Italy's speedsters race for the stock market

Ferrari, Ducati and Lamborghini all plan to go public. Robert B Cox reports

ITALIAN sports cars are the stuff of men's dreams. "A Ferrari is passion," the company's chief executive, Luca Cordero di Monte- Zemolo asserts. Soon, if you cannot afford such passion by buying one of the cars, you could have a piece of the dream by buying shares in the company.

Combining Italian flair for style and solid engineering, Ferrari, together with Ducati and Lamborghini, make up one of the fastest-growing parts of Italy's luxury goods industry, outpacing names such as Armani and Versace in sales growth as they race for the cash of the super-rich.

The companies brought in more than $1bn (pounds 588m) in sales last year, up about 29 per cent from 1996, with exports accounting for about 80 per cent of the total. Fashion clothing sales rose just 3.7 per cent. "Luxury goods means plenty of things. It's a concept and a service. It's boats, hotels and cars," says Francesco Trapani, chief executive of Roman jewellers Bulgari.

For Ferrari, it's a fire-engine red F50 convertible coupe costing $240,000, with a gearshift on the steering wheel and a maximum speed of 190 miles per hour. For Ducati, luxury means $40,000 silver motorcycles that go from zero to 100 miles per hour in a few seconds.

"When you marry Italian style with mechanical engineering you can do no wrong," said Allan Raphael, hedge fund manager in New York. "If these kinds of company decide to go public at the right price, they will have a global audience."

All three companies are planning to boost their sales by opening new markets, unveiling new products, developing merchandising and selling shares on stock exchanges to reap the valuations that investors ascribe to luxury goods makers.

In pole position for a flotation, Ducati's majority owner, Texas Pacific Group, is planning a public offering on the New York stock exchange. That could come as soon as the second half of this year after the company is cleaned up and production boosted, says Federico Minoli, the former McKinsey consultant who was recruited to turn the company around.

Lamborghini, too, is planning a stock offering within the next 20 months, says chief executive officer Vittorio Di Capua. In the meantime, the company's Indonesian owners will sell a controlling stake to a group, including two US investment banks and one each from Italy and Switzerland, as well as General Electric of the US.

Ferrari's owner, Fiat, has no immediate plans to sell a stake in the company until Ferrari has sorted out Maserati. Last year, Fiat transferred half of its 100 per cent stake in Maserati to Ferrari.

Ferrari, by itself, put in an impressive 1997 in terms of sales, which rose to $557m. It sold 3,581 cars, 8 per cent more than 1996, including 762 of its latest model, the Maranello 550, which sells for about $193,000 in Italy.

Ferrari's multimillion-dollar investment in its Formula One racing team and star driver Michael Schumacher will continue to lead the company's marketing. Here, too, luxury and fashion have come aboard - the team sponsors include Asprey and newcomer Tommy Hilfiger, a US clothing maker.

Ferrari's Mr Montezemolo says fixing Maserati's woes will be a challenge, but he predicts profits by 2002. By that year, Maserati will be producing 6,000 cars annually, up from 700 last year. "Now is the time to concentrate on the shirt, and not the tie," he says. "We need to invest in new products, organisation, factory and personnel." The objective is to keep the Ferrari and Maserati brands separate while using joint purchasing, administration, distributors and dealers.

The future Maserati will compete for customers that now buy top-of-the- line models from Mercedes-Benz, BMW and Jaguar. The first such car will be a two-door coupe by the end of the year, and a sporty Spider to be sold in the US by 2001.

By contrast, the turnaround at Ducati appears well under way, presenting investors with a very different company from the one TPG picked up from the Cagiva motorcycle company in 1996. Since buying 51 per cent of the company from the Cagiva Castiglioni family, Texas Pacific Group has revved up bike production by 43 per cent, hired a third more workers, invested in new plant equipment and reorganised its design team. The results are clear. In 1997, sales rose as bike production went to 27,000 units from 12,500. In 1998, the company projects sales of 30,000. In January they surged, rising in Italy to 550 from 414 and in the UK to 226 from 117.

The company is opening a retail store next month in New York, selling bikes, spare parts and T-shirts bearing the new logo and red-leather racing gear. More stores are to follow in Bologna, Genoa, Florence, and Turin.

Lamborghini has to catch up. The company, whose cars are known for their gull-wing doors, had only $44m of sales and operating profit of $4.5m in 1997. Later this month, it plans to announce a deal with a European manufacturer to produce a lower-priced line of its Diablo cars, allowing it to enter a market for luxury cars that cost about $140,000, which the company estimates at 70,000 vehicles a year.

Lamborghini's Mr Di Capua said the agreement will call for production of the cars, to be called the "Baby Diablo", within two years. It will boost annual production to more than 3,000 cars. If the venture succeeds, Lamborghini hopes to accelerate sales to as much as $106m by 2001, bringing in profit of $20m.

"What we do is not an industrial exercise, it is a craft, so people value us on that basis," says Mr Di Capua, who adds: "there have always been rich people and there always will be rich people."

Copyright: IOS & Bloomberg