Speed merchant

Luca Cordero di Montezemolo is most famous for pulling Ferrari back from the brink. So how did Italy’s most famous businessman do it?
Speed merchant
Regional ties: Montezemolo says he has big admiration for Abu Dhabi and its leaders
By Ed Attwood
Fri 29 Mar 2013 05:25 PM

On the wall outside Luca Cordero di Montezemolo’s office hangs a black and white photo showing Niki Lauda crossing the finishing line at the Spanish Grand Prix in 1974. Next to the man waving the chequered flag, another man with dark, collar-length hair is standing next to him and gesticulating frantically. The Ferrari chairman smiles as he recognises himself.

“I left the pits and begged the flag waver to stop the race five laps early because we were winning — but he wouldn’t do it,” Montezemolo says, wistfully.

Forty-odd years on, the Italian’s passion for Ferrari remains utterly undiminished. When I bring up the fact that Ferrari lost the 2012 driver’s title by a sliver, on the last day of the season, he looks momentarily aghast. “Don’t say these things, you are ruining the afternoon!” he says, and despite the laughter, it’s clear that the wounds of that afternoon in Brazil, when Fernando Alonso lost out on the title by just three points, are still fresh.

Now 65, Montezemolo is sitting comfortably in his office in Maranello, the sprawling complex in northern Italy that is not just Ferrari’s manufacturing base, but also a monument to motorsport’s most iconic brand. As his reputation suggests, he is the perfect gentleman; dressed with stylish understatement in a blue jacket and brown woollen tie, he interrupts the interview several times to draw attention to the keepsakes dotted around the room.

“You see this chair I keep over there?” he says. “It’s a present from an old friend of mine that sadly passed away — [film director] Sydney Pollack. He was a fantastic Ferrari fan. He kept Ferrari clippings from American newspapers and then varnished the clippings onto that chair himself.”

If Montezemolo seems relaxed, then he has good reason to be. Under his chairmanship, which began in 1991, Ferrari has tripled production and posted revenues of $3.1bn in 2012. But 22 years ago, the Italian marque was a mess. Around 90 percent of its cars rolled out into just three markets — Italy, Germany and the US. “Can you imagine if we had to face a big crisis in one of these three markets? We would be finished,” recalls Montezemolo.

A second problem lay in the cars themselves; the chairman uses an unprintable word to describe the 348, which he had bought as a present for himself after overseeing the management of the FIFA World Cup, which was held in Italy in 1990.

“I bought my first Ferrari — and I wasn’t very pleased with that car,” he says. “It was very noisy, but not modern, and the gearbox wasn’t very strong. I remember the English magazine, Car, wrote an article about the gearbox from the 348 being similar to the gearbox from a truck.”

A third area of concern lay in racing, where Ferrari had not won a Formula One (F1) world championship since Jody Scheckter picked up the title in 1979. For the sport’s biggest brand, with the most passionate fans, this was unacceptable. But as a former boss of Ferrari Scuderia (the racing team division) under legendary chairman Enzo Ferrari back in the 1970s, Montezemolo’s experience in this area was peerless. “The company was in the prison of the past,” he says.

“We had stopped innovation, didn’t have new models, and we weren’t anticipating the trends in the world. If you are looking back instead of looking ahead, you lose because the world is moving at such an unbelievable speed.

“When I came back in December 1991, it was hugely emotional for me, because Ferrari was maybe the most important experience of my life. So, on one side, it felt like I was back at home. From the other side, it was a little bit surprising to see a company that hasn’t been renewed so much, even aesthetically, in its layout.”

The layout, certainly, has changed a great deal since Montezemolo took over. A tour round the closed campus of Maranello is a unique experience. Voted the best place to work in Europe by the Financial Times in 2007, even the Marco Visconti-designed staff restaurant stands out due to its ultra-modern feel. The streets are named after Ferrari drivers, past and present, and the roads themselves are stuffed with crimson-coloured cars — from current models to prototypes. Every now and again, a garage door opens to reveal tens of sleek supercars, waiting in the darkness.

New models, as much as anything, have been the key to the Ferrari revolution. It added the 355 and the 456 in 1996-7, and launched the Quattroporte, from scratch, in 2001. The marque created the first car to be made entirely out of carbon fibre — the F50 — at the end of the 1990s, and its four-wheel drive FF, launched in 2011, has also been a massive hit. Last month, Ferrari unveiled LaFerrari, a limited-edition car that is more powerful than its current F1 model, but which is also – somewhat astonishingly — a hybrid. The 20 percent of revenue that Ferrari spends on research is clearly paying off.

Perhaps the most impressive area at Maranello is the vehicle assembly line, a cavernous room in which vehicle frames enter at one end, and emerge as a completed car, three days later. A buzzer sounds every two hours, shifting the mammoth line of cars onto the next workstation, while each vehicle is attended by its own trolley, which details the future owner’s exacting requirements.

