When Maserati reached its 90th birthday last month, the venerable Italian sports marque should have been celebrating. But, after six owners and several near-death experiences, the Modena-based company was preparing yet another new business plan.
And once more, Maserati has a new leader: Martin Leach, a Briton imported last summer from Ford of Europe. The brand has lost its latest owner, Ferrari, €205 million in the past five years at operating level. A planned sales and financing link-up with Audi failed to materialise. The weak dollar means that sales in the US, its biggest market, make losses, not profits. And, with annual production of fewer than 5,000 cars, suppliers charge Maserati as much as 20 per cent more than rival manufacturers.
Maserati has an enviable racing history. Its 1929 land speed record is still proudly remembered. But, before Ferrari started pumping in cash in 1997, it had little else.
"It was a ramshackle, almost derelict, factory producing fewer than 700 cars a year," says Leach, speaking at the Modena headquarters. "It's hard to say there was really a business there. Ferrari's investment essentially built a company from almost nothing. What we are living through is more akin to a start-up than a restructuring."
It would be easy to lump Maserati in with other big investments in nearly defunct brands planned in the late 1990s as part of attempts by Volkswagen, BMW and Mercedes-Benz to cash in on the growing number of the super-rich willing to buy luxury cars. Most of these projects have hit roadblocks, with long development times meaning vehicles hit showrooms just as the dotcom bubble burst and millionaires closed their wallets.
VW has found that Lamborghini, a neighbour of Maserati, and France's Bugatti are harder to turn round than expected, while BMW's British Rolls-Royce is well behind its goal of 1,000 sales last year. Mercedes has also abandoned hopes of 1,000 sales a year in the near future for the Maybach marque, while Bentley has cut back sales plans for its top-of-the-range models, saying the market is not big enough to support so many super-luxury cars. Only the Continental GT, the relatively low-priced coupé, has done well.
But the decision by Ferrari to buy half of Maserati in 1997 and take full control two years later is not just about reviving the trident logo on the car's grille.
Maserati engines are built in Ferrari's stunning - and expensive - new factory in Maranello. With Ferrari, which is controlled by Fiat, setting itself a limit of selling about 4,700 cars a year, Maserati's volumes are vital to justify these investments. Maserati also gives Ferrari, run by the irrepressible Luca di Montezemolo, now also chairman of Fiat, a way to expand without diluting its exclusivity.
Maserati remains heavily lossmaking, the figure an eye-watering €27,368 on each car sold last year. However, it has achieved some remarkable successes.
The Quattroporte, its €106,000 saloon, has outsold the Mercedes S-Class in Britain since its launch early last year, and the company has managed to sell 50 limited edition MC12 racing cars for €700,000 each. Total 2004 sales were up by 60 per cent to more than 4,500 cars, its highest level since a push into cheaper cars with the Bi-Turbo engine of the mid-1980s.
When will these sales be transformed into profits? Martin Leach is coy, saying profits will arrive in the "medium term" when the factory, which can build up to 10,000 cars a year, is full.
"We're still heavily in the investment phase," he says. "We can see a way forward that ultimately provides a return on the investment. We have relatively patient shareholders who believe fervently in our long-term potential."
This is understood to mean profits will come in about 2007, when new Coupé and Spyder models should boost sales. Even then, Maserati will barely register among the luxury brands dominated by the one million-plus sales a year achieved by BMW and Mercedes. This, says Leach, is both the company's biggest problem and its main opportunity.
"Generally the auto business is one where economies of scale are of paramount importance," he says. "It's a tough business for us because of our scale." To offset this, Maserati is trying to "piggyback" on suppliers of parts to other manufacturers, using the same parts wherever customers do not differentiate, such as seat frames. The company's limited research and development budget, €53.5 million in 2003, is mainly spent on engine, gearbox and electronics research, to ensure Maserati can distinguish itself through performance.
"When you're a small player you have to make trade-offs," says Leach. "We haven't pursued keyless entry, for example. It would have required a fairly sizeable investment to adopt it on our vehicles." Lack of scale is a significant disadvantage, and "analytically" should lead to lower profit margins than larger rivals, he admits.
Leach believes that drivers of luxury cars want to make a statement with their vehicles and are willing to pay for the privilege. As richer areas in the world's leading cities are packed full of Audis, BMWs and Mercedes, Maseratis have the rare ability to make pedestrians turn to watch them pass. "Over time that exclusivity allows us to take a higher price point," he says. "The brand appears to have an intrinsic value that can justify a high price if the product is right." He puts that price at 10-20 per cent above an equivalent BMW or Mercedes model, although, of course, the exclusivity provides a self-imposed cap on potential growth.
If Leach can persuade customers to pay up, Maserati may be able to offset its lack of scale and generate decent profits. But, after 90 years of stumbling from crisis to crisis, Ferrari's investors will need race-hardened nerves to fund it through the next few years of losses. ... - Financial Times Service
BRINGING
BACK THE BESPOKE CAR
Maserati reached its peak in the late 1950s. Its racing reputation was so great that the Shah of Iran commissioned a road car based on the 450S Formula One car. The result, the 5000GT, became a luxury legend - just 34 were built for Middle Eastern potentates, the president of Mexico and motor industry figures such as Fiat boss Giovanni Agnelli. Each had a different body, crafted to order by former coach builders of northern Italy who had switched their efforts to car design.
Maserati now plans to capitalise on its history as a bespoke car maker to bring it closer to its customers. "We are building in a more personal relationship with our clients," says chief executive Martin Leach. "When we talk to our clients they really buy into the Italian lifestyle as well as the heritage of the company."
Maserati offers wealthy would-be racing drivers the chance to pay €123,000 for a season's racing in the newly created Trofeo Maserati without needing to set up their own team. Also available is a concierge service, helping drivers to track down their nearest Italian restaurant or book airline tickets. Cars can be painted in any colour and the company wants to be able to offer more complex customising in future.
But it will take time before buyers can instruct Maserati engineers the way the Shah once could. "There's no plan to be able to walk into a dealer in London by June next year and say you want a supercharged armoured Quattroporte in pink," a spokesman says.