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ERIC REGULY

Saturday, December 23, 2017

A few years ago, when I toured the dazzling Ferrari site in Maranello, Italy, my photographer was put under strict instructions to avoid shooting the assembly line in a way that showed the car bodies all lined up as they snaked through the factory.

I asked: Why? The PR guy explained that Ferrari did not want to convey the message that Ferraris were mass produced, like so many Fiats or Mazdas; close-ups showing only one or two cars would deliver the (disingenuous) message that Ferraris were exclusive, bespoke products infused with the spirit of Ferrari founder Enzo Ferrari himself.

Indeed, if you search for the Ferrari factory on Google, you almost never see sweeping assembly line shots.

Ferrari turned into the world's hottest sports-car brand, and one of the bestknown luxury brands, by carefully fine-tuning its image. The sports cars were sold as race-inspired machines, brimming with the DNA of Ferrari's Formula 1 team, the most successful in the history of the sport (think Michael Schumacher, Niki Lauda and Canada's own Gilles Villeneuve). Production was limited to ensure a twoyear waiting time for delivery.

Anything less and the cars might lose their worth-waitingfor mystique; anything more, and buyers might lose patience and opt for a Lamborghini or a McLaren.

The legendary Ferrari brand is about to take a big hit, I fear, and herein lies a lesson for any consumer products company that values its image above all: Don't mess with a good thing.

Ferrari is about to become a truck maker. You didn't read that wrong.

Sergio Marchionne, the Italian-Canadian CEO of Fiat Chrysler Automobiles (FCA) and CEO of Ferrari, which was spun off from FCA in 2015 and 2016 and trades in New York, said in August that a Ferrari SUV would "probably happen."

In October, Mr. Marchionne confirmed that an SUV was under development and that it would take about 30 months to decide whether the new machine would go into production. Since then, rival Lamborghini has unveiled a beast of an SUV, called the Urus, which virtually guarantees a Ferrari SUV cannot be far behind.

Enzo Ferrari, who died in 1988 and was obsessed with one thing - speed - must be rolling in his grave.

No doubt, Mr. Marchionne is a brilliant auto executive. He welded together Chrysler, which went bankrupt after the 2008 financial crisis, and Fiat, which he had rescued from near bankruptcy a few years earlier, creating an unlikely transatlantic success story that has turned into a stock market star as new Jeep, Ram and Alfa Romeo models lured buyers into once-vacant showrooms.

In the past year, FCA's New York- and Milan-listed shares have climbed more than 80 per cent.

Ferrari has been a business triumph even if the F1 team has not won a driver's championship since 2007. It is solidly profitable, has mouth-watering profit margins, enviable growth rates and champion stock-market performance. Ferrari has a market value of $20-billion (U.S.): not bad for a company that makes a few more than 8,000 cars a year (FCA, the world's seventh- or eighth-biggest auto maker, is worth only about $7-billion more and it makes millions of vehicles a year).

And that's the point. Ferrari prints money and is able to charge outrageous prices for pretty products that are not bespoke and, frankly, not any faster or of higher quality than McLarens, Lamborghinis or high-end Porsches. The reason that Ferrari is able to get away with charging outrageous prices for uncomfortable red cars that make a lot of noise is that the company is not really selling cars; it's selling dreams.

Ferrari was built on the race circuit, on shrieking V12 engines, on Lauda's heroic return from a near-fatal accident, on Villeneuve's seemingly reckless but genius daring, on sports and on cars so gorgeous, so sensuously and glamorously Italian, that they made grown men go weak at the knees. No other sports-car maker can sell such a glorious history.

Ferrari, the sports-car company, built an entire business selling the Ferrari dream - the elixir of youth, in effect - to older, divorced men with obscene amounts of disposable income. The formula has reliably worked decade after decade. Now along comes a Ferrari truck - a truck! It seems foolhardy to puncture the Ferrari dream by introducing an offroad vehicle to a stable of highperformance cars.

So why is Mr. Marchionne pushing ahead with an SUV?

Greed is the answer. SUVs are all the rage and command extremely high prices and profit margins. I am guessing a Ferrari SUV will cost $300,000-plus. (The current range of sports and grand touring cars range from about $200,000 to $300,000.)

A Ferrari SUV will certainly propel the company's growth in the same way that SUVs propelled Porsche's growth.

Porsche is now largely an SUV maker, not a sports-car maker.

Porsche makes a lot of money, but transforming itself into a truck company did its high-performance image no favours.

Everyone makes SUVs, from Hyundai to Ford. SUVs are not glamorous.

They're just big and fat and bland. Mr. Marchionne doesn't seem to realize that running Ferrari means you are the custodian of the company's magnificent racing heritage. That heritage does not include trucks.

Associated Graphic

A man cleans a Ferrari parked in front of the New York Stock Exchange in October. Ferrari CEO Sergio Marchionne has indicated that the iconic Italian sports-car maker will follow its German rival Porsche into the sport-utility vehicle market.

MICHAEL NAGLE/BLOOMBERG

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