In the last two weeks, both Aston Martin and Ferrari have reported their respective Q3 2020 results (McLaren does not report until the end of November so we will come back to them later). The article on Aston Martin’s Q3 Results & Mercedes Deal was posted last week and in summary:
To say Stroll, Moers, and their teams have their work cut out for them is the understatement of the century. The new Mercedes Benz technical partnership gives Aston Martin access to the technology it needs to be able to relaunch the current line up and deliver the next generation of cars. It also allows Mercedes to “rent” Aston before they decide to “buy”. The lack of transparency on the DBX order book is highly concerning, but the plans for the relaunch/facelift of the current line starting in the back half of next year is reason for hope. Financially Aston is a long way from being out of the woods, but they have bought themselves a few extra years at a fairly steep price. There is likely more pain for the organization as a restructuring is in store to address the excess manufacturing capacity. I do give Stroll and his new management team high marks for getting the deal with Mercedes done and the financing in place while standing in the middle of a massive turd of a situation. While the confidence and vision are refreshing, it’s going to take flawless execution to get them out of what is still one big odious mess.
Unlike Aston Martin, which is still basically a train wreck with the hope that the light at the end of the tunnel isn’t another train coming at them, Ferrari turned in another very solid quarter given the circumstances. In fact, if it was a normal year, you would look at Ferrari’s Q3 results and probably walk away with the impression that they are only mildly disappointing. Shipments were down 7% vs. Q3 2019, with Sales at negative 3% and net profit up €2 million which is highly impressive. How they did this is quite interesting and shows the depth and experience of their management team. It also presents some risk going forward as I not sure that some of the levers they pulled to deliver these results are repeatable.
On the Ferrari Q3 2020 Earnings Call, CEO Louis Camilleri comes off as both understated and completely in control. The earning’s call webcast is posted: Ferrari Q3 Earnings Call. There were some specific comments that I found interesting:
Overall, Ferrari has, and continues to be, very well managed.
Ferrari is a highly successful company doing a great job navigating in a challenging environment. The only areas of concern I can see are related to mix dependency for profitability, a waitlist that is too long, and continued portfolio fragmentation. None of these are Covid-19 related and are questions of long-term strategy. The drop in free cash flow is concerning and needs to rebound in 2021. The F1 team is unlikely to bounce back until 2022 when the rules change again but the stores should recover as soon as the Covid-19 pandemic retreats.
Post Script on My Recent Experiences
One additional area I do see risk for Ferrari is in the attitude and approach of a number of the dealerships. My last two experiences with Ferrari salesmen have been abysmal. In one case, I was basically told I should feel privileged to have the opportunity to buy a Ferrari. In the other I actually contacted them on a car that I had formerly owned and potentially had an interest in reacquiring. I talked to a salesman once and then emailed the him with the history on the car that they were missing. Despite making an additional follow up call and leaving a message with the receptionist, two weeks later, I am still awaiting a reply. The chances I would buy a car from them now are basically zero. If a dealership doesn’t respond when you are interested in buying, I can’t imagine how helpful they would be if there was later an issue. Alienating customers is never good for the long-term health of a business.
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