The announcement couldn’t have been more glorious in crisis-struck Italy: Ferrari booked records sales and profits in 2012. The report was dazzling in every aspect. Not a single cloud darkened the horizon. Except in Italy where sales collapsed. And in the rest of the world, where central-bank printer ink stained the records.
Worldwide revenues rose 8% from prior year, to €2.43 billion, exceeding the previous record set in 2008 before the financial crisis rattled the nerves of the rich. A total of 7,318 cars were delivered to dealers, up 4.5%. Price increases stuck. Net profit jumped 17.8% to €244 million. And the company sat on an industrial net cash position of over €1 billion.
“We are all enormously proud of ending the year with these kinds of results despite the unfavorable economic backdrop in many European nations, and the distinctly hostile one in Italy,” said Chairman Luca di Montezemolo. The distinctly hostile one in Italy: we’ll get to that.
He spread the praise. “The credit for this goes to the men and women in Ferrari, the strength of the brand….” Etc. etc. But he forgot to mention the most important factor in Ferrari’s glory: central banks. They printed trillions of dollars, euros, yuan, and other currencies and handed them to their cronies. It created side bubbles to the most gargantuan credit bubble ever, and some of it trickled down to luxury goods.
Ferrari, 90% of which is owned by its illustrious sister Fiat and 10% by Piero Ferrari, is doing a lot of things right. In addition to building fabulous cars that few people can afford to buy and that fewer still can afford to drive on a daily basis—they’re assets, not transportation—it excels in brand management: Brand Finance just anointed it the most valuable brand in the world, based on financial metrics and qualitative measures, in an arena where Apple, Coca-Cola, and other giants are slugging it out!
So, unit sales in the US and Canada jumped 14.6% to 2,058 cars, an all-time record. They were up in the Middle East, Africa, and “Greater China.” And 14.4% in Japan. Economic stagnation doesn’t apply to the rich. Even Europe “performed very impressively”—though overall passenger car sales fell by 8.2% as the economic crisis was eating everyone’s lunch. Unit sales in Germany rose by 8.2% to 750 cars, in Great Britain by 20.4% to 673 cars, in Switzerland by 17.4% to 357 cars. OK, those aren’t exactly a lot of cars, compared to the 13.6 million cars sold in Europe, but Ferraris are for the chosen few.
Yet in Italy, only 318 cars were delivered, a hair-raising plunge of 46%. Total passenger car sales dropped 20%, but that shouldn’t have stopped a few hundred rich Italians. It didn’t stop the rich in other countries. So, why did Italians not want to enjoy the hard-earned fruits of their labor? Ah yes, the distinctly hostile economic backdrop, as Chairman di Montezemolo put it so elegantly.
Or more accurately, the crackdown on tax-cheats. It was so mediatized that it regularly made the news even in the US, where not a lot of news from Italy is accorded that dubious honor. Prime Minister Mario Monti, after he’d alighted on the top perch, set out to do something about the $2.5 trillion in public debt that has been suffocating Italy. He went where the money was: tax evasion in an economy where an estimated 17% of the activity takes place underground.
Targets were chosen wisely. For example, the raid on Alpine ski resort Cortina d’Ampezzo last February by the Agenzia delle Entrate. The tax collection agency caught in its net numerous middle-class people, earning between €30,000 and €39,000 per year, who were hanging out there—showing off their gleaming Ferraris.
And not just individuals. “We identified companies that had apparently been making losses for years,” explained Marco di Capua, deputy director of the Agenzia delle Entrate. “If someone is buying an SUV or a yacht or sending their children to private schools and declaring revenue of €5,000 a year, then you’re going to be asking how that’s possible.”
By May, Monti was going for a cultural change, postulating that tax fraud by the rich hurts the poor. They are giving “poisoned bread to their children,” he said. Tax authorities claimed that they’d identified more than 2,000 owners of luxury cars who’d cheated on their taxes and that they’d discovered billions in unpaid taxes so far that year. They explained it this way: “Luxuries are often the first clue.”
Ferrari’s results are proof that the strategy is working, if in the opposite direction: rich Italians became reluctant to blow their untaxed money—while their counterparts in the rest of the world are luxuriating in what central banks have made available to them.
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