NHTSA fines Ferrari $3.5M for not reporting deaths

1 Nov 2014 | Author: | No comments yet »

Can Ferrari survive in a niche market?.

It is hardly what the company would have wanted in the week that its parent announced plans to spin it off – but Ferrari has agreed to pay a $3.5m fine for its failure to report to US regulators three fatal crashes that might have resulted from vehicle faults. Ferrari neglected to disclose three deaths and other safety problems over a three-year period, according to the National Highway Traffic Safety Administration.Following its spin-off next year from parent Fiat Chrysler Automobiles, the global cachet of the Ferrari name will be key to master hurdles such as the costs of developing cars that meet the standards of its elite customers and ever demanding regulators. Companies are required to report that information quarterly. “There is no excuse for failing to follow laws created to keep drivers safe, and our aggressive enforcement action today underscores the point that all automakers will be held accountable if they fail to do their part in our mission to keep Americans safe on the road,” U.S.

Ferrari’s self-imposed production cap at about 7 000 cars a year, aimed at preserving the exclusive appeal, will limit growth potential in an industry where scale can be paramount to survival. “The global industry trend is that such brands seek shelter” by becoming part of a large automaker, said Arndt Ellinghorst, an analyst with ISI Group. “Fiat does the opposite to repay debt from the mass-market business. It’s the beginning of the end.” The threat of being squeezed out of a market has driven Bentley, Lamborghini and Porsche into the arms of Volkswagen, and Rolls-Royce is part of BMW. Aston Martin, which has struggled since being cut loose by Ford in 2007, is cosying up to Daimler to access technology, while British sports carmaker Group Lotus is cutting its workforce by as much as 27 percent to survive. “It’s getting increasingly difficult to operate in a market niche like sports cars as a stand-alone company,” said Stefan Bratzel, a director of the Centre of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. In the third quarter, Ferrari posted earnings before interest and taxes of €89 million ($111 million) on revenue of €662 million, giving it a profit margin of 13.4%. Ferrari has already begun implementation of new procedures to ensure full compliance in the future.” As part of the settlement, Ferrari agreed to train employees in how to comply with the reporting requirements, and file the missing early warning reports. “Early warning reports are like NHTSA’s radar, helping us to find unsafe vehicles and make sure they are fixed,” NHTSA acting administrator David Friedman said.

What might set the company apart from other sports carmakers is what Brand Finance lauded as the world’s “most powerful” brand, beating even Apple. The action against Ferrari comes as the NHTSA is under fire from lawmakers for its slow response to evidence of safety problems with millions of General Motors Co. vehicles as well as millions of vehicles equipped with faulty Takata Corp. air bags. Earlier this week, FCA said it would spin off Ferrari by offering about 10% of its shares in an initial public offering and distributing the remainder of the shares to FCA holders. It’s supported by quasi-religious loyalty of devout fans ranging from young boys plastering their bedrooms with posters to Formula One fanatics to rich serial buyers who will spend any sum on the latest model.

Ferrari’s independence was the result of mounting debt at Fiat Chrysler, which is seeking to finance a five-year, e48bn (R663bn) investment programme.

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