SEPTEMBER 26, 2005
A little help from your friends
In recent days there have been rumours that Fiat boss (and Ferrari protector) Luca di Montezemolo might be in trouble with the company's creditor banks demanding his resignation. The Agnelli Family has now moved to make sure that this does not happen and has spent $690m to buy an additional 87.75m shares in the company, using its IFIL holding company. This means that the family will retain its 30.06% controlling shareholding in the main Fiat company. The family's stake in the business would have dropped to 21.9% if this action had not been taken because of the decision to convert $3bn of debt into equity which is held by the creditor banks. The banks are thus not in any position to demand new management, even if they are probably not very happy about what has happened.
Fiat's future is of great importance to Ferrari in F1 because of the pressure that exists to offload Ferrari in order to help Fiat survive as a major car company. A healthy Fiat (particularly with Montezemolo at the head) is good for Ferrari, which spends far too much of its earnings on the F1 project. Without good results the pressure on the F1 project increases as sponsors are less likely to pay up. This is the primary reason why Ferrari has signed up to the extended Concorde Agreement which offered the company financial incentives for the future in F1, rather than the promise of bigger and better things which was all that the other car manufacturers had been able to do.
Ferrari is not worried by the inequality of the system of payment in F1, arguing that it should be paid more because it is special. While there may be some logic in the argument, the position has not gone down well with the rest of the F1 circus which believes that the only way forward - with or without Ferrari - is for the sport to look after everyone in equal shares.
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