One FF sitting on the assembly line has the word ‘Golfo’ (Gulf) emblazoned on its trolley. Its owner, who will be collecting the car in a matter of weeks, has requested yellow speed dials on the dashboard, cream leather seats and ‘Rosso Berlinetta’, a glitzy three-layer covering of paint that makes the traditional Ferrari red seem deeper than ever.

Owners can choose from a bewildering array of styles and gizmos with which to adorn their car. Denim upholstery? Pinstripe cloth? It may not be to everyone’s taste, but if you want it, it’s yours. But even the deepest pockets can’t buy you everything; you won’t see any pink Ferraris rolling out of the Maranello gates.

For Montezemolo — who sees Ferrari as being closer to luxury brands like Gucci or Louis Vuitton than other car manufacturers — getting the blend right is crucial.

“We are a mix between technology — and F1 is for us the most important and advanced place to carry out test research — innovation, extreme design, and beautiful, beautiful cars,” he says. “I always say a Ferrari has to be like a good-looking woman; you fall in love, but even more so when you start the engine.

“They have to be innovative but not fashionable — I don’t want cars or designs that are only good for one year. And that’s the reason why we have old Ferraris which are sold at unbelievable prices.”

There is clearly a hefty commitment to craftsmanship. Almost every part of a Ferrari is added to the frame manually, and away from the assembly line, teams of staff are carefully poring over leather stitching or assembling the electronic gadgetry. Even on those occasions where machines have taken over from humans due to the danger of the task, the equipment is somehow anthropomorphised. The robots that fuse valve seats onto engine cylinder heads are nicknamed ‘Romeo and Juliet’ for their balletic ability to dip small rings into liquid nitrogen, and then pass them to each other before fixing them permanently to the engine.

Outside the confines of Maranello, Ferrari’s world has changed hugely in the last 20 years or so. Instead of being captive to any one particular market, 95 percent of Ferraris are today sold outside Italy. The brand is present in 60 markets, and sees India is a big potential player. But at the same time, Montezemolo is keen to retain the sense of exclusivity around the brand. When I ask him whether he will increase production levels to cut down on waiting lists — some owners have to wait as long as eighteen months before they receive their cars — the chairman shakes his head.

“In one sense, we will raise production,” he says. “But that’s because we will increase the number of markets. So in the next five years we will have India, which means that we have to increase production to supply cars for India, but we’ll provide the same number of cars to the markets in the US, the UAE and the UK. So yes, we will maintain exclusivity and low numbers in each market.

“So in terms of overall numbers, assuming the markets remain like they are today, we will keep to 7,500. But if, as I hope, we increase the number of markets — maybe Vietnam, and depending on the taxes, maybe Brazil and Mexico — where we don’t even sell one car, then the number will probably increase.”

Ferrari’s relationship with China — where it sold nearly 700 cars last year, making it the firm’s second-biggest market — was cemented in January when Weichai Power, a state-run engine manufacturer, agreed to sponsor the F1 team until 2016. Montezemolo says he has no concerns with the recent worse-than-expected performance of the Chinese economy, and that the firm is hard at work expanding dealerships in the country.

Another area where ties run deep is the Gulf. Montezemolo is fulsome in his praise for the UAE, and especially Abu Dhabi, where he has a villa. He leans over, showing a selection of pictures of Sicily that he plans to hang on the wall there. And it’s not just about sales either; Mubadala, the government-owned investment vehicle, has a five percent stake in Ferrari, and CEO Khaldoon Al Mubarak has a seat on the Italian firm’s board.

“You know, I have a big, big admiration for Abu Dhabi,” Montezemolo says. “They are young in terms of mentality. They are innovative. And they love their country, so we have worked very, very well with them. I have a big, big opinion of Sheikh Mohammed [Bin Zayed Al Nahyan, crown prince of Abu Dhabi] because they are doing very well.”

That relationship was cemented, of course, by the launch of the Ferrari World theme park in 2010, which the chairman says is “doing very well”. Judicious licensing of the Ferrari brand with the likes of Hublot, Puma and Mattel has allowed the firm to make a mint, adding $65m to its bottom line last year. However, Montezemolo seems less inclined to add a similar park somewhere else in the world.

“To be honest, I’m not so keen,” he says. “If there is a good opportunity, with a good layout that I can control, then yes. But I think we will do maximum one more. I don’t want to do more because — with all due respect to companies like Disney — for us it’s different. This is also the reason why we have said no to other offers in the past, like Ferrari hotels. We make cars, fantastic cars — and I want to maintain the focus on our core business.”

