg, “It won’t be a difficult placement. I wish they were all like this. The execution of this is going to be very short. We just need to be focused on which investor base we’re going after and once we do that, you could probably sell it by the time you and I have a bagel in the morning.”

Ferrari’s sales numbers defy the $200,000 price for its current entry-level Spider California model, as well as its production cap of 7,000 vehicles a year. The company delivered 7,255 cars over the past 12 months, generating revenues of about 2.7 billion euros and earnings of 265 million euros. There are no cars waiting for buyers on lots at Ferrari dealerships; rather, there is a long backlog of orders.Customers must often wait several months to take the keys of their new and highly-customizable Ferrari. (Source: Ferrari just filed to go public in the U.S., Fortune, July 23, 2015.)

Now, FCA owns 90% of Ferrari’s shares. Piero Ferrari, son of founder Enzo, will keep his 10%. The NYSE listing will float a 10% portion of FCA’s shares, reducing its control to 80%.

As for FCA, its future might be more exciting than the Formula One rivalry between Ferrari and McLaren in the 1970s, as told in the Hollywood movie Rush.

FCA’s historic brand Alfa Romeo, the company once managed by Enzo Ferrari, whose team ‘Scuderia’ scored a major victory at the Nurburgring circuit in 1935, beating larger and more powerful Mercedes Benz and Auto Union (now Audi) cars, has just set a new record at the same circuit.

Alfa Romeo’s new 510HP, 200 mph, (and 29 mpg) Giulia ‘Quadrifoglio’ sports sedan, which made its debut at the Frankfurt Auto Show, set a new record at that same Nurburgring track as the world’s fastest four-door sedan. With this triumph, it beat the likes of the BMW M4, Audi RS4, Porsche GT3 RS, and even the McLaren SLR and Lamborghini Murcielago.

While the Giulia is the undisputed queen of the Frankfurt show, the car has generated some 5,000 orders within hours of being unveiled on September 15th. Alfa Romeo will soon launch a new SUV—its first—in 2016, leading on to new sports cars and sedans to take on the German and high-end Japanese manufacturers.

FCA’s Fiat division is about to launch a two-seater open-top sports car, reviving the 124 Spider nameplate in 2016 based on a platform shared with Mazda’s MX5. Maserati, also part of FCA, will soon launch its own SUV—the Levante—to be followed by the Alfieri Sports GT in 2016.

Meanwhile, the Agnelli family, which founded Fiat automobiles in 1889 and have a controlling stake in Ferrari, have also recently become the top shareholders in “The Economist” through the  Turin-based Exor Spa re-insurance group.

Like him or not, Sergio Marchionne has become a major force in the automobile industry and beyond. In recent months, the Italian-Canadian manager, who grew up and studied in Toronto before landing in Switzerland and then Italy, continues to press for a takeover of General Motors even as he is restoring the prestige of the Italian motoring industry.

Marchionne has also secured a strong deal with the United Auto Workers’ (UAW) union in Detroit after weeks of negotiations over working conditions. The union had chosen Fiat Chrysler as a partner and the deal will serve as a framework agreement for the other giants of the car in the U.S. These include General Motors and FordMotor Co. (NYSE:F). Sergio Marchionne missed the Frankfurt show, letting FCA’s cars do the talking for him.

The contract affects 140,000 employees (40,000 of whom work for FCA) over the next four years. Marchionne hinted that one of the hottest issues, new employees’ salaries, would now be adjusted to match those of existing employees.

The UAW leaders were satisfied with the deal. This should help to ensure that the FCA group’s ambitious strategy, which also includes a slew of new models for the Chrysler and Dodge brands, would remain competitive.

The wage dispute was related to measures adopted after the 2008 financial crisis, which saw a sharp cut in pay for new hires on the factory floor. However, Marchionne, a strategist capable of embarrassing Niccolo Machiavelli himself, has used the UAW as one of the chess pieces in his gradual efforts to take over GM.

Nobody had expected that the UAW would deal with FCA first. By doing so, he has set the tone for Ford and GM—not to mention workers in other non-American brands with major production facilities in the U.S. like VW, Toyota or Honda—to follow.

Among the three big Detroit names, Ford is the one that has the highest labor costs, followed by GM and then FCA. Over the past four years, the group has issued bonuses to employees as a form of re-distribution of profits. The agreement comes as FCA celebrates some 13.5% higher in Europe last August, during which period sales also increased 1.7% in North America. GM dropped 0.7%, according to Detroit News. (Source: The Detroit News, September, 1, 2015).

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