Automotive Purchasing Weekly 15 December 2014 - page 2

Automotive Purchasing
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I tried thinking about the first things that came to my mind when someone said Ferrari, and
the result - opulence, racing, red and Italia. Whenever I’ve had to describe the carmaker in
my past articles, I would mention “Italian carmaker” somewhere in the text. But then I read
somewhere that “Ferrari was fleeing Italy” and the company was now mulling over whether
or not to stay in the country. So when I had to write a piece about the company later that
evening, I played with the thought of switching to “Italian (as of now) carmaker” and ended
up skipping the part about the country entirely.
But this whole affair about Ferrari got me thinking about the
company’s Italian heritage. Ferrari has always been as Italian as
Mama’s pasta. Let’s go back in time for a bit, shall we? In 1929,
Enzo Ferrari started the Scuderia Ferrari (Stable Ferrari - used
as Team Ferrari) to sponsor drivers and to manufacture race cars
before moving into production of street-legal vehicles in 1947. The
Italian heritage of the supercar is clearly reflected in it’s logo. If you did
think that ‘prancing pony’ logo is without meaning, allow me to enlighten you.
The horse was originally the symbol of Count Francesco Baracca, a legendary
“asso” (ace) of the Italian air force during World War I, who painted it on the side of
his planes. Baracca died very young on June 19, 1918, shot down after 34 victorious duels
and many team victories, subsequent to which he was proclaimed a national hero. It was
Countess Baracca, the legendary hero’s mother, who suggested to Ferrari that he paint the
horse on his cars as it would bring him good luck. The ‘prancing horse’ is placed on a yellow
background, which is the symbolic colour of Modena, the birthplace of both Ferrari and its
founder.
That was just the logo. I won’t even get into how intricately the carmaker is linked to its
home country. So when Ferrari announces it might leave the country, I see people reacting
exactly the way I expect them to - surprise, shock, anger, disbelief. Except there’s just one
little problem - none of it is true.
The rumour was that Ferrari will be moving its FISCAL residence outside of Italy and NOT
production. Most media outlets did what they do best - sensationalisation - and ended up
reporting the story as if Ferrari is relocating its entire operation outside its birthplace. Ever
since the story broke, I kept feeling the need to stand on rooftops and shout that this is
not true. I guess the pandemonium was further fuelled by the fact that Ferrari or its parent
company, Fiat Chrysler Automobiles (FCA), hadn’t released an official statement. But late on
December 11, FCA finaly released a statement that completely dismissed the rumours. And
thank God for that!
FCA’s statement said: “The press has reported certain rumors suggesting that Ferrari
S.p.A. would be considering moving its fiscal residence outside Italy. These rumors have no
grounds. There is no intention to move the tax residence of Ferrari S.p.A. outside Italy, nor
is there any project to delocalise its Italian operations, which will continue to be subject to
Italian tax jurisdiction.”
Earlier in October, FCA confirmed plans to spin off Ferrari by listing the premium luxury
car manufacturer on the public markets in 2015. FCA revealed that it expects to list Ferrari
in the US and possibly on a European exchange. But other news media outlets cited ‘inside
sources’ saying that Ferrari is considering moving its fiscal headquarters away from Italy as a
result of the country’s ridiculous rate of corporate tax, that currently stands at 31.4%.
Let’s look at this logically. No matter how much media outlets sensationalise these
rumours, it is practically impossible for Ferrari to shift their production operations outside
Italy. One of the key reasons that this luxury sports car stands out from the crowd in the first
place is because its design DNA is very Italian. If design and production did move away from
the country, it would be an irreparable blow to the brand’s image, and in my opinion, that
would really affect demand.
If we look at it fiscally, Agnelli family scion and FCA’s chairman, John Elkann, said in October
that the spin-off, set to be completed early next year, would preserve the cherished Italian
heritage and unique position of the Ferrari business and allow Fiat Chrysler shareholders to
continue to benefit from the substantial value inherent in this business”. FCA, is registered
in the Netherlands, listed on the New York Stock Exchange and based in London for tax
reasons. But if this spinoff set out to “preserve the cherished Italian heritage”, apart from
the obvious financial benefits, doesn’t moving out of Italy seem like a contradictory thought?
I think the news was blown out of proportion to a large extent as a result of Italy’s current
economic conditions. Italy is one of the unfortunate European nations to be hit hard by
the debt crisis. The country
is currently reeling under recession, and its
only
lifeline
has been a bailout by the European Union.
I n
the luxury sector, several well-known
Italian brands have been sold to
foreign companies in the last
five years or have moved to
a different country, mostly
the UK, in order to
avoid the countries
exorbitant corporate
tax. Moreover, it
is currently faced
with
record
unemployment
figures, which
justifies the
panic the
news of
Ferrari’s move caused.
It’s very difficult to predict something under such circumstances,
especially because companies have been known to act exactly
opposite to what has been predicted. But nevertheless, I can
confidently say that Ferrari will not move from Italy, especially
because this will be detrimental to both sides. Ferrari is one
of the largest companies in Italy, and shifting its fiscal
residence will definitely have an impact on the country’s
revenue, though exactly how much is unknown. But,
most importantly, I feel that the move will scar the
brand’s image completely, which might even result
in a substantial decline in demand. So worry not Italy,
Ferrari will continue to be an important Italian automotive
heritage.
2
15 December 2014
automotive purchasing weekly
TheTrishaChowdhuryColumn
Tobeor not tobe in Italy
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