That core business, of course, includes the final plank of Montezemolo’s strategy when he began to reshape the firm in 1991. It took five years for Scuderia Ferrari to get back into the habit of winning; the catalyst for that was the signing of Michael Schumacher from Benetton. From 2000 until 2004, Schumacher picked up five driver’s championship titles, with Kimi Raikkonen adding another in 2007. In addition, Ferrari won six constructor’s championship titles between 1999 and 2004, with another two coming in 2007 and 2008. Since 1997, Ferrari has either won or lost the F1 championship on the final day of racing. And it’s the ones that got away that are clearly still niggling Montezemolo.

“Maybe we are the only team in the world that is not happy when we finish second,” he says, solemnly. “We are here to win. Last year, we were second in the driver’s and constructor’s titles, and oh, it’s a disaster to finish second.”

When questioned as to how Ferrari will perform in F1 this season, Montezemolo is keen to stress the constraints under which he feels the team is operating. Top among his list of gripes is the rule that has banned in-season testing.

“This is an incredible situation; F1 is the only professional sport in which you are not allowed to train,” he says. “I would be happy to go to Bahrain or Abu Dhabi in the winter to test. Just to make an example, imagine you were to tell Manchester City, Chelsea or Manchester United that they were not allowed to train during the week?”

Instead of track time, Ferrari and the other teams have had to use computer simulation to test their drivers. However, that makes it impossible to ‘stress’ either the car, or the tyres, or the driver, the chairman argues, which could result in drivers potentially failing to make it into F1.

“Even if you are a good driver, how can I find that out, how can I judge your potential?” he asks. “I will never put you in a Ferrari, because it is a big risk, without that experience.”

Another bugbear is F1’s dependence on aerodynamics, a vital area in which the sports teams spend millions of dollars each year in wind tunnels, trying to gain the odd millisecond on their rivals.

“Aerodynamics has nothing to do with road cars — it has to do with planes and satellites, and it is very expensive,” Montezemolo says. “Ferrari know-how is more mechanical — we do engines, gearboxes and suspension. We do cars, we don’t do satellites.”

He is hoping to have the rules on aerodynamics and testing changed for 2014, but so far his pleas have fallen on deaf ears. Given that Ferrari is the only team to have raced in every Grand Prix since 1951, does Montezemolo not feel that his concerns should be given more weight?

“The answer is yes. The problem is that for Ferrari, F1 is part of our life. Let me tell you that F1, without Ferrari, is…” he tails off, dismissively. “But also Ferrari without F1. We have been here in the good times and the bad, since 1951. So if we want to change or improve, it’s not only in Ferrari’s interests, it’s in F1’s as well.

“Because when I see small teams that after three or four laps are five, six, ten seconds behind; when I see that I’m not allowed to take a risk on a young, new driver because I cannot judge him; when I see that the testing, which has been so important in F1 history, is gone, I think it’s time to do something.”

Among the ideas that Montezemolo has is staging more evening races in Europe during the summer. And while he praises the Bernie Ecclestone-led drive to host races in different countries, he also hints that perhaps the exodus has gone too far. The chairman has no hesitation when asked whether the Gulf should host more races in the future.

“I think two are enough, because you have to consider that F1 has to be worldwide. Having said that, we are very pleased because there are two fantastic circuits, particularly in Abu Dhabi, where some of the driving takes place at night.”

It’s tempting just to dwell on the Ferrari story, but that would marginalise Montezemolo’s many other careers. Apart from running the Italia 90 World Cup, he has had stints in charge of Juventus and drinks firm Cinzano, while his family fund owns Poltrona Frau, the Turin-based furniture maker that is also gaining popularity amongst well-heeled buyers in the Gulf. Most recently, he launched NTV, a high-speed train network that has been dubbed ‘the Ferrari of trains”, and which has proved hugely popular.

So what’s next for Italy’s most engaging businessman? An IPO for Ferrari is not on the cards; “Absolutely not” flashes back when the question is posed. And when I ask him whether he will still be at Ferrari in five years time, his response is simply, and cryptically: “Why not?”

One area that is definitely off the agenda is that of politics. Throughout his career, Montezemolo has repeatedly been linked with a move into public office but he’s so far resisted. But he’s also keen not to criticise what has gone on in the past, despite the economic difficulties in which Italy now finds itself.

“We need a person with international credibility, we need someone who is an expert on the economy, and we need someone who is ‘persona per bene’, an honest person,” he says, when discussing Italy’s next prime minister. “I represent what I call civic society — now it’s time not only to be polemic with politicians, now is the time to give support to change.”

And with that, Montezemolo is off; he has a meeting with prime minister Mario Monti in the morning in Rome, and a long evening drive down the A1 motorway in his beloved FF awaits.

For all the latest car news & reviews from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.