This morning's announcement that Fiat Chrysler will spin off Ferrari into a separate company rocked the automotive world. Coming hot on the heels of the fiery resignation of longtime Ferrari CEO Luca Cordero di Montezemolo, the Italian-American auto conglomerate's decision to shed Ferrari seems particularly chaotic. We spoke with Dave Sullivan, an analyst at AutoPacific, to get some insider insight on the deal.
"In Q2 of this year, Ferrari contributed 729 million Euros (roughly $928 million) of revenue, with earnings before interest and tax of 105 million Euros (about $133 million)," Sullivan told us via email. "Not bad for 1900 sales."
"Ferrari is no doubt, the crown jewel of the Agnelli empire [the founding family behind Fiat]. Ferrari is not just a vehicle manufacturer. It's also a brand. You can buy clothes, luggage, etc. It's the pinnacle of F1. It's now up for debate what the value is of FCA with the most valuable piece of it being spun off," Sullivan told us.
READ MORE: Breaking: Fiat Chrysler is selling Ferrari
"But if you need to raise capital to fund the overhaul of Alfa Romeo and you're dead serious about it, this is what makes the most sense. Tesla stock is no joke and I am pretty sure Fiat Chrysler would love to get in on that type of success."
In , FCA CEO Sergio Marchionne said that pursuing a separate path for Ferrari was necessary "to secure the 2014-2018 Business Plan and work toward maximizing the value of our businesses to our shareholders." Sullivan tells us that, in light of Marchionne's assertion that he didn't need to borrow any money for this business plan, selling off Ferrari was perhaps FCA's only option.
"This really didn't come as a surprise to me," he told us.
As for the alleged pressure to ramp up production, which sources cited as the reason Montezemolo left Ferrari in a huff this month? "I imagine that was all a nice fable," Sullivan says. "I would bet that he was told the company would be spun off and he wanted no part of it."
It's not just a big change for Fiat Chrysler: Sullivan points out that Ferrari has been run with full autonomy, despite being owned by Fiat since 1969.
"It does make me wonder who will run the company a year from now," he said. "Increasing capacity at Ferrari is not going to be easy or cheap. Also, having shareholders barking at management will be a change." Fiat Chrysler's plan is to offer 10 percent of Ferrari shares on the U.S. and/or European markets, dispersing the rest to current FCA shareholders.
It's not the first time Ferrari's undergone big changes. Montezemolo, who was appointed as president of Ferrari in 1991 in the company's dark days after founder Enzo Ferrari's death in 1988, helped make the road car division profitable despite insisting on limiting production to 7000 cars a year. He also headed up the company as it went from a small, insular factory in Maranello to a worldwide luxury brand with, among other things, "," Ferrari's amusement complex in Abu Dhabi.
Come next year, you'll be able to add a Ferrari-branded stock certificate to your collection of Ferrari-branded hats, shirts, jackets, gloves, bags, keychains, cologne, laptops, and more.
Fiat Chrysler Automotive stocks on Wednesday after the announcement.
Dave Sullivan is a Product Analyst at , an independent automotive research and consulting firm specializing in future-oriented research and analysis. He was gracious enough to provide us with his insight on the spinoff of Ferrari from FCA.